Investment Advisory Staff Reports 11/06/19MEETING OF THE INVESTMENT
ADVISORY/OVERSIGHT JOINT
COMMITTEE MEETING
Wednesday, November 6, 2019
3:00 p.m. - 4:00 p.m.
Finance Conference Room
Meeting called by: Robert Foley, Chair Facilitator: Robert Foley
Type of meeting: Quarterly Meeting Minutes taken by: Diane Hornsby
Attendees: Robert Foley, Larry Sallinger (IAC)
Richard Rohm, Rick Otto, Will Kolbow (IOC)
Josephine Chan, Diane Hornsby (Staff)
Please read: The attached
Please bring: The attached
Agenda Topics
1. Call to Order Robert Foley
2. Approval of Minutes, Meeting of August 7, 2019 Robert Foley
3. Rate Summary September 2018 - September 2019 Josephine Chan
4. Investment Portfolio Update Josephine Chan
5. Treasurer's Investment Reports for July, August, & September 2019 Josephine Chan
6. Sales Tax Update Will Kolbow
7. California Forecast: Sales Tax Trends and Economic Drivers Will Kolbow
8. City Update Rick Otto
9. Next Meeting Date - Wed., February 5, 2020 Robert Foley
10. Public Comment
11. Adjournment Robert Foley
MINUTES
INVESTMENT ADVISORY (IAC) COMMITTEE
INVESTMENT OVERSIGHT (IOC) COMMITTEE
Wednesday, August 7,2019,3:00 p.m. - Finance Conference Room
PRESENT:
IAC COMMITTEE IOC COMMITTEE (non-voting)
Robert Foley, Chair Richard Rohm, City Treasurer
Larry Sallinger, Member Will Kolbow, Assistant City Manager!
Vacant Administrative Services Director
STAFF
Josephine Chan, Investment/Revenue Officer
Robert Moya, Budget Manager
Diane Hornsby, Executive Assistant
1. Call to Order
Chairman Robert Foley called the meeting to order at 3:02 p.m.
2. Approval of Meeting Minutes of May 8, 2019.
Mr. Foley moved to approve; Mr. Sallinger seconded; motion carried.
3. Rate Summary
A report of the highs and lows for various investments during period of July 2018 through June
2019.
Action: Received and filed.
4. Investment Portfolio Update
A report showing City's portfolio investment percentages in various areas as of July 30, 2019.
Action: Received and filed.
5. Treasurer's Investment Reports for April, May, and June 2019
Explanation of disbursements, investment activity, and sales tax revenue by month. There was a
question regarding the implications of being out of compliance when maximum percentage of
LAIF is exceeded. Chairman Foley moved that a memo be prepared to City Council on behalf of
the committee regarding our intention to bring investment percentages back into compliance, as
per our investment policy. Mr. Sallinger seconded the motion.
6. Sales Tax Update
Sales tax receipts of the top seven business groups show that, overall, Orange saw a 12.6%
decrease in receipts from the same quarter last year. The State underpaid us (fuel) in the first
quarter in error, which was corrected later. After accounting aberrations were factored out, actual
sales activity increased 4.9%.
Action: Received and filed.
Minutes of the Joint Meeting of the
Investment Advisory and Investment Oversight
Committees, August 7, 2019
7. i. California Economic & Business Review- James Doti, President Emeritus, indicated that
the economy shows promise, with no recession likely in the next twelve months.
ii. California Forecast: Sales Tax Trends & Economic Drivers - It was indicated that sales
tax in transportation are predicted to take a dip. National economy shows growth, with a
decreasing unemployment rate.
Action: Received and filed.
8. City Update
None given.
9. Next meeting date
Wednesday, November 6, 2019 at 3:00 p.m. in the Finance Conference Room. Mr. Rohm stated
that he is unable to attend the meeting. (He later mentioned that he could participate in the meeting
via conference call or zoom video.)
10. Public Comment -
None.
11. Adjournment - The meeting adjourned at 3:35 p.m.
Robert Foley, Chair Richard Rohm, City Treasurer
Investment Advisory Committee Investment Oversight Committee
Distribution:
Mayor and City Council
City Manager, IOC
Investment/Revenue Officer
Assistant City Manager! Administrative Services Director, IOC
City Treasurer, IOC
City Clerk
Investment Advisory Committee
2
RATE SUMMARY
September 2018 to September 2019
Month
Ending
U.S. Treasury Yield LAW
Yield 3 month 6 month 2 year 3 year 5 year
Sep-18 2.19% 2.36% 2.81% 2.88% 2.94% 2.06%
Oct-18 2.34% 2.49% 2.87% 2.93% 2.98% 2.14%
Nov-18 2.37% 2.52% 2.80% 2.83% 2.84% 2.21%
Dec-18 2.45% 2.56% 2.48% 2.46% 2.51% 2.29%
Jan-19 2.41% 2.46% 2.45% 2.43% 2.43% 2.36%
Feb-19 2.45% 2.50% 2.52% 2.50% 2.52% 2.39%
Mar-19 2.40% 2.44% 2.27% 2.21% 2.23% 2.44%
Apr-19 2.43% 2.46% 2.27% 2.24% 2.28% 2.45%
May-19 2.35% 2.35% 1.95% 1.90% 1.93% 2.45%
Jun-19 2.12% 2.09% 1.75% 1.71% 1.76% 2.43%
Jul-19 2.08% 2.10% 1.89% 1.84% 1.84% 2.38%
Aug-19 1.99% 1.89% 1.50% 1.42% 1.39% 2.34%
Sep-19 1.88% 1.83% 1.63% 1.56% 1.55% 2.28%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19
-1-3 month -4-6 month 2 year 3 year -5 year - LAIF
ITEM NO PAGE . I .---MEEflNG. 11-&-49
Investment Portfolio Update
As of 10-25-19
Instruments Book - % of
(Days to Maturity) Value Portfolio
LAW $
- Treasury Sweep
17,200,000
1,268,770
14.4%
1.1% Money Market Mutual Fund
Medium Term Note
10,000,000 8.4% 1 year
2 year 2,000,000 1.7%
5 year 2,964,967 2.5%
14,964,967 12.5%
Federal Aqency
26,000,000 21.8% 1 year
2 year 36,996,187 31.0%
3 year 7,000,000 5.9%
4 year 2,998,512 2.5%
5year 13,000,000 11.0%
Total 85,994,699 72.0%
Total $ 119,428,436 100.0%
DATE OF
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AGENDA ITEM
November 12, 2019
TO: Honorable Mayor and Members of the City Council
THRU: Rick Otto, City Manager
FROM: Richard A. Rohm, City Treasurer ,
William M. Kolbow, Assistant City Manager/Administrative Services
Director
REVIEW: City Manager Finance
1. SUBJECT
Monthly Treasurer's Reports for July, August, and September 2019.
2. SUMMARY
Presentation of three monthly Treasurer's Reports to the City Council after the end of the
quarter covered by the reports.
3. RECOMMENDED ACTION
Receive and file.
4. FISCAL IMPACT
None.
5. STRATEGIC PLAN GOALS
Goal 2: Be a fiscally healthy community
d: Effectively manage and develop City assets.
6. 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 11163 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.
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.
ITEM( 1
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 (lAO).
Summary of chanqes in Treasurer's cash and investments:
Treasurer's Operating
Cash & Investments(l)
Balance @ 6/30/2019 $149,863,725
Monthly Activity:
Cash Received 47,354,304
Cash Disbursed (73,271,412)
Balance @ 9/30/2019 $123,946,617
(Includes operating cash and investments (valued at cost). Does not include deposits
with administrator, imprest cash, fiscal agent cash and investments, and deferred
compensation.
For the month of July 2019
The July cash disbursements exceeded cash receipts by $25,812,531. During the month,
large disbursements included payments totaling $17,462,406 to PEAS for annual lump
sum prepayment of unfunded liability, $4,608,589 to Orange County Water District for
pumping assessments, $2,256,200 to PERS for employee benefits, $1,656,268 to CIPA
(California Insurance Pool Authority) for insurance, $1,116,461 to Chapman University
for refund of development impact fees, $881,122 to All American Asphalt for annual
pavement maintenance, $420,728 to Municipal Water District of Orange County for
purchased water, and $240,278 to Los Angeles Freightllne for a CNG powered dump
truck. In July, the City received $3,708,570 in sales tax revenue and $288,172 in property
tax revenue.
In the month of July, one Federal Home Loan Bank note was called. The City's balance
in L.A.I.F. on July 30 was $33,000,000 or a decrease of $24,200,000 due to cash
disbursements exceeding cash receipts during the month.
The City invested $67,362,746 (including L.A.I.F.) or held 54% or of its portfolio in
securities at time of purchase with maturities equal to or less than 365 days, which was
above the 50% limit allowed in the Investment Policy by $5,683,488. This maturity
category was out of compliance based on anticipated cash flow needs for large
disbursements in August.
For the month of August 2019
The August cash receipts exceeded cash disbursements by $281,605. The City received
$5,426,020 in sales tax revenue. During the month, large disbursements included
payments totaling $4,683,438 to U.S. Bank for debt service, $1,740,022 to PERS for
employee benefits, $922,319 to Chapman University for cash bond release on a grading
permit, $817,780 to Municipal Water District of Orange County for annual water
connection charge and purchased water, $684,131 to All American Asphalt for annual
ITEM 5
2
pavement maintenance, and S532,814 to Morillo Construction for Shaffer Park
renovation.
In the month of August, one medium term note matured. The City's balance in L.A.I.F.
on August 31 was $26,500,000 or a decrease of $6,500,000 due to transfer of funds for
an investment purchase that settled in early September.
The City invested $58,893,843 (including L.A.I.F.) or held 51% of its portfolio in securities
at time of purchase with maturities equal to or less than 365 days, which was slightly
above the 50% maturity limit by $1,448,932. This maturity sector was out of compliance
because some large checks were issued by the end of the month and they cleared the
bank in September.
For the month of September 2019
The September cash disbursements exceeded cash receipts by $386,182. Large
disbursements included payments totaling $2,600,725 to U.S. Bank for debt service,
$1,742,490 to PIERS for employee benefits, $1,580,731 to All American Asphalt for
annual pavement maintenance, and $762,150 to Municipal Water District of Orange
County for purchased water. The City received $3,508,759 in sales tax revenue and
465,851 in property tax revenue.
In the month of September, we purchased one Federal Farm Credit Bank note (2% for 5
years), one Federal Home Loan Mortgage Corporation note (2.05% for 4 years), and one
medium term note (2% for 5 years). The City's balance in L.A.I.F. on September 30 was
$19,500,000, or a decrease of $7,000,000 mainly due to the investment activity. The
investment portfolio was back in full compliance with the investment policy.
Credit ratinq on investments
During this period, there was no change to the credit rating on the investments in the
investment portfolio.
Investment Advisory Committee (IAC)
The most recent IAC meeting was November 6, 2019 while the next quarterly Committee
meeting is to be scheduled for February 2020.
7. ATTACHMENTS
1. Investment Report for July 2019
2. Investment Report for August 2019
3. Investment Report for September 2019
ITEM C 3 /1-6-19
1. Investment Report for July 2019
DATE OF
ITEM NO. PAGE MEETING.
MONTHLY SUMMARY COMPLIANCE CERTIFICATE
July 2019
Note: All concentration restrictions were obtained from Sections 53601 and 53635 of the Government Code or the City's
Investment Policy as of June 11, 2019, whichever was the more stringent.
1. U.S. Agencies
(A) Total amount (book value) of U.S. Agency securities owned by the City = $69,995,770.
(B) Total amount allowed (75% of portfolio book value) of all City investments = $92,518,887.
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 $4,362,982.
(B) Total amount allowed ($15 million or 20% of portfolio book value, whichever is less) of
all City investments = $15,000,000.
Is (A) less than (B)? Yes X No
3. LAW
(A) Total amount (book value) invested in LAIF by the City = $33,000,000.
(B) Total amount allowed (35% of portfolio book value) of all City investments = $43,175,481.
Is (A) less than (B)? Yes X No
4. Medium-Term Notes
(A) Total amount (book value) invested in medium-term notes by the City = $15,999,764.
(C) Total amount allowed (20% of portfolio book value) of all City investments $24,671,703.
Is (A) less than (B) at time of purchase? Yes X No
5. Excluded Investment Vehicles
(A) Are any securities excluded by the Statement of Investment Policy currently included in the
City's portfolio?
Yes No X
6. Investment Management Agreements
(A) Does the City have any investment manager or advisor agreements?
Yes No X (if no, skip to number 7)
(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
DATE OF
ITEM NO. PAGE MEETING F/..& i9
(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
7. 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 15% and no more than 50% of its portfolio in securities
at time of purchase with maturities equal to or less than 365 days?
Yes No X
(C) Does the City currently hold no more than 50% of its portfolio in securities at time of purchase
with maturities between 366 days and 730 days?
Yes No
(D) Does the City currently hold no more than 35% of its portfolio in securities at time of purchase
with maturities between 731 days and 1095 days?
Yes No
(E) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1096 days and 1460 days?
Yes No
(F) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1461 days and 1825 days?
Yes No
8. Issuer Limits
Does each issuer of Money Market Mutual Funds continue to meet the following requirements?
(i) Is each issuer registered with the Securities and Exchange Commission under the
Investment Company Act of 1940?
Yes No N/A X
(ii) Does the fund of each issuer carry the highest rating of at least two of the three largest
national rating agencies?
Yes No N/A X
(iii) Has each issuer retained an investment adviser registered with the Securities and
Exchange Commission with not less than five years' experience managing money market
mutual funds with assets under management in excess of $500 million?
Yes No N/A X
DATE OF
ITEM NO.. PAGE ( MEETING
Prepared By:
c_) 1') \-- LCv/
Audited By:
Josephine Chan gosari6 Guzman
Investment/Revenue Officer Accountant
We hereby certify that for the month of July 2019, 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 except No. 7(B) and that there is sufficient cash flow to cover the next six months'
expenditures barring any catastrophic natural disasters. Market values are obtained through ICE Data
Pricing and Reference Data, the State Treasurer's Office, U.S. Trust and U.S. Bank.
Certified By: Verified By:
le- ec 4, c,^ d X ~ ~o 4, v, , DATED: October 25, 2019
Richard A. Rohm
City Treasurer
William M. Kolbow
Assistant City Manager
Administrative Services Director
DATE OF
ITEM NO. c PAGE 7 MEETING 11-to-19
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ITEM NO. c PAGE q MEETING //-&-/I
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City of Orange
Reconciliation of Total Cash and
Investments to General Ledger
As of July 31, 2019
Treasurer's Operating Cash and Investments
Checking, Payroll & PMA - Wells Fargo 255,872
Treasurer's Investments 123,358,516
Cash in transit 436,806 124,051,194
Imprest Cash 12,200
Fiscal Agent Cash and Investments 3,330,681
Total Cash & Investments 127,394,075
Total Cash and Investments per General Ledger 1 126,071,455
Plus Outstanding Checks 1,322,620
Total Cash & Investments 127,394,075
1 Includes adjustment for month-end timing differences.
DATE OF
ITEM NO. PAGE /f MEETING (/.4/9
GL Cash.1
Attachment V
City of Orange
Fiscal Agent Investments
As of July 31, 2019
Carrying
Value
Market or
Contract
Value
Fiscal Agent Cash and Investments
Assessment District 95-1 1996 Limited Obligation Improvement Bonds - U.S. Bank 79,651 79,651
First American Government Obligation Fund (2.24%)
Community Facilities District 91-2 2013 Special Tax Refunding Bonds - U.S. Bank 1,576,407 1,576,407
First American Government Obligation Fund (2.24%)
Federal National Mortgage Association (1.25%)
Successor Agency 2008A Merged & Amended Tax Allocation Bonds - U.S. Bank 2,460 2,460
First American Government Obligation Fund (2.24%)
Successor Agency 2008B Merged & Amended Tax Allocation Bonds - U.S. Bank 467 467
First American Government Obligation Fund (2.24%)
Community Facilities District 06-1 2015 Special Tax Refunding Bonds - U.S. Bank 1671 ,473 1,671473
First American Government Obligation Fund (2.24%)
US Treasury Bond (4.375%)
Successor Agency 2014A Merged & Amended Tax Allocation Refunding Bonds - U.S. Bank 93 93
First American Government Obligation Fund (2.24%)
Successor Agency Refunding Bonds 2018A - U.S. Bank 130 130
First American Government Obligation Fund (2.24%)
Total Fiscal Agent Cash and Investments 3,330,681 3330,681
DATE OF
ITEM NO. Jr PAGE /' MEETING-Lt- p1 9
2. Investment Report for August 2019
DATE OF
ITEM NO. PAGE If, MEETING/J
MONTHLY SUMMARY COMPLIANCE CERTIFICATE
August 2019
Note: All concentration restrictions were obtained from Sections 53601 and 53635 of the Government Code or the City's
Investment Policy as of June 11, 2019, whichever was the more stringent.
1. U.S. Agencies
(A) Total amount (book value) of U.S. Agency securities owned by the City = $69,995,978.
(B) Total amount allowed (75% of portfolio book value) of all City investments = $86,167,366.
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 = $6,393,843.
(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 = $26,500,000.
(B) Total amount allowed (35% of portfolio book value) of all City investments = $40,211,438.
Is (A) less than (B)? Yes X No
4. Medium-Term Notes
(A) Total amount (book value) invested in medium-term notes by the City = $12,000,000.
(C) Total amount allowed (20% of portfolio book value) of all City investments = $22,977,964.
Is (A) less than (B) at time of purchase? Yes X No
5. Excluded Investment Vehicles
(A) Are any securities excluded by the Statement of Investment Policy currently included in the
City's portfolio?
Yes No X
6. Investment Management Agreements
(A) Does the City have any investment manager or advisor agreements?
Yes No X (if no, skip to number 7)
(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
DATE OF
01
ITEM NO. PAGE. f7
(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
7. 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 15% and no more than 50% of its portfolio in securities
at time of purchase with maturities equal to or less than 365 days?
Yes No X
(C) Does the City currently hold no more than 50% of its portfolio in securities at time of purchase
with maturities between 366 days and 730 days?
Yes No
(D) Does the City currently hold no more than 35% of its portfolio in securities at time of purchase
with maturities between 731 days and 1095 days?
Yes No
(E) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1096 days and 1460 days?
Yes No
(F) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1461 days and 1825 days?
Yes No
8. Issuer Limits
Does each issuer of Money Market Mutual Funds continue to meet the following requirements?
(i) Is each issuer registered with the Securities and Exchange Commission under the
Investment Company Act of 1940?
Yes No N/A X
(ii) Does the fund of each issuer carry the highest rating of at least two of the three largest
national rating agencies?
Yes No N/A X
(iii) Has each issuer retained an investment adviser registered with the Securities and
Exchange Commission with not less than five years' experience managing money market
mutual funds with assets under management in excess of $500 million?
Yes No N/A X
ITEM NO. -50
DATE OF
PAGE, ft MEETING f/ejq
Prepared By: Audited By:
Josephine Chan Rosario Guzman
Investment/Revenue Officer Accountant
We hereby certify that for the month of August 2019, 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 except No. 7(B) and that there is sufficient cash flow to cover the next six months'
expenditures barring any catastrophic natural disasters. Market values are obtained through ICE Data
Pricing and Reference Data, the State Treasurer's Office, U.S. Trust and U.S. Bank.
Certified By: Verified By:
7::&c Lki 4 4?4
A. Rohm
City Treasurer
DATED: October 25, 2019
William M. Kolbow
Assistant City Manager
Administrative Services Director
/ DATE OF
ITEM NO. PAGE, /9 _MEF_it
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City of Orange
Reconciliation of Total Cash and
Investments to General Ledger
As of August 31, 2019
Treasurer's Operating Cash and Investments
Checking, Payroll & PMA - Wells Fargo 207,401
Treasurer's Investments 114,889,822
Cash in transit 9,235,577 124,332,800
lmprest Cash
Fiscal Agent Cash and Investments
12,200
8,040,126
Total Cash & Investments 132,385,126
Total Cash and Investments per General Ledger 1
Plus Outstanding Checks
129,895,457
2,489,669
Total Cash & Investments 132,385,126
I Includes adjustment for month-end timing differences. GL Cash.2
DATE OF
Attachment
ITEM No. PAGE 2_c. MEETING
City of Orange
Fiscal Agent Investments
As of August 31, 2019
Carrying
Value
Market or
Contract
Value
Fiscal Agent Cash and Investments
Assessment District 95-1 1996 Limited Obligation Improvement Bonds - U.S. Bank 207,027 207,027
First American Government Obligation Fund (2.01%)
Community Facilities District 91-2 2013 Special Tax Refunding Bonds - U.S. Bank 1,576,446 1,576,446
First American Government Obligation Fund (2.01%)
Federal National Mortgage Association (1.25%)
Successor Agency 2008A Merged & Amended Tax Allocation Bonds - U.S. Bank 2,465 2,465
First American Government Obligation Fund (2.01 %)
Successor Agency 2008B Merged & Amended Tax Allocation Bonds - U.S. Bank 526,155 526,155
First American Government Obligation Fund (2.01%)
Community Facilities District 06-1 2015 Special Tax Refunding Bonds - U.S. Bank 1,697,283 1,697,283
First American Government Obligation Fund (2.01%)
US Treasury Bond (4.375%)
Successor Agency 2014A Merged & Amended Tax Allocation Refunding Bonds - U.S. Bank 3,575,750 3,575,750
First American Government Obligation Fund (2.01%)
Successor Agency Refunding Bonds 2018A - U.S. Bank 455,000 455,000
First American Government Obligation Fund (2.01 %)
Total Fiscal Agent Cash and Investments 8,040,126 8040,126
V
DATE OF
MEETING ITEM NO. PAGE .2 7 /9
3. Investment Report for September 2019
DATE OF
ITEM NO. PAGE it MEFTNG 11-10-19
MONTHLY SUMMARY COMPLIANCE CERTIFICATE
September 2019
Note: All concentration restrictions were obtained from Sections 53601 and 53635 of the Government Code or the City's
Investment Policy as of June 11, 2019, whichever was the more stringent.
1. U.S. Agencies
(A) Total amount (book value) of U.S. Agency securities owned by the City = $85,994,698.
(B) Total amount allowed (75% of portfolio book value) of all City investments = $92,584,293.
Is (A) less than (B) at time of purchase? Yes X No
2. Money Market Mutual Funds
(A) Total amount (book value) invested in money market mutual funds by the City = $2,986,059.
(B) Total amount allowed ($15 million or 20% of portfolio book value, whichever is less) of
all City investments = $15,000,000.
Is (A) less than (B)? Yes X No
3. LAW
(A) Total amount (book value) invested in LAIF by the City = $19,500,000.
(B) Total amount allowed (35% of portfolio book value) of all City investments = $43,206,003.
Is (A) less than (B)? Yes X No
4. Medium-Term Notes
(A) Total amount (book value) invested in medium-term notes by the City = $14,964,967.
(C) Total amount allowed (20% of portfolio book value) of all City investments = $24,689,145.
Is (A) less than (B) at time of purchase? Yes X No
5. Excluded Investment Vehicles
(A) Are any securities excluded by the Statement of Investment Policy currently included in the
City's portfolio?
Yes No X
6. Investment Management Agreements
(A) Does the City have any investment manager or advisor agreements?
Yes No X (if no, skip to number 7)
(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
DATE OF
de
ITEM NO. _ PAGE MEETING It -4- /9
(D) Pursuant to the agreement, does the City retain authority to make investment decisions?
Yes No
(B) Pursuant to the agreement, are the investments deposited with the City's custodian?
Yes No
7. 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 15% and no more than 50% of its portfolio in securities
at time of purchase with maturities equal to or less than 365 days?
Yes No
(C) Does the City currently hold no more than 50% of its portfolio in securities at time of purchase
with maturities between 366 days and 730 days?
Yes No
(D) Does the City currently hold no more than 35% of its portfolio in securities at time of purchase
with maturities between 731 days and 1095 days?
Yes No
(E) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1096 days and 1460 days?
Yes No
(F) Does the City currently hold no more than 30% of its portfolio in securities at time of purchase
with maturities between 1461 days and 1825 days?
Yes No
8. Issuer Limits
Does each issuer of Money Market Mutual Funds continue to meet the following requirements?
(i) Is each issuer registered with the Securities and Exchange Commission under the
Investment Company Act of 1940?
Yes No N/A X
(ii) Does the fund of each issuer carry the highest rating of at least two of the three largest
national rating agencies?
Yes No N/A X
(iii) Has each issuer retained an investment adviser registered with the Securities and
Exchange Commission with not less than five years' experience managing money market
mutual funds with assets under management in excess of $500 million?
Yes No N/A X
DATE OF
ITEM NO. Ir PAGE 30 MEETING
oseph ne Chan
Investment/Revenue Officer
Prepared By: Audited By:
ROsario Guzman
Accountant
We hereby certify that for the month of September 2019, the investment actions of the City of Orange
comply in all respects with the requirements of the California Government Code and the City's current
Investment Policy and that there is sufficient cash flow to cover the next six months' expenditures barring
any catastrophic natural disasters. Market values are obtained through ICE Data Pricing and Reference
Data, the State Treasurer's Office, U.S. Trust and U.S. Bank.
Certified By: Verified By:
A
Richard A. A. Rohm
City Treasurer
DATED: October 25, 2019
William M. Kolbow
Assistant City Manager
Administrative Services Director
ITEM NO. (PAGE .3 /
J/.(,./q
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City of Orange
Reconciliation of Total Cash and
Investments to General Ledger
As of September 30, 2019
Treasurer's Operating Cash and Investments
Checking, Payroll & PMA - Wells Fargo 347,951
Treasurers Investments 123,445,724
Accrued Interest on Investments 4,604
Cash in transit 148,338 123,946,617
Imprest Cash 12,200
Fiscal Agent Cash and Investments 5,883,751
Total Cash & Investments 129,842,568
Total Cash and Investments per General Ledger 127,833,777
Plus Outstanding Checks 2,008,791
Total Cash & Investments 129,842,568
1 Includes adjustment for month-end timing differences. GL Cash.
Attachment V
//P /9 ITEM NO. PAGE 3 g MEETING.
City of Orange
Fiscal Agent Investments
As of September 30, 2019
Carrying
Value
Market or
Contract
Value
Fiscal Agent Cash and Investments
Assessment District 95-1 1996 Limited Obligation Improvement Bonds - U.S. Bank 309 309
First American Government Obligation Fund (1.98%)
Community Facilities District 91-2 2013 Special Tax Refunding Bonds - U.S. Bank 3,350,864 3,350,864
First American Government Obligation Fund (1.98%)
Federal National Mortgage Association (1.25%)
Successor Agency 2008A Merged & Amended Tax Allocation Bonds - U.S. Bank 2,469 2,469
First American Government Obligation Fund (1.98%)
Successor Agency 2008B Merged & Amended Tax Allocation Bonds - U.S. Bank 619 619
First American Government Obligation Fund (1.98%)
Community Facilities District 06-1 2015 Special Tax Refunding Bonds - U.S. Bank 2,523,962 2,523,962
First American Government Obligation Fund (1.98%)
US Treasury Bond (4.375%)
Successor Agency 2014A Merged & Amended Tax Allocation Refunding Bonds - U.S. Bank 1,170 1,170
First American Government Obligation Fund (1.98%)
Successor Agency Refunding Bonds 2018A - U.S. Bank 50 50
First American Government Obligation Fund (1.98%)
Total Fiscal Agent Cash and Investments 5,879443 5,879,443
DATE OF
ITEM NO._ PAGE. ff_MEETNG_ /1 4/9
REVENUE COMPARISON
Four Quarters - Fiscal Year To Date (Q3 to Q2)
2017-18 2018-19
Point-of-Sale 36.485.055 $43,062.478
County Pool 4.923.957 6,005.137
State Pool 20,711 21.130
Gross Receipts S41,429,722 S49,088,745
/1/It 20/9)
Orange
In Brief
range's receipts from April
through June were 31.2% above the
second sales period in 2018. While
this comparison was inflated due to
CDTFA's transition to a new report-
ing system in the prior year that tem-
porarily delayed distributions to the
City, actual sales were still up an ex-
ceptional 12.4% when adjusted for
proper payment timing.
he consolidation of operations
in Orange by several fuel and ser-
vice station outlets was the primary
factor in this quarter's exceptional
growth.
his change had the additional im-
pact of bolstering allocations from
the countywide use tax pool as this
funding is divided proportionately
among county agencies based on
relative cash performance. Orange
therefore received a larger share of
the pool funding as the City's rate of
growth significantly exceeded the
regional and statewide trend.
he closure of a local car dealer
and a State payment correction for
a medical-biotech supplier were the
primary negatives.
et of aberrations, taxable receipts
for all of Orange County grew 4.0%
over the comparable time period;
the Southern California region was
up 2.6%.
rhii d,i,ailer R t' tot S'e 0/1(1 ()mii fit S ih c (- ip; ii
SALES TAX BY MAJOR BUSINESS GROUP
2nd Quarter 2018
0 2nd Quarter 2019
$3,200,000
$2,800,000
$2,400,000
$2,000,000
$1,600,000
$1,200,000
$800,000
$400,000
$0
Fuel and
Service
Stations
General Autos
Consumer and
Goods Transportation
Business County Restaurants Building Food
and and State and and and
Industry Pools Hotels Construction Drugs
Top 25 PRODUCERS
IN ALPHABETICAL ORDER w
CL
New Flyer of
America
NIKE Factory Store
Ormco Corporation
Ralphs
SC Fuels
Selman Chevrolet
Stadium Nissan
Target
Thompson Building
Materials
Toyota Lease Trust
Toyota Scion of
Orange
Verco Decking
Walmart
Beacon Roofing
Supply
Best Buy
Cardlock Fuels
System
Clafin Medical
Equipment
David Wilsons Ford
David Wilsons Villa
Ford
DMG Corporation
Enterprise Rent A
Car
Foundation Building
Materials
Home Depot
L&WSupply
MS International
Published by HdL Companies in Fall 2019
www.hdlcompanies.com I 88.861.0220
Cons.Goods
14%
Autos/Trans.
14%
9%
Restaurants
10%
13%
Q2 2019
City of Orange Sales Tax Update
California Overall
The local one percent share of Cal-
ifornia's sales and use tax from April
through June sales was 20.4% higher
than the same quarter in 2018. How-
ever, the actual gain came to 2.9% after
factoring for online filing issues and ac-
counting anomalies. Fiscal year 2018-19
ended with an increase of 3.6% over the
previous year after similarly adjusting
for reporting aberrations.
The quarter exhibited continuation
of a recent softening for most taxable
categories. Rising used car sales and
rentals helped offset what was other-
wise, a generally flat quarter for the
auto-transportation group. An accel-
eration in online shopping boosted
receipts from county wide pools while
gains for brick and mortar stores were
limited to value-priced apparel, discount
department stores and jewelry.
Restaurant patronage appears to be
leveling with a shift toward lower cost
dining options that produced relative-
ly modest gains for the group when
compared to previous quarters. New
cannabis operations resulted in a small
rise in food and drug receipts.
A 2.5% gain in business-industrial sales
and use tax revenues came primarily
from online fulfillment centers, logis-
tics and utility company purchases and
ongoing investment in automation and
information technology. A similar rise
in receipts from the building-construc-
tion group was due to a variety of infra-
structure and onetime special projects
that offset declines in material purchases
for new \iome construction.
Marketplace Facilitator Act
Effective Oct. 1, 2019, companies such
as Amazon, eBay and Google who pro-
vide sales tax related services to other
retailers are required to assume the obli-
gation for collecting and remitting their
client's sales and use tax. The definition
of sales-related services includes payment
processing inventory and shipping of
merchandise, order taking, providing
customer service, or assisting with re-
turns and exchanges.
The Marketplace provision was part of
AB 147 which was adopted to imple-
ment California's approach to the U.S.
Supreme Court decision in South Da-
kota v. Wayfair Inc.
AB 147 requires out-of-state retailers
with annual combined sales of $500,000
or more to now collect and remit this
state's sales and use tax from its custom-
ers. Applying the $500,000 threshold to
the sum total of all the third-party trans-
actions that facilitators process for their
clients, is hoped to produce moderate
gains in previously uncollected revenues
for the state, cities, counties and local
transaction tax districts.
Facilitator tax remittances from mer-
chandise inventoried in California will
be allocated to specific jurisdictions
while receipts from deliveries outside of
the state will be distributed via the pools.
Some facilitators have begun to collect
and remit taxes ahead of this deadline.
This is evidenced by new pool alloca-
tions and increases in direct allocations
to certain jurisdictions.
SALES PER CAPITA
$8,000
$6,000
$4,000
$2,000
$0
Q2 02 Q2 Q2
16 17 18 19
Orange County California
REVENUE B BUSINESS GROUP
Orange This Quarter
ORANGE Top 15 BUSINESS TYPES
'In thousands of dollars Orange County HdL State
Business Type Q219' Change Change Change
Building Materials 746.2 22.4% 26.8% 341%
Casual Dining 584.1 25.4% 25.1% 24.5%
Contractors 335.2 13.3% 1.1% 26.8%
Department Stores 180.8 -0.5% -23.7% -24.7%
Discount Dept Stores -CONFIDENTIAL- 22.9% 26.3%
Electronics/Appliance Stores 258.4 11.6% 10.1% 7.0%
Family Apparel 299.9 22.6% 35.2% 45.3%
Grocery Stores 232.4 8.3% 3.8% 9.6%
Light Industrial/Printers 277.6 113.4% 48.6% 51.4%
Medical/Biotech 309.3 158.8% 95.9% 39.8%
New Motor Vehicle Dealers 1,207.4 -4.3% 22.8% 5.4%
Petroleum Prod/Equipment -CONFIDENTIAL- 23.9% 15.5%
Quick-Service Restaurants 465.0 15.5% 15.8% 15.9%
Service Staons 1,198.2 251.0% 61.7% 51.4%
Shoe Stores 216.7 11.1% 5.4% 9.2%
Total All Accounts 11,224.9 31.1% 21.5% 20.1%
County & State Pool Allocation 1,612.4 32.3% 22.1% 22.4%
Gross Receipts 12,837.4 31.2% 21.6% 20.4%
HdL Companies
SALES TAX TRENDS
AND ECONOMIC
Sonoma County, CA
HdL provides relevant information and analyses on the economic forces affecting California's
local government agencies. In addition, HdL's Revenue Enhancement and Economic
Development Services help clients to maximize revenues.
HdL serves over 500 cities, counties and special districts in California and across the nation.
Delivering Revenue, Insight and Efficiency
to Local Government Since 1983
HDL CONSENSUS FORECAST - OCTOBER 2019
STATEWIDE SALES TAX TRENDS
EJ 2019/20 I 2020/21
TOTAL 1.6% I 1.9%
2019/20 I 2020/21
-0.3% 10.3%
New car pricing is at record levels, up four percent over the prior
year, as buyers opt for more expensive SUVs, features and safety
equipment. The higher pricing has helped offset the impact of
declining new car sales volume and incentivized increases in used
car sales. Overall allocations are expected to remain relatively stable
with these trends in play, though the risk of a self-made recession
resulting from simmering trade tensions remains a wildcard. The next
two quarters will also be difficult in comparison to last year when an
emerging vehicle manufacturer fulfilled a large backlog of orders for
a newly released model.
A Building/Construction 2.6% 1 3.0%
While there are still many development and infrastructure projects
in the pipeline note that residential permits are down in three of the
last four quarters. This is in response to slumping home sales where
recent activity is tied to those moving up in home size while first-time
buyers wait to put aside down-payment cash. Despite low interest
rates, buyers are losing ground as rising prices eat up mortgage
savings. Single family and multifamily permit totals are well below
2018 levels but commercial construction and home improvement
work will help counter the eventual drop in housing starts that come
in four to eighteen months.
HdLO Companies
Fuel/Service Stations -1.0%11.0%
Recent conflicts in the Middle East have disrupted what was
a quiet period relative to global crude oil. While it appears
to only be temporaryat this moment, should conflicts persist
the expectation is that global crude oil prices would rise,
and local gas prices could follow. Barring future impacts,
prices may begin to decrease as refineries switch over to the
California seasonal winter blend, possibly helping consumer
spending in other categories.
General Consumer Goods -0.6%1-0.3%
Brick and mortar trends remain unstable throughout
the balance of the calendar year and beyond. Just as
the evolution of retail is promoted by shifting consumer
expectations, perception drives customer spending. As
we approach the end of 2019 shoppers may begin to feel
the effects of increased prices related to tariffs on Chinese
consumer goods, a tightening labor market and increased
uncertainty surrounding an election year. Ease of choice via
technology is expected to further strain declining in-store
activity. How these headwinds frame buyer perceptions and
behavior are key factors shaping this sector's performance
over the next few months.
I ~; I Autos/Transportation IF
S.
Business/ Industry 2.3% I 2.0%
Overall moderate growth is expected to continue although various
surveys suggest that trade tensions, shortages of key labor skills and
tariff uncertainty will slow capital investment and expansion plans for
some industries over the next few quarters. Spending on information
technology, artificial intelligence and labor-saving innovations is
unlikely to be deferred. Purchases of equipment and supplies to
support logistics services and power utility infrastructures are also
expected to remain strong.
Food/Drugs 1.5% I 1.5%
Consistent with other groups, technology investment is contributing
to new ways of reaching customer's attention. Grocers are piloting
in-store digital media networks designed to influence shoppers
spending behaviors. Floor space is being repurposed into bars
and cooking studios while shelves are stocked with ever increasing
demands for produce, dairy and other products created locally. Retail
pharmacies have also revamped footprints to offer primary medical
services and lab testing areas. While these changes are favorable to
consumers who demand great experiences, repurposed stores may
only generate modest tax improvement.
Proposition 172 projections vary from statewide Bradley-Burns
calculations due to the state's utilization of differing collection
periods in its allocation to counties. HdL forecasts a statewide
increase of 1.95% for Fiscal Year 2019/2020 and a gain of 1.86%
in 2020/2021.
tt
Restaurants/ Hotels 2.3% I 2.0%
Fast-casual chain restaurants and deliveries are fueling
growth; however, rising food, rent and labor prices
coupled with a decline in foot traffic continue to plague
the restaurant industry and put a damper on overall gains.
Guests are eating out less and opting for cheaper selections
when they do partake in dining experiences away from their
homes. Hotel development is projected to be the slowest
in a decade (only 1%), with the lower-priced extended stay
market the current trend. Fewer tourists in some regions
of the State are constraining food and beverage sales from
existing hoteliers.
State and County Pools 7.5% I 6.0%
Implementation of AB147 began April 1, 2019; this is
California's enabling legislation tied to the SCOTUS
Wayfair decision which established economic nexus
as the basis for collection of use taxes by out of state
retailers. Marketplace facilitator's obligations for third
party sellers begins October 1. Pools growth over the
coming quarters reflects new revenues from merchants
who have not remitted taxes previously. Deployment of
digital development strategies ranging from augmented
reality to voice activated procurement are appeasing
both consumers and businesses. Online sales continue to
remain a bright spot for the foreseeable future.
(6
II"
,\
III
NATIONAL AND STATEWIDE
ECONOMIC DRIVERS 4
BEACON ECONOMICS
2019 /201 2020/21
U.S. Real GDP Growth 2.3% I 2.0%
There has been a lot of alarming media coverage about the
potential impact of the trade war but, currently at least, the
hype is greater than the reality. The tariffs have indeed been
a challenge for groups and businesses directly impacted by
them, but it is easy to underestimate the human ability to
mitigate when faced with a crisis. The ability to resource,
renegotiate, and simply pass through the costs of the recent
tariffs has limited the damage they have done to economic
activity. Although exports fell in the second quarter, imports
have been rising on the strength of the U.S. economy. So
far, the disruptions have not slowed trade—only diverted it.
Moreover, Beacon Economics doesn't see the trade turbulence
at this level to be a threat to the broader economic expansion.
This could change, of course, if the disputes spiral, and we
are concerned about the potential long run consequences of
conflating trade policy and foreign policy.
U.S. Unemployment Rate 3.9% I 4.0%
With the U.S. unemployment rate (3.7%) at a 50-year low, and
wage growth accelerating, expect solid consumer spending
numbers for the balance of calendar year 2019 despite the
modest slowing of job and GDP growth. This will help to offset
other issues that continue to confront the economy. Because
the consumer sector comprises the lion's share of spending in
the economy, growth will be sustained in the coming quarters
despite concerns about trade, a global slowdown, and even
the inverted yield curve. Indeed, consumer spending is on
sound footing right now, supported by job growth, income
gains, and increases in wealth. Consumers have also exercised
prudence in their use of credit, with household debt service as
a share of income holding steady at 10% for over five years.
CA Total Nonfarm 1.6% I 1.4%
, Employment Growth
Having barely savored the fact that the U.S. economy is the
midst of a record-breaking expansion, attention has suddenly
shifted to the question of when the next recession will begin.
Admittedly, there are areas of concerns including U.S. trade
conflicts, weaker global economic conditions, Brexit, and
the inverted yield curve. However, despite the uncertainty
that continues to fuel these concerns, and despite chronic
homegrown problems with respect to the labor force and
housing. the California economy has performed solidly
through the first half of the year and will stay on track into
2020. As of July, jobs grew statewide at a year-over-year rate
of 1.8%, comfortably above the long run rate of 1.2% (since
1991) and a just a hair behind last year's 1.9% growth rate.
Additionally, with a tight labor market and steady job growth,
wages continue to climb.
CA Unemployment Rate 4.1% I 4.1%
Looking beyond the rhetoric and headline-catching hyperbole,
the data clearly show a California economy that is humming
along. Having hit a record low of 4.1% in July 2018, the
state's unemployment rate has been at or slightly above that
rate in the months since. To be sure, California is not without
problems. While some are national or even international as
described above, others are homegrown, most notably the
housing shortfall and its consequent impact on both home
prices and rents. Yet, California's labor market and its industries
have shown remarkable resilience.
CA Median Existing $496,950 1$509,500
Home Price
Median home prices are a mixed bag. Prices are up across most
areas of the state but flat or decreasing in some places. Home
sales declined steadily last year in response to rising mortgage
rates. With those rates turning down since late 2018, sales
improved modestly in the first half of 2019. Moreover, sales
in the second half of this year should improve over the first
half. Meanwhile, rents have continued to rise over the year
against a backdrop of stable or declining vacancy rates, while
statewide residential construction has declined compared to
last year's levels, making an already chronic housing shortfall
even worse.
CA Residential 118,630 I 120,280 HI' Building Permits
Many local leaders want their cities to grow, but the structure of
state and local taxation discourages residential development,
as it adds little to local government coffers but imposes
public service costs. In California, there are often greater
fiscal benefits from other land uses that directly or indirectly
generate taxable sales and other revenue streams for a city's
general fund. And, at present, building industry constraints
pose yet another complication, notably construction labor,
which is expensive and limited in availability with California's
economy at full employment. There is no doubt that California
needs more housing - more housing of all types: multi-family
as well as single-family, affordable as well as market-rate units,
and the urgency to deal with this problem has never been
greater.
Beacon Economics I BeaconECofl.com
HdL Companies
120 S. State College Blvd., Suite 200
Brea, CA 92821
Telephone: 714.879.5000 • 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, CA 90045
Telephone: 310.571.3399
Fax: 424.646.4660
Beacon Economics has proven to be one of the most thorough
and accurate economic research/analytical forecasting firms
in the country. 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
and HdL helps both companies enhance the accuracy of the
work that they perform for their respective clients.
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Hdti,Companies
714.879.5000 1 hdlcompanies.com