Contra Costa Transportation Authority Meeting STAFF REPORT
Contra Costa Transportation Authority Meeting STAFF REPORT Meeting Date: September 1, 2011 Subject
Monthly Cash and Investment Report for July 2011
Summary of Issues
The Authority’s Investment Policy requires that a monthly report of investment transactions be prepared and submitted to the Executive Director, APC, and the Authority Board. This monthly report covers transactions for July 2011.
Recommendations
It is recommended that this report be accepted.
Financial Implications
A summary of balances and transactions is provided in the text below.
Options
Not applicable.
Attachments
A. Summary and Detail of Cash and Investment Activity for July 2011
Changes from Committee
Background The Authority’s Investment Policy calls for a monthly report to be submitted to the Executive Director, APC, and the Authority Board. The report summarizes monthly investment balances, transactions, return, and other pertinent investment matters. The Authority’s cash and securities are invested in separate portfolios depending upon the objectives of the assets being managed. As of July 31, 2011, the combined total for all cash and investments was $219,407,424. $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000
Jul-11 Jul-10
$-
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Contra Costa Transportation Authority Meeting STAFF REPORT September 1, 2011 Page 2 of 4 Checking Account – $3,003,879 This is the Authority’s commercial banking account for accounts payable, payroll, deposits and electronic activity. Unencumbered funds at the end of each business day are invested in an interest bearing account with Wells Fargo Bank. Portfolio Cash Account - $1,240,886 The Investment Portfolio’s balance is invested in the Wells Fargo Investment Government Money Market fund while in transition for the purchase of an investment security. Investment Portfolio - $76,876,034 This portfolio includes individual securities, such as Treasury Notes, Federal Agency Securities and other securities permitted by the Authority’s Investment Policy. The portfolio is actively managed by PFM Asset Management, the Authority’s independent investment advisor. The investment strategy is to manage total return consistent with 1 to 3 year maturity treasuries as benchmarks for performance and maturity duration. Annualized returns for the portfolio and the benchmarks for the past year and past 2 years were: Annualized Returns as of July 31, 2011 Past Year Past 2 Years Effective Duration (Years)
CCTA 1.35% 1.95% 1.57
1-3 Year UST Index* 1.35% 2.09% 1.79
The figures above represent total return numbers. Total return is a period-to-period performance measurement that includes income, realized and unrealized gains and losses. Total return is an industry standard method of measuring performance. This differs from yield, which is simply a snapshot projection of the income to be earned for the coming year, and includes no principal value changes. Total return for the twelve months ended was 1.35%, even with the benchmark. Cash received on the portfolio during the month totaled $24,137.42. Summary and detail information regarding securities within the portfolio can be found in the accompanying report from PFM. * This index is the Bank of America Merrill Lynch 1 – 3 years U.S. Treasury Note Index. This is a commonly used total return index of all U.S. Treasuries with a maturity between 1 and 3 years.
PFM Portfolio Manager Commentary: Though initial jobless claims were below 400,000 for the first time since early April, second quarter GDP was revised downwards in July, to an anemic 1.3%, falling well short of the expected growth of 1.9%. No growth in the consumer sector dragged down overall numbers. According to the GDP price index, inflation came in at 2.3% for the second quarter, marking a slight S:\04-APC Packets\2011\09-01-11\03.2 - MolyInvTransReport 9-11 (July).docx
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Contra Costa Transportation Authority Meeting STAFF REPORT September 1, 2011 Page 3 of 4 decrease from the 2.5% inflation seen in the first quarter. The latest data suggest that the recession was the worst since World War II, and lower expectations for growth significantly for the latter half of the year, as businesses and consumers both seek for clarity from Washington to recover. Late in the month, President Barack Obama and congressional leaders announced a historic agreement on emergency legislation to avert the nation's first-ever financial default. That agreement will slice at least $2.2 trillion from federal spending over the next decade. The increased borrowing would include $400 billion that would take effect immediately and another $500 billion after additional Congressional approval. Passage of the debt ceiling extension with its associated program to cut future spending has not ended investors’ concerns about whether the pace of debt accumulation can be brought under control. Nevertheless, investor appetite for Treasury debt has not waned, and has maintained yield levels near historic lows. We continued to look for opportunities beyond the 2-year maturity area, as the steepness of the yield curve continued to offer opportunities for yield and total return enhancement. As in prior months, we weigh any new investments in longer-term maturities with the possibility of a rise in interest rates and the negative effect on fair value that this move may cause. Local Agency Investment Fund (LAIF) - $39,291,034 LAIF is a pooled investment fund managed by the State Treasurer’s Office for the investment of public agency funds. LAIF is a short term investment alternative for the Authority. The LAIF return was 0.38% for the month end. California Asset Management Program (CAMP) - $138,229 CAMP is a fund designed as an investment vehicle for short term purposes, mainly for operating funds and bond proceeds. CAMP is available only to public agencies, managed by PFM Asset Management and overseen by a Joint Powers Authority of public agency officials. The investment objective is to provide a market level return consistent with maintaining liquidity and stability of principal. The fund functions similar to a money market mutual fund. The fund is rated ‘AAAm’ by Standard & Poor’s. The CAMP return was 0.12% for the month end. 2010 Bonds - $98,857,362 This portfolio contains bonds proceeds from the 2010 Sales Tax Revenue Bonds and is used specifically to finance Measure J projects. As such, the investment style is to maintain daily liquidity as needed to pay construction related expenditures for projects. The investment vehicles used for these funds are LAIF and CAMP with balances of $75,204,554 and $23,652,808, respectively. These balances will naturally decrease as the Authority expends the bond proceeds to pay for Measure J projects.
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Contra Costa Transportation Authority Meeting STAFF REPORT September 1, 2011 Page 4 of 4 Certification: The investment portfolio is in compliance with the Authority's adopted investment policy. Furthermore, as required by State regulation, it is certified that the Authority has sufficient cash liquidity to meet expected expenditure requirements over the next six months for fiscal operations. This information has been reviewed and approved by the Authority’s Chief Financial Officer.
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Attachment A
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This Page Intentionally Blank
Monthly Cash and Investment Report for July 2011
Summary of Issues
The Authority’s Investment Policy requires that a monthly report of investment transactions be prepared and submitted to the Executive Director, APC, and the Authority Board. This monthly report covers transactions for July 2011.
Recommendations
It is recommended that this report be accepted.
Financial Implications
A summary of balances and transactions is provided in the text below.
Options
Not applicable.
Attachments
A. Summary and Detail of Cash and Investment Activity for July 2011
Changes from Committee
Background The Authority’s Investment Policy calls for a monthly report to be submitted to the Executive Director, APC, and the Authority Board. The report summarizes monthly investment balances, transactions, return, and other pertinent investment matters. The Authority’s cash and securities are invested in separate portfolios depending upon the objectives of the assets being managed. As of July 31, 2011, the combined total for all cash and investments was $219,407,424. $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000
Jul-11 Jul-10
$-
S:\04-APC Packets\2011\09-01-11\03.2 - MolyInvTransReport 9-11 (July).docx
3.2-1
Contra Costa Transportation Authority Meeting STAFF REPORT September 1, 2011 Page 2 of 4 Checking Account – $3,003,879 This is the Authority’s commercial banking account for accounts payable, payroll, deposits and electronic activity. Unencumbered funds at the end of each business day are invested in an interest bearing account with Wells Fargo Bank. Portfolio Cash Account - $1,240,886 The Investment Portfolio’s balance is invested in the Wells Fargo Investment Government Money Market fund while in transition for the purchase of an investment security. Investment Portfolio - $76,876,034 This portfolio includes individual securities, such as Treasury Notes, Federal Agency Securities and other securities permitted by the Authority’s Investment Policy. The portfolio is actively managed by PFM Asset Management, the Authority’s independent investment advisor. The investment strategy is to manage total return consistent with 1 to 3 year maturity treasuries as benchmarks for performance and maturity duration. Annualized returns for the portfolio and the benchmarks for the past year and past 2 years were: Annualized Returns as of July 31, 2011 Past Year Past 2 Years Effective Duration (Years)
CCTA 1.35% 1.95% 1.57
1-3 Year UST Index* 1.35% 2.09% 1.79
The figures above represent total return numbers. Total return is a period-to-period performance measurement that includes income, realized and unrealized gains and losses. Total return is an industry standard method of measuring performance. This differs from yield, which is simply a snapshot projection of the income to be earned for the coming year, and includes no principal value changes. Total return for the twelve months ended was 1.35%, even with the benchmark. Cash received on the portfolio during the month totaled $24,137.42. Summary and detail information regarding securities within the portfolio can be found in the accompanying report from PFM. * This index is the Bank of America Merrill Lynch 1 – 3 years U.S. Treasury Note Index. This is a commonly used total return index of all U.S. Treasuries with a maturity between 1 and 3 years.
PFM Portfolio Manager Commentary: Though initial jobless claims were below 400,000 for the first time since early April, second quarter GDP was revised downwards in July, to an anemic 1.3%, falling well short of the expected growth of 1.9%. No growth in the consumer sector dragged down overall numbers. According to the GDP price index, inflation came in at 2.3% for the second quarter, marking a slight S:\04-APC Packets\2011\09-01-11\03.2 - MolyInvTransReport 9-11 (July).docx
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Contra Costa Transportation Authority Meeting STAFF REPORT September 1, 2011 Page 3 of 4 decrease from the 2.5% inflation seen in the first quarter. The latest data suggest that the recession was the worst since World War II, and lower expectations for growth significantly for the latter half of the year, as businesses and consumers both seek for clarity from Washington to recover. Late in the month, President Barack Obama and congressional leaders announced a historic agreement on emergency legislation to avert the nation's first-ever financial default. That agreement will slice at least $2.2 trillion from federal spending over the next decade. The increased borrowing would include $400 billion that would take effect immediately and another $500 billion after additional Congressional approval. Passage of the debt ceiling extension with its associated program to cut future spending has not ended investors’ concerns about whether the pace of debt accumulation can be brought under control. Nevertheless, investor appetite for Treasury debt has not waned, and has maintained yield levels near historic lows. We continued to look for opportunities beyond the 2-year maturity area, as the steepness of the yield curve continued to offer opportunities for yield and total return enhancement. As in prior months, we weigh any new investments in longer-term maturities with the possibility of a rise in interest rates and the negative effect on fair value that this move may cause. Local Agency Investment Fund (LAIF) - $39,291,034 LAIF is a pooled investment fund managed by the State Treasurer’s Office for the investment of public agency funds. LAIF is a short term investment alternative for the Authority. The LAIF return was 0.38% for the month end. California Asset Management Program (CAMP) - $138,229 CAMP is a fund designed as an investment vehicle for short term purposes, mainly for operating funds and bond proceeds. CAMP is available only to public agencies, managed by PFM Asset Management and overseen by a Joint Powers Authority of public agency officials. The investment objective is to provide a market level return consistent with maintaining liquidity and stability of principal. The fund functions similar to a money market mutual fund. The fund is rated ‘AAAm’ by Standard & Poor’s. The CAMP return was 0.12% for the month end. 2010 Bonds - $98,857,362 This portfolio contains bonds proceeds from the 2010 Sales Tax Revenue Bonds and is used specifically to finance Measure J projects. As such, the investment style is to maintain daily liquidity as needed to pay construction related expenditures for projects. The investment vehicles used for these funds are LAIF and CAMP with balances of $75,204,554 and $23,652,808, respectively. These balances will naturally decrease as the Authority expends the bond proceeds to pay for Measure J projects.
S:\04-APC Packets\2011\09-01-11\03.2 - MolyInvTransReport 9-11 (July).docx
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Contra Costa Transportation Authority Meeting STAFF REPORT September 1, 2011 Page 4 of 4 Certification: The investment portfolio is in compliance with the Authority's adopted investment policy. Furthermore, as required by State regulation, it is certified that the Authority has sufficient cash liquidity to meet expected expenditure requirements over the next six months for fiscal operations. This information has been reviewed and approved by the Authority’s Chief Financial Officer.
S:\04-APC Packets\2011\09-01-11\03.2 - MolyInvTransReport 9-11 (July).docx
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Attachment A
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This Page Intentionally Blank
