HomeMy WebLinkAboutJoint Study Session - City Treasurer - Investment Advisory B tom =
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SE-SSION
IAB/CITY CO NCIL
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JOINT STUDY
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Investment Advisory Board Members:
Jon Ely, Chair;
Bill Bernard, Rick Ganulin, Bob Glass,
Warren Hall, Bob Turicchi, Bob Winchell
June 5, 2000
Out o f the Spag hetti B owl :
The Short End of the Curve
6.7500
_�o
6-2500--
5.7500
- Dec-98
—Dec-99
N Nb:]y 00
by-00
5.2500--
4.7500---
4.2500
Fed Funds 3mo 6mo lyr 2yr 5yr
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What does it all mean to the City?
• The current weighted average maturity of the City's
portfolio is 419 days.
• The value of 1 basis point is approx. $ 114.79 per
$ 1 Million invested.
• The portfolio market value changes approx. $330,000
when rates move by 25 bps.
• Time reduces volatility. If the portfolio wtd. avg. maturity
becomes 365 days, the same rate change would cause a
valuation change of $287,500.
• An inverted curve captures higher yields with less risk to
the portfolio.
GASB 31
• GASB 31 Update
• 3-31 -00 Impact of ($3 15,000)
• Investment Income vs. Budget
• $ 1 .3 Million over as of 4-30-00
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CITY OF HUNTINGTON BEACH
INVESTMENT ADVISORY BOARD (IAB)
ANNUAL REPORT TO THE CITY COUNCIL
FOR THE PERIOD OCTOBER 1, 1998 TO SEPTEMBER 30, 1999 0Cz
November 1, 1999 "-
Establishment of Board �w o r- -
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 Councrl,�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
Bob Turicchi, Chair Shirley Dettloff
William P. Bernard Tom Harman
Jon D. Ely Dave Sullivan
Richard Ganulin Dave Garofalo
Bob Glass Pam Julian
Warren Hall Peter Green
Robert Winchell Ralph Bauer
Board Activities
The meetings of the Board for the fiscal year ended September 30, 1999 were open to the
public as required by Government Code 54950 and held on the following dates in City
Hall:
October 21, 1998
January 27, 1999
April 21, 1999
July 28, 1999
In addition, a joint study session with the City Council was held on June 7, 1999.
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.
As required under BB 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
• Reviewed the Management Letter from the City's independent financial auditor in
conjunction with the annual financial audit which includes the investments
• Discussed Cash Management and ensured that there was sufficient liquidity to meet
the next six month's estimated expenditures.
ST�p� SASS 1 a�
• Reviewed Risk-Return Analysis as it relates to Safety,Liquidity, and Yield
• Reviewed Long Term Investments and how cash flow forecasting will enable 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
• Reviewed Quarterly Reports prior to them being presented to the City Council
• Reviewed Quarterly Compliance with Investment Policy
• Monitored Broker-Dealer Selection and performance
Based on the information reviewed by the Board during 1999, it appears that the City
Treasurer has maintained compliance with all requirements in the City's Investment
Policy.
Respectfully submitted,
Bob Turicchi
Chair—Investment Advisory Board
xc: Shari L. Freidenrich, City Treasurer
Study Session Topics
* Overview of year - IAB Report
• Broker Update
• GASB 31 Update
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The Economy, The Bond Market
& The City
Presented to:
Huntington Beach
City Council &
By Howard Herring & Investment Advisory
Michael Swan Board
J.W.Genesis June 5, 2000
Financial Services, Inc.
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1999-2000 : A"quick"review
The ray of sunshine- the U.S.
• Unprecedented long-term growth
{ without inflation.
` Employment at record levels.
Near record levels of housing
construction and sales.
• Mr.Greenspan's talk of the "New
-� Paradigm" hits the bullseye.
Pricing power disappears as the
internet grows.
The Fed begins to act aggressively,
g gg Y,
raising interest rates 3 times from
the end of June to November .
Q
• Y2K is a non-event
4
Welcome to the most fantastic
economy in world history
• Almost anyone who wants
to work can find a job.
• Consumer confidence is
extremely high.
Technology has changed
the way people work
} ---- Personal wealth is being
created at the fastest rate
ever seen.
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No New Taxes . . . . . . . .
• Capital Gains Tax has 9 Inheritance taxes to be
been cut 20%. cut or eliminated?
• Gains on home sales • Capital Gains tax to be
tax exempt every 2 cut further or
yrs. eliminated?
• Budget surplus still • Debt service on
growing. Treasury borrowings
• More growth = more will drop.
revenue. Flat Tax reappears?
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The Volker Greenspan Legacy
• Stable Growth for over
20 years.
• Economic downturns
have been shorter and
more muted.
• Restored the U.S. to
world leadership.
• Pro-active vs. Re-active
The Legacy Continues . . . .
• The Greenspan Fed
J�I continues its pre-inflation
attack. Rates rise 100 bps.
in the first 137 days of the
year.
• Equities are shell shocked
as values drop 30-50% in
some areas.
• No "safe harbor" in bonds.
s
Trac%king The Bond Market.
The Yield Curve
......................................................................
6.7500 -
6.2500 -- — -- ----
j
- Dec-ss i
Mar-99
May-99
5.7500 Oct-99
Dec-99
/ Jan-00
.x —�---Feb-00
Mar-00
5.2500 — Apr-00
May-00
l—
4-7500 -- — — ---- ----- —
4.2500
Fad Funds 3— 6— lyr 2yr 5yr 10yr 30yr
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