Investment Portfolio Objectives

The City maintains a conservative investment policy with the primary objectives of safety, liquidity and yield. Consistent with this policy, the portfolio of securities is invested in U.S. Treasuries, U.S. Agencies; local government investment pools (LGIPs), commercial paper, and corporate debt subject to rating restrictions and concentration limits which are outlined in the City’s investment policy. The City-managed investment portfolio is administered to provide sufficient liquidity to meet all reasonably anticipated operating cash needs without selling securities prior to maturity. The portfolio controlled by PFM is actively managed which means that investments may be sold prior to maturity and reinvested in order to achieve the desired duration, yield or diversification of the portfolio.

The City’s investment policy requires a minimum A- rating from two credit rating agencies. The Credit Quality graph is based on the S&P rating only, the other two agencies are Moody’s and Fitch .

Economic Outook

The second quarter of 2023 saw more Fed rate hikes, ending at 5.25%. While the U.S. banking system is resilient and sound, the tightening of credit conditions for consumers and businesses continues to impact inflation, hiring, and economic activities. The Consumer Price Index (CPI) remains elevated and job creation has slowed. Treasury yields pushed higher, while the inversion of the yield curve reached the greatest disparity since 1981.

The City’s total investment portfolio increased to $307 million. The portfolio yields continue to increase and interest earnings for the quarter totaled $1,720,931. The total unrealized loss is $15.6 million, with no loss realized because the City holds its investments until maturity at par.

Portfolio Changes

Portfolio

CREDIT QUALITY (S&P RATING)

Investment Management Focus - 2023

• The yields in the LGIP pools continue to rise along with Federal interest rates. The City uses liquidity from LGIPs to invest excess cash.

• Portfolios will be extended methodically to bring yields closer to benchmarks as the yield curve remains extremely inverted. Non-Treasury sectors such as agencies, municipals and supra-nationals may help with duration as their yields remain tight. Mortgage-backed securities continue to perform strongly and the City will maintain exposure while adding call protection options and bullets.

• PFM actively trades in order to reinvest the proceeds into a more attractive investment with higher potential future earnings. Asset-backed security spreads have tightened and they will continue to purchase in the new issue and secondary market as those spreads increase. Corporate spreads narrowed while the sector’s incremental income remains attractive due to the wide difference in yields and industrials.

Overview:

The City is in the proecess of implementing AmpliFund, a grants management software. Future financial updates will include additional information.

Safe Community

6/2025 THE ONE SMALL STEP (OSS) SPECIALTY COURT DOCKET WILL BE SUCCESSFULLY IMPLEMENTED TO IMPROVE OUTCOMES FOR PEOPLE EXPERIENCING HOMELESSNESS

BY

By 12/2023 reduce recidivism among One Small Step defendants by 25% and identify where clients disengage in the process to enhance the benefits of the program

By 6/2023 the specialty court docket will be in compliance with best practices for the homeless population

By 6/2025 60% of One Small Step defendants are enrolled in a treatment program

Infrastructure

BY 12/23, CONTINUE TO IMPLEMENT A STREET MAINTENANCE MASTER PLAN AND DEVELOP AN IMPLEMENTATION PLAN TO ADDRESS AND PRIORITIZE FINDINGS.

Annually prepare an annual street maintenance report for City Council and the community

By 1/23 provide City Council with a briefing of the Streets Maintenance Master Plan

By 12/23, develop an implementation plan to address and prioritize master plan findings