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Quarterly Investment Report for the 6 months ended 12-31-21 CITY OF ENCINITAS INVESTMENT REPORT MEMORANDUM Six Months ended December 31, 2021 TO: City Council VIA: Pamela Antil, City Manager FROM: Teresa S. McBroome, Director of Finance/City Treasurer DATE: SUBJECT: March 2, 2022 City of Encinitas Investment Report for the six (6) months ended December 31, 2021 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 $113.5 million at December 31, 2021, compared to an average investable balance for the six months ended December 31, 2021 of $108 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 monthly portfolio balance over the last five years. The City utilizes a variety of investment vehicles, including direct investments and indirect investments. Direct investments are primarily fixed income securities issued by the US Treasury and several US Gov’t 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 investments funds managed by other agencies, such as the California Local Agency Investment Fund. Indirect investment balances are generally available to the City on a next day basis and are classified as “liquid” meaning 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 the City’s direct securities vary from less than two months to under five years. The City has overnight liquidity, including cash in the bank, of $27.3 million at December 31, 2021. The Pool earned $724,153 the first six months of FY 2021-22 for an annualized return of 1.33 percent. This compares to the City’s adopted performance benchmark of the one (1) year constant maturity Treasury index which averaged a 0.14 percent yield over the twelve months ended December 31, 2021 and was 0.55 percent at December 31, 2021. The market value of the City’s direct investments is more than their carrying value by $281,304 as of December 31, 2021, meaning that the portfolio has unrealized gains on securities held. Since the City has never had to sell a security prior to maturity, any unrealized gains or losses would only constitute a timing difference. The public’s monies are extremely safe and well-diversified and follow the City’s adopted investment policy and the overall direction of the City Council. ATTACHMENTS – Portfolio Management and Interest Earnings Reports FY 2021-22 June 30, 2022 March 31, 2022 Dec. 31, 2021 Sep. 30, 2021 Book Value 113,540,519$ 108,584,422$ Market Value 113,821,823$ 109,637,863$ Unrealized Gain/(Loss)281,304$ 1,053,441$ Unrealized Gain/Loss as % of Book Value 0.25%0.97% Effective Rate of Return 1.33%1.32% Average Yield To Maturity 1.23%1.31% Average Maturity (Years)1.71 1.90 Investment Earnings Year to Date 724,153$ 388,307$