Staff Report - Investment 1st Qtr Final
PREPARED BY: STEPHEN CONWAY
FINANCE DIRECTOR
Reviewed by: Town Manager, Assistant Town Manager, and Town Attorney
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 11/7/2017
ITEM NO: 8
DATE: OCTOBER 30, 2017
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: RECEIVE THE FIRST QUARTER INVESTMENT REPORT (JULY THROUGH
SEPTEMBER 2017) FOR FISCAL YEAR 2017/18.
RECOMMENDATION:
Receive the First Quarter Investment Report (July through September 2017) for Fiscal Year
2017/18.
DISCUSSION:
As of September 30, 2017 the Town’s weighted portfolio yield of 1.37% continues to
outperform the Local Agency Investment Fund (LAIF) yield of 1.11% (difference of 26 basis
points). As a result, staff continues to replace matured or called investments with similar
investments with respect to maturity and credit quality. For the quarter, the Town’s weighted
average rate of return increased 12 basis points (0.12%) from 1.25% to 01.37%.
Cash balances fell in this quarter due to some significant payments made in the quarter
including approximately $2.5M of CalPERS unfunded liability amortization payments due for FY
17/18, $1.5M of debt service payments on the Town’s 2002 and 2010 Certificates of
Participation due in August 2017, and approximately $1.8M paid for annual Street Repair and
Resurfacing projects. It is normal for cash balances to decline during the first quarter because
property tax payments do not begin to be collected until November of each fiscal year.
During the quarter, yields have generally been increasing anticipating continued economic
growth. According to the Wall Street Journal, some investors expect that a tax overhaul will
stimulate growth in the economy and inflation, while also increasing the budget deficit and
supply of Treasury debt.
PAGE 2 OF 2
SUBJECT: RECEIVE FIRST QUARTER INVESTMENT REPORT (JULY THROUGH SEPTEMBER
2017) FOR FISCAL YEAR 2017/18
DATE: OCTOBER 30, 2017
S:\COUNCIL REPORTS\2017\11-07-17\Investment Report\Staff Report - Investment 1st Qtr Final.docx 11/2/2017 2:41 PM SLL
The Town Council Investment Policy (4-02) identifies the Town’s authorized securities and
transactions consistent with state and federal regulations. Page two of Attachment 1 identifies
the Town’s current portfolio compared with the Town’s adopted Policy.
At the conclusion of the Federal Reserve’s September Open Market Committee, twelve of the
sixteen officials predicted another rate increase sometime this year. As such, staff’s strategy
remains to continue focusing on the purchase of new short-term (two years or less in maturity)
investments as the rewards for longer term investments in the three to five year maturity do
not have adequate spreads to justify the risk of holding longer term maturities.
CONCLUSION:
Staff recommends that the Town Council receive the First Quarter Investment Report (July
through September 2017) for Fiscal Year 2017/18.
ENVIRONMENTAL ASSESSMENT:
This is not a project defined under CEQA, and no further action is required.
Attachment:
1. First Quarter Investment Report for FY 2017/18 (July through September 2017)