Recommendation to Accept the Treasury Report for the Quarter Ending September 30, 2014. (Finance 2410) (Continued from January 20, 2015)
Okay. All those in favor I oppose abstentions. Motion carries unanimously. All right, next item. Recommendation to accept the Treasury report for the quarter ending September 30th, 2014. Don't go. Away. Sorry, but. Our office also manages the investment portfolio for the city in conjunction with the advice and consent of the elected city treasurer Kevin Kennedy. State law prescribes the requirements that we must that must be applied should a local agency governing body choose to invest unneeded cash and receive reports on those investments. Since the inception of this law, Alameda city councils have chosen to implement these requirements. The elected treasurer, Mr. Kevin Kennedy, chairs the Investment Advisory Commission Committee, which oversees the portfolio portfolio as managed by two investment advisors, Chandler Asset Management and Public Financial Management, Inc.. These two firms report their management activities on a monthly basis as required by state law. The Investment Advisory Committee reports quarterly on the results as stipulated in the law. The compliance with the investment policy and the cash coverage for the ensuing six months. While the state law states that the report will be made within 30 days of the quarter, close Alameda Sunshine Ordinance precludes presentation until the second month after the quarter end. Could you just explain why that is? I read it about six times and I can't figure it out. So quarter end September 30th, we don't get the data until, well, almost to the middle of September. And then by then, the 27 days prior to a meeting date has already elapsed. So we can't get it in until. End of October, beginning of November. Help me understand the 27 days I thought. When staff reports are due first within hours. So it takes it's 12 days to be publishing. But then it's. Okay. More time. So. So it's not just the Sunshine Ordinance. It's the time that's required to prepare to comply with sunshine. Or is that correct? Yeah. The the new sunshine ordinance merely added to the existing procedure. The existing procedure has always been 15 days before it was you had 15 days you published three days before was 18. Now it's 27. Thank you. I'm so out of it. Pardon me. Part of it is because every report, as you'll see as a review from the city attorney's office, the finance office, as well as the city manager's office. So a department prepares a report. It's got to be checked by three other people, three other departments before it actually gets published. Thank you. We have. Your privacy. You're literally trying to find a way to make it work and it it just doesn't work. Calendars and we count it and it just isn't going to make it. Well. If I may. Yes. It does. It actually, I'm going to take issue with that. It does work. It's what it takes to make sure everything is being checked properly. Yes. It's the price we pay for having a longer system and triple checks. And that's part of why this city has very few problems in terms of giant mistakes being made, in terms of what's in a staff report. That these continue. Almeida's statement of investment policy was last updated in February of 2014. The first principle therein is the is safety of the portfolio. The second is liquidity, quick access to cash and finally yield. That is what the investment earns. But all of these principles must also comply with the limitations listed in state law regarding the type of instrument, the credit quality and the length of the investment. All of these limitations are intended to preclude the use of public investments in risky investments over long periods of time. The city's statement of Investment Policy is located on the city's website in the finance department with a special button in the lower right hand corner. This report before you this evening contained. As contents are determined by state law as well in the staff report, a short summary of the of the portfolio is displayed. The investment types are listed for most liquid to least liquid. Cash we can get right away, cash that we would have to sell an investment in order to get the money. Market value is provided by the investment advisers and reflects the market on the final day of the quarter being reported. It is compared to cost or book value for review purposes only. A negative number indicates that the market value is less than the book value. The average duration is the average age of the investments. 146 days divided by 365 days equals 1.22 years. The limit by state law is five years or 1825 days. To measure the performance of the portfolio. The U.S. Treasury bill rate is used as a comparison. In this case, the report that you have before you the portfolio performed about 0.03% better than better than the Treasury rate. The exhibit contains the detailed investments by Instrument. The advisory firms report on credit quality and the return for their individual portions of the portfolio. We divide the portfolio into short term and long term. Public financial management manages the 1 to 3 year terms and the Chandler asset managers the 3 to 5 year terms. So they they have different instruments and they look at different pieces of the market and try to make sure that their portion returns better than the U.S. Treasury bill rate. So in this first quarter investment report. You will see that there is a big number, but a lot of that number is restricted in its use. It's not available for unrestricted uses of the general fund. The majority of this is debt service or other special revenue funds. Those funds are run. Are those funds not totally restricted? Are in the general fund and the internal service funds. Cash is managed on a daily basis with the goal of making certain that six months needs payroll accounts payable debt service will be met. Historically, Alameda has had two investment advisory firms. And both firms must comply with the investment policy, which includes the types of investment, the credit quality and duration as stipulated in state law. The policy also prohibits investments in companies which receive more than 51% of gross revenues from cigarets alcohol or gambling products. This chart is taken right from the report. And it it basically shows you. Where our money is invested and what the market value was. And the -237 says that the market value was less than the book value. Investments with bond trustees or those funds required to be held by the trustee by the bond covenants. The duration of one indicates that they are very liquid. The trustees are keeping them liquid in order to be able to meet any demands that we don't otherwise fund. The local agency investment fund is managed by the State Treasurer's office. The maximum investment that we are allowed to make in that pool is $50 million. Between these funds and cash on deposit, the six month cash needs are met. The certificates of deposit are a safe instrument for holding small amounts required to be maintained for a variety of purposes. The remainder are instruments managed by PFM, Public Financial Management and K.M. Chandler Asset Management. This quick thumbnail gives the reader a quick view of the elements of the portfolio how the book and market values compare the duration and the average yield. And that ends my report. Any public figures? No. Speaker. All right. Of counsel comments. Brody. I have a couple of quick questions again. Thank you for the report. Can you go back a little bit and talk about the investment policy? And I think you mentioned we don't invest in cigaret alcohol or gambling. So is that a counsel discretion or. Yes. So the investment policy is actually a document that comes before you each year and should be coming before you soon. Okay. And it is reviewed by Mr. Kennedy and I and the staff. And we look at any new laws that have been passed. Anything new that. Ella Fournier dead advisory commission is recommending or the Treasurers Association is recommending be included in those investment policies. We then look at those and bring a revised policy before the Council. One of the issues was several years ago that we were asked to create that restriction rather than making it. You cannot invest in any company that does that. It's just if they get 51% of their gross revenues from one of those products. So it's just those three. Issues that we try to restrict. Oh, but if we thought there should be more than the council because a couple of things you know, stuck out to me on that on that report on page six were actually investing in Walmart Global Notes. And that kind of disturbs me. You know, you look at the investment policy and it says, you know, we shouldn't be. I was at sea. Investments which serve only to enrich a few to the detriment of the people, will be strictly avoided. And I would hardly classify Wal-Mart as one that, you know, benefits small businesses, benefits workers, benefits working families. And, you know, I know Peralta went through this a while back. We have Chevron, you know, and Occidental Petroleum in there. And, you know, we're investing in fossil fuels. At the same time, we're all trying to sit up here and figure out how we're going to fight global warming yet, you know, we're we're helping fund them. So, you know, you're in the state. You know, the state doesn't invest money in gunmakers that actually produce and sell the guns that are banned here in California. So I'm hoping that, you know, has as we get to look at this bar, you know, we'll kind of be a little more socially responsible with, you know, where we invest our money. And before you answer that, that that really is an issue for the council. It's that's a pure policy question. The job for the investment people is to balance off safety of the investment versus return. If there are things you don't want to participate in. It is absolutely the council's right as an expression of the democratic process. But staff is not going to bring those forward as ideas. So, for example, there's a political question, and I'm not by the way, I don't happen to disagree with you on this question, but it is a political question to say Wal-Mart doesn't benefit working families , may not benefit the working families who work at Wal-Mart particularly, but many working families get low cost goods via Wal-Mart. That's a policy question. It's a value judgment. It's not appropriate for staff to intrude into those types of judgments. I don't think we want staff going down that road. So I would just suggest when the investment policy comes forward, that counsel bring up exactly those kinds of issues, which is appropriate in the council's role, but not in the staff's role. Yeah, I get that. But I didn't see, you know, cigarets alcohol and gambling in the investment policy is being restricted. So I was just kind of curious on how that how that came about. It came about as a policy action by the council, by the council many, many years ago. Well, I'll save that for another meeting then. Member de SAC. Well, thank you. I think it my take on this quarterly report, which is important, is always to take a look at, you know, how do I do my own? 401k And when I do my own 401k, maybe I'm not following the typical rules, but I'm always looking for security and safety to me over returns. So I'm always looking for things that granted, you know, will have really low volatility because even if it means I'm going to get, you know, small returns. To me, it's safety and security that that matters the most. And when I look at the instruments now tonight and as it has always been the case, your office, in conjunction with the city treasurer, from what I can tell, has always followed that. I mean, you look at the abundance of federal type of instruments, whether it's Fannie Mae or or Freddie Mac. I mean, or frankly, all the U.S. Treasury notes. I mean, you've got so much invested in cash. I meant. For the most part, I can't I can't remember if the U.S. if the buck was broken when we had a historic downturn. I can't remember. But it was a big issue. And and by that, what we mean is it's a safe holding. And and we are, for the most part, I think, investing very. So with safety in mind. So the take home, I think, is to make sure that we don't ever do what happened to Orange County in the mid 1990s when we start playing around with money and making, you know, an unwise and I know, you know, for all my years that I've been here, we've never been down that insight. But I think it's always worth when when this report comes up, it's always worth saying that over and over again so that we never do go down that path. I'll I'll the state laws that I referred to this evening or as a result of what happened in Orange County. Yeah. I will say, though, it is interesting to see who we are invested in when it comes to like long term instruments for the nonfederal agencies like Berkshire Hathaway. We've got a few things with Berkshire Hathaway, i.e. Warren Buffett. So it's it's it's interesting. Thank you. Thank you very much. There. Just a question on the book value versus market value is, is there a alert limit or an alert point? That were were tracking to see how close that should be. That's right. You mentioned the $237,000 under. And is that something that you track to or the Treasurer tracks to make sure that it. Doesn't grow enormous. Yes. Yes. The asset, the portfolio managers track that to make sure that they're within reason and there isn't an exact number. But if the market starts to drop, they're going to start liquidating. Can we get a little statement in that, at least in a conclusion, statement in the next report that says where our trend is that we're within the expected limits or we're going to recommend some action or take some action. I can discuss that with the investment advisers and try to include so it won't be in the next report. But if there's something if there's something that can be to address that, whenever it's feasible to put in, I think it would be helpful. Thank you. Remember ASHCROFT? No, I was just because I agree with the vice mayor. That would be interesting information for us to have it. At what point was the determined determination made to liquidate? Yeah. Thank you. And I'd like to add that as part of our quarterly investment report, it does provide that our city treasurer, Kevin Kennedy, reviewed the City of Almeida's Treasury report for the quarter ending September 30th, 2014, and found that it complies with the investment policy established by his office. So thank you. And do we have a motion to make? I'm level. Oh you move all second. I'm acceptance of the Treasurer report for the quarter ending September 3rd, 2014. A second. All those in favor. I oppose abstentions. Motion carries unanimously. Thank you. And our next item is 60.