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Home My WebLink AboutAnalysis & Investment Report - February 2004City orPalm Desert City and Redevelopment Agency Portfolios COMPLIANCE ANALYSIS AND INVESTMENT REPORT February 2004 Paul S. Gibson, C.C.M.T., Treasurer Thomas W. Jeffrey, J.D., M.B.A., Deputy City Treasurer Treasurer's Commentary The Federal Open Market Committee (FOMC) met on 16 March and left short-term interest rates unchanged. The February jobs report was bleak, showing new job growth only in the public sector; a declining rate of labor force participation; a decline in average hourly earnings (in real terms); and the highest average duration of unemployment since 1984. In short, the 28-month-old "jobless" recovery continues. There are several causes: 1) the use of technology to eliminate jobs; 2) the "offshoring" of jobs; 3) the use of temporary labor to fill jobs; 4) renewed merger and acquisition activity; 5) a continued focus on corporate cost controls; and 6) the absence of an economic "multiplier effect" due to a diminished manufacturing base. The unemployment rate would have risen from 5.6% to 5.8% in February but for 372,000 workers who gave up looking for jobs. After the release of the jobs report, the yield on 10-year U.S. Treasuries fell below 4%, a new low, since inflation is not likely to be an issue in the foreeseeable future. There may be some economic improvement over the coming months when consumer spending increases due to income tax refunds and a new wave of mortgage refinancings. The amount of home refinancings may be smaller than last time, however, since so many homeowners extracted equity from their homes in 2003. Pas Gihson4 c. c.M r Treasurer Dollars in Thousands PORTFOLIO STATISTICS FEB-04 JAN-04 DEC-03 NOV-03 OCT-03 SEP-03 CITY Month -End Book Value*** $ 124,938 $ 127,837 $ 132,836 $ 132,138 $ 134,142 $ 138,363 Month -End Market Value*** $ 125,243 $ 128,091 $ 133,087 $ 132,214 $ 134,231 $ 138,561 Paper Gain (Loss) $ 305 $ 254 $ 251 $ 76 $ 89 $ 198 Prior Year Book Variance $ (39,878) $ (46,315) $ (3,851) $ (10,382) $ (9,912) $ (32,060) Interest Earnings $ 143 $ 168 $ 172 $ 169 $ 175 $ 176 Yield -To -Maturity 1.58% 1.58% 1.58% 1.61% 1.61% 1.62% Weighted Maturity (Days) 111 100 92 94 94 93 Effective Duration 0.21 0.18 0.16 0.17 0.17 0.19 RDA Month -End Book Value*** $ 164,571 $ 163,130 $ 141,723 $ 144,184 $ 144,220 $ 152,893 Month -End Market Value *** $ 166,715 $ 165,294 $ 143,881 $ 146,322 $ 146,360 $ 155,033 Paper Gain (Loss) $ 2,144 $ 2,164 $ 2,158 $ 2,138 $ 2,140 $ 2,140 Prior Year Book Variance $ 60,901 $ 58,107 $ 48,936 $ 51,423 $ 49,336 $ 53,672 Interest Earnings $ 154 $ 151 $ 159 $ 155 $ 162 $ 161 Yield -To -Maturity 1.20% 1.24% 1.29% 1.29% 1.30% 1.28% Weighted Maturity (Days) 93 91 89 87 87 82 Effective Duration 0.06 0.06 0.03 0.03 0.04 0.04 Omits SLGSs. Dollars in Thousands Ageing Interval <1M < 2M < 3M < 6M < 1YR < 2YR < 3YR < 4YR < 5YR > 5YR Total: City of Palm Desert -- Portfolio Characteristics 28 February 2004 Market Value $ 66,682 7,083 4,988 6,012 $ 84,765 Ratings * Aaa Unrated ** A Al/P1 Total: Market Value $ 26,705 72,785 10,592 2,502 $ 112,584 Sector Market Value Money Market Funds $ 21,715 LAIF 40,000 RDA Loan 32,785 MTNs 13,080 U.S. Treasury Federal Agency 2,502 Commercial Paper 2,502 Total: $ 112,584 Month City Yield LAIF Yield Variance Mar03 1.48 1.90 -0.43 Apr 1.45 1.86 -0.41 May 1.62 1.77 -0.15 Jun 1.58 1.70 -0.12 Jul 1.46 1.65 -0.20 Aug 1.43 1.63 -0.20 Sep 1.62 1.64 -0.01 Oct 1.61 1.60 0.01 Nov 1.61 1.57 0.03 Dec 1.58 1.55 0.03 Jan04 1.58 1.53 0.05 Feb 1.58 1.44 0.14 'General Fund Ageing 100 80 60 40 20 0 79 <1M 0 0 < 2M < 3M 8 6 1-I r-"1 < 6M < 1YR 0 < 2YR Credit Quality 1 Unrated ** 66% Asset AllocationI RDA Loan 30% Money Market Funds 20% Performance' 2.9 2.5 -a 2.1 d 1.7 1.3 Mar03 Apr May Jun Jul Aug Sep Oct Nov Dec Jan04 Feb ■LAIF Yield ® City Yield * Moody's Credit Ratings ** LAIF, and City Loan to RDA Page 2 of 8 City of Palm Desert Portfolio Characteristics 28 February 2004 Market Ratings lPar Value Medium -Term Notes $ 3,000,000 $ 2,500,000 $ 2,500,000 $ 2,000,000 Issuer FORD FORD FORD FORD Coupon I Maturity I Cost I YTM 7.20 7.20 7.50 6.70 6/15/07 $ 6/15/07 $ 6/15/04 $ 7/16/04 $ Price 1 Value 3,125,947 5.75 109.31 $ 2,604,956 5.75 109.31 $ 2,533,524 2.84 101.71 $ 2,026,134 3.17 101.86 $ 3,279,285 2,732,737 2,542,788 2,037,284 Moody's A3 A3 A3 A3 $ 10,000,000 Subtotal $ 10,290,561 3.90 $ 10,592,094 Commercial Paper - $ 2,425,000 $ 2,517,000 - Discount GENERAL ELECTRIC GENERAL ELECTRIC 4.25 1/28/05 $ 2,489,655 1.30 102.61 $ 2,488,273 Aaa 1.06 9/15/04 $ 2,499,880 1.10 99.41 $ 2,502,038 Aaa $ 4,942,000 Subtotal $ 4,989,535 1.10 $ 4,990,311 Federal Agencies -- Discount $ 2,513,000 FED NATIONAL MTG ASSOC 1.06 7/28/04 $ 2,499,670 1.08 99.58 $ 2,502,445 Aaa $ 2,513,000 Subtotal $ 2,499,670 1.08 $ 2,502,445 LGIP $ 40,000,000 L.A.I.F. 0.00 3/1/04 $ 40,000,000 1.44 100.00 $ 40,000,000 NR $ 40,000,000 Subtotal $ 40,000,000 1.44 $ 40,000,000 LGIP $ 12,860,177 C.A.M.P. 0.00 3/1/04 $ 12,860,177 0.91 100.00 $ 12,860,177 N/A $ 12,860,177 Subtotal $ 12,860,177 0.91 $ 12,860,177 Pooled Funds -- AIM $ 8,854,980 PRIME PORTFOLIO 0.00 3/1/04 $ 8,854,980 0.64 100.00 $ 8,854,980 Aaa $ 8,854,980 Subtotal $ 8,854,980 0.64 $ 8,854,980 City Loan to RDA $ 32,785,480 CITY OF PALM DESERT 0.00 3/1/34 $ 32,785,480 1.44 100.00 $ 32,785,480 NR $ 32,785,480 Subtotal $ 32,785,480 1.44 $ 32,785,480 Total Investments $ 111,955,636 Cash $ 12,192,042 $ 235,133 $ 206,407 $ 23,003 CITY MAIN CHKG RECREATIONAL FAC CHKG DESERT WILLOW CHKG OFFICE COMPLEX TRUST 0.00 0.00 0.00 0.00 3/1/04 3/1/04 3/1/04 3/1/04 $ 112,280,403 1.58 $ 12,192,042 $ 235,133 $ 206,407 $ 23,003 $ 112,585,487 N/A 100.00 $ N/A 100.00 $ N/A 100.00 $ N/A 100.00 $ 12,192, 042 235,133 206,407 23,003 NR NR NR NR $ 12,656,585 Subtotal $ 12,656,585 $ 12,656,585 NR = Not Rated Page 3 of 8 City of Palm Desert Portfolio Characteristics 28 February 2004 Market Ratings Par Value I Issuer I Coupon_ Maturity I Cost I YTM $ 124,612,221 $ 124,936,988 Price I Value $ 125,242,072 Moodys NR = Not Rated Page 4of8 Dollars in Thousands Ageing Interval <1M < 2M < 3M < 6M < 1YR < 2YR < 3YR < 4YR < 5YR > 5YR Total: Palm Desert Redevelopment Agency -- Portfolio Characteristics 28 February 2004 Market Value $ 101,405 2,494 2,999 3,993 6,504 $ 117,395 Quality* Market Value Aaa $ 84,314 Unrated ** 60,959 Aa A A1/P1 19,004 Total: $ 164,277 Sector Market Value U.S. Treasury $ 7,112 Money Market Funds 71,705 LAIF 60,958 Federal Agency 5,498 Commercial Paper 19,004 Corporate Bonds Total: $ 164,277 Month RDA Yield LAIF Yield Variance Mar03 1.64 1.90 -0.26 Apr 1.74 1.86 -0.12 May 1.71 1.77 -0.06 Jun 1.71 1.70 0.01 Jul 1.56 1.65 -0.09 Aug 1.36 1.63 -0.27 Sep 1.28 1.64 -0.36 Oct 1.30 1.60 -0.30 Nov 1.29 1.57 -0.28 Dec 1.29 1.55 -0.25 Jan04 1.24 1.53 -0.29 Feb 1.20 1.44 -0.24 Portfolio Ageing w/o SLGSsi 100 90 80 70 60 .0 50 40 a° 30 20 10 0 86 2 3 3 6 r, 0 0 0 < 1 M < 2M < 3M < 6M < 1 YR < 2YR < 3YR < 4YR ,J Credit Quality' L, Aaa 58% Unrated '* 42% Asset Allocation U.S. Treasury 5% Money Market Funds 51 % LAI F 44% Performance 2.1 1.1 Mar03 Apr May Jun Jul Aug Sep Oct Nov DecJan04Feb I■LAIFYield RDA Yield * Moody's Credit Ratings ** LAIF Page 5 of 8 Palm Desert Redevelopment Agency Portfolio Characteristics 28 February 2004 Market Ratings Par Value Commercial Paper $ 3,008,000 $ 3,004,000 $ 3,021,000 $ 3,004,000 $ 2,008,000 $ 2,500,000 $ 2,500,000 Issuer - Discount CITIGROUP CITIGROUP GENERAL ELECTRIC MERRILL LYNCH TOYOTA TOYOTA WELLS FARGO BANK 1 Coupon I Maturity I Cost I YTM 1.04 5/10/04 1.03 3/22/04 1.10 9/22/04 1.02 3/18/04 1.01 6/23/04 0.98 3/22/04 0.99 4/22/04 $ 2,999,223 $ 2,999,531 $ 2,999,215 $ 2,999,915 $ 1,999,831 $ 2,496,461 $ 2,494,294 1.06 1.05 1.14 1.04 1.03 1.00 1.01 Price I Value , Moody's 99.79 99.93 99.38 99.95 99.66 99.94 99.85 $ 3,001,804 $ 3,002,042 $ 3,002,413 $ 3,002,399 $ 2,001,271 $ 2,498,387 $ 2,496,138 P-1 P-1 P-1 P-1 P-1 P-1 P-1 $ 19,045,000 Subtotal $ 18,988,470 1.05 $ 19,004,453 U.S. Treasury -- Discount $ 7,143,000 UNITED STATES TREASURY 4.59 8/15/04 $ 4,989,671 5.54 99.56 $ 7,111,578 Aaa $ 7,143,000 Subtotal $ 4,989,671 5.54 $ 7,111,578 Federal Agency - $ 2,000,000 $ 3,523,000 - Discount FED NATIONAL MTG ASSOC FED NATIONAL MTG ASSOC 1.02 6/23/04 $ 1,991,783 1.04 99.69 1.10 9/3/04 $ 3,499,963 1.14 99.46 $ 1,993,800 $ 3,503,976 Aaa Aaa $ 5,523,000 Subtotal $ 5,491,747 1.10 $ 5,497,776 LGIPs $ 40,000,000 $ 6,226,680 $ 9,722,538 $ 5,009,039 L.A.I.F. L.A.I.F. (HOUSING) L.A.I.F. BOND PROCEEDS L.A.I.F. BOND PROCEEDS 0.00 3/1/04 $ 40,000,000 0.00 3/1/04 $ 6,226,680 0.00 3/1/04 $ 9,722,538 0.00 3/1/04 $ 5,009,039 1.44 100.00 $ 40,000,000 1.44 100.00 $ 6,226,680 1.44 100.00 $ 9,722,538 1.44 100.00 $ 5,009,039 NR NR NR NR $ 60,958,257 Subtotal $ 60,958,257 1.44 $ 60,958,257 LGIP $ 29,812,429 C.A.M.P. 0.00 3/1/04 $ 29,812,429 0.91 100.00 $ 29,812,429 NR $ 29,812,429 Subtotal $ 29,812,429 0.91 $ 29,812,429 Pooled Funds -- AIM $ 41,892,267 PRIME PORTFOLIO 0.00 3/1/04 $ 41,892,267 0.64 100.00 $ 41,892,267 Aaa $ 41,892,267 Subtotal $ 41,892,267 0.64 $ 41,892,267 Total Investments $ 164,373,954 Cash $ 2,118,000 $ 320,322 HOUSING AUTH CHKG HOUSING AUTH TRUST $ 162,132,842 1.20 $ 164,276,761 0.00 3/1/04 $ 2,118,000 N/A 100.00 $ 2,118,000 NR 0.00 3/1/04 $ 320,322 N/A 100.00 $ 320,322 NR $ 2,438,322 Subtotal $ 2,438,322 $ 2,438,322 NR = Not Rated Page 6 of 8 Palm Desert Redevelopment Agency Portfolio Characteristics 28 February 2004 Market Par Value Issuer I Coupon I Maturity I Cost I YTM Price I Value Ratings Moody's' Total Cash and Investments $ 166,812,276 $ 164,571,164 $ 166,715,084 NR = Not Rated Page 7 of 8 STATEMENT OF COMPLIANCE The investment portfolios of the City of Palm Desert ("City") and the Palm Desert Redevelopment Agency ("RDA") are governed by federal, state, and local law. The City Treasurer's "Statement of Investment Policy" is more restrictive than the California Government Code. The Palm Desert Investment Committee and the Palm Desert City Council review the Statement of Investment Policy annually. For the month ended 28 February 2004, the City and the RDA investment portfolios were in compliance with all applicable federal, state, and local laws and regulations. The City Treasury continued to pursue conservative and prudent investment strategies, based upon the stated objectives of safety, liquidity, and yield (in order of priority). Barring unforeseen events, the City Treasury should have sufficient cash to finance the operations of the City of Palm Desert and the Palm Desert Redevelopment Agency over the next six months. In addition, portions of either the City or the RDA portfolio could be liquidated in order to meet any significant, unexpected cash requirements. Bloomberg L.P. and Interactive Data Corporation provided the data and the analytical tools that were used to calculate the market value of all securities in the City and the RDA investment portfolios. State and Local Government Series securities are held in escrow accounts and are therefore not included in this report as assets. All balances are bank balances. Respectfully submitted on 24 March 2004, Pis Q C.. C.. M 7 City Treasurer CA Govt Code Investment Category SUMMARY OF AUTHORIZED INVESTMENTS 1 California Government Code 1 City Investment Policy Maximum Maximum Quality Maximum Maximum Quality % of City % of RDA Maturity Limit S&P/Mdys Maturity Limit S&P/Mdys Portfolio Portfolio 53601(a) Palm Desert Bonds 5 Years No Limit Not Authorized (1) 53601(b) U.S. Treasuries. 5 Years No Limit 5 Years No Limit 0.0% 3.1% 53601(c) CA State Debt 5 Years No Limit Not Authorized 53601(d) CA Local Agency Debt 5 Years No Limit Not Authorized 53601(e) Federal Agencies 5 Years No Limit 5 Years 30% 2.2% 3.4% 53601(f) Bankers's Acceptances 180 Days 40% 180 Days 40% A-1 & P-1 - - 53601(g) Commercial Paper 270 Days 25% A-1+ or P-1 270 Days 25% . , A-1+ or P-1 2.2% 11.7% 53601(h) Negotiable CDs ,,,_„ 5 Years 30% 5 Years 30% AA- or Aa3 - - 53601(i) Repos 1 Year, No Limit 30 Days 20% AAA & Aaa - - 53601(i) Reverse Repos 92 Days 20% Not Authorized 53601 (j) Medium -Term Notes 5 Years 30% _, A 5 Years 30% A 11.4% 0.0% 53601(k) Mutual Funds 90 Days 20% AAA & Aaa. •53601(1) 90 Days 20% (2) AAA & Aaa 7.9% 25.8% Trust Indenture Debt Not Authorized 53601(m) Secured Bank Deposits 5 Years No Limit Not Authorized 53601(k) Local Government Investment Pools 90 Days 20% AAA & Aaa or Advisor 90 Days 20% (2) AAA & Aaa or Advisor 11.5% _ 18.4% 53601(n) Mortgage -Backed Securities 5 Years 20% A (Issuer) & AA (Security) Not Authorized 16429 LAIF. . , ...,, No Limit I No Limit 35.6% 37.6% (1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. (2) Maximum limit for mutual funds and local government investment pools, excluding bond proceeds. 70.8% 100.0% * Certified California Municipal Treasurer Page 8 of 8