Quarterly Investment Report for 6 months ended 12-31-2018TO:
VIA:
CITY OF ENCINITAS
INVESTMENT REPORT
MEMORANDUM
Six Months Ended December 31, 2018
City Council
Karen P. Brust, City Manager
FROM: Teresa S. McBroome, Director of Finance/City Treasurer
DATE: March 11, 2019
SUBJECT: City of Encinitas Investment Report for the six (6) months ended December 31,
2018
It is the practice of the Finance Department to report on the status of City investments to the
City Council on a periodic basis. Currently, the process is to report investment positions and
results quarterly via memorandum , with attachments showing positions and earnings by
investment and in summary. This report covers only the City's Pooled Investment fund (the
"Pool".) It does not cover monies invested by the City's bond trustee, which are reported on an
annual basis.
The Pool had an investable balance of $118.8 million at December 31, 2018, compared to an
average daily investable balance for the period of $109.3 million. The size of the pool varies
throughout the year depending upon cash flow. Several factors have a significant impact on
cash flow. Property tax revenue is received primarily in December, January, April and May,
while debt payments typically fall in February, April , August and October. In addition, large
payments on capital projects can happen throughout the year. The chart below shows the
portfolio balance over the last five years.
Monthly Portfolio Balance by Fiscal Year
Ju I Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
End of Month Balance
-FYlS-19
-FY17/18
-FY16/17
_;._ FYlS/16
-FY14/15
The City utilizes a variety of investment vehicles, including direct and indirect investments.
Direct investments are primarily fixed-income securities issued by the US Treasury and several
US Government Agencies, such as the Federal National Mortgage Association (FNMA) and the
Federal Home Loan Mortgage Corporation (FHLMC). Indirect investments include money
market funds and pooled investment funds managed by other agencies, such as the California
Local Agency Investment Fund (LAIF). Indirect investment balances are generally available to
the City on a next-day basis, and are classified as "liquid" meaning they are available to pay
current demands. Monies invested in direct securities can only be accessed via the maturity of
a security, or selling the security prior to maturity. The final maturities on our direct securities
vary from less than one month to four years. The City's total of liquid assets, including cash in
the bank, is $32.2 million at December 31, 2018.
FY 2018-19 June 30, 2019 March 31, 2019 Dec .31,2018 Sep . 30, 2018
Book Value $ 118,821,686 $ 106,932,888
Market Value $ 118,035,779 $ 105,492,981
Unrealized Gain/(Loss) $ (785,907) $ (1,439,907)
Unrealized Gain/Loss as% of Book Value -0.6614% -1 .3466%
Effect ive Rate of Return 1.94% 1.86%
Average Yield To Maturity 1.97% 1.93%
Average Maturity (Years) 1.55 1.95
Investment Earnings Year to Date $ 1,068,725 $ 530,070
The Pool earned $1,068,725 during the first six months of FY 2018-19 for an annualized return
of 1.94%. This compares to the City's adopted performance benchmark of the one (1) year
constant maturity Treasury index which averaged a 2.40% yield over the 12 months ended
December 31, 2018. The City also informally utilizes an alternative benchmark of the two (2)
year constant maturity Treasury index yield for comparison. This is a more appropriate
comparison when the weighted-average maturity (WAM) of the Pool is greater than one year
(the current WAM is 565 days or 1.54 years.) The 2 year T-note averaged a bout 2.02% during
the period .
1.60%
1.40%
1.20%
1.00%
0.80%
0.60%
0.40%
City Portfolio Yield Compared to Treasury Inde xes
~ ____ _,-----------~1---.. , -----
-City Portfolio ---2 Yr Treasury ---1 Yr Treasury ---6 Mth Treasury
The market value of the City's direct investments is less than their carrying value by $785 ,907
as of December 31, 2018, meaning that the portfolio has unrealized losses on securities held .
Since the City typicaljy does not sell securities prior to maturity, any unrealized gains or losses
would only constitute a timing difference.
The public's monies are extremely safe and well-diversified, and are in compliance with the
City's adopted investment policy and the overall direction of the City Council.
ATTACHMENTS -Portfolio Management and Interest Earnings Reports