2010 02 10 IABP.O. Box 1504
LA QuINIA, CALIFORNIA 92247-1504
78-495 CAI -Le: TA.NIPICO (760) 777-7000
LA QUINIA, CALIFORNIA 92253 FAX (760) 777-7tOl
AGENDA
INVESTMENT ADVISORY BOARD
Caucus Room
78-495 Calle Tampico- La Quinta, CA 92253
February 10, 2010 — 4:00 P.M.
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 January 13, 2010 for the Investment
Advisory Board.
V BUSINESS SESSION
A. Transmittal of Treasury Report for December, 2009
B. Continued Consideration of Fiscal Year 2009-10 Work Plan Items and Review the
2010-11 Investment Policy
VI CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report - January 2010
B. Pooled Money Investment Board Reports - November, 2009
VII BOARD MEMBER ITEMS
Vill ADJOURNMENT
PUBLIC NOTICES
The La Quinta Caucus Room is handicapped accessible. If special equipment is needed for the hearing impaired, please call the
Finance Department at 777-7150, twenty-four (241 hours in advance of the meeting and accommodations will be made.
Any writings or documents provided to a majority of the Investment Advisory Board regarding any item on this agenda will be made
available for public inspection at the City Clerk counter at City Hall located at 78-495 Calle Tampico, La Quinta, CA 92253, during
normal business hours. 4�
INVESTMENT ADVISORY BOARD
Meeting
January 13, 2010
CALL TO ORDER
Regular meeting of the La Quinta Investment Advisory Board was called to order at the
hour of 4:00 p.m. by Chairman Ross followed by the Pledge of Allegiance.
PRESENT: Board Members Moulin, Ross, Rassi and Park (4:08)
ABSENT: None
OTHERS PRESENT: John Falconer, Finance Director and Vianka Orrantia, Senior
Secretary
II PUBLIC COMMENT - None
III CONFIRMATION OF AGENDA - Confirmed
IV CONSENT CALENDAR
1. Approval of Minutes of Meeting on December 9, 2009 for the Investment
Advisory Board.
In response to Board Member Moulin, Ms. Orrantia clarified that Board Member
Park was also asked to serve on the Ad Hoc Committee.
In response to Board Member Moulin, Mr. Falconer advised that a statement
was made on page 2 referencing the auditor's presentation following the
approval of the minutes.
Board Member Moulin requested that the following correction be made to page
4, eighth sentence:
In response to Board Member Park, Mr. Falconer explained the assumptions used
to in the long-term financial planning.
Investment Advisory Board
Minutes
January 13, 2010
MOTION - It was moved by Board Members Moulin/Ross to approve the Minutes
of December 9, 2009 as amended. Motion carried unanimously.
V BUSINESS SESSION
A. Transmittal of Treasury Report for November 2009
Mr. Falconer presented and reviewed the staff report advising the Board
of a decrease in the cash balance with an ending balance slightly under
$167 million for the month. The portfolio activity on Page 3 reflects an
increase in the average maturity from 62 days to 152 days and page 7
also reflecting an increase in the average maturity. Investments
purchased during the month were $13 million in a one year Treasury Note
and $2 million and $12 million in two year Treasury Notes. Mr. Falconer
further advised that due to the recent increase in the average maturity
the City was able to maintain their current yields.
In response to Board Member Moulin, Mr. Falconer agreed that a
correction to page 3, first paragraph second sentence should read:
The major reason for the decrease was that expenditures were less than
revenues which [...I
Mr. Falconer summarized for the Board the current market average and
the city's performance.
General discussion ensued amongst the Board and staff regarding the
current market and interest rates.
MOTION - It was moved by Board Members Park/Moulin to review,
receive and file the Treasurers Reports for November 2009. Motion
carried unanimously.
B. Continued Consideration of the Fiscal Year 2009-1010 Work Plan
Mr. Falconer advised that in prior meetings, the Board and staff discussed
revisiting the CDARS program in addition to seeking possible alternatives
to LAIF and review and discuss their findings at the January meeting.
Mr. Falconer also advised that Chairman Ross and Board Member Moulin
E
Investment Advisory Board
Minutes
January 13, 2010
reviewed several alternatives to LAIF. Mr. Falconer further advised that
staff contacted Palm Desert National Bank regarding CDAR's current
yields and was advised that a current market two-year bill's yield is at
1 %, with CDAR's two-year bill currently at 1 .4%, (possible increase by
40 basis points) and a current market fifty-two week bill's yield at .30%
and CDAR's fifty-two week bill at a .40%. In addition, Mr. Falconer
advised that there were other institutions offering better rates at this
time. He also further advised that included with the staff report was
additional information regarding CDAR's and previously issued staff
reports for the Board's review. Mr. Falconer commented that the current
investment limit stands at $250,000.
In response to Board Member Moulin, Mr. Falconer advised that the
$250,000 limit expires in December of 2012.
In response to Board Member Moulin, Mr. Falconer stated that he was
not opposed to utilizing the CDAR's program but does not feel there is
enough yield for the investment.
General discussion ensued amongst the Board and staff regarding the use
of the CDAR's program as a possible investment tool and some of the
issues of investing in CDAR's, such as the wiring of funds a day in
advance.
In response to Chairman Ross, Mr. Falconer stated that with the
investment increase in TLGP Notes, he prefers the TLGP Program over
the CDAR's program particularly with the wiring of funds a day in
advance and the one day exposure.
Continued discussion ensued amongst the Board and staff regarding the
CDAR's program.
Chairman Ross advised that the Ad Hoc Committee consisted of himself
and Board Member Moulin, the committee's focus was to explore any
alternatives to LAIF. After much discussion with Board Member Moulin,
Chairman Ross advised that they were both in agreement that any
recommendations and presentations should come from staff.
Mr. Falconer stated that he would try and compile a presentation for the
next scheduled meeting. He also stated that after his attendance at the
3
Investment Advisory Board
Minutes
January 13, 2010
LAIF Conference, he felt more at ease with continued investments in
LAIF.
MOTION - It was moved by Board Members Moulin/Park to continue the
discussion of the 2009-2010 Work Plan. Motion carried unanimously.
C. Revision of 2009-10 Investment Policy - Corporate Notes
Mr. Falconer advised that due to the size of the portfolio and the
investment limitation in the TLGP Program and at the direction of the
Board, staff was asked to consider increasing the investment percentage
in the TLGP Program. Mr. Falconer further advised that he was not
comfortable in investing in Corporate Notes that were not insured under
the TLGP Program but was in favor of the TLGP Program itself and
increasing the investment limit by 10%.
The Board and staff reviewed Board Member Moulin's handout with the
suggested change to the language in the investment policy, page 11,
Section 8, (ending the last paragraph) allowing the 10% increase.
The following language was agreed upon by the Board and staff for City
Council's approval:
The City is also permitted to invest in corporate notes issued under the
FDIC Temporary Liquidity Guarantee Program subject to the
aforementioned corporate note limitations "except that corporate notes
issued under the Temporary Liquidity Guarantee Program or otherwise
backed by the United States government shall be limited to 20% of the
portfolio and the maximum aggregate investments for such notes shall
not exceed $10 million face amount for each issuer. "
General discussion ensued amongst the Board and staff regarding the
investment percentage and staff suggested that the following change be
made to page 11, Section 8, fourth bullet point clarifying the percentage
invested in Corporate Notes. The following language to the fourth bullet
was agreed upon by Board and staff:
Total investment shall not exceed 10% of the portfolio in Non-TLGP
and 20% in TLGP, and
C!
Investment Advisory Board
Minutes
January 13, 2010
Mr. Falconer reiterated for the Board the suggested changes to the
Investment Policy; staff will incorporate into the last paragraph in Section
8, the January 11" email received from Board Member Moulin with the
proposed language in addition to the change to the fourth bullet point.
MOTION - It was moved by Board Members Rassi/Moulin to accept the
proposed language for a change to the City's investment policy. Motion
carried unanimously.
Mr. Falconer clarified for the Board that the proposed changes will be
brought before Council the first Council meeting in February.
VI CORRESPONDENCE AND WRITTEN MATERIAL
A. Month End Cash Report
Mr. Falconer presented and reviewed the Month End report advising the
Board that page 3 references the current activity in LAIF; he also advised
that at the end of November the performance report indicated a decline in
LAIF from .61 % to .55%, with the current three month bill auction at
.08%, which is a slight increase. Mr. Falconer further advised that the
Treasury Note rates were also included for the Board's review.
Board Member Moulin asked if column 7 on page 2 should be titled
Corporate Notes in lieu of Certificate of Deposits or if the two columns
should be combined
Mr. Falconer advised that the beginning balance listed under Certificate of
Deposits was incorrect and stated that staff would research the balance
reflected and report back at the next scheduled meeting.
General comments were made in reference to the loans on page 3 of the
report.
Noted and Filed
B. Pooled Money Investment Board Reports
Mr. Falconer presented and reviewed the pooled report advising the Board
that the LAIF portfolio ended at .64% with the average maturity at 253
5
Investment Advisory Board
Minutes
January 13, 2010
days and the ending portfolio balance at $61 billion versus $61.6 billion a
year ago.
General discussion ensued amongst the Board and staff regarding the
Pooled Money report and whether the report reflects any indication to the
current economy.
Noted and Filed
VII BOARD MEMBER ITEMS - None
Vill ADJOURNMENT
MOTION - It was moved by Board Members Park/Moulin to adjourn the meeting at
4:50 p.m. Motion carried unanimously.
Senior Secretary
0
INVESTMENT ADVISORY BOARD
Meeting Date: February 10, 2010
ITEM TITLE:
Transmittal of Treasury Report
for December 31, 2009
BACKGROUND:
Business Session: A
Attached please find the Treasury Report December 31, 2009
RECOMMENDATION:
Review, Receive and File the Treasury Report for December 31, 2009
, 'L n , 4""'
John M. Falconer, Finance Director
MEMORANDUM
TO: La Quinta City Council
FROM: John M. Falconer, Finance Director/Treasurer
SUBJECT: Treasurers Report for December 31, 2009
DATE: February 1, 2010
Attached is the Treasurers Report for the month ending December 31, 2009. 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
Be innin
Purchased
Notes
Sol7turedEndin
Chan e
LAIF
Certificates of Deposit
$
48,106,194
1.209,000
$ 4,050.000
$
$ 48,956,194
850,000
US Treasudrs
US Gov't Sponsored Enterprises
102,975,248
64,000,000
(2)
(5)
1,209,000
98.829,823
0
(4,145,425)
Commercial PaperCorporate
(2)
(2)
0
0
Notes
15,262.998
0
0
Mutual Funds
)
15,250.906
(12,092)
Subtotal
$
167,553,440
$ 68050,000
$ 71,200,000 $
746666 1
904183
$ 165,150106 1 $
904183
2,403,334
Cash
1 4'
566,593
$ 1 535,407
1 8 3
$ 968.814 F
1,535.407
Total
1 $
166,986,847 1
$ 69,585,407 1
4, 11,200,000 $
746.666 1
$ 166,118.920 $
867,927
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.
As Treasurer of the City of La Quinta, 1 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.
A� zA 1 n M. Falconer
Finance Director/Treasurer Date
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.
2
Treasurer's Commentary
For the Month of December 2009
Cash Balances - The portfolio size decreased by $868,000 to end the month at $166.12
million. The major reason for the decrease was $1.82 million in Capital Projects - $995,000
for Hwy 111 Phase 3 improvements and $440,000 for the Phase 1 Maintenance Yard
improvements.
Investment Activity - The average maturity of the portfolio increased by 87 days to 239 days
at the end of December. The Treasurer follows a buy and hold investment policy and five (5)
U.S. Treasury Securities were purchased in December. Two of the U.S. Treasury Securities
mature in one (1) year and the other three U.S. Treasury Securities mature in six (6) months.
The sweep account earned $12 in interest income for the month of December and the bank
fees for the month were $ 1,982 which resulted in a net decrease of $1,970 in real savings.
Portfolio Performance - The overall portfolio performance decreased by two (2) basis points
from the prior month and ended at .51 % for the month, with the pooled cash investments
yielding .56%. The portfolio yield should continue to stay at these levels for the near future.
At this time last year, the portfolio was yielding 1.42% which reflects the current interest
rate environment.
Looking Ahead
While the liquidity crisis impacting financial and business institutions has somewhat waned,
the Treasurer is still concentrating on safety first and foremost. In the short term, the
Treasurer will be maintaining LAIF balances at the maximum allowable percentage because its
rate declines slower in a declining rate environment.
The Treasurer will not be investing in non-TLGP corporate notes, non-TLGP commercial paper
or Fannie Mae or Freddie Mac Government Sponsored Enterprises (GSE) due to the current
economic conditions affecting the financial markets.
The Finance Department will be only remitting Redevelopment Pass Through payments in
August of each year instead of in February, June and August. As a result of this change,
future cash flow reports will show more funds available to invest between February and July.
The Treasurer plans to invest these funds in either short term Farm Credit (GSE) or Federal
Home Loan Bank (GES) Discount or Bullet Notes to earn additional interest. While these
investments will reduce the overall yield of the portfolio, the actual interest income will
increase.
3
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City of La DWNa
Compareeve Rates of l dowest
December 31, 200D
CM of La Duirrta
Twee Manm
August 2006
d94%
5.01%
4,97%
48
4,97%
4.95%
Se912006
4.98%
501%
499%
53
5.W%
&W%
002006
5.00%
502%
5.01%
67
4.98%
5.10%
Nov2W6
504%
5.03%
5,03%
62
4.94%
5,13%
Dec 2006
5,08%
5.04%
506%
80
4.W%
5.13%
Je02W7
5,18%
5,12%
5.16%
64
4.0%
5,16%
Feb 2007
5.19%
5.13%
5,17%
45
4.95%
5.18%
Mar 2W7
5,21%
5.03%
5.15%
67
4,88%
5.21%
Apr 2007
5.2D%
5.14%
5.15%
42
4.84%
5.22%
May 2007
5.20%
5,05%
5.16%
32
C81%
5.25%
Jute 2007
5,19%
4.88%
5,10%
85
4.81%
5.25%
FY07M$
July 2007
5,21%
4.9D%
5A2%
129
4,80%
5,26%
Au9uat 2007
5.17%
4.85%
5.08%
1W
4.59%
5.25%
Sep12007
5,16%
4.86%
5.08%
129
4.W%
523%
Od 2007
5.11%
4.95%
502%
116
3.95%
5.14%
Nov 2007
503%
4.83%
4.96%
99
3.34%
4.96%
Dec 2007
4.95%
3.43%
4.45%
123
3.39%
4.W%
Ja02We
4.W%
3.33%
422%
96
2,31%
462%
Feb 2008
4,12%
3.24%
3.85%
86
2.07%
4.16%
Mar 20W
4,07%
2.83%
3,67%
74
1.50%
3.78%
Apr 2008
3.45%
327%
3.41%
82
1)0%
3A0%
May 2W8
3.14%
3.27%
3,17%
63
1,92%
3.07%
June 2008
3.09%
1.94%
2,86%
W
2,14%
2,89%
FY 0=9
July 2008
2,99%
1.93%
2.77%
62
1,70%
1.88%
229%
2.75%
2,18%
2.7934
August 2W8
3.18%
1.92%
2.88%
51
1.89%
1.89%
2.14%
2.38%
2.08%
2.78%
Sept 2W8
281%
182%
2.64%
37
1,42%
1.79%
1.96%
2.00%
2.13%
2.77%
002008
2.06%
2.01%
2,61%
29
09D%
tA0%
1.72%
1,50%
2.07%
2.71%
Nov 2W8
2,38%
2.36%
2,36%
64
0.15%
049%
104%
1.25%
1.45%
2.57%
Dec 2008
1150%
0.18%
1.42%
116
0,05%
0.25%
0,50%
0.88%
097%
2,35%
Jae 20D9
1.36%
0.18%
123%
82
0.15%
0.35%
0.43%
0.88%
031%
205%
Feb 2009
1.23%
0,18%
1,11%
75
0.30%
0.50%
0.61%
0.68%
0.48%
1.87%
Mar 2W9
1.26%
0.18%
1.13%
69
020%
042%
070%
088%
0.37%
1,82%
Apr 2009
0.94%
0.18%
0,85%
54
0.31%
0,33%
0.59%
0.88%
0.28%
181%
May 2009
0.92%
0,18%
O84%
80
0.18%
0.30%
0.53%
0.88%
0.23%
1.53%
Jura 20W
0.85%
0.29%
0.80%
111
020%
035%
0.55%
1.13%
0.26%
138%
FY 09/10
July 20W
069%
0,30%
085%
111
0.19%
0.28%
047%
1.W%
0.28%
1.04%
August2009
064%
03D%
0.61%
92
0.18%
0.26%
0.46%
100%
0.24%
0.93%
Sept 2009
0.5B%
0.31%
053%
112
0.12%
0.19%
041%
1.W%
0.19%
075%
002009
0.52%
0.3i%
0.50%
W
008%
0.19%
0.38%
1.00%
0.19%
065%
Nov 2W9
0.56%
037%
0.53%
152
0.04%
0.14%
0.32%
0,75%
0.15%
061%
10
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11
INVESTMENT ADVISORY BOARD Business Session: B
Meeting Date: February 10, 2010
ITEM TITLE:
Continued Consideration of the Fiscal Year 2009-2010 Work Plan and Review the
2010-2011 Investment Policy
BACKGROUND:
Attached please find the draft Fiscal Year 2010-2011 Investment Policy
RECOMMENDATION:
Continued review of the Fiscal Year 2009-2010 Work Plan and Review the 2010-
2011 Investment Policy for approval by City Council in June 2010.
, Finance Director
Section
I
II
III
IV
V
VI
VII
Vill
IX
X
XI
XII
XIII
XIV
XV
XVI
XVII
XIII
XIX
Appendices
A
B
C
D
E
F
G
H
J
CITY OF LA QUINTA
Investment Policy
Fiscal Year 2010/2011
Table of Contents
Topic
Executive Summary
General Purpose
Investment Policy
Scope
Objectives
► Safety of Principal
► Provide Liquidity s
► Yield A Risk -Based Market Rate Of(Ri
Maximum Maturities l' I%
Prudence
Authority
Ethics and Conflicts of Interestp:°1
114
Authorized Financial Dealers and'li,stltutions
► Broker/Dealers ,iIiih'�I'1�;�61'
► Financial Institutions iTi
4
Permissible Deposits and Investments
Investment Pools f;j!f �ljji( ,
Payment and Custody " IT
Interest Earnirig:1Distributionl Policy °1i1i, i111,6 tilt 6� f,
Internal Controislapnd Independ11 1—WI,ent Auditorsi,
Reporting Stands }ds ti i
Financial Assets and lY�U siment Actaylty No
, 1115111111s� i146l15 ,li[i,,
Subject to this Policy
I,y,d tmentltoflBond Proceeds
:t
,fyestment Advisory Boa,rdjiy,City of La Quints
Page
2
6
6
7
7
7
8
12
12
12
13
14
14
15
15
16
Top c1 }j Pale
sum Permissible of Permissiblle Deposits and Investments 17
City of Laf(uinta Muln`i�cipal Code Ordinance 2.70 - Investment Advisory Board 19
4 ui f.af,lis,
City of La Q ptalMunicipal Code Ordinance 3.08 - Investment of Moneys and Funds20
Segregation ofWjx
t=Major Investment Responsibilities 22
Listing of Approved Financial Institutions 23
Broker/Dealer Questionnaire and Certification 24
Request for Proposal for Professional Portfolio Management Firm 28
Permissible Investment Chart - Professional Portfolio Management Firm 34
Investment Management Process and Risk 35
Glossary 36
1
CITY OF LA QUINTA
Investment Policy
Fiscal Year 2010/2011
Executive Summary
The general purpose of this Investment Policy is to provide the rules and standards that must be
followed in administering the City of La Quinta's deposits and investments.
The City's Investment Policy conforms to all state and local statutes and applies to all deposits
and investments of the City of La Quinta, City of La Quinta Redevelopment Agency, and the
City of La Quinta Financing Authority (the"City" ).
It is the City's policy to deposit and invest public funds in a manner that shall provide:
► Safety of principal;
► Liquidity to meet all of the City's obligations and requirements that may be reasonably
anticipated;
► A risk -based market rate of return.
It is the City's policy to hold securities and other investments until maturity. This buy -and -hold
policy shall not prevent the sale of a security to minimize loss of principal when an issuer or
backer suffers declining credit worthiness or when the liquidity needs of the portfolio require
that a security be sold.
Authority to manage the City's investment portfolio is derived from the City Ordinance.
Management responsibility for the investment program is delegated to the City Treasurer, who
shall establish and implement written procedures for the operation of the City's investment
program consistent with the Investment Policy. The Treasurer shall establish and implement a
system of internal controls to accomplish the following objectives:
► Safeguard assets;
► The orderly and efficient conduct of its business, including adherence to all City
management policies;
► Prevention or detection of errors and fraud;
► The accuracy and completeness of accounting records;
► Timely preparation of reliable financial information.
The System of Internal Controls developed by the City Treasurer shall be reviewed annually by the
independent auditors in connection with the annual audit of the City's Financial Statements.
The City Manager, Assistant City Managers, City Treasurer and city employees involved in the
City's banking and investment process shall conduct the City's business in an ethical manner and
refrain from any activity or relationship that may be, or have the appearance of, a conflict of
interest.
The City Treasurer maintains a listing of financial institutions which are approved for investment
purposes. All Broker/Dealers and financial institutions that provide investment services will be
subject to City Council approval.
The Treasurer will be permitted to invest only in the permissible deposits and investments
described in Section X and Appendix A up to the specified maximum allowable percentages
2
and/or dollar limitations and, where applicable, through the bid process requirements. Permissible
deposits and investments include, in general:
► FDIC -Insured Checking, Savings, and Sweep Accounts;
► Certificates of Deposit;
► U.S. Government Agency Securities and Federal Government Securities;
► Prime Commercial Paper;
► Local Agency Investment Fund (LAIF);
► Money Market Mutual Funds;
► Corporate Notes;
► Professionally Managed Accounts.
The City's deposits and investments are generally limited to three years' maximum maturity.
However, the projected amount of funds not expected to be disbursed within five years may be
invested in U.S. Treasury bills, notes and bonds maturing between three and five years.
The City's Investment Policy does not specify a single benchmark as a goal or target yield for a
rate of return on its investment portfolio. As a basis for comparison only, the Treasurer's
monthly report will display the rates of return on the three-month, six-month, and one-year U.S.
Treasury Bill, comparable -period rates for commercial paper, and the yield for the State
Treasurer's Local Agency Investment Fund (LAIF)•
The Investment Policy shall be adopted by resolution of the La Quinta City Council on an annual
basis. The Investment Policy will be adopted before the end of June of each year.
This Executive Summary is only an overview of the City's Investment Policy. Reading this
summary does not constitute a complete review, which can only be accomplished by reviewing all
of the pages herein.
i
City of La Quinta
Statement of Investment Policy
July 1, 2010 through June 30, 2011
Adopted by the City Council on June 15, 2010
GENERAL PURPOSE
The general purpose of this document is to provide the rules and standards that must be followed
in administering the City of La Quinta's deposits and investments.
11 INVESTMENT POLICY
It is the policy of the City of La Quinta to deposit and invest public funds in a manner that shall
provide:
➢ Safety of principal;
➢ Liquidity to meet all of the City's obligations and requirements that may be reasonably
anticipated;
➢ A risk -based market rate of return.
The Investment Policy conforms to all State and local statutes governing the investment of public
funds and sets forth the permissible deposits and investments of the City's funds and the
limitations thereon.
III SCOPE
Except as further detailed in Section XVI1, this Investment Policy applies to all deposits and
investments of the City of La Quinta, City of La Quinta Redevelopment Agency and the City of La
Quinta Financing Authority (hereafter referred to in this document as the "City"). These funds are
reported in the City's Comprehensive Annual Financial Report (CAFR) and include all funds within
the following fund types:
► General
► Special Revenue
► Capital Projects
► Debt Service
► Enterprise
► Internal Service
► Trust and Agency
► Any new fund types and fund(s) that may be created.
IV OBJECTIVES
The objectives of the City's investment activity, in order of priority and importance, are:
1. Safety of Principal
Safety of principal is the foremost objective of the City's investment program.
M
Investments shall be undertaken in a manner that seeks to ensure the preservation of
principal of the overall portfolio in accordance with the permissible deposits and
investments.
The City shall endeavor to preserve its investment principal by making only permissible
deposits and investments, undertaken in a controlled manner to minimize the possibility of
loss or misappropriation through malfeasance or otherwise. Investments not backed by
the full faith and credit of the United States Government shall be diversified by allocating
assets between different types of permissible investments, maturities, and issuers as a
means to mitigate credit risk and interest rate risk.
A. Credit Risk is the risk of loss from the failure of the security issuer or backer.
Credit risk may be mitigated by:
► Limiting investments to investment grade securities as permitted in Section X;
► Diversifying the issuers of the securities in the investment portfolio so that
potential losses due to issuer failure or individual securities downgrades may be
minimized.
B. Interest Rate Risk is the risk that market values of securities in the portfolio will
decline due to changes in general interest rates. Interest rate risk may be mitigated
by:
► Structuring the investment portfolio so that securities mature to meet cash
requirements for ongoing operations, thereby avoiding the need to sell securities
on the open market prior to maturity; and
► Investing operating funds primarily in shorter -term securities.
C. Liquidity Risk is the risk that a security cannot be liquidated because of its unique
features or structure or because it is thinly traded. Liquidity risk is not a material
issue for the City's portfolio because of the permissible deposits and investments
(see Section X) and because the City maintains a buy -and -hold policy and holds
securities and other investments to maturity. A discussion of the City's investment
process and risk is presented in Appendix I.
2. Provide Liquidity
The investment portfolio shall remain sufficiently liquid to meet all of the City's cash needs
that may be reasonably anticipated. This is accomplished by structuring the portfolio so
that sufficient liquid funds are available to meet anticipated demands. Furthermore, since
all possible cash needs cannot be anticipated the portfolio should be diversified and
consist of securities with active secondary or resale markets.
The City's policy is to hold securities and other investments to maturity. Accordingly,
securities shall not be sold prior to maturity with the following exceptions:
► A security with declining credit quality can be sold early to minimize loss of
principal;
► Unanticipated liquidity needs of the portfolio require that one or more securities be
sold.
5
3. Yield A Risk -Based Market Rate Of Return
The City's investment portfolio shall be structured with the objective of yielding a risk -
based market rate of return throughout budgetary and economic cycles. Return on
investment is less important than the safety and liquidity objectives described above.
The City's Investment Policy does not specify a single benchmark as a goal or target yield
for a rate of return on its investment portfolio. The portfolio's rates of return will be
influenced by several factors, including actions by the Federal Reserve Board, the
marketplace, and overall economic perceptions and conditions. These factors will not
affect yield during the securities' holding period because the City's buy -and -hold policy
fixes the securities' yield at the time of purchase.
As a basis for comparison only, the Treasurer's monthly report will display the rates of
return on the three-month, six-month, and one-year U.S. Treasury Bill, comparable -period
rates for commercial paper, and the yield for the State Treasurer's Local Agency
Investment Fund (LAIF). The Treasurer may use these or any other published rates of
return that the Treasurer deems appropriate for comparison to the return on the City's
investment portfolio.
V MAXIMUM MATURITIES
It is the City's policy to hold securities and other investments until maturity, thus avoiding the risk
of market value fluctuations with overall market interest rates. This buy -and -hold policy shall not
prevent the sale of a security to minimize loss of principal when an issuer or backer suffers
declining credit worthiness or when the liquidity needs of the City require that a security be sold.
The buy -and -hold policy requires that the City's investment portfolio be structured so that
sufficient liquid funds are available from maturing investments and other sources to meet all
reasonably -anticipated cash needs. To meet anticipated cash needs, it is essential that the
Treasurer have reliable, diligently prepared cash flow projections.
Annually, the Treasurer shall project the amount of funds not expected to be disbursed within five
years. For FY 2010/2011, the amount of such funds is projected to be $4 million. Funds up to
that amount may be invested in U.S. Treasury bills, notes and bonds maturing between 3 and 5
years. For all other funds, investments are limited to three years maximum maturity, with no
more than 25% of surplus funds invested in maturities exceeding two years and less than three
years.
VI PRUDENCE
The City shall follow the Uniform Prudent Investor Act as adopted by the State of California in
Probate Code Sections 16045 through 16054.
Section 16053 sets forth the terms of a prudent person which are as follows: "Investments shall
be made with judgment and care - under circumstances then prevailing - which persons of
prudence, discretion, and intelligence exercise in the professional management of their own
affairs, not for speculation, but for investment, considering the probable safety of their capital as
well as the probable income to be derived."
VII AUTHORITY
Authority to manage the City's investment portfolio is derived from sections 35607 and 35608 of
City Ordinance 3.08.010. Management responsibility for the investment program is delegated to
the City Treasurer for a period of one year pursuant to the City Council's annual adoption of the
Investment Policy.
The City Treasurer shall establish written procedures for the operation of the investment program
consistent with the Investment Policy. Procedures should include reference to safekeeping, wire
transfer agreements, banking service contracts, and collateral/depository agreements. Such
procedures shall include explicit delegation of authority to persons responsible for investment
transactions. No person may engage in an investment transaction except as provided under the
terms of this Investment Policy and the procedures established by the City Treasurer. The City
Treasurer shall be responsible for all transactions undertaken and shall establish a system of
controls to regulate the activities of subordinate officials. The City Manager or an Assistant City
Manager shall acknowledge in writing all purchases and sales of investments prior to their
execution by the City Treasurer.
VIII ETHICS AND CONFLICTS OF INTEREST
The City Manager, Assistant City Managers, City Treasurer and city employees involved in the
City's banking and investment process shall conduct the City's business in an ethical manner and
refrain from any activity or relationship that may be, or have the appearance of, a conflict of
interest. Any questionable activity or relationship shall be reported immediately and in compliance
with the procedures set forth in Section 1 .40 — Conflicts of Interest and Acceptance of Gifts and
other Gratuities of the City of La Quinta Personnel Manual. Reporting must be made in
accordance with the personnel policies of the City and, until resolved, the officer or employee
shall refrain from participating in the City's business related to the matter.
The City Manager, Assistant City Managers, City Treasurer and city employees may conduct
personal business with banks, brokers, and other financial institutions that are authorized to
conduct business with the City provided that the terms of the activity to the accountholder with
the City are the same as those that are available to the public in general.
IX AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City Treasurer maintains a listing of financial institutions which are approved for direct
investment purposes. In addition a list will also be maintained of approved broker/dealers selected
by credit worthiness, who maintain an office in the State of California.
1. Broker/Dealers who desire to become bidders for direct investment transactions must
supply the City with the following:
► Current audited financial statements;
► Proof of Financial Industry Regulatory Authority (FINRA) Certification;
► Trading resolution;
► Proof of California registration;
► Resume of Financial broker; and
► Completion of the City of La Quinta Broker/Dealer questionnaire (see Appendix F)
which contains a certification of having read the City's Investment Policy.
7
The City Treasurer shall evaluate the documentation submitted by the broker/dealer and
independently verify existing reports on file for any firm and individual conducting
investment related business.
The City Treasurer will also contact the following agencies during the verification process:
► Financial Industry Regulatory Authority (FINRA) Public Disclosure Report File (1-
800-289-9999).
► State of California Department of Corporations (1-916-445-3062)•
The City Treasurer maintains a listing of financial institutions which are approved for
investment purposes. All Broker/Dealers and financial institutions that provide investment
services will be subject to City Council approval.
Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S. Treasury
Department regulations. Each mutual fund shall provide a prospectus and statement of additional
information.
2. Financial Institutions will be required to meet the following criteria in order to receive City
funds for deposit or investment (see Appendix E, "Listing of Approved Financial
Institutions"):
A. Insurance - Public Funds shall be deposited only in financial institutions having
accounts insured by the Federal Deposit Insurance Corporation (FDIC).
B. Collateral - The amount of the City's deposits or investments not insured by the
FDIC —shall be collateralized by securities with market values of 110%, or by
mortgages with market values 150%, of the amount of invested funds plus unpaid
interest earnings.
C. Disclosure - Each financial institution maintaining invested funds in excess of the
FDIC insured amount shall furnish the City a copy of the most recent Call Report.
The City shall not invest in excess of the FDIC insured amount in banking
institutions which do not disclose to the city a current listing of securities pledged
for collateralization in public monies.
X PERMISSIBLE DEPOSITS AND INVESTMENTS
Permissible deposits and investments are summarized below. A more comprehensive list is
included in Appendix A.
Permissible Investments and Limitations
(See Appendix A for Additional Information)
Maximum
Allocation
Maximum
Maturity
Restrictions
Current/
Sweep Account:
Checking & Savings Accounts FDIC Insured & Sweep Accounts
85% Portfolio
On Demand
U.S. Treasuries
and/or GSE's
<= $250,000,
Certificates of Deposit
60% Portfolio
3 Years
including interest
per institution
Permissible Investments and Limitations
Maximum
Maximum
(See Appendix A for Additional Information)
Allocation
Maturity
Restrictions
U.S. Treasury Bills, Notes and Bonds, and Government National
100% Portfolio
3 Years
"$4,0000,000
Mortgage Association (GNMA) Securities
maturing 3-5 Yrs
U.S. Government Agency Securities and Federal Government Securities
(except collateralized mortgage obligations (CMO's) or structured notes
which contain embedded rate options):
- Federal National Mortgage Association (FNMA)
$20,000,000
3 Years
- Federal Home Loan Bank Notes & Bonds (FHLB)
$25,000,000
3 Years
- Federal Farm Credit Bank (FFCB)
$30,000,000
3 Years
- Federal Home Loan Mortgage Corporation (FHLMC)
$20.000,000
3 years
Prime Commercial Paper including Temporary Liquidity Guarantee
15% Portfolio
90 Days
$5,000,000 per
Program (TLGP)
issuer maximum.
Local Agency Investment Fund (LAIF)
30% Portfolio
Current /
$40 million
On Demand
per account.
Money market mutual funds regulated by the SEC that consist only of US
20% Portfolio
Current /
Maintain $1 per
Treasury Securities or GSE's and maintain a par value of $1 per share
On Demand
share par value
$5,000,000 max
Corporate Notes
10%
3 Years
per issuer AA
rated or better
$10,000,000 max
Corporate Notes - Temporary Liquidity Guarantee Program (TLGP)
20%
3 Years
per issuer, AA
rated or better.
Requires
Professionally Managed Account
10%
3 Years
City Council -
Approved RFP
1. Checking, Savings, and Sweep Accounts — The City will only maintain checking, savings,
and sweep accounts with FDIC insured financial institutions. As authorized by the City
Council, a U.S. Treasury and/or U.S. Agency Securities Money Market Sweep Account
with a $50,000 target balance may be maintained in conjunction with the checking
account.
2. Certificates of Deposit - As authorized in Government Code Section 53649, Certificates of
Deposit are fixed term investments which are required to be collateralized from 1 10% to
150% depending on the specific security pledged as collateral in accordance with
Government Code Section 53652. There are no portfolio limits on the amount or maturity
for this investment vehicle.
Collateralization will be required for Certificates of Deposits in excess of the FDIC insured
amount. The type of collateral is limited to City authorized investments. Collateral will
always be held by an independent third party from the institution that sells the Certificates
of Deposit to the City. Evidence of compliance with State Collateralization policies must
be supplied to the City and retained by the City Treasurer as follows:
A. Certificates of Deposits Insured by the FDIC: The City Treasurer may waive
collateralization of a deposit that is federally insured.
B. Certificates of Deposit in excess of FDIC Limits: The amount not federally insured
shall be 110% collateralized securities or 150% mortgages market value of that
amount of invested funds plus unpaid interest earnings.
W
The City's Investment Policy limits the percentage of Certificates of Deposit to 60% of the
portfolio.
➢ The City does not allow investments in CDAR's or negotiable (secondary market)
certificates of deposit.
U.S. Treasury Bills, Notes, and Bonds and Government National Mortgage Associations
(GNMA) securities — The City may invest in U.S. Treasury bills, notes, and bonds, and
GNMA securities directly issued and backed by the full faith and credit of the U.S.
Government. The City's Investment Policy limits investments in U.S. Treasury issues and
GNMA's to 100% of the portfolio.
➢ The City's Investment Policy does not allow investments in local and state
indebtedness.
4. U.S. Government Agency Securities and Federal Government Securities — The City may
invest in securities issued by U.S. Government instrumentalities and agencies (commonly
referred to as government sponsored enterprises or GSE's). These securities are not
backed by the full faith and credit of the U.S. Government. Publicly owned GSE's include
Federal National Mortgage Association (FNMA), Federal Home Loan Mortgage Corporation
(FHLMC) and Student Loan Marketing Association (SLMA). Non -publicly owned GSE's
include the Federal Home Loan Bank (FHLB), Federal Farm Credit Bank (FFCB), Federal
Land Bank (FLB) and Federal Intermediate Credit Bank (FICB).
The City's Investment Policy allows investment only in securities of FNMA, FHLMC, FHLB
and FFCB. For Fiscal Year 2009/2010, the maximum face amount per issuer is $20
million for FNMA and FHLMC, $25 million for FHLB and $30 million for FFCB. In addition,
no more than 30% of the portfolio surplus may be invested in all GSE's combined with a
maximum $10 million face amount per purchase.
5. Prime Commercial Paper - As authorized in Government Code Section 53601(g), a portion
of the City's portfolio may be invested in commercial paper of the highest rating (A-1 or P-
1) as rated by Moody's or Standard and Poor's. There are a number of other qualifications
regarding investments in commercial paper based on the financial strength of the
corporation and the size of the investment. The City's Investment Policy permits
investments in commercial paper with the following limitations:
A. Maximum 15% of the portfolio.
B. Maximum maturity of 90 days.
C. Maximum of $5 million per issuer.
These limitations are more restrictive than the State code allowed amounts of 25% of the
total portfolio with maturities up to 270 days with no per -issuer limitations.
The City is also permitted to invest in commercial paper issued under the FDIC Temporary
Liquidity Guarantee Program subject to the aforementioned commercial paper limitations.
6. State Treasurer's Local Agency Investment Fund (LAIF) - As authorized in Government
Code Section 16429.1 and by LAW procedures, local government agencies are each
authorized to invest a maximum of $40 million per account in this investment program
administered by the California State Treasurer.
10
The City's investment in LAIF is allowable as long as the average maturity of its
investment portfolio does not exceed two years, unless specific approval is authorized by
the City Council. The City has two accounts with LAIF and limits investment to 30% of
the portfolio.
7. Money Market Mutual Funds - As authorized in Government Code Section 53601(k), local
agencies are authorized to invest in shares of beneficial interest issued by diversified
management companies (mutual funds) in an amount not to exceed 20% of the agency's
portfolio. There are a number of other qualifications and restrictions regarding allowable
investments in corporate notes and shares of beneficial interest issued by mutual funds
which include (1) attaining the highest ranking or the highest letter and numerical rating
provided by not less than two of the three largest nationally recognized rating services, or
(2) having an investment advisor registered with the Securities and Exchange Commission
with not less than five years' experience investing in the securities and obligations and
with assets under management in excess of five hundred million dollars ($500,000,000).
The City's Investment Policy only allows investments in mutual funds that are money
market funds maintaining a par value of $1 per share that invest in direct issues of the
U.S. Treasury and/or US Agency Securities with an average maturity of their portfolio not
exceeding 90 days and the City limits such investments to 20% of the portfolio.
8. Corporate Notes - As authorized in Government Code Section 53601 (j), local agencies
may invest in corporate notes. The notes must be issued by corporations organized and
operating in the United States or by depository institutions licensed by the United States
or any other state and operating in the United States. The City's Investment Policy allows
investment in corporate notes authorized by the Government Code with the following
limitations:
► Maturities shall not exceed three years from date of purchase.
► Eligible notes shall be regularly quoted and traded in the marketplace.
► Eligible notes shall be rated "AA"or better.
► Total investment shall not exceed 10% of the portfolio for non- Temporary
Liquidity Guarantee Program (TLGP) Corporate Notes and 20% of the portfolio for
TLGP Corporate Notes, and
► The maximum aggregate investment shall not exceed $5 million face amount for
each issuer.
This is more restrictive than the State code allowed amounts of 30% of the total portfolio
with maturities up to five years with no per -issuer limitations.
The City is also permitted to invest in corporate notes issued under the FDIC
Temporary Liquidity Guarantee Program subject to the aforementioned corporate note
limitations, except that corporate notes issued under the Temporary Liquidity Guarantee
Program or otherwise backed by the United States government shall be limited to 20% of
the portfolio and the maximum aggregate investment for such notes shall not exceed $10
million face amount for each issuer.
9. Professionally Managed Account(s) - The City Treasurer may place up to 10% of the
portfolio with a professional portfolio management firm ("PPMF"). The PPMF will be
approved by the City Council based upon the City Treasurer's recommendation pursuant to
completion of a request for proposal (RFP) as outlined in Appendix G. The PPMF shall
have:
11
(a) An established professional reputation for asset or investment management;
(b) Knowledge and working familiarity with State and Federal laws governing and
restricting the investment of public funds;
(c) Substantial experience providing investment management services to local public
agencies whose investment policies and portfolio size are similar to those of the
City;
(d) Professional liability (errors and omissions) insurance and fidelity bonding in such
amounts as are required by the City;
(e) Registration with the Securities and Exchange Commission under the Investment
Advisers Act of 1940.
Before engagement by the City and except as may be specifically waived or revised, the
PPMF shall commit to adhere to the provisions of the City's Investment Policy with the
following exceptions:
(f) The PPMF may be granted the discretion to purchase and sell investment securities
in accordance with Appendix I of this Investment Policy;
(g) The PPMF is not required to adhere to the buy -and -hold policy of the City's
Investment Policy, and;
(h) The PPMF does not need City Manager or City Treasurer approval to make
permissible investments as detailed in column 8 of Appendix H of this Investment
Policy.
XI INVESTMENT POOLS
There are three (3) types of investment pools:
► State -run pools (e.g., LAIF);
► Pools that are operated by a political subdivision where allowed by law and the political
subdivision is the trustee (e.g., County Pools);
► Pools that are operated for profit by third parties.
The City's Investment Policy permits investment only in pools authorized in Section X.
XII PAYMENT AND CUSTODY
The City shall engage qualified third party custodians to act in a fiduciary capacity to maintain
appropriate evidence of the City's ownership of securities and other eligible investments. Such
custodians shall disburse funds, received from the City for a purchase, to the broker, dealer or
seller only after receiving evidence that the City has legal, record ownership of the securities.
Even though ownership is evidenced in book -entry form rather than by actual certificates, this
procedure is commonly accepted as the delivery versus payment (DVP) method for the transfer of
securities.
XIII INTEREST EARNING DISTRIBUTION POLICY
Interest earnings are generated from pooled investments and specific investments.
1. Pooled Investments - It is the general policy of the City to pool all available operating cash
of the City of La Quinta, La Quinta Redevelopment Agency and La Quinta Financing
12
Authority and allocate interest earnings, in the following order, as follows:
A. Payment to the General Fund of an amount equal to the total annual bank service
charges as incurred by the general fund for all operating funds as included in the
annual operating budget.
B. Payment to the General Fund of a management fee equal to 5% of the annual
pooled cash fund investment earnings.
C. Payment to each fund of an amount based on the average computerized
daily cash balance included in the common portfolio for the earning period.
2. Specific Investments - Specific investments purchased by a fund shall incur all earnings
and expenses to that particular fund.
XIV , INTERNAL CONTROLS AND INDEPENDENT AUDITOR
The City Treasurer shall establish a system of internal controls to accomplish the following
objectives:
► Safeguard assets;
► The orderly and efficient conduct of its business, including adherence to management
policies;
► Prevention or detection of errors and fraud;
► The accuracy and completeness of accounting records; and
► Timely preparation of reliable financial information.
While no internal control system, however elaborate, can guarantee absolute assurance that the
City's assets are safeguarded, it is the intent of the City's internal control to provide a reasonable
assurance that management of the investment function meets the City's objectives.
The internal controls shall address the following:
Control of collusion. Collusion is a situation where two or more employees are working in
conjunction to defraud their employer.
2. Separation of transaction authority from accounting and record keeping. By separating the
person who authorizes or performs the transaction from the people who record or
otherwise account for the transaction, a separation of duties is achieved.
3. Custodial safekeeping. Securities purchased from any bank or dealer including appropriate
collateral (as defined by State Law) shall be placed with an independent third party for
custodial safekeeping.
4. Avoidance of physical delivery securities. Book entry securities are much easier to
transfer and account for since actual delivery of a document never takes place. Delivered
securities must be properly safeguarded against loss or destruction. The potential for
fraud and loss increases with physically delivered securities.
5. Clear delegation of authority to subordinate staff members. Subordinate staff members
must have a clear understanding of their authority and responsibilities to avoid improper
13
actions. Clear delegation of authority also preserves the internal control structure that is
contingent on the various staff positions and their respective responsibilities as outlined in
the Segregation of Major Investment Responsibilities appendices.
6. Written confirmation or telephone transactions for investments and wire transfers. Due to
the potential for error and improprieties arising from telephone transactions, all telephone
transactions shall be supported by written communications or electronic confirmations and
approved by the appropriate person. Written communications may be via fax if on
letterhead and the safekeeping institution has a list of authorized signatures. Fax
correspondence must be supported by evidence of verbal or written follow-up.
7. Development of a wire transfer agreement with the City's bank and third party custodian.
This agreement should outline the various controls, security provisions, and delineate
responsibilities of each party making and receiving wire transfers.
The System of Internal Controls developed by the City, shall be reviewed annually by the
independent auditor in connection with the annual audit of the City's Financial Statements.
The independent auditor's letter on internal control over financial reporting and compliance as it
pertains to cash and investments, if any, shall be directed to the City Manager who will direct the
City Treasurer to provide a written response to the independent auditor's letter. The auditor's
letter, as it pertains, to cash and investment activities and the City Treasurer's response shall be
provided to the City's Investment Advisory Board for their consideration. Following the
completion of each annual audit, the independent auditor shall meet with the Investment Advisory
Board and discuss the auditing procedures performed and the review of internal controls for cash
and investment activities.
See Appendix D, "Segregation of Major Investment Responsibilities."
XV REPORTING STANDA
The City Treasurer shall submit a monthly Treasurers Report to the City Council and the
Investment Advisory Board that includes all cash and investments under the authority of the
Treasurer.
The Treasurer's Report shall summarize cash and investment activity and changes in balances and
include the following:
► A certification by the City Treasurer.
► A listing of purchases and sales/maturities of investments.
► Cash and Investments categorized by authorized investments, except for LAIF
which will be provided quarterly and show yield and maturity.
► Comparison of month end actual holdings to Investment Policy limitations.
► Current year and prior year monthly history of cash and investments for trend
analysis.
► Balance Sheet.
► Distribution of cash and investment balances by fund.
► A comparison of actual and surplus funds.
► A year to date historical cash flow analysis and projection for the next six months.
► A two-year list of historical interest rates.
14
XVI FINANCIAL ASSETS AND INVESTMENT ACTIVITY NOT SUBJECT TO THIS POLICY
The City's Investment Policy does not apply to the following:
► Cash and Investments raised from Conduit Debt Financing;
► Funds held in trust in the City's name in pension or other post -retirement benefit
programs;
► Cash and Investments held in lieu of retention by banks or other financial
institutions for construction projects;
► Short or long term loans made to other entities by the City or Agency; and
Short term (Due to/from) or long term (Advances from/to) obligations made
either between the City and its funds or between the City and Agency.
XVII INVESTMENT OF BOND PROCEEDS
The City's Investment Policy shall govern bond proceeds and bond reserve fund investments.
California Code Section 5922 (d) governs the investment of bond proceeds and reserve funds in
accordance with bond indenture provisions which shall be structured in accordance with the
City's Investment Policy.
Arbitrage Requirement - The US Tax Reform Act of 1986 requires the City to perform arbitrage
calculations as required and return excess earnings to the US Treasury from investments of
proceeds of bond issues sold after the effective date of this law. These arbitrage calculations
may be contracted with an outside source to provide the necessary technical assistance to
comply with this regulation. Investable funds subject to the 1986 Tax Reform Act will be kept
segregated from other funds and records will be kept in a fashion to facilitate the calculations.
The City's investment position relative to the new arbitrage restrictions is to continue pursuing
the maximum yield on applicable investments while ensuring the safety of capital and liquidity. It
is the City's position to, continue maximization of yield and to rebate excess earnings, if
necessary.
XVIII INVESTMENT ADVISORY BOARD - CITY OF LA QUINTA
The Investment Advisory Board (IAB) is a standing board composed of five members from the
public that are appointed by the City Council. Background information will be requested and
potential candidates must agree to a background check and verification. On an annual basis, in
conjunction with the Political Reform Act disclosure statutes, or at any time if a change in
circumstances warrants, each board member will provide the City Council with a disclosure
statement which identifies any matters that have a bearing on the appropriateness of that
member's service on the board. All board members shall report annually to the City Clerk on
Form 700, Statement of Economic Interests, any activities, interests, or relationships that may be,
or have the appearance of, a conflict of interest.
The IAB must meet at least quarterly, but usually meets monthly, to
1. Review at least annually the City's Investment Policy and recommend appropriate
changes;
2. Review monthly treasury report and note compliance with the Investment Policy and
adequacy of cash and investments for anticipated obligations;
3. Receive and consider other reports provided by the City Treasurer;
15
4. Meet with the independent auditor after completion of the annual audit of the City's
financial statements, and receive and consider the auditor's comments on auditing
procedures, internal controls and findings for cash and investment activities, and;
5. Serve as a resource for the City Treasurer on matters such as proposed investments,
internal controls, use or change of financial institutions, custodians, brokers and dealers.
The IAB will report to the City Council after each meeting either in person or through
correspondence at a regular City Council meeting. See Appendix B: "Investment Advisory Board
Provisions".
XIX INVESTMENT POLICY ADOPTION
The City's Investment Policy will be reviewed annually by the City's Investment Advisory Board
and the City Treasurer. The Investment Advisory Board will forward the Investment Policy with
any revisions to the City Manager and City Attorney for their review and comment. A joint
meeting will be held with the Investment Advisory Board, City Manager, City Attorney, and City
Treasurer to review the Investment Policy and any comments prior to submission to the City
Council for their consideration.
The Investment Policy shall be adopted by resolution of the City Council annually before the end
of June of each year.
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Appendix B
City of La Quinta Municipal Code
Chapter 2.70
INVESTMENT ADVISORY BOARD PROVISIONS
Sections:
2.70.010 General Rules Regarding Appointment.
2.70.020 Board meetings.
2.70.030 Board functions.
2.70.010 General rules regarding appointment
A. Except as set out below, see Chapter 2.06 for General Provisions.
B. The Investment Advisory Board (the "board") is a standing board composed of five (5)
members from the public that are appointed by city council.
C. Applicants for the board should have a background in finance, preferably with knowledge
and/or experience in markets, controls and accounting for securities. Background information will
be requested and potential candidates must agree to a background check and verification.
D. On an annual basis, in conjunction with the Political Reform Act disclosure statutes, or at
any time if a change in circumstances warrants, each board member will provide the City Council
with a disclosure statement which identifies any matters that have a bearing on the
appropriateness of that member's service on the board. Such matters may include, but are not
limited to, changes in employment, changes in residence, or changes in clients.
E. To promote continuity, the expiration of the terms of the members of the board shall be
staggered. The term of service is three years, with one or two terms expiring each year.
2.70.020 Board meetings.
The Board usually will meet monthly, but this schedule may be extended to quarterly
meetings upon the concurrence of the Board and the City Council. The specific meeting dates will
be determined by the Board Members and meetings may be called for on an as needed basis.
2.70.030 Board functions.
A. The principal functions of the Board are: (1) review at least annually the City's Investment
Policy and recommend appropriate changes; (2) review monthly Treasury Report and note
compliance with the Investment Policy and adequacy of cash and investments for anticipated
obligations; (3) receive and consider other reports provided by the City Treasurer; (4) meet with
the independent auditor after completion of the annual audit of the City's financial statements, and
receive and consider the auditor's comments on auditing procedures, internal controls, and findings
for cash and investment activities, and; (5) serve as a resource for the City Treasurer on matters
such as proposed investments, internal controls, use or change of financial institutions, custodians,
brokers and dealers.
B. The Board will report to the City Council after each meeting either in person or through
correspondence at a regular City Council meeting.
19
Appendix C
City of La Quinta Municipal Code
Chapter 3.08
INVESTMENT OF MONEYS AND FUNDS
Sections:
3.08.010 Investment of city moneys and deposit of securities.
3.08.020 Authorized investments.
3.08.030 Sales of securities.
3.08.040 City bonds.
3.08.050 Reports.
3.08.060 Deposits of securities.
3.08.070 Trust fund administration.
3.08.010 Investment of city moneys and deposit of securities.
Pursuant to, and in accordance with, and to the extent allowed by, Sections
53607 and 53608 of the Government Code, the authority to invest and reinvest
moneys of the city, to sell or exchange securities, and to deposit them and provide for
their safekeeping, is delegated to the city treasurer. (Ord. 2 § 1 (part), 1982)
3.08.020 Authorized investments.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is
authorized to purchase, at their original sale or after they have been issued, securities
which are permissible investments under any provision of state law relating to the
investing of general city funds, including but not limited to Sections 53601 and 53635 of
the Government Code, as said sections now read or may hereafter be amended, from
moneys in his custody which are not required for the immediate necessities of the city
and as he may deem wise and expedient, and to sell or exchange for other eligible
securities and reinvest the proceeds of the securities so purchased. (Ord. 2 § 1 (part),
1982)
3.08.030 Sales of Securities.
From time to time the city treasurer shall sell the securities in which city moneys have
been invested pursuant to this chapter, so that the proceeds may, as appropriate, be
applied to the purchase for which the original purchase money may have been designated
or placed in the city treasury. (Ord.2 § I (part),
3.08.040 City bonds.
Bonds issued by the city and purchased pursuant to this chapter may be canceled
either in satisfaction of sinking fund obligations or otherwise if proper and appropriate;
provided, however, that the bonds may be held uncancelled and while so held may be
resold. (Ord. 2 § 1 (part), 1982)
20
3.08.050 Reports.
The city treasurer shall make a monthly report to the city council of all investments
made pursuant to the authority delegated in this chapter. (Ord. 2 § 1 (part), 1982)
3.08.060 Deposits of securities.
Pursuant to the delegation of authority in Section 3.08.010, the city treasurer is
authorized to deposit for safekeeping, the securities in which city moneys have been
invested pursuant to this chapter, in any institution or depository authorized by the terms
of any state law, including but not limited to Section 53608 of the Government Code as
it now reads or may hereafter be amended. In accordance with said section, the city
treasurer shall take from the institution or depository a receipt for the securities so
deposited and shall not be responsible for the securities delivered to and receipted for by
the institution or depository until they are withdrawn therefrom by the city treasurer.
(Ord. 2 § 1 (part), 1982
3.08.070 Trust fund administration.
Any departmental trust fund established by the city council pursuant to Section
36523 of the Government Code shall be administered by the city treasurer in accordance
with Section 36523 and 26524 of the Government code and any other applicable
provisions of law. (Ord. 2 § 1 (part), 1982)
21
SEGREGATION OF MAJOR INVESTMENT RESPONSIBILITIES
Function
Develop and Recommend Modifications
to City's Formal Investment Policy
Review City's Investment Policy
and Recommend City Council Action
Adopt Formal Investment Policy
Implement Formal Investment Policy
Review Financial Institutions & Select Investments
Acknowledge Investment Selections
Execute Investment transactions
Confirm Wires (if applicable)
Record Investment Transactions in City's
Accounting Records
Investment Verification (match broker confirmation
to City investment records)
Reconcile Investment Records
to Accounting Records and Bank Statements
Reconcile Investment Records
to Treasurers Report of Investments
Security of Investments at City
Security of Investments outside City
Review Internal Control Procedures
22
Appendix D
Responsible Parties
Investment Advisory Board
and City Treasurer
City Manager
and City Attorney
City Council
City Treasurer
City Treasurer
City Manager or an
Assistant City Manager
City Treasurer or City Manager
Accounting Manager or
Financial Services Assistant
Accounting Manager or
Financial Services Assistant
City Treasurer and Financial
Services Assistant
Financial Services Assistant
Accounting Manager
Accounting Manager or Senior
Secretary
Third Party Custodian
External Auditor
Appendix E
LISTING OF APPROVED FINANCIAL INSTITUTIONS
1. Banking Services Wells Fargo Bank, Government Services,
Los Angeles, CA
2. Custodian Services Bank of New York/Mellon, Los Angeles,
CA
3. Deferred Compensation International City/County Management
Association Retirement Corporation
4. Broker/Dealer Services Banc of America Securities, San
Francisco, CA
Morgan Stanley, San Rafael, CA
CitiGroup, Costa Mesa, CA
5. Government Pool State of California Local Agency
Investment Fund
City of La Quinta Account
La Quinta Redevelopment Agency
6. Bond Trustees 1991 City Hall Revenue Bonds - US Bank
1991 RDA Project Area 1 -US Bank
1992 RDA Project Area 2 - US Bank
1994 RDA Project Area 1 -US Bank
1998 RDA Project Area 1 &2 — US Bank
2001 RDA Project Area 1 — US Bank
2002 RDA Project Area 1 — US Bank
2003 RDA Project Area 1 — US Bank
Assessment Districts — US Bank
No Changes to this listing may be made without City Council approval
23
Appendix F
BROKER/DEALER QUESTIONNAIRE AND CERTIFICATION
1. Name of Firm:
2. Address:
3. Telephone:
4. Broker's Representative to the City (attach resume):
Name:
Title:
Telephone: 1 1
5. Manager/Partner-in-charge (attach resume):
Name:
Title:
Telephone:
6. List all personnel who will be trading with or quoting securities to City employees (attach
resume)
Name:
Title:
Telephone:
7. Which of the above personnel have read the City's Investment Policy?
8. Which instruments are offered regularly by your local office? (Must equal 100%)
% U.S. Treasuries
% BA's
% Commercial Paper
% CD's
% Mutual Funds
Agencies (specify):
• Repos
% Reverse Repos
% CMO's
% Derivatives
• Stocks/Equities
• Other (specify):
9. References -- Please identify your most directly comparable public sector clients in our
geographical area.
Entity
Contact
24
Entity
Contact
Telephone ( ) Telephone ()
Client Since Client Since
10. Have any of your clients ever sustained a loss on a securities transaction arising from a
misunderstanding or misrepresentation of the risk characteristics of the instrument? If so,
explain.
11. Has your firm or your local office ever been subject to a regulatory or state/ federal
agency investigation for alleged improper, fraudulent, disreputable or unfair activities
related to the sale of securities? Have any of your employees been so investigated? If
so, explain.
12. Has a client ever claimed in writing that you were responsible for an investment loss?
Yes No If yes, please provide action taken
Has a client ever claimed in writing that your firm was responsible for an investment
loss? Yes No If yes, please provide action taken
Do you have any current or pending complaints that are unreported to FINRA?
Yes No If yes, please provide action taken
Does your firm have any current, or pending complaints that are unreported to FINRA?
Yes No If yes, please provide action taken
13. Explain your clearing and safekeeping procedures, custody and delivery process.
Who audits these fiduciary responsibilities?
Latest Audit Report Date
25
14. How many and what percentage of your transactions failed?
Last month? % $
Last year? % $
15. Describe the method your firm would use to establish capital trading limits for the City of
La Quinta.
16. Is your firm a member in the S.I.P.C. insurance program? Yes No
If yes, explain primary and excess coverage and carriers.
17. What portfolio information, if any, do you require from your clients?
18. What reports and transaction confirmations or any other research publications will the City
receive?
19. Does your firm offer investment training to your clients? Yes No
20. Does your firm have professional liability insurance? Yes No
If yes, please provide the insurance carrier, limits and expiration date.
21. Please list your FINRA/NASD Registration Number
22. Do you have any relatives who work at the City of La Quinta?
Yes No If yes, Name and Department
23.
Do you maintain an office in California?
Yes
No
24.
Do you maintain an office in La Quinta or Riverside County?
Yes
No
25. Please enclose the following:
► Latest audited financial statements.
► Samples of reports, transaction confirmations and any other research/publications the
City will receive.
► Samples of research reports and/or publications that your firm regularly provides to
clients.
► Complete schedule of fees and charges for various transactions.
'CERTIFICATION'
*CERTIFICATION
26
I hereby certify that I have personally read the Statement of Investment Policy of the City of La
Quinta, and have implemented reasonable procedures and a system of controls designed to
preclude imprudent investment activities arising out of transactions conducted between our firm
and the City of La Quinta. All sales personnel will be routinely informed of the City's investment
objectives, horizons, outlooks, strategies and risk constraints whenever we are so advised by the
City. We pledge to exercise due diligence in informing the City of La Quinta of all foreseeable
risks associated with financial transactions conducted with our firm.
By signing this document the City of La Quinta is authorized to conduct any and all background
checks.
Under penalties of perjury, the responses to this questionnaire are true and accurate to the best of
my knowledge.
Broker Representative
Date
Title
Sales Manager and/or Managing Partner*_
Date Title
27
Appendix G
Request for Proposals
Professional Portfolio Management Firm
City of La Quinta, CA
The City of La Quinta, CA is soliciting Requests for Proposals (RFP) from interested firms for the
provision of a discretionary investment management services for City of La Quinta, CA. The
portfolio to be managed of the invested assets is will be approximately 10% of the City's
investment portfolio and will be invested between 0 - 3 years.
The investment of City of La Quinta, CA's funds is guided by the applicable State statutes and
the City of La Quinta, CA's investment policy. A copy of the investment policy is attached for
your information.
Questions regarding this RFP should be directed to:
Name:
Title:
City of:
Address:
City, State, Zip Code:
Phone Number:
John M. Falconer
Finance Director/Treasurer
La Quinta, CA
P.O. Box 1504
La Quinta, CA 92247-1504
(760)777-7150
I. CRITERIA FOR EVALUATION AND SELECTION
■ Experience of the firm in providing services to public sector entities of similar size
and with similar investment objectives;
■ Professional experience and qualifications of the individuals assigned to the
account;
■ Portfolio management resources, investment philosophy and approach;
■ Responsiveness to the RFP, communicating an understanding of the overall
program and services required;
■ Reporting capabilities;
■ Fees.
II. SELECTION TIMETABLE
A. [Month, Day and Year] Proposals due by [Time] PST.
B. [Month, Day and Year] Proposals evaluated: to be determined
C. [Month, Day and Year] [City of La Quinta, CA] [Board/Council] approves selection
and awards contract.
III. FORMAT FOR PROPOSALS
Please format your response to this RFP in the following manner:
A. Organization
W.
1. Describe your organization, date founded, ownership and other business
affiliations. Provide number and location of affiliated offices. Specify the number
of years your organization has provided investment management service.
2. Describe your firm's revenue sources (e.g., investment management, institutional
research, etc.) and comment on your firm's financial condition.
3. Within the past three years, have there been any significant developments in your
organization (e.g., changes in ownership, new business ventures)? Do you expect
any changes in the near future?
4. Describe any U.S. Securities and Exchange Commission (SEC) censures or litigation
involving your organization, any officer, or employee at any time in the last ten
years.
5. Describe the firm's fiduciary liability and/or errors and omissions insurance
coverage. Include dollar amount of coverage.
B. Personnel
1 . Identify the number of professionals employed by your firm by classification.
2. Provide an organization chart showing function, positions, and titles of all the
professionals in your organization.
3. Provide biographical information on investment professionals that will be involved
in the decision -making process for our portfolio, including number of years at your
firm. Identify the person who will be the primary portfolio manager assigned to the
account.
4. Describe your firm's compensation policies for investment professionals and
address any incentive compensation programs.
C. Assets Under Management
1. Summarize your institutional investment management asset totals by category for
your latest reporting period in the following table:
Number Operating Funds Number of Other Restrictive
of Clients Clients Funds
Governmental S $
Governmental Pension S Nod
APPI!al"e"e N"ar�p'Vliabl
Non Governmental 5 Not
Pension Apphcatle Now ; • lial
M
Corporate $ Not
Applic til {XIot A+p t CIJe
High Net Worth Client $ Not
— c-- Notu'A�b`plteable
Applicable
Endowmental/Foun- $ Not
Not Arpplr""eabl'e
dation }4pplicabl_e
2. Provide the number of separate accounts whose portfolios consist of operating
funds.
3. List in the following table the percentage by market value of aggregate assets
under all governmental accounts under management for your latest reporting
period:
Type of Asset Percent by Market
Value
U.S. Treasury securities
Federal Agency obligations
Corporate securities rated AAA -AA
Corporate securities rated A
Corporate securities rated BBB or
lower
Other
(specify )
4. Describe the procedures that your firm has in place to address the potential or
actual credit downgrade of an issuer and to disclose and advise a client of the
situation.
5. Provide data on account/asset growth over the past five years. Indicate the
number of government accounts gained and the number of government accounts
lost.
6. List your five governmental largest clients. Identify those that are exclusively
operating fund relationships and/or those that are other relationships (e.g., bond
fund, retirement fund).
7. Provide a copy of the firm's Form ADV, Parts I and II (including all schedules).
8. Provide proof of State of California Registration, if your firm is not eligible for SEC
registration.
9. Provide a sample contract for services.
30
D. Philosophy/Approach
Describe your firm's investment philosophy for public clients, including your firm's
philosophy regarding average duration, maturity, investment types, credit quality,
and yield.
2. Describe in detail your investment process, as you would apply it to City of La
Quinta, CA's portfolio.
3. What are the primary strategies for adding value to portfolios?
4. Describe the process you would recommend for establishing the investment
objectives and constraints for this account.
5. Describe in detail your process of credit risk management, including how you
analyze credit quality, monitor credits on an ongoing basis, and report credit to
governmental accounts.
6. Describe your firm's trading methodology.
7. Describe your firm's decision -making process in terms of structure, committees,
membership, meeting frequency, responsibilities, integration of research ideas, and
portfolio management.
8. Describe your research capabilities as they would pertain to governmental
accounts. What types of analysis do you use?
9. Describe the firm's approach to managing relationships with the broker -dealer
community.
E. Portfolio Management
1. Are portfolios managed by teams or by one individual?
2. What is the average number of accounts handled per manager?
3. Which professional staff member will be the primary client contact for City of La
Quinta, CA?
4. How frequently are you willing to meet with us?
5. Describe procedures used to ensure that portfolios comply with client investment
objectives, policies, and bond resolutions.
F. Fees Charged
Please include a copy of your firm's fee schedule applicable to this RFP.
2. Identify any expenses that would not be covered through this fee structure and
would be required in order to implement the firm's program.
31
3. Is there a minimum annual fee?
G. Performance Reporting
1 . Please report on all accounts under $100 million.
2. Please provide performance history for governmental accounts for the last five
years.
3. Please provide risk measurements for governmental accounts for the last five
years.
4. Indicate whether your returns are calculated and compiled in accordance with
the Association for Investment Management and Research (AIMR/CFA Institute)
standards.
5. Do your reports conform to the State of California reporting standards? Are you
willing to customize your reports to meet our specifications?
6. How will you notify us of investment transactions?
7. Are confirmations of investment transactions sent directly by the broker/dealer to
the client?
8. Do your reports include rating information on investments which is required by
GASB 40?
H. References
Provide a list of at least five (5) client references in California. References should be
public agencies with portfolio size and investment objectives similar to City of La Quinta,
CA. Include length of time managing the assets, contact name, and phone number.
Insurance Requirements
Exhibit A defines the insurance requirements that will need to be met prior to the
[Board/Councill's approval of any agreement for services.
J. Submittal of proposals
Seven (7) copies of the proposal shall be submitted in a sealed envelope bearing
the caption RFP for (City of La Quinta, CA) and addressed to:
City of La Quinta, CA
P.O. Box 1504
La Quinta, CA 92247-1504
Attention: John M. Falconer
Finance Director/Treasurer
2. Proposal must be received no later than [Time] PST on [Month, Day, and Year].
32
3. Proposals should be verified before submission. The City of La Quinta, CA shall
not be responsible for errors or omissions on the part of the respondent in
preparation of a proposal. The City of La Quinta, CA reserves the right to reject
any and all proposals, to wave any irregularities, or informalities in the
proposals, and to negotiate modifications to any proposal.
Enclosures: Investment Policy
Treasurers Report
33
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7
Appendix I
Investment Management Process and Risk
Except as provided for in Section 27000.3, Government Code Section 53600.3 declares each
person, treasurer, or governing body authorized to make investment decisions on behalf of
local agencies to be a trustee and therefore a fiduciary subject to the prudent investor
standard. These persons shall act with care, skill, prudence, and diligence under the
circumstances then prevailing when investing, reinvesting, purchasing, acquiring, exchanging,
selling, and managing funds. Section 53600.5 further stipulates that the primary objective of
any person investing public funds is to safeguard principal; secondly, to meet liquidity needs
of the depositor; and lastly, to achieve a return or yield on invested funds (Government Code
Section 27000.5 specifies the same objectives for county treasurers and board of
supervisors[.
Risk is inherent throughout the investment process. There is risk assigned to any investment
activity as well as opportunity risk related to inactivity. Market risk is derived from exposure
to overall changes in the general level of interest rates while credit risk is the risk of loss due
to the failure of the insurer of a security. The market value of a security varies inversely with
the level of interest rates. If an investor is required to sell an investment with a five percent
yield in a comparable seven percent rate environment, that security will be sold at a loss. The
magnitude of that loss will depend on the amount of time until maturity.
Purchasing certain allowable securities with a maturity of greater than five years requires
approval of the governing board (see Government Code Section 53601). Part of that approval
process involves assessing and disclosing the risk and possible volatility of longer -term
investments
Another element of market risk is liquidity risk. Instruments with unique call features, special
structures or those issued by little known companies are often thinly traded. Their uniqueness
often makes finding prospective buyers in a secondary market more difficult and,
consequently, the securities' marketability and price are discounted. However, under certain
market conditions, gains are also possible with these types of securities.
Default risk occurs when the borrower is unable to repay the obligation. Generally, securities
issued by the federal government and its agencies are considered the most secure, while
securities issued by private corporations or negotiable certificates of deposit issued by
commercial banks have a greater degree of risk. Securities with additional credit
enhancements, such as bankers acceptances, collateralized repurchase agreements and
collateralized bank deposits are somewhere between the two on the risk spectrum.
The vast majority of portfolios are managed within a buy and hold policy. Investments are
purchased with the intent and capacity to hold that security until maturity. At times, market
forces or operations may dictate swapping one security for another or selling a security before
maturity. Continuous analysis and fine tuning of the investment portfolio are considered
prudent investment management. [... i
The Government Code contains specific provisions regarding the types of investments and
practices permitted after considering the broad requirement of preserving principal and
maintaining liquidity before seeking yield. These provisions are intended to promote the use of
reliable, diverse, and safe investment instruments to better ensure a prudently managed portfolio
worthy of public trust.
Chapter II. Fund Management
Local Agency Investment Guidelines 2007 Issued by California Debt and Investment Advisory Commission
35
Appendix J
GLOSSARY
(Adopted from the Municipal Treasurers Association)
The purpose of this glossary is to provide the reader of the City of La Quinta investment
policies with a better understanding of financial terms used in municipal investing.
AGENCIES: Federal agency securities and/or
Government -sponsored enterprises.
ASKED: The price at which securities are offered
BANKERS' ACCEPTANCE (BA): A draft or bill of
exchange accepted by a bank or trust company.
The accepting institution guarantees payment of
the bill, as well as the issuer.
BID: The price offered by a buyer of securities.
(When you are selling securities, you ask for a
bid.) See Offer.
BROKER: A broker brings buyers and sellers
together for a commission.
CERTIFICATE OF DEPOSIT (CD): A time deposit
with a specific maturity evidenced by a
certificate. Large -denomination CD's are typically
negotiable.
COLLATERAL: Securities, evidence of deposit or
other property which a borrower pledges to
secure repayment of a loan. Also refers to
securities pledged by a bank to secure deposits of
public monies.
COMMERCIAL PAPER: Short-term unsecured
promissory notes issued by a corporation to raise
working capital. These negotiable instruments
are purchased at a discount to par value or at par
value with interest bearing. Commercial paper is
issued by corporations such as General Motors
Acceptance Corporation, IBM, Bank America, etc.
COMPREHENSIVE ANNUAL FINANCIAL REPORT
(CAFR): The official annual report for the City of
La Quinta. It includes five combined statements
for each individual fund and account group
prepared in conformity with GAAP. It also
includes supporting schedules necessary to
demonstrate compliance with finance -related
legal and contractual provisions, extensive
introductory material, and a detailed Statistical
Section.
CONDUIT FINANCING: A form of Financing in
which a government or a government agency
lends its name to a bond issue, although it is
acting only as a conduit between a specific project
and bond holders. The bond holders can look only
to the revenues from the project being financed
for repayment and not to the government or
agency whose name appears on the bond.
COUPON: (a) The annual rate of interest that a
bond's issuer promises to pay the bondholder on
the bond's face value. (b) A certificate attached
to a bond evidencing interest due on a payment
date.
DEALER: A dealer, as opposed to a broker, acts as
a principal in all transactions, buying and selling
for his own account.
DEBENTURE: A bond secured only by the general
credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two
methods of delivery of securities: delivery versus
payment and delivery versus receipt. Delivery
versus payment is delivery of securities with an
exchange of money for the securities. Delivery
versus receipt is delivery of securities with an
exchange of a signed receipt for the securities.
DERIVATIVES: (1) Financial instruments whose
return profile is linked to, or derived from, the
movement of one or more underlying index or
security, and may include a leveraging factor, or
(2) financial contracts based upon notional
amounts whose value is derived from an
underlying index or security (interest rates, foreign
exchange rates, equities or commodities).
DISCOUNT: The difference between the cost price
of a security and its maturity when quoted at
36
lower than face value. A security selling below
original offering price shortly after sale also is
considered to be at a discount.
DISCOUNT SECURITIES: Non -interest bearing
money market instruments that are issued a
discount and redeemed at maturity for full face
value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds
among a variety of securities offering
independent returns.
FEDERAL CREDIT AGENCIES: Agencies of the
Federal government set up to supply credit to
various classes of institutions and individuals,
e.g., S&L's, small business firms, students,
farmers, farm cooperatives, and exporters. 5
1. FNMA's (Federal National Mortgage
Association) - Like GNMA was chartered
under the Federal National Mortgage
Association Act in 1938. FNMA is a federal
corporation working under the auspices of the
Department of Housing and Urban
Development (HUD). It is the largest single
provider of residential mortgage funds in the
United States. Fannie Mae, as the corporation
is called, is a private stockholder -owned
corporation. The corporation's purchases
include a variety of adjustable mortgages and
second loans, in addition to fixed-rate
mortgages. FNMA's securities are also highly
liquid and are widely accepted. FNMA
assumes and guarantees that all security
holders will receive timely payment of
principal and interest.
2. FHLB's (Federal Home Loan Bank Notes and
Bonds) - Issued by the Federal Home Loan
Bank System to help finance the housing
industry. The notes and bonds provide
liquidity and home mortgage credit to savings
and loan associations, mutual savings banks,
cooperative banks, insurance companies, and
mortgage -lending institutions. They are
issued irregularly for various maturities. The
minimum denomination is $5,000. The notes
are issued with maturities of less than one
year and interest is paid at maturity.
3. FLB's (Federal Land Bank Bonds) - Long-term
mortgage credit provided to farmers by Federal
Land Banks. These bonds are issued at
irregular times for various maturities ranging
from a few months to ten years. The
minimum denomination is $1,000. They carry
semi-annual coupons. Interest is calculated on
a 360-day, 30 day month basis.
FFCB's (Federal Farm Credit Bank) - Debt
instruments used to finance the short and
intermediate term needs of farmers and the
national agricultural industry. They are issued
monthly with three- and six-month maturities.
The FFCB issues larger issues (one to ten
year) on a periodic basis. These issues are
highly liquid.
FICB's (Federal Intermediate Credit bank
Debentures) - Loans to lending institutions
used to finance the short-term and
intermediate needs of farmers, such as
seasonal production. They are usually issued
monthly in minimum denominations of $3,000
with a nine -month maturity. Interest is
payable at maturity and is calculated on a 360-
day, 30-day month basis.
6. FHLMC's (Federal Home Loan Mortgage
Corporation) - a government sponsored entity
established in 1970 to provide a secondary
market for conventional home mortgages.
Mortgages are purchased solely from the
Federal home Loan Bank System member
lending institutions whose deposits are insured
by agencies of the United States Government.
They are issued for various maturities and in
minimum denominations of $10,000. Principal
and Interest is paid monthly. Other federal
agency issues are Small Business
Administration notes (SBA's), Government
National Mortgage Association notes
(GNMA's), Tennessee Valley Authority notes
(TVA's), and Student Loan Association notes
(SALLIE-MAE's).
FEDERAL DEPOSITOR INSURANCE
CORPORATION (FDIC): A federal agency that
insures bank deposits, currently up to $250,000
per deposit.
FEDERAL FUNDS RATE: The rate of interest at
which Fed funds are traded. This rate is currently
37
pegged by the Federal Reserve through open -
market operations.
FEDERAL HOME LOAN BANKS (FHLB):
Government sponsored wholesale banks
(currently 12 regional banks) which lend funds
and provide correspondent banking services to
member commercial banks, thrift institutions,
credit unions and insurance companies. The
mission of the FHLB's is to liquefy the housing
related assets of its members who must purchase
stock in their district Bank.
FEDERAL OPEN MARKET COMMITTEE (FOMC):
Consists of seven members of the Federal
Reserve Board and five of the twelve Federal
Reserve Bank Presidents. The President of the
New York Federal Reserve Bank is a permanent
member, while the other Presidents serve on a
rotating basis. The Committee periodically meets
to set Federal Reserve guidelines regarding
purchases and sales of Government Securities in
the open market as a means of influencing the
volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of
the United States created by Congress and
consisting of a seven member Board of Governors
in Washington, D.C., 12 regional banks and about
5,700 commercial banks that are members of the
system.
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION (GNMA or Ginnie Mae): Securities
influencing the volume of bank credit guaranteed
by GNMA and issued by mortgage bankers,
commercial banks, savings and loan associations,
and other institutions. Security holder is
protected by full faith and credit of the U.S.
Government. Ginnie Mae securities are backed
by the FHA, VA or FMHM mortgages. The term
"pass -through" is often used to describe Ginnie
Maes.
LAIF (Local Agency Investment Fund) - A special
fund in the State Treasury which local agencies
may use to deposit funds for investment. There
is no minimum investment period and the
minimum transaction is $5,000, in multiples of
$1,000 above that, with a maximum balance of
$40,000,000 for any agency. The City is
restricted to a maximum of ten transactions per
month. It offers high liquidity because deposits
can be converted to cash in 24 hours and no
interest is lost. All interest is distributed to those
agencies participating on a proportionate share
basis determined by the amounts deposited and
the length of time they are deposited. Interest is
paid quarterly. The State retains an amount for
reasonable costs of making the investments, not
to exceed one -quarter of one percent of the
earnings.
LIQUIDITY: A liquid asset is one that can be
converted easily and rapidly into cash without a
substantial loss of value. In the money market, a
security is said to be liquid if the spread between
bid and asked prices is narrow and reasonable size
can be done at those quotes.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP):
The aggregate of all funds from political
subdivisions that are placed in the custody of the
State Treasurer for investment and reinvestment
MARKET VALUE: The price at which a security is
trading and could presumably be purchased or
sold.
MASTER REPURCHASE AGREEMENT: A written
contract covering all future transactions between
the parties to repurchase --reverse repurchase
agreements that establishes each party's rights in
the transactions. A master agreement will often
specify, among other things, the right of the
buyer -lender to liquidate the underlying securities
in the vent of default by the seller -borrower.
MATURITY: The date upon which the principal or
stated value of an investment becomes due and
payable
MONEY MARKET: The market in which short-term
debt instruments (bills, commercial paper, banker'
acceptances, etc.) are issued and traded.
OFFER: The price asked by a seller of securities.
(When you are buying securities, you ask for an
offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and
sales of government and certain other securities in
the open market by the New York Federal Reserve
Bank as directed by the FOMC in order to
m
influence the volume of money and credit in the
economy. Purchases inject reserves into the
bank system and stimulate growth of money and
credit; sales have the opposite effect. Open
market operations are the Federal Reserve's most
important and most flexible monetary policy tool.
PORTFOLIO: Collection of all cash and securities
under the direction of the City Treasurer,
including Bond Proceeds.
PRIMARY DEALER: A group of government
securities dealers who submit daily reports of
market activity and depositions and monthly
financial statements to the Federal Reserve Bank
of New York and are subject to its informal
oversight. Primary dealers include Securities and
Exchange Commission (SEC) -registered securities
broker -dealers, banks and a few unregulated
firms.
QUALIFIED PUBLIC DEPOSITORIES: A financial
institution which does not claim exemption from
the payment of any sales or compensating use or
ad valorem taxes under the laws of this state,
which has segregated for the benefit of the
commission eligible collateral having a value of
not less than its maximum liability and which has
been approved by the Public Deposit Protection
Commission to hold public deposits.
RATE OF RETURN: The yield obtainable on a
security based on its purchase price or its current
market price. This may be the amortized yield to
maturity on a bond the current income return.
REPURCHASE AGREEMENT (RP OR REPO►: A
repurchase agreement is a short-term investment
transaction. Banks buy temporarily idle funds
from a customer by selling U.S. Government or
other securities with a contractual agreement to
repurchase the same securities on a future date.
Repurchase agreements are typically for one to
ten days in maturity. The customer receives
interest from the bank. The interest rate reflects
both the prevailing demand for Federal funds and
the maturity of the repo. Some banks will
execute repurchase agreements for a minimum of
$100,000 to $500,000, but most banks have a
minimum of $1,000,000.
REVERSE REPURCHASE AGREEMENTS (RRP or
RevRepo) - A holder of securities sells these
securities to an investor with an agreement to
repurchase them at a fixed price on a fixed date.
The sec urity"buyer" in effect lends the"seller"
money for the period of the agreement, and the
terms of the agreement are structured to
compensate him for this. Dealers use RRP
extensively to finance their positions. Exception:
When the Fed is said to be doing RRP, it is lending
money that is increasing bank reserves.
SAFEKEEPING: A service to customers rendered
by banks for a fee whereby securities and
valuables of all types and descriptions are held in
the bank's vaults for protection.
SECONDARY MARKET: A market made for the
purchase and sale of outstanding issues following
the initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency
created by Congress to protect investors in
securities transactions by administering securities
legislation.
SEC RULE 15C3-1: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by
Government Sponsored Enterprises (FHLB,
FNMAS, SLMA, etc.) And Corporations which
have imbedded options (e.g., call features, step-up
coupons, floating rate coupons, derivative -based
returns) into their debt structure. Their market
performance is impacted by the fluctuation of
interest rates, the volatility of the imbedded
options and shifts in the Shape of the yield curve.
SURPLUS FUNDS: Section 53601 of the California
Government Code defines surplus funds as any
money not required for immediate necessities of
the local agency. The City has defined immediate
necessities to be payment due within one week.
TREASURY BILLS: A non -interest bearing discount
security issued by the U.S. Treasury to finance the
national debt. Most bills are issued to mature in
three months, six months or one year.
TREASURY BONDS: Long-term coupon -bearing
U.S. Treasury securities issued as direct
R&OI
obligations of the U.S. Government and having
initial maturities of more than 10 years.
TREASURY NOTES: Medium -term coupon -bearing
U.S. Treasury securities issued as direct
obligations of the U.S. Government and having
initial maturities from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and
Exchange Commission requirement that member
firms as well as nonmember broker -dealers in
securities maintain a maximum ratio of
indebtedness to liquid capital of 15 to 1; also
called net capital rule and net capital ratio.
Indebtedness covers all money owed to a firm,
including margin loans and commitments to
purchase securities, one reason new public issues
are spread among members of underwriting
syndicates. Liquid capital includes cash and
assets easily converted into cash.
UNIFORM PRUDENT INVESTOR ACT: The State
of California has adopted this Act. The Act
contains the following sections: duty of care,
diversification, review of assets, costs,
compliance determinations, delegation of
investments, terms of prudent investor rule, and
application.
YIELD: The rate of annual income return on an
investment, expressed as a percentage. (a)
INCOME YIELD is obtained by dividing the current
dollar income by the current market price for the
security. (b) NET YIELD or YIELD TO MATURITY
is the current income yield minus any premium
above par of plus any discount from par in
purchase price, with the adjustment spread over
the period from the date of purchase to the date
of maturity of the bond.
,N
INVESTMENT ADVISORY BOARD Correspondence & Written
Material Item A
Meeting Date: February 10, 2010
TITLE:
Month End Cash Report for January 2010 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.
In addition, a revised December 2009 report has been attached with the revised
Certificate of Deposits amount.
RECOMMENDATION:
Information item only.
1. Falconer, Finance Director
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KI
Bill Lockyer, State Treasurer
Inside the State Treasurer's Office
PMIA Performance Report
���
Da G
� DitY��
Yi 1�d�
6laaiter t�o�
Dete Yields
Average
, AAaturity
� ingda`s
1/13/2010
0.57
0.56
229
1/14/2010
0.57
0.56
232
1/15/2010
0.56
0.56
229
1/16/2010
0.56
0.56
229
1/17/2010
0.56
0.56
229
1/18/2010
0.561
0.56
229
1/19/2010
0.561
0.56
225
1/20/2010
0.56
0.56
227
1/21/2010
0.56
0.56
227
1/22/2010
0.55
0.56
226
1/23/2010
0.55
0.56
226
1/24/2010
0.55
0.56
226
1/25/2010
0.55
0.56
222
1/26/2010
0.54
0.56
220
LAIF Performance Report
Quarter ending 12/31/2009
Apportionment Rate:
Earnings Ratio:
Fair Value Factor:
Daily:
Quarter To Date:
Average Life:
0.60%
.00001657120783286
1.000947825
0.56%
0.61 %
222
PMIA Average Monthly Effective Yields
DEC 2009
0.569%
NOV 2009
0.611%
OCT 2009
0.646%
Pooled Money Investment Account
Portfolio Composition
$67.2 Billion
12/31 /09
Loans
�R IA0/
Corporate Bon
0.28%
Commercial Paper
7.51 %
Time Deposits
6.51 %
CDs
9.E
reasuries
37.43%
tgages
33%
rig
xeceni niu Auction mesuus
1 asp
TreasuryDirect.
Flog ¢ , t.ne l l ...I A'I n m, o-. ", Data d Pu 11, _e a 1aI Data eclr 1 u a at Pesull.
Recent Bill Auction Results
Security
I99ue
Maturity
Di5<oullt
to S,1nlenl
Price
eUSIP
m Te,
Data
Oal<
a.,. ^Ai
Pate °b
Per SI00
4-WEEK
01..2P
2010
U2-25-Z010
0 "0
0,000
too 000000
9:279ST41
13-WEEK
0Y28-2010
04 29-2010
0,055
0 056
19.986097
9279SUrt
26 WEEK
U1-28-2010
U1-29-12
0,135
0,132
99931750
912]9511]4
4-WEEK
01..21-2010
02-18
2010
0.005
0.005
99.99961E
912195T35
13 WEEK
01-21-1110
at D2-2010
0.010
0.06E
99 984833
912795UN9
2G WEEK
0
2010
02-22
2010
0.145
0. 142
99.926694
912195UZ2
4 WEEK
O1..14-2010
02 11-2010
0.000
acoo
too 000000
912295T22
]3.WEEK
01-14-2010
04-15-ZOIC
0,040
0,041
99.989889
912795UMI
W 2G EEK
U1..14
2010
U2-15-2010
0,130
0.132
99.9342J8
912795UY'i
" WEEK
01-14-2010
01-13-2011
0.335
0,341
99.66122&
91d295.%7
43WLEK
01-02-2010
02-04-2010
U.025
0.025
99.998056
9I2295S05
ll-WEEK
Ol-U24010
04-UtlQ010
0.080
0,081
95929A8
912795V33
26 MEEK
O1-U2-2010
01-08-2010
0.100
0. 183
99.9U9000
912295UW9
4-W1,EK
12-31-ro9
01-28-2010
0.010
Solo
99.999222
912295S27
13WEEK
12-3t-2009
04-01-2D10
0.110
OAl2
99.9R194
917,951,8.3
26WEEK
12-3E
2009
01-01-2010
0.200
0.203
99.816889
91ll951)66
36 SAY
12-10-2009
02-04-2010
0.000
0Oto
100, 0000D0
912195585
4W1EK
12-24-2009
01-21-2010
0.005
0-005
99.99961E
912Y95N94
13WFEK
12 24-2009
03 25-2010
0,010
0,071
99982306
912195T84
26WEEK
12 24-2009
06 24-2010
0,110
0173
99.914056
9127951IV1
4..WEEK
12 17
2009
01.-14
2010
0,000
0.000
too 000000
912795P86
13 WEEK
1? .7-2009
03 IS
2010
0,040
0.41
99989809
912795776
76 WEEK
12-174009
06-17-2010
0,160
0162
99.91"It
912795UW
52 WEEK
1212
2009
12 16-2010
0 41U
0,417
99985444
912795UKS
4 DAY
1210
2009
12 14-2009
0.070
0,021
99.999222
912295Y39
19 DAY
12-10-2009
12-29-2009
Saito
0.081
99 195778
912295Y42
+WEEK
1210-2009
01-m-201D
O.0o0
0000
100,000000
912199RJ6
13 WEEK
U IS
2009
03 It
2010
O.U50
U.051
99,987301
912795160
26WEEK
12-10
2009
06 W-2010
0. 1.5
O.lti2
99.916583
912195D'.
4 WEEK
12 03
209
12 31-2009
0.085
0.086
99.993169
912195K60
- 13 WEEK
11-03-2009
03 04-2010
0.000
006,
99,984033
911195150
26WEEK
12-03-2009
06-03-2010
0. 150
0-152
99.921161
9129951o58
4-WEEK
1121-2009
1224-2009
0.060
0.06E
99,995500
9IV95152
13 WEEK
11-272009
02-25-2010
0.040
0,041
99990000
912295T43
26-WEEK
1122
2009
05 27
2010
0. 140
0.142
99929611
91219515s
4-WEEK
11-19
2009
12 17
2009
0.050
0.05E
99 K16111
912195569
13-WEEK
I1-19-2009
02-18
2010
0, 065
O066
99.983561
912295135
26-WFFK
1119
2009
05-20
2010
0.165
0,162
99,916503
91219511P0
52-WFFK
11-19
2009
11018-2010
0.315
0.323
99.681500
at 22951D6
4 WEEK
11-12-2009
12 10
2009
0.060
0.06E
99.995333
912195n37
Effective With Me 11/2/98 auction, all bills are auctioned using the single -priced method.
-rnenr�. i mrrn»nron Act 11a1, a ao'ui t.o I r. %ray n LK", flu, . I mst " n s p t,.m, m, I *eye-� I: rIY I Una 0Y11fily
115. i , 01, l y 81a It, Ir Ir, M,t Pebt
5
http://www.treasurydirect.gov/RI/OFBills 2/1/2010
Recent Note, tsona, ana t tr3 IAUCL1011 icnsuns
Mo nr o fiTst,Tt,oII I I I A I I DO FTcll:nq URI1&9111ILS . LIIIIsl A1,TIY1Dela , NY11, blld,nn1lu rzuon;1-a"I
Recent Note, Bond, and TIPS Auction Results
ISSue
Aw ily
Int¢1¢sl
Yi.W
Pt ice
I..DSIP
5¢Nrlty
T¢rm
TY Pe
DRY
D.I.
Reln %
u
Pn191AU
YEAR
NOTF
02 01-201.0
0131-2012
O.875
O. BAR
99 990112
912828M16
S�YFAR
NOTE
02-01-2010
01L-31 -201S
2. d50
2.370
99 132540
912828MHO
AYEAR
NOTE
02-01 2030
03 2017
3.125
3.127
99.982365
`l1292BNR3
3-YEAR
NOTE
01-15 S010
OS-I$Q013
1.325
1.410
91663:20
912828MG2
9-YEAR
10 MONTH
NOTE
01-15 2010
11 15 2019
3375
3]54
96.90005
912828LY4
10-YEAR
THIS
01-153010
01 15 2020
L325
1430
99 489212
912828MF4
29-YEAR
10 MONTH
BOND
01 15-2010
11-15-2039
4.325
6 640
95.231167
912810QW
2-YEAR
NOTE
12 11 2009
12-31 2011
1.00E
Loss
911
9121121 ML1
5-YEAR
NOTE
12 )1 2009
1231 2014
2.625
2.665
99.613909
910828ME2
9-YEAR
NOTE
1231-2009
12-31-2016
3.250
3.345
99.411474
912028MD9
3-YEAR
NOTE
12-15-2009
12-15-2012
1. 125
1,223
99,712191
91202UM03
9'YEAR
11 -MONTH
NOTE
12-15-2009
11-15-2019
3.375
3.446
99.382238
912828LY4
29-YEAR
11 MONTH
BOND
12-15-2009
11 15-2039
4.375
4.52U
91 622644
91281UQD3
2-YEAR
NOTE
11-30-2009
11-30-201,
0.750
0.802
99.092034
91282BMH9
5-YEAR
NOTE
11:30-2009
11-30-2014
2.1d5
2. 115
99. IM325
91Y028V1
2 YEAR
NOTE
11-30-2009
11 30-2016
2.750
2.035
99.46324E
912828MA5
3 YEAR
NOTE
11 16 2009
11 15 2012
1325
1.404
99.915140
90E,3 .6
0 YEAR
11or,
11.-16-2009
11-15-?.IN
3.375
3 070
99.203098
912020LY4
30 YEAR
BOND
11-16-1.09
11-15-2.11
4.375
4 469
93154984
9I2810QD3
2-YEAR
NOTE
11 02-2009
10-31 2011
100E
1.02D
99.960585
9128281.15
5 YEAR
NOTE
i1-02-2009
1031-]014
2.325
d.388
99.938492
9128281.52
2 YEAR
NOTE
11-02-2009
10 31 2016
8. 125
3.141
99 899963
112.261112
4-YEAR
6-MONTH
TIPS
10-30-2009
04.15-2014
1250
0]69
104.11565E
912828011
3 YEAR
NOTE
10-15 2009
30 15 2012
1.32S
1445
99 ]9521U
'132820LR9
9-YEAR
9'MONTH
TIMS
10 15 2009
02 15 2019
1 B25
1510
104,288197
91202816
9-YEAR
10 MONTH
NOTE
10-15 2009
00 15 2019
3 625
3.210
103 470013
912828U2
29'YEAR
10 MONTH
BOND
10-15-2009
08-15-2039
4.500
4.009
108.490231
91281OQC5
2-YEAR
NOTE
09 30 2009
09-30-2011
1.000
1.034
99.932870
91282BLIVB
5-YEAR
NOTE
09-30-2009
091
2. 325
2.420
99.555232
912828LQ1
2-YEAR
NOTE
IN 30, 2009
09-30 2016
3.000
3005
99 968641
912028LP3
3-YEAR
NOTE
09-15-2009
09-15-2012
1. 31S
I H37
99.612513
912828LMD
9-YEAR
11-MONT11
NOTE
0915-LUUY
08-15-2019
3.625
3.S1U
100.95166E
91282BU2
29-YEAR
11-MONTH
BOND
09-15-2009
OB 4S1039
4.500
4.23E
104 412534
91201UQ15
2-YEAR
NOTE
08-31-2009
00-31-loll
1,000
1.119
99765292
Y128201V0
5-YEAR
NOTE
08-31-2009
00-313814
2.325
2A9n
99.443852
Y128201M1
2-YEAR
NOTE
08-31-2009
08-31 2018
3.000
3D92
99424898
9128281.12
3 YEAR
NOTE
08-17-2009
08-15-2012
1.150
1. 180
9991280E
Y12828LH1
10 YEAR
NOTE
08-12-2009
08-15-2019
3A25
3J34
94.U9A42
912B28L12
30 YEAR
BOND
09 17-2009
08 15 2019
4.500
4.541
99.33138E
912010QC5
2-YEAR
NOTE
02-31-2009
02 31-2011
L000
1.08E
Y9.842132
91262BLG3
Denotes TIPS bond; all Other TIPS without a tensks are notes
VreeO< T 0 Difi)r0ia.[ on Act I L.11 % 13-1 ce I Fr,va y a - 11� Not u>. I N21 .1 -✓el: h luN] Lo s I A n:sslb l ly I [)Ito QimlltY
Il.j ["IN Im -nl nf"" BVrew , H" PobNC DeN1
6
http://www.treasurydirect.gov/RI/OFNtebnd 2/1/2010
FFJ3: HM--Selected interest Kates, wed-vnly Liauy upuatc--aanuary L7, LV I V
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
January
29,
2010
2010
2010
2010
2010
Instruments
Jan
Jan
Jan
Jan
25
26
27
28
Federal funds (effective) 1 2 3
0.12
0.12
0.12
0.12
Commercial Paper 3 4 5 6
Nonfinancial
1-month
0.13
0.12
0.11
0.12
2-month
0.15
0.11
n.a.
0.13
3-month
n.a.
n.a.
n.a.
n.a.
Financial
1-month
0.13
0.14
0.12
0.13
2-month
0.16
0.16
0.12
0.17
3-month
0.19
0.20
0.19
0.20
3-month nonfinancial or financial
posted by CPFF 7
Without surcharge
1.15
1.15
1.15
1.15
With surcharge
2.15
2.15
2.15
2.15
CDs (secondary market) 3 8
1-month
0.16
0.16
0.16
0.16
3-month
0.20
0.20
0.19
0.19
6-month
0.29
0.29
0.28
0.29
Eurodollar deposits (London) 3 9
1-month
0.28
0.28
0.28
0.28
3-month
0.40
0.40
0.40
0.40
6-month
0.48
0.48
0.45
0.45
Bank prime loan 2 3 10
3.25
3.25
3.25
3.25
Discount window primary credit 2 11
0.50
0.50
0.50
0.50
U.S. government securities
Treasury bills (secondary market) 3 4
4-week
0.02
0.02
0.01
0.01
3-month
0.06
0.07
0.08
0.08
6-month
0.14
0.14
0.16
0.15
' 1-year
0.28
0.30
0.31
0.29
Treasury constant maturities
Nominal 12
1-month
0.02
0.02
0.01
0.01
3-month
0.06
0.07
0.08
0.08
6-month
0.14
0.14
0.16
0.15
1-year
0.30
0.32
0.33
0.31
2-year
0.86
0.87
0.90
0.87
3-year
1.40
1.40
1.46
1.44
5-year
2.39
2.38
2.43
2.41
7-year
3.12
3.11
3.14
3.15
10-year
3.66
3.65
3.66
3.68
20-year
4.42
4.43
4.42
4.44
30-year
4.55
4.56
4.55
4.57
http://www.federalreserve.gov/Releases/H 15/update/
Federal Reserve Statistical Release
H.IS
Selected Interest Rates (Daily)
skin m Comcnt '
Release Date: January 29, 2010
Weekly release dates I Historical data I Data Download Program (DDP_I About I Announcements
Daily update Otherformats: Screen reader I ASCII
1'I'I a',m9�Dar twa
The weekly release is posted on Monday. Daily updates of the weekly release are posted Tuesday
through Friday on this site. If Monday is a holiday, the weekly release will be posted on Tuesday
after the holiday and the daily update will not be posted on that Tuesday.
2/1/2010
7
FKB: 11.1J--Selecteu interest Kates, wen-kinly uaily upaale--Jalluafy /7, wIv
Inflation indexed 13
5-year
7-year
10-year
20-year
Inflation -indexed long-term average 14
Interest rate swaps 15
1-year
2-year
3-year
4-year
5-year
7-year
10-yeas
30-year
Corporate bonds
Moody's seasoned
Ass 16
Bea
State & local bonds 17
Conventional mortgages 18
n.a. Not available.
Footnotes
0.42
0.41
0.47
0.47
0.85
0.63
0.89
0.89
1.33
1.31
1.35
1.35
2.00
1.99
2.00
1.97
1.98
1.97
1.97
1.95
0.49
0.48
0.48
0.50
1.11
1.10
1.09
1.15
1.73
1.72
1.70
1.78
2.25
2.23
2.22
2.30
2.67
2.65
2.64
2.72
3.25
3.23
3.22
3.30
3.74
3.72
3.72
3.78
4.43
4.43
4.42
4.47
5.29
5.30
5.28
5.30
6.22
6.24
6.23
6.25
4.39
4.98
1. The daily effective federal funds rate is a weighted average of rates on brokered trades.
2. Weekly figures are averages of 7 calendar days ending on Wednesday of the current week; monthly
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 The
Depository Trust Company. The trades represent sales of commercial paper by dealers or direct
issuers to investors (that is, the offer side). The 1-, 2-, and 3-month rates are equivalent to the
30-, 60-, and 90-day dates reported on the Board's Commercial Paper Web page
(www.federalreserve.gov/releases/cp/).
6. Financial paper that is insured by the FDIC's Temporary Liquidity Guarantee Program is not
excluded from relevant indexes, nor is any financial or nonfinancial commercial paper that may be
directly or indirectly affected by one or more of the Federal Reserve's liquidity facilities. Thus
the rates published after September 19, 2008, likely reflect the direct or indirect effects of the
new temporary programs and, accordingly, likely are not comparable for some purposes to rates
published prior to that period.
7. CPFF refers to the Federal Reserve's Commercial Paper Funding Facility. The rates are identical
under the CPFF for financial and nonfinancial commercial paper. An issuer of commercial paper into
the CPFF may avoid the surcharge by providing a collateral arrangement or indorsement that is
acceptable to the Federal Reserve Bank of New York. Source: Federal Reserve Bank of New York.
8. An average of dealer bid rates on nationally traded certificates of deposit.
9. Bid rates for Eurodollar deposits collected around 9:30 a.m. Eastern time.
10. Rate posted by a majority of top 25 (by assets in domestic offices) insured O.S.-chartered
commercial banks. Prime is one of several base rates used by banks to price short-term business
loans.
11. The rate charged for discounts made and advances extended under the Federal Reserve's primary
credit discount window program, which became effective January 9, 2003. This rate replaces that for
adjustment credit, which was discontinued after January 8, 2003. For further information, see
www.federalreserve.gov/boarddocs/press/bcreg/2002/200210312/defauit.htm. The rate reported is that
for the Federal Reserve Bank of New York. Historical series for the rate on adjustment credit as
well as the rate on primary credit are available at www.federalreserve.gov/releases/hl5/data.htm.
12. Yields on actively traded non -inflation -indexed issues adjusted to constant maturities. The
30-year Treasury constant maturity series was discontinued on February 18, 2002, and reintroduced
on February 9, 2006. From February 18, 2002, to February 9, 2006, the U.S. Treasury published a
http://wwiv.federalreserve.gov/Releases/H15/update/ 2/1/2010 8
FRB: H.15--Selected interest Kates, Weo-unry L)any upuate--January /7, avly
I a6, J Vl J
factor for adjusting the daily nominal 20-year constant maturity in order to estimate a 30-year
nominal rate. The historical adjustment factor can be found at
www.treas.gov/offices/domestic-finance/debt-management/interest-rate/itcompositeindex_historical.shtml.
Source: U.S. Treasury.
13. Yields on Treasury inflation protected securities (TIPS) adjusted to constant maturities.
Source: U.S. Treasury. Additional information on both nominal and inflation -indexed yields may be
found at www.treas.gov/offices/domestic-finance/debt-management/interest-rate/index.html.
14. Based on the unweighted average bid yields for all TIPS with remaining terms to maturity of
more than 10 years.
15. International Swaps and Derivatives Association (ISDA(R)) mid -market par swap rates. Rates are
for a Fixed Rate Payer in return for receiving three month LIBOR, and are based on rates collected
at 11:00 a.m. Eastern time by Garban Intercapital plc and published on Reuters Page ISDAFIX(R)1.
ISDAFIX is a registered service mark of ISDA. Source: Reuters Limited.
16. Moody's Aaa rates through December 6, 2001, are averages of Aaa utility and Aaa industrial bond
rates. As of December 7, 2001, these rates are averages of Aaa industrial bonds only.
17. Bond Buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations.
18. Contract interest rates on commitments for fixed-rate first mortgages. Source: Primary Mortgage
Market Survey(R) data provided by Freddie Mac.
----------------------------------------------------------------------------------------------------
Note: Weekly and monthly figures on this release, as well as annual figures available on the
Board's historical H.15 web site (see below), are averages of business days unless otherwise noted.
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, contact
Publications Services at the Federal Reserve Board (phone 202-452-3244, fax 202-728-5886). For paid
electronic access to current and historical data, call STAT-USA at 1-800-782-8872 or 202-482-1986.
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. Treasury
from the daily yield curve for non -inflation -indexed Treasury securities. This curve, which relates
the yield on a security to its time to maturity, is based on the closing market bid yields on
actively traded Treasury securities in the over-the-counter market. These market yields are
calculated from composites of quotations obtained by the Federal Reserve Bank of New York. The
constant maturity yield values are read from the yield curve at fixed maturities, currently 1, 3,
and 6 months and 1, 2, 3, 5, 7, 10, 20, and 30 years. This method provides a yield for a 10-year
maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity.
Similarly, yields on inflation -indexed securities at "constant maturity" are interpolated from the
daily yield curve for Treasury inflation protected securities in the over-the-counter market. The
inflation -indexed constant maturity yields are read from this yield curve at fixed maturities,
currently 5, 7, 10, and 20 years.
Weekly release dates I Historical data I Data Download Program (DDP),I About I Announcements
Daily update Otherformats: Screen render I ASCII
Statistical releases
Home I Economic research and data
Accessdnhly I Cunlnct Us
Last update: January 29, 2010
http://www.federalreserve.gov/Releases/H 15/update/
2/1/2010 9
rKb: commerclal raper crates anu tJutstattutugS
Federal Reserve Release
Commercial Paper
Release I About I Announcements I On
tstandi_ngs I Volume_ statistics I Year-end I Maturity Distribution I Data
Download Program (DDP)
Data as of January 29, 2010
Commercial Paper Rates and Outstanding
Derived from data supplied by The Depository Trust & Clearing Corporation
Posted February 1, 2010
Discount rates
Term
AA
nonfinancial
A2/P2
nonfinancial
AA
financial
AA
asset -backed
1-day
0.11
0.23
0.11
0.22
7-day
0.10
0.25
0.09
0.24
15-day
0.11
0.29
0.09
0.22
30-day
0.12
0.22
0.10
0.19
60-day
n.a.
n.a.
0.15
0.25
90-day
n.a.
n.a.
0.23
0.23
_ _ _ _
..... en a-., AA nnnln—ini On -A." AA nnnfinancia
..da data n sunromm \V Z"N wmumuvu �•.w vv vv�
nonfinancial rates for January 29, 2010.
Yield curve
60-day A2/P2 nonfinancial, and 90-day A2/P2
10
http://www.federalreserve.gov/Releases/CP/ 2/1/2010
rKH: Commercial raper Kates and uutstanamgs
rage t 01 4
111arKei Dads reIccuI
AA nonfinancial
... A21132 nonfinancial
AA Nimwi,ii
1 7 15
Discount rate spread
O
r�
30 60 9(
Days to Maturity
Burt less HA nunimancial cvmmeitlal paper tunny) nasu� puma
--- epmnd. S-day n�uvin�a�c
2001 2002 2003 2004 2005 2006 2007 2008 2009
Discount rate history
0.50
wKii
UMO
800
700
600
500
400
300
200
100
0
http://www.federaireserve.gov/Releases/CP/
1�
2/1/2010
FKB: Commercial raper Kates ana umstanamgs
rare i vi ,
Thiny-day commercial paper (daily) rercem
AA non6n;m6td '
A?/P° nonhnancial
-- 1 rtnnnci t
is
yr 3
2001 2002 2003 2004 2005 2006 2007 2008 2009
Outstandings
Weekly (Wednesday), seasonally adjusted
Billions of dollars
1210
1110
1010
FHfl
810
710
610
510
410
--- Nonflnmmial (right scale}
1 ---- r'inan.:itJ (left :,al4I
4
yl,
y
1
'�k,v tJ Aft Jf1✓wV�h.w
7
6
5
4
2
1
0
Billions of dollars
260
240
41, , 200
r�
�l
I 160
tl 19 '�V 120
2001 2002 2003 2004 2005 2006 2007 2008 2009
M
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
Federal Reserve Board is closed on a business day, rates for the previous business day will be available
through the Federal Reserve Board's Data Download Program (DDP). This policy is subject to change at
any time without notice.
Release I About I Announcements I Outstandings I Volume statistics I Year-end I Maturity Distribution Data
Download Pro ram (DDP),
12
http://www.federalreserve.gov/Releases/CP/ 2/1/2010
N'K13: Commercial Faper Kates and Uutstandmgs
rage 4 or 4
Home I Statistical releases
Accessibility I Contact Us
Last update: February 1, 2010
13
http://www.federalreserve.gov/Releases/CP/ 2/1/2010
City of La Quinta
Cash Flow
Budget to Actual
December 31, 2009
Cash Basis
Budget
Actual
Accrual/
Adjusted Total
Variance
Account
12/09
12/Og
Adiustment
'12109
Over Under
Notes
Property Tax/ Tax Increment
845,592
2,219,869
-
2,219.869
1,374,277
December
Transient Occupancy Tax
401.067
273,880
273.880
(127,187)
Decline in TOT due to economy
Sales Tax
561,750
470,313
470.313
(91437)
Deane in Sales Tax due to economy
SllverRock Golf
171.717
308,623
308,623
136,906
Son round. higherthan budgeted
Library
238
-
(238)
aec'd reimbursement for Hwy 111
Riverside Cc Transportation Commission
-
1.046,328
1,046.328
1,046.328
expenditures
Developer Fees lower than budgeted due u,
Omer revenues
1718,722
949,606
949.606
769,116
s1.. in development
Revenues
3,699,086
5,268,619
5,268,619
1,569,533
Expenditures
Salaries B Fringe Benefits
903,448
1.147,125
1,147,125
243.677
Paid vacation a sick Pay buyback
Other expenditures
1,848 766
2,143,301
2,143,301
296,535
Slurry Seal 11631,
2,750,214
3290,426
3,290,426
540,212
Subtotal
317,406
183,415
183.415
(133,991)
Redevelopment Agency
Washington St Axis activM not recorded
Debt Service(PrincipalMterest/Pass Through)
223044
300,374
300374
77,330
540450
483,790
483.790
56.661
Subtotal
11824,049
1,824,049
1,824,049
-
Capital Projects
Total Expenditures
5,114,713
5,598,266
5.698,265
483,552
Not RevenuealExpenditures
1,415,627
329,648)1
j329,wil
2,057,066
NOTE 1:
Expenditures are budgeted at 8.34% per month
Difference between actual and budget
(Underspent)
DEPARTMENT
Overspent
Notes
GENERAL GOVERNMENT
147,492
Vacation a Sick pay buyback
CITY CLERK
(5,468)
COMMUNITY SERVICES
(27,392)
FINANCE
(8,974)
BUILDING 8 SAFETY
(39,267)
PUBLIC SAFETY
(143,293)
PLANNING
(74,284)
PUBLIC WORKS:
62 814
88,372
SUBTOTAL -GENERAL FUND
Library
Gas Tax
Federal Assistance
-
JAG Grant
Slesf(Cops) Revenue
Indian Gaming
-
Lighting 6 Landscaping
-
RCTC
Development Agreement
CV Violent Crime Task Force
-
AB 939
(13,290)
Quimby
Infrastructure
Proposition I
-
South Coast Air Quality
(2,219)
Transportation
-
Parks 8 Recreation
Civic Center
Library Development
-
Community Center
Street Facility
-
Park Facility
-
Fire Prolection
-
Adts In Public Places
263
Interest Allocation
-
Equipmenl Replacement
(76.639)
Information Technology
(19,333)
Park Maintenance Facility
(31.603)
SilverRock Goff
43.220
SilverRock Reserve
LQ Public Safety Officer
(167)
Finance Authority
(1,316)
Capital Improvement
Total
189 456
14
INVESTMENT ADVISORY BOARD
Meeting Date: February 10, 2010
TITLE:
Pooled Money Investment Board Report
for November 2009
BACKGROUND:
Correspondence
& Written Material Item B
The Pooled Money Investment Board Report for Novemmber 2009 is included in the
agenda packet.
RECOMMENDATION:
Receive & File
yjo--
M. Falconer, Finance Director
POOLED MONEY INVESTMENT ACCOUNT
SUMMARY OF INVESTMENT DATA
A COMPARISON OF NOVEMBER 2009 WITH NOVEMBER 2008
(DOLLARS IN THOUSANDS)
NOVEMBER 2009 NOVEMBER 2008 CHANGE
Average Daily Portfolio
$
63,645,120
$
60,842,357
$
+2,802,763
Accrued Earnings
$
31,969
$
128,407
$
-96,438
Effective Yield
0.611
%
2.568 %
-1.957 %
Average Life -Month End (In Days)
222
228
-6
Total Security Transactions
Amount
$
14,291,334
$
16,345,349
$
-2,054,015
Number
296
333
-37
Total Time Deposit Transactions
Amount
$
2,412,000
$
2,652,000
$
-140,000
Number
106
107
-1
Average Workday Investment Activity
$
927,963
$
1,111,609
$
-183,646
Prescribed Demand Account Balances
For Services
$
1,161,463
$
1,314,741
$
-153,278
For Uncollected Funds
$
96,440
$
137,454
$
-41,014
NOW Account Average Balance
$
992,678
$
0
$
+992,678
1
BILL LOCKYER
TREASURER
STATE OF CALIFORNIA
INVESTMENT DIVISION SELECTED INVESTMENT DATA
ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO
(000 OMITTED)
November 30, 2009
DIFFERENCE IN
PERCENT OF
PERCENT OF
PORTFOLIO FROM
TYPE OF SECURITY
AMOUNT
PORTFOLIO
PRIOR MONTH
Government
Bills
$ 15,091,045
22.25
-3.01
Bonds
0
0.00
0
Notes
6,965,612
10.27
-1.05
Strips
0
0.00
0
Total Government
$ 22,056,657
32.52
-4.06
Federal Agency Debentures
$ 5,162,135
7.61
-0.83
Certificates of Deposit
5,400,063
7.96
+2.00
Bank Notes
0
0.00
0
Bankers' Acceptances
0
0.00
0
Repurchases
0
0.00
0
Federal Agency Discount Notes
8,312,516
12.26
+1.62
Time Deposits
5,030,400
7.42
-0.68
GNMAs
111
0.00
0
Commercial Paper
6,327,445
9.33
-1.26
FHLMC/Remics
906,105
1.34
-0.12
Corporate Bonds
188,888
0.28
-0.02
AB 55 Loans
485,324
0.72
-0.05
GF Loans
11,826,300
17.44
+0.98
NOW Accounts
1,820,839
2.68
+2.45
Other
300,000
0.44
-0.03
Reversed Repurchases
0
0.00
0
Total (All Types)
$ 67,816,783
100.00
INVESTMENT ACTIVITY
NOVEMBER 2009
OCTOBER 2009
NUMBER
AMOUNT
NUMBER
AMOUNT
Pooled Money
296
$ 14,291,334
526
$ 25,864,993
Other
70
5,044,985
11
169,778
Time Deposits
106
2,412,000
177
4,227,100
Totals
472
$ 21,748,319
714
$ 30,261,871
PMIA Monthly Average Effective Yield
0.611
0.646
Year to Date Yield Last Day of Month
0.791
0.837
8
Pooled Money Investment Account
Portfolio Composition
$67.8 Billion
11 /30/09
Corporate Bon
0.28%
Commercial Paper
9.33%
NOW Accounts
2.68%
Time Depc
7.42%
Loans
7.96% Agencies
20.31 %
reasuries
32.52%
rtgages
.34%
INVESTMENT ADVISORY BOARD
Meeting Date: February 10, 2010
TITLE:
Pooled Money Investment Board Report
for December 2009
BACKGROUND:
Correspondence
& Written Material Item B
The Pooled Money Investment Board Report for December 2009 is included in the
agenda packet.
RECOMMENDATION:
Receive & File
John M. Falconer, Finance Director
POOLED MONEY INVESTMENT ACCOUNT
SUMMARY OF INVESTMENT DATA
A COMPARISON OF DECEMBER 2008 WITH DECEMBER 2007
(DOLLARS IN THOUSANDS)
DECEMBER 2008
DECEMBER 1. 20071
f
CHANGE
Average Daily Portfolio
$
69,947,044
$
59,946,588
$
+456
Accrued Earnings
$
119,799
$
243,786
$
-123,987
Effective Yield
2.353
4.801
-2.448
Average Life -Month End (In Days)
223
204
+19
Total Security Transactions
Amount
$
16,783,128
$
29,629,407
$
-12,846,279
Number
339
621
-282
Total Time Deposit Transactions
Amount
$
2,993,000
$
3,796,000
$
-803,000
Number
156
190
.34
Average Workday Investment Activity
$
898,915
$
1,671,270
$
-772,366
Prescribed Demand Account Balances
For Services
$
1,199,393
$
356,958
$
+842,435
For Uncollected Funds
$
150,315
$
182,622
$
-32,207
1
BILL LOCKYER
TREASURER
STATE OF CALIFORNIA
INVESTMENT DIVISION SELECTED INVESTMENT DATA
ANALYSIS OF THE POOLED MONEY INVESTMENT ACCOUNT PORTFOLIO
(000 OMITTED)
December 31, 2008
DIFFERENCE IN
PERCENT OF
PERCENT OF
PORTFOLIO FROM
TYPE OF SECURITY
AMOUNT
PORTFOLIO
PRIOR MONTH
Government
Bills
$ 7,698,685
12.01
+2.27
Bonds
0
0.00
0
Notes
3,773,662
5.96
+0.39
Strips
0
0.00
0
Total Government
$ 11,372,347
17.97
+2.66
Federal Agency Debentures
$ 10,166,951
16.06
-0.46
Certificates of Deposit
3,950,070
6.24
+0.81
Bank Notes
0
0.00
0
Bankers'Acceptances
0
0.00
0
Repurchases
0
0.00
0
Federal Agency Discount Notes
4,889,729
7.73
+2.16
Time Deposits
8,249,500
13.03
-0.57
GNMAs
144
0.00
0.00
Commercial Paper
1,947,499
3.08
-4.67
FHLMC/Remics
1,070,368
1.69
-0.03
Corporate Bonds
324,434
0.51
-0.02
AB 55 Loans
11,852,564
18.73
-0.18
GF Loans
9,466,600
14.96
+0.04
Reversed Repurchases
0
0.00
+0.16
Total (All Types)
$ 63,290,206
100.00
INVESTMENT ACTIVITY
DECEMBER2008
NOVEMBER2008
NUMBER
AMOUNT
NUMBER
AMOUNT
Pooled Money
339
$ 16,783,128
333
$ 16,345,349
Other
27
130,095
23
1,411,366
Time Deposits
156
2,993,000
107
2,552,000
Totals
522
$ 19,906,223
463
$ 20,308,716
PMIA Monthly Average Effective Yield
2.353
2.568
Year to Date Yield Last Day of Month
2.667
2.726
FA
Loans
33.69%
Corporate Bonds
0.51 %
Commercial F
3.08%
Pooled Money Investment Account
Portfolio Composition
$63.3 Billion
12/31 /08
Treasuries
Time Deposits CDs/BNs
13.03% 6.24%
lortgages
1.69%
Agencies
23.79%