Santa Paula: Investment Report for Three Quarters

By Sheryl Hamlin

Although Sandra Easley retired in December of 2018, she still retains her elected position of City Treasurer, a position she held while Finance Director of the city.

At the May 15, 2019 Santa Paula City Council meeting, Treasurer Easley presented the Three Quarter Investment Report comparing Q1, Q2, and Q3 investment earnings for the current and last fiscal years. This item was in the Consent Calendar, but fortunately Council Member Sobel asked for it to be pulled. The chart below summarizes the report:

Source:Staff Report

 

What is the Source of this Interest?

The amount of interest indicates the existence of a large interest bearing balance. This balance is $49,132,069. What are these monies?

When Santa Paula sells bonds, such as the buyout of the waste water plant in 2015 or a $55 million sale in 2010 for water projects, the city is required to spend monies from the bond sales for projects related to the prospectus of the bond. Unspent monies are placed in conservative interest bearing investments.

This report is valuable because it shows what is left unspent and in reserves of those bond issues, but it also tells at what rate they are invested. As shown in the chart above the earned interest is increasing, which is a result of the Fed’s change in interest policy. We lived in a world of ZIRP (Zero Interest Rate Policy) for years when the Fed tried to drive us out of cash and in to assets. The Fed is now trying to slow this down a bit, so has raised interest rates to draw people back into cash. Here is a good article explaining this movement of rates and its effects.

Local Agency Investment Fund

The LAIF is a state pooled fund cities use which gives slightly higher interest rates, explained Treasurer Easley. When the interest is earned in a lump sum or pool, the city’s financial staff ratios this interest back to the individual funds shown on the report.

Note too that the goal of selling bonds is to spend the money on projects, not to invest it. So at some point, the interest will diminish, except for the reserve fund, a point made by Council Member Crosswhite.

To watch the video click here.

For more information on author click sherylhamlin dot com


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