HomeMy WebLinkAboutDirect the City Manager and City Treasurer to Develop a Plan �S'i4MEl�fi�
_ City of Huntington Beach
File #: 21-827 MEETING DATE: 11/2/2021
Submitted by Councilmember Kalmick and Councilmember Moser - Divest Corporate Bond
Holdings of Fossil Fuel Corporations
Direct the City Manager and City Treasurer to develop a plan to divest our holdings in Chevron
Corporate Bonds and reinvest the funds in an alternate fund in a manner that will not negatively
affect the City's return on investment.
City of Huntington Beach Page 1 of 1 Pnnted on 10272021
Pc.e&W Leg slay -
LEY
CITY OF HUNTINGTON BEACH
CITY COUNCIL MEETING—COUNCIL MEMBER ITEMS REPORT
TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: CITY COUNCIL MEMBER DAN KALMICK
CITY COUNCIL MEMBER NATALIE MOSER
DATE: NOVEMBER 2, 2021
SUBJECT: DIVEST CORPORATE BOND HOLDINGS OF FOSSIL FUEL CORPORATIONS
With the oil spill in October affecting Huntington Beach and the City's recent call for the end of
offshore drilling in both State and Federal waters, it would be hypocritical to publicly call for
ending offshore oil production while still providing fossil fuel companies with financing.
We are therefore asking that the City Council to direct the Investment Advisory Board in
conjunction with the City Treasurer to establish a plan to divest our approximately $5 million
stake in Chevron Corporate Bonds and develop an alternative investment outside of the fossil
fuel industry in a manner that will not negatively affect the City's return on investment.
RECOMMENDED ACTION
Direct the City Manager and City Treasurer to develop a plan to divest our holdings in Chevron
Corporate Bonds and reinvest the funds in an alternate fund in a manner that will not negatively
affect the City's return on investment.
2ise
City Council/ ACTION AGENDA November 2, 2021
Public Financing Authority
Rentals." (Attachment No. 1)
Approved 7-0
ADMINISTRATIVE ITEMS
29. 21-803 Approved Fiscal Year 2020121 Year End Budget Adjustments, Inter-Fund
Transfers, and Assignment
Recommended Action:
A) Approve the year-end inter-fund transfers for the Fiscal Year 2020/21 Revised Budget in the
Funds and by the amounts contained in Attachment 1: and,
B) Increase appropriations for the FY 2020/21 Revised Budget by $13,225,591 in the Funds and
amounts contained in Attachment 1 and associated carryovers to reconcile the budget with actual
expenses incurred.
C) Approve the assignment of $3,650,000 in the General Fund for Litigation Reserves.
Approved 7-0
COUNCILMEMBER ITEMS
30. 21-826 Item Submitted by COUncilmember Kalmick Approved - Develop A Plan
and Cost Analysis to Move the City of Huntington Beach Municipal
Corporation's Power Consumption to 100% Renewable Energy
Recommended Action:
It is recommended that the City Manager direct the Public Works Department to prepare the
analysis for City Council consideration.
Approved 6-1 (Peterson-No)
31. 21-827 Item Submitted by Councilmembers Kalmick and Moser Approved -
Divest Corporate Bond Holdings of Fossil Fuel Corporations
Recommended Action:
QiFeGt the Cily Manag8F aAd G ily Treasurer to develop a plan to d vast our holdings n Ghewen
Gerperate-Bonds and reinvest the-fufW&4- an alternate fund-ina manner that will net negat yely
en-investment.
Approved 7-0 as amended— Direct the Investment Advisory Board in conjunction with the
City Treasurer to examine whether there are comparable alternatives to invest in energy
companies and to make recommendations as to whether the city's investment policy
statement should be amended to reflect any findings.
COUNCILMEMBER COMMENTS (Not Agendized)
Comments provided by Kalmick, Moser, Posey, Bolton, Carr, and Delgleize
Moore, Tania
From: Estanislau, Robin
Sent: Saturday, October 30, 2021 8:31 AM
To: Moore, Tania; Switzer, Donna
Cc: Esparza, Patty
Subject: FW: City Treasurer Information RE: City Council item 21-827 Submitted by
Councilmember Kalmick and Councilmember Moser: Divest Corporate Bond Holdings of
Fossil Fuel Corporations SUPPLEMENTAL
COMMUNICATION
Supplemental Communication AlestNq Dell:
From: Backstrom, Alisa <Alisa.Backstrom@surfcity-hb.org>Sent: Friday, October 29, 2021 3:36 PM ALends %m No. I al
Cc: Estanislau, Robin <Robin.Estanislau@surfcity-hb.org>; Bolton, Rhonda <Rhonda.Bolton@surfcity-hb.org>; Carr, Kim
<Kim.Carr@surfcity-hb.org>; Chi, Oliver <oliver.chi@surfcity-hb.org>; Delgleize, Barbara <Barbara.Delgleize@surfcity-
hb.org>; Delgleize, Barbara <Barbara4hb@gmail.com>; Gates, Michael <Michael.Gates@surfcity-hb.org>; Hopkins,
Travis<thopkins@surfcity-hb.org>; Kalmick, Dan <Dan.Kalmick@surfcity-hb.org>; Moser, Natalie
<Natalie.Moser@surfcity-hb.org>; Peterson, Erik<Erik.Peterson @surfcity-hb.org>; Posey, Mike <Mike.Posey@surfcity-
hb.org>; Posey, Mike <mikeposey@earthlink.net>; Backstrom, Alisa <Alisa.Backstrom @surfcity-hb.org>
Subject: City Treasurer Information RE: City Council item 21-827 Submitted by Councilmember Kalmick and
Councilmember Moser: Divest Corporate Bond Holdings of Fossil Fuel Corporations
Good afternoon:
I would like to provide some information so that you may make an informed decision
regarding this item. Please do not hesitate to contact me if you should like further
information.
CITY OF HUNTINGTON BEACH
INVESTMENT PORTFOLIO INFORMATION - CORPORATE BONDS/Chevron Bond
October 29, 2021
Prepared by: Alisa Backstrom - City Treasurer. Colin Stevens - Analyst
AS OF: September 30, 2021
% of yield to
Investment Type Portfolio maturity
Federal Agency Issues 33.8% 1.232%
Local Agency Investment Fund (LAIF) 4.6% 0.206%
Treasury Securities 8.5% 1.048%
Medium Term Notes - Supranationals 12.7% 1 .020%
Corporate Bonds 15.1% 2.319%
OC Investment Pool 23.5% 0.562%
US Bank Money Market Sweep 1.8% 0.020%
The yield to maturity of the Corporate Bonds as a group is 2.319/.,. the highest yield of all investment
types in the portfolio This makes sense according to the risk-reward scenario, which provides the
potential of greater return with more risk
CORPORATE BOND HOLDINGS AS OF SEPTEMBER 30, 2021
Awrap KnhM9 3"
hwr Byrom Do PsYyw m rtNVAN leBllhMu RIB W
1`c•• x. •.%2c 5.000 000 00 ; I n ISO 00 5 103.309 6S 2 600
Chq Carp 05242019 S00000000 S.211.WOOD SOS1,0690S 3191 AA
Drwr 121167019 2.87S 00000 3.091.8%00 2991,1S39S sow
Hi~Oe9a Inc 06242019 '..ODD 000 00 S.069 9S0 00 S004.691811 2.625 A
91M Carp D91262019 3.000 000 0D 1.03999000 2.%6.6{S 90 1075 A
PE PSCO INC 12,21,2010 500000000 5.0902SO 00 1"1.14269 3.100
few MWLon"Uh K 12/1112019 5.000.000 00 S.06S.ISO 00 496401837 1150
urwh r OW V 2019 S.000 000 0D S.050 250 00 4992.96792 2.200
US Bar*NA CKa OL2112020 2010000000 2 106 NO 00 2.059.220 16 I= AA
US Kati AU C� rrua 0 1n2021 3 909 o00 00 1 990 146 19 6 003,41M A 2 600
StOWN V4 APW 42.119.90108 61.a6.0w W 62H3.961 40 411"aBM
Per the investment policy statement and government code, only investments in A-rated and above
issuers are allowable. This, combined with other important factors when choosing a particular
investment such as industry outlook, no negative watch, reasonable or no 'make-whole call. etc ).
results in only a handful of issuers to select from when investing in corporate bonds.
Potential scenarios for $5MM Chevron bond as of 10/28/21:
1. Hold the Chevron bond and let it mature in June, 2023. Net profit when bond matures in June,
2023 is approximately $212,000
2. Sell the Chevron bond now and net approximately $120,000. Reinvest the S120.000 in an 18-
month US Treasury at approximately .36%. This will provide an additional S32.000 in income.
So the total amount we would receive by June 2023 (approx. 18-19 months from today) is
$120,000 + $32,000 = $152,000, This is $60.000 less than if we were to just hold the Chevron
bond to maturity
3 Sell the Chevron bond now and net approximately $120,000. Reinvest the $120,000 gain in
another 18-month corporate bond at around .50%. The additional income will be $42,000. The
total amount we would receive by June, 2023 would be S120,000 + $42.000 = $162,000. This
is still $50.000 less than if we were to just hold the Chevron bond to maturity.
4. This last option just to note is not apples to apples like the other options: Sell Chevron and
take the $120.000 gain and put into a 5-year US Agency at around 1%. Net gain is $200,000.
This is still less than the $212,000 net gain if we just held the Chevron to maturity in the first
option Even though we do not give up as much as the other options, were putting on
significant additional duration as opposed to options #2 and #3. So it is not a "something for
nothing' trade. This option mitigates the loss of potential income, but to do so we have to go
out 5 years vs. the current 18 months. and if rates continue to go up, we will be locked in at a
less-than-market rate for 5 years
Corporate issuers and connections to fossil fuels:
Most corporate issuers have some connection to, and reliance on. fossil fuels Just as an example,
following is relevant information regarding issuers whose bonds we currently hold
Disney While they are currently investigating various alternatives such as low carbon fuel sources,
Disney currently uses fossil fuels to power their fleet of trucks, trams, shuttles, and cruise ships.
2
Fossil fuels are also utilized in the making/packaging of many Disney branded products sold across
hundreds of categories from books to figurines, games, apparel and more
Home Depot: Fossil fuels are used in Home Depot operations relating to combustible sources and
refrigerants. as well as indirect emissions from purchasing electricity to power the company's
operations.
IBM: In 2020, 40% of the electricity consumed across IBM's global operations came from the use of
fossil fuels. The other 60% was from renewables.
PepsiCo Pepsi purchases packaging from plastic manufactures that require the use of fossil fuels.
Texas Instruments: TI does not state how they use fossil fuels directly on their website however. the
production of their products require the manufacturing and purchasing of plastics, which are made
from chemicals sourced from fossil fuels
Unilever While the company has long term plans to move away from the use of fossil fuels, currently
the chemicals used in Unilever's cleaning and laundry products make up the greatest proportion of
their carbon footprint (46%).
Apple. While Apple has developed a 2030 carbon-neutral plan, manufacturing today still requires the
use of fossil fuels.
Chevron: Production and exploration currently requires the use of fossil fuels. though Chevron has
outlined a plan to expand renewable natural gas production in the future.
US Bank NA Cincinnati — Provides lending to companies that use fossil fuels.
I hope this information proves helpful.
Best regards,
Alisa Backstrom, MBA, CCMT, CPFIM
City Treasurer
City of Huntington Beach
alisa.backstrom(a)surfcity-hb.org
Direct: 714-536-5299
Cell: 714-655-9312
Moore, Tania
From: KC Fockler <kcsurfhb@gmail.com>
Sent: Tuesday, November 2, 2021 7:39 AM
To: Estanislau, Robin, Kalmick, Dan; Posey, Mike; Carr, Kim; Peterson, Erik; Delgleize, Barbara;
Bolton, Rhonda, Moser, Natalie; supplementalcomm@surfcity-hb.org
Subject: Oil and Gas
Dear Honorable Mayor Carr and City Councilmembers,
As our beaches have shown us over the last few weeks, we need to stop using oil and other fossil fuels ASAP.
Please vote in support of item 30 by Councilmember Dan Kalmick and also agendize a discussion of 100%
carbon free electricity for every HB energy user through the OC Power Authority.
On another note, Item 31 looks to divest the portfolio holdings in Chevron. 1 would rather the city look to "add"
renewable energy to the portfolio, while still holding some interest in Chevron, as long as the yield is
acceptable. Not eliminate it in its entirety,just because it is in the oil industry. The oil industry still provides
material that has many uses outside of just providing electricity for powering homes, and therefore it remains a
viable company and industry in which to invest. Invest in multiple sources and diversify the city's holdings is
what I would advise moving forward. Investing in bonds and other dividend yielding companies would be
prudent and,overall, it protects the investment of the city.
Thank you again for passing the Recent City Resolution calling for a ban to new offshore oil and gas drilling in
federal waters, that shows what the city is about...surfing, not cleaning up the catastrophes of man.
Thank you,
KC Fockler
"Carpe Diem"
(7nt of HB firvva,wrnrul Board.Nrntlrr,{/SS Swfn&r Ea wa(on('hair and('h,qurr('n-(')mr
SUPPLEMENTAL
COMMUNICATION
Meetktg Date:_ 1�a2l�Da�
Agenda rem No.: 3! 421 - Ro;7L
t
Moore, Tania
From: Fikes, Cathy
Sent: Tuesday, November 2, 2021 9:22 AM
To: Agenda Alerts
Subject: FW: Nov 2, 2021 City Council Agenda Items 30 & 31
From: Linda Moon <OCLCV2@outlook.com>
Sent: Monday, November 1, 2021 8:29 PM
To: CITY COUNCIL <city.council@surfcity-hb.org>
Cc: OCLCV<OCLCV@groups.outlook.com>
Subject: Nov 2, 2021 City Council Agenda Items 30 & 31
Dear Mayor Carr and City Councilmembers:
To mitigate the effects of climate change and
protect our local environment. it is essential that
power consumers move away from the use of fossil
fuels as soon as possible.
The Orange County League of Conservation Voters
urges your support of Item 30 on the November 2.
2021 Council Agenda. to direct city staff to perform
an analysis of 100% renewable energy pricing from
both SCE and OCPA based on municipal usage,
across all funds and rate classes and develop
timelines for moving municipal accounts to 100%
renewable energy.
OCLCV further urges your support of Item 31 to
direct the Investment Advisory Board. in conjunction
with the City Treasurer to establish a plan divest
City investment holdings of Chevron Corporate
Bonds and reinvest in an alternate fund. not
including fossil industry investments.
Thank you.
Denise Erkeneff SUPPLEMENTAL
President, OCLCV COMMUNICATION
Meeang Da*: 4�
Agenda Item No.: ga
Moore, Tania
From: Lisa Swanson <lisainlb@ymail.com>
Sent: Tuesday, November 2, 2021 11:28 AM
To: supplementalcomm@surfcity-hb.org
Subject: Support for Agenda Items 30 and 31
Dear Mayor and City Council Members, it is so exciting and encouraging to see all the actions our
City is taking to become more sustainable and protect our beautiful environment. Thank you for your
excellent leadership in this area! I am writing today to support Agenda items 30 and 31 that will
facilitate a transition from fossil fuels to renewable energy sources. We are finally at a tipping point
where renewable energy sources make good economic sense, and the environmental benefits are
critical for the future of our City and the planet. I am especially supportive of Item 30 because it will
send a strong message to the Orange County Power Authority that a key member city supports a
strong portfolio of renewable energy sources. This will promote a 100% renewables option for
residential customers which I strongly support.
Regards,
Lisa Swanson
11yr+ resident SE Huntington Beach
SUPPLEMENTAL
COMMUNICATION
Mee&V Date:
Agenda Iwm No.,
Moore, Tania
From: Linda Law <lindaklaw@aol.com>
Sent: Tuesday, November 2, 2021 1:58 PM
To: Carr, Kim, Delgleize, Barbara, Peterson, Erik, Bolton, Rhonda: Posey, Mike: Moser,
Natalie; Kalmick, Dan
Cc: supplementalcomm@surfcity-hb.org, CITY COUNCIL: Chi, Oliver, Crumby, Sean
Subject: Items 30 and 31: Yes to 100% renewable electricity!
Dear Mayor Carr and City Councilmembers, Our beaches have shown us that we need to stop using oil and other fossil
fuels ASAP in order to have a livable future. Please vote in support of items 30 and 31 by Councilmember Dan Kalmick
and Councilperson Moser and also agendize a discussion of 100%carbon free electricity for every HB energy user
through the OC Power Authority. Thanks
SUPPLEMENTAL
COMMUNICATION
Meetkg Date: gn�)-
Agenda ram No.:
t
Moore, Tania
From: Linda K <Ikteamtalk@gmail.com>
Sent: Tuesday, November 2, 2021 2:00 PM
To: CITY COUNCIL; supplementalcomm@surfcity-hb.org
Subject: In support of item 30 and 31
Dear HB City Council,
You have shown strong leadership in your role to keep Huntington Beach a thriving beach community and lead
the way in establishing the first Community Choice Energy agency in Orange County, OCPA.
Please continue to show leadership in sustainability by voting YES on item 30 and 31,establishing a plan for
1001/o renewables for municipal power consumption, and divesting from fossil fuels.
I also support ASAP placing a discussion on a future agenda of 100%clean power default for Huntington
Beach. A default means customers start at that level. They can easily choose to "Opt-Down" if they want to
choose another power mix.
A 100%clean power mix with OCPA is the easiest way for businesses and residents to significantly reduce
their carbon footprint.
Thank you!
Linda Kraemer
Linda Kraemer, M.S.
Chapter Co-Chair
The Climate Reality Project: Orange County, CA Chapter
www.c l i matereal i tvoc.com
OC Clean Power- www.occleanpower.org
LKTeamTalkna vmail.com
oThe CHniate
ux. N(A rairm,rw r"wvrr"
www.facebook.com/aroups/climaterealitycrangecounty
www.instagram.com/climatereality orangecounty SUPPLEMENTAL
Twitter: @climateoc COMMMNUNI
Meerir�q Date: I I �21i CATION
Agenda Um No.: ?i� (a ► - Sa�)
t