Investment Advisory Staff Reports 11/07/18MEETING OF THE INVESTMENT
ADVISORY/OVERSIGHT JOINT
COMMITTEE MEETING
Wednesday, November 7, 2018
3:00 p.m. - 4:00 p.m.
Finance Conference Room
Meeting called by: Robert Foley, Chair - Facilitator: Robert Foley
Type of meeting: Quarterly Meeting Minutes taken by: Diane Hornsby
Attendees: Robert Foley, Larry Sallinger (IAC)
Richard Rohm, Rick Otto, Will Kolbow (IOC)
Josephine Chan, Diane Hornsby (Staff)
Please read: The attached
Please bring: The attached
Agenda Topics
1. Call to Order Robert Foley
2. Approval of Minutes, Meeting of August 8, 2018 Robert Foley
3. Rate Summary October 2017 - September 2018 Josephine Chan
4. Investment Portfolio Update Josephine Chan
5. Treasurer's Investment Reports for July, August, & September 2018 Josephine Chan
6. Sales Tax Update Will Kolbow
7. California Forecast: Sales Tax Trends and Economic Drivers Will Kolbow
8. City Update Rick Otto
9. Next Meeting Date - Wed., February 6, 2019 Robert Foley
10. Public Comment
11. Adjournment Robert Foley
MINUTES
INVESTMENT ADVISORY (IAC) COMMITTEE
INVESTMENT OVERSIGHT (IOC) COMMITTEE
Wednesday, August 8,2018,3:00 p.m. - Finance Conference Room
PRESENT:
IAC COMMITTEE
Robert Foley, Chair
Ken Romero (absent)
Larry Sallinger
IOC COMMITTEE (non-voting)
Richard Rohm, City Treasurer
Will Kolbow, Finance Director (absent)
Rick Otto, City Manager (absent)
STAFF
Katrin Bandhauer, Assistant Finance Director
Josephine Chan, Investment/Revenue Officer
Diane Hornsby, Executive Assistant
1. Call to Order
Chairman Robert Foley called the meeting to order at 3:03 p.m.
2. Approval of Meeting Minutes of May 2, 2018.
Mr. Foley moved to approve; Mr. Sallinger seconded; motion carried.
3. Rate Summary
Highs and lows for various investments during period of July 2017 through June 2018.
Action: Received and filed.
4. Investment Portfolio Update
A report showing City's portfolio's investment percentages in various areas, as of July 30, 2018.
Action: Received and filed.
5. Treasurer's Investment Reports for April, May, and June, 2018
Explanation of disbursements, investment activity, and sales tax revenue by month.
Action: Received and filed.
6. Comparison of Investment Policy with Other Cities
Although the cities of Garden Grove, Tustin, and Anaheim have fewer restrictions in their
investment policies, Orange, which is more conservative, has seen a competitive rate of return in
investments compared to these cities.
7. Sales Tax Update
Sales tax receipts and the fifteen top business types comparing latest quarter to corresponding
quarter of previous year.
Action: Received and filed.
DATE OF ITEM NO. 2 PAGE / MEETING //7i?
Minutes of the Joint Meeting of the
Investment Advisory and Investment Oversight
Committees, August 8, 2018
8. i. Chapman Economic & Business Review
ii. California Forecast: Sales Trends & Economic Drivers
Findings by the forecast show a positive outlook for Orange County in 2018.
Action: Received and filed.
9. City Update
A verbal report was given regarding PERS unfunded liability and the upcoming Council election.
10. Next meeting date
Wednesday, November 7, 2018, at 3:00 p.m. in the Finance Conference Room.
11. Public Comment - None
12. Adjournment - The meeting adjourned at 3:42 p.m.
Robert Foley, Chair Richard Rohm, City Treasurer
Investment Advisory Committee Investment Oversight Committee
Distribution:
Mayor and City Council City Manager, IOC Investment/Revenue Officer
Administrative Services Director, IOC City Treasurer, IOC City Clerk
Investment Advisory Committee
2 DATE OF
ITEM NO. PAGE -MEETING
RATE SUMMARY
October 2017 to September 2018
Month
Ending
U.S. Treasury Yield LAIF
Yield 3 month 6 month 2 year 3 year 5 year
Oct-17 1.15% 1.28% 1.60% 1.73% 2.01% 1.14%
Nov-17 1.27% 1.44% 1.78% 1.90% 2.14% 1.17%
Dec-17 1.39% 1.53% 1.89% 1.98% 2.20% 1.24%
Jan-18 1.46% 1.66% 2.14% 2.29% 2.52% 1.35%
Feb-18 1.65% 1.86% 2.25% 2.42% 2.65% 1.41%
Mar-18 1.73% 1.93% 2.27% 2.39% 2.56% 1.52%
Apr-18 1.87% 2.04% 2.49% 2.62% 2.79% 1.66%
May-18 1.93% 2.08% 2.40% 2.54% 2.68% 1.76%
Jun-18 1.93% 2.11% 2.52% 2.63% 2.73% 1.85%
Jul-18 2.03% 2.21% 2.67% 2.77% 2.85% 1.94%
Aug-18 2.11% 2.28% 2.62% 2.70% 2.74% 2.00%
Sep-18 2.19% 2.36% 2.81% 2.88% 2.94% 2.06%
3.50%
3.00%
2.50%
2,00%
1.50%
1.00%
0.50% 1 I I I
Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18
3month -4--6 month -0-2 year 3year --5year -8-LAIF
DATE OF
ITEM NO. 3 PAGE / MEETING 1' 7/i'
Investment Portfolio Update
As of 10-30-18
Instruments Book % of
(Days to Maturity) Value Portfolio
LAI F $ 13,700,000 12.6%
Money Market Mutual Fund - Treasury Sweep 1,228,095 1.1%
Medium Term Note
1 year 9,998,914 9.2%
2 year 10,000,000 9.2%
3 year 2,000,000 1.8%
21,998,914 20.2%
Federal Agency
1 year 1,000,000 0.9%
2 year 27,000,930 24.8%
3 year 36,993,689 34.0%
4 year 7,000,000 6.4%
Total 71,994,619 66.1%
Total $ 108,921,628 100.0%
DATE OF
ITEM NO. PAGE / MEETING 1/' 71
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AGENDA ITEM
Date: November 13, 2018
Reviewed/Verified By:
City Manager
Administrative Services Director 1041
To Be Presented By:
X Cons Calendar City Mgr Rpts
Council Reports Legal Affairs
Boards/Cmtes Public Hrgs
Admin Reports Plan/Environ
William M. Kolbow
Administrative Services Director
1. SUBJECT
Monthly Treasurer's Reports for July, August, and September 2018.
2. SUMMARY
Presentation of three monthly Treasurer's Reports to the City Council after the end of the quarter
covered by the reports.
3. RECOMMENDED ACTION
Receive and file.
4. FISCAL IMPACT
No fiscal impact as a result of this action.
5. STRATEGIC PLAN GOAL(S)
2d. Be a Fiscally Healthy Community - Effectively manage and develop City assets.
6. GENERAL PLAN IMPLEMENTATION
N/A
7. DISCUSSION and BACKGROUND
The City's current Statement of Investment Policy has been adopted by the City Council of the
City of Orange as Resolution 11080 and is in accordance with the California Government Code
DATE OF
ITEM NO. PAGE, / MEETING //7''
TO: Honorable Mayor and
Members of the City Council
THRU: Rick Otto
City Manager
FROM: Richard A. RAM —
City Treasurer 9-P
Sections 53600 ET Seq. Per the Investment Policy, three monthly investment reports are to be
submitted to the City Council within 45 days following the end of the quarter.
As required by the City's present Investment Policy, the City Treasurer's report delineates all
investments made by the City Treasurer for the City, its special funds, and the Successor Agency
funds, by investment type and by broker.
The monthly Compliance Report certifying compliance of all investments with both the
Government Code and the City's Investment Policy is included.
The Investment Portfolio Statement accurately reflects all investments held by the City and its
agents as of the end of the month. This investment data is also presented in other summary and
graphic form. A reconciliation between total cash and investments and total cash per the General
Ledger is also included.
All of the three monthly Treasurer's Reports have been reviewed by the Investment Advisory
Committee (IAC).
SUMMARY OF CHANGES IN TREASURER'S CASH AND INVESTMENTS
Treasurer's Operating
Cash & Investments(')
Balance @ 6/30/2018 $149,722,612
Monthly Activity:
Cash Received 34,522,565
Cash Disbursed (71,106,825)
Balance @ 9/30/2018 $113,138,352
"Includes operating cash and investments (valued at cost). Does not include deposits with
administrators, imprest cash, fiscal agent cash and investments, and deferred compensation.
For the month of July 2018
The July cash disbursements exceeded cash receipts by $30,848,141. During the month, large
disbursements included payments totaling $14,890,062 to PERS for annual lump sum prepayment
of unfunded liability, $5,182,495 to U.S. Bank for debt service, $4,453,649 to Orange County
Water District for pumping assessments, $2,345,089 to Morillo Construction for Shaffer Park
renovation, $1,634,104 to PERS for employee benefits, $1,550,848 to CIPA (California Insurance
Pool Authority) for insurance, $753,578 to Municipal Water District of Orange County for annual
water connection charge and purchased water, and $402,219 to R.J. Noble for annual pavement
maintenance. In July, the City received $3,604,029 in sales tax revenue and $269,557 in property
tax revenue.
In the month of July, no investments were purchased, matured or were called. The City's balance
in L.A.I.F. on July 31 was $21,000,000 or a decrease of $30,700,000 due to cash disbursements
exceeding cash receipts during the month.
DATE OF
ITEM NO. PAGE 2 MEETING
For the month of August 2018
The August cash receipts exceeded cash disbursements by $22,022. During the month, large
disbursements included payments totaling $1,643,347 to PERS for employee benefits, $1,181,180
to Orange County Transportation Authority for the Metrolink Parking Structure, and $367,455 to
Municipal Water District of Orange County for purchased water. In August, the City received
$3,155,301 in sales tax revenue.
In the month of August, no investments were purchased, matured or were called. The City's
balance in L.A.I.F. on August 31 was $21,300,000 or an increase of $300,000 related to cash
receipts exceeding cash disbursements during the month.
For the month of September 2018
The September cash disbursements exceeded cash receipts by $5,758,141. Large disbursements
included payments totaling $2,534,974 to U.S. Bank for debt service, $1,644,343 to PERS for
employee benefits, $976,325 to R.J. Noble for Street maintenance and rehabilitation, $666,281 to
Morillo Construction for Shaffer Park renovation, $631,927 to Municipal Water District of Orange
County for purchased water, $405,630 to Ticor Title Company for purchase of right-of-way, and
$375,512 Big Ben Engineering for annual pipeline renewal. The City received $3,798,901 in sales
tax revenue and $487,639 in property tax revenue.
In the month of September, no investments were purchased, matured or were called. The City's
balance in L.A.I.F. on September 30 was $16,100,000 or a decrease of $5,200,000 due to cash
disbursements exceeding cash receipts during the month.
CREDIT RATING ON INVESTMENTS
During this period, there was no change to the credit rating on the investments in the investment
portfolio.
INVESTMENT ADVISORY COMMITTEE (IAC)
The most recent IAC meeting was November 7, 2018 while the next quarterly Committee meeting
is to be scheduled for February 2019.
8. ATTACHMENTS
Attachment A - Investment Report for July 2018
Attachment B - Investment Report for August 2018
Attachment C - Investment Report for September 2018
ov DATE OF
ITEM NO. 5 PAGE 3 MEE7ING2/'J.
Attachment A
Investment Report for July 2018
DATE OF
ITEM NO. PAGE 41 MEETING // 7 i?
MONTHLY SUMMARY COMPLIANCE CERTIFICATE
July 2018
Note: All concentration restrictions were obtained from Sections 53601 and 53635 of the Government Code or the City's
Investment Policy as of June 12, 2018, whichever was the more stringent.
1. U.S. Agencies
(A) Total amount (book value) of U.S. Agency securities owned by the City = $71,994,291.
(B) Total amount allowed (75% of portfolio book value) of all City investments = $88,398,995.
Is (A) less than (B) at time of purchase? Yes X No
2. Money Market Mutual Funds
(A) Total amount (book value) invested in money market mutual funds by the City = $2,871,759.
(B) Total amount allowed ($15 million or 20% of portfolio book value, whichever is less) of
all City investments = $15,000,000.
Is (A) less than (B)? Yes X No
3. LAW
(A) Total amount (book value) invested in LAIF by the City = $21,000,000.
(B) Total amount allowed (35% of portfolio book value) of all City investments = $41,252,864.
Is (A) less than (B)? Yes X No
4. Commercial Paper
(A) Total amount (book value) invested in commercial paper by the City = $0.
(B) Total amount allowed (20% of portfolio book value) of all City investments = $23,573,065.
Is (A) less than (B)? Yes X No
5. Medium-Term Notes
(A) Total amount (book value) invested in medium-term notes by the City = $21,999,277.
(C) Total amount allowed (20% of portfolio book value) of all City investments $23,573,065.
Is (A) less than (B)? Yes X No
6. Excluded Investment Vehicles
(A) Are any securities excluded by the Statement of Investment Policy currently included in the
City's portfolio?
Yes No X
7. Investment Management Agreements
(A) Does the City have any investment manager or advisor agreements?
Yes No X (if no, skip to number 8)
DATE OF
MEETING /1.7./f ITEM NO. PAGE
(B) If so, was the agreement approved in advance by the City Council?
Yes No
(C) Has the City examined the methods and past performance of the investment manager?
Yes No
(D) Pursuant to the agreement, does the City retain authority to make investment decisions?
Yes No
(E) Pursuant to the agreement, are the investments deposited with the City's custodian?
Yes No
8. Maturity Limits
(A) Does the City currently own any security with a maturity date in excess of five years?
Yes No X
(B) Does the City currently hold at least 25% and no more than 50% of its portfolio in securities
at time of purchase with maturities equal to or less than 365 days?
Yes No
(C) Does the City currently hold no more than 50% of its portfolio in securities at time of purchase
with maturities between 366 days and 730 days?
Yes X No
(D) Does the City currently hold no more than 35% of its portfolio in securities at time of purchase
with maturities between 731 days and 1095 days?
Yes No
(E) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1096 days and 1460 days?
Yes No
(F) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1461 days and 1825 days?
Yes No
9. Issuer Limits
Does each issuer of Money Market Mutual Funds continue to meet the following requirements?
(i) Is each issuer registered with the Securities and Exchange Commission under the
Investment Company Act of 1940?
Yes No N/A X
(ii) Does the fund of each issuer carry the highest rating of at least two of the three largest
national rating agencies?
Yes No N/A X
(iii) Has each issuer retained an investment adviser registered with the Securities and
Exchange Commission with not less than five years' experience managing money market
mutual funds with assets under management in excess of $500 million?
Yes No N/A X
DATE OF
ITEM NO. PAGE t MEETING
Prepared By: Audited By:
c -
to-ss~phit Chan osa6io Gizman
Investment/Revenue Officer Accountant
We hereby certify that for the month of July 2018, the investment actions of the City of Orange comply
in all respects with the requirements of the California Government Code and the City's current
Investment Policy and that there is sufficient cash flow to cover the next six months' expenditures barring
any catastrophic natural disasters. Market values are obtained through ICE Data Pricing and Reference
Data, the State Treasurer's Office, U.S. Trust and U.S. Bank.
Certified By: Verified By:
<I-
11
tl-~
Richard A. Rohm William M. Kolbow
City Treasurer Administrative Services Director DATED: October 25, 2018
oop DATE OF
ITEM NO. S PAGE 7 MEETING /f 7/
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City of Orange
Reconciliation of Total Cash and
Investments to General Ledger
As of July 31, 2018
Treasurer's Operating Cash and Investments
Checking, Payroll & PMA - Wells Fargo
Treasurer's Investments
Cash in transit
Cash Deposits with Administrators
State Compensation Insurance Fund
Imprest Cash
Fiscal Agent Cash and Investments
296,345
117,865,327
712,800
118,874,472
90,423
118,964,895
12,200
7,366,841
Total Cash & Investments 126,343,936
Total Cash and Investments per General Ledger 1
Plus Outstanding Checks
126,030,730
313,206
Total Cash & Investments 126,343,936
DATE OF
ITEM NO........ PAGE /4/ MEETNG_I' 7/(
1 Includes adjustment for month-end timing differences. GL Cash 1
Attachment V
City of Orange
Fiscal Agent Investments
As of July 31, 2018
Carrying
Value
Market or
Contract
Value
Fiscal Agent Cash and Investments
Assessment District 95-1 1996 Limited Obligation Improvement Bonds - U.S. Bank 79,311 79,311
First American Government Obligation Fund (1.77%)
Community Facilities District 91-2 2013 Special Tax Refunding Bonds - U.S. Bank 1,586,475 1,586,475
First American Government Obligation Fund (1.77%)
Federal National Mortgage Association (1.25%)
Successor Agency 2008A Merged & Amended Tax Allocation Bonds - U.S. Bank 1,364 1,364
First American Government Obligation Fund (1.77%)
Federal National Mortgage Association (1.375%)
Successor Agency 2008B Merged & Amended Tax Allocation Bonds - U.S. Bank 515,773 515,773
First American Government Obligation Fund (1.77%)
Federal National Mortgage Association (1.875%)
Community Facilities District 06-1 2015 Special Tax Refunding Bonds - U.S. Bank 1564,629 1,564,629
First American Government Obligation Fund (1.77%)
US Treasury Bond (4.375%)
Successor Agency 2014A Merged & Amended Tax Allocation Refunding Bonds - U.S. Bank 3,495,428 3,495,428
First American Government Obligation Fund (1.77%)
Successor Agency Refunding Bonds 2018A - U.S. Bank 123,861 123,861
First American Government Obligation Fund (1.77%)
Total Fiscal Agent Cash and Investments 7,366,841 7,366,841
DATE OF
ITEM NO. PAGE / MEETINGL"Z1
Fiscal. 1
Master (2)
Attachment B
Investment Report for August 2018
DATE OF
ITEM NO. PAGE fe MEETING
MONTHLY SUMMARY COMPLIANCE CERTIFICATE
August 2018
Note: All concentration restrictions were obtained from Sections 53601 and 53635 of the Government Code or the City's
Investment Policy as of June 12, 2018, whichever was the more stringent.
1. U.S. Agencies
(A) Total amount (book value) of U.S. Agency securities owned by the City = $71,994,455.
(B) Total amount allowed (75% of portfolio book value) of all City investments = $89,868,777.
Is (A) less than (B) at time of purchase? Yes X No
2. Money Market Mutual Funds
(A) Total amount (book value) invested in money market mutual funds by the City = $4,531,485.
(B) Total amount allowed ($15 million or 20% of portfolio book value, whichever is less) of
all City investments = $15,000,000.
Is (A) less than (B)? Yes X No
3. LAW
(A) Total amount (book value) invested in LAW by the City = $21,300,000.
(B) Total amount allowed (35% of portfolio book value) of all City investments = $41,938,762.
Is (A) less than (B)? Yes X No
4. Commercial Paper
(A) Total amount (book value) invested in commercial paper by the City =
(B) Total amount allowed (20% of portfolio book value) of all City investments = $23,965,007.
Is (A) less than (B)? Yes X No
5. Medium-Term Notes
(A) Total amount (book value) invested in medium-term notes by the City = $21,999,096.
(C) Total amount allowed (20% of portfolio book value) of all City investments = $23,965,007.
Is (A) less than (B)? Yes X No
6. Excluded Investment Vehicles
(A) Are any securities excluded by the Statement of Investment Policy currently included in the
City's portfolio?
Yes No X
7. Investment Management Agreements
(A) Does the City have any investment manager or advisor agreements?
Yes No X (if no, skip to number 8)
DATE OF
ITEM NO. PAGE t7 MEETING
(B) If so, was the agreement approved in advance by the City Council?
Yes No
(C) Has the City examined the methods and past performance of the investment manager?
Yes No
(D) Pursuant to the agreement, does the City retain authority to make investment decisions?
Yes No
(E) Pursuant to the agreement, are the investments deposited with the City's custodian?
Yes No
8. Maturity Limits
(A) Does the City currently own any security with a maturity date in excess of five years?
Yes No X
(B) Does the City currently hold at least 25% and no more than 50% of its portfolio in securities
at time of purchase with maturities equal to or less than 365 days?
Yes No
(C) Does the City currently hold no more than 50% of its portfolio in securities at time of purchase
with maturities between 366 days and 730 days?
Yes No
(D) Does the City currently hold no more than 35% of its portfolio in securities at time of purchase
with maturities between 731 days and 1095 days?
Yes No
(E) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1096 days and 1460 days?
Yes No
(F) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1461 days and 1825 days?
Yes No
9. Issuer Limits
Does each issuer of Money Market Mutual Funds continue to meet the following requirements?
(i) Is each issuer registered with the Securities and Exchange Commission under the
Investment Company Act of 1940?
Yes No N/A X
(ii) Does the fund of each issuer carry the highest rating of at least two of the three largest
national rating agencies?
Yes No N/A X
(iii) Has each issuer retained an investment adviser registered with the Securities and
Exchange Commission with not less than five years' experience managing money market
mutual funds with assets under management in excess of $500 million?
Yes No N/A X
DATE OF
ITEM NO. PAGE / MEETING
Prepared By: Audited By:
a~
sphie Chan R
7/
osanGuzman
Investment/Revenue Officer Accountant
We hereby certify that for the month of August 2018, the investment actions of the City of Orange comply
in all respects with the requirements of the California Government Code and the City's current
Investment Policy and that there is sufficient cash flow to cover the next six months' expenditures barring
any catastrophic natural disasters. Market values are obtained through ICE Data Pricing and Reference
Data, the State Treasurer's Office, U.S. Trust and U.S. Bank.
Certified By: Verified By:
Richard A. A. Rohm
City Treasurer
William M. Kolbow
Administrative Services Director DATED: October 25, 2018
DATE OF
ITEM NO. PAGE / MEETING
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City of Orange
Reconciliation of Total Cash and
Investments to General Ledger
As of August 31, 2018
Treasurers Operating Cash and Investments
Checking, Payroll & PMA - Wells Fargo
Treasurers Investments
Cash in transit
Cash Deposits with Administrators
State Compensation Insurance Fund
Imprest Cash
Fiscal Agent Cash and Investments
218,286
119,825,035
(1,146,828)
118,896,493
118,896,493
12,200
7,467,661
Total Cash & Investments 126,376,354
Total Cash and Investments per General Ledger 1
Plus Outstanding Checks
124,613,563
1,762,791
Total Cash & Investments 126,376,354
DATE OF
ITEM NO. PAGE MEETING
1 Includes adjustment for month-end timing differences. GL Cash 2
Attachment V
City of Orange
Fiscal Agent Investments
As of August 31, 2018
Carrying
Value
Market or
Contract
Value
Fiscal Agent Cash and Investments
Assessment District 95-1 1996 Limited Obligation Improvement Bonds - U.S. Bank 147,688 147,688
First American Government Obligation Fund (1.79%)
Community Facilities District 91-2 2013 Special Tax Refunding Bonds - U.S. Bank 1,586,520 1,586,520
First American Government Obligation Fund (1.79%)
Federal National Mortgage Association (1.25%)
Successor Agency 2008A Merged & Amended Tax Allocation Bonds - U.S. Bank 2,559 2,559
First American Government Obligation Fund (1.79%)
Federal National Mortgage Association (1.375%)
Successor Agency 2008B Merged & Amended Tax Allocation Bonds - U.S. Bank 516,665 516,665
First American Government Obligation Fund (1.79%)
Federal National Mortgage Association (1.875%)
Community Facilities District 06-1 2015 Special Tax Refunding Bonds - U.S. Bank 1,590,206 1,590,206
First American Government Obligation Fund (1.79%)
US Treasury Bond (4,375%)
Successor Agency 2014A Merged & Amended Tax Allocation Refunding Bonds - U.S. Bank 3500,006 3,500,006
First American Government Obligation Fund (1.79%)
Successor Agency Refunding Bonds 2018A - U.S. Bank 124,017 124,017
First American Government Obligation Fund (1.79%)
Total Fiscal Agent Cash and Investments 7,467,661 7,467,661
Ole DATE OF
ITEM NO. > PAGE A7 MEfl1NG ff'1Ld'
Fiscal.2
Master (2)
Attachment C
Investment Report for September 2018
DATE OF
ITEM NO. PAGE MEETING IIP
MONTHLY SUMMARY COMPLIANCE CERTIFICATE
September 2018
Note: All concentration restrictions were obtained from Sections 53601 and 53635 of the Government Code or the City's
Investment Policy as of June 12, 2018, whichever was the more stringent.
1. U.S. Agencies
(A) Total amount (book value) of U.S. Agency securities owned by the City = $71,994,619.
(B) Total amount allowed (75% of portfolio book value) of all City investments = $84,566,468.
Is (A) less than (B) at time of purchase? Yes X No
2. Money Market Mutual Funds
(A) Total amount (book value) invested in money market mutual funds by the City = $2,661,758.
(B) Total amount allowed ($15 million or 20% of portfolio book value, whichever is less) of
all City investments = $15,000,000.
Is (A) less than (B)? Yes X No
3. LAW
(A) Total amount (book value) invested in LAIF by the City = $16,100,000.
(B) Total amount allowed (35% of portfolio book value) of all City investments = $39,464,352.
Is (A) less than (B)? Yes X No
4. Commercial Paper
(A) Total amount (book value) invested in commercial paper by the City =
(B) Total amount allowed (20% of portfolio book value) of all City investments = $22,551,058.
Is (A) less than (B)? Yes X No
5. Medium-Term Notes
(A) Total amount (book value) invested in medium-term notes by the City = $21,998,914.
(C) Total amount allowed (20% of portfolio book value) of all City investments = $22,551,058.
Is (A) less than (B)? Yes X No
6. Excluded Investment Vehicles
(A) Are any securities excluded by the Statement of Investment Policy currently included in the
City's portfolio?
Yes No X
7. Investment Management Agreements
(A) Does the City have any investment manager or advisor agreements?
Yes No X (if no, skip to number 8)
DATE OF
ITEM NO. s PAGE . MEETING /f.7f
(B) If so, was the agreement approved in advance by the City Council?
Yes No
(C) Has the City examined the methods and past performance of the investment manager?
Yes No
(D) Pursuant to the agreement, does the City retain authority to make investment decisions?
Yes No
(E) Pursuant to the agreement, are the investments deposited with the City's custodian?
Yes No
8. Maturity Limits
(A) Does the City currently own any security with a maturity date in excess of five years?
Yes No X
(B) Does the City currently hold at least 25% and no more than 50% of its portfolio in securities
at time of purchase with maturities equal to or less than 365 days?
Yes No
(C) Does the City currently hold no more than 50% of its portfolio in securities at time of purchase
with maturities between 366 days and 730 days?
Yes No
(D) Does the City currently hold no more than 35% of its portfolio in securities at time of purchase
with maturities between 731 days and 1095 days?
Yes No
(E) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1096 days and 1460 days?
Yes No
(F) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1461 days and 1825 days?
Yes No
9. Issuer Limits
Does each issuer of Money Market Mutual Funds continue to meet the following requirements?
(i) Is each issuer registered with the Securities and Exchange Commission under the
Investment Company Act of 1940?
Yes No N/A X
(ii) Does the fund of each issuer carry the highest rating of at least two of the three largest
national rating agencies?
Yes No N/A X
(iii) Has each issuer retained an investment adviser registered with the Securities and
Exchange Commission with not less than five years' experience managing money market
mutual funds with assets under management in excess of $500 million?
Yes No N/A X
DATE OF
ITEM NO. PAGE 3° MEETING/J7(F
Prepared By: Audited By:
/t"t1A't1 -?1t&__--
Guzman
Accountant
JbSephine Chan
Investment/Revenue Officer
We hereby certify that for the month of September 2018, the investment actions of the City of Orange
comply in all respects with the requirements of the California Government Code and the City's current
Investment Policy and that there is sufficient cash flow to cover the next six months' expenditures barring
any catastrophic natural disasters. Market values are obtained through ICE Data Pricing and Reference
Data, the State Treasurer's Office, U.S. Trust and U.S. Bank.
Certified By: Verified By:
7 ?, , -z I- a, v 6 A 72L -
Richard A. Rohm
City Treasurer
William M. Kolbow
Administrative Services Director DATED: October 25, 2018
DATE OF
ITEM NO. PAGE 3/ MEETING
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co DATE OF
ITEM NO. PAGE 33 ___
$9,531,915.46 $9,531,915.46 $9,900,000.00 $9,900,000.00 CALLABLE DESCRIPTION SETTLEMENT DATE z z
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City of Orange
Reconciliation of Total Cash and
Investments to General Ledger
As of September 30, 2018
Treasurer's Operating Cash and Investments
Checking, Payroll & PMA - Wells Fargo 201,692
Treasurer's Investments 112,755,291
Cash in transit 181,370 113,138,353
Imprest Cash 12,200
Fiscal Agent Cash and Investments 5,805,502
Total Cash & Investments 118,956,055
Total Cash and Investments per General Ledger 1 118,018,763
Plus Outstanding Checks 937,292
Total Cash & Investments 118,956,055
DATE OF
ITEM NO. < PAGE .i!
1 Includes adjustment for month-end timing differences. GL Cash 3
Attachment V
City of Orange
Fiscal Agent Investments
As of September 30, 2018
Carrying
Value
Market or
Contract
Value
Fiscal Agent Cash and Investments
Assessment District 95-1 1996 Limited Obligation Improvement Bonds - U.S. Bank 78,877 78,877
First American Government Obligation Fund (1.84%)
Community Facilities District 91-2 2013 Special Tax Refunding Bonds - U.S. Bank 3,269,061 3,269,061
First American Government Obligation Fund (1.84%)
Federal National Mortgage Association (1.25%)
Successor Agency 2008A Merged & Amended Tax Allocation Bonds - U.S. Bank 2,563 2,563
First American Government Obligation Fund (1.84%)
Federal National Mortgage Association (1.375%)
Successor Agency 2008B Merged & Amended Tax Allocation Bonds - U.S. Bank 1,895 1,895
First American Government Obligation Fund (1.84%)
Federal National Mortgage Association (1.875%)
Community Facilities District 06-1 2015 Special Tax Refunding Bonds - U.S. Bank 2,442,821 2,442,821
First American Government Obligation Fund (1.84%)
US Treasury Bond (4.375%)
Successor Agency 2014A Merged & Amended Tax Allocation Refunding Bonds - U.S. Bank 9,941 9,941
First American Government Obligation Fund (1.84%)
Successor Agency Refunding Bonds 2018A - U.S. Bank 344 344
First American Government Obligation Fund (1.84%)
Total Fiscal Agent Cash and Investments 5,805,502 5,805,502
DATE OF
ITEM NO. PACE
FiscaI.3
Master (2)
City of Orange
Sales Tax Update
Third Quarter Receitsfor Second Quarter Saks (April -Juiie 2018)
Top 25 PRODUCERS
IN ALPHABETICAL ORDER
Best Buy
Cab West/Volvo
Leasing
Caiply
Circle K
David Wilsons Ford
David Wilsons Villa
Ford
DMG Corporation
Enterprise Rent A
Car
Foundation Building
Materials
Home Depot
Kia of Orange
Mazda of Orange
MS International
NIKE Factory Store
Nordstrom Rack
Ralphs
SC Fuels
Selman Chevrolet
Stadium Nissan
Target
Thompson Building
Materials
Toyota Lease Trust
Toyota Scion of
Orange
Verco Decking
Walmart
2nd Quarter 2017
2nd Quarter 2018
I
SALES TAX BY MAJOR BUSINESS GROUP
$2,400,000
$2,000,000
$1,600,000
$1,200,000
$800,000
$400,000
$0
Autos Fuel and General County Restaurants Business
and Service Consumer and State and and
Transportation Stations Goods Pools Hotels Industry
REVENUE COMPARISON
Four Quarters - Fiscal Year To Date (Q3 to 02)
2016-17 2017-18
Point-of-Sale $36,721,239 $36,485,055
County Pool 4,819,477 4,923,957
State Pool 20,274 20,711
Gross Receipts $41,560,990 $41,429,722
Published by by HdL Companies in Fall 2018
www.hdlcompanies.com I 888.861.0220
Orange
In Brief
Receipts from Orange's April
through June sales were 6.6% low-
er than the same quarter one year
ago. However, for the second time
this year, the States software con-
version resulted in unusual process-
ing delays. Consequently, sizeable
payments remain outstanding. Actu-
alsales after adjusting for all anom-
alies. would have decreased 0.3%.
Missing/delayed payments had a
large negative impact on most gen-
eral consumer goods categories
and restaurant sectors, and along
with some business closures, also
impacted several business-industry
segments.
Most new vehicle dealerships ex-
perienced declining sales and only
partial payment receipts depressed
building-construction results.
Despite some missing/delayed
payments, higher fuel prices and
increased volume sales boosted
fuel-service station group returns.
Net of aberrations, taxable sales
for all of Orange County grew 0.7%
over the comparable time period:
the Southern California region was
up 1.0%.
Building
and
Construction
LU
(9
CL
0 2
W
Food
and LjLC
Drugs 2
W
<LIJ
REVENUE By BusiNEss GROUP
Orange This Quarter
Fuel
17%
Cons.Goods
16%
Pools
12%
Restaurant
11%
Food/Drug
4% Building
10%
Busflnd.
11%
Autos/T
18%
$8,000
$6,000
$4,000
$2,000
$0
02
15
Orange
Q2
16
County
Q2
17
California
02
18
02
<U
WC
114
LL
CL
C 2
LL I-
ORANGE Top 15 BUSINESS TYPES
In thousands of dollars
Business Type
Orange
Q2'18* Change
County HdL State
Change Change
206.2 8.5%
567.3 -11.5%
465.7 -16.7%
338.6 6.4%
181.6 -8.8%
- CONFIDENTIAL -
231.6 -1.0%
244.5 -20.7%
214.6 19.0%
1261.7 -14.0%
186.2 16.3%
-CONFIDENTIAL -
405.4
CONFIDENTIAL-
405.4 -4.4%
312.5 41.5%
195.0 22.7%
62.1%
60.9%
-22.6% -23.2%
-14.0% -12.7%
-10.4% -10.7%
20.2% 12.7%
-10.9% -13.5%
-1.3% -5.1%
-23.3% -27.2%
-7.1% -7.0%
46% -2.0%
-44.9% -21.9%
16.8% 0.4%
-1.7% -6.0%
-31.3% -26.5%
-0.8% -3.3%
-8.3%
7.8%
-6.6%
-11.5%
3.9%
-9.8%
8,563.4
1,218.8
9,782.2
Q2 2018
City of Orange Sales Tax Update
California Overall
Local Government cash receipts from
April through June sales dropped
10.1% from the same quarter one year
ago due to implementation issues with
CDFTA's new tax reporting softwarç
system. The results were further,
skewed by the State's attempt to offset
the resulting shortages by advancing
tax revenues that it estimates will be
generated next quarter.
After reviewing unprocessed returns
and approximating the full amounts of
partial payments, HdL estimates that
once all returns are properly processed
and the data adjusted to reflect actual
quarter receipts, statewide local sales
and use tax revenues will be 1.6%
higher than second quarter 2017.
Sales of building and construction
materials, jet fuel and online shop-
ping appear to have been the primary
drivers of statewide growth during the
second quarter. Auto sales leveled off
as previously anticipated, although
receipts from auto leases continued
to show substantial gains. Online
fulfillment centers and value themed
apparel stores were the primary gainers
within the general consumer goods
group. Business-industrial purchases
were slightly lower than previous
quarters with declines in new energy
projects being a major factor.
Regionally, the San Francisco Bay area
and the Sacramento and San Joaquin
Valley areas outperformed the rest of
the state.
Tariff Policies and Sales Tax
Tariffs are becoming a key element of
the federal government's international
trade strategy with additional duties
of 10% announced for the end of the
third quarter, rising to 25% by the end
of 2018.
Despite the current debates, analysts be-
lieve that the impact on prices and sales
will be minimal through the remainder
of 2018-19 as most major retailers have
already imported their inventory for the
holiday season and are attempting to
rush spring inventories through customs
ahead of the new 5% rates. Many man-
ufacturers have managed to avoid rais-
ing prices by absorbing the costs of the
initial first round of tariffs on metals,
machinery and components. On the
down side, small retailers without the
power to lock in prices may be placed at
a competitive disadvantage and contrac-
tors are beginning to require escalation
clauses in contracts to cover potential
cost increases on long range projects.
The key concern for analysts project-
ing 2019-20 tax revenues will be how
the federal government refines its trade
policies and the impact on sales and use
tax revenues. Although higher prices
generate more sales tax from individual
purchases, they also potentially reduce
the number of purchases, particularly in
an environment where rising housing,
education and health care costs compete
for a significant portion of discretionary
income.
Proponents of rising tariffs argue that
the rising strength of the U.S. dollar will
offset the impact of tariff related price
increases on consumers. Opponents
worry that the stronger dollar and the
announced $5.6 billion in retaliatory
tariffs on California exports will neg-
atively impact both the affected com-
panies' job base and capital investment
in supplies, equipment and expansion
opportunities.
Auto Lease
Budding Materials
Casual Dining
Contractors
Department Stores
Discount Dept Stores
Electronics/Appliance Stores
Family Apparel
Grocery Stores
New Motor Vehicle Dealers
Office Equipment
Petroleum Prod/Equipment
Quick-Service Restaurants
Service Stations
Shoe Stores
Total Total All Accounts
County & State Pool Allocation
Gross Receipts
SALES PER CAPITA
I P, A
TRENDS'-"
It
ECONOMIC
DRIVERS
SEPTEMBER 2018
HdL provides relevant information and analyses on the economic forces affecting California's
local government agencies. In addition, HdL's Revenue Enhancement and Economic
Development Services help clients to maximize revenues.
HdL serves over 500 cities, counties and special districts in California and across the nation.
ok
Delivering Revenue, Insight and Efficiency
to Local Government Since 1983
CALIFORNIA
FORECAST
HdL Corn
anics
2018/191 2019 /2 0
Autos/Transportation 0.5% 10.0%
This sector is in a sweet-spot marked by growing wages combined
with moderate financing rates; this has yielded strong truck and
sports utility vehicle sales. However, lending rates have risen from
historic lows and it is becoming more difficult to find zero-rate
vehicle loans. Continued increases in benchmark interest rates,
higher gasoline prices and a glut of off-lease vehicles hitting the
market are expected to crimp tax revenue in the coming months.
Simmering trade tensions further unsettle industry observers.
Building/Construction 4.5% 1 3.9%
Construction product costs are rising steadily and will boost taxes.
Home affordability continues to take a hit with both labor and
materials on a sharp upward trajectory. Planned multi-family starts
may be affected as projects fail to pencil out. At best, upcoming bids
for infrastructure projects will cause the scope of work to decrease,
some projects could be delayed or shelved due to a lack of funding.
The volume of work on highways and local streets under existing
contracts is not affected by recent increases levies on imported
steelwork and lumber.
Business/Industry 2.2% I 2.0%
Not limited to this group, but the State's computer conversion
problems delayed a substantial number of second quarter tax
returns thereby skewing what can be determined from sales tax
data. Outside statistics suggest capital investment remains at
previous year's levels with the tech sector being the primary driver
of growth. Costs of raw materials and transportation rising due to
labor shortages. A rush in purchases to beat new rounds of tariff
announcements may generate a spike in third quarter sales tax
04FAU
revenues followed by declines in subsequent quarters.
MW Food/Drugs 1.9% I 1.5%
Grocery stores are in the midst of a rapidly changing landscape.
Established chains still dominate the market. However, new
entrants are luring shoppers with low margin products, expansive
on-line inventories and quick home delivery. Cashierless outlets and
voice activated buying are emerging trends anchored to consumer
convenience preferences. Drug store offerings reflect liquor, food
and trendy products while enhancing pharmaceutical and medical
service offerings. Licensed cannabis businesses are cultivating new
revenues for this sector.
l i; I
A
HDL CONSENSUS FORECAST - SEPTEMBER 2018
STATEWIDE SALES TAX TRENDS
LJ TOTAL 2.2% I 2.1%
HdL Companies
Proposition 172 projections vary from statewide Bradley-Burns calculations
due to the state's utilization of differing collection periods in its allocation to
counties. Retroactive accounting adjustments are anticipated in 2018 /1 9
and beyond as the California Department of Tax and Fee Administration
migrated to a new information management platform in May 2018. HdL
forecasts positive growth in Fiscal Year 2018/19 just at a slower pace than
prior years due to potential economic constraints impacting consumer
spending. HdL forecasts a statewide increase of 1.51% for Fiscal Year
2018/19 and a gain of 2.10% in 2019/20.
Fuel/Service Stations 0.2% I 1.0%
Global crude oil prices have remained steady for several
months as OPEC members and affiliates complied with
production caps, only slowly increasing output to keep up
with demand. This consistent pricing also tempered U.S.
extraction in West Texas as driller's struggle with tight labor
markets. In California, while elevated summer pricing will
soon give way to lower winter blend cost, all eyes will be
on the Prop 6 November election results - repeal of SB-i
legislation that increased statewide excise tax on gas and
diesel fuel.
-/ General Consumer Goods 1.0% I 1.0%
Traditionally based retail is transforming itself driven by
emphasis on experience and community. This means the
integration of bedrock brands infused with ever changing,
limited quality, unique finds combined with the addition of
restaurants, pop-up shops, and amenities such as speaker
series, art installations and podcasts. The launching of
storefronts amplifying online sellers and the emergence of
social media are becoming a force in the retail marketplace.
As a result, there will be local and regional fluctuations in
performance based on retail mix and demographics. There
are predictions of an ongoing favorable sales trend, buoyed
by rising wages and low unemployment. However emerging
headwinds like rising freight, fuel prices and merchandise
tariffs could rein in spending.
t I Restaurants/Hotels 3.0% I 3.0%
Restaurant owners again report a net increase in activity and
are generally optimistic about sales growth in the months
ahead. Quick service and fast casual eateries have remained
unperturbed by the recent softness and should continue to
perform well. Casual dining establishments are struggling
with weak same-store sales and traffic. Menu prices are
increasing at a much quicker rate than the prices of food at
the grocery stores. California's hotel market remains strong;
new openings offer bars, meals and other conveniences that
contribute to the positive trend for this group.
1111 State and County Pools 5.5% 1 5.1%
Favorable prognostications are on the horizon for the 2018
holiday season. This is particularly so for e-commerce
and mobile device purchases; experts anticipate sizeable
growth from tech-savvy consumers. Amazon will dominate
gains; traditional retailers are poised to reap benefits from
digital age investments that cater to consumer shopping
patterns. Congress introduced the Online Sales Simplicity
and Small Business Relief Act in response to the Supreme
Court's Wayf air decision. Notable is a $10 million exemption
provision for small business sellers; it remains until simplified
taxpayer collection is agreed to by all states. California has
yet to implement Wayfair guidelines; new out of state taxes
for the pools are not expected soon.
HdL Companies I hdlcompanies.com
NATIONAL AND STATEWIDE
ECONOMIC DRIVERS 4
BEACON ECONOMICS
2018/19 2019/20
\/ U.S. Real GDP Growth 3.0% I 2.4%
II.
The United States is currently in the midst of the second longest
expansion in the nation's history at 1111 months and counting.
If it continues to July of next year, the current expansion will
officially become the longest on record. Will we make it? Odds
are almost certain we will. Far from losing steam, the U.S.
economy has been on an upswing lately. The rest of this year
looks solid, but expect slower growth next year. Additionally,
the long-term stressors of heavy Federal borrowing, rising
interest rates and ongoing political chaos make it clear that
while there is no reason to expect a recession anytime soon.
We should remain more vigilant than ever in watching for the
unanticipated shock. The nation's capacity to absorb a blow to
its economy is substantially diminished and it won't take much
to end the current expansion.
U.S. Unemployment Rate 3.9% I 3.9%
Employment growth over the last 3 months has totaled over
200,000 jobs added per month even with unemployment
below 4%. More importantly, the job openings rate is at 4.2%,
suggesting that employers would hire even more workers if
they could find them. As positive as all this news is, don't be
fooled into believing the U.S. economy has truly achieved a
new pace of sustained growth. The current growth surge is,
at best, temporary, with the economy's long-run trajectory
limited by increases in the labor force.
CA Total Nonfarm 1.8% I 1.7%
Employment Growth
With two quarters down and sights turning toward the last part
of the year, it is apparent that the California economic engine
continues to hum along, much like the nation as a whole.
Job gains have been steady and the state's leading industries
have expanded despite ongoing concerns on the international
trade front. In looking at the future growth trajectory of the
California economy, the elephant in the room is the high cost
of housing and its impact on labor force growth. As growth in
the state's labor force slows further, it will tighten like a noose
on the economy and limit future expansion and business
development.
,\ II.
CA Unemployment Rate 4.1% I 4.0%
California continues to land in record territory, with its
unemployment rate at 4.2% for the fourth month in a row as
of July 2018. Recent labor market reports reveal the ongoing
challenge that U.S. employers currently face in filling job
vacancies. The number of job openings nationally has been
routinely pushing into record territory, with nearly every
industry suffering from a lack of workers, from the tech sector
to health care to restaurants. These problems are compounded
in California, which has consistently outpaced the nation in
terms of job growth and economic activity.
0 CA Median $502,100 I $533,865
Existing Home Price
California's housing market has been a mixed bag so far
this year. According to CoreLogic, the median home price
in California was $481,100 in the second quarter, up 8.6%
year-to-year. The median price is still about 7% below its
pre-recession peak despite a string of yearly price gains
going back several years. Still, home sales have been
average, at best, and disappointing when considered against
the backdrop of the state's long economic expansion.
on CA Residential 122,500 I 132,100
Building Permits
New home construction moved up a notch in the first half of
this year compared with last year, a development that should
also temper, but not halt, price increases. Overall, housing
permits rose 9.4% in the first half of 2018 compared to one
year earlier, with increases of 7.3% in single-family permits
and 11.4% in multi-family permits. The state is on track to add
about 130,000 new units this calendar year, still far below its
needs which are closer to 200,000 units annually. As long as
home construction lags what the state needs, high housing
costs will be a painful thorn in the side of the California
economy.
Beacon Economics I BeaconEcon.com