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AGENDA
INVESTMENT ADVISORY BOARD
Study Session Room
78-495 Calle Tampico- La Quinta, CA 92253
May 10, 2006 - 5:30 P.M.
I CALL TO ORDER
a. Pledge of Allegiance
b. Roll Call
II PUBLIC COMMENT - (This is the time set aside for public comment on any matter
not scheduled on the agenda.)
III CONFIRMATION OF AGENDA
IV CONSENT CALENDAR
A. Approval of Minutes of Meeting on April 12, 2006 for the Investment Advisory
Board.
V BUSINESS SESSION
A. Transmittal of Treasury Report for March 2006
B. Continued Consideration of Fiscal Year 2006/07 Investment Policies
C. Continued Consideration of Request for City Council to Release Request for
Proposal for Portfolio (RFP) for Investment Management Services
VI CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report and other selected Financial Data -
April 2006
B. Pooled Money Investment Board Reports on Hand for Review — February 2006
C. Commission Member Recruitment
D. Update on California Municipal Treasurers Association Conference
VII BOARD MEMBER ITEMS
Vill ADJOURNMENT
INVESTMENT ADVISORY BOARD Business Session: A
Meeting Date: May 10, 2006
ITEM TITLE:
Transmittal of Treasury Report
for March 2006
BACKGROUND:
Attached please find the Treasury Report March 2006
This month the Staff report contains a commentary section from the Treasurer. Staff
has not considered this a part of the Treasurers Report at this time to allow for
discussion by the Board on its merit.
RECOMMENDATION:
Review, Receive and File the Treasury Report for March 2006
r John M. Falconer, Finance Director
Treasurer's Commentary
For the Month of March
Cash Balances — The portfolio size decreased for the month by $3.5 million to $201.5 million
due primarily to the semi-annual payment of debt service costs on March 1, 2006.
Investment Activity — Mutual funds decreased by $5.1 million due to bond draws from Capital
Project and the aforementioned semi-annual debt service payments. Investment purchased
consisted primarily of rolling over bond project fund U.S. Treasury securities for another six
months. These investments yielded 100 basis points over the same length of maturing
investments which points to the fact that short term rates have increased dramatically based
on the Fed's actions.
Portfolio Performance — The overall portfolio performance increased by 22 basis points from
4.09% to 4.31 % while the portfolio average maturity went from 73 days to 110 days. At
the end of March, the portfolio still is below the six month Treasury rate of 4.63%, which
increased by 5 basis points from the previous month. With the short average maturity of
110 days, the portfolio performance should continue to increase based upon raising short
term interest rates and the short average maturities of the portfolio. At this time last year the
portfolio was yielding 2.43% and the benchmark was at 2.85% for a 42 point difference. It
is extremely difficult to meet our benchmark in a raising short term rate environment. The
Treasurer has not been investing for more than six months Treasury securities based upon the
yield curve and GSE's for more than one year to take advantage of the spreads. (30 basis
points).
Future Thoughts
Going forward, the Treasurer believes that the Fed will continue to increase the Fed funds
rate by at least 25 points and possibly another 50 points which should continue to result in
increases in short term. Therefore, the Treasurer will continue to invest in relatively short term
maturities. The Treasurer does have $2.5 million in GSE's available to invest in and will look
at the market after the Fed May meeting to determine if the yields are attractive. In addition,
the Teasurer will look at a $3 million Corporate Note from GE Capital for possible investment
looking at a one year horizon. Both of these investments will be above the benchmark and
should increase the portfolio yields. The Treasurer has held a larger than normal balance in
LAIF based upon a possible $14.0 million housing purchase from the General Fund (which will
repaid) and a $4.5 economic development payment. If these events were to happen, the
LAIF balances would be reduced to $5 million dollars. Given the City operating and capital
project funding needs, this is lower than considered prudent. The LAIF balances would be
increased to a higher level in May since a large amount of maturing investments which would
be available for transfer to LAIF. Funds for both the GSE and Corporate Note investments
would come from the May property tax distributions, which are expected to result in a net
increase in the available cash for the portfolio( net of pass through payments).
� rw
MEMORANDUM
TO La Quinta City Council
FROM John M. Falconer, Finance Director/Treasurer
SUBJECT Treasurer's Report for March 31, 2006
DATE: April 30, 2006
Attached is the Treasurer's Report for the month ending March 31, 2006. The report is submitted to
the City Council each month after a reconciliation of accounts is accomplished by the Finance Department.
The following table summarizes the changes in investment types for the month:
Investment
Beqinning
Purchased
Notes
Sold/Matured
Other
Ending
Change 1
_
Cash (3)
$ 1,232,746
$ 342,980
(1)
$1,575,726
$342,980
LAIF
25,699,252
2,750,000
(250,000)
28,199,252
2,500,000
US Treasuries (2)
132,208,835
39,208,000
(40,000,000)
(475,867)
130,940,968
(1,267,867)
US Gov't Sponsored Enterprises (2)
34,703,370
42,500
34,745,870
42,500
Commercial Paper (2)
-
0
Corporate Notes
-
0
0
Mutual Funds
11,133,458
1
5,115,000
6,018,458
5,115,00(0)
Total
$ 205,696,124
$ 42,300,980
$ 45,365,000
$ 433,367
$ 201,480,274
$ 3,497,387)l
I certify that this report accurately reflects all pooled investments and is in compliance with the California
Government Code; and is in conformity with the City Investment Policy except as follows:
The Federal Home Loan Bank maximum was exceeded on January 18, 2006, as reported on page 2, and
is expected to come into conformity on December 15, 2006. As of March 31, 2006, the market of the investment
value was $7,544,687 and the amortized cost plus accrued interest was $7,573,302 for an unrealized loss of $28,615.
Management intends to hold the investment to maturity.
As Treasurer of the City of La Quinta, I hereby certify that sufficient investment liquidity and anticipated
revenues are available to meet the pools expenditure requirements for the next six months. The City of
La Quinta used the Bureau of the Public Debt, U.S. Bank Monthly Statement and the Bank of New York
Monthly Custodian Report to determine the fair market value of investments at month end
S Z oo6
John M. Falconer Date
Finance Director/Treasurer
Footnote
(1) The amount reported represents the net increase (decrease) of deposits and withdrawals from
the previous month.
(2) The amount reported in the other column represents the amortization of premium/discount for the
month on US Treasury, Commercial Paper and Agency investments.
(3) The cash account may reflect a negative balance. This negative balance will be offset with transfers from other investments
before warrants are presented for payment by the payee at the bank.
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City of La Ouinta
Reconciliation of Actual and Surplus Funds
City, Redevelopment Agency and Financing Authority
March 31, 2006
Balance of Actual Funds 201,480,274
Less Petty cash Funds (1,000)
Less Non -Surplus Funds (1,349,144)
Balance of Surplus Funds $ 200,130,130
I City Cash & Investments
Bank Accounts
Narne Availability -
Wells Fargo - Demand
Surplus
- Type
Checking
Book
$ 1,550,585
No
Petty Cash- Demand
No
N/A
1,000
Wells Fargo/Housing -Demand _
--- ---- --
I_ Yes
Checking _- _�
-- - -
---. 24,141
Total - Bank Accounts
$ 1,575,726
U. S. Treasury
Amortized
_- Custodian - Availability _
SuTlus
_ - Issuer/Type _
-_Value _
Bank of New York - Demand
Yes
U.S. Treasury Bill
8,972,815
Bank of New York - Demand
Yes
U.S. Treasury Bill
9,953,108
Bank of New York - Demand
Yes
U.S. Treasury Bill
4,968,629
Bank of New York - Demand
Yes
U.S. Treasury Bill
9.961,538
Bank of New York - Demand
Yes
U.S Treasury Note
3,958,255
Bank of New York -Demand
Yes
U S Treasury Note
4,950,226
Bank of New York - Demand
Yes
U.S. Treasury Bill
4.883,997
Bank of New York - Demand
Yes
U.S. Treasury Note
5,000,294
of New York - Dema_nd
Y_e_s
U.S. Treasury Note _
4,991_,064
_ _Bank _
Total - US Treasury
__
57,639 926
Surplus
Surplus
Yes
Ad)_ -
Yes
$
$
24 ,141 I
I
I -
I 24 141
$ 24,141
$ -
$ 24,141
Surplus
Surplus
Yes
Ai - -
Yes
8,972,815
8,972,815
9.953.108
9,953,108
4,968,629
4,968.629
9,961,538
9,961.538
3,958,255
3,958,255
4,950.226
4,950,226
4,883,997
4,883,997
5,000,294
5.000,294
4,991,064
-
4.991,064
57,639,926
57,639,926
Surplus
i
I Surplus
No +-_
$ 1,550585
Adj__
$ (201.441)1
i_ _ No
$ 1,349,144
1 000
1,000
$ 1,551,585
$ 1201,441)
$ 1,350, 144
Surplus �T Surplus
No Adj _. No
-I
I
All Funds Surplus
Actual % Yes
0.7821 % 0.0121%
All Funds Surplus
Actual % i _ Yes
28 6082% 28 8012`/° j
U S_ Government Sponsored Enterprises Amortized Surplus Surplus Surplus Surplus All Funds Surplus
Custodian Availability _-_ Surplus_ Issue ripe — Value _ _ ,Yes - Ad _ Yes _. _ _ No Ad) No _ _ _ Actual % i Yes
Bank of New York - Demand Yes j FHLB 4,973,t47 d,973,147 4.973,147 - - -
Bank of New York - Demand Yes FHLB-Discount 2,907.389 2,907,389 2,907,389
Bank of NewYork- Demand Yes FHLB 1,988,109 1,988,109 1,988,109 - -
i
Bank of New York - Demand Yes FHLB 7,498,146 7,498,146 7,498,146
Bank of New York - Demand Yes FNMA 4,958,625 4.958,625 I 4,958,62-5
Bank of New York - Demand Yes FHL Mortgage ' 2,510,428 2,510,428 2,510 428 - - -
Total - U.S. Government Securities � 34 745,870 34 978,138 I 4,978,138
k of New York -
and Yes
_.. _- - 931 888 4,931 888 -+
,74
_Bank of New York - De nand _ Yes FARM CREDIT
_ 4,931,888 4,J31 888 yi, - -- - _ _ ___
I _. 34,745870I__._ 172453Y/„ 1 itil 6" 1
Prime Commercial Paper Book Surplus Surplus Surplus Surplus All Funds ulplus 1
y - Yes Issuer _ Value Yes Adj Yes No Add No Actual % Yes 11
--- - _. - Yes ---_----- --------.. - - - ------_. -- _. _.. _---- --._ ---- ---
Custodian - Availabilit S_ur lus - -. - _
Yes
-- -----. _.. _..__._
Total - Prime Conimercial Pal,-"
Local Name Y Investment
nv atm tnt Fund - Surplus Surplus All Funds Surplus I
y Sur lu , Ty Book Yes d_ Yes Actual % Yes
- _ - - - - — -
LAIF - City - Demand Yes State Pool 24 498,012 24,498 012 201,441 24,699 453 -
LAIF - RDA - Demand Yes_ 1 - - StatePool_ -3 701,240 _3,701 240. _ 3,701 240 _.I
Total -State Poot 28 199,252 28,199 252 201,441 28,400,693 13 9960% 14 1911
Total City Investments 120,585,048 120,585,048 201,441 120,786.48959.8496 % 60.3540°/ 1
Total City Cash & Investments 122,160,774 120,609, 189 201.441 120,810,630 1,551,585 (201,441) - 1,350,144 60.6316% 60.3660 %]
Fiscal Agent Investments I
Portfolio - City Investments Amortized
Custodian - Availability - -_ Surplus Issuer,'Type Value
2002 RDA U.S. Bank-CIP Yes U.S.Treasury Bill 10 177,263
2004 Finance Authority -CIP Yes U.S Treasury Bill 29,692,736
2004 Finance Authority -CIP Yes U S.Treasury Bill 9,010.149
2004 Finance
UeS Treouty GIP Yes U. S. Treasury Note 24A20,894
Totalury 73,301 .042
PortfolioFunds
rtfoltee
Money Market
Book
- Surplus
Availability Sur plus
Mutual Fund
Value
_
Civic Center U S Bank - Pmlecl YES
1 st American
-
Civic Center U S Bank - Debt Svc YES
1st American
171,423
1994 RDA U S Bank -Debt Svc YES
1st Ame can
56
1995 RDA U S Bank - CIP YES
1 st American
-
1995 RDA U.S Bank - Special Fund YES
1st American
2004 Fin Auth - 1995 US Bank - Escrow YES
1st American
1998 RDA U S.Bank - CIP YES
1st American
-
1998 RDA U.S Bank - Dbt Svc YES
1st American
45
1998 RDA U S Bank - Special Fund I YES
1st American
17
1998 RDA U S Bank - CIP YES
1st American
2001 RDA U.S Bank - Dbt Svc YES
1 st American
133
2001 RDA U S Bank - CIP YES
1st American
-
2002 RDA U.S Bank-Dbt Svc YES
1st American
103
Z002 RDA U S Bank -CIP YES
1st American
1,206.973
2003 Taxable RDA U S. Bank - DS YES
1st American
86
2003 Taxable RDA U S Bank -COI YES
1st American
-
2003 Taxable RDA U S. Bank-CIP 1 YES
1st American i
-
2004 Fin Auth US Bank - GIP YES
1st American
4.639,380
2004 Fin Auth US Bank - COI YES
1st American
242
Subtotal - Mutual Fund
6,018,458
Surplus
i Surplus
No
-
Ad1._.
_ No
I
Surplus Surplus Surplus ; Surplus All Funds Surplus
i
Yes _ -i_ Ad1_ r Yes No I_ _AAA _ i No Actual Yes
1
10,177 263 � � 10,177,263 - -
29, 692.736 1 29, 692, 736
_,420,894 9,010 149 _ 3Fi 3812
9
2a,azo,69a � 24420 894
_73,301,042 - 73.301,042 _- � 36 6267i,J
Surplus I Surplus All Funds Surplus
Nrl � Ad,-- � No Actual Yes
_I I
� I
I
I
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Total Fiscal Agent Investments 79,319,500 79 319 500 39.3684 %-39.6340%
Grand Total 201,480,274 1 199 928 689 201,441 200,130,13� 1,551,585 (201,441) 7,350,144� 100.0000% 100.0000"%]
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11
INVESTMENT ADVISORY BOARD Business Session No. B
Meeting Date: May 10, 2006
TITLE:
Continued Consideration of Fiscal Year 2006/07
Investment Policies
BACKGROUND:
Pursuant to State Legislation the City investment policies must be approved on an
annual basis by the City Council. This approval is done in June of each year.
RECOMMENDATION:
Continued review of the Investment policies for approval by City Council in June 2006
1
John M. Falconer, Finance Director
INVESTMENT ADVISORY BOARD Business Session No. C
Meeting Date: May 10, 2006
TITLE:
Continued Consideration of Request for City Council to Release Request for Proposal
for Portfolio (RFP) for Investment Management Services
BACKGROUND:
At the last two Board meetings, Staff has discussed the issuance of a letter to the City
Council addressing issues brought forward by Councilmember Osborne on increasing
the portfolio yields. To that end Chairperson Deniel prepared a draft letter and with
concurrence of the Board they asked Staff to bring back the letter with comments.
Attached are two versions of the letter for the Boards consideration one being
Chairperson Deniel's letter and the other from the City Treasurer.
RECOMMENDATION:
As directed by the Board.
�_ - John M. Falconer, Finance Director
To: Honorable Mayor and Members of the City Council
From: Chairperson Deniel and Members of the Investment Advisory Board
Date: May 10, 2006
RE: Discussion/Position Paper on Issues Raised by Council Member Osborne
For the past several months, the Investment Advisory Board (IAB) has been meeting to
discuss next fiscal years Investment Policy and Work Plan. As part of these discussions,
the Board has included issues bought forward to the City Council by Council Member
Osborne, during your January 17th City Council Meeting and his subsequent appearance
at the February 81h Investment Advisory Meeting. At the January 17th City Council
Meeting, the City Council moved and approved a motion that Council Member Osborne
make a written presentation to the IAB. Pursuant to this motion, Council Member
Osborne discussed the issue with the IAB during its February 8th meeting.
In an effort to keep the City Council appraised of our discussions, we have prepared this
position paper to respond to CouncilMember Osborne's issues which were as follows:
• Council Member Osborne is concerned with the performance of the City's
investment portfolio. The portfolio has lagged the established benchmark,
which is the 6-month Treasury yield, during the past two years. He remarked
that in the past, the portfolio had exceeded the benchmark and now it is below
it.
• Council Member Osborne mentioned that the City consider the hiring of an
independent professional money manager as had been suggested by the IAB
in FY 2005/06 as a first option or as a second option hire a new employee,
part of the City staff, to handle the City's investments.
IAB Response regarding the issue of performance of the portfolio
• The Board has several important points it would like to make:
➢ The current Investment Policy was established after the City had been
victimized with a defalcation by an unscrupulous investment manager.
➢ The City was very young then. To prevent such a loss from happening
again, the City took control of its investments and an Investment Policy
was established. This policy was, appropriately, very conservative and
restrictive; its main objective being the protection of the portfolio
principal, not earnings (performance of the portfolio).
• The current Investment Policy of the City of La Quinta places certain
restrictions on how the City's investment portfolio is to be managed. There
are constraints as to the type of investments to be made, term of investment
and restrictions against "trading". The portfolio is restricted to a very short-
term investment structure and the application of a "buy -and -hold" policy to
the investments purchased.
• The result of the buy and hold strategy, is that the portfolio will outperform a
fixed income benchmark (such as the 6-month treasury rate) in a declining
interest rate environment and under -perform it, in a rising interest scenario.
• This is just so, regardless of who manages the portfolio; it is not an issue of
performance; it is an issue of constraints.
IAB Response regarding the issue of hiring a Staff Person or an Independent
Professional Money Manager
• The Board has several important points it would like to make:
➢ It is the opinion of this Board that the City has matured both in size and
experience and it is time to modify the policy to allow for a different
portfolio management strategy with a portion of the City's investments.
➢ This would entail the relaxing of some of the current restrictions to
accommodate slightly more aggressive investments in order to earn a
higher yield on a op rtion of the City's portfolio.
• This Board does not recommend the hiring of a person to be part of the City
staff to handle this task. Such a person would not have the same experience,
interaction, industry tools, or exposure, as someone in a firm whose
mainstream business is the management of investment portfolios.
• The Board does recommend that such a shift be handled by an independent
professional money manager who would actively manage a portion of the
City's investments with the objective of improving returns. It is the Board's
opinion that this portion be $10 - $20 million, which represents about 10%-
20% of the total portfolio currently under the direction of the Finance Director
(excluding the Fiscal Agent). Loss through defalcation is avoidable by using a
third party custodian who handles the investments under the Delivery vs.
Payment method. In other words, the professional money manager directs the
investments but does not carry out the transactions, nor does he or she have
access to the assets in the account.
Conclusion
• The current Investment Policy in FY 2005/06 accommodates the use of an
independent professional money manager. The majority of the IAB believe
that the City Council should consider our recommendation to hire an
independent professional money manager and plan to bring this matter to the
City Council in July as part of the IAB Work Plan for FY 2006/07.
Specifically, we will be respectfully requesting that the City Council authorize
the release of a Request for Proposal, and will further request consultation
with the City Attorney to amend the City Ordinance, if necessary.
Draft (prepared by Cristina Deniel)
To: City Council
From: Investment Advisory Board
The following is a Position/Discussion Paper presented by the members of the Investment
Advisory Board. This Position Paper seeks to address the issues raised by Council
Member Osborne during the January 171h City Council Meeting and later presented to the
IAB during its February 8th session.
Issues raised by Council Member Osborne
Council Member Osborne is concerned with the performance of the City's
investment portfolio. The portfolio has lagged the established benchmark
which is the 6-month Treasury yield during the past two quarters. He
remarked that in the past several years the portfolio had exceeded the
benchmark and now it is below it.
Council Member Osborne mentioned that the City consider the hiring of an
independent professional money manager as had been suggested by this Board
in 2005 or hire a new employee, part of the City staff, to handle the City's
investments.
• The Mayor and other Council Members moved and approved that Council
Member Osborne make a written presentation to the IAB. Pursuant to this
motion, Council Member Osborne discussed the issue with the IAB during its
February 8th meeting.
Investment Advisory Board Comments
• The current Investment Policy of the City of La Quinta places certain
restrictions on how the City's investment portfolio is to be managed. There
are constraints as to the type of investments to be made, term of investment
and restrictions against "trading". The portfolio is restricted to a very short-
term investment structure and the application of a "buy -and -hold" policy to
the investments purchased.
• The result of the buy and hold strategy, is that the portfolio will outperform a
fixed income benchmark (such as the 6-month treasury rate) in a declining
interest rate environment and under -perform it, in a rising interest scenario.
This is just so, regardless of who manages the portfolio; it is not an issue of
performance; it is an issue of constraints.
• This Board has several important points it would like to make:
➢ The current Investment Policy was established after the City had been
victimized with a defalcation by an unscrupulous investment manager.
The City was very young then. To prevent such a loss from happening
again, the City took control of its investments and an Investment Policy
was established. This policy was, appropriately, very conservative and
restrictive; its main objective being the protection of the portfolio
principal, not earnings there from (performance of the portfolio).
➢ It is the opinion of this Board that the City has matured both in size and
experience and it is time to modify the policy to allow for a different
portfolio management strategy with a portion of the City's investments.
➢ This would entail the relaxing of some of the current restrictions to
accommodate slightly more aggressive investments in order to earn a
higher yield on a op rtion of the City's portfolio.
➢ It is the Board's opinion that this portion be $10 - $20 million, which
represents about 1 /l 0th of the total portfolio currently under the direction
of the Finance Director (excluding the Fiscal Agent).
➢ The Board also recommends that such shift be handled by an independent
professional money manager who would actively manage a portion of the
City's investments with the objective of improving returns.
➢ This Board does not recommend the hiring of a person to be part of the
City staff to handle this task. Such a person would not have the same
experience, interaction, industry tools, or exposure, as someone in a firm
whose mainstream business is the management of investment portfolios.
➢ Loss through defalcation is avoidable by using a third party custodian who
handles the investments under the Delivery vs. Payment method. In other
words, the professional money manager directs the investments but does
not carry out the transactions, nor does he or she have access to the assets
in the account.
➢ This Board amended the Investment Policy during its 2005 season to
accommodate this recommendation. We believe that City Council should
consider this recommendation and consider authorizing or directing the
Finance Director to issue a Request for Proposal (RFP).
INVESTMENT ADVISORY BOARD Correspondence & Written
Material Item A
Meeting Date: May 10, 2006
TITLE:
Month End Cash Report, April 2006 and
Other selected Financial Data
BACKGROUND:
This cash report is not a complete Treasury Report (exclude petty cash, deferred
compensation and fiscal agent balances, but would report in a timely fashion selected
cash balances.
RECOMMENDATION:
Information item only.
John M. Falconer, Finance Director
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InsidePhil Angelides, State Treasurer
State"`
PMIA Performance Report
Date
Daily
Yield
Quarter to
Date Yield
Average
Maturity
(in days)
4/13/2006
4.26
4.22
180
4/14/2006
4.28
4.23
179
4/15/2006
4.28
4.23
179
4/16/2006
4.28
4.23
179
4/17/2006
4.30
4.24
175
4/18/2006
4.30
4.25
174
4/19/2006
4.31
4.25
174
4/20/2006
4.32
4.25
173
4/21 /2006
4.34
4.26
174
4/22/2006
4.34
4.26
174
4/23/2006
4.34
4.27
174
4/24/2006
4.36
4.27
169
4/25/2006
4.38
4.27
164
4/26/2006
4.391
4.281
166
Corporate B
1.59%
Commercial Paper
11.88%
Time Dep
15.20`
LAIF Performance Report
Quarter ending 3/31/2006
Apportionment Rate: 4.03%
Earnings Ratio: .00011053168579962
Fair Value Factor: .997592460
PMIA Average Monthly Effective Yields
March 2006 4.142%
February 2006 4.043%
January 2006 3.955%
Pooled Money Investment Account
Portfolio Composition
$51.5 Billion
03/31 /06
Treasuries
Loans 10.92%
CDs/BNs
19.40%
ges
YO
Agencies
25.89%
3
FRB: Commercial Paper Rates and Outstandings
Page 1 of 4
Federal Reserve Release
Commercial Paper
Release I About I Outstandings I Volume statistics I Year-end I Data Download
Data as of April 28, 2006
Commercial Paper Rates and Outstanding
Derived from data supplied by The Depository Trust Company
Posted May 1, 2006
il_.... .-4- ■+Wino
li III A "L. —
AA A2/P2/F2 AA AA
Term nonfinancial nonfinancial financial asset -backed
1-day 4.81 4.91 4.82 4.84
7-day 4.77 4.91 4.79 4.85
15-day 4.83 5.05 4.85 4.92
30-day 4.92 5.04 4.91 4.96
60-day n.a. 5.09 4.99 4.99
90-day i.a. 5.07 5.00=5.02
_c ice_ cn A.... A A nnnfinnnrini nnri an-dav AA nonfina
Trade data insutticient to suppui1 G1wuiauv11 V. 1.11 _-, • • • ••-
Yield curve
Try a a
Y
icial rates for April 28, 2006.
http://www.federalreserve.gov/Releases/CP/
4
5/1/200t
FRB: Commercial Paper Rates and Outstandings
Page 2 of 4
v It.__._._. .11 .. , I - , .1 IN -A,;,
Day�, to !VLHLIJ-it�
PCI-wit
:1. ,?
4,9
4.7
Discount rate spread
Thirtv-&tv AA m-)nfiw,,jCj�jj Cj,),jjjj,)cj,cj-,jI jxjj)cr Wziflv I BwiN
I N)
F- 100
80
60
40
'10
2001 2002 1004 2005 2 W
Discount rate history
http://www.federalreserve.gov/Releases/CP/
5
5/l/200(
FRB: Commercial Paper Rates and Outstandings
Page 3 of 4
Outstandings
Weekly (Wednesday), seasonally adjusted
0'.II;,1"L, r,1 el, .Ih11'`
940
90
840
790
740
(190
(40
590
540
10(1
2001 2002 20(
1'crc���1
r�
liilliOns. Of dOlkIrs
.�.1l.f
.kM)
170
Io
90
,ljlR)
The daily commercial paper release will usually be available before 11:00am EST. However, the Federal Reserve
Board makes no guarantee regarding the timing of the daily commercial paper release. When the Federa Reserve
Board is closed on a business day, rates for the previous business day will be available through the Feder
al
Reserver Board's Data Download application. This policy is subject to change at any time without notice.
Release I About I Outstandings I Volume statistics I Year-end I Data Download
f lome I Statistical releases
Accessibility I Contact Us
http://www.federalreserve.gov/Releases/CP/
6
5/ l /200(
FRB: Commercial Paper Rates and Outstandings
Page 4 of 4
Last update: May 1, 2006
7
http://www.federalreserve.gov/Releases/CP/ 5/l /200E
Bureau of the Public Debt : Recent Treasury Bill Auction Results Page 1 of 2
Recent Treasury Bill Auction Results
Price
Issue Maturity Discount
Investment
Per
CUSIP
Term Date Date
Rate %
Rate %
$100
91-DAY 05-04-2006 08-03-2006
4.685
4.807
98.815736
912795XP1
182-DAY 05-04-2006 1 1-02-2006
4.780
4.966
97.583444
912795YC9
28-DAY 04-27-2006 05-25-2006
4.540
4.619
99.646889
912795XD8
91-DAY 04-27-2006 07-27-2006
4.635
4.755
98.828375
912795XN6,
182-DAY 04-27-2006 10-26-2006
4.735
4.919
97.606194
912795YB 1
28-DAY 04-20-2006 05-18-2006
4.460
4.538
99.653111
912795XCO
91-DAY 04-20-2006 07-20-2006
4.600
4.719
98.837222
912795XM8
182-DAY 04-20-2006 10-19-2006
4.750
4.934
97.598611
912795YA3
4-DAY 04-13-2006 04-17-2006
4.720
4.788
99.947556
912795TU5
28-DAY 04-13-2006 05-1 1-2006
4.540
4.619
99.646889
912795XB2
91-DAY 04-13-2006 07-13-2006
4.570
4.688
98.844806
912795XLO
182-DAY 04-13-2006 10-12-2006
4.700
4.881
97.623889
912795XZ9
10-DAY 04-07-2006 04-17-2006
4.685
4.756
99.869861
912795TU5
1 1-DAY 04-06-2006 04-17-2006
4.675
4.747
99.857153
912795TU5
28-DAY 04-06-2006 05-04-2006
4.550
4.630
99.646111
912795XA4
91-DAY 04-06-2006 07-06-2006
4.535
4.651
98.853653
912795XK2
182-DAY 04-06-2006 10-05-2006
4.670
4.849
97.639056
912795XY2
14-DAY 04-03-2006 04-17-2006
4.685
4.759
99.817806
912795TU5
28-DAY 03-30-2006 04-27-2006
4.630
4.711
99.639889
912795WZO
91-DAY 03-30-2006 06-29-2006
4.495
4.610
98.863764
912795XJ5
182-DAY 03-30-2006 09-28-2006
4.600
4.775
97.674444
912795XX4
28-DAY 03-23-2006 04-20-2006
4.600
4.681
99.642222
912795WY3
91-DAY 03-23-2006 06-22-2006
4.545
4.662
98.851125
912795XH9
182-DAY 03-23-2006 09-21-2006
4.610
4.786
97.669389
912795XW6
28-DAY 03-16-2006 04-13-2006
4.395
4.471
99.658167
912795WX5
91-DAY 03-16-2006 06-15-2006
4.510
4.625
98.859972
912795XG 1
182-DAY 03-16-2006 09-14-2006
4.645
4.823
97.651694
912795XV8
1-DAY 03-14-2006 03-15-2006
4.410
4.472
99.987750
912795TSO
28-DAY 03-09-2006 04-06-2006
4.380
4.456
99.659333
912795WW7
91-DAY 03-09-2006 06-08-2006
4.500
4.615
98.862500
912795XF3
182-DAY 03-09-2006 09-07-2006
4.600
4.775
97.674444
912795XUO
6-DAY 03-08-2006 03-14-2006
4.380
4.444
99.927000
912795TT8
12-DAY 03-03-2006 03-15-2006
4.445
4.513
99.851833
912795TSO
28-DAY 03-02-2006 03-30-2006
4.390
4.466
99.658556
912795WV9
91-DAY 03-02-2006 06-01-2006
4.510
4.625
98.859972
912795XE6
182-DAY 03-02-2006 08-31-2006
4.580
4.754
97.684556
912795XT3
28-DAY 02-23-2006 03-23-2006
4.350
4.425
99.661667
912795WU 1
91-DAY 02-23-2006 05-25-2006
4.450
4.563
98.875139
912795XD8
8
http://wwws.publicdebt.treas.gov/AI/OFBills
5/1 /200E
Bureau of the Public Debt : Recent Treasury Bill Auction Results
Page 2 of 2
182-DAY 02-23-2006 08-24-2006 4.545 4.716 97.702250 912795XS5
28-DAY 02-16-2006 03-16-2006 4.330 4.405 99.663222 912795 WT4
Effective with the 11/2/98 auction, all bills are auctioned using the single -priced method.
Return to Auction Information Page
Privacy & security Notices I Terms & Conditions I Accessibility { Data Quality
Last Updated May 1, 2006 4:41:28 PM £LET
9
http://wwws.publicdebt.treas.gov/AI/OFBills 5/l /200F
FRB: H.15--Selected Interest Rates, Web -Only Daily Update --April 29, 2006
Page 1 of 4
Federal Reserve Sitatistical Releiise
I L I
Selected Interest Rates (Daily)
Release Date: April 28, 2006
� ccl l rcicasc cl,,, .cs <i.rid ��i����� t,mcem itsicy l cl < .c I:)�. � �t l�� �: .�"�i t� .�t
Daily update Other formats: Screeti reader ASCH
H
I Icr'a
The weekly release is posted on Monday. Daily updates of the weekly release are poste**T
e posted o
through Friday on this site. If Monday is a holiday, the weekly re
after the holiday and the daily update will not be posted on that Tuesday.
FEDERAL RESERVE STATISTICAL RELEASE
H.15 DAILY UPDATE: WEB RELEASE ONLY
SELECTED INTEREST RATES
For use at 4:15 p.m. Eastern Time
Yields in percent per annum
April
28, 2006
2006
2006
2006
2006
Instruments
Apr
Apr
Apr
Apr
24
25
26
27
Federal funds (effective) 1 2 3
4.77
4.74
4.73
4.79
Commercial Paper 3 4 5
Nonfinancial
4.81
4.80
4.90
4.91
1-month
n.a.
4.85
4.90
n.a.
2-month
n.a.
4.90
4.90
n.a.
3-month
Financial
4.86
4.89
4.89
4.88
1-month
4.94
4.94
4.95
4.97
2-month
4.98
4.97
5.01
5.02
3-month
CDs (secondary market) 3 6
4.93
4.96
4.96
4.98
1-month
5.07
5.07
5.09
5.11
3-month
5.19
5.19
5.23
5.25
6-month
Eurodollar deposits (London) 3 7
4.96
4.98
4.99
5.02
1-month
5.09
5.10
5.12
5.14
3-month
5.21
5.21
5.26
5.28
6-month
2 3 8
7.75
7.75
7.75
7.75
Bank prime loan
2 9
5.75
5.75
5.75
5.75
Discount window primary credit
U.S. government securities
Treasury bills (secondary market) 3 4
4-week
4.49
4.55
4.57
4.56
4.64
4.67
4.67
4.66
3-month
4.75
4.77
4.79
4.75
6-month
Treasury constant maturities
Nominal 10
4.58
4.63
4.65
4.64
1-month
4.75
4.79
4.79
4.78
3-month
4.93
4.96
4.98
4.93
6-month
http://www.federalreserve.gov/Releases/H l 5/update/
10
5/ 1 /200E
FRB: H.15--Selected Interest Rates, Web -Only Daily Update --April 29, 2006
Page 2 of 4
4.92
4.95
4.98
4.93
1-year
4.89
4.95
4.99
4.91
2-year
4.88
4.94
4.99
4.92
3-year
4.90
4.98
5.02
4.95
5-year
4.94
5.02
5.06
5.00
7-year
4.99
5.07
5.12
5.09
10-year
5.22
5.31
5.34
5.32
20-year
5.07
5.16
5.18
5.18
30-vear
Inflation indexed 11
2.21
2.38
2.39
2.33
5-year
2.31
2.39
2.43
2.36
7-year
2.39
2.47
2.51
2.45
10-year
2.43
2.51
2.54
2.50
20-year
Inflation -indexed long-term average 12
2.40
2.47
2.50
2.46
Interest rate swaps 13
5.33
5.37
5.40
5.35
1-year
5.31
5.37
5.41
5.35
2-year
5.31
5.37
5.42
5.37
3-year
5.34
5.41
5.45
5.41
4-year
5.37
5.45
5.48
5.44
5-year
5.43
5.51
5.55
5.51
7-year
5.51
5.59
5.62
5.60
10-year
F.63
�
5.71
5.75
5.75
30-year
Corporate bonds
Moody's seasoned
5.84
5.93
5.95
5.96
Aaa 14
6.66
6.75
6.76
6.76
Aaa
State & local bonds 15
Conventional mortgages 16
n.a. Not available.
Footnotes
1. The daily effective federal funds rate is a weighted average of rates on brokered tra
2. Weekly figures are averages of 7 calendar days ending on Wednesday of the current wee
figures include each calendar day in the month.
3. Annualized using a 360-day year or bank interest.
4. On a discount basis.
5. Interest rates interpolated from data on certain commercial paper trades settled by T
Depository Trust Company. The trades represent sales of commercial paper by dealers or d
issuers to investors (that is, the offer side). The 1-, 2-, and 3-month rates are equiva
30-, 60-, and 90-day dates reported on the Board's Commercial Paper Web page
(www.federalreserve.gov/releases/cp/).
6. An average of dealer bid rates on nationally traded certificates of deposit.
7. Bid rates for Eurodollar deposits collected around 9:30 a.m. Eastern time.
8. Rate posted by a majority of top 25 (by assets in domestic offices) insured U.S.-char
commercial banks. Prime is one of several base rates used by banks to price short-term b
loans.
9. The rate charged for discounts made and advances extended under the Federal Reserve's
11
http://www.federalreserve.gov/Releases/H15/update/ 5/1/200(
FRB: H.15--Selected Interest Rates, Web -Only Daily Update --April 28, 2006 Page 3 of 4
credit discount window program, which became effective January 9, 2003. This rate replac
adjustment credit, which was discontinued after January
0efaultrhtmrtThe raterreport
www.federalreserve.gov/boarddocs/press/bcreg/2002/200210312/d
for the Federal Reserve Bank of New York. Historical series for the rate on adjustment (7
ilable at www.federalreserve.gov/releases/hl5/
well as the rate on primary credit are ava
10. Yields on actively traded non -inflation -indexed issues adjusted to constant maturity
30-year Treasury constant maturity series was discontinued on February 18, 2002, and rel
on February 9, 2006. From February 18, 2002, to February 9, 2006, the U.S. Treasury publ
factor for adjusting the daily nominal 20-year constant maturity in order to estimate a
nominal rate. The historical adjustment factor can be found at
www.treas.gov/offices/domestic-finance/debt-management/interest-rate/Itcompositeindex hi
Source: U.S. Treasury.
11. Yields on Treasury inflation protected securities (TIPS) adjusted to constant maturi
Source: U.S. Treasury. Additional information on both nominal and inflation -indexed ylel
found at www.treas.gov/offices/domestic-finance/debt-management/interest-rate/index.html
12. Based on the unweighted average bid yields for all TIPS with remaining terms to matu
more than 10 years.
13. International Swaps and Derivatives Association (ISDA(R)) mid -market par swap rates.
for a Fixed Rate Payer in return for receiving three month LIBOR, and are based on rates
at 11:00 a.m. Eastern time by Garban Intercapital plc and published on Reuters Page ISDA
ISDAFIX is a registered service mark of ISDA. Source: Reuters Limited.
14. Moody's Aaa rates through December 6, 2001, are averages of Aaa utility and Aaa indiz
rates. As of December 7, 2001, these rates are averages of Aaa industrial bonds only.
15. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday
16. Contract interest rates on commitments for fixed-rate first mortgages. Source: FHLMC
Note: Weekly and monthly figures on this release, as well as annual figures available on
Board's historical H.15 web site (see below), are averages of business days unless other
Current and historical H.15 data are available on the Federal Reserve Board's web site
(www.federalreserve.gov/). For information about individual copies or subscriptions, con
Publications Services at the Federal Reserve Board (phone 202-452-3244, fax 202-728-5886
electronic access to current and historical data, call STAT-USA at 1-800-782-8872 or 202
Description of the Treasury Nominal and Inflation -Indexed Constant Maturity Series
Yields on Treasury nominal securities at "constant maturity" are interpolated by the U.S
from the daily yield curve for non -inflation -indexed Treasury securities. This curve, wh
the yield on a security to its time to maturity, is based on the closing market bid yiel
actively traded Treasury securities in the over-the-counter market. These market yields
calculated from composites of quotations obtained by the Federal Reserve Bank of New Yor
constant maturity yield values are read from the yield curve at fixed maturities, curren
and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a
maturity, for example, even if no outstanding security has exactly 10 years remaining tc
Similarly, yields on inflation -indexed securities at "constant maturity" are interpolatE
daily yield curve for Treasury inflation protected securities in the over-the-counter ma
inflation -indexed constant maturity yields are read from this yield curve at fixed matur
12
http://www.federalreserve.gov/Releases/H 15/update/ 5/ l /200f
FRB: H.15--Selected Interest Rates, Web -Only Daily Update --April 28, 2006 Page 4 of 4
currently 5, 7, 10, and 20 years.
\Veekk, release elates and al1"(:)Lljjcetjjejjts I Historical data I \ho ut
Daily update Other formats: Sci— ezl 1-ezldell
Statistical rele�lscs
Last update: April 28, 2006
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INVESTMENT ADVISORY BOARD
Meeting Date:
TITLE:
May 10, 2006
Pooled Money Investment Board Report
for February 2006
BACKGROUND:
Correspondence & Written
Material Item B
Excerpts from the Pooled Money Investment Board Report for February are included in
the agenda packet. The entire report will be available for review at the scheduled May
meeting and also can be obtained at the following website:
www.treasurer.ca.gov/pmia-laif/reports/mnthly.
RECOMMENDATION:
Receive & File
4
Y
J�
I
f i 1F
,;John M. Falconer, Finance Director
Phil Angelides
February 2006
STATE OF CALIFORNIA
STATE TREASURER'S OFFICE
POOLED MONEY INVESTMENT BOARD REPORT
February 2006
TABLE OF CONTENTS
SUMMARY................................................................. 01
SELECTED INVESTMENT DATA .................................... 02
PORTFOLIO COMPOSITION ........................................ 03
INVESTMENT TRANSACTIONS ..................................... 04
TIMEDEPOSITS........................................................ 19
BANK DEMAND DEPOSITS .......................................... 32
POOLED MONEY INVESTMENT BOARD DESIGNATION... 33
POOLED MONEY INVESTMENT ACCOUNT
SUMMARY OF INVESTMENT DATA
A COMPARISON OF FEBRUARY 2006 WITH FEBRUARY 2005
(DOLLARS IN THOUSANDS)
FEBRUARY 2006 FEBRUARY 2005 CHANGE
Average Daily Portfolio
$
57,817,453
$
54,497,333
$
+3,320,120
Accrued Earnings
$
179,309
$
98,981
$
+80,328
Effective Yield
4.043
2.368
+1.675
Average Life -Month End (In Days)
177
219
-42
Total Security Transactions
Amount
$
26,689,453
$
19,639,325
$
+7,050,128
Number
561
422
+139
Total Time Deposit Transactions
Amount
$
3,933,000
3,270,300
+662,700
Number
159
132
+27
Average Workday Investment Activity
$
1,701,247
$
1,205,770
$
+495,477
Prescribed Demand Account Balances
For Services
$
316,939
$
574,989
$
-258,050
For Uncollected Funds
$
218,854
$
105,792
$
+113,062
1
PHIL ANGELIDES
TREASURER
STATE OF CALIFORNIA
INVESTMENT DIVISION SELECTED INVESTMENT DATA
ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO
(000 OMITTED)
February 28, 2006
DIFFERENCE IN
PERCENT OF
PERCENT OF
PORTFOLIO FROM
TYPE OF SECURITY
AMOUNT
PORTFOLIO
PRIOR MONTH
Government
Bills
$
2,065,071
3.77
+0.92
Bonds
0
Notes
3,416,272
6.23
+0.57
Strips
0
Total Government
$
5,481,343
10.00
+1.49
Federal Agency Coupons
$
9,031,640
16.48
+1.65
Certificates of Deposit
8,660,110
15.81
-4.64
Bank Notes
1,399,993
2.56
-0.26
Bankers' Acceptances
0
0.00
0.00
Repurchases
0
0.00
0.00
Federal Agency Discount Notes
6,017,760
10.98
+0.85
Time Deposits
7,755,995
14.16
+1.42
GNMAs
253
0.00
0.00
Commercial Paper
7,671,527
14.00
-1.28
FHLMC/Remics
735,328
1.34
+0.10
Corporate Bonds
886,794
1.62
+0.03
AB 55 Loans
7,247,413
13.23
+0.82
GF Loans
0
0.00
0.00
Reversed Repurchases
(99,250)
(0.18)
+0.18
Total (All Types)
$
54,788,906
100.00
INVESTMENT ACTIVITY
FEBRUARY
2006
JANUARY 2006
NUMBER
AMOUNT
NUMBER
AMOUNT
Pooled Money
561
$ 26,689,453
457
$ 21,902,735
Other
6
5,161
9
435,804
Time Deposits
159
3,933,000
182
4,839,190
Totals
726
$ 30,627,614
648
$ 27,177,729
PMIA Monthly Average Effective Yield
4.043
3.955
Year to Date Yield Last Day of Month
3.564
3.497
2
Pooled Money Investment Account
Portfolio Composition
$54.8 Billion
Loans
13.23%
Corporate B
1.62%
Commercial Paper
14.00%
Time Deposits
14.16%
02/28/06
Reverses Treasuries
-0.18% 10.00%
CDs/BNs
18.37%
0
Agencies
27.46%
INVESTMENT ADVISORY BOARD
Meeting Date:
TITLE:
May 10, 2006
Commission Member Recruitment
BACKGROUND:
Correspondence & Written
Material Item C
The City Clerk has forwarded the following advertisement to the Desert Sun seeking
candidates to serve on City Commissions/Boards/Committees. This advertisement was
based upon the first draft of Board member Moulin's changes to the previous
advertisement however; the revised draft was not received in time for the City Clerk to
meet her deadline.
RECOMMENDATION:
Information only.
John M. Falconer, Finance Director
THE CITY OF LA QUINTA IS LOOKING FOR NEW
COMMISSION MEMBERS
The City of La Quinta is seeking interested citizens to fill vacancies
on the following Commissions and Boards. If you are a resident of the City of La Quinta
and would like to serve your community, the positions involve the following:
Architectural & Landscape Review Committee - The Architectural & Landscape
Review Committee is a three -member Committee that considers proposed structures
and/or landscape design and makes recommendations to the Planning Commission. It
is preferred, although not required, that members have expertise in the areas of
architecture or landscape architecture. La Quinta residency is required. (2 positions)
Community Services Commission - This is a five -member commission that
analyzes community services, programs and formulates recommendations to the City
Council. They make recommendations on fees and operations of parks and recreation
facilities, review park maintenance standards, review park master plans, community
services delivery systems and propose recreation and social programs. (3 positions)
Historical Preservation Commission - This five -member commission is
composed of three members chosen from among professionals in the discipline of
architecture, history, architectural history, planning, or other historic preservation -related
disciplines. Two commissioners are lay members who have demonstrated special interest,
competence, experience or knowledge in historic preservation, American studies, cultural
anthropology, cultural geography or other historic preservation -related disciplines. (3
positions - 1 professional member and 2 lay members)
Investment Advisory Board - A five -member body who advise the City Council on
matters dealing with the City's investments. They review the monthly Treasurer's reports
and the City's annual investment policy statement. The Board also makes
recommendations for changes in policies and procedures and the selection of providers of
investment services. Applicants should have a background in finance, preferably with
knowledge and/or experience in markets, controls and accounting for securities. (2
positions)
Planning Commission - The Planning Commission is a five -member commission
serving two-year staggered terms that serves as an advisory body to the City Council. The
Planning Commission's duties include developing and maintaining the City's general plan,
consideration of new development applications, design review of new developments, and
development of specific plans, and similar planning duties. (2 positions)
Interested members of the public may contact the Office of the
City Clerk at (760) 777-7103 for an official application and
other information. The deadline for submitting applications is
May 25, 2006 at 5.00 PM. The City Council is expected to
consider applications, interview candidates, and make their
selections at their regular meeting to be held on June 6, 2006.
Page 1 of 2
John Falconer
From: cd 1 and 1 @earthlink. net
Sent: Monday, April 17, 2006 6.32 AM
To: Donbarm@aol.com, garyegbert@dc.rr.com; milt@miltolander.com-, rrassi@verizon.com
Cc: John Falconer
Subject: Re: IAB advertisement language
Greetings to you all (or should I say you'awll') from South Carolina. Mike and I have been supplying and
outfitting "Options" to embark on our journey to Port Everglades, FL (about 500 miles depending on the wind
and how much we have to tack). Should be there in about 5 days or so.
With respect to the advertising language, I like Don's new version better because it starts with the mission of the
IAB and enters the requirements for board members afterwards (sorry Gary, just my opinion).
Incidentally, I sent a revised copy of the "white paper" or "position paper" to John for distribution. I did it from
work and didn't have your e-mail addresses. I tried to 'tone it down' and include all the comments that were
mentioned during the meeting. Please ask John to distribute if you haven t received it yet.
Cristina
-----Original Message -----
From: Donbarm@aol.com
Sent: Apr 13, 2006 2:39 PM
To: garyegbert@dc.rr.com, milt@miltolander.com, rrassi@verizon.com, cdl and 1 @earthlink.net
Cc: jfalconer@la-quinta.org
Subject: Re: IAB advertisement language
In a message dated 04/13/06 7:08:45 AM Pacific Daylight Time, garyegbert@dc.rr.com writes:
....The Investment Advisory Board is a five member panel of city residents who possess sufficient
knowledge and understanding of financial practices and standards to serve in this citizen oversight role.
The Board is charged with establishing and monitoring adherence to policy governing management and
control of the City's cash reserves and funds available for investment. The Board works closely with the
City's Finance Director and staff and also interfaces with the City Council as necessary....
Don's response:
I like Gary's fresh thoughts. I used some of his words in a redraft of my previous suggestion. I use more
guarded words that I prefer in such matters. My redraft follows:
The Investment Advisory Board is an oversight body that reviews the monthly Treasurer's reports
of cash and investment activities noting compliance with the City's investment policy statement.
The Board advises and recommends changes in investment policies, procedures and reports, and
the selection of providers of investment services. Applicants should posses the Knowledge and
4/24/2006
Page 2 of
understanding of financial matters sufficient to fulfill these responsibilities.
4/24/2006
INVESTMENT ADVISORY BOARD
Meeting Date:
TITLE:
May 10, 2006
Correspondence & Written
Material Item D
Update on California Municipal Treasurers Association Conference (CMTA)
BACKGROUND:
Board Member Egbert and Rassi along with the Treasurer attended the annual CMTA
Conference.
Attached is the entire program of events and two handouts from sessions dealing with
investments of current interest to Staff. In addition to the sessions, the attendees also
met with vendors at the conference who specialize in meeting the investment needs of
government agencies.
RECOMMENDATION:
Information only.
a
John M. Falconer, Finance Director
Monday, April 24
Pre -Conference Workshop
1: 00 p.m. — 5: 00 p. m.
3Rs: Refinancing, Ratings and Reinvestments - Julio Morales & TJ Reilly, Fieldman
Rolapp & Associates and Michael Borgani, Fitch Investor Services.
This is a three-part workshop, which will cover: Evaluating Bond
Refinancing Opportunities- When is the right time to restructure? How to
go about determining if it makes sense to restructure? Explore the 3 %
NPV Savings present value savings rule and other factors to use in
evaluating your restructuring opportunity. The Rating Agency Process -
Explore the importance of marketing and selling your agency to the credit
markets and learn how this can save your agency money through lower
interest costs! Arbitrage & Reinvesting of Bond Proceeds - Learn the
basic IRS arbitrage rules and learn why a cash -funded DSR often makes
more sense than a surety policy
Tuesday, April 25
Pre -Conference Workshop
8: 00 a.m. — 12:00p.m.
Stop That Fraud- Dana Kavander, CPFA Director of Finance, Berea, OH
This four-hour workshop developed by the Public Treasury Institute of
North America is the most comprehensive fraud prevention program for
public treasury and finance officials in the nation! A handbook will be
distributed along with a certificate of completion following the workshop.
Wednesday, April 26
Conference Opening Session
9: 00 a. m.
Opening Speaker- "Roger Crawford" Roger is a dynamic and inspirational speaker who
works with many organizations that wish to achieve success despite
obstacles. Roger's clients are inspired to hold winning attitudes about
work and life.
10:45 a.m.
Technology Crimes and Fraud Prevention- Paul Artley, FBI. Hear the latest
information from the Federal Bureau of Information (F'BI) on technology
crimes and fraud prevention. The bad guys are trying to get at your bank
account every day; learn how to prevent a loss at your agency by
becoming informed about the latest white collar crimes
12: 00 p.m.
Keynote Luncheon Speaker - Gary Zimmerman, Chief Economist with the Federal
Reserve Bank in San Francisco will provide insight on California and
United States Economic outlook and a preview of the future monetary
policy of the Federal Reserve Bank.
1: 45 p. m.
How Managers Can Become Leaders- Tim O'Donnell, City Manager. Do you know the
difference between a manager and a leader? Set yourself apart from your
fellow managers and learn the difference. Find out the simple methods
great leaders use to motivate themselves and others to make a difference in
their business and personal lives.
3: 00 p. m.
Demographic Forecast- Doug Robinson, Securities America Inc. Learn how economists
using demographics over the past century have been able to predict future
trends in the capital markets.
Concurrent Sessions
4: 00 p. m.
Get Your Revenue Measure Passed! - Catherine Lew, Lew Edwards Group. Learn
from a successful consultant in finance measure campaign services. Get
helpful tips about strategy and tactics, ballot arguments and rebuttals,
campaign management, using the media and direct mail, grassroots
organizing, vote by mail and other `get -out -the -vote" techniques.
4: 00 p. m.
Options Ideas For Small Portfolios- Kay Chandler, Chandler Asset Management. Find
out what you can do to safely maximize your portfolio returns. Learn how
to evaluate different types of investment options and appropriate levels of
diversification based on the size of your investment portfolio.
4: 00 p. m.
Arbitrage Rebates and Yield Restrictions What Every Treasurer Must Know -
Glenn Casterline, Bond Logistixs. Do you know the Internal Revenue
Code sections that apply to every bond issue? Have you complied with the
rebate calculations? Do you know the yield restrictions on your bonds?
Also, learn some tips on getting the maximum return safely from your
construction and reserve funds.
Thursday, April 27
7: 45 a.m.
Business Session (Plated Breakfast) — All conference attendees will enjoy breakfast with
their CMTA colleagues during the Annual Business Meeting.
9: 00 a.m.
Mastering Press Relations- Sally Stewart, Sally Stewart Communications. Listen to what
an expert says you must know before you talk to the press or media. Learn
special tips and helpful advice to better prepare yourself to respond to the
press or media. Become skilled at working more effectively with the press
and media and make them work towards your advantage.
10:30 a.m.
Agency Securities a look behind the scenes "What are they selling now?" - John
Radwanski, FHLMC. The Assistant Treasurer of Freddie Mac will
discuss the tactics behind why they issue debt with so many variables to
the investor. Learn what is on the horizon and the "new" products ahead in
the Agency markets.
12: 00 p.m.
Keynote Luncheon Speaker — Kathleen Brown, Senior Advisor, Head of Public Finance
Goldman Sachs Co and former California State Treasurer is responsible
for bringing public financings to the investment community. She will
share her insights on "Public Private Partnerships — A New Fad or Wave
of the Future"
Concurrent Sessions
2: 00 p.m.
Finding Value in the Market — Nancy Jones, PFM Management. Hear an investment
advisor discuss techniques and strategies for finding value for your
investment portfolio. Get information on due diligence assessment of
various risk factors and portfolio evaluation (benchmarking, total return)
and rebalancing.
2: 00 p. m.
Electrons tcation of your Receivables — Randy Ungersma & Valjean Sanchez, Union
Bank of California. Learn the cutting edge technology that is now being
used to collect receivables, including the latest on remittance processing
and remote image capturing that speeds your agency's collections.
Concurrent Sessions (continued)
2: 00 p. m.
LAIF 2006 and Beyond — Dan Dowel & Eileen Park, LAIF. The Director of Investments
and LAIF Administrator will provide insight into what is on the horizon at
LAIF, what is LAIF's current strategy in the market and how will the
LAIF portfolio be positioned in 2006.
3:1 S p.m.
Nuts & Bolts Government Associates- This is a chance to ask questions and have your
questions answered by your colleagues.
3:1 S p. m.
Nuts chic Bolts Commercial Associates- This is the time for the Commercial Associates to
get together and discuss common issues.
Friday, April 28
9: 00 a.m.
CALPERS Rates, Investments and Pension Reform —Ken Marzion, CALPERS
Listen to the Chief Actuary at CALPERS discuss the latest information of
the employer rates for FY 2007/2008. Hear the latest proposals by PERS
to further stabilized employer rates and what impact all the pension reform
proposals may have on future PERS rates.
10:15 a.m.
Economic and Budget Outlook — Brad Williams, Legislative Analyst Office. Hear the
Director of Fiscal Forecasting and Budget at the Legislative Analyst's
Office gives us the State's financial outlook for the coming year and
insight into the Governor's and Legislature's 2006-2007 Budget
Proposals.
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Topics
I. Current Market Conditions
II. Investment Strategy and Benchmarks
111. Finding Value in the Market
IV. Finding Value in Your Portfolio
Presenter: PFM Asset Management
2
Current Market
Conditions
Expected Increases In Short -Term Yields
Fed Funds Target Rate and Futures
- ---� -
7.00%
6.00%
-
-
-
mpfied+pture
i
RaWs-
-
-
--
--
rren
a
: W.75
�-
°
3.00%
2.00%-
1.00%
--
-
-
- -
----
-
-- -
-
Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul-
00 00 01 01 02 02 03 03 04 04 05 05 06 06
Source: Bloomberg, period ending April 21, 2006
Presenter: PFM Asset Management
Current Yield Curves
U.S. Treasury vs. Federal Agency vs. Corporate (AAA)
5.60%
Corporate (AAA)
5.40%
-- ....... ......................... -------- ---- .....- ...........
5.20%
--- ....- ---------------------------
Federal Agency
5.00%
.... ............................. ........... .. ..-...---------
4.80%
.--U.S, 'rWI ry.......---- ---
Corporate (AAA)
4.60%
... ....... ......... ......... : ......... . Federal Agency
U.S. Treasury
3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr
Source: Bloomberg, as of April 21, 2006
Presenter: PFM Asset Management
Impact of Market Yields on Portfolios
Sample Portfolio Structure
100°i°,+y
80%
�. 60% a�
IT
40 /
pN�
20% ,� s
N
�: fM
0%
LAIF 1 Day— 1-2 2-3 3-4 4-5
1 Year Years Years Years Years
Presenter: PFM Asset Management
Impact of Market Yields on Portfolios
Sample Portfolio Structure
30%
25%
20%
c
m
d 15%
a
10%
5%
0%
LAIF 1 Day— 1-2 2-3 3-4 4-5
1 Year Years Years Years Years
Presenter: PFM Asset Management
Investment Strategy
Benchmarks
10
Investment Strategies Used By Cities
Risk/Return of Various Strategies
10 Years Ending March 31, 2006
source: esioomoerg ara LAMP
Presenter: PFM Asset Management
11
Investment Results Past 10 Years
• The 1-3 Year Strategy earned $2 million more than LAIF over the
past 10 years, given a $25 million portfolio.
$16
$14
El LAIF
$12
$10
01-3 Year Treasury Index
o_ $8
- — - ------ h
--
g-
- --- - -- —
4
$2
$0;
($2)
Year Year Year Year Year Year Year Year Year YearTotal
1 2 3 4 5 6 7 8 9 10
Source: Bloomberg and LAIF, period ending March 31, 2006
Presenter: PFM Asset Management
12
Investment Results —Past Year
• The 1-3 Year Strategy earned $280,000 less than LAIF over the
past year, given a $25 million portfolio.
Presenter: PFM Asset Management
13
Investment Strategy Choices
• Longer -term strategies tend to have higher returns over
longer periods of time
— During periods of rising interest rates, shorter strategies
will have higher returns
• When choosing a strategy, you must be prepared for the
short-term and long-term investment results
LAIF strategy: Risk of lower long-term returns
1-3 Year strategy: Risk of lower short-term returns
Presenter: PFM Asset Management
ME
Composition of Different Strategies
Maturity Distribution
100%
®LAI F
0
75%
■ 1-3 Year Treasury Index
0 50%
c�
N
d
25%
0%
0-6 6-12 1-2 2-3 3-4 4-5
Months Months Years Years Years Years
Source: Bloomberg and LAIF, as of March 31, 2006
Presenter: PFM Asset Management
G
16
Challenge of Moving From LAW to
1-3 Year Strategy
Yield History: 2-Year U.S. Treasury and LAIF
7.00%
6.00%
5.00%
4.00%
3.00% fl
LAWDividend
--E 2-year US Treasury Note Yield
2.00%
1.00%
Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04
RWOO: nwomoerg arw uuF
Presenter: PFM Asset Management
17
Things to Remember When Picking a Strategy
• Be realistic about goals
—Higher long-term earnings?
—Beat LAIF in all markets?
• Benchmark: Select a market index that matches
your strategy
• Make sure each trading decision supports the long-
term strategy
Presenter: PFM Asset Management
Finding Value in the
Market
19
In a Flat Yield Curve Environment,
Find Value in Sector Diversification
5.60%
5.40%
5.20%
5.00%
4.80%
4.60%
Yield Curve
3 Mo 6 Mo 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr
Source: Bloomberg, as of April 21, 2006
Presenter: PFM Asset Management
N11
21
Evaluating Sectors: Agencies & Corporates
Yield Difference: 2-Year Federal Agency and AA Corporates
35
`- Buy Corporates
30-
fn
---
c 25
-
0
a
--
fn 20
- - ---
N
to
m
-- - -
15
-
10
-- -- -
Buy Agencies
5
Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06
Source: Bloomberg, as of April 21, 2006
Presenter: PFM Asset Management
22
Evaluating Sectors: Callable Options
• Callable Federal Agency notes have different call
structures
— Continuously callable (highest premium, biggest risk)
— Periodic calls, e.g., quarterly, annually
— One-time calls (lowest premium, lowest risk)
— Lock out protection
• Spreads range from 5 basis points to 40 basis points
• Set a maximum allocation to limit call risk
Presenter: PFM Asset Management
23
24
Evaluating Sectors: Commercial Paper & LAIF
Average Difference In Yield
3-Month Commercial Paper and LAW
so
70
70
65
62
60
50
50
40 35
33
30
m
20
10
0
Jan -Mar
Apr -Jun Jul -Sep Sep -Dec Jan -Mar Apr-06
2005
2005 2005 2005 2006
Source: Bloomberg and LAW
Presenter: PFM Asset Management
Earnings Benefit on
$10 million for 3 Months
N 4 k � ■y++�1 x
;� � � ..NN ■� Ok ,
I
�.
F II''J'� ids.QQ
0,000
RIt
1'6,Q0Q
C11nts
70 Basls
$181000
25
Finding Value in Your
Portfolio
26
Adding Value Through Trade
• Sector Trade
— Selling one sector to buy another
• Extension Trade
— Selling a security close to maturity to buy a
security with a longer maturity
• Security Trade
— Selling one security to buy a similar, higher -
yielding one
Presenter: PFM Asset Management
27
Sector Trade
• Strategically target purchases to capture value in spread
relationships
Sample Sector Trade
Step 1: When spreads between Treasuries and Federal
Agency are only 15 basis points, buy 2-year U.S.
Treasury
Step 2: Wait for a few weeks for spread to widen to
25 basis points, then sell U.S. Treasury and buy
2-year Federal Agency
Step 3: Earn additional 10 basis points of widening earned over
the remaining life (2 years less a few weeks)
Benefit: $19,000 on 10,000,000 for 1.9 years
Presenter: PFM Asset Management
Extension Trade
• No need to wait until securities mature to capture higher
rates in longer -term securities
Sample Extension Trade
Step 1: Own a 3-month $10,000,000 investment
Yield = 4.90%
Step 2: Sell 3-month security at 4.90%
Buy 2-year investment yielding 5.10%
Step 3: Earn 20 basis points more on principal for the 3-month
period remaining until maturity
Benefit: $5,000 on a $10 million investment
Presenter: PFM Asset Management
29
Security Trade
• Monitor market for opportunities to capture value through
pricing inefficiencies and changing yields
Sample Security Trade
Step 1: Monitor market, remain alert for pricing inefficiencies
Step 2: Sell FHLB note, $10 million par, maturity 4/18/08
Yield = 5.10%
Step 3: Buy FHLB note, $10 million par, maturity 3/10/08
(busted call)
Yield of 5.20%
Benefit: Earn an additional $19,166
Presenter: PFM Asset Management
30
Trading Low -Yielding Securities
• It is sometimes advantageous to sell securities prior to
maturity and reinvest the proceeds at current rates.
— Get a dog out of the portfolio
— Capture higher yields today as a hedge against future
rates declines
— Extend portfolio while rates are at 5-year highs
• Market yields have risen so much that the higher yield
on a new security will recoup the realized loss on sale
Presenter: PFM Asset Management
31
32
Sector/Extension Trade
Source: Tradeweb
Presenter: PFM Asset Management
33
34
35
Summary: Finding Value
• Have a defined strategy
• Understand market trends
• Analyze your own portfolio for opportunities
Presenter: PFM Asset Management
36
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