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Home My WebLink AboutJULY 2000 INVESTMENT AND FINANCE COMMITTEE Agenda INVESTMENT & FINANCE COMMITTEE Wednesday, July 19, 2000 - 11:00 p.m. North Wing Conference Room I. CALL TO ORDER II. ROLL CALL III. APPROVAL OF MINUTES - June 21, 2000 Rec: Approve minutes of the regular meeting of June 21, 2000, as submitted Action: IV. ORAL COMMUNICATIONS A. Any person wishing to discuss any item not otherwise on the agenda may address the Investment & Finance Committee at this point by giving his or her name and address for the record. Remarks shall be limited to a maximum of five minutes unless additional time is authorized by the Chairman. B. This is the time and place for any person who wishes to comment on non-hearing agenda items. It should be noted that at the Investment & Finance Committee's discretion, these comments may be deferred until such time on the agenda, as the item is discussed. Remarks shall be limited to a maximum of five minutes unless additional time is authorized by the Chairman. V. OLD BUSINESS A. Status of Public and Private Partnerships Background Checks for Section 4 Rec: Report by Redevelopment Manager Dave Yrigoyen Action: B. Bond Issuance by Palm Desert Financing Authority Rec: Status Report on issuing new bonds presented by Dave Yrigoyen Action: AGENDA - INVESTMENT & FINANCE COMMITTEE July 19, 2000 Page 2 VI. NEW BUSINESS A. City and Redevelopment Agency Investment Schedule for June 2000 Rec: Review and submit to the next City Council agenda. Review the presentation on the investment graphs. Review the investment activity for June 2000. Review status of capital projects and cash-flow projections. Action: B. Review Short Term Investments Maturing in July 2000 Rec: Review investments in 1 collateralized 2 deposits;P ) treasury bonds and notes; and, 3) agencies discount notes Action: C. State of California Local Agency Investment Fund Monthly Reports for May 2000 Rec: Informational item for the Committee to review. No action required D. Monthly Financial Report for City Council for June 2000 Rec: Report and submit to City Council Action: E. Parkview Professional Office Buildings - Financial Reports for June 2000 Rec: Review and file report Action: F. Desert Willow Golf Resort Financial Information for June 2000 Rec: Review and file report Action: G. Palm Desert Recreation Facilities Corporation Income Analysis for June 2000 Rec: Review and file report Action: AGENDA - INVESTMENT & FINANCE COMMITTEE July 19, 2000 Page 3 H. Prime Money Market Fund Rec: Approve investment of bond proceeds in Aim-Prime Portfolio Money-Market Fund , Action: I. August 16, 2000, Meeting of the Investment & Finance Committee Rec: Approve to cancel the regular meeting of August 16, 2000, and reconvene on September 20, 2000 Action: VII. REPORTS AND REMARKS A. Reports and Remarks by any Committee Member B. Items to be placed on the next agenda Vill. INFORMATIONAL ITEMS A. Approved Corporate Securities Lists B. McCallum Theatre Financial Report IX. NEXT MEETING - As determined by action on Item No. VI (1). X. ADJOURNMENT I hereby certify under penalty of perjury under the laws of the State of California, that the foregoing agenda for the Palm Desert Investment and Finance Committee was posted on the City Hall bulletin board not less than 72 hours prior to the meeting. Dated this July 14, 2000. bebr6a Bradley, Recording S ary �u INVESTMENT AND FINANCE COMMITTEE Minutes June 21, 2000 CALL TO ORDER A regular meeting was called to order by Finance Director Paul Gibson on Wednesday, June 21, 2000, at 11:00 a.m. ROLL CALL Present were the following members, constituting a quorum: Finance Director Paul Gibson, City Council Member Bob Spiegel, Acting City Manager Carlos Ortega, Investment Manager Thomas Jeffrey, Redevelopment Manager Dave Yrigoyen, Russ Campbell, Murray Magloff and Bill Veazie Absent were the following members: Mayor Buford Crites, Mayor Pro-Tem Jim Ferguson, City Attorney Dave Erwin Also, present were: Gregg Lindquist, Recording Secretary Debra Bradley ORAL None. COMMUNICATIONS APPROVAL OF Upon motion of Mr. Campbell,seconded by Mr. Veazie, and MINUTES by unanimous vote, the minutes of the May 17, 2000, meeting were approved as submitted. OLD BUSINESS A. Status of Public and Private Partnerships Background Checks for Section 4 There being no updates on background checks, discussion ensued to the next agenda item. B. Bond Issuance by Palm Desert Housing Authority Mr. Yrigoyen informed that a bond issuance in Project Area No. 2 is in its infancy stage. Currently, the figures are being reviewed and, after analyzing whether or not the development will be taxable, staff will present to the Committee for review thereon. NEW BUSINESS A. City and Redevelopment Agency Investment Schedule for May 2000 Investment and Finance Committee Minutes of June 21, 2000 Page 2 NEW BUSINESS (Cont.) Mr. Jeffrey gave a pre-economic synopsis of events that has happened since the last Committee meeting, explaining the Federal Reserve's strategy of increasing interest rates in order to slow the economy from a very rapid growth,which appears to be effective. Referring to the portfolio summary for the City of Palm Desert, the book value ending May 31, 2000, was $164 million,reflecting a gain of$1 million over the prior month. This was due to the receipt of sales-tax revenue apportion which was allocated to the City. Fidelity Treasury,Highmark Sweep and LAIF reflected a total of 43% in liquid money- market funds. As denoted in the bar chart, the City is riding the increases and interest rates at a 5.81% yield. LAIF is ahead of the City due to active reinvestment. Mr. Gibson referred to the City's Summary of Cash report ending May 31, 2000, which exhibits the accountable and unrestricted cash categories of the City. Mr. Spiegel asked what the City's position was in relations to the budget's year- to-date interest,to which Mr. Gibson advised that the City is ahead overall. He noted that next year's cash usage will reduce the interest earnings. In referring to the portfolio summary for the Redevelopment Agency (RDA), Mr. Jeffrey reported the book value ending May 31, 2000,was approximately$158 million, reflecting an increase of$13 million over the prior month. This was due to the bulk of property-tax receipts being allocated to RDA property taxes. In concluding, 62% of RDA's portfolio is in liquid money-market funds, reflecting a yield of 5.93%. A brief report was given by Mr. Gibson relating to RDA's Summary of Cash report ending May 31, 2000. B. Review Short-Term Investments Maturing in June 2000 There being no short-term investments maturing for the City or Agency, discussion ensued to the next agenda item. C. State of California Local Agency Investment Fund Monthly Reports for April 2000 Report was filed with brief discussion. Investment and Finance Committee Minutes of June 21, 2000 Page 3 NEW BUSINESS (Cont.) D. Monthly Financial Report for City Council for May 2000 The May 2000 financial report for the City was received and filed with discussion proceeding. Relating to revenues, Mr. Gibson reported that sales tax was higher than budgeted by approximately$233,000. In regards to Transient Occupancy Tax (TOT), the City is higher than budgeted year-to-date. The two main contributors were the Residency and Court Yard, in addition to the time shares. In summation, the total year-to-date for general fund revenues is 27.504 million, an increase over last year's 24.417 million. In brief, Mr. Gibson advised that the expenditures were under budget. The May 2000 financial report for the Redevelopment Agency was received and filed. Mr. Gibson briefed that the increased tax increment actual was 31.7 million, versus the budgeted 28.3 million for the entire year. E. Parkview Professional Office Buildings - Financial Reports for May 2000 It was advised by Mr. Gibson that the City is awaiting from the attorney the language for the lease with Hanover, pertaining to Hanover dropping his lawsuit against the City. Mr. Gibson informed that it is probable that Golf Dimension's will renew their lease in 2001. In concluding, Parkview is one-hundred percent occupied. F. Desert Willow Golf Resort Financial Information for April/May 2000 Referring to the report of April 2000, Mr. Lindquist advised that the Food and Beverage revenue was almost $30,000 (22%) ahead of projections. The new clubhouse, in addition to a number of non-golf events, had a vital impact to the revenue. Mr. Lindquist pointed out that Food and Beverage revenue is between 35-38%of the total restaurant business in non-golf, which is higher than the 15-20% estimated in the original projections. In relations to payroll, Mr. Lindquist informed there was a $19,000 increase, primarily due to the costs of doing extra business. Operating expenses were $18,000 over budget due to equipment rental for the clubhouse events. It was advised by Mr. Lindquist that in the upcoming season, additional • Investment and Finance Committee Minutes of June 21, 2000 Page 4 NEW BUSINESS (Cont.) tables, chairs and equipment will be purchased, which will eliminate future expenses of this type. These items have been recommended as a part of the capital budget. Net-operating income was a little more than $18,000, which was short of projections. In relations to golf operations, Mr. Lindquist reported a total of more than 9,200 golf rounds for the month of April 2000, 16%over projections. hi further explanation,he advised 64% was nonresident golf rounds. In summation, the budget's revenue exceeded by approximately $251,000, of which $191,000 was in golf-greens fees; $32,000 (plus) was in retail; $29,000 was in food and beverage. Payroll was over budget by $4,600, primarily due to the food and beverage business. All the other departments were within acceptable ranges. Overall, operating expenses were approximately $52,000 over budget. Mr. Lindquist reported that the David Leadbetter Academy operations are doing less than projected. For this reason, official notice has been given to the Academy to cease their operations,effective the end of June 2000. As a replacement, and to make the operations more profitable, in-house expanded programs are currently being explored. Overall, net-operating income was approximately $320,000, which was $190,000 over projections. Referring to the May 2000 report,Mr. Lindquist reported this was a favorable month. Golf rounds were 6,931, opposed to the budgeted 5,800, 20% ahead of projections in terms of rounds. In reference to revenues, the budget was exceeded by approximately 36%. Pertaining to golf rounds, Mr. Spiegel pointed out that the rounds are considerably over projections in nonresident, however, under in resident. In concern, he asked Mr. Lindquist if this was due to residents being unable to get on, to which Mr. Lindquist confirmed correct. In explanation, Mr. Lindquist advised that during peak times of the week, which are Fridays, Saturdays and Sundays, the times fill up quickly. As a favorable part of this equation, preplanned events for the months of April, May and June 2000 caused a blocking-out time. It was noted that the majority of resident golfers derive from the mens' and ladies' clubs. Investment and Finance Committee Minutes of June 21, 2000 Page 5 NEW BUSINESS (Cont.) A lengthy discussion followed with inquiries by several members recapping information outlined in the report. Mr. Lindquist announced that Desert Willow's pro-shop is number one in sales, out of forty-five golf operations, with Kemper Sports. Additionally, Desert Willow is one out of three courses (resort and public) that achieved a four-star rating by Golf Digest Magazine. Press releases are currently being publicized to announce this information. Mr. Spiegel extended accolades to Mr. Lindquist and the Desert Willow staff for their performance. There being no further discussion on this item, Mr. Lindquist was excused from the meeting at 11:45 a.m. G. Palm Desert Recreation Facilities Corporation Income Analysis for May 2000 Report was received and filed with no discussion. H.Annual Review of List of Approved Corporate Issuers Referring to the Proposed Commercial Paper Issuers' list and the Proposed Medium-Term Note Issuers' list, Mr. Jeffrey reviewed with the Committee staff s recommended proposed issuers. It was noted by Mr. Gibson that the issuers lined-out on the list represent the issuers that staff is deleting. Mr. Gibson offered that a rating on all the companies will be given at the July 19,2000,meeting. After lengthy discussion, a consensus was formed to strike Walt Disney Company from the Medium-Term Note Issuers and May Company from the Commercial Paper Issuers. It was moved by Mr. Campbell, seconded by Mr. Veazie and carried to approve the Proposed Commercial Paper Issuers' list and the Proposed Medium-Term Note Issuers' list, as amended by striking Walt Disney Company and May Company, as noted hereinabove. REPORTS AND REMARKS A memo from Thomas Jeffrey to Paul Gibson was received and filed regarding the selection of money-market fund for successor trustee. Mr. Jeffrey reiterated the contents of the memo, which revealed the various money-market fund portfolios. hivestment and Finance Committee Minutes of June 21, 2000 Page 6 REPORTS AND REMARKS Mr. Gibson directed the Recording Secretary to place on the (Cont.) Committee's July 19, 2000, agenda, the recommendation to cancel the August 16, 2000, meeting and reconvene September 20, 2000. INFORMATIONAL ITEMS None. NEXT MEETING The next regularly scheduled meeting will be held on Wednesday, July 19, 2000, at 11:00 a.m., in the North Wing Conference Room. ADJOURNMENT There being no further business, the meeting was adjourned by Mr. Gibson at 12:35 p.m. Respectfully submitted, Debra Bradley, Recording Sec G VWANCFDEBBRA-1\WPCOCNNVSTCCMFIIMITFSU6i100.WPO July 19, 2000 - REGULAR INVESTMENT & FINANCE COMMITTEE MEETING VI. NEW BUSINESS A. 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o Qm o YIELD(%) $MILLIONS 35 T y Om A A N p T T _pp — C m tWT O PSG O tV)r O G. PORTFOLIO (%) D D o 0 0 0 0 c � (OS m 4 uz N,!rr3K3.QY"ac ks5%r! 71 m qNq ti K W X •a) _ z O yy O F O O a gym+ Ul <P3 m 0 EEC _ � > m a mom m<_ Ri 'Q?a""Le1'12kd FiW4%f! T < N N m m Z O O m ` O N m 6 x 0 9 T- w rya*ea4 0 8 � ay m a o N T � N m W g � o m m A � o m w � g CITY OF PALM DESERT INVESTMENT ACTIVITY REPORT JUNE 2000 EXECUTIVE SUMMARY As of 6/30/00, total portfolio book value was approximately$169.7MM. This reflected a net increase of approximately$5.3MM from prior month due to RDA expense reimbursement. There was an unrealized portfolio net gain (market value- book value) ,of approximately$179M, based upon prevailing market interest rates. This was only a "paper" gain since there were no premature securities sales. Significant changes in investment position are shown below: "United States Treasury-Coupon". The City buys interest-bearing U.S. Treasury notes with maturities of 2- 10 years to invest assessment bond proceeds. Although unrated, considered "AAA". THIS ACCOUNT BALANCE DECREASED BY APPROXIMATELY$3M DUE TO AMORTIZATION OF PREMIUMS. "Federal Agency -Coupon". The City buys U.S. government agency and instrumentality notes with maturities of 2- 10 years to invest assessment bond proceeds. Agency debt guaranteed by U.S. Treasury; instrumentality debt is not (guarantee, instead, believed to be U.S. Government's"moral obligation"). Although unrated, considered "AAA." THIS ACCOUNT BALANCE DECREASED BYAPPROXIMATELY$1M DUE TO AMORTIZATION OF PREMIUMS. "Local Agency Investment Fund (LAIF)". The City temporarily invests proceeds of matured securities in $13MMM pool managed by State Treasurer's Office for 2,600 governmental entities. LAIF has diversified portfolio (BAs, CP, Treasuries, agencies, corporates, repos, reverse repos, CDs)with weighted average maturity of 180- 540 days. THIS ACCOUNT BALANCE DID NOT CHANGE. "Federal Agency-Callable". The City purchases federal agency securities that may be called prior to maturity, in order to obtain an additional premium for that risk, thereby increasing overall portfolio profitability. THIS ACCOUNT BALANCE BALANCE DID NOT CHANGE. "City Loan to RDA". The City has made long-term cash advances at LAIF interest rate to RDA for property purchases. Advances will be repaid in future years from tax increment revenue generated by associated redevelopment projects. THIS ACCOUNT BALANCE DID NOT CHANGE. "Fidelity Treasury Pool". The City invests assessment bond proceeds (construction, cost of issuance, and bond reserve reserve monies)in "Fidelity Institutional Money Market Fund: Treasury Portfolio- Class I." This $3.9MMM fund invests in U.S. Treasury bills and notes, and repurchase agreements for those securities. Weighted average maturity is 60 days or less. S&P credit quality rating of"AAAm"; Moody's of"Aaa". THIS ACCOUNT BALANCE DECREASED BY APPROXIMATELY$85M DUE TO INDIAN RIDGE IMPROVEMENTS. "United States Treasury-Discount". The City buys noninterest-bearing zero coupon securities ("STRIPS")with maturities of 6 months-30 years,to invest assessment bond proceeds. Purchased at discount; face value paid at maturity (difference is yield). Although unrated, considered "AAA". THIS ACCOUNT BALANCE DID NOT CHANGE. "fthMark Sweep Accounts". The City sweeps excess checking balances into"HighMark 100% U.S. Treasury Money Market Fund". This $905MM fund invests only in U.S. Treasury bills, notes, and STRIPS (no repos or reverse repos). Weighted average maturity is 90 days or less (per SEC regs). Although unrated, underlying securities considered "AAA". THIS ACCOUNT BALANCE INCREASED BYAPPROXIMATELY$5.4MM DUE TO RDA EXPENSE REIMBURSEMENT. "State & Local Govt Series -Time". The City buys special noninterest-bearing U.S. Treasury certificates of indebtedness with maturities of 15 days- 1 year, to invest assessment bond proceeds (to comply with IRS yield &arbitrage rebate regs). Nonmarketable. Although unrated, considered"AAA". THIS ACCOUNT BALANCE DID NOT CHANGE. "Medium-Term Notes". The City buys interest-bearing corporate medium-term notes with maturities of five years or less, to invest revenues. THIS ACCOUNT BALANCE DECREASED BYAPPROXIMATELY$9M DUE TO AMORTIZATION OF PREMIUMS. % ° 41 N N Z mw i frail 3 0 ' N � o y 3 m N z M m m (n3DyDyDDy fn 000 mN mm > j $ cf° mDD � nn cam 0000c`O° fDmm mo O t,D (,D O' 7 0 n 3 Z Z = y W N O cp d 0 O ' O N m d N f0 N W Z »� ° 0 C N N CO C C O 3 C A n 0 ,0 z OfD O -U , o K N N 3 N N O N O. 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OI m W T Ol 01 W T O+ OI Of O OI b OIOf T N T W O O O O O O O O O O O O O O O O O O O O O O O O O O O S O O O O O O O O O N n N � O ; m u c D 0 Y y m A ur 0 y N N N N N N N N N Cm Q Q C o D m m m m m m m m m 0 m m N c w w w IJa N X G M r G) G) c� � w - � a a o + q q q m n a p c m A m y < 0 D 0 C G1 2 J O C m j b b b b b V V J V V V V V O O O O 9 O O O 0 8 9 O S S O O 1 W W + + + O b g J q i W g J W qW INm O = 3 m r m = e e m c m' r C m' C C C C C C C C C C C C C C r O T T T T T T T T T T T T _z z z z z m z z z z _z z z z z m 0 m m m m m m m m m m m m m m > > 0 0 0 0 0 0 0 0 0 0 0 0 0 e m m m m m 6 m m m m m m m m m 6 D O. mA m m m m mD m m m m m m m m m m m m ` m m m m m m m m m < D A p p p p 0 0 0 0 D 0 0 0 0 0 0 0 0 D r D D D D D D m 41 m q m m N q 41 N N N m N 4) m � m < m m m m m m m m m m m J 1 m y i y y y m m m m m m m m m m m m m m m D D D D D m D D D D D D D D D m ro 0 0 0 0 0 0 0 0 0 0 0 0 m m m m m ° m m m m m m m m m m n ° G) G) G) G7 ni G) L1 L1 Q Q Q Q MWOOM N g m m IN O1 W N m < O O C O O O O <O <O C O <O <O O C C C C C C C C C C C C C C V N J N V V T O mD q q C + mm 1iOo N O q a 'm q N q m fC q q q m m 1 1 O O O O O 0 0 0 0 0 0 0 0 0 O O O O O O T1 o J Z. V0 V V 9 v meJ J J J J q q q q q q q q q b b b fm b f0 9 m o mC— a2. O CD N N CD 1�1� V Of V OI N O O S S O O O S O O N N m O O g O O O O O A N O O m CD �Q O O O O O O O G O C C O C N N g 0 0 0 0 0 0 0 N m 0 0 C O (D CD O O S O S O O O O O O O O O O 0 0 q O O O O O O O N O O O ° O N 3 D R M YI 7 P /z M \J V g V q q O b O g O A q N !li g O O q O O O O O A N O O m O O O O O 0 W O g 0 m N O m m N N m S S + 0 S S 0 S N O 0 S m O O O O O g m O m O m m O pp+ a + + m m m Qm J g J S m0 S 0 m yV {Jf m m J q m q O O m O O O O O A N O O mG O O S A m J N V q Ol S t N m m S S + S O O O O N O O O 0 m m m m g m q q q m m m m m m m g q q m m m c g N O O O O O q O (D O O O O O O O O O O O O O 1 O D D D D D D D D D D D D D D m m m m m m m m m m m m m m m m m m m m m m m m m m m m W w A � ma � rn a �' bnmmomANlNm + + + + + + + + + + m� r = o N O .D SO OOS OO OO OO qg gN Aq Aq qA qA 0m WqW N0. 0. N qW qy q domN qN qN qN qN qN qN mN mN mN mN mN m O m O O O O O O O ' 0 p ry 0 O t0° A {O{JJ O m f0`O m m_ m O m O m O O O O N O O i W i i i 3 m Nb D O 0 N 0m C D O O O 00 0 • O • b T TT b C N O a O 0 > m •; W W W W W A m 9 n n m O rOn r T x A S � G p x y r J rn b a a X 8 m f < z m r i m o c� J in O O O n N N N N N fp [O J U C J Ol Q b Ol V U W = m Q z 3 m 3 � N = N •y N N r 0 a Y m s s s T T T T E C C C C C 6 C C C C C q Y O O O O O O O 0 Z Z Z Z Z 0 Z Z Z Z Z n mmmmm a CC u tititi � � m. g1 -ay = m 6 b 4) m m m m m m m m m m D $ Z Z O O O O O O O O O O u 0 r r m m r O O (1 m 41 N N N W Y y N N 4J N 'm Z Z Z Z S D D 'm 'i -1 1 1 1 p ti H ti ti ti Y b D D O O O n C C b D D D D D b D D D D D _ m m m m m m Y m m m m m u o m m Y -� m m m m m m m m m m O O m m m = = 4l Ol Vl tll y N N N W N Z Z 1 yn F yn F�y m m m m � 3 2 2 2 01 0 nn "1 m Ol OJ M W W W W W u L) O D D D m m m m A A A A A .ZC1 ,CT m SI 00 bm C C e S b W O O b m m eo mm m b O b O 0000 1 1 � � WWW SSSS9 c 0 A aiL � aQ aaaaa + + a m baaaN NNNN as T m m m to to m m is m b O O o o b .Y b (p Ip Ip (p b b fp b fp O O O O (O 0 Q O M fp b Ip Ip 1p b fm b b b O O O O J •dT 0 cl o m 00 CD CD m ° v Nm N W p P. (p ip fJ fJ m J 41 _ w • 3 g N U O U S 00 O b r U b (pJ W a b fD Oy N (y V J 9 H W b b O O O O O O O P U f0 -O U P O O OO f0 A Y OI N b O O O O p W N 0 0 0 0 0 P O O S O O O 01 U O O O O O O O A O V U U OI Y Q < OI O O O O O O A V J O O O O O O 6 O O O O O CCD 0 0 0 0 0 0 o b m 0 b o 0 0 0 0 0 0 0 0 0 o O y 3 ^ r+ m YI � K Z w n O O N N � � W W 01 pp N y ppW y 3 N S _fOJ O � � 4Vi b N r + m N O fU0 Y m P a L N N N q 1 O O V U + U A U 10 V N Ol W b U + � fO A A O) •� p+ V O U V U m W U O N S tWli �Up b J a O J N U m A a O w O O b W U O b N O L U O O O O O O O 0 N O b N N + + W W N A W 0 A 0f0 (D O m N b O 0I b W N J N U 0 0 P a a N N N 0 CI b O J W b b b V O U F U j m �Op N {O� V P U O + O tO + (�p Nm A O V 0 N 0 Y V O 0 OI + a O+ T OVl O b N V N b > O O O O O O O Ot A N N u a s qA 0 A� A A A N OI a + + U (f0 ID 01 OI b N O m 0 U O D U O O O N N O W P 0+6 O 6 D D D D D D D D D D D D D ,� m m m m m m m m m m m m m m m m m m m m m m m Y m m m m d 10 b a O O A p U N U 01 (p b 01 N N YO p V W V O) A b y O q V p 00 U 1 Ol 0 0 U b (b b YI A a a O O O O O y N U O V U U O U U N J J L 0 Ob f0 b U O O b V P O O O b O O O O O O O U f•1 o o g g 00 m N N o o_ cb3 r3 3 9 N 00 13 13 0 f3 !3 tp3 1p3 � 0 0 SN pN N Q C (O D S S O+ O tOJ tOJ a A w O O 0 O 2 N N ¢ a - ao � Q W � a ° o E n O O O N O � m a � a I p w n f W i. v 8 f a u 3� N J O Q N D O; �h m N b Y OI 8 O h N O IO O N W at O n N W C N (7 N A a d V O n � O Z W N N W 0 p o o c a J > 30 woaca yo 00 n o 0 o i0 U i ui W W D N 00 N T OO W q N b m Z ] N ? W j U V F W = _ = r W a ¢ ¢ W W W Z Z m P N N W we W e O_ O W W N > C ¢ W 9 L C m W W U 0 p Q N N N W W U i O Y o a t oN W U U � rc YIELD(%) n rn N m m aDmmmOm2C�Cm5'-4� < cm�K m cr K� V Z �-+ 0 m mD>mV�ia yyam �ym N m Z V z m- N 0I <z y <OCm 1m pm0po � m N rw0000NyOy $O<� z m m Ri Czmzo ' m V + 1 m �zm w z m aQ D m m z -1 0 r o K 0 N p�p 1 w m C 6 m ePm m o 0 D D 0 _ 3. m e C C rn C j 0 m 8 m r Z 22 aV � 'w mw�n+A mmgiaO m m A. xdik o m N y� ro @@ 55�� iD A IV A O G4 "'�' s m �� 75m SKoBm �mn 2 r m 3 r m A A N+ N y m D O D !o 6 aA° m 0 = E8&of8 ki828Xt NMI i i c o �� n n n nwwwwwv n = m z 8 m m� o _ v y n $ mwmwa mmgz N C myy�pp AA 10AA tD ANN V tNT�N m g D (3mDl1 � 5 7J pAp V ONi OpNNOp�� OG��O O A O+ J wO Oros N8 aO C m wNtYi GG A>p�oAp tVvtlOpJ��N O YNW m K�J V N OOi�+OA .. . 8 0 C O W(A fp f9 wfH fAW dlwdl bl fN z C V 0 + + 0 V m y QD SELL g V(II>pN pNp qqA A p�p N �{pJ pJ�O VwV fyNAi� W pp pV , !� m V 8 0 Z_ m c m < m 7 & mm w y m 8 Omm z 0 m YIELD(%) $ a 3 A IN fn m P+ Om w IJ m C A c z ` $MILLIONS O c_ m z o 0 0 8 S 8 PORTFOLIO (%) s c c S S S S x � n•sfi.'ztexr.'k;'et � m e D � o O a m 0 N m z b m p z ro ,5s uwi�-s.+5r x t3x ■ c z y 3 m N• p m m m m m O yZy m mo d F m $ <`mz - 8 yrr F S.a•3FrvwGrvi,PN Y m Cm 0 N y m N g k/ 4.0 Lr,-0nNU4 �r 2 9 z w O O 8 A m p :5 N 8 a k::,ts n�a1,>:.ra 6 8 a `wG `dG > m $ �,t. .�•¢x>;scz-r.;:�tr-�^�,vsvcu- n�.esta. 8 REDEVELOPMENT AGENCY INVESTMENT ACTIVITY REPORT JUNE 2000 EXECUTIVE SUMMARY As of 6/30/00, total portfolio book value was approximately$150.4MM (with SLGS). This reflected a net decrease of $7.1 MM from prior month due principally to City expense reimbursement. There was an unrealized portfolio net gain (market value- book value)of approximately$478M, based upon prevailing market interest rates. This was only a "paper"gain since there was no profit-taking. Significant changes in investment position, by security type, are discussed below: "State& Local Goyt Series -Coupon." Palm Desert Financing Authority buys special interest-bearing U.S. Treasury notes with maturities of 2- 10 years to invest proceeds of advance refundings held in escrow(to comply with IRS yield and arbitrage rebate restrictions). Although unrated, considered "AAA". THIS ACCOUNT BALANCE DID NOT CHANGE. "Fidelity Treasury Pool." RDA invests tax-exempt bond proceeds (construction, cost of issuance, and reserve monies) in Fidelity Institutional Money Market Fund: Treasury Portfolio-Class I." This $3.9MMM fund invests in U.S. Treasury bills and notes, and repurchase agreements for those securities. Weighted average maturity is 60 days or less. S&P credit quality rating of"AAAm"; Moody's of"Aaa." THIS ACCOUNT BALANCE DECREASED BYAPPROXIMATELY$8.3MM DUE PRINCIPALLY TO CITY EXPENSE REIMBURSEMENT. "Local Agency Investment Fund (LAIF)." RDA invests City's loan in $13MMM pool managed by State Treasurer's Office for 2,600 governmental entities. LAIF has diversified portfolio (BAs, CP, Treasuries, agencies, corporates, repos, reverse repos, CDs)with weighted average maturity of 180-540 days. THIS ACCOUNT BALANCE DID NOT CHANGE. "United States Treasury-Coupon." RDA buys interest-bearing U.S. Treasury notes with maturities of 2 - 10 years to invest tax-exempt bond proceeds. Although unrated, considered "AAA". THIS ACCOUNT BALANCE DECREASED BY APPROXIMATELY$2M DUE TO AMORTIZATION OF PREMIUMS. "State& Local Goyt Series -Time." Palm Desert Financing Authority buys special noninterest-bearing U.S. Treasury certificates of indebtedness with maturities of 15 days- 1 year to invest proceeds of advance refundings held in escrow(to comply with IRS yield and arbitrage rebate restrictions). Nonmarketable. Although unrated, considered "AAA." THIS ACCOUNT BALANCE INCREASED BYAPPROXIMATELY$1.1MM DUE TO NEW PURCHASES. "United States Treasury-Discount." RDA buys noninterest-bearing zero coupon securities ("STRIPS")with maturities of 6 months-30 years to invest tax-exempt bond proceeds (construction monies). Purchased at discount;face value paid at maturity(difference is yield). Although unrated, considered "AAA". THIS ACCOUNT BALANCE DID NOT CHANGE. "H*ahMark Sweep Accounts." RDA sweeps excess checking balances into "HighMark 100% U.S. Treasury Money Market Fund:' This$905MM fund invests only in U.S. Treasury bills and notes (no repos or reverse repos). Weighted average maturity is 90 days or less (per SEC regs). Although unrated, underlying securities considered "AAA." THIS ACCOUNT BALANCE INCREASED BYAPPROXIMATELY$125M DUE TO INTEREST INCOME. "Federal Agency-Coupon." RDA buys U.S. government agency and instrumentality notes with maturities of 2 - 10 years to invest advance refundings and tax-exempt construction funds. Agency debt guaranteed by U.S. Treasury; instrumentality debt is not(guarantee, instead, believed to be U.S. Government's"moral obligation"). Although unrated, considered "AAA." THIS ACCOUNT BALANCE DECREASED BYAPPROXIMATELY$5M DUE TO AMORTIZATION OF PREMIUMS. "Federal Agency-Callable". The City purchases federal agency.securities that may be called prior to maturity, in order to obtain an additional premium for that risk, thereby increasing overall portfolio profitability. THIS ACCOUNT BALANCE INCREASED BYAPPROXIMATELY$2M DUE TO AMORTIZATION OF DISCOUNTS. "Medium-Term Notes". The City buys noninterest-bearing corporate medium-term notes with maturities of five years or less,to invest revenues. THIS ACCOUNT HAS NO CURRENT BALANCE. z � a W m [ m = e nmmm - � y » » ( » $ » » » � S 2 ] - - � § ww 2 ` \ / _ j__ _ j_ _ jZ s u N LU § � 4 ( £ £ £ £ £ 44f £ £ £ z ) . , J S 3 _ ® 2 ~ § Q { L) \ E E2 M 0 = 0 ° , f � o f % ( o � IL 73 > 2 k ® z � \ ) ) C)v0o £G0- = e , % � � , w j | IL � a § £ « ) Ea00 \ k � £ ; » Lo § a j ! \ ) \ � � - 33 cn v o _ ; 2 - I \ - � B (] \ | ! a § / ( � k / 2 \ m0) Q0Qn2 \ \ \ § _ } _ / ) v / e - - maa [ ] » Eee � . a £ ) ) 6 � ^ e ` ~ < R / § /\ Im \ LU } co } L / 2 ! § k ƒ 2 ] W U z Q ZJ (1) c/) N � } } } } } } O U O N rn U) J OD co OQ O fo � F O N U C6 tp IL Q us cs » fa OF J Z o O to N ~ 0: 0 d N w pa z a n 7 w ' U z Qo J w w IL N > N O C y C N V W c U d v w o m - o o y w m E a U F am, O O o U y o w Q p _ � E r in ; D 0 4 � > o 4 IL J (L 5, 00°_ Ol- 2 ` Z - V a Z U =_ o)0 V o m o o o m — M o W J o 3 c p O 0 j d 0 V = 0 « O 0) n0 ¢ o rf o } o 69 T o �' o o o N o '- co a aGU)W Uvv av coa) a Cn u, a > > aa o w o �' o C o ) oa w »v j � w ' oc v 2E w (DO O ' wN CD a)N U0 ow V W LL dj = w a a ¢ > w 900n UUUn nz2 w CCU s �N Mau) .�- N (`7 04M V 0 .- a e w U. }a F a�i W ` C G lL G � o W a O d >+ _o d > W N V °r °r z (1 d t Q U V 0 0 ( City of Palm Desert Portfolio Summary of Cash June 30,2000 Total Cash"' $ 175,382,558.15 Less Cash Restricted for. Assessment Districts'(i) $64,239,395.98 Special Revenue Fund(2) $23,152,001.24 Capital Projects(3) $ 18,626,346.48 Enterprise Fund(4) $ 2,991,775.63 Trust&Assessments(e) $ 6,983,823.08 Library Materials(6) $ 16,362.28 Loan to RDA(7) $ 31,002,916.95 $ 147,012,621.64 Less General Furl Reserved for. Equipment Replacement $ 2,194,478.00 Debt Service $ 1,198,101.00 Loans&Receivables $ 500,000.00 RDA Cash" $ 1,423,858.13 Self Insurance/Refiree Health $ 4,183,966.15 $ 9,500,403.28 Unrestricted Cash $ 18,869,5W.23 Total Cash ®Assessment Districts ■Special Revenue Fund ❑Capital Projects ❑Enterprise Projects ❑Trust& Assessments ■Library Materials ■Loan to RDA ❑Unrestricted Cash ■General Fund Reserved 36% 13% 5% 11% 11% 2% 18% 0% 4% (1)Funds are restricted for Assessment District Capital Improvement,Principal and Interest payments. (2)Funds have been restricted for specific purposes. Example: 'Measure A'funds can be used only for street projects. (3)Funds have been appropriated for Capita)Projects. Example:$10 Million for Westfield Shopping town parking structure. (4)Funds have restrictions on what they can be used for. (5)Funds held on deposit for developers and employees. (6)Funds restricted for library purposes. (7)RDA Loans-No payment schedule has been done. Payments are unknown. $ 52,152,808.73 Represents cash held by trustee on bond issues. All cash in the general checking account is reflected in the City Investment Portfolio. Amount represent RDA cash on hand. Total cash balance in this schedule is calculated on a cash basis. Investment Committee receives cash balance on the accrual basis. July 19, 2000 - REGULAR INVESTMENT & FINANCE COMMITTEE MEETING VI. NEW BUSINESS B. REVIEW SHORT-TERM INVESTMENTS MATURING IN JULY 2000 Rec: Review investments in 1) collateralized deposits; 2) treasury bonds and notes; and, 3) agencies discount notes (REPORT TO BE DISTRIBUTED AT MEETING) G:Tinance\Deb B.dley�wpd=\INVSTCOMUne a-Vlb.wpd U > • o O N a - 4 C a_ 8 e m E E 0 U m m N � N N yO O O O O C � O O m O O O O a o 0 0 N N N O � a N m � EN � T m SO j O A O N p as W C N N d � W E e+> � N T � > � a3 arno LL E N Y 0 ` a r m V 5 OJ O J w Co m LL a m U < C J — LL U R C � FO p � � O C Q O X y � o � m U m C 0 � a n o' 0 a � a s ` o g a° € rc a_ A f c m E 0 U m W fN0 N O O O O O O 9 O O O O O N W O O O O O N N N a Q O M Oat P W O O a � W 8 O 1 E � U 0 0 O W •y. a a � C N ~ W T W atom W > 8 2 c O � o J N a i LU > 7 m = W A a w p 3 Z o a W U w m Q.' Foy = a 1 J J (A 0 w O W W F CO W LL LL 7 A m A LL LL E — }Cm� p N N N C N N N 1� O m p N o. U in In 8 ry B O O O C STATE OF CALIFORNIA ;- • PHILIP ANGELIDES, Treasurer OFFICE OF THE TREASURER -- SACRAMENTO RECEIVED Local Agency Investment Fund PO Box 942809 Sacramento, CA 94209-0001 JUN 21 2000 (916) 653-3001 AGENCY May, 2000 Statement REDEVELOPMENT PALM DESERT REDEVELOPMENT AGENCY Account Number • 65-33-015 Ann: TREASURER - 7M10 FRED WARING DRIVE PALM DESERT CA 92260 Transactions Effective Transaction Tran Confirm Authorized Amount Date Date Type Number Caller 05-19-2000 05-19-2000 RD 716750 THOMAS W. JEFFREY 13,677,000.00 Account Summary Total Deposit : 13,677,000.00 Beginning Balance : 12,580,685.26 Total Withdrawal : 0.00 Ending Balance : 26,257,685.26 Page : 1 of 1 RATE OF CALIFORNIA • PHIUP ANGEUDES, Treasurer OFFICE OF THE TREASURER __ -- SACRAMENTO Cil 1 � i;r �;'-_ L= ,`;T 7-7 Local Agency Investment Fund ' ':"- ;?;:;c'!T (a PO Box 942809 .. ,,,; Sacramento, CA 94209-OOOT-J (916) 653-3001 May, 2000 Statement CITY OF PALM DESERT Account Number : 98-33-621 AM: CITY TREASURER 73510 FRED WARING DRIVE PALM DESERT CA 92260 Transactions Effective Transaction Tran Confirm Authorized Amount Date Date Type Number Caller I 05-19-2000 05-19-2000 RD 135564 THOMAS JEFFREY 3,752,000.00 Account Summary Total Deposit : 3,752,000.00 Beginning Balance: 26,116,567.88 Total Withdrawal : 0.00 Ending Balance : 29,868,567.88 Page : 1 of 1 0 July 19, 2000 - REGULAR INVESTMENT & FINANCE COMMITTEE MEETING VI. NEW BUSINESS D. MONTHLY FINANCIAL REPORTS FOR CITY COUNCIL FOR JUNE 2000 Rec: Report and submit to City Council. (REPORTS TO BE DISTRIBUTED AT MEETING) G.TinanceTeb&adley\wpd=\INVSTCOWnsed-Vid.wpd 0 ^ N N U o e m ai o to to m u a w K c A 0➢ O\ ^ ^ O 00 � O\ O eo b a0 1� W T 1� r O ^ N 'O VW W r`W 077 7� 00 bQT\ O\ _R 1- O a � b WQ W vt N O V1 N � V1 h � O oo T ^ N D O O O ffi N O M N �O vt O N C W l� M i0 b O 1 . zr R _ ♦+ O O b b D M Ol N b �O v� op N N O M b � � O O O N N G N ^ ^ (`I 01 O N raj N W Q O O �R 2 ;R 27 0 0 7 a` O v'i d' V1 O 7 .• .-. O T � O N W 7 O\ N O\ N M O N C w O W O �O vi N 7 N N E C C p 2T c0 mo Q C -o 72 N Y ti u a z O W d O 42 b t'n 0 0 •a"i m aaT L''. :.". o aLi W .°. C7 3 "Cc: an d City of Palm Desert • Parkview Office Complex June-00 June-00 # % YTD YTD ti Budget Actual Variance Variance Budget Actual Variance Variance Revenues Rental $ 66,500 $ 63,476 $ (3,024) 95.45% $ 787,000 $ 766,109 $ (20,891) 97.35% Dividends Interest $ 1,250 $ 6,428 $ 5178 514.21% $ 15000 $ 57247 $ 42247 381.65% Total Revenues $ 67,750 $ 69,903 $ 2,153 103.18% $ 802,000 $ 823,356 $ 21,356 102.66"/ Expenses Professional-Accounting&Auditing $ 5,800 $ 5,800 $ - 100.00% $ 69,600 $ 69,600 $ - 100.00% Professional-Consultants $ 5,500 $ 6,214 $ (714) 112.99% $ 66,000 $ 82,644 $ (16,644) 125.22% Tenant Improvements $ 3,700 $ - $ 3,700 0.00% $ 44,400 $ 3,472 $ 40,928 7.82% Repairs&Maintenance Building $ 9,100 $ 11,230 $ (2,130) 123.41% $ 109,200 $ 71,730 $ 37,470 65.69% Repairs&Maintenance-Landscapin $ 1,979 $ - $ 1,079 0.00% $ 12,948 $ - $ 12,948 0.00% Utilities-Water $ 250 $ 117 $ 133 46.80% $ 3,000 $ 1,137 $ 1,863 37.90% Utilities-Gas/Electric $ 6,000 $ 5,944 $ 56 99.07% $ 59,500 $ 52,157 $ 7,343 87.66% Utilities-Trash $ 450 $ 633 $ (183) 140.72% $ 5,400 $ 8,004 $ (2,604) 148.22% Telephone $ 150 $ 173 $ (23) 115.07% $ 1,800 $ 1,562 $ 238 86.80% Insurance $ 521 $ - $ 521 0.00% $ 6,250 $ - $ 6,250 0.00% Total Expenses $ 32,550 $ 30,111 $ 2,439 92.51%1 $ 378,098 $ 290,305 $ 87,793 76.78% utntg fncarxe $ 35200 $.. 33792 $ 402 113,014 $ 423;902 $ 533051 $ 009,1 99 125.75ufa Equipment Replacement Reserve $ 9,186 $ 9,639 $ (453) 104.93% $ 110,232 $ 106,024 $ 4,208 96.18% etlttmme $ 26A14 $. 30,154 $ 4,140 115.91% $ 313,670 $ 427;027 $ 113;357 136.14% lnve t,200awv�t • Parkview Office Complex • Vacancy Rate Schedule by Suite June 2000 Suite Square No. Tenant Feet 73-710 Fred Waring Drive-Two (2) Story Building 100 Hanover(Options expires on December 31,00) 2,560 102 Bergren 1,360 103 Multiple Sclerosis 488 104 Arthritis Foundation 960 106 Council Approved a Five Year Lease Agreement 928 with JMS Consulting 108 Senator Kelly(Lease determined by election results) 785 112 Assemblyman Battin(Lease determined by election res 1,406 114 Chamber of Commerce 1,478 118 Goodwill Industries 1,250 119 City/CVAG Conference Room 1,380 120 Golf Dimensions 1,750 200 CVAG 4,292 200A Council Approved a 1 year lease agreement with 841 University of California Riverside 201 Vacant 604 203 Accounting Services 480 205 Coachella Valley Economic Partnership 700 208 Desert Springs Investments 960 210 Wilson,Pesota&Pichardo 3,040 211 Alzheimer's Association 937 Invest,Vacancy Report • Parkview Office Complex • Vacancy Rate Schedule by Suite June 2000 Suite Square No. Tenant Feet 217 Mcmillan 775 220 CA. State Dept. of Agriculture 1,607 (Agreed to a Five Year Lease Extension) 222 WMA Securities 2,981 Total square footage(2 story Building) 31,562 Vacancy Rate-2,373/31,562= 7.52% 73-720 Fred Waring Drive-One Story Building 100 State of California-Water Resources 15,233 112 State of California-Rehabilitation Department 4,396 Total Square Footage 19,629 Vacancy Rate-0.00% Overall Vacancy Rate for Both Buildings: Vacancy Rate-2,373/51,191= 4.64% Occupancy Rate-48,818/51,191 95.36% Invest,Vacancy Report July 19, 2000 - REGULAR INVESTMENT & FINANCE COMMITTEE MEETING VI. NEW BUSINESS F. DESERT WILLOW GOLF RESORT FINANCIAL INFORMATION FOR JUNE 2000 Rec: Review and file report. (REPORTS TO BE DISTRIBUTED AT MEETING) G?Fina \Oe0 8 adtey\wpda \MSTCAMtinse NK..pd July 19, 2000 - REGULAR INVESTMENT & FINANCE COMMITTEE MEETING VI. NEW BUSINESS G. PALM DESERT RECREATION FACILITIES CORPORATION INCOME ANALYSIS FOR JUNE 2000 Rec: Review and file report. (REPORT TO BE DISTRIBUTED AT MEETING) G:Tinanm\Deb BradleyAwpdo \INVSTCOM4naen-Vlg.wpd JLL-10-2000 16:16 FROM RICHFIRDS WRTSON & GERSHON TO 1?6034163?2# P.02i02 RICHARDS, WATSON & GF-RSHON ATTORNEYS AT LAW A PROFESSIONAL ODRPORAw N WILLIAM L. STRAUSZ THIRTY-EIGHTH FLOOR OFFICES IN WSTRAU&X@RWGLAW.WM 333 SOUTH HOPE STREET LOS ANGELES LOS ANGELES,CALIFORNIA 90071.1469 (2131 626-0404 SAN FRANCISGO PA=IMILE(213)525-0078 ORANGE COUNTY July 10,2000 Mr.Thomas Jeffrey Investment Manager City of Palm Desert 73-510 Fred Waring Drive Palm Desert,California 92260 Reference: Investment of Bond Proceeds in Money Market Funds Dear Mr.Jeffrey: I have reviewed your memorandum dated June 30,2000 and relevant provisions of the Calf mia Government Code pertaining to the investment of public moneys. I have not independently rmewed the various bond resolutions,indentures and other instruments which limit the investment of band proceeds,but have assumed that the proposed investment security complies with such limitations. Under Sections 5922(d)and 53601(1)of the Government Code,proceeds of bonds may be invested in accordance with the bond h ument,and the limitations contained in the other subsections of Section 53601 do not apply. Very truly yours, William L.S P6407WOO11616340.1 TOTSL P.02 City of Palm Desert Internal Correspondence Date: 30 June 2000 Subject: Interpreting California Government Code Sections 53601 (k) and (1) From: Thomas Jeffrey, Investment Manager �T To: William Strausz, Esq., Richards, Watson & Gershon The City Treasurer's Office is examining the possibility of investing bond proceeds in a prime money market fund ("MMF"). A prime MMF would include corporate securities, as well as U.S. Treasury and Government Agency securities. Such a fund would provide the City with the highest possible return within the context of MMFs. Consequently, we are requesting your legal opinion as bond counsel on the legality of such an investment. All of the City and RDA Indentures of Trust implicitly permit investment in prime MMFs if they: (1) are registered under the "Investment Company Act of 1940"; (2) are registered under the "Securities Act of 1933"; and (3) have the highest credit rating that both Standard and Poor's and Moody's can assign to a MMF. (The foregoing criteria is a composite of the most restrictive provisions in the Indentures of various bond issues). The only remaining question is whether California Government Code Sections 53601 (k) (2) and/or 53601 (1) permit investment in a prime MMF. With respect to Section 53601 (k) (2), our interpretation is that if a MMF is registered with the SEC, then, through the implied silence of subsection W (2), it is not subject to the restrictions of Sections 53601 (a) to (1), or (m) or (n). Among those restrictions is a ridiculously low concentration limit of 15 percent on commercial paper holdings by cities, which effectively precludes cities from investing in prime MMFs. If a MMF is not registered with the SEC, then Section 53601 (k) (1) would appear to limit all investments by an eligible MMF to those specified in Section 53601 . Independent of the foregoing, Section 53601 (1) would appear to empower bond trustees to make investments that are authorized in Indentures, such as prime MMFs, even when such investments are in conflict with the provisions of Section 53601 . Please indicate whether these statutory interpretations have merit. I need to receive a written response by no later than Monday, 18 July 2000. We will subsequently be consulting MBIA on this matter. If you have any questions, then please call me at 760.346.0611 , extension 383. Attachments: (1) Indenture (1997 Rev Bonds A.D. #92-1 . 94-1 & C.F.D. #91-1) (2) Indenture (Tax Alloc Rev Bonds P.A. #4, Series 1998) • 0 (vi) obligations, the interest on which is exempt from federal income taxation under Section 103 of the Code and which are rated in one of the two highest rating categories by a nationally recognized rating service; V (vii) money market funds which invest solely in Federal Securities or in obligations described in the preceding clause (ii) or (iv) of this definition, or money market funds which are rated in the highest rating category by S & P and Moody's; (viii) units of a taxable government money market portfolio comprised solely of obligations listed in clause (i), (ii) or (iv) above; (ix) commercial paper of"prime" quality of the highest ranking or of the highest letter and numerical rating by Moody's or S & P, of issuing corporations that are organized and operating within the United States of America and have total assets in excess of $500,000,000 and have an "Aa," "AA" or higher rating for the issuer's debentures, other than commercial paper, as provided by Moody's or S & P, respectively, and provided that purchases of eligible commercial paper may not exceed 180 days' maturity nor represent more than 10 percent of the outstanding paper of an issuing corporation; (x) any general obligation of a bank or insurance company whose long-term debt obligations are rated in one of the two highest rating categories of a nationally recognized rating service; or .j (xi) the Local Agency Investment Fund in the State Treasury of the State of California as permitted by the State Treasurer pursuant to Section 16429.1 of the California Government Code. "Princilal Account" means the account by that name established and held by the Trustee pursuant to Section 4.02(b). "Prop-ram Fund' means the fund by that name established and held by the Trustee pursuant to Section 3.03. "Reassessments" means the reassessments levied on the lots and parcels within the Assessment Districts as security for the payment the principal of and interest on the Local Obligations relating to the Assessment Districts. "Rebate Account" means the account by that name established and held by the Trustee pursuant to Section 4.02(c). 'Record Date" means,with respect to any Interest Payment Date,the fifteenth (15th) calendar day of the month immediately preceding such Interest Payment Date, whether or not such day is a Business Day. 7MMM27.o7 7 4 Indenture of Trust With reference to $11,020,000 Palm Desert Financing Authority Tax Allocation Revenue Bonds (Project Area No. 4) Series 1998 i t v ll. Money market funds registered under the Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and having a rating by S&P of AAAm-G; AAAm; or AAm. . E. Certificates of deposit secured at all times by collateral described in A and/or B above; provided that such certificates must be issued by commercial banks (including the Trustee and its affiliates), savings and loan associations or mutual savings banks and provided further that the collateral must be held by a third party and the Trustee on behalf of the Owners must have a perfected first security interest in the collateral. F. Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by the Federal Deposit Insurance Corporation. G. Investment agreements, including guaranteed investment contracts, acceptable to the Insurer. i H. Commercial paper rated, at the time of purchase, "Prime - 1" by Moody's and "A-1" or better by S&P. I. Bonds or notes issued by any state or municipality which are rated by Moody's and S&P in one of the two highest rating categories assigned by such agencies. J. Federal funds or bankers acceptances with a maximum term of one year of any bank (including the Trustee and its affiliates) which has an unsecured, uninsured and unguaranteed obligation rating of "Prime - 1" or "AY or better by Moody's and "A-l" or "A" or better by S&P. i K. Repurchase Agreements [which are acceptable to the Insurer and] which provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee or third party custodian, as the case may be (buyer/lender), i and the transfer of cash from the Trustee to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date. ' L. The Local Agency Investment Fund in the State Treasury or any similar pooled investment fund administered by the State, to the extent such investment is held in the name and to the credit of the Trustee. "Principal Account" means the account by that-name established and held by "• the Trustee pursuant to Section 4.02(b)(2). "Project Area" means the territory within the project area described and defined in the Redevelopment Plan approved and adopted by the City by its Ordinance' No. 724. 9SD226 P6402-01001 rye 11135M 0 - 7 - City of Palm Desert Internal Correspondence Date: 14 July 2000 Subject: Upgrade to Prime Money Market Fund for Bond Proceeds From: Thomas W. Jeffrey, Investment Manager To: Paul S. Gibson, City Treasurer Recommendation That the City of Palm Desert and the Palm Desert Redevelopment Agency invest bond proceeds in the AIM Prime Portfolio Money Market Fund in order to maximize profit. Background Previously, the City and the RDA (Hereafter referred to collectively as "City") had upgraded from a U.S. Treasury money market fund to a U.S. government agency money market fund in order to improve the yield on invested bond proceeds. At that time, the issue of whether the City had the legal authority to invest bond proceeds in an even higher-yielding prime money market fund ("Prime MMF") had not been settled. The resolution of that issue required an interpretative analysis of relevant provisions in the City's current "Statement of Investment Policy", City bond indentures, and the California Government Code. Prime MMFs, in addition to U.S. Treasury and Agency securities, also include corporate securities, such as commercial paper, certificates of deposit, time deposits, bankers's acceptances, medium-term notes, repurchase agreements, and variable-rate notes. Since the private sector originates these obligations, an incremental risk premium is built into yield, even though such obligations are typically issued by U.S. blue-chip firms or by U.S. affiliates of global foreign banks and corporations. The City's current "Statement of Investment Policy" permits investment in prime money market funds. Likewise, all of the City's bond indentures permit investment in Prime MMFs. With respect to the Government Code, Bond Counsel Strausz has confirmed that in the event of a conflict between Section 53601 and City bond indentures over permitted investments, the City bond indentures would prevail. Consequently, the last obstacle to the City's investing in a Prime MMF has been eliminated. It would have been impossible for the City to track, on a daily basis, fluctuating corporate securities holdings in a Prime MMF in order to ensure City compliance with the Government Code concentration limits on corporate securities. Upgrade to Prime Money Market Fund for Bond Proceeds 14 July 2000 Page 2 of 2 Accordingly, I have evaluated four of the Prime MMFs that Bank of New York offers (see Exhibit "A"), as possible investment vehicles for the City's bond proceeds. Within this group, the AIM Prime Portfolio MMF emerges as the clear leader, in terms of yield and expense. AIM, a mutual fund company headquartered in Houston, Texas, was founded in 1976 and currently manages $176 billion in assets. The operating expenses of AIM's MMFs are among the lowest in the mutual fund industry. In the case of the AIM Prime Portfolio MMF, AIM's strategy is to concentrate in domestic commercial paper in order to leverage portfolio profitability (see Exhibit "B"). The relatively small amount of foreign commercial paper in the portfolio is guaranteed by large, internationally-known English, Canadian, and German commercial banks and industrial companies (see Exhibit "C"), such as Barclays Bank, Canadian Imperial Bank, Deutsche Bank, Daimler-Chrysler, and Seimens. The City currently invests bond proceeds in the Federated Government Obligations Fund. An immediate change to the AIM Prime Portfolio MMF is recommended, based upon yield pick-up. The County of Riverside currently invests in this fund. Fiscal Impact As of 14 July 2000, there is a 12-basis point yield spread between the AIM Prime Portfolio MMF and the Federated Government Obligations Fund. Based upon a hypothetical constant average investment balance of $50 million, if the City's bond proceeds were invested in the AIM Prime Portfolio MMF, then annual investment income might increase by an estimated $60,000. cc: Finance Committee Attachments: (1) Exhibit "A" — Comparison of Money Market Funds (2) Exhibit "B" — Asset Mix of Money Market Funds (3) Exhibit "C" — Schedule of Investments for AIM Prime MMF xz 0 r § / 0 0 0 2 w � � OL ¢ § ) \ k ) � § co m 2 t = 0 0 . { co LL \ \ \ \ CL § @co 2 § Z .50 § o I Ci 2 0 CD } cc� � � ■ � o 2 0 [ 7 § _ _ _ \ \ « E � z — § j IL 06 § k } } } \ cu E © w 22 . &) § m § ■ ) ) co ca w � —CL \ o � 2B � E oa � § % § L b ) % 4 k ) kj 0 § � § | E ) Ei ! } 0 22 0 � 3 3 R ) J § qr k2 D ) j e o Cc ( \ @ k 7 » ) k (» U k M ) / U \ _ 9 k / 2 0 \ / ! § k _ : \ / ( 0 ■ m _ CL ± _ / ( -- IL IL > \ \ / � j 2 { $ % k LL ) r c W o o 0 0 a0 0 0 0 0 0 o O 7 V: M Iq N aD 0) M � QO N N It O 1� c] V M O . W LL y ZZ Q o o \ o 0 0 0 o O) d (� � °moo o 0 0 0 o O O LL n s- M 00 Q) Cl) O M M Lr) ui N M O O M YO Q W 2 LL CD Z O = o m o �'� o 0 0 o rn Q U co co v n C) 2 Z O (q N D W W O N CW m C9 L } LL am _X W o O N LO N p 00 LLL L Q N � L2J O O O N HO W co uj G J 2 � W N Z N 42 m m `� .- � •" aGi O W G Z ° Q O co .N « o CD 0 m Z m O o LL LL E m m m a o ¢ o m E ° O G m m U V N N O V ° G C—LJ O d to i O �, c m a co IL ° m coN U N U N m =1 Q G 01 a. C9 o EE '� - mac E a r o c y G Eoo 'Coo mo h o cGa x m U U O U O ti J ti a c° to N V C Q U ` ^ G T N � C City of Palm Desert Internal Correspondence Date: 14 July 2000 Subject: Upgrade to Prime Money Market Fund for Bond Proceeds From: Thomas W. Jeffrey, Investment Manager �J To: Paul S. Gibson, City Treasurer Recommendation That the City of Palm Desert and the Palm Desert Redevelopment Agency invest bond proceeds in the AIM Prime Portfolio Money Market Fund in order to maximize profit. Background Previously, the City and the RDA (hereafter referred to collectively as "City") had upgraded from a U.S. Treasury money market fund to a U.S. government agency money market fund in order to improve the yield on invested bond proceeds. At that time, the issue of whether the City had the legal authority to invest bond proceeds in an even higher-yielding prime money market fund ("Prime MMF") had not been settled. The resolution of that issue required an interpretative analysis of relevant provisions in the City's current "Statement of Investment Policy", City bond indentures, and the California Government Code. Prime MMFs, in addition to U.S. Treasury and Agency securities, also include corporate securities, such as commercial paper, certificates of deposit, time deposits, bankers's acceptances, medium-term notes, repurchase agreements, and variable-rate notes. Since the private sector originates these obligations, an incremental risk premium is built into yield, even though such obligations are typically issued by U.S. blue-chip firms or by U.S. affiliates of global foreign banks and corporations. The City's current "Statement of Investment Policy" permits investment in prime money market funds. Likewise, all of the City's bond indentures permit investment in Prime-MMFs. With respect to the Government Code, Bond Counsel Strausz has confirmed that in the event of a conflict between Section 53601 and City bond indentures over permitted investments, the City bond indentures would prevail. Consequently, the last obstacle to the City's investing in a Prime MMF has been eliminated. It would have been impossible for the City to track, on a daily basis, fluctuating corporate securities holdings in a Prime MMF in order to ensure City compliance with the Government Code concentration limits on corporate securities. • • Upgrade to Prime Money Market Fund for Bond Proceeds 14 July 2000 Page 2 of 2 Accordingly, I have evaluated four of the Prime MMFs that Bank of New York offers (see Exhibit "A"), as possible investment vehicles for the City's bond proceeds. Within this group, the AIM Prime Portfolio MMF emerges as the clear leader, in terms of yield and expense. AIM, a mutual fund company headquartered in Houston, Texas, was founded in 1976 and currently manages $176 billion in assets. The operating expenses of AIM's MMFs are among the lowest in the mutual fund industry. In the case of the AIM Prime Portfolio MMF, AIM's strategy is to concentrate in domestic commercial paper in order to leverage portfolio profitability (see Exhibit "B"). The relatively small amount of foreign commercial paper in the portfolio is guaranteed by large, internationally-known English, Canadian, and German commercial banks and industrial companies (see Exhibit "C"), such as Barclays Bank, Canadian Imperial Bank, Deutsche Bank, Daimler-Chrysler, and Seimens. The City currently invests bond proceeds in the Federated Government Obligations Fund. An immediate change to the AIM Prime Portfolio MMF is recommended, based upon yield pick-up. The County of Riverside currently invests in this fund. Fiscal Impact As of 14 July 2000, there is a 12-basis point yield spread between the AIM Prime Portfolio MMF and the Federated Government Obligations Fund. Based upon a hypothetical constant average investment balance of $50 million, if the City's bond proceeds were invested in the AIM Prime Portfolio MMF, then annual investment income might increase by an estimated $60,000. cc: Finance Committee Attachments: (1) Exhibit "A" — Comparison of Money Market Funds (2) Exhibit "B" — Asset Mix of Money Market Funds (3) Exhibit "C" — Schedule of Investments for AIM Prime MMF Ez : o / o 0 CD 0 o z LLI § u . - Q.j r 2 z z z � ) � @ \ LO @ @ { � LL z z LU to / f £ } 2LL. 2 Q G 2 t § @ / / / \ § o ll�o = w } W. 2 � d § 0 \ 3 & � ( 3 _ _ ■ A z _ � k } \ } 0 § � \ / {) CL s � o ■ • , , , ■ 09 ■ J J J LL § k - - 2 LU § oU. L 2 � � A k ) k ƒ � \ ( j 2 ° J0 | ■ t ) / $ ! ¥ @D G2 @ 3 8 IL LU § § � ° z § : L " k \ E / ) ( ( 0 . 2 @ ) k » \ k \_ _ k _2 _ _ cc §LU \ z - ( ( g § ƒ - / & � w E0 c m -- � ; 22 2 ) \ . � 2 a £ ) « % ƒ E LU W ~ \ \ \ \ o 0 0 0 o c It � � Cl) o ° 0 0 o O � N co m Cl) W O O N N � O � m � V' Cl)M O W LL CO Q o o \' o 0 0 0 o T d 0co °� o o o 0 0 o O O LL Y i � vi m � � � Cl) aorn m o co O Cl) Cl) I N M O O Y 0 Q W Z LL W O = o o o 0 0 o I Z D U Cl) 00 (D M v, h rn • O Z O to N CO N OD O N m W m m ao pW o 0 0 0 0 o ' o N o LLL L 00 Q N r 0 O O O N N HO W N Q G J y Z N W N F 4 m R m " •- aci w � p m F E o o Wy z a p°N N _o m :)oo °m ELL c c O aE aE m ° a° m a a c Q U y O c c c C� U ' Ia) o L:h � mo C6 o UpIo Upo tip J xm F ap o m N N J � U o a c � N V V � fV v " trCri...._....... . . ... _. F]CHIBIT SCHEDULE OF INVESTMENTS dugust31,1999 PAR NAnTd Y (000) VALUE C,OSIMERCLAL PAPER—82-48%t21 - B.�SIC NUSTRIES—2.62% Chemicals—0.63% Do Pont(E.I.)de 5emours and Co. 5.05% 09/03/99 $ 25,000 $ 24,992,985 Henkel Corp. - 5A7% 09/02/99 30,000 29,995,775 54,988.760 .Metal Mining—1.99% Rio Timo America.Inc. 5.12% 09/01/99 50,000 50,000,000 5.11% 09/0-199 50,000 49,957,417 i 2'" 091291I9 42,300 42,126,617 5.27% 09/30/99 32,000 31,864,151 173,948.185 Total Basic industries 228.936,945 CAPITAL GOODS-0.83% Electrical Equipment—0.83% ' Siemens Capital Corp. 5.0, 09/2-t% 72,775 72.536.944 CONSUMER DURABLES—1.43% .Automobile—1.43% Dahnler{hnsfer North America Holding Corp. i.09% 09/09/99 50,000 49,943,444 5.2"% 10/12M 25,000 24,849,951 5.29% 1022r99 25,000 24,812.646 5.38% 10/26" 25,000 24,798,333 ToW Consumer Durables 124,404,374 5 CONSN ER SO\T)URABLPS—2.61% Household Products—2.61% Colgate-Palmolive Co. 5.26% 09/30/99 67,0DD 66,716,106 Aim1berb-0arkWorldaide,Inc. 5.2-1. I0/13/99 33,021 32,817.976 Procter&Gamble Co. _ 5.10% 09/13/99 50,000 49,915,000 5.14% 09/20/99 28,500 28,422,686— 5.16% 09/2." 50,000 49.842,33.3" Total Consumer 9oodurables 227,7I4,101 3 PAR MATURITY (000) Y:ALLI ENERGY-1.94% Oil&Gas-1.94% Chevron D.S.A.,Inc. 5.27% 1029/99 $ 50,000 S 19.5-5.472 Koch Industries,Inc. 5.07% 09/01/99 50,000 50IM.000 . Petrofina Delaware,Inc. 5.13% 0927/99 20,000 19.95,900 '. k 5.30% 10125N9 50,000 49.602,500 Total Energy 169.103,872 FINANCIAL-71.52% Asset-Backed Securicies-Commercial LoauslLeases-4.98% Centric Capital Corp. 5.13% 09/13/99 40,000 39,931,600 5.14% 0923/99 40,742 40.614.025 5,16% 092"9 40,000 39.845.200 5.20% 0929/99 50,000 19.797.778 5.30% 0929/99 80,226 -9.895,291 5.35% 10/0(v99 20,000 19.895,972 5.31% 10/08/99 44,000 43."59,870 Fleet Funding Corp. 5.12% 09/1-1/99 54,655 54.530.629 5.31% 10/12/99 66,381 6i.979.561 4.34.249.926 Asset-Backed SecuriOes-Consumer Receivables-4.00% Old Line Funding Corp. 5.33% 10/07/99 25,851 25.713,214 Riverwoods Funding Corp. 5.17% 09/08M 40,000 39.959.789 - 5.12% 092-M 50,000 49.836.444 5A3% 092799 50,000 19.814.750 5.20% 0927i99 50,000 19.812,222 5.30% 10/01/99 50,000 49.7779,167 Thunder Bay Funding Inc. 5.12% 09/10/99 42,273 4?.218.891 5.14% 09/11/99 42,280 - -?.183,414 - 349�3L7.891 � 4 PAR MATURITY (000) VALUE Asset-Backed Securities Mult1•Parpose-31.69 Aspen Funding Corp. 5.30% 10/05/99 S 50.000 $ 49,749,722 5.34% 10/15/99 100,000 99,347.334 5.35% lam,99 50,000 49,621.042 Clipper Receivables Corp. 5.15% 09/03/99 501000 49,985.750 5.12% 09/07/99 50,000 49,957,333 5.30% 10Po5/99 50,000 49,749,722 f 5.30% IQ/0" 80,000 79,564.222 Corporate Receivables Corp. . 5.12% 09/0"9 50,000 49,950.222 5.12% 09/15/99 50,000 49,900.444 5.13% 09115/99 50,000 49,900.250 5.12% 09/16/99 50.000 49,893,333 5.11% 09/20/99 50.00D 49,865.153 5,13% 09/21/99 30,000 29,914500 5.13% 09/23/99 50.000 49,843.250 5,30% 1N" 7i.000 74,635.625 5.30% 10/0" 50.000 49,727.639 Edison.asset Securiumm.L.L.C. 5.16% 09/14/99 50.000 49.906.833 Enterprise Funding Corp. 5.13% 09/10/99 50,000 49,935,875 5.1 % 0928i99 14.693 24.59?253 5.20% 09/28/99 53.999 53,788.404 5.28% 09/30/99 25.185 25,077.890 5.35% 10/07/99 17.632 17,537.669 Falcon.asset Securitizadon Corp. 413% 09/09/99 50.000 49,913,000 5.16% 09/15/99 40.000 39.919.733 5.1'% 09/27/99 25.000 24.906.653 Mont Blanc Capital Corp. 5.350. 10/19/99 40.000 39.714.667 Monte Rosa Capital Corp. 5.35% 10/13/99 92.000 91.425:767 5.35% 10/15/99 25.000 24,836.528 5.35% 10/1" 471.000 46.67 ,,18 5 r PAR AIATURM (000) VALLI Asset-Backed Securities-Muld-Purpose—(continued) \export Funding Corp. 5.13% 09/16M $ 50.000 $ 49,893,125 5.13% 09/21i99 50,OW 49,857,500 5.30% 10/07/99 100,000 99,470,000 5,35% IWYN 50,000 49,621,042 Park Avenue Receivables Corp. 5.12% 09/10/99 35,000 34,955,200 5.14% 09122299 40,119 39,M10 5.19% 09/22/99 50,000 49,848,625 5.35% 10/12/99 29,976 29,793,355 Preferred Receivables Funding Corp. 5.12% 09/13/99 25,000 24,957.333 5.13% 09/13/99 20,000 19,965,800 5.13% 09/16/99 50,000 49,893,125 5.12% 09/20/99 10,00D 9,972.978 5.30% 10/05/99 2400 24,675,862 Quinn Capital Corp. 5.13% D9107/199 50,DD0 49,957,250 _ 5A2% 09/0 " 31,655 31,623,486 5.12% 09/1" 88,620 88,456.151 5.13% 09/14/99 27,151 27,100,703 5.14% 09/1" 26,066 26.010.175 5.12% 09/17/99 30,226 30,157,219 5.17% 09/20/99 29,997 29,915,150 5.30% 10/0(v99 74,274 73,891,283 5.30% IOJOir99 57,131 5028206 5.35% 10/1L99 55,101 54.765,266 Receivables Capital Corp. 5,14% W16/99 201000 19,957.167 5.30% 10/" 53,193 52.918,908 5.30% 10/08r99 83,965 83,408.169 Sheffield Receivables Corp. 5.15% 09/24/99 22,500 22.425,,49 5.22% 0912" 42,800 42,632,438 5.28% IN" 80,400 80,010:864 5.39% 10/15M 42,200 41,922.511 2,764.751,091 6 PAR MA77JR17Y (000) VALUE Asset-Backed Securities-Trade Receivables-11.33% Asset Secuntizadon Cooperame Corp. 5.12% 09/17/99 S ROW S 29,931,733 5.12% 09/20/99 50,000 49,864.889 5.15% 09/27/99 50.000 49,814.028 Ciesco.I.P. 5.16% 09/2199 50,000 49,949,500 ' Corporate Asset Funding Co..Inc. i 5.12% 09/01/99 20.000 20,000.000 5.12% 09/09/99 50,000 49,943,111 5.16% 09/23/99 40,000 39,873,867 5.20% 09 09 75AM0 74,707,500 5.31% 10/009 50,000 49,727,125 Delanare Funding Corp. 5.12% 09/10/99 25,000 24.968,000 5.13% 09/15/99 25.059 25,009,007 5.18% 0920/99 32.031 31,943,431 5.33% 10/" 66368 66,004.432 ;. Variable Funding Capital 5.12% 09/07/99 50.000 49,957,333 5.11% 09/13M 25,000 24,957,416 5.13% 09/14M 20.000 19.962.950 5.30% 10ro7/99 59,075 58,761,903 5.34% 10/13/99 100,000 99377,000 5.34% 10/18,199 50.000 49,65L417 5.34% 10/19/99 %,M 49,6441000 5.35% 10/21/99 75.0M 74,431.563 988,380,205 Banking-3.48% Canadian Impenal Holdings.Inc. 5.10% 09/01/99 30,000 30,000.000 Citicorp 5.ti:o 09/21/99 70.000 69,199,722 Banc One Finanaal Corp. - 5.11% 09/08/99 50,000 49,959,,319 5.13% 09/13/99 35.000 34,940,150 5.28% 10/04/99 4i.000 44,782Z00 5.26% 10/12M 15,000 14,910,142 5.34% 10/18/99 60.000 5958L700 303,964.233 7 PAR MAlURI'fV (000) VALUE Brokeragdlnvesrments—1.15% Bear,Simms&Co,Inc. 5.12% 091" E 50,000 E 49.950,222 Memll Lynch&Co.,Inc. - 5.30% 10MI/99 50,000 49,79,167 99,729,389 Financial(Diversified)—12.62% . Ameritech Capital Funding Corp. 5.08% 09/02r99 50,000 49,992,944 Associates First Capital Corp. 5.15% 0921t99 50000 49.856,944 5.14% 09/23/99 40,000 39.874356 533% 10 0/99 50,000 49.637,264 5.35% 1U2699 301000 29.755,708 BellSouth Capital Funding Corp. 5.12% 09/22/99 50,000 49,850.667 CFF Group Holdings,Inc.(The) 5.30% 1026199 50,000 49,595139 Commercial Credit Co. 5.11% 09/10/99 50.000 49.936.125 Deere(John)Capital Corp. 5.13% 09/1 J99 50.000 49.986,000 Deutsche Bank Financial Inc. 5.10% 09/03/99 50,000 49.985.833 Dresdner L.S.Finance,Inc. 5.11% 09ro2/99 50,000 49.992.903 Ford Motor Credit Co. 5.11% 09/03/99 50.000 49.985.806 5.13% 09/15/99 50.000 49.900.250 5.30% 10/06/99 50.000 49.742.361 !. General Electric Capital Senices i31% 10/19/99 100.000 99.292.000 5.30% 10/20/99 100.000 99,278.612 General Motors Acceptance Corp. 5.31% 10/20/99 50.000 49.638,625 International Leese Finance Corp. _ 5.08% 09/09/99 50.000 49.943.556 Sadonal Rural VAmes Cooperawe Finance Corp. 51+% 10/12M 35.000 3i.;91,128 8 PAR MATURITY (000) VALUE UBS Finance(Delaware)Inc. 5.11% 09/02N9. $ 50,000 5 19.992.903 5.25% 10/12/Y99 50,000 19,701,042 1.100.630.166 Insurance(Life)-0.57 Prudential Funding Corp. 5.16% 0921/99 50.000 49,856,667 Personal Credit-1.14% American Express Credit Corp. . 5.07% 09/01/99 50,000 50,000.000 5.27% 1026/99 50.000 49,597.431 99,597.431 Multiple Industry-0.56% American General Corp. 5.31% 1025/99 50.000 49.601.750 Total Financial 6.240.078.749 TECHNOLOGY-0.39% Computers(Softa-are&Services)-0.39% ' Electronic Data Systems Corp. 5.13% 09/24/99 33,550 33,440.040 Total Technolow 33,440.040 UTILITIES-1.14% Telephone-1.14% BellSouth Telecommunications,Inc. 5.28% 10/15/99 50.000 49,677333 SBC Communications.Inc. 5.28% 10/27/99 50.000 49,589.333 Total Utilities 99,266.666 Total Commerdal Paper(Cost-$7,195.481.691) -.195.481.691 - MUTER NOTE AGREEMENT-3.57% Merrill Lynch Mortgage Capital.Inc 5.82") 08/17/00 311.525 311.525.000 Total Master Note AQWMent(Cost-$311.525.000) 311.525.000 9 PAR MATURfPS' (000) VALUE MEDILM TERM NOTE—0.45% Toyota Motor Credit Corp. 5.26% 09/29/99 E 40,000 S 39,996.709 Total Medium Term Note(cost—E39.996.709) 39,996.709 Total Investments(excluding Repurchase Agreements) 7.547,003,400 REPLRCIUSE AGREEMENTS—13.95%101 Dean Witter Revnolds Inc. 5.51%'a' 09/01/99 163,902 163,901.609 Goldman.Sachs&Co. 5.40%',' 01/24/00 100,000 100.000.000 4.625WD 0126/00 100,000 100,000.000 Salomon Smith Bamev Inc. 5.51%'d — 853,000 853,000.000 Total Repurchase Agreements(Cost—$1,216.901.609) 1,216,901.609 TOTAL INVEbTMEN•IS-100.45% 8.763,905,009ie' LIABILITIES LESS OTHER ASSETS—(0.45%) (39,680.318) NET ASSETS—100.00% $8,724.224.691 Notes to Schedule of Investments: "' Some commercial paper is traded on a discount basis.In such taus the interest rate shown represents the rate of discount paid or received at the time of purchase by the Portfolio. 'v' Master Note Purchase Agreement may be terminated by either pant upon one business day prior nritten notice,at wallitich time a amounts outstanding under the notes purchased under the Master Note Agreement wiE become payable.Interest rates on master notes are redetermined periodically.Rate sbown is the rate in effect on 031/99. 'r' Collateral on repurchase agreements including the Portfolio's pro-rata interest in joint repurchase agreements. is taken into possession by the Portfolio upon entering into the repurchase agreement.The collateral a marked to market daily to ensure its market%nine is at least 102%of the sales price of the repurchase agreement.The investments in some repurchase agreements are through participation in joint accounts wbb other mutual funds,pri%ate accounts and certain non-registered investment companies managed by the investment advisor or its a®iares. j Joint repurchase agreement entered into 0831/99 with a maturing value of$300,045,913.Collateralized by$312.373,000 C.S. ) Government obligations,0%to 8.25%due 09/14M to 05/15/29 with an aggregare market value at 0831/99 of$306,004,298. j 10 Tenn repurchase agreement entered into 07129/99;however.either party may terminate the agreement upon demand Interest rates,par and collateral are redetermined dory.CoOateraUed by E 105,904,376 U.S.Government Agency securities.5.00%to 7,50% due 09/01/06 to 08/01/29 with an aggregate market value a 0831N9 of$102.000,000. 'n Term repurchase agreement entered into 08/13N9;however,either party may terminate the agreement upon demand Interest rates.par and collateral are redetermined date.Collateralized by E 106,703.765 U.S.Government Agency securities,5.50%to 8.00% due 01/01/05 to 001/29 with an aggregate market value at 0831/99 of$102.000.001. Open repurchase agreement. Either party may terminate the agreement upon demand. Interest rates, par and-collateral are redetermined daily.Collateralized by E880.79143 C.S.Government obligations.0%to 6.85%due 1021/99 to 01/15/29 with an aggregate market value at 08/31/99 of$889.1 I4.611. - 's' Also represents cost for federal income tax purposes. See Notes to Financial Statements. 10 >� • CITY OF PALM DESERT APPROVED COMMERCIAL PAPER ISSUERS JUNE 2000 Moody's Moody's CP Rating LTD Rating Auto American Honda Motor Co. P-1 A2 Ford Motor Co. P-1 A2 General Motors Corp. P-1 A2 Toyota Motor Credit Corp. P-1 Aal Bank BankAmerica Corp. P-1 Aa2 Bank of New York Co. P-1 Aa2 Barclays U.S. Funding Corp. P-1 Aa2 BNP U.S. Finance Corp. P-1 Aa3 Chase Manhattan Corp. P-1 Aa3 J.P. Morgan & Co. P-1 Al Mellon Financial Corp. P-1 Al Societ6 Generale North America, Inc. P-1 Aa3 State Street Boston Corp. P-1 Aa3 Wachovia Bank of North Carolina P-1 Aa2 Beverage Coca-Cola Co. P-1 Aa3 Chemical Du Pont (E.I.) de Nemours & Co. P-1 Aa3 Computer Hewlett Packard Co. P-1 Aa3 IBM Corp. P-1 Al Electric Equipment Emerson Electric P-1 Aal General Electric Co. P-1 Aaa Electronics Sony Capital Corp. P-1 Aa3 Entertainment Walt Disney Co. P-1 A2 Page 1 of 3 • CITY OF PALM DESERT • APPROVED COMMERCIAL PAPER ISSUERS JUNE 2000 Moody's Moody's CP Rating LTD Rating Finance American Express Co. P-1 Al Citigroup, Inc. P-1 Aa2 Food Hershey Foods, Inc. P-1 Al _ H.J. Heinz Co. P-1 Al PepsiCo, Inc. P-1 Al Imaging Eastman Kodak Co. P-1 A2 Fuji Photo Film Finance U.S.A., Inc. (NY) P-1 Aa3 Insurance American International Group P-1 Aaa Manufacturing Minnesota Mining & Manufacturing (3M) P-1 Aal Natural Gas Washington Gas Light Co. P-1 Aa2 Newspaper Gannett Co. P-1 A2 Washington Post Co. P-1 Aa3 Office Equipment Pitney Bowes, Inc. P-1 Aa3 Petroleum BP America, Inc. P-1 Aal Chevron Corp. P-1 Aa2 Exxon-Mobil Corp. P-1 Aaa Shell Oil Co. P-1 Aal Texaco Corp. P-1 Al Page 2 of 3 r: • CITY OF PALM DESERT • APPROVED COMMERCIAL PAPER ISSUERS JUNE 2000 Moody s Moody's CP Rating LTD Rating Publishing McGraw-Hill, Inc. P-1 Al Restaurant McDonald's Corp. P-1 Aa2 Retail Wal-Mart Stores Inc. P-1 Aa2 Securities Brokerage Goldman Sachs Group P-1 Al Merrill Lynch & Company, Inc. P-1 Aa3 Telecommunications AT&T Corp. P-1 Al Bell Atlantic Corp. P-1 Al BellSouth Corp. P-1 Aa2 Lucent Technologies Inc. P-1 A2 Utility - Electric Allegheny Energy, Inc. P-1 A2 Consolidated Edison Co. of New York P-1 Al Duke Energy Corp. P-1 Al Pacific Gas & Electric Corp. P-1 A2 Page 3 of 3 �/ • CITY OF PALM DESERT • APPROVED MEDIUM-TERM NOTE ISSUERS (1) JUNE 2000 Moody's MTN Rating Auto American Honda Finance Corp. A2 Ford Motor Co. A2 General Motors Corp. A2 Toyota Motor Credit Corp. Aal Bank BankAmerica Corp. Aa3 Bank of New York Co. A2 Chase Manhattan Corp. Aa3 J.P. Morgan & Co. Aa3 Wachovia Bank of North Carolina Aa2 State Street Boston Corp. Aa3 Chemical Du Pont (E.I.) de Nemours & Co. Aa3 Computer Hewlett Packard Co. Aa2 IBM Corp. Al Electric Equipment Emerson Electric Aal General Electric Co. Aaa Finance American Express Co. Al Citigroup, Inc. Aa2 Food Hershey Foods, Inc. Al H.J. Heinz Co. Aa2 Household Colgate-Palmolive Co. Al Page 1 of 3 (1) Maximum maturity of "A" MTNs is 2 years; "AA" MTNs 3 years; and "AAA" MTNs 5 years. • CITY OF PALM DESERT • APPROVED MEDIUM-TERM NOTE ISSUERS (1) JUNE 2000 Moody's MTN Rating Insurance American International Group Aaa Manufacturing Minnesota Mining & Manufacturing (3M) Aal Natural Gas Washington Gas Light Co. Aa2 Office Equipment Pitney Bowes, Inc. Aa3 Petroleum BP America, Inc. Aal Chevron Corp. Aa2 Exxon-Mobil Corp. Aal Shell Oil Corp. Aal Texaco Corp. Al Restaurant McDonald's Corp. Aa2 Retail Wal-Mart Stores, Inc. Aa2 Securities Brokerage Merrill Lynch & Co. Aa3 Morgan Stanley Dean Witter & Co. Aa3 Salomon Smith Barney Holdings, Inc Aa3 Telecommunications AT&T Corp. Al Bell Atlantic Corp. Al BellSouth Corp. Aal Page 2 of 3 (1) Maximum maturity of "A" MTNs is 2 years; "AA" MTNs 3 years; and "AAA" MTNs 5 years. CITY OF PALM DESERT • APPROVED MEDIUM-TERM NOTE ISSUERS (1) JUNE 2000 Moody's MTN Rating Utility - Electric Duke Energy Corp. Aa3 FRIENDS OF THE CULTURAL CE[WPER, INC. PALM DESERT, CALIFORNIA DMEPEMENT AUDITORS' REPORT AND Q')ISD= FEWCIAL STATES JULY 31, 1999 LUND & GUTTRY LLP /CERTIFIED PUBLIC ACCOUNTANTS 39700 BOB HOPE DRIVE•SUITE 309•P.O.BOX 250•RANCHO MIRAGE,CA 92270-0250 Telephone(760)568-2242•Fax(760)346-8891 E-Mail:cpas®cpalg.com•www.cpalg.com DOEPEDIDEBTI' AUDITORS' RETORT Board of Trustees Friends of the Cultural Center, Inc. Palm Desert, California We have audited the accompanying Combined Statements of Financial Position of Friends of the cultural Center Inc. as of Jul 31 1999 and 1998 and the related Combined Y • Statements of Activities, Functional Expenses and Cash Flows for the years then ended. These combined financial statements are the responsibility of the Center's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statelrent presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion the combined financial statements referred to above present fairly, in all material respects, the financial position of Friends of the Cultural Center, Inc. as of July 31, 1999 and 1998, and the changes in their net assets and their cash flaws for the years then ended in conformity with generally accepted accounting principles. October 22, 1999 (1) Palm Springs Office• (760)325-5561 (THIS PAGE LEFT BLANK INTENTIONALLY) ALOF THE CULTURAL CENTER, INC� CaYSINED STATEMNTS OF FINANCIAL, POSITION JULY 31, 1999 AND 1998 ASSETS 1999 McCallum Friends of Theatre the Cultural Endmm-ent, Center, Inc. Inc. Combined CURRENT ASSETS Cash and cash equivalents $ 77,377 $ 1,467,050 $ 1,544,427 Accounts receivable 26,175 - 26,175 Pledges receivable (net) - Note 4 552,607 - 552,607 Inventory - Note 5 198,558 - 198,558 Other current assets 108,837 - 108,837 Note receivable 60,161 - 60,161 Note receivable - designated - Note 6 100,000 - 100,000 Due from related parties - Note 14 68,345 66,666 135,011 Total current assets 1,192,060 1,533,716 2,725,776 NOTE RECEIVABLE - DESIGNED - Note 6 200,000 - 200,000 PROPERTY AND EQUIPMENT (NET) - Note 7 13,179,345 - 13,179,345 INVESTMENTS - Note 8 100,000 - 100,000 DUE FROM RELATED PARTIES - Note 14 - 626,626 626,626 PLEDGES RECEIVABLE - Note 4 349,625 - 349,625 'ICITAL ASSETS $15,021,030 S 2,160,342 $17,181.372 (The acco panying notes are an integral part of these financial statements) (2) 1998 McCallum Friends of Theatre the Cultural fhdowent, Center. Inc. Inc. Combined $ 420,517 $ 769,933 $ 1,190,450 42,653 - 42,653 304,362 - 364,362 198,558 - 198,558 43,515 - 43,515 60,161 - 60,161 100,000 - 100,000 7,285 349,500 356,785 1,182,051 1,119,433 2,301,484 300,000 - 300,000 13,357,680 - 13,357,680 100,000 302,250 420,250 365,146 - 365,146 $15,304,877 $1,421,683 $16.726,560 (THIS PAGE LEFT BLANK INTENTIONALLY) FRs OF THE CULTURAL CENTER, IN� C3MIDII) STATEMEPTIS OF FINANCIAL POSITION JULY 31, 1999 AND 1998 LIABILITIES AND NET ASSETS 1999 McCallum Friends of Theatre the Cultural Flildownent, Center, Inc. Inc. Combined CURR= LIABILITIES: Accounts payable $ 75,703 $ - $ 75,703 Revolving line of credit - Note 10 1,500,000 - 1,500,000 C= ent portion of notes payable - Note 11 - - - Cutrrent portion of obligations under capital leases - Note 12 74,627 - 74,627 Other current liabilities 53,599 - 53,599 Deferred revenue - tickets - Note 9 1,477,331 - 1,477,331 Deferred revenue -,memberships & other 18,046 - 18,046 Due to related parties - Note 14 66,666 68,345 135,011 Total current liabilities 3,265,972 68,345 3,334,317 LONG-TERM LIABILITIES Notes payable - Note 11 3,000,000 - 3,000,000 Obligations under capital leases - Note 12 213,647 - 213,647 Due to related parties - Note 14 626,626 - 626,626 TOTAL LIABILITIES 7,106,245 68,345 7,174,590 NET ASSETS Unrestricted - Undesignated 6,712,553 202,499 6,915,052 Unrestricted - Designated - Note 6 300,000 - 300,000 Temporarily restricted - Note 13 902,232 - 902,232 Permanently restricted - Note 13 - 1,889,498 1,889,498 TOTAL NET ASSETS 7,914,785 2,091,997 10,006,782 TOTAL LIABILITIES AND NET ASSETS 515,021,030 S 2,160.342 517,181,372 (The accompanying notes are an integral part of these financial statements) (3) 1998 Mccallun Friends of Theatre the Cultural Endowent, Center, Inc. Inc. Combined - $ 122,447 $ - $ 122,447 616,271 - 616,271 100,000 - 100,000 36,848 - 36,848 34,142 - 34,142 1,607,931 - 1,607,931 96,799 - 96,799 349,500 7,285 356,785 2,963,938 7,285 2,971,223 3,200,000 - 3,200,000 111,312 - 111,312 6,275,250 7,285 6,282,535 7,860,119 220,346 8,080,465 400,000 - 400,000 769,508 - 769,508 1,194,052 1,194,052 9,029,627 1,414,398 10,444,025 $ 15,304,877 $ 1,421,683 $ 16,726,560 (THIS PAGE LEFT BLANK INTENTIONALLY) FA OF THE CULTURAL CENTER, C5SINED ST MENTS OF ACTIVITIES FOR THE YEARS ENDED JULY 31 1999 AND 1998 1999 McCallum Friends of Theatre the Cultural Endowment, Center, Inc. Inc. Combined CHANGES IN UNRESTRICTED NET ASSETS: REVENUE AND SUPPORT FROM OPERATIONS: Production $ 5,107,485 $ - $ 5,107,485 Marketing 19,133 - 19,133 Development - Note 16 1,261,183 - 1,261,183 Interest and other investment inane 39,830 71,032 110,862 Other 62,607 24,378 86,985 Total revenue & support" from operations 6,490,238 95,410 6,585,648 NET ASSETS RELEASED FROM RESTRICTIONS: Expiration and allocation of restrictions 718,028 (45,446) 672,582 Total net assets released from restrictions 718,028 (45,446) 672,582 Total unrestricted revenues and support 7,208,266 49,964 7,258,230 EXPENSES: Production costs 5,065,601 - 5,065,601 Marketing 714,796 - 714,796 Development 641,731 - 641731 General and administrative 1,598,676 67,811 1,666:487 Depreciation 435,028 - 435,028 Total expenses 8,455,832 67,811 8,523,643 INCREASE (DECREASE) IN UNRESTRICTED NET ASS $(1,247,566) S (17,847) $(1,265,413) (The accoapanying notes are an integral part of these financial statements) (4) 1998 McCallum Friends of Theatre the Cultural Endowment, Center, Inc. Inc. Combined $ 3,744,037 $ - $ 3,744,037 1,918,276 - 1,918,276 608 50,652 51,260 48,940 - 48,940 5,711,861 50,652 5,762,513 266,603 (34,778) 231,825 266,603 (34,786) 231,825 5,978,464 15,874 5,994,338 3,755,608 - 3,755,608 615,495 - 615,495 614,662 - 614,662 1,527,372 4,385 1,531,757 490,146 - 490,146 7,003,283 4,385 7,007,668 $(1,024,819) $ 11,489 $ (1,013,330) (THIS PAGE LEFT BLANK INTENTIONALLY) FRs OF THE CULTURAL CENTER, INC� COMBINED STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED JULY 31, 1999 AMID 1998 1999 McCallum Friends of Theatre the Cultural Endaament, Center, Inc. Inc. Combined INCREASE (DECREASE) IN UNRE,STRiCIED NET ASSETS $(1,247,566) $ (17,847) $(1,265,413) CHANGES IN TEMPORARILY RESTRICTED NET ASSETS: Development revenues for future periods - Note 16 850,752 - 850,752 Net assets released from restrictions (718,028) (718,028) INCREASE IN TEMPORARILY RESTRICTED NET ASSETS 132,724 132,724 CHANGES IN PEf239N=Y RESTRICTED NET ASSETS: Contributions - 650,000 650,000 Net increase in restrictions - 45,446 45,446 INCREASE IN PERbfAN=Y RESTRICTED NET ASSETS 695,446 695,446 INCREASE (DECREASE) IN NET ASSETS (1,114,842) 677,599 (437,243) NET ASSETS AT BEGINNING OF YEAR 9,029,627 1,414,398 10,444,025 NET ASSETS AT END OF YEAR S 7,914.785 $2,091,997 $10,006,782 (The accompanying notes are an integral part of these financial statements) (5) 1998 General Production and Costs Marketincr Develowent Admin. Total $ 930,609 $ 92,693 $119,362 $ 432,520 $1,575,184 2,658,186 - - - 2,658,186 - 449,520 147,564 221,133 818,217 47,779 1,535 208,773 26,420 284,507 - - - 164,620 164,620 203 3,947 11,651 12,582 28,383 29,750 - 536 40,521 70,807 - - 2,916 3,825 6,741 5,591 3,327 - - 8,918 64,635 - - - 64,635 - - - 18,172 18,172 - - 23,808 23,808 - - - 337,887 337,887 18,855 64,473 123,860 250,269 457,457 53,755,608 S 615,495 $ 614,662 $1,531,757 $6,517,522 1998 Mccalliun FYiends of Theatre the Cultural Fndownent, Center, Inc. Inc. Ccxnbined $(1,024,819) $ 11,489 $(1,013,330) 514,565 - 514,565 (266,603) - (266,603) 247,962 247,962 34,778 34,778 34,778 34,778 (776,857) 46,267 (730,590) 9,806,484 1,368,131 11,174,615 $ 9,029,627 $1,414,398 $10,444,025 (THIS PAGE LEFT BLANK INTENTIONALLY) AMS OF THE CULTURAL CEB7I . 1� COMB= SPATEMEN S OF FUNCPICNAL EXPENSES FOR THE YEARS ENDED JULY 31, 1999 AND 1998 1999 General Production and Costs Marketing Development Admin. Total Salaries, payroll taxes and employee benefits $1,068,913 $ 69,359 $221,070 $ 384,277 $1,743,619 Artist fees 3,621,805 - - - 3,621,805 Contract labor & insurance 45,600 426,285 165,707 360,131 997,723 Supplies 110,821 912 44,447 35,068 191,248 Utilities - - - 168,851 168,851 Postage & shipping 1,386 197,831 37,070 23,794 260,081 Maintenance, repairs, and rentals 116,108 - 15,452 16,879 148,439 Meals & entertainment - - 69,432 3,436 72,868 Conferences and travel 2,167 650 21,705 13,049 37,571 Cost of sales 44,584 - - - 44,584 Professional fees - - - 86,384 86,384 Computer software and telecnTuunications 11,236 2,301 2,697 50,610 66,844 Interest - - - 344,590 344,590 Miscellaneous & other 42,981 17,458 64,151 179,418 304,008 Total 55,065,601 S 714,796 $ 641,731 51,666,487 58,088,615 (The accapanying notes are an integral part of these financial statements) (6) (THIS PAGE LEFT BLANK INTENTIONALLY) FAhDS OF THE CULTDRAL CENTER, INS CUYIBIINED STATa1EN S OF CASH FLC)W FOR THE YEARS ENDED JULY 31, 1999 AND 1998 1999 McCallum PYiends of Theatre the Cultural Endowment, Center, Inc. Inc. Combined CASH FLOWS FROM OPERATING ACTIVITIES: Increase (Decrease) in net assets $ (1,114,842) $ 677,599 $ (437,243) Depreciation 435,028 - 435,028 Net realized gain on investments - (24,378) (24,378) Net (gain) loss on disposal of equipment 1,109 - 1,109 (Increase) Decrease in: Receivables (216,246) - (216,246) Other assets (65,322) - (65,322) Increase (Decrease) in: Accounts payable (46,744) - (46,744) Other liabilities 19,457 - 19,457 Deferred revenue (209,353) - (209,353) Net cash provided (used) by operating activities (1,196,913) 653,221 (543,692) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of equipment 3,891 - 3,891 Purchase of property and equipment (50,949) - (50,949) Proceeds from sale of investments - 326,628 326,628 Proceeds from note receivable 100,000 - 100,000 Net cash used by investing activities 52,942 326,628 379,570 CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds (payments) from line of credit 883,729 - 863,729 Proceeds from long-term debt - - - Repayments of notes payable and capital leases (365,630) - (365,630) Interfund loan - net 282,732 (282,732) - Net cash provided by financing activities 800,831 (282,732) 518, 099 NET INCREASE (DECREASE) IN CASH (343,140) 697,117 353,977 CASH AND CASH EQUIVALENTS, Beginning of year 420,517 769,933 1,190,450 CASH AND CASH EQUIVALENTS, End of year $ 77,377 1,467,050 $1,544,427 Cash paid during 1999 and 1998 for interest amounted to $344,590 and $337,887. Capital lease obligations of $205,744 and $105,245 were incurred in 1999 and 1998 for the purchase of new theatrical equipment and office equipment. (The accompanying notes are an integral part of these financial statements) (7) 1998 McCallwn Friends of Theatre the Cultural axbwment, Center, Inc. Inc. Combined $ (776,857) $ 46,267 $ (730,590) 490,146 - 490,146 7,141 - 7,141 (152,867) - (152,867) 11,824 (27,000) (15,176) (76,536) - (76,536) (2,764) 4,385 1,621 701,157 701,157 201,244 23,652 224,896 4,500 - 4,500 (144,977) - (144,977) 18,044 - 18,044 110,000 110,000 (12,433) (12,433) 225,271 - 225,271 400,000 - 400,000 (125,425) - (125,425) (300,000) 300,000 - 199,846 300,000 499,846 388,657 323,652 712,309 31,860 446,281 478,141 S 420,517 $ 769,933 S1,190,450 • FRIENDS OF THE CULTURAL CEN� INC. NC7PFS TO THE COMB= FEWCIAL STATEMENTS 1. DESCRIPTION OF THE CENTER The Friends of the Cultural Center, Inc. is a not-for-profit organization incorporated in California in 1973. Its stated purpose is to conduct cultural, charitable and educational activities in the Coachella Valley. Currently, the Center operates the McCallum Theatre for the Performing Arts. 2. SCARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of Friends of the Cultural Center, Inc. have been prepared on the accrual basis of accounting. Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-irnposed restrictions. Accordingly, net assets of the Center and changes therein are classified and reported as follows: Unrestricted net assets - Net assets that are not subject to donor-imposed stipulations. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that may or will be met, either by actions of the Center and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently restricted net assets - Net assets subject to donor-imposed stipulations that they be maintained permanently by the Center. Generally, the donors of these assets permit the Center to use all or part of the income earned on any related investments for general or specific purposes. Combined Financial Statements The financial statements of the McCallum Theatre Endowment, Inc. have been combined with the financial statements of Friends of the Cultural Center, Inc. Intercorpany transactions and balances have not been eliminated in the combined financial statements. Credit Risk Financial instruments which potentially subject the Center to concentrations of credit risk consist principally of temporary cash investments and pledge receivables. The Center places its temporary cash investments with high credit quality financial institutions and, by policy, limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to pledge receivables are limited due to the Center's large number of donors and their dispersion across multiple geographic areas. The Center currently does not have any significant concentrations of credit risk. Cash and Cash EAuivalents For purposes of the statement of cash flows, cash equivalents include money market funds and certificates of deposit with original maturities of three months or less. Inventory Base stock inventory is stated at the lower of cost or market. Changes to base stock inventory are made for only significant purchases and usage. Investments Investments are reported at fair market value. Investments consist of land, which was sold in October 1998 - see Note 8, and the Centers' donated interest in a charitable remainder annuity trust. (8) • Y • FRIENDS OF THE CULTURAL CE�T�C INC. NOTF5 TO THE OQMB= FINAP7CIAL STAT=TS 2. SUMMARY OF SIGNIFICANT ACC_MN MG POLICIES (continued) Property and Eauim ent Property and equipment are stated at cost and are being depreciated using the straight-line method over their estimated useful lives. Donations of property and equipment are recorded as support at their estimated fair value. such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted support. Absent donor stipulations regarding how long those donated assets must be maintained, the Center reports expirations of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. The Center reclassifies temporarily restricted net assets to unrestricted net assets at that time. The useful lives of property and equipment are follows: Building 60 years Improvements 3 - 20 years Theatrical equipment 7 - 20 years Office furniture and equipment 3 - 10 years Reclassifications Certain reclassifications have been made to the 1998 financial statements to conform with the 1999 financial statement presentation. Revenue Recognition Contributions are recognized when the donor makes a promise to give which is, in substance, unconditional. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal year in which the contributions are recognized. All other donor restricted contributions are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. Ticket sales received prior to the fiscal year to which they apply are not recognized as revenues until the year earned. These amounts are included in deferred revenue in the Statement of Financial Position. Tax-exempt Status The Center is classified as a Section 501(c) (3) Organization under the 1986 Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Cede. As a result, it has been determined to be exempt from federal income and California franchise taxes. - Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly actual results could differ from those estimates. (9) • FRIENDS OF THE CULTURAL CENO INC. IKYTFS TO THE COMBINED FINANCIAL STATEMENTS 3. PERMANENT EdD V&1ENTS During 1994, the McCallum Theatre Endowment, Inc. was funded with a $1,000,000 contribution, to provide income for the McCallum Theatre's operations and programming. Terms of this endowment stipulate that this endowment's principal must grow at 3% per annum, compounded annually. Should Friends of the Cultural Center, Inc. cease to function as an active organization responsible for the operation and maintenance of the McCallum Theatre for the Performing Arts or otherwise fail to maintain its status as a nonprofit organization, $1,000,000 from the McCallum Theatre Endowment, Inc. would be distributed to the Prim Foundation of Nevada. During 1988 and in subsequent years, a number of donors directed their current and future donations to establish a permanent endowment, to provide income for the McCallum Theatre's operation and programming. The Board of Trustees resolved that the principle of the endowment be made available for current operations, and established a plan to replenish, in the future, those funds which were borrowed. 4. PLEDGES RECEIVABLE Pledges receivable consists of the following at July 31, 1999 and 1998: 1999 1998 Pledges receivable $ 902,232 $ 684,008 Less: Reserve for doubtful pledges - (14,500) Net pledges receivable 902,232 669,508 Less: current portion of net pledges receivable (552,607) (304,362) $ 349,625 $ 365,146 The maturities of pledges receivable at July 31, 1999 are as follows: Less than one year $552,607 One to five years 349,625 902 232 5. INVENTORY Inventory consists of the following at July 31, 1999 and 1998: 1999 1998 Audio supplies $ 44,907 $ 44,907 Lighting supplies 80,675 80,675 Stage supplies 49,439 49,439 Other supplies 23,537 23,537 Total $ 198,558 $ 198,558 6. DESIGNATED NET ASSETS The -Center received_ a contribution of one million shares of common stock from a Corporation in July 1997 valued at $510,000. On August 1, 1997, the Corporation entered into a stock redemption agreement with the Center. The one million shares of common stock that were donated during the year were redeemed for $110,000 cash and a $400,000 note receivable on August 1, 1997. At July 31, 1999, this amount was classified as note receivable - current $100,000 and note receivable - noncurrent $200,000. The terms of the note require annual principal of $100,000 along with interest at 8% to be paid August 1, for each of the remaining three years. (10) • FRIENDS OF THE CULTURAL CE INC. NOTES TO THE CCPSINED FINANCIAL STATT=S 6. DESICATID NET ASSETS (continued) The Board of Trustees have designated the proceeds of these assets for the purpose of paying interest and/or principal on the note payable to the City of Palm Desert. The unrestricted - designated net assets at July 31, 1999 and 1998 are as follows: 1999 1998 $ 300,000 $ 400,000 7. PROPERTY, PLANT AND EQUIPMENT Property and equipment consists of the following at July 31, 1999 and 1998: 1999 1996 Building and improvements $15,734,074 $15,718,774 Theatrical equipment 2,224,755 2,529,119 Office furniture and equipment 492,522 333,709 Property held under capital lease 365,510 159,767 18,816,861 18,741,369 Less: accurulated depreciation (5,973,842) 5,720,015 12,843,019 13,021,354 Artwork 336,326 336,326 Total $13,179,345 $13,357,680 8. INVESTMENTS Investments consists of the following at July 31, 1999 and 1998: McCallum Friends of Theatre Cultural Endowment, Center Inc. Inc. Combined 1999 Interest in Charitable Remainder Annuity Trust $100,000 $ - $100,000 100 000 1998 Land $ - $ 302,250 $302,250 Interest in Charitable Remainder Annuity Trust 100,000 - 100,000 100 000 S 302,250 420 250 In October 1998, the land was sold for $350,000. The Endowment received net proceeds of $326,626 from this sale. 9. ADVANCE COLLECTIONS OF TICKET SALES The Center had received $1,477,331 and $1,607,931 at July 31, 1999 and 1998 respectively, on advance ticket sales for the 1999-2000 and 1998-1999 seasons. As each production is presented, that portion of the advance sales collections which pertains to that production will be recognized as revenue. In the event any of the scheduled productions for the 1999-2000 season is not presented, the advance ticket collections for that production will be available for refund to the ticket holder. (11) • FRIENDS OF THE CULTURAL CENI�, INC. NC7I'ES TO THE COMBINED FINANCIAL STATEP1E[VTS 10. REVOLVING LINE OF =IT Under the terms of a revolving credit agreement with a bank, the line of credit is secured by real property and matures in February 2000. The Center may borrow up to $1,500,000 at 1% above prime rate as stated in the wall Street Journal, with an interest rate floor of 71, and a ceiling of 16%. Funds for these borrowings may be used for any purpose. At July 31, 1999 and 1998, the Center had $1,500,000 and $616,271 outstanding on this line of credit. 11. N7PFS PAYABLE Notes payable consists of the following at July 31, 1999 and 1998: 1999 1998 Lean from private foundation with 7.5% interest only due monthly, and principal and interest due January 2002 $2,500,000 $2,500,000 Loan from valley Independent Bank with 9.51- interest payments due monthly, $100,000 principal payments due annually through July 2001. Lean paid off in April 1999 - 300,000 Lean from City of Palm Desert with 51 interest only due annually, and principal and interest due January 2007 500,000 500,000 3,000,000 3,300,000 Less: Current portion of notes payable - (100,000) $3,000,000 $3,200,000 Future principal maturities of notes payable outstanding at July 31, 1999 are as follows: July 31, Amount 2000 $ - 2001 - 2002 2,500,000 2003 - 2004 - Thereafter 500,000 Total $3,000,000 12. LEASES The Center leases office and theatrical equipment under capital leases expiring in various years through June 2004. The assets and liabilities under capital leases are recorded at the lower of the present value of the minis n lease payments or the fair value of the asset. The assets are amortized over their estimated productive lives. Amortization of assets under capital leases is included in depreciation expense. Property held under capital leases consists of the following at July 31, 1999 and 1998: 1999 1998 Office equipment $ 123,608 $ 57,345 Theatrical equipment 241,903 102,422 365 511 159 767 Interest rates on capitalized leases vary fran 101- to 201 and are imputed based on the lower of the Center's incremental borrowing rate at the inception of each lease or the lessor's implicit rate of return. (12) • FRIENDS OF 'IEEE CULTURAL CENO INC. NOTES TO THE Cav2INED FINANCIAL STATEM=S 12. LEASES (continued) Minimum future lease payments under capital leases as of July 31, 1999 for each of the next five years and in the aggregate are as follows: July 31, Amounts 2000 74,627 2001 82,082 2002 54,717 2003 41,657 2004 35,191 Present value of net minimnsn lease payments 288,274 Less: current portion of obligations under capital lease (74,627) 213 647 The Center leases real property under an operating lease expiring in 2048. All of the obligations under this lease were prepaid in 1982. Under the terms of this agreement all funds held in endowment are to be paid to the College of the Desert for the continued benefit of the theater upon expiration of the lease. The Center leases computer workstations under an operating lease agreement. Monthly payments of $731 are payable through June 2001. Mininnun lease payments for the years ended July 31, 2000 and July 31, 2001 amount to $8,775 and $4,388, respectively. 13. RESTRICTIONS ON NET ASSETS Temporarily restricted net assets are available for the following purposes or periods: 1999 1998 Contributions and pledges for operations for periods after July 31, S 902,232 769 508 Temporarily restricted net assets at July 1999 consists solely of outstanding pledges (see Note 4) in the amount of $902,232. Temporarily restricted net assets at July 1998 consists of outstanding pledges in the amount of $669,508 plus contributions received during 1998 amounting to $100,000 from two cities specifically designated for fiscal year July 31, 1999. Permanently restricted net assets are restricted to: 1999 1998 Permanent endowment with 3% growth factor $1,229,873 $1,194,052 Permanent endowment - 1998-1999 campaign with 306 annualized growth factor 659,625 - 51,889,498 S1,194,052 14. DUE TO/FRCM RELATED PARTIES During the fiscal year ended July 31, 1997, the McCallum Theater Endowment, Inc. loaned $300,000 to Friends of the Cultural Center, Inc. for operating purposes. These loans were repaid in July 1998. During the fiscal year ended July 31, 1996, the McCallum Theater Endnt, Inc. loaned $300,000 to Friends of the Cultural Center, Inc. for operating purposes. The loan is unsecured and is payable January 1, 1999 with interest at 3%. This loan was extended in 1999 with no specific principal repayment date. The balance of $300,000 is classified as long-term repayment in the statement of financial position. (13) FRI= OF THE CULTURAL =0 INC. • DK7PFS TO THE COMB= FDMNCIAL STATEMENT'S 14. DUE TO/FRCM RELA= PARTIES (continued) During the fiscal year ended July 31, 1999, the McCallum Theater Endowment, Inc. sold land held for investment (see Note 8) and loaned the proceeds $326,626 to the Center for operating purposes. Interest is accruing at 3% with no specified principal repayment date determined. The balance of $326,626 is classified as long-term repayment in the statement of financial position. Due to/from related parties consists of the following at July 31, 1999 and 1998: Current Portion July 31, 1999 July 31. 1998 Advances due within one year $ - $300,000 Accrued interest on advances and operating expenses 135,011 56,785 135 O11 356 785 Lana-Term Portion Advances due after one year 626 626 _$_ 15. 401 (K) PLAN A 401(K) plan was adopted in 1999. The plan coverage includes substantially all employees. The Center will match funds up to 506 of the first 6a of salary deferred by the employees. Amounts paid during the year ended July 31, 1999 amounted to $16,004. 16. DEVELCO,= REVENUE Development revenue on the combined statements of activities is allocated as follows: 1999 1998 Unrestricted net assets $1,261,183 $1,918,276 Tenn-orarily restricted net assets 850,752 514.565 Total Development Revenue 52,111,935 ,52,432,841 17. Dv2ACT OF YEAR 2000 The Center believes its computer system to be cctTpliant with year 2000. The business of the Center could be adversely affected should the organization or other entities with wham the Center does business be unsuccessful in completing critical modifications on a timely manner. (14)