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Compliance Analysis and Investment Report CC-RDA - October 2005
--=-� City of Palm Desert City and Redevelopment Agency Portfolios COMPLIANCE ANALYSIS S S AND INVESTMENT REPORT October 2005 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 November 1, and raised the Federal Funds Rate by 25 basis points to 4.00% -- the 12th consecutive increase. The FOMC observed that elevated energy prices, and hurricane damage were temporary disruptions that would be offset by continued economic strength, coupled with rebuilding in hurricane -damaged areas. The FOMC indicated that "policy accomodations would continue to be removed at a measured pace" in order to control the threat of price -wage inflation. The FOMC is expected to raise the Federal Funds Rate to 4.25% on December 13; to 4.50% on January 31, 2006; and to 4.75% on March 28 (76% probability assigned by futures market). Deutsche Bank believes that the Federal Funds Rate could rise to 5.00% if the economy runs out of spare capacity, and price -wage inflation starts, driven by higher energy prices. The yield curve is expected to be flat, however, not inverted (this usually precedes a recession). In the third quarter, U.S. Gross Domestic Product (GDP) grew at an annualized rate of 3.80% -- the eighth consecutive quarter of growth. Inflation, excluding food and energy prices, was 2.00% in August and in September -- near the top of the FOMC's comfort level. U.S. GDP is projected to grow at 3.50% in 2005, and at 3.00% in 2006. The U.S. Unemployment Rate is .,projected to continue to remain at 5.00% in 2006. In short, the economy will continue to grow, but at a slower pace. Chairman Greenspan will retire on February 1, 2006. Dollars in Thousands CITY Month -End Book Value — Month -End Market Value`"' Paper Gain (Loss) Prior Year Book Variance Interest Earnings Yield -To -Maturity Weighted Maturity (Days) Effective Duration RDA Month -End Book Value'*" Month -End Market Value 'k Paper Gain (Loss) Prior Year Book Variance Interest Earnings Yield -To -Maturity Weighted Maturity (Days) Effective Duration Pis Gibes c.c.s 7- Treasurer PORTFOLIO STATISTICS OCT-05 SEP-05 AUG-05 JULY-05 JUNE-05 MAY-05 $ 148,655 $ 149,081 $ 153,545 $ 151,176 $ 150,073 $ 172,413 $ 148,157 $ 148,892 $ 153,380 $ 150,936 $ 149,868 $ 172,196 $ (498) $ (189) $ (165) $ (240) $ (205) $ (217) $ 18,105 $ 16,961 $ 16,570 $ 9,725 $ 7,656 $ 46,510 $ 444 $ 431 $ 444 $ 437 $ 377 $ 359 3.67% 3.56% 3,43% 3.34% 3.29% 3.06% 214 211 208 216 220 134 0.33 0.35 0.36 0.40 0.43 0.21 $ 123,243 $ 126,018 $ 139,481 $ 143,968 $ 146,433 $ 124,373 $ 122,833 $ 125,695 $ 139,291 $ 143,916 $ 146,296 $ 124,233 $ (410) $ (323) $ (190) $ (52) $ (137) $ (140) $ (25,906) $ (33,342) $ (21,638) $ (31,342) $ (38,476) $ (52,270) $ 350 $ 374 $ 374 $ 386 $ 366 $ 302 3.54% 3.42% 3.32% 3.15% 3.09% 2.93% 156 153 146 142 140 101 0.25 0.27 0.27 0.28 0.30 0.21 *** Omits SLGSs. Dollars in Thousands Aaeinq Interval < 1 M < 2M < 3M < 6M < 1YR < 2YR < 3YR < 4YR < 5YR > 5YR Total: Ratings AAA Unrated AA A-1 BB+ Total: Sector MMFs LAIF RDA Loan MTNs Agencies CP Total: Month Nov04 Dec Jan05 Feb Mar Apr May Jun Jul Aug Sep Oct City of Palm Desert -- Portfolio Characteristics 31 October 2005 Market Value $ 65,183 1,985 1,011 2,022 2,959 22,371 $ 95,531 Market Value $ 85,602 40,000 6,064 10,091 $ 141,757 Market Value $ 27,034 40,000 32,785 18,120 23,818 $ 141,757 Citv Yield LAIF Yield 2.08 2.00 2.26 2.20 2.54 2.26 2.66 2.37 2.79 2.54 2.94 2.72 3.06 2.86 3.29 2.97 3.37 3.08 3.43 3.18 3.56 3.32 3.67 3.46 r General Fund Ageing 100 80 - 68 c 60 - 0 C 40 - 0 23 IL 20 n 2 1 2 3 I I 0 0 ^ < 1 M < 2M < 3M < 6M < 1 YR < 2YR < 3YR /' Credit Quality AAA 61% IAssetAllocation� I� Variance Performances 0.08 0.06 ! 3.8 BB+ 7% AA 4% A-1 Unrated 0% 28% Standard and Poors "" LAIF, and City Loan to RDA Page 2 of 8 City of Palm Desert Portfolio Holdings 31 October 2005 Market Ratings Par Value Issuer I Coupon] Maturity I Cost YTM I Price Value I Moody's S & P Medium -Term Notes $ 3,000,000 BANK ONE 4.13 9/1/07 $ 3,025,158 3.64 99.04 $ 2,971,341 Aa3 A+ $ 3,000,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 3,062,018 5.75 99.79 $ 2,993,787 Baa3 BB+ $ 2,500,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 2,551,681 5.75 99.79 $ 2,494,822 Baa3 BB+ $ 4,612,000 FORD MOTOR CREDIT CORP 7.20 6/15/07 $ 4,757,927 5.10 99.79 $ 4,602,448 Baa3 BB+ $ 2,000,000 GENERAL ELECTRIC 3.13 11/9/06 $ 1,984,271 3.92 98.26 $ 1,965,212 Aaa AAA $ 3,000,000 GOLDMAN SACHS 7.20 3/1/07 $ 3,141,406 3.50 103.09 $ 3,092,595 Aa3 A+ $ 18,112,000 Subtotal $ 18,522,461 4.66 $ 18,120,205 Federal Agencies -- Discount $ 2,060,000 FED HOME LOAN BANK 0.00 3/20/06 $ 2,000,681 3.59 98.39 $ 2,026,834 Aaa AAA $ 2,000,000 FED HOME LOAN MTG CORP 0.00 12/13/05 $ 1,967,042 3.49 99.54 $ 1,990,800 Aaa AAA $ 1,023,000 FED NATIONAL MTG ASSOC 0.00 1/18/06 $ 999,798 3.54 99.14 $ 1,014,202 Aaa AAA $ 1,630,000 FED NATIONAL MTG ASSOC 0.00 11/15/05 $ 1,607,855 3.44 99.85 $ 1,627,555 Aaa AAA $ 6,713,000 Subtotal $ 6,575,376 3.52 $ 6,659,391 Federal Agencies -- Coupon $ 3,000,000 FED HOME LOAN BANK 3.70 8/15107 $ 2,995,274 3.79 98.41 $ 2,952,188 Aaa AAA $ 1,500,000 FED HOME LOAN BANK 2.10 10/13/06 $ 1,476,687 3.79 97.75 $ 1,466,250 Aaa AAA $ 2,035,000 FED HOME LOAN MTG CORP 2.50 12/4/06 $ 2,006,288 3.84 97.78 $ 1,989,848 Aaa AAA $ 2,009,000 FED HOME LOAN MTG CORP 1.88 2/15/06 $ 1,998,788 3.67 99.31 $ 1,995,188 Aaa AAA $ 2,786,000 FED NATIONAL MTG ASSOC 7.13 3/15/07 $ 2,917,100 3.55 103.31 $ 2,878,286 Aaa AAA $ 3,000,000 FED NATIONAL MTG ASSOC 3.00 8/15/07 $ 2,968,474 3.63 97.22 $ 2,916,563 Aaa AAA $ 3,000,000 FED NATIONAL MTG ASSOC 2.75 8/11/06 $ 2,975,865 3.81 98.69 $ 2,960,625 Aaa AAA $ 17,330,000 Subtotal $ 17,338,477 3.72 $ 17,158,948 Local Government Investment Pools $ 40,000,000 L.A.I.F. 0.00 11/1/05 $ 40,000,000 3.46 100.00 $ 40,000,000 U U $ 18,270,128 C.A.M.P. 0.00 11/1/05 $ 18,270,128 3.60 100.00 $ 18,270,128 U AAA $ 58,270,128 Subtotal $ 58,270,128 3.50 $ 58,270,128 Money Market Funds $ 8,762,798 AIM 0.00 11/1/05 $ 8,762,798 3.46 100.00 $ 8,762,798 Aaa AAA $ 8,762,798 Subtotal $ 8,762,798 3.46 $ 8,762,798 City Loan to RDA $ 32,785,480 CITY OF PALM DESERT 0.00 11/1/35 $ 32,785,480 3.46 100.00 $ 32,785,480 U U $ 32,785,480 Subtotal $ 32,785,480 3.46 $ 32,785,480 Total Investments $ 141,973,406 "U" = Unrated $ 142,254,719 3.67 $ 141,756,950 Page 3 of 8 City of Palm Desert Portfolio Holdings 31 October 2005 Market Par Value Issuer I Couponj Maturity I Cost YTM I Price Value Cash $ 5,345,582 CITY MAIN CHKG 0.00 11/1/05 $ 5,345,582 0.00 100.00 $ 5,345,582 $ 559,439 DESERT WILLOW CHKG 0.00 11/1/05 $ 559,439 0.00 100.00 $ 559,439 $ 494,913 RECREATIONAL FAC CHKG 0.00 11/1/05 $ 494,913 0.00 100.00 $ 494,913 $ 6,399,935 Subtotal $ 6,399,935 $ 6,399,935 Total Investments and Cash $ 148,373,341 $ 148,654,654 $ 148,156,885 Corporate Issuers FORD MOTOR CREDIT CORPORATION GOLDMAN SACHS BANK ONE GENERAL ELECTRIC CAPITAL CORPORATION % of Portfolio (Market Value) 6.81 % 2.08% 2.00% 1.32% Ratings I Moody's I S & P N/A N/A N/A N/A N/A N/A 7 "U" = Unrated Page 4 of 8 Dollars in Thousands AGleinp Interval < 1 M < 2M < 3M < 6M < 1YR < 2YR < 3YR < 4YR < 5YR > 5YR Total: Quality AAA Unrated A-1 BB+ Total: Sector LAIF MMFs Agencies CID MTNs Treasuries Total: Month Nov04 Dec Jan05 Feb Mar Apr May Jun Jul Aug Sep Oct RDA Yield 1.84 2.00 2.23 2.37 2.58 2.80 2.93 3.09 3.21 3.32 3.42 3.54 Palm Desert Redevelopment Agency -- Portfolio Characteristics 31 October 2005 Market Value $ 49,083 12,368 5,907 14,816 $ 82,174 Market Value $ 53,517 61,157 6,488 $ 121,162 Market Value $ 61,157 27,025 20,660 12,320 $ 121,162 LAIF Yield 2.00 2.20 2.26 2.37 2.54 2.72 2.86 2.97 3.08 3.18 3.32 3.46 (Portfolio Ageing w/o SLGSs� 100 90 80 0 70 60 c 60 - 0 50 - C 40 - n°. 30 - 15 18 20 100 I 0 0 n I� I I 0 0 < 1 M < 2M < 3M < 6M < 1 YR < 2YR < 3YR < 4YR \ l (Credit Qualityl \ Unrated AAA 51 % 44% BB+ A 1 5% 0% Asset Allocation Variance / Performances -0.17 -0.20 3 6 -0.03 0.00 3.1 ,3 0.04 �. -a 2.6 0.08 z= Y 0.07 ' 2.1 0.13 0.13 1.6 0.14 Nov04 Dec Jan05 Feb Mar Apr May Jun Jul Aug Sep Oct 0.10 0.08 © LAIF Yield MR DA Yield Standard and Poors * LAIF Page 5 of 8 PALM DESERT REDEVELOPMENT AGENCY Portfolio Holdings 31 October 2005 Market Par Value Issuer Coupon Maturity Cost YTM I Price I Value Medium -Term Notes Ratings ' Moody's l S & P $ 3,000,000 FORD MOTOR CREDIT CORP 6.50 1/25/07 $ 3,057,363 4.85 98.81 $ 2,964,399 Baa3 BB+ $ 3,525,000 FORD MOTOR CREDIT CORP 6.88 2/1/06 $ 3,550,077 3.94 99.95 $ 3,523,188 Baa3 BB+ $ 2,896,000 GENERAL ELECTRIC 6.38 3/15/06 $ 2,925,988 3.52 100.70 $ 2,916,197 Aaa AAA $ 2,896,000 GENERAL ELECTRIC 6.38 3/15/06 $ 2,925,988 3.52 100.70 $ 2,916,197 Aaa AAA $ 12,317,000 Subtotal $ 12,459,416 3.97 $ 12,319,980 Federal Agency -- Coupon $ 3,000,000 FED FARM CREDIT BANK 2.63 9/17/07 $ 2,956,428 3.43 96.47 $ 2,894,063 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 3.38 9/14/07 $ 2,994,845 3.82 97.78 $ 2,933,438 Aaa AAA $ 3,005,000 FED HOME LOAN BANK 2.50 3/15/06 $ 2,994,898 3.42 99.34 $ 2,985,280 Aaa AAA $ 3,000,000 FED HOME LOAN MTG CORP 4.88 3/15/07 $ 3,058,788 3.38 100.38 $ 3,011,250 Aaa AAA $ 2,974,000 FED HOME LOAN MTG CORP 3.63 9/15/06 $ 2,974,766 3.60 99.22 $ 2,950,766 Aaa AAA $ 2,974,000 FED HOME LOAN MTG CORP 3.63 9115/06 $ 2,974,908 3.60 99.22 $ 2,950,766 Aaa AAA $ 2,973,000 FED NATIONAL MTG ASSOC 3.63 3/15/07 $ 2,975,855 3.95 98.72 $ 2,934,908 Aaa AAA -1 $ 20,926,000 Subtotal $ 20,930,489 3.60 $ 20,660,469 Local Government Investment Pools $ 40,320,759 L.A.I.F. 0.00 11/1/05 $ 40,320,759 3.46 100.00 $ 40,320,759 U U $ 5,848,824 L.A.I.F. (HOUSING) 0.00 11/1/05 $ 5,848,824 3.46 100.00 $ 5,848,824 U U $ 14,827,783 L.A.I.F. BOND PROCEEDS 0.00 11/1/05 $ 14,827,783 3.46 100.00 $ 14,827,783 U U $ 160,090 L.A.I.F. BOND PROCEEDS 0.00 11/1/05 $ 160,090 3.46 100.00 $ 160,090 U U $ 5,792,052 C.A.M.P. 0.00 11/1/05 $ 5,792,052 3.60 100.00 $ 5,792,052 U AAA $ 66,949,508 Subtotal $ 66,949,508 3.47 $ 66,949,608 Money Market Funds $ 21,231,698 AIM 0.00 11/1/05 $ 21,231,698 3.46 100.00 $ 21,231,698 Aaa AAA $ 21,231,698 Subtotal $ 21,231,698 3.46 $ 21,231,698 Total Investments $ 121,424,206 $ 121,571,111 3.54 $ 121,161,656 Cash $ 1,331,912 HOUSING AUTH CHKG 0.00 11/1/05 $ 1,331,912 0.00 100.00 $ 1,331,912 N/A N/A $ 339,904 HOUSING AUTH TRUST 0.00 11/1/05 $ 339,904 0.00 100.00 $ 339,904 N/A N/A $ 1,671,816 Subtotal $ 1,671,816 $ 1,671,816 Total Investments and Cash $ 123,096,022 $ 123,242,927 $ 122,833,471 "U" = Unrated Page 6 of 8 PALM DESERT REDEVELOPMENT AGENCY Portfolio Holdings 31 October 2005 I Par Value I Issuer Corporate Issuers Coupon I Maturity FORD MOTOR CREDIT CORPORATION GENERAL ELECTRIC CAPITAL CORPORATION Cost % of Portfolio (Market Value) 5.37% 4.76% Market Ratings YTM I Price I Value I Moody's I S& P "U" = Unrated 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 31 October 2005, 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 23 November 2005, PauLS. 67dijo�, C. C. A/. r City Treasurer SUMMARY OF AUTHORIZED INVESTMENTS California Government Code I City Investment Policy CA Govt Maximum Maximum Quality Maximum Maximum Quality % of City % of RDA Code Investment Category 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 I 1 0.0% 0.0% 53601(c) CA State Debt 5 Years No Limit Not Authorized 53601(d) CA Local Agency Debt 5 Years No Limit NotAuthorized 53601(e) Federal Agencies 5 Years No Limit 5 Years 30% 6% 16.8% 17.2% 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 0.0% 0.0% 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 l 30% J A I 13.0% 10.3% 53601(k) Mutual Funds 90 Days 20% AAA & Aaa 90 Days 120% (2) 1 AAA & Aaa 6.2% 17 5% 53601(I) Trust Indenture Debt Not Authorized 53601(m) Secured Bank Deposits 5 Years No Limit Not Authorized 53601(k) Local Government AAA & Aaa I AAA & AaaI Investment Pools 90 Days 20% or Advisor 90 Days 20% (2) 1 or Advisor 1 12.8% 4.8% 53601(n) Mortgage -Backed 5 Years 20% A (Issuer) & Not Authorized Securities AA (Security) LAW No Limit No Limit ( 28.1% 50.3% (1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. I 77.0% 100.0% (2) Maximum limit for mutual funds and local government investment pools, excluding bond proceeds Certified California Municipal Treasurer Page 8 of 8