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Home My WebLink AboutCompliance Analysis and Investment Reports - October 2010 - Joint ConsiderationCITY OF PALM DESERT FINANCE DEPARTMENT INTEROFFICE MEMORANDUM TO: RACHELLE KLASSEN, CITY CLERK FROM: NIAMH ORTEGA, RECORDING SECRETAO� 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\RKLASSENINVREPORTAPD City of Palm Desert Cfty aod Redevelopment Agency 61to G FL ICE ANALYSIS AND IIV1r{E; T"M NT REPORT October 31 F10 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 met on November 3, and announced that it would "print" and issue another $600 billion in order to promote economic growth and inflation. As envisioned, this second quantitative easing ("QE2") would cause: (1) bond yields to flatten; (2) consumers to flee cash, and buy stocks and real estate; (3) the stock market to boom; (4) U.S. exports to surge; and (5) foreign creditors holding U.S. Treasuries to be repaid with depreciated dollars. The Fed wants to raise asset prices. The most likely consequence of QE2 will be the debasement and devaluation of the U.S. Dollar. After the Fed made the above announcement, cash poured into the commodities markets causing a surge in prices, with gold breaking $1,400 per ounce. Capital outflows to foreign countries where central banks have raised interest rates, also increased. Since the United States is a net importer, a weaker dollar would trigger higher U.S. food and energy prices, leaving consumers with less discretionary income to spend. Upward pressure on domestic prices may be further compounded by rising demand from a resurgent Asia. IOn a separate note, the City has submitted paperwork to transfer $25 million of bond proceeds ("University Park") from Wells Fargo Corporate Trust Services to LAIF for investment, in order to enhance portfolio yield. 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 ,Pa"zs �iau�, C,C.R r. City Treasurer PORTFOLIO STATISTICS OCT-10 SEP-10 AUG-10 JUL-10 JUN-10 MAY-10 $ 192,696 $ 195,728 $ 206,273 $ 197,878 $ 201,932 $ 201,783 $ 193,077 $ 196,176 $ 206,833 $ 198,453 $ 202,476 $ 202,374 $ 381 $ 448 $ 560 $ 575 $ 544 $ 591 $ (46,511) $ (36,665) $ (22,125) $ (28,582) $ (27,016) $ (22,506) 136 155 166 173 227 207 0.78% 0.96% 0.93% 1.12% 1.16% 1.28% 255 311 295 351 363 415 0.13 0.15 0.17 0.21 0.23 0.23 $ 242,873 $ 257,899 $ 276,345 $ 298,512 $ 302,563 $ 299,721 $ 243,401 $ 258,372 $ 276,806 $ 299,018 $ 303,003 $ 299,998 $ 528 $ 473 $ 461 $ 506 $ 440 $ 277 $ 16,866 $ (8,043) $ 471 $ 14,305 $ 15,272 $ 6,001 116 166 193 195 200 171 0.60% 0.59% 0.79% 0.76% 0.78% 0.69% 305 296 367 339 344 226 0.47 0.47 0.51 0.49 0.51 0.31 *** Omits SLGSs. City of Palm Desert -- Portfolio Characteristics October 31, 2010 Dollars in Thousands Aaeina Interval Market Value < 1 M $ 90,593 < 2M 3,014 < 3M _ < 6M 11,109 < 1YR 14,207 < 2YR 6,044 < 3YR 15,007 < 4YR _ < 5YR _ > 5YR _ Total: $ 139,974 Ratinas * Market Value AAA $ 104,186 AA 11,110 A 3,923 Unrated ** 66,065 Total: $ 185,284 Sector Market Value MMF $ 29,603 Agencies 36,244 MTNs 15,032 CAMP 38,340 RDA Loan 22,655 LAIF 43,410 Total: $ 185,284 Month City Yield LAIF Yield Nov09 1.93 0.61 Dec 1.82 0.57 Jan10 1.31 0.56 Feb 1.41 0.58 Mar 1.43 0.55 Apr 1.41 0.59 May 1.25 0.56 Jun 1.16 0.53 Jul 1.12 0.53 Aug 0.93 0.51 Sep 0.96 0.50 Oct 0.78 0.48 Standard and Poors ** LAIF, and City Loan to RDA Variance 1.32 1.26 0.76 0.83 0.88 0.83 0.69 0.63 0.59 0.41 0.46 0.30 General Fund Ageing 100 80 0 60 40 0 a 20 0 Credit Quality 1 65 10 2 p 8 4 11 0 0 0 1 M 2M 3M 6M 1 YR 2YR 3YR 4YR 5YR 5YR AAA 56% Unrated ** 36% AA A 6% 2% Asset Allocation MTNs 8% CAMP Agencies M 21% 20%;'�, RDA Loan 12% MMF 16% LAI F 23% Page 2 City of Palm Desert Portfolio Holdings October 31, 2010 Market Ratings Par Value Issuer lCouponj MaturityL Cost YTM I Price I Value Moody's I S&P Medium -Term Notes $ 3,795,000 BANK OF AMERICA 5.38 8/15/11 $ 3,831,658 4.05 103.22 $ A2 A $ 1,891,000 GENERAL ELECTRIC 6.88 11/15/10 $ 1,891,787 5.65 100.22 $ 1,,5 ,89595,105 Aa2 AA+ $ 2,000,000 GENERAL ELECTRIC 6.13 2/22/11 $ 2,002,455 5.67 101.72 $ 2,034,418 Aa2 AA+ $ 3,000,000 TOYOTA 4.35 12/15/10 $ 3,014,290 0.44 100.47 $ 3,014,109 Aal AA $ 4,000,000 WELLS FARGO BANK 6.38 8/1/11 $ 4,032,984 5.13 104.16 $ 4,166,252 Al AA IS 14.686.000 Subtotal $ 14,773,175 4.03 $ 15,032,480 Agencies -- Coupon $ 3,000,000 FED FARM CREDIT BANK 3.50 10/3/11 $ 3,069,226 0.97 102.94 $ 3,088,125 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 1.63 7/27/11 $ 3,017,471 1.18 101.00 $ 3,030,000 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 1.63 3/16/11 $ 3,012,708 0.41 100.59 $ 3,017,813 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 1.10 8/28/12 $ 2,999,461 1.11 101.28 $ 3,038,438 Aaa AAA $ 3,000,000 FED HOME LOAN MTG CORP 1.63 4/26/11 $ 3,014,279 0.60 100.69 $ 3,020,625 Aaa AAA $ 3,000,000 FED HOME LOAN MTG CORP 4.13 2124/11 $ 3,033,817 0.52 101.22 $ 3,036,563 Aaa AAA $ 3,000,000 FED NATIONAL MTG ASSOC 1.75 12/28/12 $ 2,996,714 1.91 100.22 $ 3,006,563 Aaa AAA $ 21,000,000 Subtotal $ 21,143,675 0.96 $ 21,238,125 Agencies -- Callable $ 2,980,000 FED HOME LOAN BANK 1.88 11/19/12 $ 2,984,694 1.61 100.09 $ 2,982,794 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 1.85 12/21/12 $ 3,000,682 1.82 100.16 $ 3,004,688 Aaa AAA $ 3,000,000 FED HOME LOAN MTG CORP 1.25 1/26/12 $ 3,000,000 1.25 100.19 $ 3,005,559 Aaa AAA $ 6,000,000 FED NATIONAL MTG ASSOC 1.75 12/28/12 $ 5,993,696 1.90 100.22 $ 6,013,125 Aaa AAA $ 14,980,000 Subtotal $ 14,979,072 1.70 $ 15,006,165 Local Agency Investment Fund $ 43,410,209 L.A.I.F. 0.00 11/1/10 $ 43,410,209 0.48 100.00 $ 43,410,209 U U $ 43,410,209 Subtotal $ 43,410,209 0.48 $ 43,410,209 Local Agency Investment Fund $ 38,331,993 C.A.M.P. 0.00 11/1/10 $ 38,331,993 0.20 100.00 $ 38,331,993 U AAA $ 7,743 C.A.M.P. (DESERT WILLOW) 0.00 11/1/10 $ 7,743 0.20 100.00 $ 7,743 U AAA $ 38,339,736 Subtotal $ 38,339,736 0.20 $ 38,339,736 Money Market Fund $ 29,602,559 WF ADVANTAGE GOVT MMF 0.00 11/1/10 $ 29,602,559 0.00 100.00 $ 29,602,559 Aaa AAA $ 29,602,559 Subtotal $ 29,602,559 0.00 $ 29,602,559 City Loan to RDA $ 22,655,000 CITY OF PALM DESERT 0.00 11/1/40 $ 22,655,000 0.48 100.00 $ 22,655,000 U U $ 22,655,000 Subtotal $ 22,655,000 0.48 $ 22,655,000 "U" = Unrated Page 3 City of Palm Desert Portfolio Holdings October 31, 2010 Market Ratings Par Value Issuer Couponj Maturity I Cost YTM I Price Value Moody's I S&P Total Investments $ 184,673,503 $ 184,903,426 0.78 $ 185,284,274 Cash $ 6,961,413 CITY MAIN CHKG 0.00 11/1/10 $ 6,961,413 0.00 100.00 $ 6,961,413 U U $ 760,680 DESERT WILLOW CHKG 0.00 11/1/10 $ 760,680 0.00 100.00 $ 760,680 U U $ 70,531 RECREATIONAL FAC CHKG 0.00 11/1/10 $ 70,531 0.00 100.00 $ 70,531 U U $ 7,792,625 Subtotal $ 7,792,625 $ 7,792,625 Total Investments and Cash $ 192,466,128 $ 192,696,050 Corporate Issuers BANK OF AMERICA GENERAL ELECTRIC TOYOTA WELLS FARGO BANK Agency Issuers FED FARM CREDIT BANK FED HOME LOAN BANK FED HOME LOAN MTG CORP FED NATIONAL MTG ASSOC % of Portfolio ;Market Value) 2.03% 2.04% 1.56% 2.16% % of Portfolio ;Market Value) 1.60% 7.81 % 4.69% 4.67% $ 193,076,898 "U" = Unrated Page 4 Dollars in Thousands Aaeina Interval <1M <2M < 3M < 6M < 1 YR < 2YR < 3YR < 4YR < 5YR > 5YR Total: Palm Desert Redevelopment Agency -- Portfolio Characteristics October 31, 2010 Market Value $ 36,171 12,985 3,089 36,711 10,033 3,151 $ 102,140 ualit * Market Value AAA $ 114,153 86,361 AA 9,984 A Unrated ** 31,717 Total: $ 242,215 Sector MarkeValue MMF $ 58,266 Agencies 52,797 MTNs 13,023 CAMP 3,090 LAIF 31,717 EIP 3,151 LAIF/Bond Proceeds 80,171 Total: $ 242,215 Portfolio Ageing w/o SLGSs 100 80 0 60 V 40 a° 20 f Credit Quality Month RDA Yield LAIF Yield Variance Nov09 1.21 0.61 0.59 Dec 1.21 0.57 0.64 Jan10 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 Asset Allocation Performance 1.4 0 0.7 d 0.0 Nov091)edanl0=eb Mar AprMayJun Jul Aug Sep Oct ® LAIF Yield G RDA Yield 1 M 2M 3M 6M 1YR 2YR 3YR 4YR 5YR 5YR AAA AA 47% 36% Unrated ** A 13% 4% Agencies MTNs 22% 5 /oCAMP 1% MMF LAIF 24% 13% EIP 1% LAIF/Bond Proceeds 34% Standard and Poors Page 5 ** LAIF Palm Desert Redevelopment Agency Portfolio Holdings October 31, 2010 Market I Ratings Par Value Issuer Coupon Maturity Cost YTM I Price I Value I Moody's I S&P Medium -Term Notes $ 3,000,000 ABBOTT LABS 3.75 3/15/11 $ 3,034,993 0.60 101.29 $ 3,038,673 Al AA $ 3,450,000 BEAR STEARNS (JPM) 6.95 8/10/12 $ 3,754,903 1.83 110.32 $ 3,806,071 Aa3 A+ $ 3,000,000 JP MORGAN CHASE 3.13 12/1/11 $ 3,071,862 0.69 102.96 $ 3,088,743 Aa3 A+ $ 3,000,000 JP MORGAN CHASE 5.60 6/1/11 $ 3,082,446 0.85 102.98 $ 3,089,337 Aa3 A+ $ 12,450,000 Subtotal $ 12,944,204 1.04 $ 13,022,824 Agencies -- Coupon $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,995,831 5.49 101.72 $ 2,034,375 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 4.88 3/11/11 $ 1,995,776 5.50 101.72 $ 2,034,375 Aaa AAA $ 2,890,000 FED HOME LOAN BANK 2.88 3/11/11 $ 2,914,744 0.49 100.97 $ 2,917,997 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 0.50 11/29/10 $ 3,000,486 0.36 100.03 $ 3,000,938 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 1.13 12/9/11 $ 3,006,388 0.96 100.91 $ 3,027,188 Aaa AAA $ 2,000,000 FED HOME LOAN BANK 1.10 8/28/12 $ 1,999,640 1.11 101.28 $ 2,025,625 Aaa AAA $ 2,500,000 FED HOME LOAN BANK 1.10 8/28/12 $ 2,499,551 1.11 101.28 $ 2,532,031 Aaa AAA $ 2,500,000 FED HOME LOAN BANK 1.10 8/28/12 $ 2,499,557 1.11 101.28 $ 2,532,031 Aaa AAA $ 2,500,000 FED HOME LOAN BANK 1.38 10/29/12 $ 2,508,570 1.20 101.97 $ 2,549,219 Aaa AAA $ 4,900,000 FED HOME LOAN BANK 1.75 12/14/12 $ 4,941,208 1.40 102.66 $ 5,030,156 Aaa AAA $ 3,000,000 FED HOME LOAN BANK 1.10 8128/12 $ 2,999,469 1.11 101.28 $ 3,038,438 Aaa AAA $ 2,940,000 FED NATIONAL MTG ASSOC 1.75 3/23/11 $ 2,954,505 0.43 100.66 $ 2,959,294 Aaa AAA $ 9,000,000 FED NATIONAL MTG ASSOC 1.00 11/23/11 $ 9,005,655 1.00 100.75 $ 9,067,500 Aaa AAA $ 2,500,000 FED NATIONAL MTG ASSOC 1.13 7130/12 $ 2,502,238 1.08 101.28 $ 2,532,031 Aaa AAA $ 44,730,000 Subtotal $ 44,823,618 1.37 $ 45,281,197 Agencies -- Callable $ 2,500,000 FED FARM CREDIT BANK 1.90 11/16/12 $ 2,510,417 0.78 100.06 $ 2,501,563 Aaa AAA $ 2,500,000 FED FARM CREDIT BANK 1.90 11/16/12 $ 2,510,417 0.78 100.06 $ 2,501,563 Aaa AAA $ 2,500,000 FED HOME LOAN MTG CORP 1.20 6/15/12 $ 2,502,433 1.08 100.50 $ 2,512,413 Aaa AAA $ 7.500.000 Subtotal $ 7,523,267 0.88 $ 7,515,538 Local Government Investment Pool $ 31,694,449 L.A.I.F. 0.00 11/1/10 $ 31,694,449 0.48 100.00 $ 31,622,149 U U $ 22,149 L.A.I.F. (HOUSING) 0.00 11/1/10 $ 22,149 0.48 100.00 $ 22,149 U U $ 31,716,598 Subtotal $ 31,716,598 0.48 $ 31,716,598 "U" = Unrated Page 6 Palm Desert Redevelopment Agency Portfolio Holdings October 31, 2010 Market Ratings Par Value Issuer I CouponI Maturity I Cost I YTM I Price I Value Moody's I S&P Local Government Investment Pool $ 17,223,950 CITY OF PALM DESERT 0.00 11/1/10 $ 17,223,950 0.48 100.00 $ 17,223,950 U AA $ 4,817,302 CITY OF PALM DESERT 0.00 11/1/10 $ 4,817,302 0.48 100.00 $ 4,817,302 U AA $ 24,705,912 CITY OF PALM DESERT 0.00 11/1/10 $ 24,705,912 0.48 100.00 $ 24,705,912 U AA $ 1,694,460 CITY OF PALM DESERT 0.00 11/1/10 $ 1,694,460 0.48 100.00 $ 1,694,460 U AA $ 15,174,053 CITY OF PALM DESERT 0.00 11/1/10 $ 15,174,053 0.48 100.00 $ 15,174,053 U AA $ 16,555,528 CITY OF PALM DESERT 0.00 11/1/10 $ 16,555,528 0.48 100.00 $ 16,555,528 U AA $ 80,171,205 Subtotal $ 80,171,205 0.48 $ 80,171,205 Local Government Investment Pool $ 1,475,774 C.A.M.P. 0.00 11/1/10 $ 1,475,774 0.20 100.00 $ 1,475,774 U AAA $ 1,614,485 C.A.M.P. (HOUSING) 0.00 11/1/10 $ 1,614,485 0.20 100.00 $ 1,614,485 U AAA IS 3.090.260 Subtotal $ 3,090,260 0.20 $ 3,090,260 Money Market Fund $ 58,265,903 WF ADVANTAGE GOVT MMF 0.00 11/1/10 $ 58,265,903 0.00 100.00 $ 58,265,903 Aaa AAA $ 58,265,903 Subtotal $ 58,265,903 0.00 $ 58,265,903 Municipal Bonds $ 3,151,000 CITY OF PALM DESERT 3.00 9/2/29 $ 3,151,000 3.00 100.00 $ 3,151,000 U AA $ 3,151,000 Subtotal $ 3,151,000 3.00 $ 3,151,000 Total Investments $ 241,074,966 $ 241,686,055 0.60 $ 242,214,524 Cash $ 770,992 HOUSING AUTH CHKG 0.00 11/1/10 $ 770,992 0.00 100.00 $ 770,992 U U $ 415,830 HOUSING AUTH TRUST 0.00 11/1110 $ 415,830 0.00 100.00 $ 415,830 U U $ 1,186,822 Subtotal $ 1,186,822 0.00 $ 1,186,822 Total Investments and Cash $ 242,261,788 $ 242,872,877 $ 243,401,346 "U" = Unrated Page 7 Palm Desert Redevelopment Agency Portfolio Holdings October 31, 2010 Market Ratings Par Value Issuer Coupon I Maturity Cost I YTM I Price I Value Moodv's I S&P % of Portfolio Corporate Issuers (Market Value) ABBOTT LABS 1.25% BEAR STEARNS (JPM) 1.56% JP MORGAN CHASE 2.54% % of Portfolio Agency Issuers (Market Value) FED HOME LOAN BANK 12.62% FED NATIONAL MTG ASSOC 5.98% FED FARM CREDIT BANK 2.06% FED HOME LOAN MTG CORP 1.03% "U" = Unrated Page 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 Audit, Investment, and Finance Committee and the Palm Desert City Council review the Statement of Investment Policy annually. For the month ended October 31, 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 November 23, 2010, Pis G6Nvm, c.C..A 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/Md s Maturity Limit S&P/Md s Portfolio Portfolio 53601 a Palm Desert Bonds 5 Years No Limit I I T 0.0% 1.3% 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 Years 30% 6% 19.5% 21.7% 53601 Bankers's Acceptances 180 Days 40% 180 Days 40% A-1 & P-1 - 53601 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 - - 53601i Re os 1 Year No Limit 30 Days 20% 1 AAA & Aaa - - 53601 i Reverse Repos 92 Days 20% Not Authorized 53601 ' Medium -Term Notes 5 Years 30% A 5 Years 30% 1 A 1 8.0% 5.4% 53601 k Mutual Funds 90 Days 20% AAA & Aaa 90 Days 20% (2) 1 AAA & Aaa 1 16.0% 24.1% 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 20.7% 1.3% 53601(n) Mortgage -Backed Securities 5 Years 20% A (Issuer) & 1AA (Securit Not Authorized 16429.1 b LAIF No Limit I I No Limit 23.5% 46.3% (1) The City loan to RDA, which is not a bond, has been approved by the Palm Desert City Council. L87.8% 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 9