Title
A. RESOLUTION NO. 2017-078 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ACKNOWLEDGING RECEIPT OF, AND AMENDING, COUNCIL POLICY NO. 220-01, THE CITY OF CHULA VISTA INVESTMENT POLICY AND GUIDELINES; AND DELEGATING INVESTMENT ACTIVITY AUTHORITY TO THE DIRECTOR OF FINANCE/TREASURER
B. INVESTMENT REPORT FOR THE QUARTER ENDED MARCH 31, 2017
Body
RECOMMENDED ACTION
Recommended Action
Council adopt the resolution and accept the report.
Body
SUMMARY
Per California Government Code Section 53607, on an annual basis the City Council may delegate to the City Treasurer the authority to conduct the investment activities of the City. And per Government Code Section 53646, the City Treasurer may annually present the City’s Investment Policy to the City Council to reaffirm or make any changes to the existing policy. The Investment Policy provides guidelines for the investment of idle funds and affords the City various investment opportunities, as long as the investment is deemed prudent and is allowable under Government Code Section 53600, et seq. The City received the Certificate of Excellence Award from the Association of Public Treasurers United States and Canada (APT-US&C) in August 2007 for its Investment Policy, and most recently, the Policy was reviewed and adopted by City Council on March 15, 2016. At this time, staff is recommending minor changes to the policy to reflect the recent revision of California Government Code Section 53601 to clarify that the Code’s rating requirements specify the minimum credit rating category required for investment types at purchase.
Transmitted herewith is the City’s investment report for the quarter ended March 31, 2017. To meet the reporting requirements set forth in the California Government Code Sections 53600 et seq. and the City of Chula Vista Investment Policy and Guidelines, a separate report was distributed to the City Council in April.
ENVIRONMENTAL REVIEW
The Development Services Director has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” in accordance with Section 15378(b)(5) of the State CEQA Guidelines because it involves only amendment of a Council Policy and Guidelines regarding the City’s Investment Policy, delegation of investment activity authority to the Director of Finance/Treasurer and acceptance of the Quarterly Investment Report; therefore it is an organizational or administrative activity of government that will not result in a direct or indirect physical change in the environmental; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary.
Environmental Notice
Environmental Notice
The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Body
Environmental Determination
BOARD/COMMISSION RECOMMENDATION
Not Applicable
DISCUSSION
Investment Policy
The City's Investment Policy and Guidelines was last amended on March 15, 2016 by Resolution 2016-046 and was intended to provide direction for the prudent investment of temporarily idle cash, and for maximizing the efficiency of the cash management process. The stated goal is to enhance the economic condition of the City while ensuring the safety of funds invested. The policy includes a list of specific investment instruments available under the relevant California Government Code sections, 53600 et seq. and 53635. Each investment transaction is made in the context of first ensuring the "safety" of principal, second, investing only for that timeframe that the cash is not needed for operational purposes ("liquidity"), and last seeking the highest return possible ("yield") provided that the first two factors are met.
Per section 18.0 of the Investment Policy, each fiscal year the Finance Director/Treasurer shall provide a copy of the Policy for adoption by the City Council. At this time, staff is recommending minor changes to reflect a revision of California Government Code Section 53601 to clarify that the Code’s rating requirements specify the minimum credit rating category required for investment types at purchase.
Quarterly Investment Report
The total cash and investment portfolio held by the City as of March 31, 2017 was $236,485,733 and total cash and investments held by the trustees was $82,258,486.
The cash and investments held by the City are composed of the following components: Managed Investment Portfolio ($149,905,351), State of CA Local Agency Investment Fund ($1,649,727), County of San Diego Pooled Investment Fund ($69,901,317), Cash/Time Deposits ($12,839,405), unrealized gain ($1,504,228), and accrued interest on investment ($685,705). Cash and investments held by the City and the trustees continue to be invested in accordance with the Government Code and the Council Investment Policy as adopted by Resolution 2016-046 on March 15, 2016.
During the quarter, six investments matured totaling $15,466,000 and one investment for $3,000,000 was sold prior to its maturity date. Six purchases were made to replace those investments and invest idle cash. Purchased investments include: three corporate notes issued by Microsoft ($2,000,000), Boeing Company ($1,500,000), and Comcast ($1,500,000); two commercial paper issued by Mitsubishi ($3,000,000) and Credit Agricole ($3,000,000); and one certificate of deposit ($3,000,000). Public Financial Management (PFM), the City's investment advisor, continues to monitor the portfolio and will make recommendations as financial and economic conditions warrant. There is no further activity to report on other than routine investments by the City's fiscal agents.
In March, the Federal Open Market Committee (FOMC) raised the Fed Funds target range by 0.25% to a range of 0.75% to 1.00%. Two-year Treasuries yielding 1.19% at the beginning of the quarter ended higher at the end of the quarter at 1.26%.
As of March 31, 2017, the Yield to Maturity at Cost on the Managed Investment Portfolio was 1.43%, which was an increase of five basis points from the previous quarter.
At the end of this quarter, the weighted average maturity of the Managed Investment Portfolio was 1.91 years which is a slight decrease from 1.94 the previous quarter and is within the Council Policy.
DECISION-MAKER CONFLICT
Staff has determined that the action contemplated by this item is ministerial in nature and does not require the City Council members to make or participate in making a governmental decision, pursuant to California Code of Regulations section 18702.4(a). Consequently, this item does not present a conflict under the Political Reform Act (Cal. Gov't Code § 87100, et seq.).
Staff is not independently aware, nor has staff been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. The investment portfolio supports the Operational Excellence goal as it seeks to maintain the safety and liquidity of the City’s cash while contributing investment earnings to the bottom line.
CURRENT YEAR FISCAL IMPACT
Considering the projected timing of cash receipts and disbursements and the structure of the Pooled Investment Portfolio, the City should be able to comfortably meet overall cash flow needs over the next six months. There is no direct fiscal impact by this action.
ONGOING FISCAL IMPACT
There is no ongoing fiscal impact by this action.
ATTACHMENTS
1. Summary of Cash and Investments as of March 31, 2017
2. PFM Investment Report for the Quarter Ended March 31, 2017
3. Council Policy 220-01 Investment Policy and Guidelines
Staff Contact: David Bilby, Director of Finance/Treasurer, Finance Department
Lisa Partee, Fiscal Management Analyst, Finance Department