The URL can be used to link to this page

Investment Advisory Staff Reports 08/08/18MEETING OF THE INVESTMENT ADVISORY/OVERSIGHT JOINT COMMITTEE MEETING Wednesday, August 8, 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, Ken Romero, Larry Sallinger (IAC) Richard Rohm, Rick Otto, Will Kolbow (absent) (IOC) Katrin Bandhauer, 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 May 2, 2018 Robert Foley 3. Rate Summary July 2017 -June 2018 Josephine Chan 4. Investment Portfolio Update Josephine Chan 5. Treasurer's Investment Reports for April, May, and June 2018 Josephine Chan 6. Comparison oflnvestment Policy with Other Cities Josephine Chan 7. Sales Tax Update Katrin Bandhauer 8. i. Chapman Economic & Business Review Josephine Chan ii. California Forecast: Sales Tax Trends and Economic Drivers 9. City Update Rick Otto 10. Next Meeting Date- Wed., November 7, 2018 Robert Foley 11. Public Comment 12. Adjournment Robert Foley MINUTES INVESTMENT ADVISORY (IAC) COMMITTEE INVESTMENT OVERSIGHT (IOC) COMMITTEE Wednesday, May 2, 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 Rick Otto, City Manager STAFF Josephine Chan, Investment/Revenue Officer Diane Hornsby, Executive Assistant 1. Call to Order Chairman Robert Foley called the meeting to order at 3:00 p.m. 2. Approval of Meeting Minutes of February 7, 2018. Mr. Foley moved to approve; Mr. Sallinger seconded; motion carried. 3. Rate Summary Highs and lows for various investments during period of April 2017 through March 2018. Action: Received and filed. 4. Investment Portfolio Update A report showing City's portfolio's investment percentages in various areas, as of April 24, 2018. Action: Received and filed. 5. Treasurer's Investment Reports for January, February, and March, 2018 Explanation of disbursements, investment activity, and sales tax revenue by month. Action: Received and filed. 6. Discussion on Proposed Changes to the Investment Policy Mr. Foley moved that no changes be made at this time to the City's Investment Policy; Mr. Sallinger seconded; and the motion carried. It was suggested to look at the investment policy of other cities for comparison purposes. 7. Sales Tax Update Major sales tax categories, comparing latest quarter to corresponding quarter of previous year. Action: Received and filed. ' Minutes of the Joint Meeting of the Investment Advisory and Investment Oversight Committees, May 2, 2018 8. California Forecast: Sales Tax Trends & Economic Drivers Action: Received and filed. 9. City Update A verbal report on city projects being planned and in progress, i.e., the Lemon/Chapman parking structure on target for completion in late fall; a balanced FYl 9 budget will be adopted in June by the City Council; an update was given about the downscaling of Sears. 10. Next meeting date Wednesday, August 8, 2018, at 3:00 p.m. in the Finance Conference Room. 11. Public Comment- General questions were given regarding the 3-story self-storage facility on Glassell and public input. 12. Adjuurnment=- The meeting was adjourned at 3:34 p.m. Robert Foley, Chair Investment Advisory Committee Richard Rohm, City Treasurer Investment Oversight Committee Distribution: Mayor and City Council Administrative Services Director, IOC Investment Advisory Committee City Manager, IOC ttCity Treasurer, IOC 2 Investment/Revenue Officer City Clerk RATE SUMMARY July 2017 to June 2018 Jul-17 1.07% 1.13% 1.34% 1.51% 1.84% 1.05% Aug-17 1.01% 1.08% 1.33% 1.44% 1.70% 1.08% Sep-17 1.06% 1.20% 1.47% 1.62% 1.92% 1.11% 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% 2.50% ·r · 2.00% 1.50% 0.50% '--·--·-·-··---·- ---··--------T--·-··---··--·····-- > ---···· > -----.--·--·----··--·-··,··---·-·--·T-·-··----. Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 -�·3 month �6 month �2 year --tr-3 year �5 year ....,..LAIF DATE OF ITEM NO. _ _g __ PAGE / __ MEETING_l_·8_,_l_i'_ Investment Portfolio Update As of 7-30-18 LAIF $ 21,000,000 17.8% Money Market Mutual Fund - Treasury Sweep 3,131,642 2.7% Commercial Paper 0% Medium Term Note 1 year 6,016,421 5.1% 2 year 13,983,582 11.8% 3 year 0% 4 year 2,000,000 1.7% 22,000,003 18.6% Federal Agency 1 year 0% 2 year 28,001, 197 23.7% 3 year 36,992,439 31.3% 4 year 0% 5 year 7,000,000 5.9% Total 71,993,636 60.9% Total $ 118,125,281 100.0% ITEM NO. '( DATE OF PAGE ___,_/ __ MEETING ! · g - /I c 0 c 0 0 0 0 0 0 0 s 5 0 c 5 0 0 0 s 0 0 0 0 0 0 0 0 0 - c 0 c 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 I- � � "' c .; "' "' ., .ii � a <ri g o r_ � x 6 a ?! � a -e- g 0 � � � a, w c5 " "' ;;; 0 ;;; m N � s "' s a, � w "' m w � 0 � '" "' 0 "' 0 " :, c 0 ,.; <ri � � � oi g cc .c � .,.; g� � � )!? ., "' w a: _, " � "' ., a, m m .,., o, .,., &; "' "' a, � g "' "' 0 � 0, a, a, � m � "' � 0, "' w 0 :; > '" .,.; oi co "' :" .,., "' R c-i .,.; .,.; .; g R N N .. 3 g c 0 0 s 0 0 s s g 5 8 0 0 0 0 0 0 0 0 0 0 0 0 .. c 0 0 0 0 0 0 0 c .. 0 0 0 0 0 0 0 0 0 0 0 0 8 8 o, "' 0 § 0 0 0 § "' co m c � Q .; 0 � N 0 8 a oi m .; �- " UJ o, ., 0 0 0 0 m 0 c 0 " a, R_ 0 -e- "' 0 0 0 0 cc ., 8 N 0 w 0 N ., 0 3 � «i ri 0 § 0 g· s 0 0 cc -: >; 0 .. '5 .,.; 0 "' g .,.; � � ., "' 0 "' 5 "' ., 0 0 0 c- "' '5 .:]'; � 0 m "' � m m m m ID .. m o. 0 0 0 0 m "' c- 0 m 0 m m 0, m > " 0 "' "' ,.; .. <ri oi <ri ci o;· <" .,. .c .c .; ;;; t: "' gj .; � ;' 0 i: "' c 0 s s s s 0 0 0 0 0 0 0 6 g §'. co � 0 0 0 0 0 0 s s 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 rv, g 0 0 0 0 § 0 0 0 0 0 § 2 c N 0 g_ N a § N a § 0 0 0 UJ � 0 -r 0 0 0 0 0 0 0 0 s .; "' 0 -e "' 0 0 0 a: 0 "' 0 0 0 0 0 0 0 0 .. "'· 0 co "' 0 0 0 :, � c ci a § ci § § g 0 s c 0 0 §_ 0 0 0 0 "' _, 3 " § � � "' "' 0. "' 0 g g_ g 0 � c 0 0 0 0 0 0 0 0 0 0 .. 0 0 0 0 0 0 > -, <D .. .. <ri oi <D 0 "' ..; "' � "' "· :!? � co N ., <D .,.; N N N "' � ", i 7C :.� � � "' m 0 0 0 � ; � :l .c "' N :!l a "' a ,o � § m w "' a UJ - - - - - - - "' "' - t ;:: ... � c cc a 0 "' 0 0 0 0 0 � � � .r. � g- z UJ 5' .r, ' ;: � N w :;; "' 0 :;; :,; .c .. , � .. E I- "' w "' "' 0 "' .r, � � "' - - - - - - - - - - N "' - ... 0 ;; . I- a: < en -� _, "' i . § >- E .; 0 I- :; E . I- a: " "' "' N "' "' � 0 0 ,:) 8 " � co ,. 0 :; "' :(: m 00 ,, . u :, m ::; '{I N w � "' a R oi - ,, 0 >- I- " "' "' "' w � 0 "' "' :; 0 :; >- x � r .,. m m 0 a 0 a 0 1<l 5S �- ' I- UJ 0 N N N N N -'! '· f ., "' ., ., � o� ., -.,<>. ... � a: 0 c c 0 0 0 0 0 � :=;:, 0 I- .,, " o, � 0 ;l, � N � ,, ?'s: ., ,, :ll :B 0 i.i " R :ll :::, "' ,"j ,::, i ., N ,: � ' C, 0 ci "' " I- c ,- '" ' N s � � ;;; � " ;:; ,-.: g "' ci .. � ci ,,; "' ;( g "' 0 iS] :; � w . u ; ;; ID 2 0 t: � ;; 0 ,- If)'£, f' .' °i, 5 5 § � � 1 ;i #-� " N � � N " "' M "' " "' r, - ' i'3 � � w "' 00 i'3 "' ,o ·; 1 ii � N N N N 0, ,, ·'.'.. " " - co ,, � iv ;;; N N N N "' ;;; ,. ·.�J ,. -;; "' h I � m . .. a: � UJ u u u " � � � 0 c . . . .. a: " Cf) Cf) Cf) Cf) ID l " " " � i -� "i � "- u: u: u: .. � Cf) � Cf) Cf) Cf) � 2 � :g a < 'ii al CD CD {l) � .. :;; 7' :::, in ::, ::, ::, in in ii - � � - N � � � � � � � � � � � � � � � � ::; w � "' � w w " ., "' "' "' ·c "' "' UJ 0 0 � 0 § 0 0 R c '( I: I- � ;l, � � � �i N u "' � 0, � R co a: c � � ;;; � "' :::, � io "- ,n 0. 0 "' 0 l:! if!. /' �O 0$? .... 0 I.I') 0 0 � 111 MMC") O c: c: c: c: E�� 0 - - - - c: e � e e 0 0 0 0 0 :b!E��E r- 0 0 0 0 ]zzzz ;;, Date: August 14, 2018 AGENDA ITEM Reviewecl/V erified By: norable Mayor and City Manager mbers of the City Council Administrative Services Director -z«: kOtto To Be Presented By: y Manager x Cons Calendar City Mgr Rpts hardA.Ro� - - Council Reports Legal Affairs - - y Treasurer' . Boards/Cmtes Public Hrgs - - mM r Admin Reports Plan/Environ TO: Ho Me THRU: Ric Cit FROM: Ric Cit Wilha . Kolbow�� Administrative Services Director It. SUBJECT MONTHLY TREASURER'S REPORTS FOR APRIL, MAY, AND JUNE 2018. 12. SUMMARY Presentation of three monthly Treasurer's Reports to the City Council after the end of the quarter covered by the reports. 13. RECOMMENDED ACTION Receive and file. 14. FISCAL IMPACT No fiscal impact as a result of this action. !s. STRATEGIC PLAN GOAL(S) 2d. Be a Fiscally Healthy Community - Effectively manage and develop City assets. 16. GENERAL PLAN IMPLEMENTATION NIA I 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 11005 and is in accordance with the California Government Code 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. DATE OF ITEM N0._'5'_PAGE_f __ MEETING __ f _·�_,_/f_ 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 @ 3/31/2018 Monthly Activity: Cash Received Cash Disbursed Balance@ 6/30/2018 $135,912,640 55,189,588 (41,379,616) $149,722,612 (IJ!ncludes 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 April 2018 The April cash receipts exceeded cash disbursements by $5,417,382. The City received $8,053,531 in property tax revenue and $2,690, 100 in sales tax revenue. During the month, large disbursements included payments totaling $2,006,883 to Ticor Title Company for purchase of right-of-way, $1,603,135 to PERS for employee benefits, $1,517,473 to Southern California Edison for purchase of street lights, and $668,251 to Morillo Construction for Shaffer Park renovation. In the month of April, no investments were purchased, matured or were called. The City's balance in L.A.I.F. on April 30 was $26,300,000 or an increase of $2,800,000 due to cash receipts exceeding cash disbursements. For the month of May 2018 The May cash receipts exceeded cash disbursements by $10,807,690. The City received $6,057, 115 in property tax revenue ($1,994,771 for the City and $4,062,344 as property tax increment collected for the Successor Agency) and $4,097 ,689 in sales tax revenue. During the DATE OF ITEM NO PAGE_:Z. __ MEETING R-r- ,r month, large disbursements included payments totaling $1,598,665 to PERS for employee benefits, $416,158 to R.J. Noble for street and sewer improvements, $287,939 to SoftwareONE for renewal of Microsoft software licenses, and $261,996 to Municipal Water District of Orange County for purchased water. In the month of May, one medium term note and one Federal Home Loan Bank note matured. The ending balance in L.A.I.F. on May 31 was $48, 100,000 or an increase of $21,800,000 due to cash receipts exceeding cash disbursements and the investment activity during the month. For the month of June 2018 The June cash disbursements exceeded cash receipts by $2,415, 100. Large disbursements included payments totaling $2, 127 ,973 to PERS for employee benefits, $278,236 to Municipal Water District of Orange County for purchased water, $245,940 to Big Ben Engineering for pipeline renewal, and $215,335 to Western Audio Video for the council chambers remodel project. The City received $3,187,283 in sales tax revenue and $218,198 in property tax revenue. In the month of June, no investments were purchased, matured or were called. The City's balance in L.A.I.F. on June 30 was $51,700,000 or an increase of $3,600,000. This increase was mainly due to the transfer of the property tax revenue received on May 31 to L.A.I.F. in June, which was partially offset by 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 August 8, 2018 while the next quarterly Committee meeting is to be scheduled for November 2018. js. ATTACHMENTS Attachment A - Investment Report for April 2018 Attachment B - Investment Report for May 2018 Attachment C - Investment Report for June 2018 DATE OF ITEM N0._5_"_PAGE_3 __ MEETING <f· J> · I J' Attachment A · Investment Report for April 2018 DATE OF ITEM NO. ,t' PAGE_,f __ MEETING 8· f. Id" MONTHLY SUMMARY COMPLIANCE CERTIFICATE April 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 13, 2017, whichever was the more stringent. 1. U.S. Agencies (A) Total amount (book value) of U.S. Agency securities owned by the City = $81,993,800. (B) Total amount allowed (75% of portfolio book value) of all City investments= $105,658,600. 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= $4,584,739. (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. LAIF (A) Total amount (book value) invested in LAIF by the City= $26,300,000. (B) Total amount allowed (35% of portfolio book value) of all City investments= $49,307,347. 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= $28,175,627. 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= $27,999,594. (C) Total amount allowed (20% of portfolio book value) of all City investments= $28,175,627. 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 N0._5'_PAGE_S- __ MEETING_<f_ .. _cf_ .. _I cf_ (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 X No _ (C) Does the City currently hold no more than 50% ofits 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 X 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 X 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 X 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 NIA 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 NIA 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 NIA X --=-=--- DATE Of ITEM��Q. b PAGE (, MFETlNG__ g · f · l<f Prepared By: �>��cg,OJ,i UJosepfu; Chan Investment/Revenue Officer Audited By: We hereby certify that for the month of April 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 Interactive Data Pricing and Reference Data, the State Treasurer's Office, U.S. Trust and U.S. Bank. Certified By: ��\, A, 8,tv-- Richard A. Rohm City Treasurer Verified By: rjd/� William M. Kolbow Administrative Services Director DATED: July 30, 2018 ITEM NO. � __ PAGE_Z_ • I - OATF OF I- w w ::> � ...I a: <( <( > ::lE 000 000 c:i ci ci 000 �00 0 0 0 000 M_ o_ M ,- LO CD- � � N 0000000 '=!000000 ��;;�� C") LO,- C.O "'1'" M s:ts:tCDcri�-,..._-ri f"-O)(OC')O)(OC'II O)O)L{)O)O)f"- Ol tJ) -q-" o::i 6 L{)- ai (') 000000 000000 cicciN<cicis:t o L{) r-, L{) en r-- en No en "<t <0 ,....._-�CtJ�a5o,- O'>T'9...;tN,-cn enCllenenr---"<t l!)� � Lt)- (') O') .....- N Cll a, �M Cll ai C') (') ,.... l'- "<f. si Cl) ee L{) U') "<f- si Ol N M M ci .....: I'- M U') Lt) M C'i I'- cc M l'- CO M M (') Cll Ol C') M oi ai C'J M I'- l'- -q-" si co a:, L{)_ U') -e- si ;::: 8 o � 8 � C\icio:iC'Jcis:t l'-OC\lenOOl I'- 0 C\I L{) 0 Ill cri o tJ) si o ai en o � co o a, CllOOenOO> t.t)NCDM°or-: �N CO O O a:, 0000 C'JciciM enooa, ,- 0 0 ,-. r-:oor-: .enooai CllOOa> si si CD si 8888�8� ci ci ci o L{) ci U') 8888�8)2 oooorooco 0 0 0 0 Cll O a, OOOOO>Oa> r.!5 � U1 ci C'5 co- 0 "<f 0) (0 L{) r-: C\i ... L{) U') l'- r-: Ol Ol II) N 0 0 c:i 0 0 c5� 00 00 r-: N 0,.... 0 ci 0) 0 0) O L{)_ 0 (0 0 0) 0 0) o CD 888 c:i ci ci 000 000 o 00 000 C'J_ OM tJ) ID �N �w 0 ::> 0 ...I ID ;; w a: ::> <( ...I Q. <( > 000 000 ci ci ci 000 �� 000 C'J_ � � �N 00000 00000 c:icic:icici 00000 00000 00000 00000 oo_ooo or---,..._· N ID N 8888888 cicicic:icicici 0000000 0000000 ooooooo 0000000 0000000_ CD � tJ) cri si CD � 0000 0000 ci ci ci ci 0000 0000 o o o o 0000 o_ o o o L{) si CD 11> 000000 000000 gggggg 000000 000000 000000 000000 CD N CD "<t. o co �N en a, �M Cll ai C') (') I'- l'- ii L{) U') si '<I"- Ol N M M ai .....: M M I'- 0 � co cc U') cc a, O II) "2" M c ...I w > w � a: (0 (0 (0 U'.:! 0 (0 L{) C') 8. U1 C'J !;;;: C\iC\i 0 0 L{) 0 0 0 C\I O '=! � C\i � 000000 l!)0L{)00L{) � � I'-: � � � OO<OCllO O L{) 0 0 0 ��L{)�C! C\I 00000 O L{) L{) 0 0 � L{) I'-: 0 C\i co co ,... ,... I I 0 ,... Co? Co? ..,. C':I iii iii s s .S! .S! :g O .;: '€ 0 0 c.. c.. . 0 z � �: i i UJ Ci ! � z � Cf) ::i ti) ti) Q) Q) o o -� -� Q) Q) (J) (J) cc cc cc 000 LL. LL. LL. LL. LL. LL. c.i c..i C£ 0 0 00 ol:! ol:! ti) ti) :::, :::, ct! ct! 00 o o zz �� u5 � cc cc cc cc ...I ...J ...J ...J IIII LL. LL. LL. LL. >, <i: ::: en 00 U:- <i: -:!.. c z ::> LL. 1- z w ::lE I-- en w > z >- (J z w � ...I <( (J 0 ...I a: w � 0 a: ID � � ID z 0 � Q. ii: (J en w c w en <( w i5 � a: c ::> Q. - 0 >, .-:: 0 0) 0 LO "! w LO .,.... o co LO cc 'SI" 0) a:i N c.. LO 0) 0 Ul a:i .,.... ,- ,- {fi {fi 0) 0 LI'! "! LO a: co in <t 'SI" 0) c.. a:i N- LO Ol 0 LO_ a:i {fi {fi w ...I Ill <t -s <( ...I -- ...I z z <t o u, c: c � � 0 0 0 ...I en N .,.... ·- w � c.o ..... ;;::: !::: 'SI: � 0 en m 0 u, c: co c.. T"" w w � � m 0 0 0 I- c N .,.... ,._ C\I <t � c.o I- a: - 'SI: � ..... '- en c: Q, w Q) iid: en iid: E :I: .... o u, cc (1) ::> > o, c z c 0 :J 0 ;::: o u.: c.. o cc <( __.: o a. <( en Cl) _j w Cl) c s: Cl) w � en en c CJ) CJ) I- cii cii z "O "O w en en ::l: :J :J w 0 .Q ...I ·.:::: � t1l tii w > > en ITEM NO. :;;.,.._._ PAGE__. ... 9 DATE OF 0 0 'SI" c:i "! UJ r--- r-: CJ CD LO ii: � O'l_ Q. (') N 0) 0) LO r---_ ..... co th fF> 0 0 'SI" "! c:i ..... r-, LO a: CD 0) ct 'SI"- C\i Q. C'l 0) 0) r--- I.!) o:i ..... th th UJ ..J CD <( ct � ..J .._ ..J z z ct en CJ ....J u, ....J <( c: c o � � 0 0 0 ..J N ..... UJ - r--- CD - > en � � 0 ....J m <( u, � c: c:o � � m ,.... UJ <( 0 0 0 I- a: N ..... � N ct r--- CD I- a: c � � - ·.:: :I: c: a. !:: Q) <( � E - - en u, w Q) I- > c: a: :::, z � c 0 :E :::i 0 i= 0 u, a. 0 ii: <( > ITEM NO._� __ PAGE /0 DATE OF K·f·l<f ...... <, \,,: I 0 z � �: ,.· " " c: "' E .g " a, O g ;� 0 0 a.. a.. Q) ::, <ii > Cl c:: ·-e "' t, Q) £ 0 O i II> a: � ca 0 0 Ill I- "t:J Q) > ·a; o � "t:J Q) -� <ii ::, c:: c:: "' 'o 0 "&5 0. .s (/) >, "' "t:J >, ..0 "t:J Q) "t:J 's i:i L!) <D ('") 0 "E .92 0 ::, CT II) ... m QI > � CIJ .!::! "iii �:::, CIJ c: .!::! c: "iii (0 :::, 0 § s (0 9 O t--;- S > "i: co a. ,... <( � ...... �2 c: c: ...... ::, :::, Q) Q) a: a: �� C\I � C\I 00 00 I 00 CIJ CIJ m ns a: a: "iii "iii 0 0 r;- r;- >< >< CIJ CIJ "C "C c: c: >, >, ...... :::, :::, en en (0 (0 e e I- 1- ...... (0 (0 CIJ CIJ > > "? <'? ,... ,... �� ID a, T'" C\I 00 I I �� r,,.. ID � ": a, T'" r- r- N �� O T"" 0 «£? LO «£? T'" T'" T'" U) QI >< QI "O c: .2 0 ::: ... 0 a. ... i 00 Eo iii C\I Qlo >cw, £ QI·;: Cl Q. c: � I'll 0 - 0 >, ... u . 2 0 ::: ... 0 a. I Cl) C') ca C') t:: 0 O O o>: o>: :E c:ocn 0 ,- O - ·- • ID ca'ajcn. C: ·- N ,- 0 0 ·- 0 m IIJO"O z (IJ ·- - <(; .!!! � w>- C1> "O if Cl) - 0 0 Z O o>: o>: 0 EN in Cl) s:r in - � .. a,Cl).-.- a.1- <t Eo"O ::, ·- ·- N C1> "Ow·- Cl) >- :!!: "O c: :::J u. Q) o�� Z o en Mo ;: ect::?-=t: 0 ...._ N ,- UJ Q) 0 .... . � E o "O :!!: .:! ..,; 4i "CJ w ·- Q) >- :E Cl) - 0 0 Z � o>: 0 0 Eco ca ,- o - .... O e t- . >I- N oEo .... • "O ::,0- ·- ,- Cl) "Ow·- Cl) >- :E 0 ..... � co E,... ..... 0 u, N Cl) .... >o c: C") - - ·- Cl) I,. c, a. c: <C ca I.. 0 Ili- c >a ..... ·- 0 ·- - 0 = I.. 0 a. DATE OF ITEM N0._5 PAGE__.../ __ 2- __ MEETING __ S+-f_-_,_f_ ---i I I I T"" 0 ,...... II .Q 0 t 0 Q. >, ...., ·.:: ::} ...., ('(l E 0 ...., ,.__ 0 ...... (/) ,.__ ('(l Q) >, Q) 0) ('(l ,.__ Q) > ('(l I -0 Q) ...., ..c .Q'l Q) :s: 'ct- 'ct- 'ct- 'ct- 'ct- 'ct- C') <.O I.{) ,-- I.{) 0 C') C\J ,-- C\J O ,-- ::::s - 1J ; CX) Q) Ee� (n N (I) � > 0 c: (t) - ·- (I) :i.. > tn a. ·'E c: <( ::::s ca - :i.. ca 0 :E - 0 � (.) 0 ·- - 0 � 0 0.. 0 0 0 0 0 0 0 0 0 0 <!'} co 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 g 0 0 0 0 0 0 0 0 0 � 0 0 0 0 0 0 0 0 0 � 0 0 0 0 0 0 0 0 0 0 .... 0 0 0 0 c5 0 0 c5 c5 c5 0 Ol a) I'- (0 l!J 'St (') C\l � � <fl <fl <fl <fl <fl <fl <fl <fl ·---- --- - ---·----· - - ------- City of Orange Reconciliation of Total Cash and Investments to General Ledger As of April 30, 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 Flexible Benefits Plan - Tri-Ad Imprest Cash Fiscal Agent Cash and Investments Total Cash & Investments Total Cash and Investments per General Ledger Plus Outstanding Checks Total Cash & Investments 471,153 140,878, 134 (19,267) 141,330,020 72,035 0 141.402,055 12,070 5,958,453 147,372,578 144,079, 190 3,293,388 147,372,578 DATE OF ITEM NO. _f PAGE ·-·- __ {f ": ,, r r.:-:�- , .. .r: 1 Includes adjustment for month-end timing differences. GL Cash 10 Altachmenl V City of Orange Fiscal Agent Investments As of April 30, 2018 Carrying Value Fiscal Agent Cash and Investments Market or Contract Value Assessment District 95-1 1996 Limited Obligation Improvement Bonds - U.S. Bank First American Government Obligation Fund (1.53%) Community Facilities District 91-2 2013 Special Tax Refunding Bonds - U.S. Bank First American Government Obligation Fund (1.53%) Federal National Mortgage Association (1.25%) Successor Agency 2008A Merged & Amended Tax Allocation Bonds - U.S. Bank First American Government Obligation Fund (1.53%) Federal National Mortgage Association (1.375%) Successor Agency 20088 Merged & Amended Tax Allocation Bonds - U.S. Bank First American Government Obligation Fund (1.53%) Federal National Mortgage Association (1.875%) Community Facilities District 06-1 2015 Special Tax Refunding Bonds - U.S. Bank First American Government Obligation Fund (1.53%) US Treasury Bond (4.375%) Successor Agency 2014A Merged & Amended Tax Allocation Refunding Bonds - U.S. Bank First American Government Obligation Fund (1.53%) Total Fiscal Agent Cash and Investments 78,996 1,576,597 2,321,377 417,121 1,564,309 53 5,958,453 78,996 1,576,597 2,321,377 417,121 1,564,309 53 5,958,453 Fiscal.10 Master (2) fTEM NO._!>_' _PAGE DATE OF Mf=Fl'1NG Attachment B Investment Report for May 2018 DATEOF f f ITEM NO. G' PAGE_._l_, __ MEETINGJ.:_ * L ,. MONTHLY SUMMARY COMPLIANCE CERTIFICATE May 2018 Note: All concentration restrictions were obtained from Sections 5360 l and 53635 of the Government Code or the City's Investment Policy as of June 13, 2017, whichever was the more stringent. 1. U.S. Agencies (A) Total amount (book value) of U.S. Agency securities owned by the City = $71,993,964. (B) Total amount allowed (75% of portfolio book value) of all City investments= $109,657,144. 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= $4,115,921. (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. LAIF (A) Total amount (book value) invested in LAIF by the City = $48,100,000. (B) Total amount allowed (35% of portfolio book value) of all City investments= $51,173,334. Is (A) less than (B)? Yes X No ---- 4. Commercial Paper (A) Total amount (book value) invested in commercial paper by the City= i!!: (B) Total amount allowed (20% of portfolio book value) of all City investments = $29,241,905. Is (A) less than (B)? Yes X No ---- S. Medium-Term Notes (A) Total amount (book value) invested in medium-term notes by the City= $21,999,640. (C) Total amount allowed (20% of portfolio book value) of all City investments= $29,241,905. 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 l 7 __ 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 X 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 X 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 X 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 X 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__ NIA 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 __ NIA 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__ NIA X ---- Prepared By: �J2_,_�� sephin"e Chan Investment/Revenue Officer Audited By: We hereby certify that for the month of May 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 Interactive Data Pricing and Reference Data, the State Treasurer's Office, U.S. Trust and U.S. Bank. Certified By: '72LLt!A,J. U"'L- Richard A. Rohm City Treasurer Verified By: William M. Kolbow Administrative Services Director DATED: July 30, 2018 DATE OF fTEMNO. �_PAGE __ /9 MEETINr,_(_�_J' .. - If 0000000 00000�0 C\lc:ilO,:,jcciC\Jo t'-LD'StC\IOLDl.tl ��-��::-� coco,-cooms:t COO'l<OCOO'lt'-0 I.I). «i cxi M lll o 'St 0000 0000 c:i C\i C\i <i ;::: � 8 s i� ;;;·r:: co O'l CX) (0 «i (") l{) «i a, ,- M � R CS!. Lt) (') ,.... l'- O M «i cxi 'St M �w 0 ::, 0 -' m :!: 000 000 c:i c:i ci 000 000 a ao 000 C') co ,.... cxi cri cxi (\j..-s;t ts- 0 LD N <O O CO <O c:i cci 00> CD -r-- I.{) O"l C"')- <D O 'St O'l O O a, ts- 0 0 l'- <O c:i c:i (0 ts- 0 0 l'- C\J O O N r--· ci ci ,.: O'l O O a, O'l O O O'l «i v· co «i O C\I O C\J c:i l() O C') 0 0 <O O <O ci v· lll ci ai o,-coocn 000'>00> C\icoMo� ,.... N ,.... T"". � NN O'l a, LD. Ill ,.... ,.... ,.... ,.... «i «i O CO 0 (0 in M N M l.t) ,.... � � N CO (0 0 'St 'St w a: ::, < -' ll. < > 000 000 c:i c:i ci 000 000 ci ci o 000 C"'J_ co .... co cri cxi C\J .... """ 0000 0000 c:i c:i c:i ci 0000 0000 aoao 0000 �000 r-, ,-.: C\i <e> 0000000 0000000 c:i c:i c:i c:i c:i c:i ci 0000000 0000000 cicicicicici o 0000000 OOOOOOC!_ co ,....- l{) cri «i co :; 0000 0000 c:i c:i c:i ci 0000 0000 ocioo 0000 o_ o o o LD 'St. CO Ill 00000 00000 c:i c:i c:i c:i ci 00000 00000 00000 00000 00000 C\ico,t"oC'i ,.... N en ""'. M ,.... ai N M a, " Ill «i ,.... co N CO (0 0 'St 'St 0 -' w ;;:: LD LD LD LD I'-; I'-; O CO O'l O I.I) 0 0 0 I.I)� -st:� w � a: >- !:: w cc 1- ::, < �o :E LD LD LD LD I'-; I'-; O LD O O C\I O � C\i � 0000 LD LD O O �"' � � CIO CIO ,- ,- I I ,- 0 C? M U) � m ca 2 B .2 .2 � � 0 0 a. a. �- �-. > a: ::, rJl < w a: !=. (J) 0 z ::, LL -' < ::, � .:,e. :E 15 I- co W O � en a: 16 < LL :!!: s: >- ai �3 0 :E "' "' VJ Ql Ql Ql u u u I I-� Ql Ql Ql UJ UJ UJ CD CD CD uuu LL LL LL LL LL LL "' "' ::, ::, ctl ctl 00 u u zz CD CD CD ...J ...J ...J I I I LL LL LL � Z o o o <.S.S.S m o o o zuuu < oe:s oe:s oe:s 0 tn -' ::, w ctl :E 8 O:z :I: >, <{ :t:: Cf) uo c ci: ::.. 0 z ::, u, � w :E 1- rJl w > � > o z w � -' < c 0 -' z 0 i= e, a: o (J) w 0 w (J) <w ::c 1- u < CC O ::, c, a: w � 0 cc m � z < ID - 0 >, .t: (.) 0 0 C\J 0 w a:i 0 c c» 0 ii: O') 0 a. 0 co 0 m Lt') a5 � C\J C\J Y') Y') 0 0 C\J 0 a:i 0 a: m 0 ct 0 a. O') 0 co 0 m Lt') a5 � C\J C\J Y') Y') w ..J ID ct � <( ..J -- ..J z z ct o "' e 0 -;!2. -;!2. 0 0 0 ..J en Lt') w I'- Lt') +"" ;;::: t:::: � I'-: 0 en ca 0 "' a. c: co w -;!2. -;!2. ca ,... w 0 0 0 I- c ,.... Lt') 'I- ct I'- Lt') I- C\I a: - � I'-: +"" > en e ca w Cl> 2 en <t: E :I: +"" o "' a: Cl> ::::> > a. e z c 0 ::J 0 ;::: o u, e, o ii: <( <( o a. !/) (!) _j w (!) 0 3: Cf) w � 0 1- z w :E w ..J I: w !/) (/) (/) (!) 2 iii Cl! "'O "'O (/) (/) ::J ::J .Q 0 iii ·.:::: Cl! > > DATE OF rrat NO. __.{:-_PAGE_'1 __ ! __ MEETING <f· f ·!_f _ LO 0 0 0 0) 0) 0 0 0 w C\J ci ci ci o q 0 0 0 1i: 0 0 0 c.. ..... ci ci ci CD """ 0 0 0 O"i r--- 0 0 C\J C\i co ci ffl ffl ffl ..... ffl LO 0 0 0 0) 0 0 0 0) 0 ci ci C\J 0 0 0 a: q 0 0 0 < ..... ci ci ci c.. CD 0 0 0 -e- r--- 0 0 O"i C\J co ci C\J ffl ffl ..... ffl Y7 w .J III <( < � -s � .J -- .J z z z z < en c ..J rn ..J < c: c o � � � � 0 0 0 0 .J ..... LO 0 0 0 ·- w - r--- LO 0 0 .., >= en '!:? I'-: '<l: � 0 ..J ca < rn ;= c: co < � � � 'o'2- ca T"" w 0 0 0 0 I- a: ..... LO 0 0 � < r-, LO 0 0 I- C'\I a: c '!:? I'-: � � > :::c .., ('ti I- c: Q) :iE ;= E - .., en rn w Q) I- > co Cl) co c: a: Cl) ..... (") -� r-, O Lt) Ct) 0 ..... 0 :::::, z ..... C\J z £:! C\J � ELON ..:.:: LO ....- c c: en C\J z ,._ en =II: ('IJ - =II: 0 :iE :::> � Cl)- a:i Cl) - 0 .!::! c c � c: � u u.: E 2: Cll ('IJ ('IJ Cl) c.. 0 1i: <( :::i (I) E o :a: E o a. <( :a Cl) in � - ti CJ) Cl) _j Cl)- Cl) Cl) Cll (I) w (I) � .s > E .c > c � O C 0 ..2 c � c- I o ;; Cl) ('IJ "O :.c c Cl) - a. Cl) C/'J ·- .._ ('IJ :::> ... ..:.:: u, .a ,._ 0 ::i ... Cl) Cll .gi OJ ii, Cl) co � m ::) Cl) :.= � u. ·- o w I- < en en c Cl) (I) co I- iu ii, co z "O "O ..... ..... 0 0 w en en � C\J :ii: :::> ::i -- w 0 .Q LO ..... .J -� ..... C\J I= i'ii -- LO LO w > > CJ) Ji DATE OF I ITEM NO. { PAGE �;i_ MEETING <f · (- Ii " c c: § .g " Q. .... g � � 0 0 a, Q. Ol c: t <O in Q) £ 'o .Q iii Q. .!: <Jl >, <O "O >, .0 "O Q) "O :� "O LI) <O (') 0 c Q) '5 :::, CT >, .0 "O .91 a. -� "3 .s "O Q) -� ca :::, c: c: <O Ill ... C'a Cl) > � QI .!!! iii � :I QI c: ] � ca - :I O c: .s � c 0 � .s > > CIC> ca .... :E � ...... J:! .s c: c: ...... :I :I -a; Q) cc cc 00 QI QI ca ca cc cc iii iii 0 0 '7 '7 ><. >< QI QI "O "O c: c: >, >, ...... :I :I rn rn ca ca QI QI ...... I- I- ...... ca ca QI QI > > <'? ,::, ........ �� It) (D C") 0 c:i c:i �� a, C") O a, c:i c:i � -� iii :I � c: -� � iii O :I .s c: c: ca '? O t-:- c: > ;: CIC ca .... :E � ...... 0 0 - - QI - ca "C I 0 ";' cij QI > "iii > o ca rn :E u::: �� CD CO <D Cl:! 0 N .- c,.i c,.i �� ONO "! It? ": ......... en Cl) >< Cl) "'C c .2 0 'E 0 c.. . 2 0 'E 0 0.. - c <LI CD E ... .. o Ill N <LI > ... c C") "a; ia' gi :E C'a 0 0 > - u 0 ·- - 0 .,... t:: 0 a.. .. c Cl) co .§ 0 u, N Cl) ... > ,- c C") - Cl) > en ca c :=B ca I.. 0 ·- 0 Q) - 0 ,o Z � O' 0 0 t1l E:o ... - . 0 oa,CD" >,I- N oEo I- . "'C ::,0- ·- ... Q) "'C EA-·- Q) > :!!: Q) 0 o�o<: Z O a, Mo .::: E """: '<:!'. 0 ._ N .- Ill Q) 0 1- -� E o -c :!!: .2 ..,;. a; "'C EA- ·- Q) > :!!: "'C c: ::J u, �\ Q) - 0 0 ";12. Zo<:o EI'- LO a, M LO - . c.. Q) ... c..1- <CE o "'C ::J ·- ·- N Q) "'CEA-·- Q) > ::i!: Q) Cl t1l Cl t:: � ,o Q O O' """ c: ¢ a, -==coo - ·- • CD t11-;CX>. C: ·- N .- O CJ ·- 0 -; 111 o "'C z Ill • - - <C :;: .!!! E 0> Q) "'C Q) u, Lt) N Lt) "' Ul a, � Co No (O� � s ,- � 0� 0 -� ·- (!) =i O cii .... > t:: � oo e, � ell - ..c ca o ... 0 I- DAll:Of L_��li�EM=---:__:NO�. ��PA�G�E��y��M�E�ET�IN�G��8::::!""_(�-/_8 __ ll��--�··---------- 1 ,- CX) LO ..... 0 ....... en ..... ro Q) >, Q) 0) ro ..... Q) > ro I l:J Q) ..... ..c 0) ·a5 3: II 0 0 ....... t::'. 0 o, ?!< ?!< ?!< ?!< ?!< ?!< O T""" '-t O l() 0 "T C\J C\J T""" 0 T""" c: ·- C) c: ::J - "O c: Cl.) a, co ..c E � o _ o en u, N en a, - c: >� C: M en <C 8, � -� c: 2 .... m .a i'o,,. ctl 0 :E - 0 >- :!::::: 0 0 0 - t:: 0 a. 0 0 0 0 0 0 0 0 0 0 .;. "' 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ;; 6 0 6 6 6 6 6 6 0 6 � "' 0 0 0 0 0 0 0 0 0 0 � 0 0 0 0 0 0 0 0 0 0 6 0 6 6 6 6 6 6 6 6 0 Ol eo ...... <D 1/1 st (') C\J � � <fl <fl <fl <fl <fl <fl <fl <fl ··�------ ---------�- ----···-- City of Orange Reconciliation of Total Cash and Investments to General Ledger As of May 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 Total Cash & Investments Total Cash and Investments per General Ledger Plus Outstanding Checks Total Cash & Investments 239,189 146,209,525 5,688,997 152,137,711 72,035 152,209,746 12,000 5,968,531 158, 190,277 157,600,740 589,537 158, 190,277 DATE OF ITEM NO. S' PAGE � c MEETING g · I?.. I J> ---------- ------------ 1 Includes adjustment for month-end timing differences. GL Cash 11 Attachment V City of Orange Fiscal Agent Investments As of May 31, 2018 Carrying Value Fiscal Agent Cash and Investments Market or Contract Value Assessment District 95-1 1996 Limited Obligation Improvement Bonds - U.S. Bank First American Government Obligation Fund (1.58%) Community Facilities District 91-2 2013 Special Tax Refunding Bonds - U.S. Bank First American Government Obligation Fund (1.58%) Federal National Mortgage Association (1.25%) Successor Agency 2008A Merged & Amended Tax Allocation Bonds - U.S. Bank First American Government Obligation Fund (1.58%) Federal National Mortgage Association (1.375%) Successor Agency 20088 Merged & Amended Tax Allocation Bonds - U.S. Bank First American Government Obligation Fund (1.58%) Federal National Mortgage Association (1.875%) Community Facilities District 06-1 2015 Special Tax Refunding Bonds - U.S. Bank First American Government Obligation Fund (1.58%) US Treasury Bond (4.375%) Successor Agency 2014A Merged & Amended Tax Allocation Refunding Bonds - U.S. Bank First American Government Obligation Fund (1.58%) Total Fiscal Agent Cash and Investments 79,096 1,586,395 2,321,432 417, 132 1,564,423 53 5,968,531 79,096 1,586,395 2,321,432 417,132 1,564,423 53 5,968,531 Fiscal.11 Master (2) � DATE OF ITEM NO. PAGE_i_, __ MEETING Attachment C Investment Report for June 2018 ITEMNO._�_PAGE �r DATE OF , MEETING. __ ! :J · f_.,f MONTHLY SUMMARY COMPLIANCE CERTIFICATE June 2018 Note: All concentration restrictions were obtained from Sections 5360 l and 53635 of the Government Code or the City's Investment Policy as of June 13, 2017, whichever was the more stringent. 1. U.S. Agencies (A) Total amount (book value) of U.S. Agency securities owned by the City = $71,994,128. (B) Total amount allowed (75% of portfolio book value) of all City investments= $114,388,677. 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= $6,824,649. (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. LAIF (A) Total amount (book value) invested in LAIF by the City= $51,700,000. (B) Total amount allowed (35% of portfolio book value) of all City investments= $53,381,382. Is (A) less than (B)? Yes X No ---- 4. Commercial Paper (A) Total amount (book value) invested in commercial paper by the City=,$!!: (B) Total amount allowed (20% of portfolio book value) of all City investments= $30,503,647. 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= $21,999,459. (C) Total amount allowed (20% of portfolio book value) of all City investments= $30,503,647. 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) fTEMN0._5_PAGE �2 DATE OF MEETING .r · f · I!;> (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 X 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 X 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 X 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 X 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__ NIA 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 __ NIA 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__ NIA __ X __ DATE OF ITEM NO. � PAGE 40 MEETING 8 · f'· ff Prepared By: �CRm- Josephinehan Investment/Revenue Officer Audited By: We hereby certify that for the month of June 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 Interactive Data Pricing and Reference Data, the State Treasurer's Office, U.S. Trust and U.S. Bank. Certified By: ·---;z .. i.�4.- £72.,lv-- Richard A. Rohm City Treasurer Verified By: William M. Kolbow Administrative Services Director DATED: July 30, 2018 DATE OF ITEM NO. __ PAGE_3_I __ MEETING_f_·_f_- /_J_ 1- w� � ..J a: < �> 000 000 ci ci ci 000 000 6 c5 c5 000 (0 ,.... r-- 1.f)- CD ..: C\J C\J II) 0000 0000 cii.tiC\i...: 0) I'- r-- 0) I'- CX) II) 6 -ct" 6 CD C'J I'- 0) Ol I'- I'- 0) st (0- 0 ._- lO 0000000 0000000 g:rogg��i;; O'lC\JL!JOL!JCO<O C\1- co- 0- T"'"- /'-,- t.6 ct) CX)CX)O')L!)O)CX)Ol CX) 0) I.!) CX) CX) I'- 0) I.!) -ct" cxi cry Lli "' M 0 0 0 0 I.!) ci L!) 0 C\J ro" 6 �� -ct" C'J 00 00 C\i....: <O <O O Lli .,; I'- II) CX) (D 10 ..,,.- Cl) Ol C\J N oi ai """""" <O (D st" .,; NN CX) Cl) <.o CD �w 0 ::::, 0 ..J ID � 000 000 ci ci ci 000 000 6 6c5 000 co_ T"'" r,,... .. I.!) (0 ,.... C\J C\J Lt) I'- 0 0 l"- O I'- Cl) 'SI' ci (') ....: I'- 0 COM I'- 0 0 CO c.o O,...: r-: 0)000) o, o_ o_ o, <.o I'- C\J 10 OOOOstO'St 0000 o..- ci ci ci ci oi ci ai OOOOC\JON 0 0 0 0 O'l O Ol 6 6 6 6 cxi 6 cxi 00000)00) 0 0 0 0 O'l O O'l <.6 � Lli oi' cry <.6 o """ O'lOOOl 'St O O 'St ci ci ci ci CO O O CD C'J O O M "'" 6 6 ...: O'l O O Ol O'l O O Ol -ct" st" <.o .,; O C\J L!J O l'-- Ost C\J O CD ciC\icocia:i Ost,.... 0 II) O CXl <O O 'St o C\J" <.6 o ai' O,-CXJOOl 0 0 O'l O Ol C\J" <.o cry O .: ,.... N 0) Ol C\J N oi ai st""" <O (D .,; .,; NN CX) Cl) <.o CD I.D O """ 0 iti iti M N N II) cxi "' .... 0 II) N c,i CD II) """ w a: ::::, < ..J ll. < > 000 000 ci ci ci 000 000 6 6c5 000 (0 ,.... r-- U') c.o..: C\J C\J Lt) 0000 0000 ci ci ci ci 0000 OOOC!_ 6660 0000 0000 r--: r--: C\i CD 0000000 0000000 ci ci ci ci ci ci ci 0000000 0000000 660606 o 0000000 0000000 co- T"'"- LO m "¢ co- -:; 0000 0000 ci ci ci ci 0000 0000 6660 0000 0000 I.!) -ct" <.o 10 ggggg ci ci ci ci ci 00000 00000 06660 00000 00000 C\J. <.6 -ct" o c,i ,.... N 0) Ol C\J N oi ai st""" <O (D .,; .,; C\J N CX) Cl) <.o CD 0) N '": � N (D Ol .,; 10 N ,.... Lt) N c,i CD II) """ c ..J w >= w � a: > !:: w a: I- ::::, < �c :E st st I.!) I.!) CX) CX) O L!J O O C\J O I.!) C\i � C\J O C\J C\J C\J 000 � ss �� O L!J O C\J C\J <O <O <.C! C'J O CO O'l O L!J O O O I.!) I.!)�� C\J 0000 L!J L!J O O � "': -r-: 0 C\i CX) <O ": CIO CIO ,... ,... I I 0,... C"/ C"/ ID in mm o o - - .s .!:! o o ·'€ '€ 0 0 a. a. w o � �1 � z ...:. (/) ::i > a: ::::, � w a: !:::, u, c z ::::, LL. ..J < ::::, I- ::::, .>,:. :E fa I- co WO � Cl) a: <ii < LL. :E .!!l > ai �3 0 :E co co co o o o u. u. LL. U. U. LL (0 (0 (0 (0 (0 (0 u <.i <.i c cc 0 0 0 o o o co co co _J _J _J III U. U. LL >, <( "= CJ) () 0 ii:' <( 2. 0 z ::::, LL. 1- z w :E tn w > � > 0 z w � ..J < 0 0 ..J z 0 i= ll. ii: 0 u, w c a: w � 0 a: ID � z < ID w tn <w :I: l- o < a: c ::::, ll. - 0 > - i:3 co (\J 0 cri 0 w ci c ...... a: r--- 0 aS 0 c. """ 0 co 0 t'J C")_ ...... co f'7 f'7 co 0 (\J 0 cri ci a: ...... 0 <I: r--- 0 c. aS 0 """ 0 co C") t'J w f'7 f'7 w ..... Ill <I: <( <( ..... ..._ ..._ ..... z z <I: o en c: c :,e :,e 0 0 ..... Cl) co 0 '<t w co U1 ... > I- rs-: � (.) en cu 0 en c: co 0. ,- w :,g :,e cu w 0 0 I- c co 0 """ :i... N <I: co U1 I- a: - ": = CIJ Cl) ... c e ::::, w (1) .., Cl) E <( ::c ... o en a: (1) ::, > 0. c: z c 0 ::J j:: 0 0 u.: 0. 0 a: <( --' o a. <( Cl) Q) _j w Q) c :s: Cf) w I- <I: en c Q) I- ro co z "O ...... w en 0 :E ::J � w 0 ..... ·.::: � 111 co w > Cl) ITEM NO._�_ PAGF �? ....-- ,..... e--2 .. � «, - DATE OF 0 0 tO 0 UJ ci ci 0 l{) 0 ii: l{) 0 c.. io ci '<1" 0 CJ> "'· oi C\J � � 0 0 eo 0 ci ci io 0 a: l{)_ 0 < c.. io ci '<1" 0 CJ> I'-- oi N � � UJ ...J co -c < -c ...J -- -- ...J z z < en 0 ..J u, ..J <( e c o � � 0 0 0 ...J tO '<1" UJ - (0 l{) ... > en "-: � 0 ..J ca <( u, 00 3: e ,.... UJ <( � � ca 0 0 0 � cc tO '<1" :i.. C\I < (0 l{) I- a: c "-: � Q) :c ... c t: e ::::s Cl) ..., 3: E - ... en u, w Q,) i= > ii: s::::: ::::, z � 'E 0 � ::J 0 i= o u..: c.. o ii: <l'.: � 0 a. > ITEM NO._;-_PAGE .Jy' DATE OF MEET4NG N -. "' � <D s Cl) -� s iii co :iE :I 0 <l'. Cl) c £:! -� c CD � iii ca � :I 0 c ..s c ca 9 0 c I-;- 'c > 0 Cl) co -� c ,... a. :I 0 ..., C'II .S ... ... (/) 0 .E >, - <ti c c 'O ... ... >, (/) :I :I D Cl) - - 'O >< Cl) Cl) (!) Cl) a: a: 'O "O 0 0 's c: ti Cl) Cl) Cl) Cl) Cl) ll) Cl Cl Cl 1ii 1ii CD ai ca ca ca a: a: (') :::, ... ... ... 0 cii Cl) Cl) Cl) iii iii > > > c > <( <( <( - - Cl 0 0 (!) c: Cl) Cl) Cl) I-;- I-;- .-§ :e e c c x x :::, ctl :I :I :I er 1ii ..., ..., ..., Cl) Cl) >, "C "C D (!) -= -= 'O £ ui > > > ... ... ... > > -� 0 c (I) :I :I :I ... ... 0.. c .Q ....... � CII CII (/) :I :I ·.;::; 0 '° ca ca ca (/) (/) :i 'e :::, Cl) Cl) Cl) ca ca .s -ci 0 cii � ... ... ... Cl) Cl) (!) I- a. > I- I- ... ... 'O > e "ti s: .s::. I- I- (!) 'ai 0 z- ' 0 - - ... ... .'::! C) a. ·g 'iii '° c c ... ca ca cii e <ti 'O 0 0 0 ca Cl) Cl) :::, c (/) a. c � E E Cl) > > c: ctl (!) 0 - > :::, - M <'? c: 0 ui ai £ 'O ... M (0 ,... I <ti c (!) 0 C) E Cl ,... ,... '0- (/) (/) c.. ti (!) 0 c: ctl I.LC) Cl) � � � � � .Q E C) "§ D - 0 0 0 0 0 (/) :;; 0 2 .s 0 c: (.) N 0 ,.... N co ... 'O oz Cl) co O? ,.... M 0 0 Ill a. 'O 1ii 'O .Q c: ,.... e C'i C'i ci ci Cl) E 'iii .S c - E 0 ,.... ctl 0 .!!l �� - > a. (!) t 'O (/) N � (!) E cii :::, c C) 0 Cl) 0 e c: .sf :::, c: cii a. ctl > M <ti .E 0 > (!) 'O .s rfl. � � � � ,-... � � � cii 0 (!) (!) ai £ .Q a:e a, D t :::, :;; � 0 0 0 0 <::!;: 0 0 0 0. cii -"' a, c: ,.... M o::t' en N ee 0 0 z- 0 ro 0 a. Cl :, ": Lr! ": 0 co ,.... M II) N a. >, > ci ci CX) CX) .....: 'iii c: ai E :5 (!) c: -., a... ,.... ,.... ,.... 'O -� ctl 0 £ m � I en en o::t' (!) E -"' (!) ... Cl c ro £ 0 Cl '� 0 � (!) E c (!) .S 0 ·;:: - (!) 2 � (/) (/) -� :::, 0 0 > (!) (!) 'O <ti w (!) 'O Cl (/) .Q � > ·- c-, :0 C) s c ;: 0 - - D � e ctl g u 'O ctl .c t: (!) .S1 (!) a. C) .c 0 t 'O 0.. £ c: .c (/) a. s a. .Q 0 ctl (!) .8 C) ti ctl � D £ w 0 'O ·- c 0 Cl 2 c: 0 ai (!) a. c: 0 (!) Q.. -� '° E 0 ti 'c E ti 0 :::, 0 f a. 'O u .c :::, E cii :::, <ti .S ai "§ Cl) 00 'o '° :iE C) ctl .Q- 1ii ,... en 0 0 - .£ c: N "C s 0 a. <ti <I) :§ ai (!) 6 M 'iii >, C) t:: i:3 � Cl) CD (/) c: \n -� C) .'!: (!) e 0 ! e :5 'O a. 'O c iii .2 '° :::, (!) l ca 0 u cii (!) � Cl) :I E £ ti s 0 .s .S a: (/) > c 0 c: Cl) c - .8 ui 'O 0 :::;;; 0 � 00 00 - (/) Cl) iii -� ca ,... ,... ... Cl 'O c c: <I) C) 0 ·;: - - 0 c: ctl :::, :;; <ti .2 c CII iii 0 :I 0 ,... a. ·c ai (!) Cl cii s (/) g 0 :I i.i: :I ..s - M M 0 ro ·;;.. E c: > (!) ..., c ca CD u, (!) iii :� (/) E - (!) (!) ·u; - ... ... co c :E - Cl (!) a: £ :::, ... 0 0 ,... ca c .2 .2 c iii � > <ti (/) 0 - - 0 0 Cl) e (!) .s <ti .S D (/) I C'II � - <ti ! c.. - 0 0 0 0 <I) > c: '° (!) 'O c c 0 C I Cl) ... <ti 0 (!) 'O ... ... -> E t: - Cl) .s -b 0 .S E 0 M - a. :I :I CD Cl) ... c. (!) :::, (!) u Cl .c ai - c 00 i= 0 0 (/) c: E 0 .2: (!) 'ai ai Cl) - ,... a. a. :i C) t, 'O ;: :iE a: a: ca :I 0 Cl) ca Cl ..., C'II Cl - - CII ii 'ai 0 � 0 d, N - - � 0 0 0 0 ... ... ca - - Cl) a: ;: (!) (!) .c ._§ ai ·;: .E .E ... ·.;::: (/) � j i:5 Cl) Cl) Cl) c c .... .� OS - - :I E > Cl) Cl) ·;:: 0 C) e ctl 'O ca ca - <( 0 0 :I «i a: a: ca c: c: ... ... 0 Cl) :i Q) Cl c: � :E I i £ :::, 0 Ql .2 ... ... "C Cl) Cl) Cl) i iii i: ti " Cl) Cl) :I :I Cl) c. c. rJ) a: 'O " > > s (I) - - :: .s > ... (!) 0 "' E .. ct Cl) Cl) - CII CII Cl) :I :iE § .. a: a: .s::. ca ca > -� B ti ti iii 0 0 0 "C ..... Cl 0 .,. :::, (!) 't: .2 Cl) Cl) ai 0 - - 'ju Cl) Cl) c ti 'O ... a: '5' .c Ql 11. (I) :::: :::: > 0 0 ;::: :I :I Cl) Cl) 'ii ctl 0 ctl I- ct w w � Cl) .l!! iij iij Cl :i:: > :: C\I g .S! .S! .S! Cll - .S! > > <( w 0 Cl) ; 'E ..... ct ca ca iii .2 .2 i 0 0 a 0 0 0 a: a: i...: 0 - - 11. ll. - Cl) Cl) ... � � II a: � - t: - .El iii � (I) t: .lo: .lo: Cl) � iii t: t:: £ ... ... "C Cll � 0 ca ca :::, 0 0 0 0 0 0 Cl) 0 0 0 ct a. a. a. I- I- 0 a. == ::!: u.. a. a. en I- "tJ c: :I LL 0 ·- - 0 .... ..... I.. 0 c, ..... r.: co Cl) E � 0 ..... C\I u, Cl) ... > 0 e C") - Cl) Cl) r.: C) ::s e -:, ca I.. 0 .... 0 >,. ..... ·- 0 Q) - 0 0 Z:::l:!.,::: 0 0 mE�0 - .... o QQ)U)" >I- N oEo I- . ,:, ::::10- ·- .... Q) "tJ 0 ·- Q) >- :!E Q) - 0 0 Z O.,::: .,:C:o Q) EM:g - . a. Q) .... a.l- et E o ,:, :::, ·- ·- N Q) "tJ 0 ·- Q) >- :!E Q) Cl m Cl t O O 0 .,::: .,::: � c:cocn O COO - ·- • U) C"aiijt0 • C: ·- N .- 0 0 ·- 0 ca UI O 'O z UI • - - ct;.!!! f! 0 >- Q) 'O Q) LL Lt) ('t') C'\I "' (J) co ..... � T'"" 0 Lt) 0 C'\I"' � Lt) c .Q T'"" ·- -El)- � 0 c (J) ·- (I) - :J 0 co It- > t:: ..... � 0 0 0.. 0 t:: co - .c ca o .... 0 t- DATE OF ITEM NO. __ PAGE 3::;;..;l�_MEETING 8 __ , ...... f_, I __ !_ �-- i I I I � I <1l Q) I >, I LO I I � I � � � � � � ""'" I 0 0 0 0 0 0 ,::f' C\J T""" C\J 0 LO 0 T"" "st C\J C\J T""" 0 T""" � <1l OO"stO LO Q) T""" >, Cl) 0) CO O> I"-- 0 co st :::::s "st c.o C\J I"-- 0 C\J II M ... .. ... ... ... C'a I"-- I"-- c.o c.o O co .Q > (") CO 0) O> 0 T""" 0 i � L00)0)0}0 LO ...... ... ... .. ... ... t'. �I 0 0 "st T""" (") "st I"-- C\J 0 ·- 0 c.o (") (") T""" LO 0.. ,i - ca T""" ,._ \ 0 f:17- 0 � - ...... .... >, � :i.. ..... 0 Cl) ·;.:: a.. :::::) ::::s ..... I ro .... 1J E c: Cl) � Cl) co <1l �� ..c: 0 Q) E T"' (J +-' >, 0 en Cl) C') .... C\I ,._ N - ti) C'l ro �t G) � Q) 0 c > >, iC: UI c: M C'l Q) - G) < 0) c� G) c: >, ro ,._ c, :::::s - Q) c: '"') 'i: > ::::s ro C'a - I :i.. ca "'O 0 :a: Q) r-, ..... - .c � 0 0) ·a; > s � <1l :t::: Q) w (..) >, <)l o � f c: ·- CfJ CfJ CfJ CfJ CfJ c, "- "- "- "- "- \J, C'CI C'CI C'CI C'CI C'CI c Cl) Cl) Cl) Cl) Cl) :i.. >,. >,. >,. >,. >,. :::::s T""" C\J (") "st LO .... C'a I I I I I a O T""" C\J (") "st i � <1l ffl Q) >, � 0 -. 0 0 0 0 0 0 0 0 0 0 <fl co 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 ci ci ci ci ci ci ci ci ci ci s 0 0 0 0 0 0 0 0 0 0 � 0 0 0 0 0 0 0 0 0 0 .... ci ci ci ci ci ci ci ci ci ci 0 "' CX) r-, <D LO st C') C\J � � <F> <F> <F> <F> <F> <F> <F> <F> <F> --·--·· --- ·-------- ------- -··. City of Orange Reconciliation of Total Cash and Investments to General Ledger As of June 30, 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 Total Cash & Investments Total Cash and Investments per General Ledger Plus Outstanding Checks Total Cash & Investments 196,534 152,518,235 (2,992, 159) 149,722,610 90,423 149,813,033 12,200 5,968,853 155,794,086 154,260,634 1,533,452 155,794,086 1 Includes adjustment for month-end timing differences. GL Cash 12 Attachment V City of Orange Fiscal Agent Investments As of June 30, 2018 Fiscal Agent Cash and Investments Assessment District 95-1 1996 Limited Obligation Improvement Bonds - U.S. Bank First American Government Obligation Fund (1.68%) Community Facilities District 91-2 2013 Special Tax Refunding Bonds - U.S. Bank First American Government Obligation Fund (1.68%) Federal National Mortgage Association (1.25%) Successor Agency 2008A Merged & Amended Tax Allocation Bonds - U.S. Bank First American Government Obligation Fund (1.68%) Federal National Mortgage Association (1.375%) Successor Agency 20088 Merged & Amended Tax Allocation Bonds - U.S. Bank First American Government Obligation Fund (1.68%) Federal National Mortgage Association (1.875%) Community Facilities District 06-1 2015 Special Tax Refunding Bonds - U.S. Bank First American Government Obligation Fund (1.68%) US Treasury Bond (4.375%) Successor Agency 2014A Merged & Amended Tax Allocation Refunding Bonds - U.S. Bank First American Government Obligation Fund (1.68%) Total Fiscal Agent Cash and Investments Carrying Value 79,202 1,586,433 2,321,496 417, 145 1,564,524 53 5,968,853 Market or Contract Value 79,202 1,586,433 2,321,496 417,145 1,564,524 53 5,968,853 Fiscal.12 Master (2) ITEM NO. 5 _PAGE DATE OF 3 2 ·-- ..... MFFTING g .s.tr .... ,.,. ........ _.... .....,."""'-- E "iii .c .. c < � (!J' a1 rn c c "' 0 0 > z z :;; .� "' 00 c ·;; (lJ ; -� ;!!. "' 0 00 " c � w ·;:;; Cl.I re c ro c ru O ....._. 0 > Z O Z Vl "' "' g § � z z z bO c ·;:; � > .0 bO c -� � "' ;, * c: (1.1 "' 0 > r-, z ., "' g g � z z z � nr "' "' c c "' 0 0 > z z "' "' g § � z z z > .0 "° c � .Q � ... 0 QI a.. Q. - .. 0 Q.. � iii E ·� :> QI E E x E "' 0 2 u ... N 0 N *- � B 0 0 C. "' z :, ... N 0 N ';!?. � � � � � "' "' g § � z z z � ,:, c 0 .0 -e � e 8 "' :, -o ;!!. 0 " ec c: ·;:; e 0 ;!!. "' "' * � m "' 0 > " z � "' ., "' c c a, 0 0 > z z "' � Cl.I llJ � c c a, 0 0 > z z QI 8 .. c QI E E l l!I "' C1J ·.;:::; u ... C1J s: .... 0 £ -� > -� 0 0.. .... e C1J E .... "' C1J > .!: - 0 c 0 ·� "' c. E 0 u DATE OF ITEM NO.--.wt'---_PAGE__.;I __ MEETING_g_._K_- _If_ E ai .J:. "' c < c � ::, I- � "' "' '*' c QJ o O > "' z z � "' "' '* c "O O O O N 2 CT\ ., :;; *� c OJ O O > "' z "' c 0 z ., � c: -0 O O z "' ., .. c E 0 � � j � � s ., "' � :(] > c "' .� "' ... u ·.;; 0 0 QI ... ,; E .... ., 0 .s 2 0 E *- "' c 'o" 0 e ai, ., 0 c s: E 0 > � "' � � ., c � .... "' "' c: � "§ ., "' -0 ., :, "' ., "' ·;;; ·c "' ., :;; "' "' > ii c *- c ., c c c :;:; ., ., c c "' *- c -0 0 � ·;;;, a. � 0 0 0 00 0 0 > 0 0 0 .:; > x > 0 0 > 0 0 N > I!) " z .... "' z z z z z a: � 0 ., c z z z N z "' .!= 0 .. ., Q. "' "' c .... "O ., .. � � c: � � c E � c: ::, ., QI c c .... c 0 c c E .. c E "' "' ., "' ., "' .. "' .. t;. E E c: E 0 E E E E .... -� .� ., � 0. e :i -� <( � .,, � .. QI .2 ::, ., .2 ::, 2 5 � .2 5 c .2 ::, < .. .2 ·5 > "' � a ·;;; 2 a 2 a s � C" .. 2 C" c 2 a .: ... .. "' 0 a:. ?: -s � a: ?: .. a:. ?: "' c: a:. ?: - ., � 1 -� .. ? '§ -= � -� .3 .? ·c E . ? c .J:. .. 0 -� '§ 0 E c 0.. ::, ::, 3 :::! .... 0.. c: ... 0. 0 "' ... 0 "' <;;; "O 0 ;;; <( 0 ;;; <;;; "" 0 "' "' 0 "' <;;; .. .. ::, "' 0 ::, .. ::, i � :, < :, "' ::, ·� ::, 0 ., u *- 0 2 "' *- 0 2 0 *- 0 *- 0 2 � *- 0 2 0. *- 0 2 ·E > 4. OJ OJ ..5 E E E � E E E 0 E E E :: E E E "' E E E a: ·;:; E E E "' ... "' ::, :, :, "' :, :, :, 0. ::, :, ::, 0 ::, ::, :, .J:. ::, ::, � OJ ::, :, ::, :, u c. 0 � E E E u E E E > E E E 0. E E E :::! -� E � OJ -� E E OJ .;:: c E ., -"' ·x :� ·;. '€ ·x "i: ·;. ·x "i: ·;. c ·x "i: ·;. ::, x :� x ., Ill x :s ·x 0. c: "' "' "' � i ::, "' i i i i i 0. i "' > "O "' "' 0 � "' 2 2 2 .. 2 0 2 Q OJ 2 2 .. c: 2 2 2 u "' u u a: a: "' :;; :;; .; -� .� � � CIJ 2 :::. '"' CIJ "' M 0 0 c: w '"' 00 ---- >--- f-- ·,; .0 c: c: U1 >- >- "' ·,; ·,; - � > 0 "' "' a � a � 2 "" a a .. E ;fl. � � * s 2 2 'iii ::::: "' u, ::; * .c -ii. "' *� "' "' j' CIJ .. M ;fl. .. � CIJ c CIJ c: CIJ co "' U1 c 0 � > 0 a > ::::: a > U1 U1 r- <( N N z z V'> ..--i :;; � "' -� -� � o' "' CIJ M 0 '"' '"' -<, >--- c: c: "' >- ·,; ·,; 0 "' "' c: � � 0 0 "' * � * 2 2 c U1 U1 :';: '£; -j{ "' .. j' Q) "' � � c: Q) <: "' � ::, U1 a > � 0 > N "' I- � z z V'> z s 0 � >--- .. U1 >- > 0 > e � � Cl .. c 2 2 .. ::; IF: "E 0 M 0 � .. N N Cl V'> z � :::. 0 0 M ---- >--- f-- u, >- >- 0 > � "' � 2 2 "' .. ::; .E 2 .. 2 � * c "' 0 t!! ::; U1 " 0 V'> "' ·� .. .'!I o -0 ... 0 w Qj u .0 ..c ... 0 c 0 .. cc E c ..c E � � ... .. :. :;; 'j CIJ CIJ CIJ CIJ "' > ;f. � CIJ c c CIJ c: c CIJ 0 0 < > a 0 > 0 a > > Cl M z z U1 z z -� 0 � .. ... "' 0 e -0 "' Qj c c c .. c 0 0 E CIJ CD CIJ CIJ ... E 0 E z E "' -� Q e '" Q � Qj Q :, "' 5 c 5 E > ] er .. ] er � er :, .!: ... CIJ 0 "' t CIJ w c t'. ix: ?: t'. a: ?: 0 o: ?: - .. 0 z a "' 0 E 0.. -� ·.:: 0.. -� ·.:: .. 0.. -� 'c a "' :, i :, 3: :, e t: .. a <ii � a <ii � a <ii -:. :!e 0 !!! c: ;f. :, ::; c: * :, ::; > * :, ::; � CIJ 0 t 0 u 0 � "' .g c: cc -;:: ·.:: .!: E E E E E E .. E E E ui .. :, :, "' :, :, .., :, :, 0 0 IV ... :, 3: :, :, Q >--- >--- Q. 0 c E � � -� E E <( "' E E E ] >- >- E .. .. ·x x � x ·2 x .. -0 ·;:;; c x ] ] a. "' c "' "' "' c: "' "' 0 Cl. i i u i � � :, ::; ::; � ::; 2 0 0 ::; ::; I.I "' "' ... CD 0.. u: u: - II 1st Quarter 2017 II 1st Quarter 2018 County Building and State and Pools Construction Restaurants and Hotels 2016-17 2017-18 w Point-of-Sale S:-6,49 3,297 SJ 7 .2 5'H 21 o � County Pool 5. 79 ].984 4.8-14.120 State Pool 28.514 12.(,92 Gross Receipts $42,313,794 $42,116,233 . i :E � Four Quarters - Fiscal Year To Date REVENUE COMPARISON Business and Industry . . . . ;;J{t�.;;}\ ' .· 'f.-, t--\/ ., /; Ci y Of Orange Sales Tax Update Second Quarter Receipt.r for First Quarter Sales ljanuary - March 2018) Fuel and Autos General Service and Coo sumer Stations Transportation Goods $0 Published by HdL Companies in Summer 2018 Hdl:.� www.hdlcompanies.com I 888.861.0220 c OM r A NI L 5 ToP 25 PRODlTCERS I·.;., "" :::=- >. Co:cR Best Buy Mazda of Orange Calply MS International Chevron NIKE Factory Store Claflin Medical SC Fuels Equipment Selman Chevrolet David Wilsons Ford Stadium Nissan David Wilsons Villa Target Ford Direct Edge Media Tesoro DMG Corporation Thompson Building Materials Enterprise Rent A Toyota Scion of Car Orange Foundation Building Verco Decking Materials Home Depot Village Nurseries Kia of Orange Walmart SALES TAX BY MAJOR BUSINESS GROUP $400,000 $800,000 $1,600,000 $2,000,000 $1,200,000 Qt 2018 City of Orange Sales Tax Update CDTFA Changes ·1 he California Department of Taxes and Fees Administration (CDTFA) implemented new reporting software - Centralized Revenue Opportunity System (CROS) with the first quarter 2018 tax filings. 111e change will al- low CDTFA to collect and allocate tax revenue more quickly than the prior system making data more timely and relevant for decision making purposes. ·1 here will also be a greater emphasis on electronic tax filing with the goal of decreasing errors and misallocations. During the changeover, CDTFA had a hard cutoff of April 30 for tax returns. Allocating the revenue received through chat period left some activity out oft he current quarter, pushing it to the second quarrer 2018. However, CDTFA will be disbursing the revenue related to the previously delayed payments with the June 2018 monrhly allocation. l n summary, the change in software and partial allocations in the first quarter 2018 payments will inflate actual dis- rributions in] une 20 I 8 and be included with second quarter 2018 data. Statewide Results Supreme Court Ruling On Thursday, June 21, 2018, the Su- preme Court ruled in a 5-4 decision to require out-of-state online retailers to collect sales taxes on sales to in-state residents. -, he physical presence rule as defined by Quill is n�) longer a clear or easily applicable standard, and the on- line interstate marketplace was not the prevailing issue before the court in 1992. In California, numerous online retailers already collect and remit state and local taxes, including 2 of the 3 companies involved in this Supreme Court case (Wr1yjr1ir and Newegg). According to a study conducted by the California State Board of Equalization, the total revenue losses related to remote sellers for both businesses and house- hold consumers were about $1.453 bil- lion in fiscal year 2016-17. Unpaid use tax liabilities in 2016-17 average $60 per year fc.)r each California household, and California businesses average $171 per year in unpaid use tax liabilities. The CDTFA is currently reviewing the court's opinion to determine next steps to support taxpayers. SALES PER CAPITA $8,000 $6,000 - $4,000 ..... � . . � ... .... ... $2,000 $0 Q1 Q1 Q1 Q1 15 16 17 18 �'Gli��,j,ZJ Orange County California RE\'L\l"f. BY Bl'SI\ESS GIH>l"P Orange This Quarter Cons.Goods Autos/Trans. Bus.find. 13% Fuel 17% 12% Given the CDTFA changeover, the statewide first quarter 2018 receipts were 1.8°/c, lower than the prior year. How- ever, once Hd L adjusted the results for missing payments and other accounting anomalies, the results were 5.9% higher than rhc same period in 2017. A stellar rebound in building-construc- tion activity, compared to a year ago when gloomy winter weather depressed results, and continued increases in foci prices, were the primary contributors to overall growth. Steady receipts from purchases made on line also helped boost count ywide use tax pool allocations. After a long period of solid growth in new car sales, much of the upward movement within this group is now coming from leases rather than pur- chases. Corporar« tax breaks approved by Congr..:ss in December 2017, arc ex- peered to have a positive impact 011 the industrial sector as businesses look ro invest excess cash. 0RA\:GE TOP 15 BLSl\:ESS TYPES 'In thousands of dollars Orange County Hdl State Business Type Q1 '18* Change Change Change Building Materials 646.6 2.5% 2.8% 3.8% Casual Dining 530.0 -4.4% -3.4% -2.0% Contractors 325.6 24.6% 8.3% 21.6% Discount Dept Stores - CONFIDENTIAL- 4.5% 2.8% Electronics/Appliance Stores 207.1 1.4% --0.2% 0.8% Family Apparel 253.6 -0.5% 5.8% 8.2% Grocery Stores 148.0 3.4% 3.2% 1.9% Light Industrial/Printers 216.7 -17.8% -15.5% -12.2% Medical/Biotech 195.4 107.1% 11.7% 10.0% New Motor Vehicle Dealers 1,221.7 -15.0% -1.6% --0.2% Petroleum Prod/Equipment - CONFIDENTIAL - 11.0% 3.7% Quick-Service Restaurants 400.5 1.1% 0.4% -3.8% Service Stations 483.7 -6.0% 13.1% 4.6% Shoe Stores 181.5 34.4% 10.3% 0.2% Specialty Stores 146.2 -12.0% -<l.9% -9.9% Total All Accounts 8,462.1 ·3.2% -2.0% -1.8% County & State Pool Allocation 1,131.3 -2.4% -1.2% ·2.1% Gross Receipts 9,593.4 -3.1% -1.9% -1.8% 1978 . VOUJME 36 NUMBER 2 JUNE 2018 2018 JUNE 2018 ECONOMIC & BUSINESS REVIEW CONTENTS Dean's Message 1 2018 U.S. Forecast Update 2018 Should be Smooth Sailing, but Is It the Calm Before the Sto1111? 2 U.S. Variables, Tables 1-6 4 2018 California Forecast Update California Picks Up Steam ... Thanks to Housing IO California Variables, Tables 7-10 12 2018 Orange County Forecast Update The County is a Leader, Not a Laggard 16 Orange County Variables, Tables 11-14 18 Don't Believe the Doomsday Scenarios on Our Housing Needs 22 Acknowledgements 24 The Economic & Business Review, published semiannually by the A. Gary Anderson Center for Economic Research, is owned and provided as an educational service by Chapman University. Con- tents reflect the views and opinions of the contributors and do not necessarily represent those of The Argyros School of Business & Economics or Chapman University. Inquiries regarding subscriptions may be emailed to acer@chapman.edu, or call (714) 997-6693. Copyright© 2018 by the A. Gary Anderson Center for Econom- ic Research. Copying/or other than personal use or internal refer- ence without express permission of the copyright owner is express- ly prohibited. A. GARY ANDERSON CENTER FOR ECONOMIC RESEARCH James L. Doti, Ph.D. President Emeritus of Chapman University Donald Bren Distinguished Chair of Business and Economics Raymond Sfeir, Ph.D. Director of the Anderson Center for Economic Research A. Gary Anderson Chair of Economic Analysis Ann Cameron Research Fellow Linda Corcoran Research Associate Dorothy Farol Research Assistant Nicholas Difilippo Student Research Assistant ADVISORY BOARD Lee Ann Canaday Canaday Group Deborah Stickley Diep Center for Demographic Research California State University, Fullerton Maritza Gamboa Employment Development Department State of California Walter Hahn E& Y Kenneth Leventhal Real Estate Group Jerry Holdner Kidder Mathews DEAN'S MESSAGE Twenty years ago, the School of Business and Eco- nomics had just received AACSB accreditation as our 20 full-time faculty moved into the brand new Beckman Hall. Then in 1999, the School of Business and Eco- nomics was renamed the George L. Argyros School of Business and Economics and we began a period of dramatic growth. We now have over 75 full-time faculty who will have published nearly 100 academic articles this year. More than 100 business leaders will guest lecture in our classrooms. Enrollments have risen 350%. We now rank 34th for undergraduate programs and this year rose 19 spots to 79th for graduate programs out of more than 12,000 business schools worldwide. Over the past 20 years, our faculty have launched 3 new centers, 3 institutes, have established us as the world leaders in Experimental Economics and are now engaged in an ambitious new Real Estate initiative. We opened the Janes Financial Center, Launch Labs, the Sims Shen Data Analytics Lab, the Graduate and Exec- utive Programs Office, and a dedicated Career Center, to better serve our students. Our key to success remains our distinctive combina- tion of outstanding faculty, influential business leaders, and dedicated alumni working together to provide unparalleled individualized attention to each and every student. The inspiration and support of George L. Argyros and our many business partners has propelled us to national attention. Through it all the Anderson Center for Economic Research and its forecasts have been at the forefront of our success. For 40 years, it has provided the most objective and reliable analysis of current economic conditions available. We look forward to partnering with you for 20 more years of extraordinary success! 2018 U.S. FORECAST UPDATE 2018 SHOULD BE SMOOTH SAILING BUT IS IT THE CALM BEFORE THE STORM? 3. 5 -··--------------�----------------------------···-··- 0/i, Change REAL GDP Shaded. lrea.\' Represent Fed li.11:�ct !?ale • • • • •• • • ...... . . . . . . . ······ ········ .. . . . . .. ... 2.5 1.5 2.0 3.5 3.0 Percent 1.0 18:1 18:2 18:3 18:4 19:1 19:2 19:3 19:4 FEDERAL FUNDS RATE The Fed's increasing concerns over mounting inflation- ary pressure seem justified. Labor markets have tightened to the point where unemployment rates are near historic lows. That, in turn, has fueled wage increases that hit an annualized rate of increase of four percent in the first quar- ter. The value of the U.S. dollar has fallen sharply over the last six months, also signaling higher inflation. The Fed's favorite inflation gauge, the personal con- sumption expenditures price index, has increased steadily and recently hit the Fed's two percent inflation target. Even the index excluding food and energy has increased close to the two percent threshold. It is this upward infla- tionary trajectory that has led the Fed to steadily ratchet up the fed funds rate. to 2.25 percent by year-end. Since the Fed has already announced its intention to increase rates three more times in 2019, that would raise the high end of the fed funds tar- get range to 3. 00 percent by the end of next year. 18: I 17:4 17:3 17:2 ' �------�'":�, I 1.5 1.0 17: I 2.0 2.5 At our December forecast, we called for an uptick in real GDP growth from 2.3 percent in 2017 to 2.5 percent in 2018. The major reason for our projection of faster growth was our belief that the Tax Cut and Jobs Act would have a stimulative impact on the economy. The BEA's advance estimate of 2.3 percent growth in the first quarter of 2018 may, at first glance, appear under- whelming. Actually, that growth rate was quite robust, par- ticularly given the fact that first-quarter growth rates over the last three years have underreported actual growth by wide margins. It appears that the BEA still has some work to do in its statistical treatment of seasonal variation dur- ing the first quarter of the year. The following figure shows that real GDP, as measured by year-to-year percentage changes, steadily increased through 2017 and reached a high of 2.9 percent in the first quarter of 2018. We believe this stronger momentum mov- ing into 2018 more accurately measures the gathering strength of the economy than the quarter-to-quarter changes that, in fact, point to a slowdown. 3.0 PERSONAL CONSUMPTION EXPENDITURES PRICE IN DEX March '18 Jan. '18 Nov. '17 Sept. '17 FED TARGET 1.25 July '17 2.00 Yr/Yr% Change 2.25 been raised since the Fed began tightening two years ago. We expect the Fed to increase the rate two more times in 2018, bringing the high end of the fed funds target range quarter of a percentage point to a range of 1.50 to 1. 75 per- 1.75 cent. This is the sixth time that the benchmark rate has J .50 While these contradictory trends seem puzzling, the Federal Reserve Board is not confused. The Fed appears to be increasingly committed to raising the federal funds rate to cool what it considers to be an overheating economy. In March, the Fed increased the federal funds rate by a 2 ECONOMIC & BUSINESS REVIEW Long-term interest rates, like the l O-year treasury bond, have also been rising. In fact, the l O-year bond has recent- ly increased at a faster clip than the fed funds rate. This has led to a slight widening in the spread ( difference between the 10-year treasury bond and fed funds rate). for buying them. And they pay a higher interest rate to boot! 10-YEAR BOND RATE ON GOVERNMENT DEBT (MARCH 2018) LNTEREST RATE SPREAD Percent 4 3 2.84 Italy Canada US 0.04 Japan Germany France I TK 2 3 () Although these trends portend problems in 2019, 2018 should be smooth sailing. Even though the interest rate spread is likely to narrow in 2018, it is extremely unlikely that it will go negative before year-end. More important is the fact that the Tax Cut and Jobs Act will fuel the current recovery and help extend its life. That recovery is already the second longest on record. Our forecast calls for real GDP to increase at rates above 2.0 percent for all four quarters of 2018 with aver- age annual growth hitting 2.7 percent, 0.2 percent higher than our forecast made last December of 2.5 percent. l 8: l l 7:3 Net Loans and Leases Y r/Y r �.;, Change 17: I 16:3 () �1· ------�= 16:1 Interest Rate Spread Percent 2 I._ Percent This is critical, since it's a narrowing, not a widening, in the spread that invariably leads to recession. Notice that it's the negative spread, when short rates exceed long rates, that leads to declines in investment spending as financial institutions tum off the lending spigot. INTEREST RATE SPREAD AND NET LOANS AND LEASES The recent widening in the interest rate spread, howev- er, may be short-lived. Given the Fed's announced inten- tions to push the federal funds rate to three percent by year-end 2019, the interest rate spread could move into negative territory if rates on long bonds flat line. That might happen, since other developed countries' government-issued bonds pay lower interest rates than U.S. bonds. That interest rate premium on U.S. bonds will actually serve to limit upward pressure on U.S. long-bond interest rates. Not only are U.S. bonds safe and secure, global capital markets seem to have an insatiable appetite 17:1 17:2 17:3 17:4 18:l 18:2 18:3 18:4 U.S. FORECAST TABUS Tables 1 to 6 present details of Real GDP, Employment, Monetary Aggregates, Price Indexes, Existing Homes and Housing Starts, and Interest Rates. Tables I and 2 present annu- al levels and rates of change; Tables 3 and 5 present quarterly levels; Table 4 presents year-to-year percentage changes on a quarterly basis; Table 6 presents quarter-to-quarter percentage changes, compounded at annual rates. () 2 REAL GDP Qtr/Qtr % Change 4 r·-------·--·---�--------- ------------·- --· 3 I :u 3.2 10 - l () -2 2 -(, 6 '15 '[() '05 '()() '95 '90 '85 JUNE 2018 3 U.S. VARIABLES TABLE 1 ANNUAL HISTORY AND FORECASTS: 2013-2018 LEVELS Details of GDP($ Billions): (i[)p .. Real GDP (2009 Dollars). Total Consumption . Gross Private Investment. Nonresidential Investment. Residential Structures Change in Inventories .. Total Government Purchases . Federal Government Purchases . State and Local Government Purchases Net Exports ... Total Exports Total Imports Employment: Total Nonlarm Payroll Jobs (Millions) . l Jncmploymcnt Rate .. Monetary Aggregates ($ Billions): Ml...... .. . M2. Reul M2 ... Price Indicators: Consumer Price Index: All Items ( 1982-84= I 00) .. Personal Consumption Expenditures Price Index: Less Food and Energy (2009=!00) ... (iDP Price Deflater (2009=100) . Crude Oil ($/bbl). Existing Homes: Sales. Single-Family & Condo (Thousands) . Median Price. Single-Family($ Thousands) . Price Index. Singlc-lumily (2009=100) Affordability Index. Single-Family Housing Starts (Thousands): Total Housing Starts . Single-Family I Inits .. Units in Buildings with 2 Units or More. Interest Rates: Federal Funds .. Treasury Bill, 90-Day .. Prime . Treasury Bond. I 0- Y C,11' ,-0-Y car Fixed Mortgage Interest Spread ( 10-Y car T-Bund Less Fed Funds) f= Forecast 2013 1(,.691.5 15.612.2 10,565.4 2.6 I s.s 2.()32 9 488.3 78.7 2.857.6 1,142.8 1.714.1 -404.9 2,031.6 2.436.5 136.4 7.4 2.549.6 10,715.0 10,021.9 233.0 106.3 106.9 ')79 5.078.3 195.9 113.6 179.9 928.3 620.3 308 0 0 1 01 2.4 4 0 2014 17.427 6 16,013 3 I 0.868.4 2,761.7 2.1727 505.2 67.8 2.839 I 1,115.0 1,723.0 -432.7 2,118.4 2.546.1 138.9 6.2 2,815.0 IU76.9 10,453.7 236.7 !08 0 108.8 93.3 4,922 5 207.1 120.1 169.3 1,001.0 64(,.5 354.5 O I O I 3.3 2.5 4.2 2.5 2015 18,120 7 16,471.5 11,264.3 2,905.4 2.:!21.5 556 9 JOO 6 2,878 5 1,114.1 1.762 8 -545.3 2.127 I 2,672.4 141.8 5.3 3,021.7 12,034.0 10,938.5 237.0 109.5 1100 48.7 5,234.2 221.4 128.3 170.9 1,107.0 712.5 394.5 0.1 0.1 3 :l 2.1 3.8 20 2016 18,624.5 16.7162 11,5721 2,858.3 2.210.4 587.4 33.4 2.900.2 l.l 14.6 1,78'.U -586.2 2,120.1 2, 706.3 144.3 4.9 3.250.6 12.853.3 11.535.9 240.0 111.4 111.4 43.1 5,440.0 233.6 135.5 171.5 ],] 77.3 784.5 392.8 0.4 0.:1 1.5 1.8 3.7 1.4 2017 19.390.6 17,0962 11,890 7 2,952.:l 2.314.2 597.9 15.2 2.903..1 r, 116.4 1.785.0 -621.8 2, 191.4 2,813.2 146.6 4.4 3,505.9 13,570.8 11.%5.1 245.1 113.1 113.4 50.9 5.535.9 247.5 143.5 162.4 1,208.3 85U 357.0 1.0 0 9 4.1 2.3 40 2018f 20,326.2 17,556.2 12,191.4 3.09 l.3 2,45 LI 604.4 29.4 2,923 8 l,128.6 1,794. 7 -<>42.9 2J063 2,949.2 148.8 3.9 3,748 5 14,156.8 12,227 5 251.9 115.4 115.8 59.5 5,665.2 260.9 151.2 152.7 1.321.0 ') 17 5 403.5 1.9 l.7 4.(, 3.1 4.4 l.2 4 ECONOMIC & BUSINESS REVIEW TABLE 2 U.S. VARIABLES ANNUAL HISTORY AND FORECASTS: 2013-2018 ANNUAL PERCENTAGE CHANGES Details of GDP: GDP . Real GDP (2009 Dollars) .. Total Consumption ..... Gross Private Invcstment.. .... Nonresidential Investment. . Residential Structures . Change in Inventories . Total Government Purchases . Federal Government Purchases . State and Local Government Purchases . Net Exports .. Total Exports . Total Imports . Employment: Total Nonfarm Payroll Jobs Unemployment Rate . Monetary Aggregates: Ml .... M2 Real M2 .... Price Indicators: Consumer Price Index: All Items Personal Consumption Expenditures Price Index: Less Food and Energy . GDP Price Detlntor...... . . Crude Oil . Existing Homes: Sales, Single-Family & Condo . Median Price, Single-Family . Price Index, Single-Family . Affordability Index. Single-Family . Housing Starts: Total Housing Starts . Single-Family Units . Units in Buildings with 2 Units or More Interest Rates: Federal Funds . Treasury Bill, 90-Day . Prime . Treasury Bond, l G-Ycnr . 30-Year Fixed Mortgage........ . . Interest Spread ( IO-Year T-Bond Less Fed Funds) . !'= Forecast JUNE 2018 21113 3.3 l.7 1.5 6.1 3.5 11.9 NIA -2.9 -5.8 -0.8 9.4 3.5 I. I 1.6 -8.7 10.l 6.7 5.0 1.5 1.5 1.6 4.0 9.1 11.5 11.5 -11.4 18.5 15.6 24.8 -23.2 -32.0 0.0 30.4 8.9 NIA 2014 4.4 2.6 2.9 5.5 6.9 3.5 NIA -0.6 -2.4 0.5 -6.9 4.3 4.5 1.9 -16.4 10.4 6.2 4.3 1.6 1.6 1.8 -4.7 -3.1 5.7 5.7 -5.9 7.8 4.2 IS. I -17. l 71.4 0.0 8.3 4.7 Ni A 2015 4.0 2.9 3.6 5.2 2.3 10.2 NIA 1.4 -0. l 2.3 -26.0 0.4 5.0 2.1 -14.3 5.8 4.6 0.1 1.3 I.I -47.8 6.3 6.9 6.9 1.0 10.6 10.2 11.3 48.6 -47.5 !U -16.0 -7.8 NIA 2016 2.8 1.5 2.7 -1.6 -0.6 5.5 NIA 0.8 00 i.z -7.5 -0.3 u 1.8 -8.1 7.6 (di 5.5 lJ 1.8 -11.4 3.9 5.6 5.6 0.4 (i.3 1()1 -0.4 NIA NIA 7.7 -13.9 -5.0 NIA 2017 4.1 2.3 2.8 :u 4.7 1.8 NIA 0.1 02 0.1 -6. l 3.4 4.0 1.6 -10.5 7.9 5.6 3.7 2.1 1.5 1.8 17 9 1.8 5.9 5 9 -5.3 2.6 8.5 -9.1 NIA NIA 16.6 26.5 9.1 NIA 2018f 4.8 2.7 2.5 4.7 5.9 11 NIA 0. 7 1.1 0.5 -3.4 5.2 4.8 1.5 -9.8 6.9 0 2.2 2.7 2.0 2.1 17.0 2.3 5.4 5.4 -6.0 9.3 7.8 u.o 85.0 811 12.6 31.7 11.5 NIA 5 U.S. VARIABLES TABLE 3 Q1JARTERLY HISTORY AND FORECASTS: 2017:1-2018:4 LEVELS 17: 1 17:2 17:3 17:4 18:1 18:2f 18:3f 18:4( Details of GDP($ Billions): GDP . Real GDP (2009 Dollars) . l 9.057.7 I 9,250.0 I 9,500.6 I 9,754. l l 9,965.3 20,208.4 20.440.9 20,690.3 16,903.2 17,031.1 17,163.9 17.286.5 17J85.8 17,510.5 17,611.6 17,716.8 I l.758.0 l l.853.0 11,916.6 12,035.2 12.066.8 12,151.8 12,219.6 2,976.5 3,011.1 3,064.4 3,077.7 3,092.7 2J26.9 2,365.7 2,400.8 2,445.4 2,465.8 587.0 604.9 605.0 601.2 599.1 -597.5 -653.9 -645 9 -633.4 2,192.4 2,229.8 2,256.3 2,304.1 2,790.0 2,883.7 2,902.2 2,937.5 -614.2 -678. 1 2,320.2 2,344.5 2,934.5 3,022.6 12,327.2 3,130.6 2,492.5 612.3 25.8 2,937.l 1,134.9 1,802.2 27.7 2,913.6 1,123.6 1,790.0 31.1 2,914.4 1,125.0 1,789.4 33. l 2,930.0 I, 13 l.O 1,797.2 15.6 2.9215 I, 126.2 1,793.5 38.5 2,900.0 I.I l 7.4 1,780.7 2,924.7 2,300.6 594.1 5.5 2.895 2 1.113.7 1.779.6 -613 6 2.1811 2.794.8 -622.2 2162.3 2.784.5 2,897.0 2.263.6 605.5 1.2 2,896.6 1,108.4 l.786.2 Nonresidential lnvcstmcnt.. . Residential Structures . Change in Inventories Total Government Purchases .. Federal Government Purchases Total Consumption . Gross Private Investment : . State and Local Government Purchases Total Exports . Total Imports . Net Exports ... Employment: Total Nnnfanu Payroll Jobs (Millions) . Unemployment Rate . 145.9 4.7 146.3 4.3 146.9 4.3 147.4 4.1 148.1 4.1 148.5 3.8 149.0 3.9 149.5 3.8 11.823.2 11,944.3 12,025.1 12.067.6 12.079.2 12,194.5 12,289.5 12,346.6 Monetary Aggregates($ Billions): Ml . M2 . Real M2 . 3404.5 13330.2 3476.6 3545.9 3596.7 3642.l 3717.7 13500.5 13662.2 13790.3 13871.4 14073.3 3790.6 3843.6 14263.8 14418.8 Price Indicators: Consumer Price Index: All Items (I 982-84=100) . Personal Consumption Expenditures Price Index: Less Food and Energy (2009=100) . GD!' Price Della tor (2009= I 00) . Crude Oil ($/bbl) . 24).9 112.6 112.7 51.8 244.0 112.8 113.0 48.2 245.3 113.2 n i.o 48.2 247.3 113.8 114.3 55.4 249.4 114.5 114.8 62.9 250.9 115.1 115.4 57.2 252.7 115.7 116.1 55.5 254.5 116.4 116.8 62.5 5,506.7 5,830.7 5,558.2 5,765.5 245.5 270.1 267.8 259.9 Existing Homes: Sales, Single-Family & Condo (Thousands. SAAR) ..... Median Price. Sing le-Family ($ Thousands). Price Index. Single-Family (2009= l 00) .. Affordability Index, Single-Family . 5,600.0 232.2 134.6 167.2 5,54(>.9 255.4 148.0 156.7 5,403.3 5,593.3 254.7 247.8 147.7 143.6 160.2 165.5 142.3 16 l.5 156.6 146.7 155.3 148.2 150.7 154.4 Housing Starts (Thousands, SAAR): Total Housing Starts . Single-Family Units . Units in Buildings with 2 Units or More . 1.238.0 839.0 399.0 1.1670 825.0 342.0 1,172.0 848.0 324.0 1,256.0 893.0 363.0 U18.0 889.0 429.0 1,254.0 869.2 384.8 l,315.0 935.0 380.0 1,396.9 976.8 420.1 I ntercst Rates: Federal Funds. Treasury Bill, 90-Day . Prime . T rcasury Bond, l 0- Y car . 30- Y car Fixed Mortgage . Interest Spread (l 0-Year T-Bond Less Fed Funds) . 0.7 0.6 3.8 2.4 4.2 1.7 1.0 0.9 4.0 23 4.0 u 1.2 I. I 4.3 2.2 3.9 l.1 1.2 1.2 4.3 2.4 3 9 1.2 1.5 1.6 4.5 2.8 4.3 u 1.7 1.7 4.6 3.0 4.3 1.3 2.0 1.8 4.6 3.2 4.5 1.2 2.3 1.8 4.7 :u 4.7 l. I f= Forecast 6 ECONOMIC & BUSINESS REVIEW TABLE 4 U.S. VARIABLES Q!)ARTERLY HISTORY AND FORECASTS: 2017:1-2018:4 YEAR-TO-YEAR PERCENTAGE CHANGES 17:1 17:2 17:3 17:4 18:1 18:2f 18:3f 18:4f Details of GDP: GDP ........................... 4.0 3.8 4.1 4.5 4.8 5.0 4.8 4.7 Real GDP (2009 Dollars). ................... ·············-··· 2.0 2.2 2.3 2.6 2.9 2.8 2.6 2.5 Total Consumption ....... .......................................... 2 9 2.7 2.6 2.8 2.6 2.5 2.5 2.4 Gross Private Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7 :u 4.5 Hi 5.8 5.2 3.9 4.0 N onrcsidcntial Investment .... ...................... 3.5 4.3 4.6 6.3 6.l 6.3 6.0 5.4 Residential Structures ........... ................. ................. 2.0 u 1.2 2.6 -0.1 1.2 2.1 1.2 Change in Inventories ......... ··················· Nit\ NIA NIA NIA NIA Nit\ Nit\ NIA Total Government Purchases ...................................... -0.2 0.0 0.0 0 7 1.2 0.7 0.5 0.5 Federal Government Purchases .. -0.6 O.l O.l 1.0 2.0 1.0 0.6 0 8 State and J .ocal Government Purchases 0.0 -0.2 -0. l 0.5 0.6 0.6 0.5 0.5 Net Exports .. .... ····•·······-· -6.5 -7.2 - 7.2 -3.6 -3.8 -3.2 -2.8 -3.7 Total Exports .................... 3.l 3.2 2.2 5.0 4.3 5.6 5.8 5. l Tota I Imports .. ........•..•... ................. .................. 3.8 4.1 3.2 4.7 4.2 5.l 5.2 4.8 Employment: Total Nonlann Payroll Jobs ....................................... 1.7 l.6 1.5 l.5 1.5 1.5 1.5 l .4 Unemployment Rate ..... ····································· -4.7 -12.2 -12.2 -12.8 -12.8 -10.9 -8.5 -6.7 Monetary Aggregates: Ml .. ............................ . .............. 8.7 7.6 7.6 7.6 7.0 6.9 (i.9 6.9 M2 .. .............• 6.4 5.8 5.4 4.8 4.l 4.2 4.4 4.6 Real M2 ....... ..................... ····-··········· 4.4 4.2 3.5 2.9 2.2 2.1 2.2 2.3 Price Indicators: Consumer Price Index: All lll:IJ1S .................................. 2.6 l. 9 2.0 2. l ) ' 2.8 3.0 2.9 --·' Personal Consumption Expenditures Price Index: Less Food and Energy .................................. i.s 1.5 l .4 1.5 1.7 2.0 2.2 2.3 GDP Price Dl:f1ator ............................ . ..•..•..•.•..•..•.•. 2.0 i.« 1.8 i.o l.9 2.l 2.2 2.2 Crude Oil.. ............... ............................. ........................ 56.0 (i2 7.4 12.7 21.5 18.5 15.2 12.9 Existing Homes: Sales. Single-Family & Condo .... 4.5 u 0.4 0.8 -1.7 5.1 2.9 3.1 Median Price, Single-Family ................. 6.9 6.l 5.6 5.3 5.8 5.8 5.1 4.9 Price Index, Single-Family. 6.9 6.1 5.6 5.3 5.8 5.8 5.1 4.9 Affordability Index, Singlc-Fumily -6.9 -5.8 -5.8 -2.6 -3.4 -6.4 -7.5 -6.7 Housing Starts: Total Housing Starts .......... ················ . . . - . . . . . . . . . . . . . 7.4 0.8 l.9 0.6 6.5 7.5 12.2 I l.2 Single-Family Units ....... 6.6 9.l 11.4 7.l 6.0 5.4 10.3 9.4 Units in Buildings with 2 Units or More ...... 9.0 -14.9 -16.7 -12.'., 7.5 12.5 17.3 15.7 Interest Rates: Federal Funds NIA NIA NIA NIA Nit\ 78.9 73.9 87.5 Treasury n.n. 90-Day NIA NIA NIA Nit\ Nit\ 89.2 66.6 47.7 Prime ..... 8.3 15.4 21.4 21.1 19.5 13.7 9.0 8.9 Treasury Bond. 10-Year.. .............................................. 27.1 29.l 43.6 11.3 13.l 32.7 42.9 :-9.2 30-Y ear Fixed Mortgage ................................................ 11.5 I0.9 12.5 2.1 2.6 8.0 I (,.0 19.9 Interest Spread ( IO-Y car 'I-Bond Less Fed Funds) ........ NIA NIA NIA NIA NIA NIA NIA NIA f= Forecast JUNE 2018 7 U.S. VARIABLES TABLE 5 Q!JARTERLY HISTORY AND FORECASTS: 2017:1-2018:4 LEVELS 17: 1 17:2 17:3 17:4 18:1 18:2f 18:3f 18:4f Details of GDP($ Billions): GDP . Real GDP (2009 Dollars) . Total Consumption . 19.057 7 19,250.0 19.500.6 19, 754.1 19,965.3 20,208.4 20.440.9 20,690.:l 16.903.2 17,031.1 17,16:l.9 17.286.5 17.385.8 17,510.5 17,611.6 17.716.8 11.758.0 11.853.0 11.916.6 12,035.2 12,066.8 12.151.8 12.219.6 12.327.2 Gross Private Investment . Nonresidential Investment . Residential Structures ... Change in Inventories Total Government Purchases ... Federal Government Purchases . State and Local Government Purchases ..... Net Exports . Total Exports .. Total Imports . Employment: Total Nonfarm Payroll Jobs (Millions) . Unemployment Rate . 2,897.0 2.263 6 605.5 1.2 2.896.6 I. I 08.4 1,78(J.2 -(>22.2 21623 2,784.5 145.9 4.7 2,924.7 2,300.6 594.1 5.5 2,895.2 I, I J:i. 7 1.779.6 -613.6 2,181.1 2,794.8 146.:l 4.:l 2,976.5 2J26.9 587.0 :l8.5 2,900.0 1,117.4 1.780.7 146.9 4.3 15.6 2,921.5 1.126.2 1.793.5 147.4 4.1 33.1 2,930.0 1,131.0 1.797.2 148.1 4.1 311 2,914.4 1,125.0 1.789.4 148.5 3.8 27.7 2,913.6 1,123.6 1,790.0 149.0 3.9 25.8 2,9'.\7.l 1,134.9 1,802.2 149.5 3.8 -597.5 -65:l.9 -645.9 -63:l.4 -614.2 -678.1 2, 192.4 2.229.8 2,256.3 2,304.1 2,320.2 2.344.5 2,790.0 2,883.7 2,902.2 2,937.5 2,934.5 3,022.6 :l,011.1 3,064.4 3,077.7 3,092.7 3,130.6 2,365.7 2,400.8 2,445.4 2,465.8 2,4'.)2.5 604.9 605.0 601.2 599.1 612.3 Monetary Aggregates ($ Billions): Ml . M2 . 3404.5 l'.\330.2 3476.6 3545.9 '.\596.7 '.\642.1 '.\717.7 13500.5 13662.2 1379(U 13871.4 1407:i.:l 3790.6 3843.6 14263.8 14418.8 Real M2 . 11.823 2 11,944.:l 12,025.1 12,067.6 12,079.2 12. 194.5 12.289.5 I 2.'.\46.6 Price Indicators: Consumer Price Index: All Items ( 1982-84= I 00) .... Personal Consumption Expenditures Price Index: Less Food and Energy (2009=100) . GDP Price Dcflator (2009=100) . Crude Oil ($/bbl).. . . Existing Homes: Sales, Single-Family & Condo (Thousands, SAAR) .. Median Price, Single-Family($ Thousands) ... Price Index, Single-Family (2009=100) .. Affordability Index, Single-Family . Housing Starts (Thousands, SAAR): Total Housing Starts . Single-Family Units........ . . Units in Buildings with 2 Units or More . Interest Ra tcs: Federal Funds.... . . Treasury Bill, 90-Day... . . Prime . T rcasury Bond, I 0- Year . JO-Year Fixed Mortgage Interest Spread ( I 0-Year T-Bond Less Fed Funds). f= Forecast 24:l.9 112.6 112.7 51.8 5,600.0 232.2 l'.\4.6 167.2 1,238.0 8'.\9.0 '.\99.0 () 7 0.6 s.s 2.4 4.2 1.7 244.0 112.8 113.0 48.2 5.546.9 255.4 148.0 156.7 1.167.0 825.0 '.\42.0 1.0 09 4.0 2.3 4.0 1.3 245.3 113.2 113.6 48.2 5.403 :l 254.7 147.7 160.2 1.172.0 848.0 '.\24.0 1.2 1.1 4.3 2.2 :l.9 1.1 247.3 113.8 114.3 55.4 1,256.0 893.0 363.0 1.2 1.2 4.3 2.4 3.9 1.2 249.4 114.5 114.8 62.9 Ul80 889.0 429.0 1.5 1.6 4.5 2.8 4.3 1.3 250.9 115.1 115.4 57.2 1,254.0 869.2 384.8 1.7 l.7 4.6 x.o 4.3 1.3 252.7 115.7 116.1 55.5 1,315.0 935.0 380.0 2.0 1.8 4.6 :l.2 4.5 1.2 254.5 116.4 116.8 62.5 U969 976.8 420. l 2.:l 1.8 4.7 3.3 4.7 1.1 5.593.3 5,506.7 5,830.7 5,558.2 5,765.5 247.8 245.5 270.1 267.8 259.9 143.6 142.3 156.6 155.3 150.7 165.5 161.5 146.7 148.2 154.4 8 ECONOMIC & BUSINESS REVIEW TABLE 6 U.S. VARIABLES QlJARTERLY HISTORY AND FORECASTS: 2017:1-2018:4 QlJARTER--TO-QlJARTER PERCENTAGE CHANGES 17:1 17:2 17:3 17:4 18:1 ]8:2f ]8:3f 18:4f Details of GDP: GDP ...... ................ . .............................. :u 4.l 5.3 5.3 4.3 5.0 4.7 5.0 Real GDP (2009 Dollars) l.2 3.1 3.2 2.9 2.3 2.9 2.3 2.4 Total Consumption .................. ....................... 1.9 3.3 2.2 4.0 I.I 2.8 2.2 3.6 Gross Private Investment ............................................ -1.2 3.9 7.3 4.7 7.3 1.7 2.0 5.0 Nonresidential Investment ....................................... 7.2 6.7 4.7 6.8 6.1 7.6 3.4 4.4 Residential Structures .... . . . . . . . . . . . . . . . . . -··-·············· 11.l -7.3 -4.7 12.8 0.0 -2.5 -1.4 9.1 Change in Inventories ...... . . . . . . . . . .. . ... . . . . .............. NIA NIA NIA NIA NIA NIA NIA NIA Total Government Purchases . . . . . . . . . . . . . . . . -0.6 -0.2 0.7 3.0 l.2 -2.1 -0.1 3.3 Federal Government Purchases ................................ -2.4 1.9 u 3.2 l.7 -2.1 -0.5 4.1 State and Local Government Purchases ................... 0.5 -1.5 0.2 2.9 0.8 -1.7 0.1 2.8 Net Exports ...... ......................................... . ............... 5.7 5.6 10.9 -32.7 5.0 8.0 12.7 -35.5 Total Exports .. . . . . . . . . . . . . . . . 7.3 3.5 2.1 7.0 4.8 8.7 2.8 4.3 Total Imports . . . . . . . . . . . . . . . . ............. 4.3 1.5 -0.7 14.1 2.6 5.0 -0.4 12.6 Employment: Total Nonfarm Payroll Jobs ...................... ···················· 1.6 ]J 1.5 1.5 1.7 ]J 1.3 1.4 Unemployment Rate ...... ..........••.•..•....•.••.•. . ..•....•..•.•.. - 0.0 -29.9 0.0 -l 7.3 0 .0 -23.9 I 1.4 - I 0.5 Monetary Aggregates: Ml .......... . ......................... 7.6 8.7 8.2 5.9 5.1 8.6 8.1 5.7 M2 ..... . .......................... ......................... 5.2 5.2 4.9 3.8 2.4 6.0 5.5 4.4 Real M2 ............... ······················-··························· 3.l 4.2 2.7 1.4 0.4 3.9 3.2 1.9 Price Indicators: Consumer Price Index: All Items .................... 3.0 0.1 2.1 3.3 3.5 2.3 2.9 3.0 Personal Consumption Expenditures Price Index: Less Food and Energy ................................................. l.8 0.9 ]J l.9 2.5 2.1 2.3 2.5 GDP Price Deflutor ...... ·····················-········· 2.0 1.0 2.1 2.3 2.0 2.0 2.3 2.5 Crude Oil... . ......................................................... 23.2 -24.6 -0.7 74.7 66.4 -31.7 -11.4 61.5 Existing Homes: Sales, Single-Family & Condo ............•..• 3.9 -:i.7 -10.0 14.8 -6.1 25.7 -17.4 15.8 Median Price, Single-Family .... ............... ··············-······ -5.4 46.4 -1.0 -10.5 -3.6 46.5 -:.u -113 Price Index, Single-Family .......................... .................. -5.4 46.4 -1.0 - l0.5 -3.6 46.5 -3.3 -11.:i Affordability Index, Single-Family . . . . . . . . . . . . . . . . . -6.2 -22.9 9.2 13.9 -9.3 -32.0 4.3 17.6 Housing Starts: Total Housing Starts ................... ................................... -3.2 -21.0 1.7 :, 1.9 2U -18.0 20.9 27.3 Single-Family Units ...... ........•....•..•.....• 2.4 -6.5 11.6 23.0 -1.8 -8.6 33.9 19.1 Units in Buildings with 2 Units or More ... ················· -13.7 -46.0 -19.4 57.6 95.1 -35.3 -4.9 49.4 Interest Rates: Federal Funds . . . . . . . . . . . . . . . . . . . . ............................ NIA NIA 114.7 18.6 113.2 88.9 NIA 60.2 Treasury Bill, 90-Day ........... . . . . . . . . . . . . . . . . . . . . . . . NIA NIA 92.4 813 172.:i 34.9 15 6 12.1 Prime ..... . .............. 29.9 29.1 22.5 4.8 NIA 5.6 3 (i 4.4 Treasury Bond, 10-Ycar ................................................. 72.2 -26.4 .s.s 25.3 83.9 39.6 29.5 n. l 30-Y car Fixed Mortgage ........................................ 39.1 -17.0 -9.7 4.2 42.l 1.9 19.9 19 0 Interest Spread ( I 0-Year 'I-Bond Less Fed Funds) 15.1 -67 9 -52.1 32.8 57.2 -s.o -27.4 -41.4 f= Forecast JUNE 2018 9 2018 CALIFORNIA FORECAST UPDATE CALIFORNIA PICKS UP STEAM ... THANKS TO HOUSING Annual % Change . . : . . . . . . . . '17 '18 '16 '15 '14 7 5 4 '13 8 (i Annual % Change 9 ------------------------------, CONSTRUCTION EMPL.OYM ENT PAYROLL EMPLOYMENT That increase will be the single most important factor pushing California job growth from 1.9 percent in 2017 to 2.3 percent in 2018. That compares to our U.S. forecast of 1.5 percent growth. Such trends will restore the positive gap in job growth when California is compared to the U.S. will stabilize and show marginally higher growth rates in 2018. A more important engine of economic growth in 2018 will occur in the construction industry. Our forecast calls for construction job growth to increase from 4.2 percent in 2017 to 8.9 percent in 2018. This would result in the cre- ation of 72,000 construction jobs this year, more than dou- ble the 33,000 constructionjobs created in 2017. 'J(i '17 '15 '14 __ _J '13 '12 ; :� ,- C'Al ll�R=---··----------- - -------·------- 2.5 2.0 1.5 I 1.0 '11 PAYROLL EMPLOYMENT Most of the decline in California's job growth last year can be attributed to a decline in service-related jobs. After increasing at a 2.8 percent rate in 2016, this sector's growth dropped to 2.1 percent in 2017. In terms of num- bers of jobs, California created 324,000 new service jobs in 2016 but only 248,000 jobs were added in 2017. That decline of 76,000 new jobs shaved about a half of a per- cent from California's job growth from 2016 to 2017. Most of the decline in creating new services jobs is explained by sharp drops in three services sectors: finan- cial activities, information and leisure & hospitality. Since 2011, California has outpaced the U.S. in payroll job growth. But the differential narrowed as job growth in California dropped from 2.6 percent in 2016 to 1.9 percent in 2017. EMPLOYMENT GROWTH IN SELECT SERVICES SECTORS Annual %, Change 3.5 ---------------·------------� Annual % Change ... ... ... '17 '18 'I (1 '15 '14 -�-----------------J 2.0 1.5 1.0 '13 3.0 2.5 3.8 8.2 i);(fr{�/ ··-;··' ,,,.;_,, ·;w 0.4 4 () 8 (, 10 ·---------------·--···---·------·--·--·--- .. · -------- --------- [-- 2016•2017] Moving into 2018, we see no resurgence of growth in these three service-related job sectors. But we believe they Financial Activities Information Leisure & Hospitality The strong growth we are forecasting for construction jobs is tied to our forecast of a rapid pickup in residential building permits in 2018. This pickup is fueled by a tight supply of unsold housing, illustrated in the following fig- ure. 10 ECONOMIC & BUSINESS REVIEW SUPPLY OF UNSOLD HOMES HOUSING PERMITS Months Thousands of Units 'I sr '17 'I(, '15 '14 .. �-------------·-----------· LM�nily _ • Singl�-FnmiJi] I'.) l .4 I IJ.4 98.1 ]()!.() · 85.8 () 40 80 [20 160 () -----------------------·-- '95 '97 '99 'OJ '03 '05 '07 '09 '11 '13 '15 '17 lndcx HOUSJ NG AFFORDABILITY Our forecast that the 30-year mortgage rate will increase to 4.7 percent by year-end will cause housing affordability to decline in 2018. HOUSING APPRECIArJON One might believe that such a high rate of housing pro- duction will tend to dampen the rate of housing apprecia- tion in California. But in a separate article in this Review ("Don't Believe the Doomsday Scenarios on our Housing Needs," pages 22-23), an analysis of demographic and socio-economic trends suggests that the forecasted number of 131,400 units in 2018 is roughly in line with what Cal- ifornia will require annually through 2025. That means the relatively high rate of housing production will not lead to a decline in housing appreciation. Rather, it is simply what's necessary to keep pace with growing demand and what will be required to maintain the household popula- tion to housing unit ratio at the curent level of 2.97. Our forecast calls for housing appreciation in California to remain at a relatively high level of 7 .0 percent in 2018. In comparison, U.S. housing appreciation is forecasted to slow to 5 .4 percent. ---------------------- -- --- --·-1 �--j 'O(i '07 '08 '09 ' l O 'I I ' 12 '13 ' 14 '15 ' l Ci 'I 7 ' 18 60 40 140 120 100 80 The constraint posed by a lack of affordable housing in California will lead to a 20.4 percent increase in multi- family rental housing permits in 2018 versus a lower increase of 11.3 percent in single-family permits. Annual 'Yr, Change '18 '17 '16 '15 (i ! L � '14 CALIFORNIA FORECAST TAHUS Tables 7 to 10 present details of Payroll Employment, Per- sonal Income, Taxable Sales, Existing Homes and Construction Activity. Tables 7 and 8 present annual levels and rates of change. Tables 9 and 10 present quarterly levels and year-to- year percentage changes on a quarterly basis. Percent I I · ---- ·--···-···------·------·· ····----·---- -----·------ 10 9 8 7 '18 '17 ,,•' 'IG '15 ----------------------- ·1 SINGLE-JAMii Y ............ __ J 25 20 15 IO 5 0 -5 '14 HOUSING PERMITS Total housing permits are forecasted to increase almost 16 percent to 131,400 units in 2018. This will be the high- est level of housing production since the 164,300 permits issued in 2006, prior to the Great Recession. JUNE 2018 11 CALIFORNIA VARIABLES TABLE 7 ANNUAL HISTORY AND FORECASTS: 2013-2018 LEVELS 2013 2014 2015 2016 2017 2018f Payroll Employment (Thousands): Total Payroll Employment ......... ................... 15.154 15.578 16,056 16.479 16,794 17.178 Mining & Natural Resources ....................... 31 32 29 22 22 23 Construction ........... 637 674 732 775 808 880 Manufacturing .................................... 1,263 1,280 1,302 1,311 1,310 1,117 Durable Goods ..... ........................ 790 802 818 821 823 836 Nondurable Goods ......................... 473 478 483 490 487 481 Services ......................................... ]0,849 I 1,178 11,531 11,855 12, 10:l 12J81 Trade, Transportation & Utilities ... 2,789 2.858 2,932 2.990 3.039 3,094 Wholesale Trade 692 707 715 718 722 732 Retail Trade ........... 1.595 1,628 1,661 1,679 1,692 1.712 Transportation & Warehousing 443 465 498 534 567 593 Utilities ....... 59 58 58 59 58 57 Financial Activities .............. 7X2 782 801 822 830 840 Information ........ 449 462 486 526 528 536 Professional & Business ........................... 2.335 2,413 2.481 2.522 2,560 2.622 Education & Health ....... .......................... 2JOJ 2.370 2,455 2,541 2,634 2,722 Leisure & Hospitality .... ................... 1,676 l.758 l.830 1,900 1.949 2,000 Other Services . . . . . . . - . . - . . . . . . . . . . . . . 517 536 545 555 563 567 Government .. 2,374 2.414 2,463 2,515 2,551 2,577 Federal Civilian Government. ................. 246 242 244 248 248 244 Stale & Local Government. . . . . . . . . . . . . . . . . . . . . . 2,129 2,172 2,219 2,268 2.303 2.332 Personal Income($ Millions): Total Personal Income .... .................... l.8(11,957 1,986,026 2,133.664 2,212,691 2.303,871 2,417,351 Taxable Sales($ Millions): Total Taxable Sales ....................................... 586,840 615,822 633.942 649,079 664,295 685,034 General Merchandising and Clothing .......... <)7,643 100,477 99,174 101,117 103,920 107,134 All Food and Drink ............ 88.066 94.163 101,829 106,715 109,953 113,346 Motor Vehicles and Parts ..... 67,986 73,232 80,347 84.226 86.985 89,286 Service Stations. . . . . . . . . . . . . . . . 56.861 55.733 47,398 42,731 44,524 47,827 All Other .............. 276,284 292.216 305,195 314,291 318,913 327,442 Existing Homes: Sales. Single-Family & Condo. 1.655.666 1.530.870 1.637,633 1.665,673 1,695,070 1,731,288 Median Price, Single-Family ... 407,528 448.670 475.668 502,166 537,261 574,701 Price Index (2009=100), Single-Family 147.3 162.2 171.9 181.5 194.2 207.7 Affordability Index, Single-Family ··············· 92.4 84.2 85.8 87.3 81.9 76.l Building Permits: Total Residential Permits ..................... 85,310 85,846 98,073 100.961 l 13J84 131,430 Residential, Single-Family ............... .,6,878 37,091 44)196 49,208 56, I 07 62,453 Residential. Multi-Family 48.4.U 48.755 53.177 5 l.753 57,277 68,977 Building Permit Valuation($ Millions): Total Building Permit Valuation .... ............... 44.652 48.082 55J79 58,588 62,079 71,553 Total Residential Valuation ............... 2:1.200 24.624 2<),341 31,446 35,125 40,577 Residential. Single-Family ... 11,030 11,474 14.126 15,557 17,189 19.65(, Residential, Multi-Family .. . . . . . . . . . . . . . . . . . . . 7,317 7,358 8,494 8,803 10.635 13, I 09 Additions. Renovations ........ 4,853 5,792 6,721 7.086 7,301 7.811 Total Nonresidential Valuation .... 21,452 23,458 26.038 27-142 26.954 30,976 f = Forecast 12 ECONOMIC & BUSINESS REVIEW TABLE 8 CALIFORNIA VARIABLES ANNUAL HISTORY AND FORECASTS: 2013-2018 YEAR-TO-YEAR PERCENTAGE CHANGES 2013 2014 2015 2016 2017 2018f Payroll Employment: Total Payroll Employment ......... -·-················ 2.6 2.8 :u 2.6 1.9 2.3 Mining & Natural Resources ... 0.2 3.1 -8.8 -22.2 -1.7 2.7 Construction ................. 8.0 5.8 8.5 6.0 4.2 8.9 Manufacturing ............................................. 0.1 1.4 1.7 0.7 -0.1 0.5 Durable Goods ........................................ 0.0 1.5 2.1 0.3 0.3 1.6 Nondurable Goods. ················-················ 0.4 1.1 1.0 1.5 -0.7 -1.2 Services ..................... ............... :u Hl 3.2 2.8 2.1 2.3 Trade, Transportation & Utilities .. 2.1 2.5 2.6 2.0 1.7 1.8 Wholesale Trade 2.5 2.1 1.2 0.4 0.6 1.4 Retail Trade ............. -··························· 1.6 2.1 2.0 1.0 0.8 1.2 Transportation & Warehousing ............ 3.7 4.9 7.0 7.3 6.2 4.5 Utilities ............... ·················· -0.8 -1.8 0.1 2.6 -1.7 -1.7 Financial Activities 1.2 -0.1 2.5 2.6 0.9 1.3 Information ................... .................... 3.1 3.0 5.3 8.2 0.4 1.5 Professional & Business ·-·-······················ 4.4 3.4 2.8 1.6 1.5 2.4 Education & Health 3.4 3.0 3.6 3.5 3.6 3.3 Leisure & Hospitality .....•..........• 4.9 4.9 4.1 3.8 2.6 2.6 Other Services ........... ............................. 2.4 3.8 1.7 1.9 13 0.8 Government .. -0.1 1.7 2.0 2.1 1.4 1.0 Federal Civilian Government .................. -2.0 -1.3 0.8 13 0.1 -1.5 State & Local Government .... .................. 0.1 2.0 2.2 2.2 1.6 1.3 Personal Income: Total Personal Income .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 6.7 7.4 3.7 4.1 4.9 Taxable Sales: Total Taxable Sales ······································· 5.1 4.9 2.9 2.4 2.3 3.1 General Merchandising and Clothing .......... 4.8 2.9 -1.3 2.0 2.8 3.1 All Food and Drink ......... 5.4 6.9 8.1 4.8 3.0 3.1 Motor Vehicles and Parts 10.5 7.7 9.7 4.8 3.3 2.6 Service Stations -2.0 -2.0 -15.0 -9.8 4.2 7.4 All Other 5.4 5.8 4.4 3.0 1.5 2.7 Existing Homes: Sales, Single-Family & Condo ······················ -5.9 -7.5 7.0 1.7 1.8 2.1 Median Price. Single-Family ..........•...........•.. 26.8 ]().] 6.0 5.6 7.0 7.0 Price Index (2009=100), Single-Family ......... 26.8 JO.I 6.0 5.6 7.0 7.0 Affordability Index, Single-Family -21.6 -8.8 1.9 1.7 -6.2 -7.0 Building Permits: Total Residential Permits . 43.0 0.6 14.2 2.9 12.3 15.9 Residential, Single-Family. 33.8 0.6 21.0 9.6 14.0 11.3 Residential, Multi-Family .. 51.0 0.7 9.1 -2.7 10.7 20.4 Building Permit Valuation: Total Building Permit Valuation .................... 37. l 7.7 15.2 5.8 Ci.O 15.3 Total Residential Valuation .... .................... 29.5 6.1 19.2 7.2 11.7 15.5 Residential, Single-Family 333 4.0 23.1 JO. I 10.5 14.4 Residential, Multi-Family ... 42.2 o.s 15.4 3.6 20.8 23.3 Additions, Renovations .......................... 7.8 19.4 16.0 5.4 3.0 7.0 Total Nonresidential Valuation . . . . . . . . . . . . . . . . . . . 46.5 9.4 11.0 4.2 -0.7 14.9 r = Forecast JUNE 2018 13 CALIFORNIA VARIABLES TABLE 9 Ql.}ARTERLY HISTORY AND FORECASTS: 2017:1-2018:4 LEVELS Payroll Employment (Thousands): Total Payroll Employment . Mining & Natural Resources . Construction .... Manufacturing. Durable Goods . Nondurable Goods. Services .. Trade, Transportation & Utilities. Wholesale Trade . Retail Trade . Transportation & Warehousing . Utilities ..... Financial Activities . lnfonnation.... . . Professional & Business . Education & Health . Leisure & Hospitality . Other Services . Government Federal Civilian Government State & Local Government. .... 17:1 16,566 21 763 l ,300 819 481 11,919 2.997 714 1,673 551 59 823 524 2.519 2,605 l,897 554 2.563 247 2,3 ](, 17:2 16,804 22 805 IJ08 821 488 12,076 3,010 723 l,670 558 59 830 521 2,551 2,631 l,967 567 2,593 249 2J44 17:3 1(,,755 23 833 1,323 826 497 12,123 3,029 725 1,677 569 58 832 529 2,578 2.619 1,971 565 2,452 248 2.204 17:4 17,052 22 832 1,310 828 482 12.293 3,122 726 J,748 590 58 83:1 538 2,594 2.680 1.962 565 2,595 247 2,:147 18:1 16,915 21 826 IJ06 8:12 475 12.171 :1,045 723 1,688 576 58 83 l 527 2,571 2.694 1,946 556 2,590 244 2J46 18:2f 17.186 22 876 IJ15 8:1:1 482 12.35:1 :1.062 7:1:1 1,688 58:1 58 840 528 2.61:1 2,719 2,019 571 2.619 245 2.:174 18:3f 17,150 24 908 LJ31 840 492 12,410 :1.084 7:15 1,698 594 57 844 540 2,644 2,706 2.022 570 2,477 245 2,233 18:4f 17,460 23 910 1,317 841 476 12,589 :1,18:1 7:16 1,772 617 57 845 550 2,658 2.768 2,014 571 2.621 244 2J77 Personal Income($ Millions): Total Personal Income . 566,880 574,075 578,149 584.766 59:1,302 601,826 607.210 615,012 Taxable Sales($ Millions): Total Taxable Sales . General Merchandising and Clothing . All Food and Drink . Motor Vehicles and Parts . Service Stations ..... All Other . 154,695 2:1.623 26,247 21,055 10,828 166.491 25,818 27,676 21,45:1 10,926 22,417 11,408 22,061 I lJ6:1 159.162 171.975 174,054 179.844 24JOO 26,604 26,828 29,40 I 26,993 28,548 29.016 28,790 21,525 21.929 23,07:1 22,758 11,698 l 1,7:n 12,249 12, 148 72,942 80,620 80,242 85, II o 74,646 83. 161 82,887 86,747 168,218 174.891 26,015 28,464 28,137 27.89:1 Existing Homes: Sales. Single-Family & Condo (SAAR). Median Price. Single-Family Price Index (2009=100). Single-Family Affordability Index. Single-Family. Building Permits: Total Residential Permits Residential, Single-l-amily Residential. Multi-Family Building Permit Valuation($ Millions): Total Building Permit Valuation . Total Residential Valuation . Residential. Single-Family . Residential, Multi-Family . Additions, Renovations .. Total Nonresidential Valuation. f= Forecast 22,045 11,484 10.561 13,359 7,242 3.546 1.985 1,7]0 6,118 :15J77 16.996 18J81 l 8.214 I 0,462 5,277 :1.209 1.975 7,752 24,559 1:1,662 10,897 15J12 8,641 4,117 2,650 1,874 6,671 :11,40:1 l'.1,965 17,438 15,19:1 8,780 4,249 2,790 1.741 6,41:1 26.927 l:1,677 1:1,250 16,1:10 8,525 4,:121 2J65 1,8:19 7,605 41,948 19,529 22,420 21,456 12,410 6.212 4,080 2,117 9.046 27,988 14,525 1:1,46:1 17,299 9,885 4,507 3J77 2,002 7,414 :14,567 14,722 19,845 16,668 9,757 4,616 :1,288 1,853 6.911 412.070 426,690 425,517 430,79:1 418,655 439, 124 4:16,171 437J:18 496.90:1 547,80:1 556,7:13 547,60:1 5:18,350 587,358 592,822 580,274 179.6 198.0 201.2 197.9 194.6 212.3 214.2 209.7 85.:1 79.6 80.6 82.1 81.5 75.2 7:1.7 74.1 14 ECONOMIC & BUSINESS REVIEW TABLE 10 CALIFORNIA VARIABLES Q!JARTERLY HISTORY AND FORECASTS: 2017:1-2018:4 YEAR-TO-YEAR PERCENTAGE CHANGES Payroll Employment: Total Payroll Employment . Mining & Natural Resources . Construction . Manufacturing . Durable Goods . Nondurable Goods . Services . Trade, Transportation & Utilities . Wholesale Trade . Retail Trade .. Transportation & Warehousing . Utilities . Financial Activities . Information . Professional & Business . Education & Health . Leisure & l Iospitality . Other Services . Government . Federal Civilian Government . State & Local Government. . Personal Income: Total Personal Income . Taxable Sales: Total Taxable Sales . General Merchandising and Clothing . All Food and Drink . Motor Vehicles and Parts . Service Stations . All Other Existing Homes: Sales, Single-Family & Condo . Median Price, Single-Family . Price Index (2009= I 00), Single-Family . Affordability Index, Single-Family . Building Permits: Total Residential Permits . Residential, Single-Family . Residential, Multi-Family . Building Permit Valuation: Total Building Permit Valuation . Total Residential Valuation . Residential, Single-Family . Residential, Multi-Family . Additions, Renovations . Total Nonresidential Valuation . JUNE 2018 17: 1 2.0 -9.3 2.6 0.1 -0.1 0.4 ') ' -··" 2.0 0.2 l.O 7.9 -0.2 1.6 1.7 I. I 3.9 3.0 1.4 1.9 1.4 2.0 4.0 2.4 1.4 2.8 4.7 12.0 0.6 5.3 6.8 6.8 -6.6 -4.5 7.6 -14.9 -3.3 5.5 6.2 1.6 8.7 -I 2.0 17:2 2.1 -2.8 4.5 0.0 0.2 -0.2 2.3 1.9 0.8 0.9 6.9 -1.7 1.2 -1.6 1.8 3.7 3.1 2.0 1.6 0.5 1.8 4.1 1.6 2.5 3.0 2.6 -0.9 l.O 1.2 6.2 6.2 -6.3 27.l 18.2 36.5 14.1 19.3 16.2 46.5 -3.1 7.8 17:3 2.0 3.0 4.7 -0.1 0.5 -1.2 2.1 1.6 0.7 0.7 5.9 -2.3 0.8 (U 1.9 4.1 2.1 1.2 -0.3 1.4 3.9 2.4 3.6 3.5 2.4 2.2 1.6 l.2 7.4 7.4 -7.5 3.4 19.2 -11.4 6.6 12.3 9.3 25.7 3.1 0.0 17:4 1.8 2.8 5.2 o.o 0.9 -1.5 1.9 1.5 LO 0.8 4.4 -2.:1 0.4 1.5 1.6 3.1 2.4 0.9 I. I -1.0 1.3 4.5 3.2 3.5 2.9 3.6 4.6 2.8 -0.1 7.6 7.6 -4.4 19.5 10.0 28.4 5.2 8.2 8.7 9.3 5.1 1.4 18:1 2.1 2.4 8.3 0.5 1.5 -1.4 2.1 l.6 1.3 0.9 4.7 -2.0 0.9 0.5 2.1 3.4 2.6 0.3 1.0 -1.5 1.3 4.7 2.9 2.9 2.8 2.2 8.0 2.:1 1.6 8.3 8.3 -4.4 22.1 19.l 25.5 20.7 17.7 21.9 19.1 7.5 24.3 18:2f 2.3 2.6 8.8 0.5 1.5 -1.1 2.3 1.7 1.4 1. l 4.4 -1.8 1.3 1.5 2.5 3.4 2.6 () 7 1.0 -1.5 1.3 4.8 3.3 3.0 3.2 2.2 7.4 :1.2 2.9 7.2 7.2 -5.5 18.6 14.9 220 17.8 18.6 17.7 27.1 7.2 16.7 18:3f 2.4 2.7 9.1 0.6 1.6 -I. I 2.4 u 1.4 1.3 4.5 -1.6 1.4 1.9 2.5 3.3 2.6 LO 1.0 -1.5 1.3 5.0 3.5 3.1 3.1 2.9 7.4 :1.:1 2.5 6.5 6.5 -8.6 14.0 6.3 23.5 13.0 14.4 9.5 27.4 6.8 11.1 18:4f 2.4 2.9 9.4 0.5 1.5 -1.2 2.4 2.0 1.4 1.4 4.6 -U l.5 2.1 2.5 3.3 2.6 1.2 1.0 -1.5 1.3 5.2 2.8 3.3 3.2 3.2 6.9 1.9 1.5 6.0 6.0 -9.8 Ill.I 5.4 13.8 9.7 l l. l 8.6 17.8 6.4 7.8 15 2018 ORANGE COUNTY FORECAST UPDATE THE COUNTY IS A LEADER NOT A LAGGARD 2017 2016 2015 2014 Construction 24,000 30.8% 6.9% Professional & Business 35,000 13.1% 3.1% Education & Health 30,000 16.1% J.8%1 Leisure & Hospitality 30,000 15.9% 3.8% Total of Above Sectors 119.000 16.5% 3.9% Johs 0/o A,�. Annual Sector Created Increase 01., Increase 3 2 (} PAYROLL EMPLOYMENT 4 Annual % Change The average annual rate of increase of 3 .9 percent in the above four sectors compares to lower growth of 1.2 per- cent in all other job sectors. This disparity speaks to the growing relative importance of these categories in the Orange County economy. The construction and professional & business sectors generated average salaries higher than the $58,344 aver- age for all job sectors. The other two sectors, however, were lower, especially leisure & hospitality. When compared to California, the following figures show that Orange County's job growth not only caught up with the state but slightly exceeded it. 17:3 17:2 --------· 17: I 16:4 16:3 2 (} 4 3 Annual% Change Now that we have job numbers where we can be more confident in their historical accuracy, we can analyze longer-term trends. Such an analysis should help shed light on the changing face of Orange County. As shown in the following table, most of the 155,000 Ordinarily, we revise our projections to agree with the jobs (77 percent) created in Orange County between 2013 EDD. The differences each quarter of about two percent, and 2017 occurred in four sectors. however, were too great to ignore. We also received com- pelling evidence from the Quarterly Census of Employ- JOH CREATION. 2013-2017 ment and Wages (QCEW), which comes out about six months after the EDD estimates. Rather than being based on a sample, the QCEW job numbers are based on near census employment. Those numbers were almost exactly in line with Chapman's projections. As a result, at our forecast conference in December, we revised the job numbers to coincide with our projections rather than use EDD's. This was a critically important decision, because it resulted in our forecast that payroll jobs in Orange County would increase by 2.6 percent in 2018 instead of the 0.8 percent growth based on EDD's estimates. The significance of this is that our forecast called for Orange County to be a leader in generating new jobs versus being a laggard. Our decision was validated in March, when EDD issued its annual benchmark revision that sharply revised its job numbers to compare more closely with the QCEW and Chapman projections. At our December forecast, we were in a quandary about a sharp deviation that occurred between our quarterly fore- casts for Orange County job growth and those being reported by the Employment Development Department (EDD). While our projections pointed to relatively strong job growth in Orange County, as compared to other Cali- fornia counties, EDD's official estimates showed virtually no growth. PAYROLL EMPLOYMENT 16 ECONOMIC & BUSINESS REVIEW Sector 2017:3 AVERAGE ANNUAL SALARY Construction Professional & Business $69,576 $66.820 single-family permits have helped offset the sharp decline in multi-family units. It is too early to tell whether that decline is related in a significant way to concerns over mounting political pressure to institute rent controls in Orange County. Education & 1-lcallh $49.556 HOUSING PERMITS Leisure & Hospitality $26,312 Thousands PAYROLL EMPLOYMENT Salaries lower than the overall average of $58,344 in two of the job sectors appear to cancel out the higher salaries of the other two. That fact does not auger well for overall income growth. These trends may explain why, between 2013 and 2017, median family income grew at an average annual rate of3.9 percent in Orange County com- pared to a higher 4.4 percent growth in California. Among the four sectors that generated the most new jobs in Orange County, construction is clearly a standout. Its 6.9 percent annual average growth is roughly double that of the other three sectors. Coupled with the powerful multiplier effects that building activity has on other job sectors, the growing importance of the construction sector in shaping the county's economic outlook should be clear. Our forecast calls for construction to pick up even more steam in 2018, growing at a 5.8 percent rate versus the 4.5 percent increase in 2017. This will help fuel overall job growth of 2.4 percent in Orange County in 2018, roughly the same as the 2.3 percent growth we are forecasting for California and significantly higher than our forecast of 1.5 percent growth for the U.S. HOUSING APPRECIATION '18f '17 '16 '15 '14 TOTAL �---------·----------� '13 14 12 IO Percent 12 10 "- Housing affordability, which measures a family's abili- ty to afford a median-priced home, is projected to contin- ue a steady decline that started in late 2016, when the affordability index hit 72.6. By the fourth quarter of 2017, the index dropped to 68.3, and we project a further drop to near 60.0 by year-end 2018. Despite decreasing housing affordability in the county, we see tight supplies of homes available for sale, con- tributing to another year of relatively high housing price appreciation. $58.344 All Sectors '18 '17 '16 '15 '14 4 2 ORANGF COUNTY FORECAST TABLES Tables 11 to 14 present details of Payroll Employment, Per- sonal Income, Taxable Sales, Existing Homes and Construction Activity. Tables 7 and 8 present annual levels and rates of change. Tables 9 and 10 present quarterly levels and year-to- year percentage changes on a quarterly basis. 8 6 2.4 2018f 2017 2.6 2.6 I � 71 2.3 1_11L9li 2016 1.8 2 () 4 3 Orange County's job growth is being fueled by housing permit activity. Although total permits is expected to hit a post-recession high of 11,200 units, it should be noted that Annual % Change JUNE 2018 17 ORANGE COUNTY VARIABLES TABLE 11 ANNUAL HISTORY AND FORECASTS: 2013-2018 LEVELS 18 Payroll Employment (Thousands): Total Payroll Employment . Mining & Natural Resources . Construction . Manufacturing . Durable Goods . Nondurable Goods . Services . Trade, Transportation & Utilities . Wholesale Trade . Retail Trade . Transportation & Warehousing . Utilities . Financial Activities . Information . Professional & Business . Education & Health . Leisure & Hospitality . Other Services . Government . Federal Civilian Government . State & Local Government.. . Personal Income($ Millions): Total Personal Income . Taxable Sales($ Millions): Total Taxable Sales . General Merchandising and Clothing . All Food and Drink . Motor Vehicles and Parts . Service Stations . All Other . Existing Homes: Sales, Single-Family & Condo . Median Price, Single-Family . Price Index (2009=100), Single-Family . Affordability Index, Single-Family . Building Permits: Total Residential Permits . Residential, Single-Family . Residential, Multi-Family . Building Permit Valuation($ Millions): Total Building Permit Valuation . Total Residential Valuation . Residential, Single-Family . Residential, Multi-Family . Additions, Renovations . Total Nonresidential Valuation . f= Forecast 2013 2014 2015 2016 2017 2018f 1,463 1,497 1,544 1,584 1,618 1,656 0.6 0. 7 0.6 0.6 0.7 0.7 78 83 92 97 102 108 158 157 157 157 159 158 115 115 115 I 15 116 115 43 42 42 42 43 43 1,077 1,103 1,139 1,170 1.196 1,226 252 256 259 260 263 265 79 81 81 81 82 83 146 148 151 152 154 154 24 23 24 24 25 25 4 3 3 3 3 3 113 114 116 118 119 120 25 25 26 26 27 28 267 277 287 297 302 313 186 191 199 206 216 226 188 194 204 212 218 224 46 47 49 50 50 51 149 152 156 160 161 163 11 II 11 II 11 11 138 141 145 148 149 152 166,370 174,586 188,472 196,921 205,389 215,479 57,591 60,097 61,358 62,51 I 64,006 65,639 8,933 9,150 8,836 8,892 9,089 9,342 8,298 8,814 9,636 10,020 10,230 10,524 7,148 7,766 8,353 8,649 8,915 9,063 4,707 4,675 3,768 3,347 3,552 3,838 28,506 29,693 30,766 31,604 32,220 32,871 33,427 29,697 33,016 33,178 33,453 34,071 647,929 686,508 702,918 733,113 778,292 833,792 128.1 135.7 139.0 145.0 153.9 164.9 70.3 66.2 69.4 71.1 67.4 62.6 10,453 10,636 10,897 12,134 9,593 I 1,204 3,889 3,646 3,667 4,226 5,163 5,800 6,564 6.990 7,230 7,908 4,430 5,404 4, 175 4,634 5,030 5,647 5,605 6,695 2,654 2,640 2,834 3,160 3,321 3,908 1,238 1,234 1,288 1,465 1,808 2,036 995 985 1,052 1,196 993 1,346 421 421 494 499 520 526 1,521 1,993 2,196 2,487 2,284 2,787 ECONOMIC & BUSINESS REVIEW TABLE 12 ORANGE COUNTY VARIABLES ANNUAL HISTORY AND FORECASTS: 2013-2018 YEAR-TO-YEAR PERCENTAGE CHANGES Payroll Employment: Total Payroll Employment Mining & Natural Resources .... Construction . Manufacturing . Durable Goods . Nondurable Goods . Services . Trade, Transportation & Utilities . Wholesale Trade Retail Trade . Transportation & Warehousing . Utilities . Financial Activities . Information . Professional & Business . Education & Health . Leisure & Hospitality . Other Services . Government . Federal Civilian Government . State & Local Govcrnment.. . Personal Income: Total Personal Income . Taxable Sales: Total Taxable Sales . General Merchandising and Clothing .... All Food and Drink . Motor Vehicles and Parts . Service Stations . All Other Existing Homes: Sales, Single-Family & Condo Median Price, Single-Family Price Index (2009= l 00), Single-Family . Affordability Index, Single-Family . Building Permits: Total Residential Permits . Residential, Single-Family . Residential, Multi-Family . Building Permit Valuation: Total Building Permit Valuation . Total Residential Valuation . Residential, Single-Family . Residential, Multi-Family . Additions, Renovations . Total Nonresidential Valuation . f= Forecast JUNE 2018 2013 2.7 5.5 7.6 -0.2 0.5 -2. l 3.1 u 2.8 l. l -0.8 -8.7 4.4 2.8 2.6 5.1 4.0 2.1 0.6 -0.9 0.7 -1. 9 4.3 4.6 4.9 9.1 -7.1 4.9 1.4 20.3 20.3 -18.8 69.6 59.5 76.2 -40.0 -53.4 64.4 127. l -90.7 20.2 2014 2.3 9.1 6.0 -0.4 0.3 -2.3 2.4 1.4 l.9 2.0 -2.3 -10.7 0.5 -1.7 3.5 2.6 3.6 3.7 2.4 -0.2 2.6 4.9 4.4 2.4 6.2 8.6 -0.7 4.2 -11.2 6.0 6.0 -5.8 i.s -6.2 6.5 I L.O -0.5 -0.3 -0.9 .o.i 310 2015 3.2 -10.7 10.3 -0.3 -0.2 -0.5 3.2 l.3 -0. l 2.0 1.8 0.0 2.2 4.0 3.6 4.2 4.8 3.5 2.7 l.9 2.8 8.0 2.1 -3.4 9.3 7.6 -19.4 3.6 ] [2 2.4 2.4 4.8 2.5 06 3.4 8.6 7.3 4.4 6.8 17.5 1()2 2016 2.6 -10.7 6.2 0.0 -0.2 0.7 2.7 0.5 0 [ 0.6 2.1 -6. [ 1.3 3.4 3.6 3.7 4.0 3. [ 2.0 I.I 2.l 4.5 l.9 0.6 4.0 3.5 -l l2 2.7 0.5 4.3 4.3 2.6 [ 1.4 15.2 9.4 IV [ 1.5 13.7 D.6 1.1 13.3 2017 2.l 21.0 4.5 l. [ 0.4 2.9 2.2 1.1 15 0.8 l.8 - l.6 l.2 3.5 1.7 4.8 3.0 -0.2 0.7 0.3 0.7 4.3 2.4 2.2 2.l 3.1 6.1 l.9 0.8 6.2 6.2 -5.3 -20.9 22.2 -44.0 -0.7 5.1 23.4 -16.9 4.1 -8.2 2018{ 2.4 5.8 5.9 -0.2 -0. l -0.5 2.5 0.7 1.5 0.2 l.6 -2. l 0.5 0.9 3.6 4.7 2.8 0 7 1.4 -0.9 l.6 4.9 2.6 2.8 2.9 l.7 8.1 2.0 l.8 7.1 7.1 -7.2 16.8 12.3 22.0 [ 9.4 17.7 12.6 35.5 l.2 22.0 19 ORANGE COUNTY VARIABLES TABLE 13 Q!)ARTERLY HISTORY AND FORECASTS: 2017:1-2018:4 LEVELS Payroll Employment (Thousands): Total Payroll Employment . Mining & Natural Resources . Construe! ion.... . . Manufacturing . Durable Goods . Nondurable Goods . Services . Trade, Transportation & Utilities . Wholesale Trade . Retail Trade . Transportation & Warehousing . Utilities . Financial Activities . Information . Professional & Business . Education & Health . Leisure & Hospitality . Other Services . Government.. . Federal Civilian Government . State & Local Govemmcnt.. . Personal Income($ Millions): Total Personal Income . Taxable Sales($ Millions): Total Taxable Sales . General Merchandising and Clothing All Food and Drink . Motor Vehicles and Paris . Service Stations . All Other . Existing Homes: Sales, Single-Family & Condo (SAAR) .. Median Price, Single-Family . Price Index (2009= l 00), Single-Family Affordability Index, Single-Family ... Building Permits: Total Residential Permits . Residential, Single-Family . Residential, Multi-Family . Building Permit Valuation ($ Millions): Total Building Permit Valuation . Total Residential Valuation ... Residential, Single-Family . Residential, Multi-Family . Additions, Renovations . Total Nonresidential Valuation . r = Forecast 17:1 1.593 0.6 97 159 116 43 1,174 260 81 152 24 119 27 294 212 212 50 162 11 151 50J64 14,933 2.046 2,439 2,150 885 7,413 67.2 2,352 1,109 1,243 1.260 789 404 229 156 471 17:2 1.615 07 IOI 159 115 44 I, 189 261 83 151 24 3 119 27 297 215 219 50 165 11 154 51.119 16,060 2,288 2,577 2.186 853 8,157 66.3 3.676 1,752 l,924 1,702 1.078 609 326 143 625 17:3 1.615 0.7 104 159 116 43 1.201 262 82 152 25 3 120 27 306 214 221 50 150 11 139 51,791 16J40 2J20 2,643 2,295 884 8,199 67.7 l,514 878 636 1.247 774 345 308 121 473 17:4 1,649 0.7 105 158 115 43 1,220 269 82 159 25 3 119 27 311 222 221 51 165 11 154 52,115 16,673 2,435 2,571 2,284 931 8,452 68.3 2,051 1,424 627 1,396 680 450 130 101 716 18:1 1,628 07 103 158 115 43 1.202 261 82 151 25 3 119 27 304 223 218 50 164 11 153 52,674 15,278 2.106 2,503 2,172 960 7.537 64.8 2,150 1,213 937 1.498 742 4'.B 182 128 756 18:Zf 1.652 0.7 107 159 115 43 1.219 262 84 151 25 3 119 28 308 225 226 51 167 11 156 53,583 16,486 2,360 2,653 2,222 928 8J24 62.4 4,020 1.860 2,160 1.947 1,190 649 383 159 757 18:3f l.654 0.7 111 159 116 43 1.231 265 84 153 25 3 120 28 317 224 227 51 152 11 141 54,396 16,782 2J88 2,722 2,342 953 8,377 61.7 2,474 1.263 1.21 l 1,694 1.177 484 561 132 516 18:4f 1,691 0.7 111 158 115 43 1,253 272 84 160 2(i 3 120 28 323 232 227 52 168 II 156 54,826 17.093 2,488 2,646 2,327 997 8,634 61.3 2,560 1,464 1,096 1,556 798 471 220 108 758 7, 172 9.539 9.089 7.653 7,340 9,903 9,255 7.573 748.333 788,333 791,000 785,500 803.277 844,989 846.833 840,068 148.0 155.9 156.4 155.3 158.8 167.1 167.5 166.1 20 ECONOMIC & BUSINESS REVIEW TABLE 14 ORANGE COUNTY VARIABLES Q!JARTERLY HISTORY AND FORECASTS: 2017:1-2018:4 YEAR-TO-YEAR PERCENTAGE CHANGES Payroll Employment: Total Payroll Employment .. Mining & Natural Resources . Construction . Manufacturing . Durable Goods . Nondurable Goods . Services . Trade. Transportation & Utilities . Wholesale Trade . Retail Trade. . . Transportation & Warehousing . Utilities . Financial Activities . Information ..... Professional & Business Education & llealth . Leisure & Hospitality . Other Services ... Government................... . . Federal Civilian Government . State & Local Government. . Personal Income: Total Personal Income . Taxahtc Sales: Total Taxable Sales . General Merchandising and Clothing .. All Food and Drink . Motor Vehicles and Parts . Service Stations .... All Other Existing Homes: Sales, Single-Family & Condo Median Price, Single-Family .. Price Index (2009=100). Single-Family ... Affordability Index. Sing.le-Family .. Building Permits: Total Residential Permits . Residential, Siuglc-lamily Residential. Multi-Family . Building Permit Valuation: Total Building Permit Valuation . Total Residential Valuation .. Residential. Single-Family . Residential, Multi-Family . Additions. Renovations . Total Nonresidential Valuation . f= Forecast JUNE 2018 17:1 1.9 18 8 2.7 2.1 1.6 3.6 1.9 0.9 1.0 0.9 1.8 -5.2 2.5 4.9 0.7 4.2 2.4 0. I 1.1 1.2 !. I 4.1 2.3 -0.1 I.I 4.6 15.5 1.4 s.o 5.(, 5.6 -6.0 -I0.4 24.7 -28.4 -11. I 15.2 21.7 0.2 25.4 -35.7 17:2 21 33.4 4.4 l.9 I. I 4.1 2.4 1. I 2.1 0.7 1.0 -2.2 1.8 4.1 i.s 5.0 3.5 0.0 I.I -0.3 1.2 4.2 2.4 2.3 2.3 2.7 09 2.6 09 6.5 6.5 -6.0 -34. I 24.9 -53.9 -10.1 -IO.O 36.5 -48.2 16.7 -10.2 17:3 2.2 16.7 5.3 () 9 O I 3.0 2.5 1.0 1.4 0.7 1.8 -1. I 1.0 2.6 3.0 5.2 2.7 -1.2 -0.4 0.6 -0.5 4.5 2.4 3.0 2.5 1.9 3. I 2.3 0.6 (,.8 6.8 -6.7 11.2 -7.9 55.5 14.6 49.2 12.6 287.8 -9.1 -16.9 17:4 2.0 17.0 5.7 -0.5 -0.9 0.9 2.2 1.2 l.5 0.8 2.6 2.6 -0.4 2.5 1.7 4.7 3.5 0.2 0.8 -0.2 () 9 2.4 3.4 2.5 3.3 6.0 1.4 -2.7 5.7 5.7 -2.3 -20 I 45.2 -60.5 11.7 -I 0.4 18.3 -49.8 -16.4 46.0 18:1 2.2 10.9 6.1 -0.4 -0.6 -0. I 2.4 0.3 l.6 -0.6 1.8 -3.0 0.3 0.4 3.5 5.0 2.8 -<U l. I -0.9 1.3 4.6 ') � ....... ) 2.9 2.6 l.O 8.6 I. 7 2.3 7.3 7.3 -3.6 -8.6 9.4 -14.6 18 9 -5.9 7.1 -20.8 -18.0 60.6 18:2f 2.3 6.7 5.7 .() 2 0.0 -0.7 2.5 0.5 1.3 0.0 1.5 -2.3 0.5 0.9 3.6 4.7 2.8 0.4 I .4 -0.9 1.5 4.8 2.7 3.1 2.9 1.6 8.8 2 () 3.8 7.2 7.2 -5.8 9.4 6.1 12.3 14.4 10.5 6.5 I 7 5 11.2 21. I l8:3f 2.4 3.3 6.0 -0.2 -0. l -0.6 2.6 0.9 1.6 0.4 l.5 -1.8 () 6 1.0 3.6 4.6 2.7 l.O 15 -0.9 1.7 5.0 2.7 2.9 3.0 2.1 7.8 2.2 1.8 7.1 7. I -8.8 63.4 43.8 90.4 35.9 52. l 40 2 82.2 9.4 9.3 18:4f 2.5 2.7 6.0 -0. l 0.1 -0.7 2.7 I. I l.(i 0.9 1.5 -1.2 0.7 1.3 3.7 4.5 2.7 1.5 i.« -0.9 l.8 5.2 2.5 2.2 2.9 l.9 7.1 2.2 -1.0 6.9 7.0 -)(U 24.8 2.8 74.8 I 1.4 17.4 4.7 m.2 7.1 5.8 21 DON'T BELIEVE THE DOOMSDAY SCENARIOS ON OUR HOUSING NEEDS JAMES DOTI James Doti is president emeri- tus of Chapman University and holds the Donald Bren Distin- guished Chair of Business and Economics. This article was origi- nally published in the Orange County Register on May 20. 2018. A spate of recent research reports all seem to point to a severe housing shortage in California. Most notable among these is a McKinsey Global Institute report, which projects that by 2025, at current construction rates, Cali- fornia's housing gap will be 2.5 million units. That projected gap is based on what California will need to bring its housing units per capita in line with that of New York or New Jersey. But why compare California with those states or, for that matter, any other state? Cross- state comparisons are fraught with all kinds of problems. Demographics, cultural and socio-economic forces can account for large differences in the supply and demand for housing. Those differences, however, don't necessarily point to housing shortages or surpluses. Lt. Gov. Gavin Newsom, who is also a candidate for governor, was recently quoted as saying, "California is 49th out of 50 in the United States in per capita housing units. Only Utah can lay claim to being the lowest in per capita production." But couldn't Utah's lowest ranking have something to do with the fact that it also has the largest average household size of 3.14 versus a national average of 2.64? With larger families, in large part due to its predominant cultural and religious values, Utah just doesn't need as many homes. The state with the highest number of units per capita is Maine. But that's not because Maine residents are blessed with a bountiful housing supply. A more rational explana- tion is that jobs and people have been moving out of the state as its economy has suffered and numerous jobs have been permanently lost. In addition, many homes in Maine are vacation residences that are empty most of the year. 22 Another problem with cross-state comparisons is that the home vacancy rate and the proportion of people living in group quarters, like correctional institutions, vary by state. The McKinsey report, however, ignores those differ- ences in its cross-state comparisons of housing units per capita. A more accurate measure of a state's housing needs can be derived not by comparing it with other states ( certainly not New York and New Jersey!), but by comparing it against itself. In California, for example, the population of households (not including residents living in group quar- ters) per occupied housing unit (not vacant) increased from 2.79 in 1990 to 2.97 in 2018. Although that increase may suggest a growing housing shortage, it can also be explained by various socio-eco- nomic forces. The divorce rate, for example, has dropped sharply since 1990, leading to fewer units required for divorced mates. Children are marrying later in life and liv- ing with their parents longer. The median size of new houses has increased nationally from about 1800 square feet in 1990 to 2500 square feet in 2015, an increase of almost 40 percent. These socio-economic forces differ markedly by region, making studies that analyze one state's housing supply with another's like comparing apples and oranges. Even more important in explaining California's rela- tively high housing per capita ratio is that it's a highly desirable place to live. A natural amenities scale measured by the U.S. Dept. of Agriculture ranked counties through- out the nation on the basis of climate, topography and other measures that reflect environmental qualities most people prefer. California's average score of 6. 73 compared with the -0.07 average for the U.S., excluding California. The fact that California had the highest statewide score relating to what the USDA describes as "natural aspects of attractiveness" explains why many people want to live here. That attractiveness, however, has serious side effects. It pushes up the price of housing. The higher price of housing, in turn, creates incentives for people to use available housing more intensively. ECONOMIC & BUSINESS REVIEW Think, for example, of all those Gen X techies sharing apartments in San Francisco. To them, evidently, splitting the cost of an apartment in San Francisco is preferable to living in another state where rents may be a lot cheaper. But that means housing per capita in San Francisco is higher than in another state where rental rates are lower. All this suggests that the current ratio of 2.97 persons per household in California may not indicate a dire hous- ing shortage. That ratio may simply reflect the unique socio-economic and cultural forces affecting California. Projecting through 2025, however, California clearly will need more housing. Current projections by the Cali- fornia Department of Finance point to an increase in pop- ulation from 39.8 million in 2018 to 42.3 million by 2025. That's an increase of 6.3 percent over seven years or almost 0.9 percent per year. If it is assumed that the persons per household ratio remains at 2.97 through 2025, as it has over the last three years, and accounting for vacancies and demolitions, Cal- ifornia will need to produce about 930,000 housing units between 2018 and 2025-about 133,000 units per year. That roughly matches the 131,000 permits the Chapman forecast is projecting for 2018. So instead ofa McKinsey-projected shortfall of2.5 mil- lion units by 2025, this analysis suggests that maintaining production close to current levels will be sufficient to maintain the current 2.97 persons per household ratio. To show how baseless the McKinsey-projected short- fall of2.5 million housing units is, consider the following: If we were to somehow magically add those 2.5 million housing units by 2025, that would bring the persons per household ratio in California to an absurdly low 2.34. As shown in the following graph, the lowest it's been in California since 1960 is when it hit 2.55 in 1980. Not coin- cidentally, that's the year the divorce rate hit its historic high. PEOPLE PER HOUSEHOLD IN CALIFORNIA Millions 3.2 3.0 . 2.8 . . . . 2.6 . . . . 2.4 . 2.2 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15 '20p Numbers matter. They matter a lot. Studies like the McKinsey report that point to severe housing shortages in the millions of units invariably lead to calls for greater government intervention to counter the so-called failure of private markets. That intervention usually takes the form of low-cost housing construction requirements as well as various kinds of government subsidies. More ominously, they lead to calls for rent controls. In the past, such poli- cies have led not to more housing but to lower rates of con- struction and higher rents and home prices. If, as suggested in this article, the housing supply is roughly where it should be, then the need for government intervention is muted. The only action that's really needed is for government to get out of the way and focus its atten- tion on removing costly and burdensome land use regula- tions. Free market forces will do the rest. JUNE 2018 23 California Forecast: Sales Tax Trends and Economic Drivers COMPANIES June 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 400 cities, counties and special districts in California and across the nation. Hdl Companies, 1340 Valley Vista Drive, Suite 200, Diamond Bar, CA 91765 909.861.4335 www.hdlcompanies.com Hdt� Hdl Consensus Forecast - June 2018 STATEWIDE SALES TAX TRENDS 2018/19 2019/20 Autos/Transportation New vehicle sales are expected to fall slightly for the second consecutive year and sales tax revenue generated by the group will likely plateau after eight years of post-recession gains. High numbers of off-lease vehicles crowding dealer lots present consumers with attractive lower-cost purchase options while overall vehicle replacement demand appears to have stabilized. Demographic trends, projected interest rate increases and potential impacts of international barriers cloud longer term projections. Both residential and commercial construction kickoffs are expected to increase for the next several years, but demand will exceed growth. Material prices rose nearly 6% over the prior year and are projected to increase at this level in the next year. However, the impacts from tariffs are unknown as the industry cannot reach consensus on what will be the long-term effects and current global rhetoric is confusing the issue. Highway and local road maintenance projects are numerous and widespread across the State. Business/Industry Capital purchases for most sectors should stay within the previous year levels although with substantial investment already in place, agriculture and renewable energy expenditures may exhibit declines. Barring tariff wars, gains are expected to be primarily in construction related equipment and supplies, expanded computer & telecommunications capacity along with emerging industries such as artificial intelligence, virtual reality, industrial robots and drones. New concepts and intense competition continues to fragment tax revenues from this group although actual consumption remains relatively steady. Statewide growth is projected to come from the higher fuel prices reported by grocers who include gasoline sales in their tax returns plus the expanding number of cannabis retailers and suppliers. With crude oil prices reaching their highest level in the last four years, increased production from the West Texas - Permian Basin has begun to oversaturate supplies and apply downward pressure on per barrel trading values. OPEC nations continue to discuss increasing output levels as well, buoying the cost of Brent Crude oil. These changes have mostly flattened or decreased summer per gallon pricing for consumers. A voter initiative to repeal SB-1, Road Repair and Accountability Act of 2017, has qualified for the November ballot but it will be met with informational campaigns about how the new tax money is already helping many local communities. Although the shift in consumer preferences to entertainment and services continue, record low unemployment along with wage gains appear to be reviving Brick and Mortar purchases for retailers who sell value-priced apparel, electronics and diverse merchandise at discount warehouses. Restaurant expenses continue to grow due to higher rent and labor costs, which has resulted in larger guest checks. The increasing cost to eat out has been responsible for much of the growth in overall receipts because customer traffic is declining on a same-store basis. The economy is accelerating and consumer spending has picked up in recent quarters. Restaurant operators are now more optimistic about future sales growth than they have been at any time within the last five months. Shoppers continue to turn to their smart phones as these devices provide a wealth of information including product research and features, price and availability and electronic payment convenience. Mobile devices increasingly are how on line orders are placed, triggering continued growth in use taxes from out-of-state sellers. Amazon competitors continue to execute strategic acquisitions and spend available capital on technology investments to expand offerings which is driving greater online sales. The U.S. Supreme Court's June decision in South Dakota vs. Wayfair should generate additional tax from some internet retailers; results will be dependent upon implementation timing and State policies. ".T'0TAL Proposition 172 projections vary from statewide Bradley-Burns calculations due to the state's utilization of differing collection periods in its allocation to counties. No retroactive accounting adjustments are anticipated prior to 2018/19 when the California Department of Tax and Fee Administration will have migrated to a new information management platform. Hdl forecasts a statewide increase of 3.43% for Fiscal Year 2018/19 and a gain of 2.08% in 2019/20. Hdl Companies www.hdlcompanies.com BEACON ECONOMICS National and Statewide - June 2018 ECONOMIC DRIVERS 2018/19 2019/20 P r h Beacon Economics expects 2018 to be a solid year for growth, even better than 2017. However, the top line numbers do not hide signs of turbulence with any number of imbalances starting to form in the system due to conflicting forces-some pushing hard to make the economy grow faster while others try to slow it down. On the acceleration side, the new Federal budget is at the forefront. The tax cuts implemented under the 2017 Tax Cuts and Jobs Act would have stimulated economic growth by themselves but were followed by a sharp increase in Federal spending. Together, these will juice an economy that is already at full employment for this year and likely in 2019 as well. Foreign trade is uncertain as U.S. trade policy has yet to derail increases in imports or exports largely because of economic gains both here and abroad. U.S. Unemployment Rate As of April 2018, there were more job openings than unemployed workers in the U.S. With the economy at full employment, labor shortages have emerged in some job sectors. Shortages among many well-paying occupations may be due to a lack of qualified workers. However, employers and official data suggest that there are labor shortages within lower skilled occupations such as food services as well as in skilled and semi-skilled occupations such as manufacturing, construction and auto repair. At 3.8%, the nation's headline unemployment rate is at its lowest in over 40 years. The more comprehensive U-6 rate is falling. More people are working full time and wages are on the rise. The prospect of full-time employment may draw more people into the labor force tempering expected declines in the U.S. unemployment rate over the near term. California Total Nonfarm Employment Growth Throughout much of the expansion, California has outpaced the nation and many states in terms of economic growth, job gains and improvements in its unemployment rate fueled by strength in many of its key industries. Wage and salary jobs rose by 2.1 % year-over-year in April, adding 356,800 nonfarm jobs. Health Care made the largest contribution to job growth, followed by Construction and Professional and Business Services. California's economic outlook for 2018 is somewhat better than previously expected and the state will continue to lead the nation in economic gains this year. As such, it is an opportune time to devote serious attention to long-run concerns. Employment growth continues to outpace labor force growth in California, limiting job creation in the near term even while the tight labor market attracts people back into the labor force. The state's unemployment rate also fell to 4.2% in April 2018, the lowest since these records first began in 1976. The recent decline was partly driven by a decrease in the state's labor force during the month, the fourth month-over-month decline in the last six months. If labor force growth picks up, we could see an uptick in the unemployment rate as new entrants begin their job search. California Median Existing Home Price Home prices in inland California are closer to the U.S. norm: $241,000 in Fresno, $356,000 in the Inland Empire, and $355,000 in Sacramento. More extreme home prices exist in coastal areas with median prices at $1.3 million in San Francisco, $609,000 in Los Angeles County, and $586,000 in San Diego County. As the median home price in the state approaches its pre-recession peak, homeowners who were able to manage during the downturn will continue to recover equity. This could indicate home sales from these homeowners and may provide a much-needed increase in the supply of available properties for sale. California Residential Building Permits Responding to the market, California's home builders are expected to expand the supply of new homes in 2018, although their response will be dampened by the state's need for housing units. Residential building permits are expected to increase 10.1 % over 2017 levels. Acknowledging California's chronic housing shortage, state lawmakers have passed legislation that could make a difference. For example, SB-35, the Housing Accountability and Affordability Act, stipulates that projects that comply with local land use regulations may receive ministerial approval if the jurisdiction in which it is located has not met its housing goals. Beacon Economics www.BeaconEcon.com Hdl9 HdL Companies 1340 Valley Vista Drive, Suite 200 Diamond Bar, California 91765 Telephone: 909.861.4335 • 888.861.0220 Fax: 909.861.7726 California's allocation data trails actual sales activity by three to six months. HdL compensates for the lack of current information by reviewing the latest reports, statistics and perspectives from fifty or more economists, analysts and trade associations to reach a consensus on probable trends for coming quarters. The forecast is used to help project revenues based on statewide formulas and for reference in tailoring sales tax estimates appropriate to each client's specific demographics, tax base and regional trends. BEACON ECONOMICS SOUTHERN CALIFORNIA OFFICE 5777 West Century Boulevard, Suite 895 Los Angeles, California 90045 Telephone: 310.571.3399 Fax: 424.646.4660 E-Fax: 888.821.464 7 Beacon Economics, LLC has proven to be one of the most thorough and accurate, economic research/analytical forecasters in the country. They regularly provide national, state, regional, and sub- regional economic analysis/forecasting to clients ranging from the State of California to private hedge funds to major universities. Their evaluation of the key drivers impacting local economies and tax revenues provides additional perspective to Hdl's quarterly consensus updates. The collaboration and sharing of information between Beacon Economics and HdL helps both companies enhance the accuracy of the work that they perform for their respective clients. nd tax revenues provides additional perspective to Hdl's quarterly consensus updates. The collaboration and sharing of information between Beacon Economics and HdL helps both companies enhance the accuracy of the work that they perform for their respective clients. "Good information leads to good decisions:'