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HomeMy WebLinkAboutJOINT STUDY SESSION - (IAB) - ANNUAL REPORT - INVESTMENT ADV CITY OF HUNTINGTON BEACH INVESTMENT ADVISORY BOARD (IAB) ANNUAL REPORT TO THE CITY COUNCIL FOR THE PERIOD OCTOBER 1, 2004 TO SEPTEMBER 30, 2005 October 1, 2005 Establishment of Board The IAB was created to act in an advisory capacity to the City Council and City Treasurer in matters pertaining to all of the City's investments by the City Council in May 1995 by Resolution #3284. The seven Board members are appointed by a member of the City Council and are as follows: Name Council Member Ed Bush Cathy Green Joe Foye Debbie Cook Bob Glass Don Hansen Monica Hamilton Dave Sullivan Brian Olson Keith Bohr Diann Shelton Gil Coerper James Steinkirchner(Chair) Jill Hardy Board Activities The meetings of the Board for the fiscal year ended September 30, 2005 were open to the public as required by Government Code 54950 and held on the following dates in City Hall: October 27, 2004 December 20, 2004 January 26, 2005 April 27, 2005 July 20, 2005 In addition, a joint study session with the City Council is scheduled to be held on November 7, 2005. The two major activities of the Board consisted of reviewing each monthly investment report and reviewing the City of Huntington Beach Investment Policy annually, prior to their presentation at a City Council meeting. In addition, the City Administrator and Finance Officer participated in one of the IAB meetings and provided budgetary and cash flow information. Investment Advisory Board Page Two Annual Report to the City Council October 1, 2005 As required under HB Municipal Code 2.110.040(b), the Board has reviewed matters pertaining to the City's investments in the following areas: • Reviewed the annual Investment Policy • Discussed the Management Letter from the City's independent financial auditor in conjunction with the annual financial audit and was advised that there were no comments relating to investments for the IAB to review • Discussed Cash Management and ensured that there was sufficient liquidity to meet the next six month's estimated expenditures for all funds including the General Fund. • Reviewed Risk-Return Analysis as it relates to Safety, Liquidity, and Yield • Reviewed Long Term Investments and how cash flow forecasting enables the City to match investments to budgeted expenditures • Reviewed New Investment Sources, as appropriate • Reviewed Proposed State Legislation impacting the City's Investments • Reviewed any Anticipated Exposure to Loss by looking at liquidity, credit & market value of investments • Reviewed Quarterly and Monthly Reports prior to them being presented to the City Council • Reviewed Quarterly Compliance with Investment Policy and no exceptions were identified Based on the information reviewed by the Board for the period October 1, 2004 to September 30, 2005 it appears that the City Treasurer has maintained compliance with all requirements in the City's Investment Policy. Respectfully submitted, GG�4 amen Steinkirchner Chair—Investment Advisory Board ` c: Shari L. Freidenrich, City Treasurer ioint� - Session IAB/City esso Counci 'l d C ab v 5 . ....... Investment Advisory Board Members: James Steinkirchner, Chair; Ed Bush, Joe Foye, Bob Glass, Monica Hamilton, Brian Olson, Diann Shelton 1 November 7, 2005 Study Session - Topics • Overview of year - IAB report • Investment opportunities in a rising interest rate environment 2 Overview of 1AB Annual Report • Investment policy compliance • Broker/dealer review • Legislation impacting investments • Cash management * Month ly/q uarterly investment report 3 Investment- Outlook in a Rising Interest Rate Environment • Market Overview/Economic Forecast • Interest Rate Yield Curve • Investment Strategies for the City Market Overview and Economic Forecast • Fed has- raised Fed Funds ( FF) rate from 1 % in June 04 to 4% now • We expect FF rate of 4 . 5% in first half 2006 , ''then lower by end of year • We expect slightly higher long-term rates of 4 . 5%-5% , then . 4 %-4 . 25 % by end of year • Flat then possibly inverted yield curve before it eventually resteepens Economy • Rise in - Energy. Prices and housing fueling inflation concern • Katrina recovery means grab for resources • Rising home prices sustaining consumer via equity extraction and wealth effect • Higher rates not yet slowing economy • Labor markets, remain good- Foreign and pe nsion demand for bonds continues 6 Where does the market think - rates are headed ? <HELP> for explanation, <NENU> for similar functions . P181 Govt C 1 $ Enter all values and hit <GO>. 16 : 22 COUPON IMPLIED FORWARD RATES : USA YRS TO MATURITY F 1" 2 3 4" 5 7" 10 20" 30 0 ---- ------- ------- ------- ------- ------- ------- ------- ------- -------- R NOW W ---- ------- ------- ------- ------- ------- ------- ------- ------- -------- A 1 4 . 40 4.40 4. 49 4. 51 4. 53 4 . 58 4. 64 4 . 73 R ---- ------- ------- ------- ------- ------- ------- ------- ------ YIELDS D 2 4 . 48 4 . 50 4 . 52 4 . 55 4 . 57 4 . 62 4 . 66 4 . 75 ARE ---- ------- ------- ------- ------- - 2/YR Y 3 4 . 51 4 . 54 4 . 57 4 . 59 4 . 62 4 . 67 4 . 69 4 . 77 COMPOUND R ---- ------- ------- ------ ------- ------- ------- ------- ------- S © 4 . 62 4. 65 - 4 . 67 4 . 70 4 . 73 4. 72 4. 74 4 . 82 4.9 : interpolated 4.8 YIELD CURVES 4.7 4.6 0-TODAYS 4.5 4.4 - S YRS FWD 4.3 4.2 I YC CURVE #F2 1 2 3 4 5 7 10 20 30 Australia 61 2 9777 8600 Brazil 5511 3048 4500 Europe 44 20 7330 7500 Germany 49 69 920410 Hong Kong 852 2977 6000 Japan 81 3 3201 8900 Singapore 65 6212 1000 U.S. 1 212 318 2000 Copyright 2005 Bloomberg L.P. G994-409-2 26-Oct-05 16 22 57 7 Treasury Yield Curve ' now and 1 ago year <HELP> for explanation . P181 Govt C 1 5 Screen Printed H ISTOk? ICAL YIELD CURVE PAGE 1 OF 2 DRTE RHNGE 110/26/04 110126/0 MTY RHNGE � OY 5.00 - - - - - • .�. 4.50 4.00 L . . . . . D or ' - - - - - - - • - - - - - - - - - - . - - - - - . . . . • . . . • • • . 3.00 C3' V - - 10126105 2.00 • - -0- 1Oi26iO4 P 2 R E A - - - - - - - - - - - - - - - - . - - • - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ' 1 D -1 3 6 2 3 5 10 30 Australia 61 2 9777 8600 Brazil 5511 3048 4500 Europe 44 20 7330 7500 Germany 49 69 920410 Hong Kong 852 2977 6000 Japan 81 3 3201 8900 Singapore 65 6212 1000 U.S. 1 212 318 2000 Copyright 2005 Bloomberg L.P. G994-409-2 26-0ct-05 16;22;08 Interest Yield Curve �r��,, K i 's fix;' �'d r• f a- r 5� .: a„ R ,, f..r .K WN 4b MAR. Rs» x { a `:; X41, w 3 w ',... - X .� z'x, ''x}' s,�„ zt � ,a � ri.�, _. zi w! r fir ' ,r r. „ "' ,. a 'v �7FES ��arr �' x„,z��r., s;�f`s�sr. 9 Investment Strategies .for the City • Determine Liquidity Needs.! • Consider extending maturities over the next year to lock up higher long-term yields — Invest in callables with 1 time calls and plenty of call protection — Invest in agency bullets and US Treasuries with 3-5 year maturities to protect against the eventual decline in . rates 10 Disclaimer • Citigroup Global Markets Inc., including its parent, subsidiaries and/or affiliates ("Citigroup"), usually makes a market in the U.S.-traded over the counter securities and may sell to or buy from customers, as principal, securities mentioned herein. Citigroup or employees preparing this presentation may have a position in securities or options of any company mentioned in this presentation. An employee of Citigroup may be a director of a company in this presentation. Securities recommended, offered, or sold by Citigroup. (i) are not insured by the Federal Deposit Insurance Corporation; (ii) are not deposits or other obligations of any insured depository institution (including Citibank); and (iii) are subject to investment risks, including the possible loss of the principal amount invested. Although information has been obtained from and is based upon sources Citigroup .believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Citigroup's judgment as of the date of this presentation and are subject to change without notice. This presentation is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any security. This is neither an offer to sell nor a solicitation of any offer to buy a new security. For further information, please contact your Citigroup representative. 11 Conclusion • Overview of year - IAB - report • Investment opportunities in a rising interest -mteen-vironment 12 REQUEST FOR LATE SUBMITTAL (To accompany RCA's submitted after Deadline Department: City Treasurer Subject November 7 Study Session Council Meeting Date: Date of This Request: 10/31/05 - 11/7/05 REASON (Why is this RCA being submitted late?): Additional information was needed for the report and was only ,able to be finalized at the October 26 Investment Advisory Board quarterly'meeting. Today, October 31, is the first opportunity since the quarterly meeting to submit the agenda with back up. EXPLANATION (Why is this RCA necessary to this agenda?):. This Study Session between City Council and the Investment Advisory.Board has been a endized and is, therefore, necessary to-have at this meeting. CONSEQUENCES (How shall delay of this RCA adversely impact the City?): The Study Session handouts would be handed out as a late item and would not be available to Council in their packets. Signature: /OrApproved 0 Denied r7qMA'� C � Department Head Penelope Cul ert-Graft City Administrator 11-7-05 Study Session 07/14/94