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Home My WebLink AboutCompliance Analysis and Investment Reports - November 2010 - Joint ConsiderationCITY OF PALM DESERT FINANCE DEPARTMENT INTEROFFICE MEMORANDUM TO: RACHELLE KLASSEN, CITY CLERK FROM: NIAMH ORTEGA, RECORDING SECRETAR) DATE: JANUARY 31, 2011 SUBJECT: COMPLIANCE ANALYSIS AND INVESTMENT REPORTS Please find attached the Compliance Analysis and Investment Reports which were presented and approved at the recent meetings of the Audit, Investment and Finance Committee for the months of September, October and November 2010. Please include the report on the upcoming agenda for review and acceptance by City Council. Also included are the Minutes of the September, October and November meetings for acceptance by the City Council. Please feel free to contact me at Ext. 382 if you have any questions. Thank you. nmo Attachment (as noted) GAFINANCE\NIAMH ORTEGA\INVESTMENT COMM ITTEE\MEMOS\RKLASSENINVREPORT.WPD city orFalm Desert C r,ld RiidevelapM4 rnt Agonoy PoWbilos CC MPLIA40k Lvmi AND INVOWI* ENT REPORT NtiV8i1b6r 30,° 2010 ` 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 December 14, and announced that it would maintain the pace of its $600 billion QE2 stimulus because the U.S. economy was growing too slowly to reduce high unemployment. In advance of the meeting, Moody's warned that the U.S. would put its "Aaa" credit rating at risk if Congress extended the Bush tax cuts. A Moody's "Negative Outlook" on that credit rating would substantially increase the U.S. Government's borrowing costs. Yields on U.S. Treasury bonds have been rising in recent weeks due to market nervousness about exploding U.S. debt and future inflation. Weiss Research is forecasting that 2011 will be the "Year of the Sovereign Debt Crisis" due to pressure from global bond investors. Debt -ridden governments in Europe and in the United States will be compelled to adopt severe austerity programs. China will revalue the Yuan higher in order to control inflation -- this will cause a de facto devaluation of the U.S. Dollar. The Federal Reserve may adopt measures to force cash out of the banks in order to increase the velocity of money. Commodity food prices may climb due to greater demand in Emerging Markets, and oil prices may rise to $100 or more per barrel. Investors are advised to reduce their exposure to U.S. and European stocks and long-term government debt. The City recently submitted paperwork to transfer $47 million of bond proceeds (PA #2, Series 2006 ABCD) from Wells Fargo Corporate Trust Services to LAIF for investment, in order to enhance portfolio yield. Pis ri ori, C.C.Al. 7- City Treasurer 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 Paper Gain (Loss) Prior Year Book Variance Interest Earnings Yield -To -Maturity Weighted Maturity (Days) Effective Duration PORTFOLIO STATISTICS NOV-10 OCT-10 SEP-10 AUG-10 JUL-10 JUN-10 $ 190,254 $ 192,696 $ 195,728 $ 206,273 $ 197,878 $ 201,932 $ 190,546 $ 193,077 $ 196,176 $ 206,833 $ 198,453 $ 202,476 $ 292 $ 381 $ 448 $ 560 $ 575 $ 544 $ (11,127) $ (46,511) $ (36,665) $ (22,125) $ (28,582) $ (27,016) 112 136 155 166 173 227 0.75% 0.78% 0.96% 0.93% 1.12% 1.16% 217 255 311 295 351 363 0.10 0.13 0.15 0.17 0.21 0.23 $ 233,601 $ 242,873 $ 257,899 $ 276,345 $ 298,512 $ 302,563 $ 234,003 $ 243,401 $ 258,372 $ 276,806 $ 299,018 $ 303,003 $ 402 $ 528 $ 473 $ 461 $ 506 $ 440 $ (28,133) $ 16,866 $ (8,043) $ 471 $ 14,305 $ 15,272 98 116 166 193 195 200 0.59% 0.60% 0.59% 0.79% 0.76% 0.78% 293 305 296 367 339 344 0.47 0.47 0.47 0.51 0.49 0.51 *** Omits SLGSs. City of Palm Desert -- Portfolio Characteristics November 30, 2010 Dollars in Thousands Aneina Interval Market Value < 1 M $ 93,425 < 2M - < 3M 5,071 < 6M 6,038 < 1YR 14,207 < 2YR 6,044 < 3YR 12,024 < 4YR - < 5YR - > 5YR - Total: $ 136,809 Ratings * Market Value AAA $ 78,655 AA 9,176 A 3,911 Unrated ** 98,017 Total: $ 189,759 Sector Market Value MMF $ 4,225 Agencies 33,185 MTNs 13,087 CAMP 41,246 LAIF 49,998 RDA Loan 22,655 LAIF/Bond Proceeds 25,363 Total: $ 189,759 Month City Yield LAIF Yield Variance Dec10 1.82 0.57 1.26 Jan11 1.31 0.56 0.76 Feb 1.41 0.58 0.83 Mar 1.43 0.55 0.88 Apr 1.41 0.59 0.83 May 1.25 0.56 0.69 Jun 1.16 0.53 0.63 Jul 1.12 0.53 0.59 Aug 0.93 0.51 0.41 Sep 0.96 0.50 0.46 Oct 0.78 0.48 0.30 Nov 0.75 0.45 0.30 * Standard and Poors '* LAIF, and City Loan to RDA General Fund Ageing 100 80 0 60 t 40 0 a 20 0 f 68 ^10 g 0 4 44 1 M 2M 3M 6M 1 YR 2YR 3YR 4YR 5YR 5YR Credit Quality AAA 41 % AA 5% A Unrated ** 2% 52% Asset Allocation CAMP 22% LAIF MTNs 27% 7% q Agencies RDA Loan 17% 12% MMF LAIF/Bond 2% Proceeds 13% Performance 2.1 1.4 m >= 0.7 0.0 DecJ@nl FebMarAprMayJun Jul AugSepOctNov ® e Page 2 City of Palm Desert Portfolio Holdings November 30, 2010 Market Rat! Par Value I Issuer I Coupon Maturity I Cost I YTM I Price I Value IMoody'sl S & PI Medium -Term Notes $ 3,795,000 BANK OF AMERICA 5.38 8/15/11 $ 3,827,786 4.05 103.04 $ 3,910,505 A2 A $ 2,000,000 GENERAL ELECTRIC 6.13 2/22/11 $ 2,001,792 5.67 101.24 $ 2,024,790 Aa2 AA+ $ 3,000,000 TOYOTA 4.35 12/15/10 $ 3,004,547 0.44 100.13 $ 3,004,044 Aal AA $ 4,000,000 WELLS FARGO BANK 6.38 8/1/11 $ 4,029,319 5.13 103.68 $ 4,147,212 Al AA $ 12,795,000 Subtotal $ 12,863,444 3.80 $ 13,086,551 Agencies -- Coupon $ 3,000,000 FED FARM CREDIT BANK 3.50 10/3/11 $ 3,062,971 0.97 102.56 $ 3,076,875 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 1.63 7/27/11 $ 3,015,500 1.18 100.81 $ 3,024,375 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 1.63 3/16/11 $ 3,009,884 0.41 100.44 $ 3,013,125 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 1.10 8/28/12 $ 2,999,485 1.11 100.91 $ 3,027,188 Aaa AAA $ 3,000,000 FED HOME LOAN MTG CORP 1.63 4126/11 $ 3,011,831 0.60 100.59 $ 3,017,813 Aaa AAA $ 3,000,000 FED HOME LOAN MTG CORP 4.13 2/24/11 $ 3,024,839 0.52 100.88 $ 3,026,250 Aaa AAA $ 3,000,000 FED NATIONAL MTG ASSOC 1.75 12/28/12 $ 2,996,841 1.91 99.94 $ 2,998,125 Aaa AAA $ 21,000,000 Subtotal $ 21,121,351 0.96 $ 21,183,750 Agencies -- Callable $ 3,000,000 FED HOME LOAN BANK 1.85 12/21/12 $ 3,000,656 1.82 100.06 $ 3,001,875 Aaa AAA $ 3,000,000 FED HOME LOAN MTG CORP 1.25 1/26/12 $ 3,000,000 1.25 100.10 $ 3,002,895 Aaa AAA $ 6,000,000 FED NATIONAL MTG ASSOC 1.75 12/28/12 $ 5,993,940 1.90 99.94 $ 5,996,250 Aaa AAA $ 12,000,000 Subtotal $ 11,994,596 1.72 $ 12,001,020 Local Agency Investment Fund $ 49,999,209 L.A.I.F. 0.00 12/1/10 $ 49,999,209 0.45 100.00 $ 49,999,209 U U $ 49,999,209 Subtotal $ 49,999,209 0.45 $ 49,999,209 Local Agency Investment Fund $ 25,363,000 L.A.I.F. / WELLS FARGO 0.00 12/1/10 $ 25,363,000 0.45 100.00 $ 25,363,000 U U $ 25,363,000 Subtotal $ 25,363,000 0.45 $ 25,363,000 Local Agency Investment Fund $ 41,237,990 C.A.M.P. (CITY) 0.00 12/1/10 $ 41,237,990 0.19 100.00 $ 41,237,990 U AAA $ 7,744 C.A.M.P. (DESERT WILLOW) 0.00 12/1/10 $ 7,744 0.19 100.00 $ 7,744 U AAA S 41.245.734 Subtotal $ 41,245,734 0.19 $ 41,245,734 Money Market Fund $ 4,224,938 WF ADVANTAGE GOVT MMF 0.00 12/1/10 $ 4,224,938 0.03 100.00 $ 4,224,938 Aaa AAA $ 4,224,938 Subtotal $ 4,224,938 0.03 $ 4,224,938 "U"= Unrated Page 3 City of Palm Desert Portfolio Holdings November 30, 2010 Market Ratings Par Value Issuer Coupon Maturity Cost YTM I Price Value Moodyyesl S & P City Loan to RDA $ 22,655,000 CITY OF PALM DESERT 0.00 12/1/40 $ 22,655,000 0.45 100.00 $ 22,655,000 U U $ 22,655,000 Subtotal $ 22,655,000 0.45 $ 22,655,000 Total Investments $ 189,282,881 $ 189,467,271 0.75 $ 189,759,202 Cash $ 79,227 CITY MAIN CHKG 0.00 12/1/10 $ 79,227 0.00 100.00 $ 79,227 U U $ 621,468 DESERT WILLOW CHKG 0.00 12/1/10 $ 621,468 0.00 100.00 $ 621,468 U U $ 86,025 RECREATIONAL FAC CHKG 0.00 12/1/10 $ 86,025 0.00 100.00 $ 86,025 U U $ 786,721 Subtotal $ 786,721 $ 786,721 Total Investments and Cash $ 190,069,602 $ 190,253,992 % of Portfolio Coporate Issuers (Market Value) BANK OF AMERICA 2.05% GENERAL ELECTRIC 1.06% TOYOTA 1.58% WELLS FARGO BANK 2.18% $ 190,545,922 "U"= Unrated Page 4 City of Palm Desert Portfolio Holdings November 30, 2010 1 Par Value 1 Issuer I Coupon Maturity I Cost I YTM I Price I Value I Moody's S& P % of Portfolio Agency Issuers (Market Value) FED FARM CREDIT BANK 1.61 % FED HOME LOAN BANK 6.33% FED HOME LOAN MTG CORP 4.75% FED NATIONAL MTG ASSOC 4.72% "U"= Unrated Page 5 Palm Desert Redevelopment Agency -- Portfolio Characteristics November 30, 2010 Dollars in Thousands Aoeing Interval Market Value < 1 M $ 28,970 <2M - < 3M - < 6M 12,985 < 1YR 12,157 < 2YR 27,644 < 3YR 5,030 < 4YR - < 5YR - > 5YR 3,151 Total: $ 89,937 ualit Market Value AAA $ 106,002 AA 3,030 A 9,938 Unrated "* 113,849 Total: $ 232,819 r Portfolio Ageing w/o SLGSs 100 80 0 60 t 40 0 a 20 Credit Quality L 32 ............. 31 i 1 d 14 14 6 4 0 0 0 0 1 M 2M 3M 6M 1 YR 2YR 3YR 4YR 5YR 5YR AA 1% A 4% AAA 46% Unrated ** 049% Sector Market Value Asset Allocation Agencies MTNs MMF $ 58,268 19% 6% CAMP Agencies 44,654 1 % MTNs 12,968 MMF LAIF CAMP 3,081 25% 13% EIP LAIF 30,527 1 EIP 3,151 LAIF/Bond Proceeds 80,170 LAIF/Bond Proceeds Total: $ 232,819 35% Month RDA Yield LAIF Yield Variance Dec10 1.21 0.57 0.64 Jan11 0.72 0.56 0.16 Feb 0.69 0.58 0.12 Mar 0.70 0.55 0.15 Apr 0.74 0.59 0.15 May 0.69 0.56 0.13 Jun 0.78 0.53 0.25 Jul 0.76 0.53 0.23 Aug 0.79 0.51 0.28 Sep 0.59 0.50 0.09 Oct 0.60 0.48 0.12 Nov 0.59 0.45 0.14 Pertormance 1.4 0 0 0.7 d 0.0 Dect01n1'Feb Mar Apr MayJun Jul Aug Sep Oct Nov ■ LAIF Yield 0 RDA Yield Standard and Poors * LAIF Page 6 Palm Desert Redevelopment Agency Portfolio Holdings November 30, 2010 Par Value I Issuer I Coupon I Maturity Cost I YTM I Price I Value I Moodysl 5 & P Medium -Term Notes $ 3,000,000 ABBOTT LABS 3.75 3/15/11 $ 3,027,159 0.60 101.01 $ 3,030,210 Al AA $ 3,450,000 BEAR STEARNS (JPM) 6.95 8110/12 $ 3,740,588 1.83 109.58 $ 3,780,631 Aa3 A+ $ 3,000,000 JP MORGAN CHASE 3.13 12/1111 $ 3,066,334 0.69 102.70 $ 3,081,108 Aa3 A+ $ 3,000,000 JP MORGAN CHASE 5.60 6/1/11 $ 3,070,668 0.85 102.54 $ 3,076,209 Aa3 A+ $ 12,450,000 Subtotal $ 12,904,749 1.04 $ 12,968,158 Agencies -- Coupon $ 2,000,000 FED HOME LOAN BANK 4.88 3111/11 $ 1,996,793 5.49 101.31 $ 2,026,250 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,996,751 5.50 101.31 $ 2,026,250 Aaa AAA $ 2,890,000 FED HOME LOAN BANK 2.88 3/11/11 $ 2,909,034 0.49 100.75 $ 2,911,675 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 1.13 12/9/11 $ 3,005,906 0.96 100.66 $ 3,019,688 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 1.10 8/28/12 $ 1,999,657 1.11 100.91 $ 2,018,125 Aaa AAA $ 2,500,000 FED HOME LOAN BANK 1.10 8/28/12 $ 2,499,571 1.11 100.91 $ 2,522,656 Aaa AAA $ 2,500,000 FED HOME LOAN BANK 1.10 8128/12 $ 2,499,578 1.11 100.91 $ 2,522,656 Aaa AAA $ 2,500,000 FED HOME LOAN BANK 1.38 10/29/12 $ 2,508,212 1.20 101.53 $ 2,538,281 Aaa AAA $ 4,900,000 FED HOME LOAN BANK 1.75 12/14/12 $ 4,939,588 1.40 102.16 $ 5,005,656 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 1.10 8/28/12 $ 2,999,493 1.11 100.91 $ 3,027,188 Aaa AAA $ 2,940,000 FED NATIONAL MTG ASSOC 1.75 3/23/11 $ 2,951,441 0.43 100.50 $ 2,954,700 Aaa AAA $ 9,000,000 FED NATIONAL MTG ASSOC 1.00 11/23/11 $ 9,005,211 1.00 100.53 $ 9,047,813 Aaa AAA $ 2,500,000 FED NATIONAL MTG ASSOC 1.13 7/30/12 $ 2,502,131 1.08 100.97 $ 2,524,219 Aaa AAA $ 41,730,000 Subtotal $ 41,813,365 1.44 $ 42,145,156 Agencies -- Callable $ 2,500,000 FED HOME LOAN MTG CORP 1.20 6/15/12 $ 2,502,308 1.08 100.36 $ 2,509,103 Aaa AAA $ 2,500,000 Subtotal $ 2,502,308 1.08 $ 2,509,103 Local Government Investment Pool $ 28,894,449 L.A.I.F. 0.00 1211110 $ 28,894,449 0.45 100.00 $ 28,894,449 U U $ 1,632,149 L.A.I.F. (HOUSING) 0.00 12/1/10 $ 1,632,149 0.45 100.00 $ 1,632,149 U U $ 30.526.598 Subtotal $ 30,526,598 0.45 $ 30,526,598 Local Government Investment Pool $ 17,223,950 L.A.I.F. / WELLS FARGO 0.00 1211110 $ 17,223,950 0.45 100.00 $ 17,223,950 U U $ 4,817,302 L.A.I.F. / WELLS FARGO 0.00 12/1/10 $ 4,817,302 0.45 100.00 $ 4,817,302 U U $ 24,705,912 L.A.I.F. / WELLS FARGO 0.00 1211/10 $ 24,705,912 0.45 100.00 $ 24,705,912 U U $ 1,694,460 L.A.I.F. / WELLS FARGO 0.00 12/1/10 $ 1,694,460 0.45 100.00 $ 1,694,460 U U $ 15,174,053 L.A.I.F. / WELLS FARGO 0.00 12/1/10 $ 15,174,053 0.45 100.00 $ 15,174,053 U U $ 16,555,528 L.A.I.F. / WELLS FARGO 0.00 12/1110 $ 16,555,528 0.45 100.00 $ 16,555,528 U U $ 80.171.205 Subtotal $ 80,171,205 0.45 $ 80,171,205 "U" = Unrated Page 7 Palm Desert Redevelopment Agency Portfolio Holdings November 30, 2010 Local Government Investment Pool $ 3,075,967 C.A.M.P. (RDA) 0.00 12/1/10 $ 3,075,967 0.19 100.00 $ 3,074,U AAA $ 4,676 C.A.M.P. (HOUSING) 0.00 12/1/10 $ 4,676 0.19 100.00 $ 4,667676 U AAA $ 3 080 643 Subtotal $ 3,080,643 0.19 $ 3,080,643 Money Market Fund $ 58,267,565 WF ADVANTAGE GOUT MMF 0.00 12/1/10 $ 58,267,565 0.03 100.00 $ 58,267,565 Aaa AAA $ 58,267,565 Subtotal $ 58,267,565 0.03 $ 58,267,565 Municipal Bonds $ 3,151,000 CITY OF PALM DESERT 3.00 9/2/29 $ 3,151,000 3.00 0.00 $ 3,151,000 U U $ 3,151,000 Subtotal $ 3,151,000 3.00 $ 3,151,000 Total Investments $ 231,877,011 $ 232,417,433 0.59 $ 232,819,428 Cash $ 771,400 HOUSING AUTH CHKG 0.00 12/1/10 $ 771,400 0.00 100.00 $ 771,400 U U $ 412,027 HOUSING AUTH TRUST 0.00 12/1/10 $ 412,027 0.00 100.00 $ 412,027 U U $ 1,183,427 Subtotal $ 1,183,427 $ 1,183,427 Total Investments and Cash $ 233,060,438 $ 233,600,860 $ 234,002,854 % of Portfolio Corporate Issuers (Market Value) ABBOTT LABS 1.29% BEAR STEARNS (JPM) 1.62% JP MORGAN CHASE 2.63% "U" = Unrated Page 8 Palm Desert Redevelopment Agency Portfolio Holdings November 30, 2010 Market IRatings Par Value Issuer coupon I Maturity cost YTM I Price I Value I Mood)(sl S & P Issuers FED HOME LOAN BANK FED NATIONAL MTG ASSOC FED HOME LOAN MTG CORP % of Portfolio 'Market Value! 11.80% 6.21 % 1.07% "U" = Unrated Page 9 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 Audit, Investment, and Finance Committee and the Palm Desert City Council review the Statement of Investment Policy annually. For the month ended November 30, 2010, 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. Interactive Data Corporation provided the data that was 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 December 21, 2010, Pis (iC.C.Al r. City Treasurer SUMMARY OF AUTHORIZED INVESTMENTS California Government Code 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 0.0% 1.4% 53632 c Savings Accounts No Limit No Limit No Limit No Limit 0.0% 0.0% 53601 b U.S. Treasuries 5 Years No Limit 5 Years No Limit 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 Not Authorized 53601 a Federal Agencies 5 Years No Limit 5 YearsHE, 6% 17.5% 19.1 % 53601 Bankers's Acceptances 180 Days 40% 180 DaysA-1 & P-1 0.0% - 53601 Commercial Paper 270 Days 25% A-1+ or P-1 270 Days-1+ or P-1 0.0% 0.0% 53601 h Negotiable CDs 5 Years 30% 5 YearsAA- or Aa3 - - 53601i Re os 1 Year No Limit 30 DaysAAA & Aaa - - 53601 I Reverse Re os 92 Days 20% Not Authorized 53601 ' Medium -Term Notes 5 Years 30% A 5 Years 30% 1 A 1 6.8% 5.6% 53601 k) Mutual Funds 90 Days 20% AAA & Aaa 90 Days 20% (2) AAA & Aaa 1 2.2% 25.1 % 53601 I 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 1 or Advisor 1 21.8% 1.3% 53601(n) Mortgage -Backed Securities 5 Years 20% A (Issuer) & AA (Security Not Authorized 16429.1 b LAW No Limit No Limit 39.8% 47.6% (1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. 88.1 % 100.0% (2) The City Energy Independence Program has been approved by the Palm Desert City Council. 3 Maximum limit for mutual funds and local government investment pools, excluding bond proceeds. * Certified California Municipal Treasurer Page 10