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REPORT <br />To the Honorable Mayor and City Council <br />From the City Manager <br /> <br />February 27, 2017 <br />SUBJECT <br />Quarterly Investment Report for Period Ending December 31, 2016 <br /> <br />RECOMMENDATION <br />Approve, by motion, the City’s Quarterly Investment Report for the period ending <br />December 31, 2016 <br /> <br />BACKGROUND <br />In June 2016, the City Council adopted a new investment policy which requires staff to <br />provide a quarterly Investment report to the City Council at a public meeting. <br />Additionally, the City hired an investment manager, PFM Asset Management LLC <br />(PFMAM), to manage the City’s surplus funds pursuant to the newly adopted policy. The <br />City’s primary investment objectives continue to be safety, liquidity, and return on <br />investment (yield), in that order. <br /> <br />The attached report represents all areas in which City invests funds, excluding trust <br />funds, and bond proceeds held with a trustee, which are excluded from the policy. <br /> <br />ANALYSIS <br />The attached investment report indicates that as of December 31, 2016, surplus funds <br />(excluding cash with fiscal agents) from all sources were invested producing an <br />earnings rate of 0.95%. The market value of the portfolio as of December 31 was <br />$223,521,478. This includes the funds held in the San Mateo County Treasurer’s <br />investment pool and with the State Treasurer’s investment pool. All of these <br />investments are in compliance with the City’s investment policy as of December 31, <br />except for the San Mateo County Investment Pool Account (SMCIP); more details are <br />provided below. The City has sufficient liquid resources available to meet expenditure <br />requirements for the next six months. <br /> <br />The maximum allowable investments in SMCIP (permitted by the investment policy) are <br />$50 million, but because SMCIP does not notify the City of all its remittances prior to <br />month end, staff was unaware of additional County remittances that brought the balance <br />over by $2.2 million by December 31, 2016. Staff anticipate receiving additional large <br />deposits next fiscal year. Additionally, the City received the first of two large property tax <br />payments in December; the second payment will be made in April. Because SMCIP <br />only allows withdrawals of 12.5% of the previous month’s balance, staff will ensure the <br />account is back in compliance by the next quarter end. <br /> <br />6.1.A. - Page 1