HomeMy WebLinkAboutFinance Committee Agenda - February 16, 2017CITY OF NEWPORT BEACH
FINANCE COMMITTEE AGENDA - Final
100 Civic Center Drive - Crystal Cove Conference Room, Bay 2D
Thursday, February 16, 2017 - 3:00 PM
Finance Committee Members:
Diane Dixon, Chair / Council Member
Kevin Muldoon, Mayor
Will O'Neill, Council Member
(Vacant), Committee Member
(Vacant), Committee Member
(Vacant), Committee Member
(Vacant), Committee Member
Staff Members:
Dave Kiff, City Manager
Dan Matusiewicz, Finance Director / Treasurer
Steve Montano, Deputy Director, Finance
Marlene Burns, Administrative Specialist to the Finance Director
The Finance Committee meeting is subject to the Ralph M. Brown Act. Among other things, the Brown Act requires that the
Finance Committee agenda be posted at least seventy-two (72) hours in advance of each regular meeting and that the public be
allowed to comment on agenda items before the Committee and items not on the agenda but are within the subject matter
jurisdiction of the Finance Committee. The Chair may limit public comments to a reasonable amount of time, generally three (3)
minutes per person.
The City of Newport Beach’s goal is to comply with the Americans with Disabilities Act (ADA) in all respects. If, as an attendee or a
participant at this meeting, you will need special assistance beyond what is normally provided, we will attempt to accommodate
you in every reasonable manner. Please contact Dan Matusiewicz, Finance Director, at least forty-eight (48) hours prior to the
meeting to inform us of your particular needs and to determine if accommodation is feasible at (949) 644-3123 or
dmatusiewicz@newportbeachca.gov.
NOTICE REGARDING PRESENTATIONS REQUIRING USE OF CITY EQUIPMENT
Any presentation requiring the use of the City of Newport Beach’s equipment must be submitted to the Finance Department 24
hours prior to the scheduled meeting.
I.CALL MEETING TO ORDER
II.ROLL CALL
III.PUBLIC COMMENTS
Public comments are invited on agenda and non-agenda items generally considered to be
within the subject matter jurisdiction of the Finance Committee. Speakers must limit comments
to three (3) minutes. Before speaking, we invite, but do not require, you to state your name for
the record. The Finance Committee has the discretion to extend or shorten the speakers’ time
limit on agenda or non-agenda items, provided the time limit adjustment is applied equally to all
speakers. As a courtesy, please turn cell phones off or set them in the silent mode.
IV.CONSENT CALENDAR
February 16, 2017
Page 2
Finance Committee Meeting
MINUTES OF NOVEMBER 10, 2016A.
Recommended Action:
Approve and file.
DRAFT MINUTES_111016
V.CURRENT BUSINESS
REVIEW OF INVESTMENT POLICY, FINANCIAL MARKETS, INVESTMENT
PORTFOLIO, AND INVESTMENT STRATEGIES
A.
Summary:
Staff and/or one or more investment advisors will discuss the City’s investment
policy’s conformance to the overall objectives of preservation of principal, liquidity
and return, and its relevance to current law and financial and economic trends.
The Committee will receive a financial markets overview and a performance
report of the City’s investment portfolio through December 31, 2016. Staff will
also recommend changes to the City’s investment strategy.
Recommended Action:
a)Review and comment on staff’s proposed changes to Council Investment Policy
F-1.
b)Direct staff to bring amended policy to Council for approval.
c)Review and comment on staff’s proposed investment strategies.
STAFF REPORT
ATTACHMENT A
PENSION UPDATEB.
Summary:
Staff will provide a status update of our CalPERS Pension plans based on
recently announced discount rate changes. Staff will review the impact to our
plans and make recommendations how to lessen the long-term cost of
implementing the phased-in implementation plan contemplated by the CalPERS
board.
Recommended Action:
Receive and file.
February 16, 2017
Page 3
Finance Committee Meeting
REVIEW OF FACILITIES FINANCING PROGRAMC.
Summary:
Staff will present a draft of Facilities Financing Program reviewing the timing,
means of financing, and fiscal impacts associated with funding Council prioritized
capital projects.
Recommended Action:
Review and comment.
REVIEW INITIAL DRAFT OF LONG-TERM FINANCIAL FORECASTD.
Summary:
Staff will present the bare bones of a high-level Long-term Financial Forecast that
summarizes future assumptions and key elements of the City’s finances culled
from other long-term plans such as the Facilities Financing Program, Pension
Projections, Harbor Master plan, etc.
Recommended Action:
Review and comment.
REVIEW DRAFT WORKPLANE.
Summary:
Staff will present and seek approval of the tentative Finance Committee agenda
topics scheduled for the calendar year. The work plan represents the planned
topics of discussion; however, is subject to change based on the availability of
information and the need to schedule other topics as they arise.
Recommended Action:
Review and comment.
STAFF REPORT
ATTACHMENT A
BUDGET AMENDMENTSF.
Summary:
Staff report on the budget amendments for the prior quarter.
Recommended Action:
Receive and file.
STAFF REPORT
ATTACHMENT A
February 16, 2017
Page 4
Finance Committee Meeting
VI.FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS
WOULD LIKE PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR
REPORT (NON-DISCUSSION ITEM)
VII.ADJOURNMENT
Finance Committee Meeting Minutes November 10, 2016
Page 1 of 5
CITY OF NEWPORT BEACH FINANCE COMMITTEE NOVEMBER 10, 2016 MEETING I. CALL MEETING TO ORDER
The meeting was called to order at 3:00 p.m. in the Crystal Cove Conference Room, 100 Civic Center Drive, Newport Beach, California 92660.
II. ROLL CALL
PRESENT: Council Member Tony Petros (Chair), Council Member Keith Curry,
Mayor Diane Dixon, Committee Member Patti Gorczyca, Committee Member William C. O’Neill, Committee Member Larry Tucker, and
Committee Member John Warner (arrived at 4:23 p.m.)
STAFF PRESENT: City Manager Dave Kiff, Assistant City Manager Carol Jacobs, Finance Director/Treasurer Dan Matusiewicz, Deputy Finance Director Steve
Montano, Budget Manager Susan Giangrande, IT Manager Rob Houston, Budget Analyst Tam Ho, Senior Budget Analyst Shannon
Espinoza, Accounting Manager Rukshana Virany, Budget Analyst Katherine Warnke Carpenter, and Administrative Specialist to the
Finance Director Marlene Burns
MEMBERS OF THE PUBLIC: Carl Cassidy, Jim Mosher, Barbara Arenado (City of Irvine), and John
Bartel (Bartel Associates) III. PUBLIC COMMENTS
Jim Mosher thanked Council Members Petros and Curry for their service to the City.
Chair Petros closed public comments. IV. CONSENT CALENDAR A. MINUTES OF OCTOBER 13, 2016 Recommended Action:
Approve and file.
Committee Members Tucker and Gorczyca and Jim Mosher noted corrections to the minutes.
MOTION Committee Member Gorczyca moved and Council Member Curry seconded a motion to
approve the October 13, 2016, Finance Committee Minutes, as amended. The motion carried 5-1, Council Member Petros abstaining and Committee Member Warner absent. V. CURRENT BUSINESS
A. CITY CALPERS PENSION ISSUES
Summary: John Bartel (Bartel Associates) will discuss CalPERS pension issues, such as, current
unfunded liability; projected contribution rates, including impact of investment return volatility; and CalPERS Risk Mitigation Policy and possible discount rate changes. In addition, there
will be a review of the City’s current funding policy and of alternatives the City might consider.
Finance Committee Meeting Minutes November 10, 2016
Page 2 of 5
Recommended Action:
Receive and file; discuss next steps.
Chair Petros requested Committee Member Tucker’s request from the previous meeting be addressed. Finance Director/Treasurer Matusiewicz explained that Committee Member
Tucker requested a sensitivity analysis or market return stress test. He discussed the straight line sensitivity analysis for various investment rates of return including 7, 6, 5, and 4
percent and the impact on the City’s contribution schedule compared as a percentage of general fund revenue.
John Bartel, President of Bartel and Associates, presented a PowerPoint presentation
outlining the CalPERS contribution policy changes and assumption changes including mortality improvement
In response to Committee Member Gorczyca, Mr. Bartel stated there was a modest impact
from retirements occurring earlier than anticipated, particularly from safety.
Mr. Bartel continued his presentation on CalPERS changes including risk mitigation strategy and Board review of Capital Market Assumptions.
Council Member Petros stated the variables were in reaction to risk and market. Mr. Bartel
anticipated the investment rate of return would go from 7 to 6 percent.
Mr. Bartel presented the City’s discount rate used as of Actuarial Valuation Date and historical Market Value Investment Returns.
Mr. Bartel reviewed the summary of demographic information, considering active versus
receiving payment status. He stated miscellaneous employees have an average retirement age of 59 to 60.
Chair Petros stated there was a perception that cutting staff was a means of reducing
pension obligations. Mr. Bartel stated elimination of staff would not eliminate the unfunded liability.
In response to Committee Member Tucker and other comments made regarding the use of
contract fire employees in other cities, Mr. Bartel explained that benefits were built into contracts; therefore, not reducing costs. Committee Member Tucker stated there was no
short-term benefit in contract employee costs but potential reduced exposure over the long term. Mr. Bartel provided an OPEB example of a County Fire Department’s hesitation of
prefunding retirement liability. He sated there may be potential for long term advantage with hiring contract personnel as opposed to prefunding existing personnel. In response to
Committee Member Tucker, Mr. Bartel stated there were different rules for Police versus Fire districts.
Mr. Bartel continued the PowerPoint presentation with Slide 9 explaining the Plan Funded
Status and actuarial accrued liability (AAL). He presented the history of the funded ratio and funded status. He discussed the impacts of benefit improvements and the dot com bubble.
He presented the funded status depicting the actuarial liability and market value of assets. He discussed the PERS contribution holiday. He projected contribution rates using Current
Amortization, Alternative #1 and Alternative #2.
In response to Committee Member, Mr. Bartel stated it was better to pay the unfunded liability off sooner rather than later. He discussed investment gains versus losses and unusable
excess assets. He stated it was fiscally prudent to pay the liability off sooner. He presented Slides 15, 16 and 17 depicting contribution projections. He discussed Funded Status with
Risk Mitigation, Alternative #1 – 20-Year Level Percentage of Projected Payroll, and
Finance Committee Meeting Minutes November 10, 2016
Page 3 of 5
Alternative #2 – 17-Year Level Dollar. He presented the Alternative Comparison and
indicated that any of the three alternatives were fine; however, could be of limiting value depending on market return. He presented agency comparisons of funded status, unfunded
actuarial accrued liability as a percentage of payroll, employer normal cost rate, and total employer rate.
In response to Committee Member Gorczyca, Mr. Bartel stated Irvine had a defined
contribution plan but were less mature in terms of retirees.
In response to Committee Member Tucker, Mr. Bartel explained that the actuarial accrued liability assumed 7.5 percent discount for every year. He stated the City would have
significantly greater pension liabilities if CalPERS consistently earned low single digit rates of return.
Mr. Bartel highlighted Slide 32, Total Employer Rate, and explained that Newport Beach’s
higher rate was a by-product of paying off the unfunded liability sooner rather than later.
Committee Member Warner arrived at 4:23 p.m.
Mr. Bartel presented a summary of demographic information, members included in valuation, plan funded status, funded ratio, and funded status for safety employees.
Finance Director/Treasurer Matusiewicz stated additional payments and fresh start were
geared to accelerate the safety plan.
Mr. Bartel discussed retirement of safety employees and expectation that growth in liability would continue at a steep rate.
City Manager Kiff explained the jump due to the percentage of retirees and the level of
disability.
Mr. Bartel explained the contribution rates, contribution projections, funded status for safety employees. He presented alternative comparison graphs for safety. He stated he did not
have a strong opinion on which way to go. He reviewed the California Public Employees’ Pension Reform Act (PEPRA) rates.
Council Member Petros asked if the City could negotiate to differentiate formulas. Finance
Director/Treasurer Matusiewicz stated the City does not have this ability.
Mr. Bartel discussed recruiting with two tiers as an issue for miscellaneous employees. He discussed means of paying down the unfunded liability.
Committee Member O’Neill asked if anyone in California had issued a pension obligation
bond in the last two years. Mr. Bartel stated he was not aware of any in the past two years but there were notable agencies that did pension obligation bonds in 2007.
In response to Council Member Petros, Mr. Bartel stated the he did not recommend pension
obligations bonds for the City of Newport Beach. Finance Director/Treasurer Matusiewicz explained that pension obligation bonds were used when the agency was in trouble and had
no other option. Mr. Bartel stated pension obligation bonds were included on the list of options to pay down unfunded liability so that the list was complete. He discussed
irrevocable supplemental pension trusts as a means to smooth out volatility.
In response to Council Member Curry, Mr. Bartel explained that conservative investments would not always trail CalPERS, rather would trail when markets were up and beat riskier
investments when markets were down.
Finance Committee Meeting Minutes November 10, 2016
Page 4 of 5
In response to Committee Member O’Neill, Mr. Bartel stated the City of Newport Beach was addressing the unfunded liability head on whereas most of the other clients reacted
differently. Mr. Bartel stated CalPERS rates were more problematic for cities with more distressed areas and was dependent on revenue and reserves.
Committee Member Tucker stated it would not be an issue until CalPERS funds ran out. Mr.
Bartel stated CalPERS was aggressively pursuing agencies that were not paying. Committee Member Tucker suggested the State Legislature would step in and provide relief. Mr. Bartel
stated he did not doubt the Legislature would try that but he did not anticipate it happening.
Mayor Dixon left the meeting at 5:00 p.m.
In response to Council Member Petros, Mr. Bartel stated they had reviewed the alternatives and did not feel strongly one way or another. He suggested the Council continue to pay
attention to its contribution and stay the course.
In response to Committee Member Gorczyca, Mr. Bartel discussed CalPERS liquidity and he stated that problems may arise if the funded ratio dropped below 50 percent and assets were
sold.
In response to Jim Mosher, Mr. Bartel discussed Slide 34 and explained transfers and vested term employees. Mr. Mosher estimated retiree payment at $43 million per year. Mr. Bartel
stated investment earnings and contributions covered the payment. Mr. Mosher asked why the retiree pool was growing. Mr. Bartel explained that safety employees retired earlier and
lived longer; therefore, remain on the pension rolls longer. Finance Director/Treasurer Matusiewicz discussed the accrued liability and projected benefit. Mr. Bartel stated the
number of retirees was expected to grow. He explained short-term retirees versus Tier 2 and PEPRA retirees.
Carl Cassidy thanked Council Members Curry and Petros, the committee members and staff.
Chair Petros suggested that the new Council and the Finance Committee should continue
discussions about pensions. He thanked Council Member Curry for appointing him to the Committee, fresh start and for Mayor Dixon appointing him as Chair.
Council Member Curry expressed his gratitude to Council Member Petros and the committee
members. He presented two articles on Arizona and Wisconsin pension plans.
Committee Member Tucker stated he had enjoyed serving and looked forward to continuing on the Committee.
VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE
PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-DISCUSSION ITEM)
None.
VII. ADJOURNMENT
The Finance Committee adjourned at 5:19 p.m. to the next regular meeting of the Finance
Committee.
Filed with these minutes are copies of all materials distributed at the meeting.
Finance Committee Meeting Minutes November 10, 2016
Page 5 of 5
The agenda for the Regular Meeting was posted on November 3, 2016, at 2:26 p.m., in the binder
and on the City Hall Electronic Board located in the entrance of the Council Chambers at 100 Civic Center Drive.
Attest:
___________________________________ _____________________
Tony Petros, Chair Date Finance Committee Chair
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5A
February 16, 2017 TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Dan Matusiewicz, Finance Director
(949) 644-3123 or danm@newportbeachca.gov
SUBJECT: REVIEW OF INVESTMENT POLICY, FINANCIAL MARKETS, INVESTMENT PORTFOLIO, AND INVESTMENT STRATEGIES
EXECUTIVE SUMMARY
Consistent with Section K-2 of Council Policy F-1, Statement of Investment Policy (the Policy), the Finance
Department has completed an annual review of the Policy to ensure its consistency with the overall objectives of preservation of principal, liquidity and return, and its relevance to current law and financial and
economic trends. Staff is proposing two major modifications to the Investment Policy as recommended by the City’s investment advisor, Chandler Asset Management (Chandler), and supported by the City’s
Finance Director/Treasurer. This memorandum also provides a financial markets overview and reports the performance of the City’s investment portfolio relative to the City’s investment objectives through December
31, 2016. All investments are in compliance with California Government Code and the City’s adopted Statement of Investment Policy. With regard to investment strategies, staff proposes to further tailor the
portfolio to the City’s needs by revising the City’s medium-term portfolio from a 1-3 to a 1-5 year investment strategy in order to better align investments along a timeline appropriate for their intended use. This will
increase the average duration of the portfolio from approximately 2 years to 3 years.
RECOMMENDATION
a) Review and comment on staff’s proposed changes to Council Investment Policy F-1. b) Direct staff to bring amended policy to Council for approval.
c) Review and comment on staff’s proposed investment strategies.
DISCUSSION
Annual Investment Policy F-1 Review
California Government Code Section 53600.5 mandates that the City Treasurer shall follow three objectives when investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds. The
primary objective of the City Treasurer shall be to safeguard the principal of the funds under his or her control. The secondary objective shall be to meet the liquidity needs of the City. The third objective shall
be to achieve a return on the funds under his or her control. Guided by the Policy and constrained by California Government Code, the City’s core investment objectives are to provide safety of the invested
principal by maintaining a well-diversified, high-quality portfolio of liquid assets while earning a market rate of return commensurate with the City’s conservative risk profile.
Review of Investment Policy, Financial Markets and Investment Portfolio, and Investment Strategies Review
February 16, 2017 Page 2
The investment of City funds is governed by California Code (Sections 53600-53610) that prescribe the
investment vehicles in which local agencies are permitted to invest available funds. Staff, working with its investment advisor, Chandler Asset Management, has completed a comprehensive review of the City’s
Investment Policy including compliance with relevant sections of the Government Code, as well as, incorporating best investment practices.
The most significant changes to the Investment Policy include:
Ratings Category – Staff recommends that where long-term rating minimums are included that it be
specified that they must be in the “A” category or better. This is consistent with a code clarification that took effect on January 1, 2017.
Mutual Funds – Staff recommends new language allowing for the use of mutual funds in a manner that is consistent with Government Code Section 53601(l). This criteria is more restrictive when compared to how private entities or individuals may invest in mutual funds and does not include equity-based mutual funds.
See the redline Statement of Investment Policy for recommended changes, included as Attachment A.
With Finance Committee concurrence, Finance staff will bring the suggested revisions to Council for formal
approval. These changes are in furtherance of the City’s investment objectives of safety, liquidity and return. Financial Markets and Investment Portfolio Review
Financial Markets Overview
The Federal Reserve’s (Fed) Federal Open Market Committee (FOMC) unanimously voted to increase the
target federal funds (fed funds) rate by 25 basis points to a range of 0.50%-0.75%, at the December 14 meeting. The Fed noted that economic activity has expanded at a moderate pace and labor market trends
have improved, but inflation remains below target. The Fed’s revised “dot plot” was slightly more hawkish, as the projected path of the fed funds rate was revised upward. The FOMC’s GDP and inflation forecasts
were little changed while projections for the unemployment rate were revised down slightly. The FOMC’s median projection for the fed funds rate in 2017 was revised up to 1.4% from 1.1%, which would be
indicative of two or three more 25 basis point rate hikes this year. The Fed’s longer-run median fed funds target rate was revised up to 3.0% from 2.9%. Fed Chair Yellen downplayed the forecast changes during
her post-meeting press conference, and continued to emphasize that future increases in the fed funds rate are expected to be gradual. She added that it is too early to anticipate how potential changes in fiscal policy
will impact the economy and the Fed’s outlook.
Domestic economic data points to ongoing moderate growth this year. The U.S. labor market continues to improve, consumer confidence remains strong, and housing trends remain mostly favorable. The
manufacturing sector has also improved. Market participants estimate GDP grew 2.2% in the fourth quarter of calendar year 2016.
In December, the yield curve shifted upward as the 2-year Treasury yield increased nearly 8 basis points
and the 10-year Treasury yield increased about 6 basis points. The move up in rates over the past few months has largely been driven by heightened expectations for fiscal stimulus, and a potential increase in
inflation, in light of President-elect Trump’s victory and the Republican Party’s congressional sweep in the U.S.
Review of Investment Policy, Financial Markets and Investment Portfolio, and Investment Strategies Review
February 16, 2017 Page 3
Treasury Yield Curve Steepened
(Source: Chandler)
According to the Bureau of Economic Analysis’s (BEA) advance estimate, real gross domestic product (real
GDP) increased at an annual rate of 1.9 percent in the fourth quarter of calendar year 2016. The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures
(PCE), private inventory investment, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by negative contributions from exports and federal
government spending.
Percentage Change of Real GDP from the Prior Calendar Quarter Seasonally Adjusted Annual Rates
(Source: BEA)
According to the U.S. Bureau of Labor Statistics (BLS), total nonfarm payroll employment rose by 156,000 in December, and the unemployment rate was little changed at 4.7 percent. Job growth occurred in health
care and social assistance.
Review of Investment Policy, Financial Markets and Investment Portfolio, and Investment Strategies Review
February 16, 2017 Page 4
Unemployment Rate, Seasonally Adjusted
December 2014 – December 2016
(Source: BLS)
Nonfarm Payroll Employment
Over-the-Month Change, Seasonally Adjusted In Thousands
December 2014 – December 2016
(Source: BLS)
Investment Portfolio Overview
The City’s strategy continues to focus on identifying value from high quality marketable securities among
the full range of investment options ensuring the portfolio continues to be well diversified.
Review of Investment Policy, Financial Markets and Investment Portfolio, and Investment Strategies Review
February 16, 2017 Page 5
As of December 31, 2016, the City’s entire investment portfolio totaled over $235 million. These
investments are pooled assets of the City Newport Beach, which includes the General Fund, special revenue funds, internal service funds, the enterprise funds (i.e., Water and Wastewater) as well as various
other funds.
Short-Term Portfolio
The City uses a combination of demand deposit accounts (DDA), the Local Agency Investment Fund (LAIF),
and short-term securities to provide sufficient liquidity to meet its day-to-day operating requirements. Municipal deposits in DDA accounts are 110 percent collateralized by bank assets, and the City received a
compensating balance credit against bank fees at an average rate of 0.44 percent. The average investment life of LAIF was 171 days for the quarter ending December 31, 2016. LAIF’s average effective yield for the
month of December was 0.719 percent. Money that is likely to be spent in the near future, that is not needed immediately, is invested in a short-term investment account, and will be withdrawn when the City’s cash in-flow is at its slowest pace. This
portfolio carve-out is composed of securities that were transferred into the short-term investment account during December 2016, and that have maturities throughout calendar year 2017. Securities maturing when
the City’s cash in-flow is at its quicker pace will be reinvested for maturity when cash in-flows are slowest.
It is anticipated that these investments will be expended commensurately with the City’s anticipated cash needs during that time period. By laddering short-term security maturities the City is able to earn a slightly higher rate of return than it would otherwise earn with LAIF. As of December 31, 2016, the average yield-
to-maturity at cost on this group of securities is 0.96 percent.
Medium-Term Portfolio
The City’s core investment portfolio of $173 million is actively managed by two individual investment advisors in accordance with the California Government Code and the City’s investment policy. The investments are held by a custody bank and are registered in the City’s name. The City accounts for and
monitors the portfolio independently of the investment advisors, by a direct feed from the custody bank and the use of third party analytical software.
The core portfolio also follows a relatively short-term bond strategy with a weighted average life of approximately 1.9 years. This portfolio aims to find value and maximize yield within the high quality fixed income market within the duration range of the City’s strategic benchmarks. The City currently uses the
Bank of America Merrill Lynch 1-3 YR US Treasuries index as one benchmark. The City also uses a second
benchmark, the Bank of America Merrill Lynch 1-3 YR US Gov/Corp A rated securities index, which is more reflective of the portfolio’s risk and return characteristics. The use of two benchmarks provides a means to evaluate the added value that high quality corporate bonds bring to the portfolio.
The City’s core portfolio finished the calendar year with a total return of 1.135 percent. As illustrated in the chart on the following page, by the end of calendar year 2016, virtually all of the total return for calendar
year 2016 is from the income return on the securities in the portfolio. Price return for the portfolio by the end of calendar year 2016 is close to zero. The likely explanation of this is the previously discussed increase in interest rates. Generally, as interest rates increase, bond prices decrease.
Review of Investment Policy, Financial Markets and Investment Portfolio, and Investment Strategies Review
February 16, 2017 Page 6
Cumulative Monthly Returns for Calendar Year 2016
In the two-year comparison below, the portfolio return compares favorably to both of its benchmarks. The favorable comparisons were driven primarily due to active management and security selection.
Two Year Comparison of Medium-Term Portfolio
Review of Investment Policy, Financial Markets and Investment Portfolio, and Investment Strategies Review
February 16, 2017 Page 7
The City’s entire investment portfolio of over $235 million as of December 31, 2016, is summarized below.
The full December 31, 2016, report contains portfolio diversification and risk summaries, and can be obtained at www.newportbeachca.gov/treasury.
Investment Strategies Review
The City’s funds are invested in accordance with all applicable City policies, codes, State statutes, and federal regulations and is done so in a manner that is consistent with their intended purposes. The nature, purpose and time horizon vary greatly by their intended use. For example, some revenues are utilized for
day to day operations and others are saved up for future capital purchases, infrastructure projects and long-term liabilities. The City has also benefited from various endowments where the principal can never be
spent. It is appropriate to match the term of investments with their intended use.
Instead of a “one-size-fits-all” portfolio, a time segmented portfolio that includes a long-term segment will allow staff more flexibility to strategically align portfolio investments with the City’s objectives for those
assets. Staff proposes to further tailor the portfolio to the City’s needs by revising the City’s medium-term portfolio from a 1-3 to a 1-5 year investment strategy in order to better align investments along a timeline appropriate for their intended use. This will increase the average duration of the portfolio from approximately 2 years to 3 years. Adding a slightly longer term segment to the medium portfolio will also
allow our investment manager greater opportunities to take advantage of the steeper parts of the yield
Review of Investment Policy, Financial Markets and Investment Portfolio, and Investment Strategies Review
February 16, 2017 Page 8
curve. Additionally, securities can be transferred between portfolios as securities mature providing higher
yields to the lower duration portfolios. Maturing securities can essentially trickle down from the medium to the short-term portfolio.
A comparison of the investment strategy as proposed to the Finance Committee on September 15, 2016,
with staff’s current direction.
With the Finance Committee’s concurrence, staff will continue to work with its investment advisors to extend
the duration of the medium-term portfolio considering market conditions and risk/reward opportunities, acknowledging safety of principal is our paramount objective.
Prepared by: Submitted by:
/s/Jeremiah Lim
/s/Dan Matusiewicz
Jeremiah Lim Dan Matusiewicz Accountant Finance Director
Attachment: A. Council Policy F-1, Statement of Investment Policy (with redline)
ATTACHMENT A
Council Policy F-1, Statement of Investment Policy (with redline)
F-1
1
STATEMENT OF INVESTMENT POLICY
PURPOSE:
The City Council has adopted this Investment Policy (the Policy) in order to establish the
scope of the investment policy, investment objectives, standards of care, authorized
investments, investment parameters, reporting, investment policy compliance and
adoption, and the safekeeping and custody of assets.
This Policy is organized in the following sections:
A. Scope of Investment Policy
1. Pooling of Funds
2. Funds Included in the Policy
3. Funds Excluded from the Policy
B. Investment Objectives
1. Safety
2. Liquidity
3. Yield
C. Standards of Care
1. Prudence
2. Ethics and Conflicts of Interest
3. Delegation of Authority
4. Internal Controls
D. Banking Services
E. Broker/Dealers
F. Safekeeping and Custody of Assets
G. Authorized Investments
1. Investments Specifically Permitted
2. Investments Specifically Not Permitted
3. Exceptions to Prohibited and Restricted Investments
H. Investment Parameters
1. Diversification
2. Maximum Maturities
3. Credit Quality
4. Competitive Transactions
I. Portfolio Performance
J. Reporting
K. Investment Policy Compliance and Adoption
1. Compliance
2. Adoption
F-1
2
A. SCOPE OF INVESTMENT POLICY
1. Pooling of Funds
All cash shall be pooled for investment purposes. The investment income
derived from the pooled investment shall be allocated to the contributing
funds, net of all banking and investing expenses, based upon the proportion
of the respective average balances relative to the total pooled balance.
Investment income shall be distributed to the individual funds not less than
annually.
2. Funds Included in the Policy
The provisions of this Policy shall apply to all financial assets of the City as
accounted for in the City’s Comprehensive Annual Financial Report,
including;
a) General Fund
b) Special Revenue Funds
c) Capital Project Funds
d) Enterprise Funds
e) Internal Service Funds
f) Trust and Agency Funds
g) Permanent Endowment Funds
h) Any new fund created unless specifically exempted
If the City invests funds on behalf of another agency and, if that agency
does not have its own investment policy, this Policy shall govern the
agency’s investments.
3. Funds Excluded from this Policy
Bond Proceeds – Investment of bond proceeds will be made in accordance
with applicable bond indentures.
B. INVESTMENT OBJECTIVES
The City’s funds shall be invested in accordance with all applicable City policies
and codes, State statutes, and Federal regulations, and in a manner designed to
accomplish the following objectives, which are listed in priority order:
1. Safety
Preservation of principal is the foremost objective of the investment
program. Investments of the City shall be undertaken in a manner that
seeks to ensure the preservation of capital in the overall portfolio. The
objective shall be to mitigate credit risk and interest rate risk. To attain this
objective, the City shall diversify its investments by investing funds among
F-1
3
several financial institutions and a variety of securities offering
independent returns.
a) Credit Risk
The City shall minimize credit risk, the risk of loss due to the
failure of the security issuer or backer, by:
Limiting investments in securities that have higher credit risks,
pre-qualifying the financial institutions, broker/dealers,
intermediaries, and advisors with which the City will do
business
Diversifying the investment portfolio so as to minimize the
impact any one industry/investment class can have on the
portfolio
b) Interest Rate Risk
To minimize the negative impact of material changes in the market
value of securities in the portfolio, the City shall:
Structure the investment portfolio so that securities mature
concurrent with cash needs to meet anticipated demands,
thereby avoiding the need to sell securities on the open
market prior to maturity
Invest in securities of varying maturities
2. Liquidity
The City’s investment portfolio shall remain sufficiently liquid to enable the
City to meet all operating requirements which might be reasonably
anticipated without requiring a sale of securities. Since all possible cash
demands cannot be anticipated, the portfolio should consist largely of
securities with active secondary or resale markets. A portion of the portfolio
also may be placed in money market mutual funds or LAIF which offer
same-day liquidity for short-term funds.
3. Yield
The City’s investment portfolio shall be designed with the objective of
attaining a benchmark rate of return throughout budgetary and economic
cycles, commensurate with the City’s investment risk constraints and the
liquidity characteristics of the portfolio. Return on investment is of
secondary importance compared to the safety and liquidity objectives
described above. The core of investments is limited to relatively low risk
securities in anticipation of earning a fair return relative to the risk being
assumed.
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C. STANDARDS OF CARE
1. Prudence
The standard of prudence to be used for managing the City's investment
program is California Government Code Section 53600.3, the prudent
investor standard, which states that “when investing, reinvesting,
purchasing, acquiring, exchanging, selling, or managing public funds, a
trustee shall act with care, skill, prudence, and diligence under the
circumstances then prevailing, including, but not limited to, the general
economic conditions and the anticipated needs of the agency, that a prudent
person acting in a like capacity and familiarity with those matters would
use in the conduct of funds of a like character and with like aims, to
safeguard the principal and maintain the liquidity needs of the agency.”
The City's overall investment program shall be designed and managed with
a degree of professionalism that is worthy of the public trust. The City
recognizes that no investment is totally without risk and that the
investment activities of the City are a matter of public record. Accordingly,
the City recognizes that occasional measured losses may occur in a
diversified portfolio and shall be considered within the context of the
overall portfolio's return, provided that adequate diversification has been
implemented and that the sale of a security is in the best long-term interest
of the City.
The Finance Director and authorized investment personnel acting in
accordance with established procedures and exercising due diligence shall
be relieved of personal responsibility for an individual security's credit risk
or market price changes, provided that deviations from expectations are
reported in a timely fashion to the City Council and appropriate action is
taken to control adverse developments.
2. Ethics and Conflicts of Interest
Elected officials and employees involved in the investment process shall
refrain from personal business activity that could conflict with proper
execution of the City’s investment program or could impair or create the
appearance of an impairment of their ability to make impartial investment
decisions. Employees and investment officials shall subordinate their
personal investment transactions to those of the City. In addition, City
Council members, the City Manager, and the Finance Director shall file a
Statement of Economic Interests each year as required by California
Government Code Section 87203 and regulations of the Fair Political
Practices Commission.
3. Delegation of Authority
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Authority to manage the City’s investment program is derived from the
Charter of the City of Newport Beach section 605 (j). The Finance Director
shall assume the title of and act as City Treasurer and with the approval of
the City Manager appoint deputies annually as necessary to act under the
provisions of any law requiring or permitting action by the City Treasurer.
The Finance Director may then delegate the authority to conduct
investment transactions and to manage the operation of the investment
portfolio to other specifically authorized staff members. No person may
engage in an investment transaction except as expressly provided under the
terms of this Policy.
The City may engage the support services of outside investment advisors
with respect to its investment program, so long as it can be demonstrated
that these services produce a net financial advantage or necessary financial
protection of the City's financial resources. Such companies must be
registered under the Investment Advisors Act of 1940, be well-established
and exceptionally reputable. Members of the staff of such companies who
will have primary responsibility for managing the City’s investments must
have a working familiarity with the special requirements and constraints of
investing municipal funds in general and this City's funds in particular.
These firms must insure that the portion of the portfolio under their
management complies with various concentration and other constraints
specified herein, and contractually agree to conform to all provisions of
governing law and the collateralization and other requirements of this
Policy. Selection and retention of broker/dealers by investment advisors
shall be at their sole discretion and dependent upon selection and retention
criteria as stated in the Uniform Application for Investment Advisor
Registration and related Amendments (SEC Form ADV 2A).
4. Internal Controls
The Finance Director is responsible for establishing and maintaining a
system of internal controls. The internal controls shall be designed to
prevent losses of public funds arising from fraud, employee error, and
misrepresentation by third parties, unanticipated changes in financial
markets, or imprudent action by City employees and officers. The internal
structure shall be designed to provide reasonable assurance that these
objectives are met. The concept of reasonable assurance recognizes that (1)
the cost of a control should not exceed the benefits likely to be derived, and
(2) the valuation of costs and benefits requires estimates and judgments by
management.
D. BANKING SERVICES
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Banking services for the City shall be provided by FDIC insured banks approved
to provide depository and other banking services. To be eligible, a bank shall
qualify as a depository of public funds in the State of California as defined in
California Government Code Section 53630.5 and shall secure deposits in excess of
FDIC insurance coverage in accordance with California Government Code Section
53652.
E. BROKER/DEALERS
In the event that an investment advisor is not used to purchase securities, the City
will select broker/dealers on the basis of their expertise in public cash
management and their ability to provide service to the City’s account.
Each approved broker/dealer must possess an authorizing certificate from the
California Commissioner of Corporations as required by Section 25210 of the
California Corporations Code.
To be eligible, a firm must meet at least one of the following criteria:
1. Be recognized as Primary Dealers by the Federal Reserve Bank of New York
or have a primary dealer within their holding company structure, or
2. Report voluntarily to the Federal Reserve Bank of New York, or
3. Qualify under Securities and Exchange Commission (SEC) Rule 15c3-1
(Uniform Net Capital Rule).
F. SAFEKEEPING AND CUSTODY OF ASSETS
The Finance Director shall select one or more banks to provide safekeeping and
custodial services for the City. A Safekeeping Agreement approved by the City
shall be executed with each custodian bank prior to utilizing that bank's
safekeeping services.
Custodian banks will be selected on the basis of their ability to provide services
for the City's account and the competitive pricing of their safekeeping related
services.
The purchase and sale of securities and repurchase agreement transactions shall
be settled on a delivery versus payment basis. All securities shall be perfected in
the name of the City. Sufficient evidence to title shall be consistent with modern
investment, banking and commercial practices.
All investment securities, except non-negotiable Certificates of Deposit, Money
Market Funds and local government investment pools, purchased by the City will
be delivered by book entry and will be held in third-party safekeeping by a City
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approved custodian bank, its correspondent bank or its Depository Trust
Company (DTC) participant account.
All Fed wireable book entry securities owned by the City shall be held in the
Federal Reserve system in a customer account for the custodian bank which will
name the City as “customer.”
All DTC eligible securities shall be held in the custodian bank’s DTC participant
account and the custodian bank shall provide evidence that the securities are held
for the City as “customer.”
G. AUTHORIZED INVESTMENTS
All investments and deposits of the City shall be made in accordance with
California Government Code Sections 16429.1, 53600-53609 and 53630-53686. Any
revisions or extensions of these code sections will be assumed to be part of this
Policy immediately upon being enacted. The City has further restricted the eligible
types of securities and transactions. The foregoing list of authorized securities and
transactions shall be strictly interpreted. Any deviation from this list must be pre-
approved by resolution of the City Council. In the event an apparent discrepancy
is found between this Policy and the Government Code, the more restrictive
parameter(s) will take precedence.
Where this section specifies a percentage limitation for a particular security type,
that percentage is applicable only at the date of purchase.
1. Investments Specifically Permitted
a) United States Treasury bills, notes, or bonds with a final maturity not
exceeding five years from the date of trade settlement. There is no
limitation as to the percentage of the City’s portfolio that may be
invested in this category.
b) Federal Instrumentality (government-sponsored enterprise)
debentures, discount notes, callable and step-up securities, with a
final maturity not exceeding five years from the date of trade
settlement. There is no limitation as to the percentage of the portfolio
that can be invested in this category.
c) Federal Agency Obligations for which the full faith and credit of the
United States are pledged for the payment of principal and interest
and which have a final maturity not exceeding five years from the
date of trade settlement. There is no limitation as to the percentage
of the portfolio that can be invested in this category.
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d) Mortgage-backed Securities, Collateralized Mortgage Obligation
(CMO) and Asset-backed Securities limited to mortgage-backed
pass-through securities issued by a US government agency, or
consumer receivable pass-through certificates or bonds with a final
maturity not exceeding five years from the date of trade
settlement. Securities eligible for investment under this subdivision
shall be issued by an issuer whose debt is rated in at least the “A”
category or the equivalent by a Nationally Recognized Statistical
Rating Organization (NRSRO). The security itself shall be rated at
least “AAA” or the equivalent by an NRSRO. No more than five
percent (5%) of the City’s total portfolio shall be invested in any one
issuer of mortgage-backed and asset-backed securities listed above,
and the aggregate investment in mortgage-backed and asset-backed
securities shall not exceed twenty percent (20%) of the City’s total
portfolio.
e) Medium-Term Notes issued by corporations organized and
operating within the United States or by depository institutions
licensed by the United States or any state and operating within the
United States, with a final maturity not exceeding five years from the
date of trade settlement, and rated in at least the “A” category or the
equivalent by an NRSRO. No more than five percent (5%) of the
City’s total portfolio shall be invested in any one issuer of medium-
term notes, and the aggregate investment in medium-term notes
shall not exceed thirty percent (30%) of the City’s total portfolio.
f) Municipal Bonds: including bonds issued by the City of Newport
Beach, including bonds payable solely out of the revenues from a
revenue-producing property owned, controlled, or operated by the
City or by a department, board, agency, or authority of the City.
State of California registered warrants or treasury notes or bonds,
including bonds payable solely out of the revenues from a revenue-
producing property owned, controlled, or operated by the state or
by a department, board, agency, or authority of the state.
Registered treasury notes or bonds of any of the other 49 states in
addition to California, including bonds payable solely out of the
revenues from a revenue producing property owned, controlled, or
operated by a state or by a department, board, agency, or authority
of any of the other 49 states, in addition to California.
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Bonds, notes, warrants, or other evidences of indebtedness of a local
agency within California, including bonds payable solely out of the
revenues from a revenue-producing property owned, controlled, or
operated by the local agency, or by a department, board, agency, or
authority of the local agency.
In addition, these securities must be rated in at least the “A” category
or the equivalent by a NRSRO with maturities not exceeding five
years from the date of trade settlement. No more than five percent
(5%) of the City’s total portfolio shall be invested in any one
municipal issuer. In addition, the aggregate investment in municipal
bonds may not exceed thirty percent (30%) of the portfolio.
g) Non-negotiable Certificates of Deposit and savings deposits with a
maturity not exceeding two years from the date of trade settlement,
in FDIC insured state or nationally chartered banks or savings banks
that qualify as a depository of public funds in the State of California
as defined in California Government Code Section 53630.5. Deposits
exceeding the FDIC insured amount shall be secured pursuant to
California Government Code Section 53652. No one issuer shall
exceed more than five percent (5%) of the portfolio, and investment
in negotiable and nonnegotiable certificates of deposit shall be
limited to thirty percent (30%) of the portfolio combined.
h) Negotiable Certificates of Deposit only with a nationally or state-
chartered bank, a savings association or a federal association (as
defined by Section 5102 of the Financial Code), a state or federal
credit union, or by a federally licensed or state-licensed branch
of a foreign bank whose senior long-term debt is rated in at least
the “A” category, or the equivalent, or short-term debt is rated at
least “A-1” or the equivalent by an NRSRO and having assets in
excess of $10 billion, so as to ensure security and a large, well-
established secondary market. Ease of subsequent marketability
should be further ascertained prior to initial investment by
examining currently quoted bids by primary dealers and the
acceptability of the issuer by these dealers. No one issuer shall
exceed more than five percent (5%) of the portfolio, and maturity
shall not exceed two years. Investment in negotiable and non-
negotiable certificates of deposit shall be limited to thirty percent
(30%) of the portfolio combined.
i) Prime Commercial Paper with a maturity not exceeding 270 days
from the date of trade settlement that is rated “A-1”, or the
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equivalent, by an NRSRO. The entity that issues the commercial
paper shall meet all of the following conditions in either sub-
paragraph i. or sub-paragraph ii. below:
i. The entity shall (1) be organized and operating in the United
States as a general corporation, (2) have total assets in excess
of $500,000,000 and (3) have debt other than commercial
paper, if any, that is rated in at least the “A” category or the
equivalent by an NRSRO.
ii. The entity shall (1) be organized within the United States as a
special purpose corporation, trust, or limited liability
company, (2) have program wide credit enhancements,
including, but not limited to, over collateralization, letters of
credit or surety bond and (3) have commercial paper that is
rated at least “A-1” or the equivalent, by an NRSRO.
iii. No more than five percent (5%) of the City’s total portfolio
shall be invested in the commercial paper of any one issuer,
and the aggregate investment in commercial paper shall not
exceed twenty- five percent (25%) of the City’s total portfolio.
j) Eligible Banker’s Acceptances with a maturity not exceeding 180
days from the date of trade settlement, drawn on and accepted by a
commercial bank whose senior long-term debt is rated in at least the
“A” category or the equivalent by an NRSRO at the time of purchase.
Banker’s Acceptances shall be rated at least “A-1”, or the equivalent
at the time of purchase by an NRSRO. If the bank has senior debt
outstanding, it must be rated in at least the “A” category or the
equivalent by an NRSRO. The aggregate investment in banker’s
acceptances shall not exceed forty percent (40%) of the City’s total
portfolio, and no more than five percent (5%) of the City’s total
portfolio shall be invested in banker’s acceptances of any one bank.
k) Repurchase Agreements and Reverse Repurchase Agreements with
a final termination date not exceeding 30 days collateralized by U.S.
Treasury obligations or Federal Instrumentality securities listed in
items 1 and 2 above with the maturity of the collateral not exceeding
ten years. For the purpose of this section, the term collateral shall
mean purchased securities under the terms of the City’s approved
Master Repurchase Agreement. The purchased securities shall have
a minimum market value including accrued interest of one hundred
and two percent (102%) of the dollar value of the funds borrowed.
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Collateral shall be held in the City's custodian bank, as safekeeping
agent, and the market value of the collateral securities shall be
marked-to-the-market daily.
Repurchase Agreements and Reverse Repurchase Agreements shall
be entered into only with broker/dealers and who are recognized as
Primary Dealers with the Federal Reserve Bank of New York, or with
firms that have a Primary Dealer within their holding company
structure. Primary Dealers approved as Repurchase Agreement
counterparties shall have a short-term credit rating of at least “A-1”
or the equivalent and a long-term credit rating of at least “A” or the
equivalent. Repurchase agreement counterparties shall execute a
City approved Master Repurchase Agreement with the City. The
Finance Director shall maintain a copy of the City's approved Master
Repurchase Agreement and a list of the broker/dealers who have
executed same.
In addition, the City must own assets for more than 30 days before
they can be used as collateral for a reverse repurchase
agreement. No more than ten percent (10%) of the portfolio can be
involved in reverse repurchase agreements.
l) State of California’s Local Agency Investment Fund (LAIF),
pursuant to California Government Code Section 16429.1.
m) County Investment Funds: Los Angeles County provides a service
similar to LAIF for municipal and other government entities outside
of Los Angeles County, including the City. Investment in this pool
is intended to be used as a temporary repository for short-term funds
used for liquidity purposes. The Finance Director shall maintain on
file appropriate information concerning the county pool’s current
investment policies, practices, and performance, as well as its
requirements for participation, including, but not limited to,
limitations on deposits or withdrawals and the composition of the
portfolio. At no time shall more than five percent (5%) of the City’s
total investment portfolio be placed in this pool.
n) Mutual Funds and Money Market Mutual Funds registered under
the Investment Company Act of 1940, provided that:
i. MUTUAL FUNDS that invest in the securities and obligations as
authorized under California Government Code, Section 53601 (a)
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to (k) and (m) to (q) inclusive and that meet either of the
following criteria:
1) Attained the highest ranking or the highest letter and
numerical rating provided by not less than two (2) NRSROs;
or
2) Have retained an investment adviser registered or exempt
from registration with the Securities and Exchange
Commission with not less than five years’ experience
investing in the securities and obligations authorized by
California Government Code, Section 53601 and with assets
under management in excess of $500 million.
3) No more than 10% of the total portfolio may be invested in
shares of any one mutual fund.
ii. MONEY MARKET MUTUAL FUNDS registered with the Securities
and Exchange Commission under the Investment Company Act
of 1940 and issued by diversified management companies and
meet either of the following criteria:
1) Have attained the highest ranking or the highest letter and
numerical rating provided by not less than two (2) NRSROs;
or
2) Have retained an investment adviser registered or exempt
from registration with the Securities and Exchange
Commission with not less than five years’ experience
managing money market mutual funds with assets under
management in excess of $500 million.
3) No more than 20% of the total portfolio may be invested in
Money Market Mutual Funds.
iii. No more than 20% of the total portfolio may be invested in these
securities.
n) (1) are “no-load” (meaning no commission or fee shall be charged on
purchases or sales of shares); (2) have a constant net asset value per
share of $1.00; (3) invest only in the securities and obligations
authorized in the applicable California statutes and (4) have a rating
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of at least AAA or the equivalent by at least two NRSROs. The
aggregate investment in money market funds shall not exceed
twenty percent (20%) of the City’s total portfolio and no more than
ten percent (10%) of the City’s total portfolio shall be invested in
any one fund.
o) Supranationals which are United States dollar denominated senior
unsecured unsubordinated obligations issued or unconditionally
guaranteed by the International Bank for Reconstruction and
Development (IBRD), International Finance Corporation (IFC), or
Inter-American Development Bank (IADB), with a maximum
remaining maturity of five years or less, and eligible for purchase
and sale within the United States. Investments under this paragraph
shall be rated in the "AA" category, its equivalent, or better by at least
one NRSRO.
No more than ten percent (10%) of the City’s total portfolio shall be
invested in any one issuer of supranational obligations. Purchases
of supranational obligations shall not exceed twenty percent (20%)
of the investment portfolio of the City.
2. Investments Specifically Not Permitted
Any security type or structure not specifically approved by this policy is
hereby prohibited. Security types, which are thereby prohibited include,
but are not limited to: “exotic” derivative structures such as range notes,
dual index notes, inverse floating rate notes, leveraged or de-leveraged
floating rate notes, interest only strips that are derived from a pool of
mortgages and any security that could result in zero interest accrual if held
to maturity, or any other complex variable or structured note with an
unusually high degree of volatility risk.
The City shall not invest funds with the Orange County Pool.
3. Exceptions to Prohibited and Restricted Investments
The City shall not be required to sell securities prohibited or restricted in
this policy, or any future policies, or prohibited or restricted by new State
regulations, if purchased prior to their prohibition and/or restriction.
Insofar as these securities provided no notable credit risk to the City,
holding of these securities until maturity is approved. At maturity or
liquidation, such monies shall be reinvested as provided by this policy.
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H. INVESTMENT PARAMETERS
1. Diversification
The City shall diversify its investments to avoid incurring unreasonable
risks inherent in over-investing in specific instruments, individual financial
institutions or maturities. As such, no more than five percent (5%) of the
City’s portfolio may be invested in the instruments of any one issuer, except
governmental issuers, supranationals, investment pools, mutual funds and
mMoney mMarket fFunds. This restriction does not apply to any type of
Federal Instrumentality or Federal Agency Security listed in Sections G1 b
and G1 c above. Nevertheless, the asset allocation in the investment
portfolio should be flexible depending upon the outlook for the economy,
the securities markets and the City’s anticipated cash flow needs.
2. Maximum Maturities
To the extent possible, investments shall be matched with anticipated cash
flow requirements and known future liabilities. The City will not invest in
securities maturing more than five years from the date of trade settlement,
unless the City Council has by resolution granted authority to make such
an investment at least three months prior to the date of investment.
3. Credit Quality
The City shall not purchase any security rated “A1” and / or “A+” or below
if that security has been placed on “credit watch” for a possible downgrade
by an NRSRO.
Each investment manager will monitor the credit quality of the securities in
their respective portfolio. In the event a security held by the City is the
subject of a rating downgrade which brings it below accepted minimums
specified herein, or the security is placed on negative credit watch, where
downgrade could result in a rate drop below acceptable levels, the
investment advisor who purchased the security will immediately notify the
Finance Director. The City shall not be required to immediately sell such
securities. The course of action to be followed will then be decided on a
case by case basis, considering such factors as the reason for the rate drop,
prognosis for recovery or further drop, and market price of the security.
The City Council will be advised of the situation and intended course of
action.
4. Competitive Transactions
Investment advisors shall make best effort to price investment transactions
on a competitive basis with broker/dealers selected consistent with their
practices disclosed in form ADV 2A filed with the SEC. Where possible, at
least three broker/dealers shall be contacted for each transaction and their
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bid or offering prices shall be recorded. If there is no other readily available
competitive offering, the investment advisor shall make their best efforts to
document quotations for comparable or alternative securities. If qualitative
characteristics of a transaction, including, but not limited to, complexity of
the transaction, or sector expertise of the broker, prevent a competitive
selection process, investment advisors shall use brokerage selection
practices as described above.
I. PORTFOLIO PERFORMANCE
The investment portfolio shall be designed to attain a market rate of return
throughout budgetary and economic cycles, taking into account prevailing market
conditions, risk constraints for eligible securities, and cash flow requirements. The
performance of the City’s investments shall be compared to the total return of a
benchmark that most closely corresponds to the portfolio’s duration, universe of
allowable securities, risk profile, and other relevant characteristics. When
comparing the performance of the City’s portfolio, its rate of return will be
computed consistent with Global Investment Performance Standards (GIPS).
J. REPORTING
Monthly, the Finance Director shall produce a treasury report of the investment
portfolio balances, transactions, risk characteristics, earnings, and performance
results of the City’s investment portfolio available to City Council and the public
on the City’s Website. The report shall include the following information:
1. Investment type, issuer, date of maturity, par value and dollar amount
invested in all securities, and investments and monies held by the City;
2. A description of the funds, investments and programs;
3. A market value as of the date of the report (or the most recent valuation as
to assets not valued monthly) and the source of the valuation;
4. A statement of compliance with this Policy or an explanation for non-
compliance
K. INVESTMENT POLICY COMPLIANCE AND ADOPTION
1. Compliance
Any deviation from the policy shall be reported to Finance Committee as
soon as practical, but no later than the next scheduled Finance Committee
meeting. Upon recommendation of the Finance Committee, the Finance
Director shall review deviations from policy with the City Council.
2. Adoption
The Finance Director shall review the Investment Policy with the Finance
Committee at least annually to ensure its consistency with the overall
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objectives of preservation of principal, liquidity and return, and its
relevance to current law and financial and economic trends.
The Finance Director shall review the Investment Policy with City Council
at a public meeting if there are changes recommended to the Investment
Policy.
This Policy was endorsed and adopted by the City Council of the City of
Newport Beach on September 8, 2015. It replaces any previous investment
policy or investment procedures of the City.
Adopted – April 6, 1959
Amended – November 9, 1970
Amended – February 11, 1974
Amended – February 9, 1981
Amended – October 27, 1986
Rewritten – October 22, 1990
Amended – January 28, 1991
Amended – January 24, 1994
Amended – January 9, 1995
Amended – April 22, 1996
Corrected – January 27, 1997
Amended – February 24, 1997
Amended – May 26, 1998
Reaffirmed – March 22, 1999
Reaffirmed – March 14, 2000
Amended & Reaffirmed – May 8, 2001
Amended & Reaffirmed – April 23, 2002
Amended & Reaffirmed – April 8, 2003
Amended & Reaffirmed – April 13, 2004
Amended & Reaffirmed – September 13, 2005
Amended – August 11, 2009
Amended & Reaffirmed – August 10, 2010
Amended & Reaffirmed – September 28, 2010
Reaffirmed – June 28, 2011
Amended & Reaffirmed – October 9, 2012
Amended – August 13, 2013
Amended – September 8, 2015
Amended – Month, Day, 2017
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5E
February 16, 2017
TO: HONORABLE CHAIRMAN AND MEMBERS OF THE COMMITTEE
FROM: Finance Department
Dan Matusiewicz, Finance Director (949) 644-3123, danm@newportbeachca.gov
SUBJECT: REVIEW DRAFT WORKPLAN
DISCUSSION:
Staff will present and seek approval of the tentative Finance Committee agenda topics scheduled for the calendar year. The work plan represents the planned topics of
discussion; however, is subject to change based on the availability of information and
the need to schedule other topics as they arise.
Prepared and submitted by:
/s/Steve Montano
Steve Montano
Deputy Finance Director
Attachment:
A. Finance Committee 2017 Work Plan
ATTACHMENT A
Finance Committee 2017 Work Plan
I:\Users\FIN\Shared\Admin\Finance Committee\Workplan\2017\2017 FC Workplan 1
Updated February 9, 2017
Scheduled Date Agenda Title Agenda Description
NO MEETINGS
Thursday, February 16, 2017 Annual Investment Policy, Financial Markets and Investment Portfolio, and Investment Strategies Review Staff and/or one or more investment advisors will discuss the City’s investment policy’s conformance to the overall objectives of preservation of principal, liquidity and return, and its relevance to current law and financial and economic
trends. The Committee will receive a financial markets overview and a performance report of the City’s investment portfolio through December 31, 2016. Staff will also recommend changes to the City’s investment strategy.
Pension Update Staff will provide a status update of our CalPERS Pension plans based on recently announced discount rate changes. Staff will review the impact to our plans and make recommendations how to lessen the long-term cost of
implementing the phased-in implementation plan contemplated by the CalPERS board.
Review of Facilities Financing Program Staff will present a draft of Facilities Financing Program reviewing the timing,
means of financing, and fiscal impacts associated with funding Council prioritized capital projects.
Review of Initial Draft of Long-Term Financial Forecast Staff will present the bare bones of a high-level Long-term Financial Forecast that summarizes future assumptions and key elements of the City’s finances culled from other long-term plans such as the Facilities Financing Program,
Pension Projections, Harbor Master plan, etc.
Annual Work Plan Overview Staff will present and seek approval of the tentative Finance Committee agenda
topics scheduled for the calendar year. The work plan represents the planned
topics of discussion; however, is subject to change based on the availability of information and the need to schedule other topics as they arise.
Budget Amendments Receive and file a staff report on the budget amendments for the prior quarter.
Thursday, March 02, 2017 Review of Budget Preparation Framework/Principles The Finance Committee meeting will review and provide comment on the Budget Preparation Framework, last reviewed by the Committee in August of
2015. The Budget Preparation Framework consists of goals/principles,
strategies and associated tactics to facilitate the allocation of resources.
Annual Review of Reserve Policy F-2 Staff will present its annual review of the City's reserve policy and seek approval
and guidance from the Finance Committee regarding the scope, objectives, and standards that govern the City's financial reserves.
Pension Discussion Agenda item reserved for any discussion regarding the status of the City's pension liability.Harbor/Tidelands Master Plan Review Staff will present the timing, means of financing, and fiscal impacts associated with funding harbor and tidelands capital projects.
Thursday, March 16, 2017 Overview of Departmental Operating Budget #1 Staff will provide an overview of a departmental operating budget. Committee
members will learn the specifics of divisions or programs, with explanations about the Budget Detail and salaries, benefits, contract service accounts, and more. This activity will provide Committee members with the context and
understanding of the City’s programs in advance of the FY 2017-18 budget process.
Pension Discussion Agenda item reserved for any discussion regarding the status of the City's
pension liability.
Thursday, March 30, 2017 FY 2015-16 Audit Review (with Auditor)The City’s external audit firm, White Nelson Diehl Evans LLP will meet with the
Finance Committee to discuss the audit findings for the fiscal year ending 6/30/2016. The committee will have an opportunity to discuss any potential areas of concern and the auditors can discuss any changes in accounting
standards or disclosures that were relevant for the audit year.
Overview of Departmental Operating Budget #2 Staff will provide an overview of a departmental operating budget. Committee
members will learn the specifics of divisions or programs, with explanations
about the Budget Detail and salaries, benefits, contract service accounts, and more. This activity will provide Committee members with the context and understanding of the City’s programs in advance of the FY 2017-18 budget
process.
Pension Discussion Agenda item reserved for any discussion regarding the status of the City's pension liability.
Thursday, April 13, 2017 Review of FY 2017-18 Proposed Budget #1 Staff will provide an overview of the Proposed FY 2017-18 Operating Budget
and or CIP.
Fee Schedule The purpose of this meeting is to review staff’s recommendation to revise the
Master Fee Schedule according to CPI and to review the specific changes recommended for departmental related fees.
Pension Discussion Agenda item reserved for any discussion regarding the status of the City's pension liability.
Budget Amendments Receive and file a staff report on the budget amendments for the prior quarter.
Thursday, April 27, 2017 Debt Policy F-6 Update Review and discuss mandated policy changes to Debt Policy F-6.
Pension/OPEB Management Strategies An actuarial consultant and or staff will lead an ongoing review and
consideration of strategies to manage the City's pension and OPEB liability.
Thursday, May 11, 2017 Review of FY 2017-18 Proposed Budget #2 Staff will provide an overview of the Proposed FY 2017-18 Operating Budget
and or CIP.
Pension Discussion Agenda item reserved for any discussion regarding the status of the City's pension liability.Thursday, May 25, 2017
Thursday, June 15, 2017 Review of Long Range Fiscal Forecast Staff will demonstrate the interactive features of a long-range fiscal forecast model using budgetary and various master plan data.
City of Newport Beach Finance Committee Work Plan 2017
February
March
May
June
January
April
I:\Users\FIN\Shared\Admin\Finance Committee\Workplan\2017\2017 FC Workplan 2
Updated February 9, 2017
Scheduled Date Agenda Title Agenda Description
City of Newport Beach Finance Committee Work Plan 2017
Pension Discussion Agenda item reserved for any discussion regarding the status of the City's pension liability.Thursday, June 29, 2017 Review of Long Range Fiscal Forecast Staff will demonstrate the interactive features of a long-range fiscal forecast model using budgetary and various master plan data.
Pension Discussion Agenda item reserved for any discussion regarding the status of the City's
pension liability.
NO MEETINGS
NO MEETINGS
Thursday, September 14, 2017 Investment Performance Review Staff and/or one or more investment advisors will describe the performance of
the City's investment portfolio.
Pension Discussion Agenda item reserved for any discussion regarding the status of the City's pension liability.Budget Amendments Receive and file a staff report on the budget amendments for the prior quarter.
Thursday, September 28, 2017 Audit Entrance Conference (Optional)Auditors will contact members of the Finance Committee individually to discuss
the work plan for the fiscal year ending 6/30/2017 CAFR audit. Alternatively, the auditor may request an audience with the Finance Committee as a whole, in which case a meeting may be convened during this month. The committee will
have an opportunity to discuss any potential areas of concern they wish the
auditors to review and the auditors can discuss any changes in accounting standards or disclosures that may be relevant for the audit year.
July
August
September
I:\Users\FIN\Shared\Admin\Finance Committee\Workplan\2017\2017 FC Workplan 3
Updated February 9, 2017
Scheduled Date Agenda Title Agenda Description
City of Newport Beach Finance Committee Work Plan 2017
Pension Discussion Agenda item reserved for any discussion regarding the status of the City's pension liability.
Thursday, October 12, 2017 HOLD FOR ANY TOPICS THAT REQUIRE A MEETING (TBD)
Budget Amendments Receive and file a staff report on the budget amendments for the prior quarter.
Thursday, October 26, 2017 HOLD FOR ANY TOPICS THAT REQUIRE A MEETING (TBD)
Thursday, November 09, 2017 Review of Post Employment Retiree Insurance Actuarial Valuation (AKA OPEB)The City's OPEB actuary will review the City's latest OPEB valuation and liability.
Thursday, December 14, 2017 Year-End Closing Results Staff will present the preliminary year-end closing results for Fiscal Year 2016-
2017.
Review of Public Employees Retirement System (PERS) Valuation Staff will present the latest actuarial valuation changes to actuarial assumptions, a review of investment returns, the potential impact of future rates, and the results of employee cost sharing.
November
December
October
CITY OF NEWPORT BEACH
FINANCE COMMITTEE STAFF REPORT
Agenda Item No. 5F
February 16, 2017 TO: HONORABLE CHAIR AND MEMBERS OF THE COMMITTEE
FROM: Finance Department Dan Matusiewicz, Finance Director
(949) 644-3123 or danm@newportbeachca.gov SUBJECT: BUDGET AMENDMENTS
EXECUTIVE SUMMARY
The purpose of this memorandum is to report on the budget amendments for the second quarter of Fiscal
Year 2016-2017. All budget amendments are in compliance with City Council Policy F-3, Budget Adoption and Administration.
DISCUSSION
The Finance Committee requested that staff provide a quarterly report of budget amendments including their effect on fund balance. City Council Policy F-3, Budget Adoption and Administration, identifies how
appropriations can be transferred, amended or reduced. Please find the list of budget amendments for the quarter ending December 31, 2016, as Attachment A.
Prepared by: Submitted by:
/s/ Susan Giangrande
/s/ Dan Matusiewicz
Susan Giangrande Dan Matusiewicz
Budget Manager Finance Director
Attachment:
A. Budget Amendments Fiscal Year 2016-17 Quarter Ending December 31, 2016
ATTACHMENT A
Budget Amendments Fiscal Year 2016-17 Quarter Ending December 31, 2016
Date Amount
Amendment
Type Fund
Net Effect on Fund
Balance
Increase/(Decrease) Department Explanation
10/06/16 2,500.00 City Manager General Fund - Library
To increase revenue estimates and expenditure
appropriations due to receipt of a grant for literacy services.
10/11/16 84,000.00 City Council
Tidelands -
Capital (84,000.00) Public Works
To increase expenditure appropriations for the Grand Canal
Dredging Project, Phase I.
10/11/16 18,000.00 City Council General Fund - Library
To increase revenue estimates and expenditure appropriations due to receipt of a grant for to provide literacy
services from the California Library Literacy Services.
10/25/16 350,000.00 City Council
Tidelands -
Capital - Public Works
To increase revenue estimates and expenditure
appropriations to record a donation from the Newport Harbor
Yacht Club to be used for the Central Avenue Pier/Street End Improvement Project.
10/25/16 682,000.00 City Council
Tidelands -
Capital and
Contributions (182,000.00) Public Works
To increase revenue estimates and expenditure
appropriations to record a $500,000 contribution from
Caltrans for the Semeniuk Slough Dredging Project and also
appropriate $182,000 from the Tidelands Capital Fund for the
11/01/16 32,360.72 City Manager General Fund - City Clerk
To transfer budget appropriations from the City Manager to
the City Clerk to provide limited term staffing.
11/18/16 4,680.00 City Manager General Fund - Recreation
To increase revenue estimates and expenditure
appropriations due to receipt of the Adult Soccer League's
Fall Field Maintenance funds. Funds will be used for Turf
Renovation.
11/22/16 40,000.00 City Council Tidelands - Operating (40,000.00) Public Works
To increase expenditure appropriations due to an increase in
the City's share of the County of Orange Beach Erosion
Control Project.
11/22/16 890,000.00 City Council
Environmental
Contributions 890,000.00 Public Works
To increase revenue estimates to record a grant in the
amount of $839,500.00 from the State Water Resources
Control Board for the Arches Diversion Project. The grant
also reduces the City's matching contribution to the project by
$50,500.00 which was already appropriated.
11/29/16 8,302.00 City Manager General Fund - Library
To increase revenue estimates and expenditure
appropriations related to a donation from the Arts Foundation
for projected costs for the Pacific Symphony summer concert.
12/13/16 815,454.00 City Council
Measure M &
Balboa Village
Parking
Management (130,000.00) Public Works
To increase revenue estimates and expenditure
appropriations to record the receipt of Measure M2 Funding
($685,454.00) from the Orange County Transportation
Authority for use on the Balboa Peninsula shuttle/trolley
project. Balboa Village Parking Management funds
($130,000.00) were appropriated to provide the City's
required matching contribution.
12/13/16 420,881.00 City Council
General Fund
CIP & Gas Tax - Public Works
To increase expenditure appropriations for the FY 17 Annual
Concrete Replacement Program by transferring project
savings from the prior year's Program and from the 15th
Street/Balboa Boulevard Reconstruction Project. General
Fund transfers in the amount of $291,881.00 and Gas Tax
transfers in the amount of $129,000.00.
12/13/16 60,000.00 City Council
IT Strategic Fund
& General Fund (60,000.00)
Community
Development
To increase expenditure appropriations in the General Fund
for document archiving services by transferring funds from the IT Strategic Replacement Fund, City Manager Assigned
Reserve.
City of Newport Beach
Budget Amendments
Fiscal Year 2016-17
Quarter Ending December 31, 2016
Finance Committee Meeting Minutes
November 10, 2016
In response to Committee Member O'Neill, Mr. Bartel stated the City of Newport Beach was
addressing the unfunded liability head on whereas most of the other clients reacted
differently. Mr. Bartel stated CalPERS rates were more problematic for cities with more
distressed areas and was dependent on revenue and reserves.
VhAt loCt
Committee Member Tucker stated it mottle! not be an issue until CalPERS funds ran out. Mr.
Bartel stated CalPERS was aggressively pursuing agencies that were not paying. Committee
Member Tucker suggested the State Legislature tep in and provide relief Mr. Bartel
stated he did not doubt the Legislature would try hat but he did not anticipate it bppening.
419 ,e/c4V0-3,-'40'
-41111414tte
In response to Council Member Petros, Mr. Bartel stated they had reviewed the alternatives
and did not feel strongly one way or another. He suggested the Council continue to pay
attention to its contribution and stay the course.
In response response to Committee Member Gorczyca, Mr. Bartel discussed CalPERS liquidity and he
stated that problems may arise if the funded ratio dropped below 50 percent and assets were
sold.
In response to Jim Mosher, Mr. Bartel discussed Slide and explained transfers and vested
term employees. Mr. Mosher estimated retiree payment at $43 million per year. Mr. Bartel
stated investment earnings and contributions covered the payment. Mr. Mosher asked why
the retiree pool was growing. Mr. Bartel explained that safety employees retired earlier and
lived longer; therefore, remain on the pension rolls longer. Finance Director/Treasurer
Matusiewicz discussed the accrued liability and projected benefit. Mr. Bartel stated the
number of retirees was expected to grow. He explained short-term retirees versus Tier 2 and
PEPRA retirees.
Carl Cassidy thanked Council Members Curry and Petros, the committee members and staff.
Chair Petros suggested that the new Council and the Finance Committee should continue
discussions about pensions. He thanked Council Member Curry for appointing him to the
Committee, fresh start and for Mayor Dixon appointing him as Chair.
Council Member Culcry expressed his gratitude to Council Member Petros and the committee
members. He presented two articles on Arizona and Wisconsin pension plans.
Committee Member Tucker stated he had enjoyed serving and looked forward to continuing
on the Committee.
VI. FINANCE COMMITTEE ANNOUNCEMENTS ON MATTERS WHICH MEMBERS WOULD LIKE
PLACED ON A FUTURE AGENDA FOR DISCUSSION, ACTION OR REPORT (NON-
DISCUSSION ITEM)
None.
VII. ADJOURNMENT
The Finance Committee adjourned at 5:19 p.m. to the next regular meeting of the Finance
Committee.
Filed with these minutes are copies of all materials distributed at the meeting.
Mayor Dixon left the meeting at 5:00 p.m.
Page 4 of 5
Item No. 4A1 Draft Minutes of November 10, 2016 Correspondence February 16, 2017
PROPOSED CHANGES BY COMMITTEE MEMBER TUCKER
Dollars and the FFP
NEWPORT BEACH FINANCE COMMITTEE
THURSDAY, FEBRUARY 16, 2017
Item No. 5A1
Review of Investment Policy, Financial Markets,
Investment Portfolio, and Investment Strategies
Staff Presentation
February 16, 2017
The FFP
It’s a plan to allocate funds towards projects
It assumes a certain level of inflow and expenditure over time, like:
Inflow –developer fees
Inflow –general fund contributions
Inflow (early on) –excess reserves
Outflow –project expenses, generally when budgeted
How the FFP works
FFP Fund Balance
Annual GF Contribution
Developer Fees
Reserves
What’s important to know?
The City Council made early FFP recommendations on Feb 14
Some projects stopped
Some reduced
Some delayed
Does this mean $$$ are now available for other things?
Yes and no
If a project was dependent on developer fees, and those fees did not come
in, then no.
If a project was stopped and funds were ready for it, then yes.
If a project was just delayed, it’s an open question.
What we’d like the FC to do
Not 2nd Guess what the Council said, but:
Review some going forward suggestions and offer advice/questions.
Going forward…
If we could reduce the annual GF contribution to FFP…
Should we? At what amount?
Should more critical projects be added to a “new” F+HFP (Facilities plus Harbor Financing Plan)?
Staff would like to propose a handful of approaches –involving GF, residual in the FFP, pension, harbor, and report back to you for your thoughts.
Once that’s done, we’d take the whole package (the funding approach and the FFP/F+HFP) back to Council for review and adoption.
We need to know more what this
looks like….
If less GF Contribution to FFP….
…then More $$ to Critical Harbor Infrastructure, and….
… more $$ to Pensions (Section 115, Cal-PERs) … but
… still meet our basic “nuts and bolts” Capital needs
What is the appropriate
funding allocation for the
City’s priorities in FY 18
and beyond?
CIP
$5.5m
FFP
$8.5m
FMP
$1.0m
FY 15-16 Surplus
$10.9m
Pension
$31.4m
FundingPriorities Future GF Allocations
Pension ?
FFP ?
CIP ?
FMP ?
HFP ?
$57.3m
FY 16-17 Allocations
6225 Lusk Blvd | San Diego, CA 92121 | Phone 800.317.4747 | Fax 858.546.3741 | www.chandlerasset.com
CHANDLER ASSET MANAGEMENT
Period Ending
December 31, 2016
City of Newport Beach
Investment Report
Item No. 5A2
Review of Investment Policy, Financial Markets, Investment
Portfolio, and Investment Strategies
Staff Presentation
February 16, 2017
Table of Contents
SECTION 1 Economic Update
SECTION 2 Account Profile
SECTION 3 Consolidated Information
SECTION 4 Portfolio Holdings
SECTION 5 Benchmark Study
SECTION 6 Transactions
1
SECTION 1
Economic Update
2
Domestic economic data remains indicative of slow growth. The U.S. labor market continues to improve, consumer
confidence remains strong,and housing trends remain mostly favorable. The manufacturing sector has also
improved. GDP grew by 1.9%in the fourth quarter and market participants are forecasting GDP growth of 2.2%in the
current quarter.
Economic Update
The Federal Open Market Committee (FOMC) unanimously voted to increase the target fed funds rate by 25 basis
points to a range of 0.50%-0.75%,at the December 14 meeting. The Fed noted that economic activity has expanded
at a moderate pace and labor market trends have improved,but inflation remains below target. The Fed’s revised “dot
plot”was slightly more hawkish,as the projected path of the fed funds rate was revised upward. The Committee’s
GDP and inflation forecasts were little changed while projections for the unemployment rate were revised down
slightly. The FOMC’s median projection for the fed funds rate in 2017 was revised up to 1.4% from 1.1%, which would
be indicative of three more 25 basis point rate hikes next year. The Fed’s longer-run median fed funds target rate was
revised up to 3.0% from 2.9%. Fed Chair Yellen downplayed the forecast changes during her press conference,and
continued to emphasize that future increases in the fed funds rate are expected to be gradual. She added that it is too
early to anticipate how potential changes in fiscal policy will impact the economy and the Fed’s outlook.
In December, the yield shifted upward as the 2-year Treasury yield increased nearly 8 basis points and the 10-year
Treasury yield increased about 6 basis points. The move up in rates over the past two months has largely been driven
by heightened expectations for fiscal stimulus,and a potential increase in inflation, with a shift in policy under the new
Presidential administration and Republican-controlled Congress. Global factors (including steeper yield curves in
Japan and Germany,and an expectation for ongoing stimulus from the European Central Bank) also continue to
influence US Treasury yields.
3
Nonfarm payrolls were lower than expected in December,up 156,000 versus the consensus forecast of 175,000. However, October
and November payrolls were revised up by a total of 19,000.On a trailing 3-month and 6-month basis, payrolls increased by an average
of 165,000 and 188,500 per month, respectively. The unemployment rate inched back up to 4.7% from 4.6%,but the participation rate
also increased to 62.7% from 62.6%. A broader measure of unemployment called the U-6, which includes those who are marginally
attached to the labor force and employed part time for economic reasons, declined to 9.2%in December from 9.3%in November.
Wages were up a solid 0.4%in December, versus expectations for a 0.3% increase.On a year-over-year basis, wages were up 2.9%
in December (the highest year-over-year increase since June 2009), vs. 2.5% in November.
Employment
Source: US Department of Labor Source: US Department of Labor
0
50
100
150
200
250
300
350
MO
M
C
h
a
n
g
e
I
n
(
0
0
0
'
s
)
Nonfarm Payroll (000's)
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
Unemployment Rate
Underemployment Rate (U6)
Unemployment Rate (U3)
Ra
t
e
(
%
)
4
The Consumer Price Index (CPI) was up 2.1% year-over-year in December, versus up 1.7% year-over-year in November, largely driven
by an increase in energy prices. Core CPI(CPI less food and energy) was up 2.2% year-over-year in December, versus up 2.1% year-
over-year in November. The Personal Consumption Expenditures (PCE) index was up 1.6% year-over-year in December, versus up
1.4% year-over-year in November. Core PCE (excluding food and energy) was up 1.7% year-over-year in December, unchanged from
November. Although Core CPI is trending above 2.0%, the Fed's primary inflation gauge is PCE which remains below the Fed's 2.0%
target.
Inflation
Source: US Department of Labor Source: US Department of Labor
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Consumer Price Index (CPI)
CPI YOY % Change
Core CPI YOY % Change
YO
Y
(
%
)
C
h
a
n
g
e
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Personal Consumption Expenditures
(PCE)
PCE Price Deflator YOY % Change
PCE Core Deflator YOY % Change
YO
Y
(
%
)
C
h
a
n
g
e
5
On a year-over-year basis, total retail sales were up 4.1%in December compared with a 3.9% increase in November.On a month-over-
month basis, retail sales were up 0.6%in December, driven largely by vehicle sales. Excluding autos and gas, retail sales were flat in
the month. Meanwhile, consumer confidence increased to 113.7 in December versus 109.4 in November.
Consumer
Source: US Department of Commerce Source: Federal Reserve
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
Retail Sales YOY % Change
YO
Y
(
%
)
C
h
a
n
g
e
75
80
85
90
95
100
105
110
115
120
In
d
e
x
L
e
v
e
l
Consumer Confidence
6
The Index of Leading Economic Indicators (LEI) rose 0.5%in December, exceeding expectations of 0.4%, which is consistent with
moderate economic growth. Meanwhile, the Chicago Fed National Activity Index (CFNAI) improved in December on a 3-month moving
average basis to -0.07 from -0.14 in November. Still, the CFNAI suggests that the pace of economic growth is below-trend.
Economic Activity
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
Leading Economic Indicators (LEI)
MO
M
(
%
)
C
h
a
n
g
e
-0.50
-0.40
-0.30
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
Chicago Fed National Activity Index
(CFNAI)
3
M
o
n
t
h
A
v
e
r
a
g
e
Source: The Conference Board Source: Federal Reserve Bank of Chicago
7
Total housing rose 11.3%in December, following a decline of 16.5%in November. The overall increase was driven by multi-family
starts which rose 57.3%in December. Meanwhile, single-family starts fell 4.0%. Housing starts tend to be volatile on a month-to-month
basis. According to the Case-Shiller 20-City home price index, home prices were up 5.1% year-over-year in October, compared to
5.0% in September.
Housing
Source: US Census Bureau Source: S&P
0
200
400
600
800
1000
1200
1400
1600
MO
M
C
h
a
n
g
e
(
I
n
T
h
o
u
s
a
n
d
s
o
f
U
n
i
t
s
)
Housing Starts
Multi Family Housing Starts
Single Family Housing Starts
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
S&P/CaseShiller 20 City Composite Home
Price Index
YO
Y
(
%
)
C
h
a
n
g
e
8
The Institute for Supply Management (ISM) manufacturing index increased to 54.7 in December from 53.2 in November, suggesting that
manufacturing activity continues to improve. Notably, a reading above 50.0 suggests the manufacturing sector is expanding. Meanwhile,
capacity utilization, which is production divided by capacity, increased to 75.5%in December from 74.9%in November. The capacity
utilization rate remains below the long-run average of 80.0% (1972-2015), suggesting there is still excess capacity in the industrial
sector.
Manufacturing
Source: Institute for Supply Management Source: Federal Reserve
46
48
50
52
54
56
58
60
Institute of Supply Management Purchasing
Manager Index
Expanding
Contracting
74.0%
75.0%
76.0%
77.0%
78.0%
79.0%
80.0%
Capacity Utilization
Ra
t
e
(
%
)
9
According to the advance estimate, fourth quarter real GDP grew at an annualized rate of 1.9%, below expectations of 2.2%. This
compares to growth of 3.5%in the third quarter of 2016.Personal consumption expenditures continued to fuel GDP growth in the fourth
quarter, while net exports detracted from growth. Market participants are forecasting GDP growth of 2.2% in the first quarter of 2017.
Gross Domestic Product (GDP)
Source: US Department of Commerce Source: US Department of Commerce
3/16 6/16 9/16 12/16
1.1% 2.9% 2.0% 1.7%
-0.6% -1.3% 0.5% 1.7%
0.0% 0.2% 0.9% -1.7%
-0.1% 0.0% 0.2% -0.1%
0.4% -0.3% 0.0% 0.3%
0.8% 1.4% 3.5% 1.9%
Federal Government Expenditures
Total
Net Exports and Imports
Personal Consumption Expenditures
Gross Private Domestic Investment
State and Local (Consumption and Gross
Investment)
Components of GDP
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Gross Domestic Product (GDP)
GDP QOQ % Change
GDP YOY % Change
10
Source: Bloomberg
Over the past three months, the yield curve steepened with the 2-year Treasury yield up nearly 43 basis points and the 10-year
Treasury yield up 85 basis points.On a year-over-year basis the 2-year Treasury yield increased 14 basis points and 10-year Treasury
yield increased about 18 basis points. Over the past year, financial market volatility has been elevated due to weak global economic
growth, volatile commodity prices, political uncertainty, and divergent global central bank monetary policy.
Bond Yields
Source: Bloomberg
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
US Treasury Note Yields
2-Year
5-Year
10-Year
Yi
e
l
d
(
%
)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
US Treasury Yield Curve
Dec-16
Sep-16
Dec-15
Yi
e
l
d
(
%
)
11
SECTION 2
Account Profile
12
Objectives
Chandler Asset Management Performance Objective
The performance objective of Newport Beach is to earn a return that equals or exceeds the return on an
index of 1-3 Year Treasury notes.
Investment Objectives
The investment objectives of the City of Newport Beach are first, to provide safety of principal to ensure the
preservation of capital in the overall portfolio; second, to provide adequate liquidity to meet all requirements
that may be reasonably anticipated; and third, to earn a commensurate rate of return.
Strategy
In order to achieve these objectives, we invest in high quality fixed income securities consistent with the
investment code and California Government Code.
13
Compliance
Category Standard Comment
Treasury Issues No Limit Complies
Agency Issues No Limit Complies
Supranationals Issued by IBRD, IFC or IADB only; "AA" rated or better by a NRSRO;
20% maximum; 5% max per issuer
Complies
Municipal Issues "A" rated or equivalent by a NRSRO; 30% maximum; 5% max issuer Complies
Banker’s Acceptances "A-1" rated or equivalent by a NRSRO; "A" rated issuer or equivalent by
a NRSRO; 40% maximum; 5% issuer max; 180 days max maturity
Complies
Commercial Paper "A-1" rated or equivalent by a NRSRO; "A" rated issuer or equivalent by a
NRSRO; 25% maximum; 5% max issuer; 270 days max maturity; USD
denominated
Complies
Negotiable CDs "A-1" rated or "A" rated issuer by a NRSRO and having assets in
excess of $10 billion; 30% maximum (combined NCDs, CDs); 5% issuer
max; 2 years max maturity
Complies
Non-Negotiable CDs 30% maximum (combined NCDs, CDs); 5% max issuer; Collateralized
or FDIC Insured; 2 years max maturity
Complies
Medium Term Notes "A" rated; 30% maximum; 5% issuer max; USD denominated Complies
Asset-Backed (ABS), Mortgage-
Backed Securities; Pass-Throughs;
CMOs
"AAA" rated or equiv by a NRSRO; "A" rated issuer by a NRSRO; 20%
max (combined mortgage-backed and asset-backed, MPTs, CMOs);
5% max issuer
Complies
Money Market Mutual Funds "AAA" rated by at least 2 NRSROs; 20% maximum; 10% max issuer Complies
Repurchase Agreements "A-1" or equivalent short term rating; "A" rated long term issuer or
equivalent; 30 days max maturity; Not used by Investment Adviser
Complies
Rev. Repo Agreements 10% maximum; 30 days max maturity; Not used by Investment Adviser Complies
LAIF Not used by outside adviser Complies
LA County Pool Not used by outside adviser Complies
Inverse floaters, range notes Prohibited Complies
Interest only strips Prohibited Complies
Zero interest accruals Prohibited Complies
Credit Quality The City shall not purchase any security rated "A1" and/ or "A+" or below
if that security has been placed on "credit watch" for a possible
downgrade by an NRSRO.
Complies
Max Per Issuer 5% of portfolio (except U.S. government, pools, and Money Market
Funds)
Complies
Maximum maturity 5 years Complies
COMPLIANCE WITH INVESTMENT POLICY
Assets managed by Chandler Asset Management are in full compliance with State law and the Client's investment policy.
City of Newport Beach, California Consolidated
December 31, 2016
14
Portfolio Characteristics
City of Newport Beach, California
12/31/2016 9/30/2016
Benchmark* Portfolio Portfolio
Average Maturity (yrs) 1.87 2.11 1.86
Modified Duration 1.82 1.95 1.70
Average Purchase Yield n/a 1.25% 1.14%
Average Market Yield 1.16% 1.37% 0.95%
Average Quality** AAA AA+/Aa1 AA+/Aa1
Contributions/Withdrawals 1,431,885
Total Market Value 87,058,811 85,936,590
*BAML 1-3 Yr US Treasury Index
**Benchmark is a blended rating of S&P, Moody’s, and Fitch. Portfolio is S&P and Moody’s respectively.
15
ABS
7.6%
Agency
33.7%
Money Market
Fund FI
1.2%
Negotiable CD
0.5%
Supranational 2.3%
US Corporate 20.1%
US Treasury 28.9%
Commercial Paper
5.7%
Sector Distribution
City of Newport Beach, California
December 31, 2016 September 30, 2016
ABS
7.6%
Agency
43.5%
Money Market
Fund FI
0.7%
Negotiable CD
2.0%
Supranational
2.3%
US Corporate
23.4%
US Treasury
20.7%
16
Issuers
City of Newport Beach, California – Account #10 As of 12/31/2016
Issue Name Investment Type % Portfolio
Government of United States US Treasury 28.95%
Federal Home Loan Bank Agency 11.79%
Federal National Mortgage Association Agency 8.56%
Federal Farm Credit Bank Agency 7.47%
Federal Home Loan Mortgage Corp Agency 5.85%
Rabobank Nederland NV NY Commercial Paper 2.96%
John Deere ABS ABS 2.66%
Honda ABS ABS 2.57%
Intl Bank Recon and Development Supranational 2.26%
Toyota ABS ABS 1.77%
Microsoft US Corporate 1.70%
Bank of New York US Corporate 1.52%
US Bancorp US Corporate 1.51%
Qualcomm Inc US Corporate 1.44%
Bank of Tokyo-Mit UFJ Commercial Paper 1.37%
Toyota Motor Credit Corp Commercial Paper 1.37%
Charles Schwab Corp/The US Corporate 1.30%
Wells Fargo Corp US Corporate 1.27%
BlackRock Inc/New York US Corporate 1.25%
Apple Inc US Corporate 1.23%
Federated GOVT Obligation MMF Money Market Fund FI 1.21%
IBM Corp US Corporate 1.19%
Deere & Company US Corporate 1.17%
Toyota Motor Corp US Corporate 1.14%
ChevronTexaco Corp US Corporate 1.09%
Berkshire Hathaway US Corporate 0.97%
Paccar Financial US Corporate 0.95%
Cisco Systems US Corporate 0.91%
State Street Bank US Corporate 0.70%
Nissan ABS ABS 0.62%
17
Issuers
City of Newport Beach, California – Account #10 As of 12/31/2016
Issue Name Investment Type % Portfolio
Honda Motor Corporation US Corporate 0.49%
Bank of Nova Scotia Houston Negotiable CD 0.46%
Oracle Corp US Corporate 0.29%
Total 100.00%
18
AAA AA A <A NR
12/31/16 10.8% 75.3% 10.1% 0.0% 3.8%
09/30/16 10.4% 73.6% 12.1% 0.0% 3.8%
Source: S&P Ratings
Quality Distribution
December 31, 2016 vs. September 30, 2016
City of Newport Beach, California
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
AAA AA A <A NR
12/31/2016 9/30/2016
19
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
0 - 0.25 0.25 - 0.50 0.50 - 1 1 - 2 2 - 3 3 - 4 4 - 5 5+
12/31/2016 9/30/2016
Duration Distribution
City of Newport Beach, California
December 31, 2016 vs. September 30, 2016
0 - 0.25 0.25 - 0.50 0.50 - 1 1 - 2 2 - 3 3 - 4 4 - 5 5+
12/31/16 1.8% 3.2% 10.0% 32.9% 41.6% 10.5% 0.0% 0.0%
09/30/16 5.2% 9.2% 13.3% 31.0% 33.7% 7.7% 0.0% 0.0%
20
Investment Performance
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
12 months 2 years 3 years 5 years 10 years Since Inception
City of Newport Beach, California BAML 1-3 Yr US Treasury Index
City of Newport Beach, California
Period Ending
December 31, 2016
Total Rate of Return
Annualized Since Inception
March 31, 1991
Total rate of return: A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains and losses in the portfolio.
Annualized
3 months 12 months 2 years 3 years 5 years 10 years Since
Inception
City of Newport Beach, California -0.35% 1.17% 0.93% 0.94% 0.86% 2.46% 4.35%
BAML 1-3 Yr US Treasury Index -0.43% 0.89% 0.71% 0.68% 0.57% 2.12% 4.07%
21
Portfolio Characteristics
City of Newport Beach, California - Short Term
12/31/2016 9/30/2016
Portfolio Portfolio
Average Maturity (yrs) 0.52 0.00
Modified Duration 0.51 0.00
Average Purchase Yield 0.96% 0.41%
Average Market Yield 0.88% 0.59%
Average Quality AA+/Aa1 AAA/Aa1
Contributions/Withdrawals 10,769,115
Total Market Value 18,628,938 7,849,872
22
Agency
55.2%
Money Market Fund FI
0.4%
US Corporate
17.6%
Commercial
Paper
4.8%
Negotiable CD 10.5%
US Treasury 11.5%
Sector Distribution
City of Newport Beach, California - Short Term
December 31, 2016 September 30, 2016
Agency
26.8%
Money Market
Fund FI
56.5%
US Corporate
16.7%
23
Issuers
City of Newport Beach, California - Short Term – Account #12 As of 12/31/2016
Issue Name Investment Type % Portfolio
Federal National Mortgage Association Agency 25.57%
Federal Farm Credit Bank Agency 18.44%
Government of United States US Treasury 11.46%
Federal Home Loan Bank Agency 11.19%
Bank of Nova Scotia Negotiable CD 9.16%
Oracle Corp US Corporate 5.92%
Bank of Tokyo-Mit UFJ Commercial Paper 4.82%
Air Products & Chemicals US Corporate 3.77%
Honda Motor Corporation US Corporate 3.50%
Paccar Financial US Corporate 2.69%
Berkshire Hathaway US Corporate 1.75%
Toronto Dominion Holdings Negotiable CD 1.36%
Goldman Sachs Financial Square Funds - Treasury Obligations Fund Money Market Fund FI 0.38%
Total 100.00%
24
AAA AA A <A NR
12/31/16 9.5% 79.2% 10.0% 0.0% 1.4%
09/30/16 83.3% 0.0% 16.7% 0.0% 0.0%
Source: S&P Ratings
Quality Distribution
December 31, 2016 vs. September 30, 2016
City of Newport Beach, California - Short Term
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
AAA AA A <A NR
12/31/2016 9/30/2016
25
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
110.00%
0 - 0.25 0.25 - 0.50 0.50 - 1 1 - 2 2 - 3 3 - 4 4 - 5 5+
12/31/2016 9/30/2016
Duration Distribution
City of Newport Beach, California - Short Term
December 31, 2016 vs. September 30, 2016
0 - 0.25 0.25 - 0.50 0.50 - 1 1 - 2 2 - 3 3 - 4 4 - 5 5+
12/31/16 37.4% 13.9% 48.8% 0.0% 0.0% 0.0% 0.0% 0.0%
09/30/16 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
26
Investment Performance
0.00%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
12 months 2 years 3 years 5 years 10 years Since Inception
City of Newport Beach, California - Short Term
City of Newport Beach, California - Short Term
Period Ending
December 31, 2016
Total Rate of Return
Annualized Since Inception
December 31, 2015
Total rate of return: A measure of a portfolio’s performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value; it includes interest earnings, realized and unrealized gains and losses in the portfolio.
Annualized
3 months 12 months 2 years 3 years 5 years 10 years Since
Inception
City of Newport Beach, California - Short Term 0.06% 0.66% N/A N/A N/A N/A 0.66%
27
SECTION 3
Consolidated Information
28
Portfolio Characteristics
City of Newport Beach, California Consolidated
12/31/2016 9/30/2016
Portfolio Portfolio
Average Maturity (yrs) 1.83 1.70
Modified Duration 1.69 1.56
Average Purchase Yield 1.20% 1.08%
Average Market Yield 1.28% 0.92%
Average Quality AA+/Aa1 AA+/Aa1
Contributions/Withdrawals 12,201,000
Total Market Value 105,687,750 93,786,461
29
ABS
6.3%
Agency 37.5%
Money Market
Fund FI
1.1% Negotiable CD
2.2%
Supranational
1.9%
US Corporate
19.7%
US Treasury
25.9%
Commercial Paper
5.5%
Sector Distribution
City of Newport Beach, California
Consolidated
December 31, 2016 September 30, 2016
ABS
7.0%
Agency
42.1%
Money Market
Fund FI
5.3%
Negotiable CD 1.8%
Supranational
2.1%
US Corporate
22.8%
US Treasury
18.9%
30
SECTION 4
Portfolio Holdings
31
Holdings Report
For the Month Ending 12/31/2016
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
ABS
43813JAC9 Honda Auto Receivables 2014-1 A3
0.670% Due 11/21/2017
35,747.11 01/22/2015
0.90%
35,638.19
35,747.11
99.97
1.16%
35,737.49
6.65
0.04%
(9.62)
Aaa / NR
AAA
0.89
0.05
89231MAC9 Toyota Auto Receivables Owner 2014-A
0.670% Due 12/15/2017
92,963.33 Various
0.79%
92,859.59
92,961.09
99.96
1.33%
92,922.71
27.68
0.11%
(38.38)
Aaa / AAA
NR
0.96
0.08
89231TAB6 Toyota Auto Receivables Owner 2015-C
0.920% Due 02/15/2018
130,563.98 08/18/2015
0.93%
130,553.48
130,559.22
99.97
1.13%
130,531.08
53.39
0.15%
(28.14)
Aaa / AAA
NR
1.13
0.12
43814GAC4 Honda Auto Receivables 2014-2 A3
0.770% Due 03/19/2018
106,165.45 05/13/2014
0.78%
106,152.68
106,163.85
99.92
1.14%
106,076.27
29.52
0.12%
(87.58)
Aaa / AAA
NR
1.21
0.23
47787VAC5 John Deere Owner Trust 2014-A A3
0.920% Due 04/16/2018
142,418.41 04/02/2014
0.93%
142,395.59
142,416.26
99.96
1.14%
142,357.17
58.23
0.16%
(59.09)
Aaa / NR
AAA
1.29
0.20
43814HAC2 Honda Auto Receivables 2014-3 A3
0.880% Due 06/15/2018
151,142.62 08/12/2014
0.89%
151,113.46
151,137.26
99.93
1.12%
151,039.84
59.11
0.17%
(97.42)
NR / AAA
AAA
1.45
0.29
47788MAB6 John Deere Owner Trust 2016-A A2
1.150% Due 10/15/2018
878,674.32 02/23/2016
1.15%
878,671.68
878,672.52
100.03
1.06%
878,974.83
449.10
1.01%
302.31
Aaa / NR
AAA
1.79
0.37
477877AD6 John Deere Owner Trust 2014-B A3
1.070% Due 11/15/2018
525,466.84 Various
1.09%
525,326.17
525,426.48
99.99
1.09%
525,431.10
249.89
0.60%
4.62
Aaa / NR
AAA
1.87
0.37
89236WAC2 Toyota Auto Receivables Owner 2015-A
1.120% Due 02/15/2019
609,539.34 02/24/2015
1.13%
609,447.18
609,504.32
99.95
1.22%
609,214.46
303.42
0.70%
(289.86)
Aaa / AAA
NR
2.13
0.54
47788NAB4 John Deere Owner Trust 2016-B A2
1.090% Due 02/15/2019
770,000.00 07/19/2016
1.10%
769,953.03
769,960.98
99.89
1.26%
769,114.50
373.02
0.88%
(846.48)
Aaa / NR
AAA
2.13
0.70
43813NAC0 Honda Auto Receivables 2015-2 A3
1.040% Due 02/21/2019
858,997.31 05/13/2015
1.05%
858,865.46
858,922.31
99.89
1.23%
858,083.34
248.15
0.99%
(838.97)
NR / AAA
AAA
2.14
0.57
43814RAB2 Honda Auto Receivables 2016-4 A2
1.040% Due 04/18/2019
1,090,000.00 10/18/2016
1.05%
1,089,969.59
1,089,971.87
99.76
1.31%
1,087,399.26
409.36
1.25%
(2,572.61)
NR / AAA
AAA
2.30
0.91
65478WAB1 Nissan Auto Receivables Owner 2016-C A2A
1.070% Due 05/15/2019
540,000.00 08/02/2016
1.08%
539,978.72
539,981.76
99.83
1.30%
539,077.14
256.80
0.62%
(904.62)
Aaa / NR
AAA
2.37
0.76
89231LAB3 Toyota Auto Receivables Owner 2016-D
1.060% Due 05/15/2019
705,000.00 10/04/2016
1.07%
704,943.60
704,948.43
99.81
1.29%
703,649.22
332.13
0.81%
(1,299.21)
Aaa / AAA
NR
2.37
0.84
Total ABS 6,636,678.71 1.07%
6,635,868.42
6,636,373.46
1.22%
6,629,608.41
2,856.45
7.62%
(6,765.05)
Aaa / AAA
Aaa
2.05
0.60
Agency
3135G0TG8 FNMA Note
0.875% Due 02/08/2018
1,225,000.00 01/15/2015
0.91%
1,223,738.25
1,224,545.59
99.93
0.94%
1,224,167.00
4,257.73
1.41%
(378.59)
Aaa / AA+
AAA
1.11
1.09
3133EEQM5 FFCB Note
1.110% Due 02/20/2018
1,700,000.00 08/28/2015
0.94%
1,706,885.00
1,703,160.70
100.05
1.06%
1,700,931.60
6,866.58
1.96%
(2,229.10)
Aaa / AA+
AAA
1.14
1.12
3130A4GJ5 FHLB Note
1.125% Due 04/25/2018
1,600,000.00 03/30/2015
1.00%
1,605,910.40
1,602,525.50
100.08
1.07%
1,601,235.20
3,300.00
1.84%
(1,290.30)
Aaa / AA+
AAA
1.32
1.30
3135G0E33 FNMA Note
1.125% Due 07/20/2018
1,700,000.00 Various
1.18%
1,697,059.95
1,698,534.01
100.00
1.12%
1,700,027.20
8,553.12
1.96%
1,493.19
Aaa / AA+
AAA
1.55
1.53
City of Newport Beach, California - Account #10
32
Holdings Report
For the Month Ending 12/31/2016
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
3135G0E58 FNMA Note
1.125% Due 10/19/2018
1,135,000.00 08/27/2015
1.18%
1,133,161.30
1,133,945.64
99.88
1.19%
1,133,603.95
2,553.75
1.31%
(341.69)
Aaa / AA+
AAA
1.80
1.77
3133EFPJ0 FFCB Note
1.290% Due 11/19/2018
1,000,000.00 03/03/2016
1.07%
1,005,970.00
1,004,142.82
100.13
1.22%
1,001,283.00
1,505.00
1.15%
(2,859.82)
Aaa / AA+
AAA
1.88
1.85
3135G0YT4 FNMA Note
1.625% Due 11/27/2018
940,000.00 Various
1.56%
942,208.85
941,035.95
100.75
1.22%
947,085.72
1,442.64
1.09%
6,049.77
Aaa / AA+
AAA
1.91
1.87
3133EGM69 FFCB Note
1.100% Due 12/05/2018
2,100,000.00 12/06/2016
1.22%
2,095,044.00
2,095,214.19
99.69
1.26%
2,093,586.60
1,668.33
2.41%
(1,627.59)
Aaa / AA+
AAA
1.93
1.90
3135G0G72 FNMA Note
1.125% Due 12/14/2018
1,765,000.00 10/30/2015
1.17%
1,762,370.15
1,763,353.16
99.79
1.23%
1,761,358.81
937.66
2.02%
(1,994.35)
Aaa / AA+
AAA
1.95
1.92
3130AAE46 FHLB Note
1.250% Due 01/16/2019
2,000,000.00 12/07/2016
1.25%
1,999,920.00
1,999,922.50
99.97
1.27%
1,999,302.00
1,597.22
2.30%
(620.50)
Aaa / AA+
AAA
2.04
2.01
3133782M2 FHLB Note
1.500% Due 03/08/2019
1,700,000.00 02/09/2016
0.99%
1,726,214.00
1,718,597.45
100.30
1.36%
1,705,125.50
8,004.17
1.97%
(13,471.95)
Aaa / AA+
AAA
2.18
2.13
3137EADZ9 FHLMC Note
1.125% Due 04/15/2019
1,700,000.00 03/18/2016
1.14%
1,699,439.00
1,699,582.26
99.60
1.30%
1,693,120.10
4,037.50
1.95%
(6,462.16)
Aaa / AA+
AAA
2.29
2.25
313379EE5 FHLB Note
1.625% Due 06/14/2019
1,750,000.00 06/23/2016
1.01%
1,781,465.00
1,775,926.00
100.49
1.42%
1,758,489.25
1,342.88
2.02%
(17,436.75)
Aaa / AA+
AAA
2.45
2.40
3133EFW52 FFCB Note
1.150% Due 07/01/2019
1,700,000.00 04/26/2016
1.15%
1,700,136.00
1,700,106.90
99.19
1.48%
1,686,216.40
9,775.00
1.95%
(13,890.50)
Aaa / AA+
AAA
2.50
2.44
3137EADK2 FHLMC Note
1.250% Due 08/01/2019
1,700,000.00 Various
1.36%
1,692,427.40
1,695,386.88
99.59
1.41%
1,693,001.10
8,854.16
1.95%
(2,385.78)
Aaa / AA+
AAA
2.58
2.52
3135G0N33 FNMA Note
0.875% Due 08/02/2019
675,000.00 07/29/2016
0.93%
673,866.00
674,023.41
98.61
1.42%
665,623.58
2,444.53
0.77%
(8,399.83)
Aaa / AA+
AAA
2.59
2.54
3137EADM8 FHLMC Note
1.250% Due 10/02/2019
1,700,000.00 02/22/2016
1.20%
1,703,026.00
1,702,306.84
99.42
1.47%
1,690,056.70
5,253.47
1.95%
(12,250.14)
Aaa / AA+
AAA
2.75
2.69
3130AA3R7 FHLB Note
1.375% Due 11/15/2019
1,900,000.00 11/29/2016
1.45%
1,896,124.00
1,896,238.84
99.60
1.52%
1,892,426.60
3,193.06
2.18%
(3,812.24)
Aaa / AA+
AAA
2.87
2.80
313381C94 FHLB Note
1.250% Due 12/13/2019
1,300,000.00 07/18/2016
1.07%
1,307,865.00
1,306,813.80
99.09
1.57%
1,288,119.30
812.50
1.48%
(18,694.50)
Aaa / AA+
AAA
2.95
2.88
Total Agency 29,290,000.00 1.15%
29,352,830.30
29,335,362.44
1.30%
29,234,759.61
76,399.30
33.67%
(100,602.83)
Aaa / AA+
Aaa 2.10
2.06
Commercial Paper
06538BR62 Bank of Tokyo Mitsubishi NY Discount CP
1.050% Due 04/06/2017
1,200,000.00 12/06/2016
1.07%
1,195,765.00
1,195,765.00
99.65
1.07%
1,195,765.00
910.00
1.37%
0.00
P-1 / A-1
NR
0.26
0.26
21687AW17 Rabobank Nederland NV NY Discount CP
1.160% Due 09/01/2017
2,600,000.00 12/06/2016
1.18%
2,577,463.78
2,577,463.78
99.13
1.18%
2,577,463.78
2,178.22
2.96%
0.00
P-1 / A-1
NR
0.67
0.66
City of Newport Beach, California - Account #10
33
Holdings Report
For the Month Ending 12/31/2016
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
89233GW10 Toyota Motor Credit Discount CP
1.250% Due 09/01/2017
1,200,000.00 12/06/2016
1.28%
1,188,791.67
1,188,791.67
99.07
1.28%
1,188,791.67
1,083.33
1.37%
0.00
P-1 / A-1+
NR
0.67
0.66
Total Commercial Paper 5,000,000.00 1.18%
4,962,020.45
4,962,020.45
1.18%
4,962,020.45
4,171.55
5.70%
0.00
P-1 / A-1
NR
0.57
0.57
Money Market Fund FI
60934N104 Federated Prime Value Oblig GOVT OBLIG MMF
1,057,737.03 Various
0.40%
1,057,737.03
1,057,737.03
1.00
0.40%
1,057,737.03
0.00
1.21%
0.00
Aaa / AAA
NR
0.00
0.00
Total Money Market Fund FI 1,057,737.03 0.40%
1,057,737.03
1,057,737.03
0.40%
1,057,737.03
0.00
1.21%
0.00
Aaa / AAA
NR 0.00
0.00
Negotiable CD
06417GPR3 Bank of Nova Scotia Yankee CD
1.350% Due 09/27/2017
400,000.00 12/06/2016
1.30%
400,151.41
400,138.07
100.03
1.30%
400,138.07
1,410.00
0.46%
0.00
Aa3 / NR
NR
0.74
0.73
Total Negotiable CD 400,000.00 1.30%
400,151.41
400,138.07
1.30%
400,138.07
1,410.00
0.46%
0.00
Aa3 / NR
NR
0.74
0.73
Supranational
459058ER0 Intl. Bank Recon & Development Note
1.000% Due 10/05/2018
1,970,000.00 09/30/2015
1.06%
1,966,651.00
1,968,034.68
99.51
1.28%
1,960,252.44
4,706.11
2.26%
(7,782.24)
Aaa / AAA
AAA
1.76
1.74
Total Supranational 1,970,000.00 1.06%
1,966,651.00
1,968,034.68
1.28%
1,960,252.44
4,706.11
2.26%
(7,782.24)
Aaa / AAA
Aaa
1.76
1.74
US Corporate
94974BFG0 Wells Fargo Corp Note
1.500% Due 01/16/2018
600,000.00 09/09/2014
1.64%
597,192.00
599,128.24
99.88
1.62%
599,281.20
4,125.00
0.69%
152.96
A2 / A
AA-
1.04
1.02
459200HZ7 IBM Corp Note
1.125% Due 02/06/2018
1,035,000.00 02/03/2015
1.23%
1,031,843.25
1,033,845.02
99.77
1.33%
1,032,647.45
4,689.84
1.19%
(1,197.57)
Aa3 / AA-
A+
1.10
1.08
166764AV2 Chevron Corp Note
1.365% Due 03/02/2018
944,000.00 Various
1.37%
943,910.12
943,952.78
99.90
1.45%
943,072.99
4,259.41
1.09%
(879.79)
Aa2 / AA-
NR
1.17
1.15
69371RM45 Paccar Financial Corp Note
1.450% Due 03/09/2018
824,000.00 Various
1.47%
823,560.84
823,809.69
99.96
1.48%
823,693.47
3,717.16
0.95%
(116.22)
A1 / A+
NR
1.19
1.17
808513AK1 Charles Schwab Corp Callable Note Cont
2/10/2018
1.500% Due 03/10/2018
1,130,000.00 Various
1.49%
1,130,242.70
1,130,122.69
100.02
1.47%
1,130,266.68
5,226.26
1.30%
143.99
A2 / A
A
1.19
1.09
24422ESB6 John Deere Capital Corp Note
1.300% Due 03/12/2018
1,015,000.00 Various
1.39%
1,012,047.05
1,013,919.48
99.73
1.53%
1,012,270.67
3,995.15
1.17%
(1,648.81)
A2 / A
A
1.19
1.18
747525AG8 Qualcomm Inc Note
1.400% Due 05/18/2018
1,255,000.00 Various
1.45%
1,253,021.30
1,254,090.86
99.99
1.41%
1,254,829.32
2,001.03
1.44%
738.46
A1 / A+
NR
1.38
1.36
02665WAC5 American Honda Finance Note
2.125% Due 10/10/2018
425,000.00 09/09/2014
1.93%
428,149.25
426,368.41
100.78
1.68%
428,323.93
2,032.03
0.49%
1,955.52
A1 / A+
NR
1.78
1.73
594918BF0 Microsoft Note
1.300% Due 11/03/2018
485,000.00 10/29/2015
1.33%
484,515.00
484,703.07
99.92
1.34%
484,612.49
1,015.81
0.56%
(90.58)
Aaa / AAA
AA+
1.84
1.81
City of Newport Beach, California - Account #10
34
Holdings Report
For the Month Ending 12/31/2016
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
037833BQ2 Apple Inc Note
1.700% Due 02/22/2019
1,060,000.00 02/16/2016
1.71%
1,059,819.80
1,059,871.31
100.19
1.61%
1,062,007.64
6,407.11
1.23%
2,136.33
Aa1 / AA+
NR
2.15
2.09
94974BFU9 Wells Fargo Corp Note
2.125% Due 04/22/2019
500,000.00 09/13/2016
1.51%
507,860.00
506,972.85
100.32
1.98%
501,618.00
2,036.46
0.58%
(5,354.85)
A2 / A
AA-
2.31
2.23
91159HHH6 US Bancorp Callable Note Cont 3/25/2019
2.200% Due 04/25/2019
1,050,000.00 01/22/2016
1.91%
1,059,324.00
1,056,574.51
100.85
1.81%
1,058,962.80
4,235.00
1.22%
2,388.29
A1 / A+
AA
2.32
2.17
89236TDE2 Toyota Motor Credit Corp Note
1.400% Due 05/20/2019
1,000,000.00 05/17/2016
1.45%
998,600.00
998,888.95
98.87
1.89%
988,654.00
1,594.44
1.14%
(10,234.95)
Aa3 / AA-
A
2.38
2.33
594918BN3 Microsoft Note
1.100% Due 08/08/2019
1,000,000.00 08/01/2016
1.14%
998,970.00
999,107.33
98.66
1.63%
986,553.00
4,369.44
1.14%
(12,554.33)
Aaa / AAA
AA+
2.60
2.54
084664CK5 Berkshire Hathaway Note
1.300% Due 08/15/2019
850,000.00 08/22/2016
1.21%
852,201.50
851,939.75
98.79
1.78%
839,677.60
4,174.44
0.97%
(12,262.15)
Aa2 / AA
A+
2.62
2.55
06406HCW7 Bank of New York Callable Note Cont 8/11/2019
2.300% Due 09/11/2019
1,300,000.00 Various
1.97%
1,313,226.00
1,310,777.04
100.82
1.97%
1,310,712.00
9,136.11
1.52%
(65.04)
A1 / A
AA-
2.70
2.51
17275RBG6 Cisco Systems Note
1.400% Due 09/20/2019
800,000.00 09/20/2016
1.36%
800,840.00
800,763.08
98.91
1.81%
791,276.00
3,142.22
0.91%
(9,487.08)
A1 / AA-
NR
2.72
2.64
68389XAX3 Oracle Corp Note
2.250% Due 10/08/2019
250,000.00 12/06/2016
1.81%
253,052.50
252,984.54
101.21
1.80%
253,031.75
1,296.88
0.29%
47.21
A1 / AA-
A+
2.77
2.66
90331HML4 US Bank NA Callable Note Cont 9/28/2019
2.125% Due 10/28/2019
250,000.00 12/06/2016
1.86%
251,772.50
251,732.65
100.36
1.99%
250,903.25
929.69
0.29%
(829.40)
A1 / AA-
AA
2.82
2.64
09247XAE1 Blackrock Inc Note
5.000% Due 12/10/2019
1,000,000.00 12/06/2016
1.90%
1,090,000.00
1,088,111.31
108.60
1.97%
1,086,049.00
2,916.67
1.25%
(2,062.31)
A1 / AA-
NR
2.94
2.75
857477AS2 State Street Bank Note
2.550% Due 08/18/2020
600,000.00 10/04/2016
1.62%
620,700.00
619,438.34
101.01
2.26%
606,052.80
5,652.50
0.70%
(13,385.54)
A1 / A
AA-
3.63
3.42
Total US Corporate 17,373,000.00 1.54%
17,510,847.81
17,507,101.90
1.68%
17,444,496.04
76,952.65
20.13%
(62,605.86)
A1 / AA-
AA-
2.02
1.94
US Treasury
912828UJ7 US Treasury Note
0.875% Due 01/31/2018
775,000.00 08/21/2014
1.20%
766,677.40
772,380.54
99.93
0.94%
774,424.95
2,837.81
0.89%
2,044.41
Aaa / AA+
AAA
1.08
1.07
912828XA3 US Treasury Note
1.000% Due 05/15/2018
2,000,000.00 12/06/2016
1.02%
1,999,381.70
1,999,411.20
99.96
1.03%
1,999,296.00
2,596.69
2.30%
(115.20)
Aaa / AA+
AAA
1.37
1.36
912828K82 US Treasury Note
1.000% Due 08/15/2018
1,700,000.00 05/10/2016
0.77%
1,708,904.13
1,706,370.87
99.87
1.08%
1,697,742.40
6,421.20
1.96%
(8,628.47)
Aaa / AA+
AAA
1.62
1.60
912828RH5 US Treasury Note
1.375% Due 09/30/2018
1,250,000.00 Various
1.29%
1,253,092.08
1,251,748.92
100.38
1.16%
1,254,687.50
4,391.31
1.45%
2,938.58
Aaa / AA+
AAA
1.75
1.72
912828SD3 US Treasury Note
1.250% Due 01/31/2019
1,700,000.00 Various
1.17%
1,704,857.26
1,702,754.61
100.06
1.22%
1,700,996.20
8,892.67
1.96%
(1,758.41)
Aaa / AA+
AAA
2.08
2.04
912828ST8 US Treasury Note
1.250% Due 04/30/2019
1,700,000.00 Various
1.22%
1,701,599.45
1,701,039.62
99.94
1.28%
1,699,003.80
3,639.50
1.96%
(2,035.82)
Aaa / AA+
AAA
2.33
2.29
912828SX9 US Treasury Note
1.125% Due 05/31/2019
1,600,000.00 12/07/2016
1.22%
1,596,130.36
1,596,233.09
99.59
1.30%
1,593,500.80
1,582.42
1.83%
(2,732.29)
Aaa / AA+
AAA
2.41
2.37
City of Newport Beach, California - Account #10
35
Holdings Report
For the Month Ending 12/31/2016
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
912828TH3 US Treasury Note
0.875% Due 07/31/2019
1,725,000.00 09/29/2015
1.19%
1,704,925.70
1,711,507.20
98.84
1.33%
1,704,986.55
6,316.41
1.97%
(6,520.65)
Aaa / AA+
AAA
2.58
2.53
912828UB4 US Treasury Note
1.000% Due 11/30/2019
1,750,000.00 10/29/2015
1.37%
1,724,576.18
1,731,886.38
98.80
1.42%
1,728,945.75
1,538.46
1.99%
(2,940.63)
Aaa / AA+
AAA
2.92
2.86
912828UF5 US Treasury Note
1.125% Due 12/31/2019
550,000.00 02/22/2016
1.11%
550,345.59
550,268.71
99.03
1.46%
544,650.15
17.09
0.63%
(5,618.56)
Aaa / AA+
AAA
3.00
2.94
912828H52 US Treasury Note
1.250% Due 01/31/2020
1,900,000.00 Various
1.05%
1,912,256.37
1,911,561.75
99.27
1.49%
1,886,046.40
9,938.86
2.18%
(25,515.35)
Aaa / AA+
AAA
3.08
3.00
912828J50 US Treasury Note
1.375% Due 02/29/2020
1,200,000.00 02/12/2016
1.06%
1,214,957.14
1,211,710.00
99.52
1.53%
1,194,280.80
5,606.35
1.38%
(17,429.20)
Aaa / AA+
AAA
3.16
3.07
912828UV0 US Treasury Note
1.125% Due 03/31/2020
1,200,000.00 10/11/2016
1.13%
1,199,769.65
1,199,784.05
98.71
1.53%
1,184,484.00
3,449.18
1.36%
(15,300.05)
Aaa / AA+
AAA
3.25
3.16
912828VA5 US Treasury Note
1.125% Due 04/30/2020
1,725,000.00 12/29/2015
1.67%
1,685,788.98
1,694,923.37
98.62
1.55%
1,701,213.98
3,288.28
1.96%
6,290.61
Aaa / AA+
AAA
3.33
3.25
912828XE5 US Treasury Note
1.500% Due 05/31/2020
2,250,000.00 12/28/2016
1.68%
2,236,911.83
2,236,943.27
99.70
1.59%
2,243,144.25
2,967.03
2.58%
6,200.98
Aaa / AA+
AAA
3.42
3.31
912828L65 US Treasury Note
1.375% Due 09/30/2020
2,250,000.00 12/28/2016
1.77%
2,218,103.24
2,218,173.04
98.87
1.69%
2,224,512.00
7,904.36
2.56%
6,338.96
Aaa / AA+
AAA
3.75
3.62
Total US Treasury 25,275,000.00 1.27%
25,178,277.06
25,196,696.62
1.37%
25,131,915.53
71,387.62
28.95%
(64,781.09)
Aaa / AA+
Aaa
2.63
2.57
TOTAL PORTFOLIO 87,002,415.74 1.25%
87,064,383.48
87,063,464.65 1.37%
86,820,927.58
237,883.68
100.00%
(242,537.07)
Aa1 / AA+
Aaa
2.11
1.95
TOTAL MARKET VALUE PLUS ACCRUALS 87,058,811.26
City of Newport Beach, California - Account #10
36
Holdings Report
For the Month Ending 12/31/2016
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
Agency
3133EEHY9 FFCB Note
0.700% Due 01/13/2017
1,225,000.00 02/20/2015
0.71%
1,224,840.75
1,224,997.23
100.01
0.46%
1,225,099.23
4,001.67
6.60%
102.00
Aaa / AA+
AAA
0.04
0.03
3133786Q9 FHLB Note
1.000% Due 02/13/2017
1,000,000.00 10/17/2012
0.75%
1,010,600.00
1,000,288.66
100.04
0.62%
1,000,442.00
3,833.33
5.39%
153.34
Aaa / AA+
AAA
0.12
0.12
3135G0VM2 FNMA Callable Note 1X 3/14/14
0.750% Due 03/14/2017
3,500,000.00 04/11/2013
0.75%
3,507,350.00
3,500,000.00
100.02
0.66%
3,500,619.50
7,802.08
18.83%
619.50
Aaa / AA+
AAA
0.20
0.20
313379FW4 FHLB Note
1.000% Due 06/09/2017
550,000.00 09/14/2012
0.82%
554,652.18
550,428.56
100.14
0.69%
550,743.05
336.11
2.96%
314.49
Aaa / AA+
AAA
0.44
0.44
313370SZ2 FHLB Note
2.250% Due 09/08/2017
520,000.00 01/04/2013
0.89%
552,271.20
524,737.40
100.99
0.79%
525,166.20
3,672.50
2.84%
428.80
Aaa / AA+
AAA
0.69
0.68
3135G0PP2 FNMA Callable Note 1X 9/20/2013
1.000% Due 09/20/2017
1,250,000.00 Various
0.94%
1,253,387.50
1,250,496.71
100.09
0.88%
1,251,100.00
3,506.95
6.73%
603.29
Aaa / AA+
AAA
0.72
0.71
3133EDDV1 FFCB Note
1.160% Due 10/23/2017
600,000.00 01/29/2015
0.87%
604,680.00
601,384.75
100.25
0.85%
601,504.80
1,314.67
3.24%
120.05
Aaa / AA+
AAA
0.81
0.80
3133EEFE5 FFCB Note
1.125% Due 12/18/2017
1,600,000.00 01/30/2015
0.85%
1,612,496.00
1,604,165.33
100.20
0.92%
1,603,153.60
650.00
8.61%
(1,011.73)
Aaa / AA+
AAA
0.96
0.96
Total Agency 10,245,000.00 0.80%
10,320,277.63
10,256,498.64
0.72%
10,257,828.38
25,117.31
55.20%
1,329.74
Aaa / AA+
Aaa
0.43
0.43
Commercial Paper
06538BQ63 Bank of Tokyo Mitsubishi NY Discount CP
1.030% Due 03/06/2017
900,000.00 10/26/2016
1.05%
896,652.50
896,652.50
99.63
1.05%
896,652.50
1,699.50
4.82%
0.00
P-1 / A-1
NR
0.18
0.18
Total Commercial Paper 900,000.00 1.05%
896,652.50
896,652.50
1.05%
896,652.50
1,699.50
4.82%
0.00
P-1 / A-1
NR
0.18
0.18
Money Market Fund FI
38141W323 Goldman Sachs Financial Square Treasury
Obligation Fund
70,491.39 Various
0.38%
70,491.39
70,491.39
1.00
0.38%
70,491.39
0.00
0.38%
0.00
Aaa / AAA
NR
0.00
0.00
Total Money Market Fund FI 70,491.39 0.38%
70,491.39
70,491.39
0.38%
70,491.39
0.00
0.38%
0.00
Aaa / AAA
NR
0.00
0.00
Negotiable CD
89113E4Z6 Toronto Dominion Yankee CD
1.150% Due 03/10/2017
250,000.00 11/23/2016
0.90%
250,179.77
250,114.25
100.05
0.90%
250,114.25
2,371.87
1.36%
0.00
Aa1 / NR
NR
0.19
0.19
06417GPZ5 Bank of Nova Scotia Yankee CD
1.260% Due 06/26/2017
1,700,000.00 09/29/2016
1.26%
1,700,000.00
1,700,000.00
100.00
1.26%
1,700,000.00
5,533.50
9.16%
0.00
P-1 / A-1+
F-1+
0.48
0.48
Total Negotiable CD 1,950,000.00 1.21%
1,950,179.77
1,950,114.25
1.21%
1,950,114.25
7,905.37
10.51%
0.00
Aaa / AAA
Aaa
0.45
0.44
City of Newport Beach, California - Short Term - Account #12
37
Holdings Report
For the Month Ending 12/31/2016
CUSIP Security Description Par Value/Units
Purchase Date
Book Yield
Cost Value
Book Value
Mkt Price
Mkt YTM
Market Value
Accrued Int.
% of Port.
Gain/Loss
Moody/S&P
Fitch
Maturity
Duration
US Corporate
084664BS9 Berkshire Hathaway Note
1.600% Due 05/15/2017
325,000.00 11/26/2013
1.18%
329,657.25
325,493.34
100.19
1.09%
325,606.13
664.44
1.75%
112.79
Aa2 / AA
A+
0.37
0.37
009158AS5 Air Products & Chemicals Note
1.200% Due 10/15/2017
700,000.00 03/03/2015
1.28%
698,551.00
699,564.08
99.98
1.23%
699,836.20
1,773.33
3.77%
272.12
A2 / A
NR
0.79
0.78
68389XAN5 Oracle Corp Note
1.200% Due 10/15/2017
1,100,000.00 Various
1.32%
1,095,291.00
1,098,953.53
100.02
1.17%
1,100,260.70
2,786.67
5.92%
1,307.17
A1 / AA-
A+
0.79
0.78
69371RM37 Paccar Financial Corp Note
1.400% Due 11/17/2017
500,000.00 11/12/2014
1.42%
499,780.00
499,935.77
100.18
1.19%
500,908.50
855.56
2.69%
972.73
A1 / A+
NR
0.88
0.87
02665WAQ4 American Honda Finance Note
1.550% Due 12/11/2017
650,000.00 12/08/2014
1.58%
649,395.50
649,810.27
100.09
1.46%
650,562.25
559.72
3.50%
751.98
A1 / A+
NR
0.95
0.93
Total US Corporate 3,275,000.00 1.37%
3,272,674.75
3,273,756.99
1.24%
3,277,173.78
6,639.72
17.63%
3,416.79
A1 / A+
A+
0.79
0.78
US Treasury
912828TG5 US Treasury Note
0.500% Due 07/31/2017
1,400,000.00 Various
0.62%
1,394,067.19
1,399,036.26
99.90
0.67%
1,398,577.60
2,929.35
7.52%
(458.66)
Aaa / AA+
AAA
0.58
0.58
912828UE8 US Treasury Note
0.750% Due 12/31/2017
735,000.00 Various
1.21%
723,550.90
731,717.29
99.84
0.92%
733,793.87
15.23
3.94%
2,076.58
Aaa / AA+
AAA
1.00
0.99
Total US Treasury 2,135,000.00 0.82%
2,117,618.09
2,130,753.55
0.76%
2,132,371.47
2,944.58
11.46%
1,617.92
Aaa / AA+
Aaa 0.72
0.72
TOTAL PORTFOLIO 18,575,491.39 0.96%
18,627,894.13
18,578,267.32 0.88%
18,584,631.77
44,306.48
100.00%
6,364.45
Aa1 / AA+
Aaa
0.52
0.51
TOTAL MARKET VALUE PLUS ACCRUALS 18,628,938.25
City of Newport Beach, California - Short Term - Account #12
38
SECTION 5
Benchmark Study
39
Annual Benchmark Study
B of A ML 1-3 Year
US Treasury
B of A ML 1-5 Year US
Treasury & Agency
B of A ML 1-5 Year A-AAA
US Corporate & Government
Maturity Composition
0-6 months
6-12 months
1-3 years 100.00% 58.15% 57.53%
3-5 years 41.86% 42.48%
5-10 years
Asset Sector Distribution
Treasury 100.00% 93.72% 68.58%
Agency 6.28% 12.89%
Corporate 18.54%
Modified Duration 12/31/2016 1.89 2.68 2.68
10 Year Annualized Total Return 2.12% 2.76% 2.90%
10 Year Standard Deviation 2.63% 2.97% 2.23%
Sharpe Ratio 0.50 0.65 0.92
Qualitative Risk Objective 12/31/1988-12/31/2016 12/31/1988-12/31/2016 12/31/1988-12/31/2016
Negative Quarterly Return Occurrences 11 21 19
2 Consecutive Negative Quarterly Return Occurrences 1 2 3
Negative Return For Year Occurrences 0 2 1
Worst Year Total Return 0.36% -0.63%-0.58%
Periods Ending December 31, 2016
40
SECTION 6
Transactions
41
Transaction Ledger
City of Newport Beach, California - Account #10
Transaction
Type
Settlement
Date CUSIP Quantity Security Description Price
Acq/Disp
Yield Amount
Interest
Pur/Sold Total Amount Gain/Loss
ACQUISITIONS
Purchase 10/03/2016 912828H52 500,000.00 US Treasury Note
1.25% Due: 01/31/2020 100.985 0.95% 504,923.55 1,086.96 506,010.51 0.00
Purchase 10/07/2016 857477AS2 600,000.00 State Street Bank Note
2.55% Due: 08/18/2020 103.450 1.62% 620,700.00 2,082.50 622,782.50 0.00
Purchase 10/12/2016 89231LAB3 705,000.00 Toyota Auto Receivables Owner 2016-D
1.06% Due: 05/15/2019 99.992 1.07% 704,943.60 0.00 704,943.60 0.00
Purchase 10/14/2016 912828UV0 1,200,000.00 US Treasury Note
1.125% Due: 03/31/2020 99.981 1.13% 1,199,769.65 519.23 1,200,288.88 0.00
Purchase 10/25/2016 43814RAB2 1,090,000.00 Honda Auto Receivables 2016-4 A2
1.04% Due: 04/18/2019 99.997 1.05% 1,089,969.59 0.00 1,089,969.59 0.00
Purchase 10/27/2016 06538BQ63 900,000.00 Bank of Tokyo Mitsubishi NY Discount CP
1.03% Due: 03/06/2017 99.628 1.05% 896,652.50 0.00 896,652.50 0.00
Purchase 11/09/2016 912828H52 1,400,000.00 US Treasury Note
1.25% Due: 01/31/2020 100.524 1.08% 1,407,332.82 4,802.99 1,412,135.81 0.00
Purchase 11/23/2016 89113E4Z6 250,000.00 Toronto Dominion Yankee CD
1.15% Due: 03/10/2017 100.072 0.90% 250,179.77 2,060.42 252,240.19 0.00
Purchase 11/30/2016 3130AA3R7 1,900,000.00 FHLB Note
1.375% Due: 11/15/2019 99.796 1.45% 1,896,124.00 943.40 1,897,067.40 0.00
Purchase 12/06/2016 06417GPR3 400,000.00 Bank of Nova Scotia Yankee CD
1.35% Due: 09/27/2017 100.038 1.30% 400,151.41 1,020.00 401,171.41 0.00
Purchase 12/06/2016 06538BR62 1,200,000.00 Bank of Tokyo Mitsubishi NY Discount CP
1.05% Due: 04/06/2017 99.647 1.07% 1,195,765.00 0.00 1,195,765.00 0.00
Purchase 12/06/2016 21687AW17 2,600,000.00 Rabobank Nederland NV NY Discount CP
1.16% Due: 09/01/2017 99.133 1.18% 2,577,463.78 0.00 2,577,463.78 0.00
Purchase 12/06/2016 89233GW10 1,200,000.00 Toyota Motor Credit Discount CP
1.25% Due: 09/01/2017 99.066 1.28% 1,188,791.67 0.00 1,188,791.67 0.00
Purchase 12/07/2016 3133EGM69 2,100,000.00 FFCB Note
1.1% Due: 12/05/2018 99.764 1.22% 2,095,044.00 128.33 2,095,172.33 0.00
Purchase 12/07/2016 912828XA3 2,000,000.00 US Treasury Note
1% Due: 05/15/2018 99.969 1.02% 1,999,381.70 1,215.47 2,000,597.17 0.00
September 30, 2016 through December 31, 2016
42
Transaction Ledger
City of Newport Beach, California - Account #10
Transaction
Type
Settlement
Date CUSIP Quantity Security Description Price
Acq/Disp
Yield Amount
Interest
Pur/Sold Total Amount Gain/Loss
Purchase 12/08/2016 3130AAE46 2,000,000.00 FHLB Note
1.25% Due: 01/16/2019 99.996 1.25% 1,999,920.00 0.00 1,999,920.00 0.00
Purchase 12/08/2016 912828SX9 1,600,000.00 US Treasury Note
1.125% Due: 05/31/2019 99.758 1.22% 1,596,130.36 395.60 1,596,525.96 0.00
Purchase 12/09/2016 06406HCW7 300,000.00 Bank of New York Callable Note Cont 8/11/2019
2.3% Due: 09/11/2019 101.102 1.88% 303,306.00 1,686.67 304,992.67 0.00
Purchase 12/09/2016 09247XAE1 1,000,000.00 Blackrock Inc Note
5% Due: 12/10/2019 109.000 1.90% 1,090,000.00 24,861.11 1,114,861.11 0.00
Purchase 12/09/2016 68389XAX3 250,000.00 Oracle Corp Note
2.25% Due: 10/08/2019 101.221 1.81% 253,052.50 953.13 254,005.63 0.00
Purchase 12/09/2016 90331HML4 250,000.00 US Bank NA Callable Note Cont 9/28/2019
2.125% Due: 10/28/2019 100.709 1.86% 251,772.50 605.03 252,377.53 0.00
Purchase 12/29/2016 912828L65 2,250,000.00 US Treasury Note
1.375% Due: 09/30/2020 98.582 1.77% 2,218,103.24 7,649.38 2,225,752.62 0.00
Purchase 12/29/2016 912828XE5 2,250,000.00 US Treasury Note
1.5% Due: 05/31/2020 99.418 1.68% 2,236,911.83 2,688.87 2,239,600.70 0.00
Subtotal 27,945,000.00 27,976,389.47 52,699.09 28,029,088.56 0.00
TOTAL ACQUISITIONS 27,945,000.00 27,976,389.47 52,699.09 28,029,088.56 0.00
DISPOSITIONS
Sale 10/06/2016 3137EADT3 825,000.00 FHLMC Note
0.875% Due: 02/22/2017 100.138 0.51% 826,139.33 882.29 827,021.62 821.37
Sale 11/09/2016 912828UA6 1,410,000.00 US Treasury Note
0.625% Due: 11/30/2017 99.879 0.74% 1,408,287.86 3,900.61 1,412,188.47 3770.39
Sale 11/30/2016 3133EAY28 1,690,000.00 FFCB Note
0.83% Due: 09/21/2017 99.997 0.83% 1,689,949.30 2,688.51 1,692,637.81 100.18
Subtotal 3,925,000.00 3,924,376.49 7,471.41 3,931,847.90 4,691.94
Maturity 10/01/2016 458140AH3 625,000.00 Intel Corp Note
1.95% Due: 10/01/2016 100.000 625,000.00 0.00 625,000.00 0.00
Maturity 10/14/2016 3137EADS5 1,000,000.00 FHLMC Note
0.875% Due: 10/14/2016 100.000 1,000,000.00 0.00 1,000,000.00 0.00
September 30, 2016 through December 31, 2016
43
Transaction Ledger
City of Newport Beach, California - Account #10
Transaction
Type
Settlement
Date CUSIP Quantity Security Description Price
Acq/Disp
Yield Amount
Interest
Pur/Sold Total Amount Gain/Loss
Maturity 10/20/2016 36962GY40 1,000,000.00 General Electric Capital Corp Note
5.375% Due: 10/20/2016 100.000 1,000,000.00 0.00 1,000,000.00 0.00
Subtotal 2,625,000.00 2,625,000.00 0.00 2,625,000.00 0.00
Intra Legal
Entity Sale 12/07/2016 009158AS5 700,000.00 Air Products & Chemicals Note
1.2% Due: 10/15/2017 100.117 700,817.37 0.00 700,817.37 0.00
Intra Legal
Entity Sale 12/07/2016 02665WAQ4 650,000.00 American Honda Finance Note
1.55% Due: 12/11/2017 101.050 656,822.94 0.00 656,822.94 0.00
Intra Legal
Entity Sale 12/07/2016 06417GPZ5 1,700,000.00 Bank of Nova Scotia Yankee CD
1.26% Due: 06/26/2017 100.242 1,704,105.50 0.00 1,704,105.50 0.00
Intra Legal
Entity Sale 12/07/2016 06538BQ63 900,000.00 Bank of Tokyo Mitsubishi NY Discount CP
1.03% Due: 03/06/2017 99.748 897,734.00 0.00 897,734.00 0.00
Intra Legal
Entity Sale 12/07/2016 084664BS9 325,000.00 Berkshire Hathaway Note
1.6% Due: 05/15/2017 100.341 326,107.67 0.00 326,107.67 0.00
Intra Legal
Entity Sale 12/07/2016 313370SZ2 520,000.00 FHLB Note
2.25% Due: 09/08/2017 101.605 528,347.04 0.00 528,347.04 0.00
Intra Legal
Entity Sale 12/07/2016 3133786Q9 1,000,000.00 FHLB Note
1% Due: 02/13/2017 100.418 1,004,183.44 0.00 1,004,183.44 0.00
Intra Legal
Entity Sale 12/07/2016 313379FW4 550,000.00 FHLB Note
1% Due: 06/09/2017 100.657 553,613.62 0.00 553,613.62 0.00
Intra Legal
Entity Sale 12/07/2016 3133EDDV1 600,000.00 FFCB Note
1.16% Due: 10/23/2017 100.404 602,423.40 0.00 602,423.40 0.00
Intra Legal
Entity Sale 12/07/2016 3133EEFE5 1,600,000.00 FFCB Note
1.125% Due: 12/18/2017 100.714 1,611,416.80 0.00 1,611,416.80 0.00
Intra Legal
Entity Sale 12/07/2016 3133EEHY9 1,225,000.00 FFCB Note
0.7% Due: 01/13/2017 100.301 1,228,692.69 0.00 1,228,692.69 0.00
Intra Legal
Entity Sale 12/07/2016 3135G0PP2 1,250,000.00 FNMA Callable Note 1X 9/20/2013
1% Due: 09/20/2017 100.331 1,254,135.84 0.00 1,254,135.84 0.00
Intra Legal
Entity Sale 12/07/2016 3135G0VM2 3,500,000.00 FNMA Callable Note 1X 3/14/14
0.75% Due: 03/14/2017 100.230 3,508,060.50 0.00 3,508,060.50 0.00
Intra Legal
Entity Sale 12/07/2016 68389XAN5 1,100,000.00 Oracle Corp Note
1.2% Due: 10/15/2017 100.160 1,101,759.63 0.00 1,101,759.63 0.00
September 30, 2016 through December 31, 2016
44
Transaction Ledger
City of Newport Beach, California - Account #10
Transaction
Type
Settlement
Date CUSIP Quantity Security Description Price
Acq/Disp
Yield Amount
Interest
Pur/Sold Total Amount Gain/Loss
Intra Legal
Entity Sale 12/07/2016 69371RM37 500,000.00 Paccar Financial Corp Note
1.4% Due: 11/17/2017 100.255 501,274.33 0.00 501,274.33 0.00
Intra Legal
Entity Sale 12/07/2016 89113E4Z6 250,000.00 Toronto Dominion Yankee CD
1.15% Due: 03/10/2017 100.934 252,334.78 0.00 252,334.78 0.00
Intra Legal
Entity Sale 12/07/2016 912828TG5 1,400,000.00 US Treasury Note
0.5% Due: 07/31/2017 100.028 1,400,395.22 0.00 1,400,395.22 0.00
Intra Legal
Entity Sale 12/07/2016 912828UE8 735,000.00 US Treasury Note
0.75% Due: 12/31/2017 100.121 735,890.27 0.00 735,890.27 0.00
Subtotal 18,505,000.00 18,568,115.04 0.00 18,568,115.04 0.00
TOTAL DISPOSITIONS 26,758,279.69 26,820,771.22 25,530.69 26,846,301.91 4,691.94
September 30, 2016 through December 31, 2016
45
Transaction Ledger
City of Newport Beach, California - Short Term - Account #12
Transaction
Type
Settlement
Date CUSIP Quantity Security Description Price
Acq/Disp
Yield Amount
Interest
Pur/Sold Total Amount Gain/Loss
ACQUISITIONS
Intra Legal
Entity
Purchase
12/07/2016 009158AS5 700,000.00 Air Products & Chemicals Note
1.2% Due: 10/15/2017 100.117 700,817.37 0.00 700,817.37 0.00
Intra Legal
Entity
Purchase
12/07/2016 02665WAQ4 650,000.00 American Honda Finance Note
1.55% Due: 12/11/2017 101.050 656,822.94 0.00 656,822.94 0.00
Intra Legal
Entity
Purchase
12/07/2016 06417GPZ5 1,700,000.00 Bank of Nova Scotia Yankee CD
1.26% Due: 06/26/2017 100.242 1,704,105.50 0.00 1,704,105.50 0.00
Intra Legal
Entity
Purchase
12/07/2016 06538BQ63 900,000.00 Bank of Tokyo Mitsubishi NY Discount CP
1.03% Due: 03/06/2017 99.748 897,734.00 0.00 897,734.00 0.00
Intra Legal
Entity
Purchase
12/07/2016 084664BS9 325,000.00 Berkshire Hathaway Note
1.6% Due: 05/15/2017 100.341 326,107.67 0.00 326,107.67 0.00
Intra Legal
Entity
Purchase
12/07/2016 313370SZ2 520,000.00 FHLB Note
2.25% Due: 09/08/2017 101.605 528,347.04 0.00 528,347.04 0.00
Intra Legal
Entity
Purchase
12/07/2016 3133786Q9 1,000,000.00 FHLB Note
1% Due: 02/13/2017 100.418 1,004,183.44 0.00 1,004,183.44 0.00
Intra Legal
Entity
Purchase
12/07/2016 313379FW4 550,000.00 FHLB Note
1% Due: 06/09/2017 100.657 553,613.62 0.00 553,613.62 0.00
Intra Legal
Entity
Purchase
12/07/2016 3133EDDV1 600,000.00 FFCB Note
1.16% Due: 10/23/2017 100.404 602,423.40 0.00 602,423.40 0.00
Intra Legal
Entity
Purchase
12/07/2016 3133EEFE5 1,600,000.00 FFCB Note
1.125% Due: 12/18/2017 100.714 1,611,416.80 0.00 1,611,416.80 0.00
Intra Legal
Entity
Purchase
12/07/2016 3133EEHY9 1,225,000.00 FFCB Note
0.7% Due: 01/13/2017 100.301 1,228,692.69 0.00 1,228,692.69 0.00
Intra Legal
Entity
Purchase
12/07/2016 3135G0PP2 1,250,000.00 FNMA Callable Note 1X 9/20/2013
1% Due: 09/20/2017 100.331 1,254,135.84 0.00 1,254,135.84 0.00
Intra Legal
Entity
Purchase
12/07/2016 3135G0VM2 3,500,000.00 FNMA Callable Note 1X 3/14/14
0.75% Due: 03/14/2017 100.230 3,508,060.50 0.00 3,508,060.50 0.00
Intra Legal
Entity
Purchase
12/07/2016 68389XAN5 1,100,000.00 Oracle Corp Note
1.2% Due: 10/15/2017 100.160 1,101,759.63 0.00 1,101,759.63 0.00
Intra Legal
Entity
Purchase
12/07/2016 69371RM37 500,000.00 Paccar Financial Corp Note
1.4% Due: 11/17/2017 100.255 501,274.33 0.00 501,274.33 0.00
September 30, 2016 through December 31, 2016
46
Transaction Ledger
City of Newport Beach, California - Short Term - Account #12
Transaction
Type
Settlement
Date CUSIP Quantity Security Description Price
Acq/Disp
Yield Amount
Interest
Pur/Sold Total Amount Gain/Loss
Intra Legal
Entity
Purchase
12/07/2016 89113E4Z6 250,000.00 Toronto Dominion Yankee CD
1.15% Due: 03/10/2017 100.934 252,334.78 0.00 252,334.78 0.00
Intra Legal
Entity
Purchase
12/07/2016 912828TG5 1,400,000.00 US Treasury Note
0.5% Due: 07/31/2017 100.028 1,400,395.22 0.00 1,400,395.22 0.00
Intra Legal
Entity
Purchase
12/07/2016 912828UE8 735,000.00 US Treasury Note
0.75% Due: 12/31/2017 100.121 735,890.27 0.00 735,890.27 0.00
Subtotal 18,505,000.00 18,568,115.04 0.00 18,568,115.04 0.00
TOTAL ACQUISITIONS 18,505,000.00 18,568,115.04 0.00 18,568,115.04 0.00
DISPOSITIONS
Maturity 10/01/2016 458140AH3 1,299,000.00 Intel Corp Note
1.95% Due: 10/01/2016 100.000 1,299,000.00 0.00 1,299,000.00 0.00
Maturity 10/03/2016 313396J38 2,100,000.00 FHLMC Discount Note
0.6% Due: 10/03/2016 100.000 2,089,989.99 10,010.01 2,100,000.00 0.00
Subtotal 3,399,000.00 3,388,989.99 10,010.01 3,399,000.00 0.00
TOTAL DISPOSITIONS 3,399,000.00 3,388,989.99 10,010.01 3,399,000.00 0.00
September 30, 2016 through December 31, 2016
47
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Pension Update
Dan Matusiewicz, Finance DirectorCity of Newport Beach
February 16, 2017
Item No. 5B2
Pension Update
Staff Presentation
February 16, 2017
Update
New Experience Losses -Updated
Upcoming Experience Losses
Valuation
Year
Contribution
FY Year
Expected
Return
Actual
Return
Experience
Loss MVA
Experience
Loss
Two Year Interest
Accumulation
Investment
Related
2015 2017-18 7.5%2.4%5.1%567,303,448 28,932,476 33,435,092
2016 2018-19 7.5%0.6%6.9%572,699,003 39,516,231 45,665,945
Discount
Rate
2016 2018-19 7.375%NA NA NA 11,975,187 13,806,660
2017 2019-20 7.25%NA NA NA 12,501,914 14,380,405
2018 2020-21 7.0%NA NA NA 26,678,934 30,544,712
119,604,742 137,832,814 10
14
~$7M PV Savings
~$13M PV Savings
Further Questions?Dan Matusiewicz, Finance DirectorCity of Newport Beachdanm@newportbeachca.gov949.644.3126
16
CITY OF NEWPORT BEACH
MISCELLANEOUS AND SAFETY PLANS
CalPERS Actuarial Issues – 6/30/15 Valuation
Preliminary Results
Presented by John Bartel, President
Prepared by Bianca Lin, Assistant Vice President
Matthew Childs, Actuarial Analyst
Bartel Associates, LLC
February 16, 2017
Agenda
\\bartcafs01\bartel_associates\clients\city of newport beach\projects\calpers\6-30-15\ba newportbeachci 17-02-16 calpers misc safety 15 dr update.docx
Topic Page
Definitions 1
CalPERS Changes 3
Investment Return 6
Miscellaneous Plan:
Demographic Information 7
Plan Funded Status 9
Contribution Rates & Projections 12
Discount Rate Sensitivity 19
Agency Comparison 25
Safety Plan:
Demographic Information 29
Plan Funded Status 31
Contribution Rates & Projections 34
Discount Rate Sensitivity 41
Agency Comparison 47
PEPRA 51
Paying Down the Unfunded Liability 53
Irrevocable Supplemental (§115) Pension trust 55
Item No. 5B3
Pension Update
Presentation
February 16, 2017
February 16, 2017 1
DEFINITIONS
PVB - Present Value of all Projected Benefits:
Discounted value (at valuation date - 6/30/15), of all future expected benefit
payments based on various (actuarial) assumptions
Actuarial Liability:
Discounted value (at valuation date) of benefits earned through valuation date
[value of past service benefit]
Portion of PVB “earned” at measurement
Current Normal Cost:
Portion of PVB allocated to (or “earned” during) current year
Value of employee and employer current service benefit
February 16, 2017 2
DEFINITIONS
Target-Have money in the bank to cover Actuarial Liability (past service)
Unfunded Liability - Money short of target at valuation date
Excess Assets / Surplus:
Money over and above target at that point in time
Doesn’t mean you’re done contributing
Super Funded:
Assets cover whole pie (PVB)
If everything goes exactly like PERS calculated, you’ll never have to put another
(employer or employee) dime in
February 16, 2017 3
CALPERS CHANGES
Contribution policy changes:
No asset smoothing
No rolling amortization
5-year ramp up
Included in 6/30/13 valuation (first impact 15/16 rates; full impact 19/20)
Assumption changes:
Anticipate future mortality improvement
Other, less significant, changes
Included in 6/30/14 valuation (first impact 16/17 rates; full impact 20/21)
CalPERS Board will change their discount rate:
Rate Initial Full
6/30/16 valuation 7.375% 18/19 22/23
6/30/17 valuation 7.25% 19/20 23/24
6/30/18 valuation 7.00% 20/21 24/25
Risk mitigation suspended until 6/30/18 valuation
February 16, 2017 4
CALPERS CHANGES
CalPERS Board reviewing their Capital Market Assumptions next summer/fall
May result in further changes to discount rate
Risk Mitigation Strategy
Move to more conservative investments over time
Only when investment return is better than expected
Lower discount rate in concert
Essentially use 50% of investment gains to pay for cost increases
Likely get to 6.5% over 20 years
February 16, 2017 5
CALPERS CHANGES
5.75%
6.00%
6.25%
6.50%
6.75%
7.00%
7.25%
7.50%
7.75%DiscountRateusedasofActuarialValuationDate
5thpercentile 25thpercentile 50thpercentile 75thpercentile 95thPercentile
February 16, 2017 6
INVESTMENT RETURN
Above assumes contributions, payments, etc. received evenly throughout year.
Estimated June 30, 2017 based on CalPERS actual return through 12/31/16 and
assumed returns for 6 months.
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Est.
2017
MVA 2.0% 16.3%15.3%20.1%19.5%12.5%10.5%-7.2%-6.0% 3.7% 16.6%12.3%11.9%18.8%-5.1% -24.0 13.3%21.7%0.1% 13.2%18.4%2.4% 0.6% 7.2%
-30.00%
-22.50%
-15.00%
-7.50%
0.00%
7.50%
15.00%
22.50%
30.00%MVA
February 16, 2017 7
SUMMARY OF DEMOGRAPHIC INFORMATION -MISCELLANEOUS
1993 2005 2014 2015
Actives
Counts 499 576 497 510
Average
Age 40 42 44 45
City Service 9 10 13 12
PERSable Wages $40,300 $59,400 $76,200 $77,500
Total PERSable Wages (millions) 20.1 34.2 37.9 39.5
Receiving Payments
Counts
Service 298 493 516
Disablity 38 44 45
Beneficiaries 42 42 44
Total 234 378 579 605
Average Annual City Provided Benefit1
Service $13,700 $28,700 $29,000
Disability 7,200 10,200 10,200
Service Retirements in last 5 years 22,700 36,200 26,900
1 Average City provided pensions are based on City service & City benefit formula, and are not
representative of benefits for long service employees.
February 16, 2017 8
MEMBERS INCLUDED IN VALUATION -MISCELLANEOUS
February 16, 2017 9
PLAN FUNDED STATUS -MISCELLANEOUS
June 30, 2014 June 30, 2015
133,100,000$ Active AAL 138,500,000$
187,600,000 Retiree AAL 196,700,000
23,100,000 Inactive AAL 21,200,000
343,800,000 Total AAL 356,400,000
255,200,000 Market Asset Value 255,200,000
(88,600,000) (Unfunded Liability)(101,200,000)
February 16, 2017 10
FUNDED RATIO -MISCELLANEOUS
6/30/16 & 6/30/17 funded status estimated.
February 16, 2017 11
FUNDED STATUS (MILLIONS)-MISCELLANEOUS
6/30/16 & 6/30/17 funded status estimated.
February 16, 2017 12
CONTRIBUTION RATES -MISCELLANEOUS
96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18
ER Normal Cost 5.1% 5.1% 5.2% 4.3% 4.3% 6.0% 6.4% 6.4% 6.6% 7.2% 7.2% 7.0% 7.9% 7.8% 7.5% 7.7% 7.7% 8.0% 7.8% 8.1% 8.2% 8.2%
Total ER Cont Rate 4.7% 7.2% 3.9% 0.0% 0.0% 0.0% 0.0% 0.0% 4.3% 10.2% 9.1% 8.7% 11.5% 10.2% 10.8% 14.6% 16.4% 17.1% 18.8% 26.8% 27.6% 29.7%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
February 16, 2017 13
CONTRIBUTION PROJECTIONS -MISCELLANEOUS
Market Value Investment Return:
June 30, 2016 0.6%2
June 30, 2017 7.2%3
Future returns based on stochastic analysis using 1,000 trials
Single Year Returns at4 25th Percentile 50th Percentile 75th Percentile
7.0% Investment Mix 0.1% 7.0% 14.8%
6.0% Investment Mix 0.8% 6.0% 11.4%
Assumes investment returns will, generally be 6.5% (as compared to 7.0%)
over the next 10 years and higher beyond that.
No Other: Gains/Losses, Method/Assumption Changes, Benefit Improvements
Excludes Employer Paid Member Contributions (EPMC)
Tier 2 2%@60 effective 11/24/12
New hire assumptions:
Assumes 50% of 2013 new hires will be Classic Tier 2 Members (2%@60) and
50% will be New Members with PEPRA benefits
Assumes Classic Tier 2 Members will decrease from 50% to 0% of new hires
over 20 years
2 Based on CalPERS CAFR
3 June 30, 2017 return based on CalPERS return of 3.9% through 12/31/16 and assumed returns for 6 months.
4 Nth percentile means N percentage of our trials result in returns lower than the indicated rates.
February 16, 2017 14
CONTRIBUTION PROJECTIONS -MISCELLANEOUS
Current Amortization
2014 Base – 17 years level % of pay
2014 Credit – 29 years (ramp up and ramp down)
2015 Loss - 30 years (ramp up and ramp down)
2016 Loss – 30 years (ramp up and ramp down), 1st payment in 2018/19
February 16, 2017 15
CONTRIBUTION PROJECTIONS -MISCELLANEOUS
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%Discount Rate Reduced from 7.5% to 7% over 3 Years
25th Percentile 50th Percentile 75th Percentile
February 16, 2017 16
CONTRIBUTION PROJECTIONS -MISCELLANEOUS
0%
10%
20%
30%
40%
50%
60%Discount Rate Reduced from 7.5% to 7% over 3 Years
25th Percentile 50th Percentile 75th Percentile
February 16, 2017 17
CONTRIBUTION PROJECTIONS -MISCELLANEOUS
27.6%
29.7%30.3%31.2%
32.9%
35.2%
37.2%38.4%39.5%40.0%40.6%41.0%
8.2%8.2%8.6%9.0%9.7%9.5%9.4%9.6%9.5%9.4%9.4%9.3%
19.4%
21.5%21.7%22.2%23.2%
25.7%
27.7%28.9%30.0%30.6%31.3%31.7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28
Discount Rate Reduced from 7.5% to 7% over 3 Years
Total Normal Cost UAL Payment
February 16, 2017 18
CONTRIBUTION PROJECTIONS -MISCELLANEOUS
$0
$5,000
$10,000
$15,000
$20,000
$25,000
16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28
Discount Rate Reduced from 7.5% to 7% over 3 Years
Total Normal Cost UAL Payment
February 16, 2017 19
CONTRIBUTION PROJECTIONS -MISCELLANEOUS
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%Discount Rate Reduced from 7.5% to 7% Immediately
25th Percentile 50th Percentile 75th Percentile
February 16, 2017 20
CONTRIBUTION PROJECTIONS -MISCELLANEOUS
0%
10%
20%
30%
40%
50%
60%Discount Rate Reduced from 7.5% to 7% Immediately
25th Percentile 50th Percentile 75th Percentile
February 16, 2017 21
CONTRIBUTION PROJECTIONS -MISCELLANEOUS
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%Discount Rate Scenarios Comparison
Original 7.5%7% Immediately Reduce to 7% over 3 Years
February 16, 2017 22
CONTRIBUTION PROJECTIONS -MISCELLANEOUS
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%Discount Rate Scenarios Comparison
Original 7.5%7% Immediately Reduce to 7% over 3 Years
February 16, 2017 23
FUNDED STATUS -MISCELLANEOUS
25%
50%
75%
100%
125%
150%
175%
Funded Status
Discount Rate Reduced from 7.5% to 7% over 3 Years
75th Percentile 50th Percentile 25th Percentile
February 16, 2017 24
FUNDED STATUS -MISCELLANEOUS
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February 16, 2017 25
AGENCY COMPARISON -MISCELLANEOUS
0%
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40%
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70%
80%
90%
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Funded Status - Miscellaneous
*All results taken from most recently available CalPERS 6/30/15 valuation reports.
February 16, 2017 26
AGENCY COMPARISON -MISCELLANEOUS
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
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6/30/15 Unfunded Actuarial Accrued Liability as a Percentage of Payroll - Miscellaneous
*All results taken from most recently available CalPERS 6/30/15 valuation reports.*All results taken from most recently available CalPERS 6/30/15 valuation reports.
February 16, 2017 27
AGENCY COMPARISON -MISCELLANEOUS
0%
2%
4%
6%
8%
10%
12%
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Employer Normal Cost Rate - Miscellaneous
*All results taken from most recently available CalPERS 6/30/15 valuation reports.
February 16, 2017 28
AGENCY COMPARISON -MISCELLANEOUS
0%
5%
10%
15%
20%
25%
30%
35%
40%
C
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Total Employer Rate - Miscellaneous
*All results taken from most recently available CalPERS 6/30/15 valuation reports.
February 16, 2017 29
SUMMARY OF DEMOGRAPHIC INFORMATION -SAFETY
1993 2005 2014 2015
Actives
Counts 263 268 269 269
Average
Age 39 40 39 39
City Service 14 13 11 11
PERSable Wages $54,000 $90,700 $111,200 $111,800
Total PERSable Wages (millions) 14.2 24.3 29.9 30.1
Receiving Payments
Counts
Service 153 255 263
Disablity 108 124 126
Beneficiaries 22 31 35
Total 132 283 410 424
Average Annual City Provided Benefit5
Service $13,700 $73,100 $76,500
Disability 7,200 43,800 44,500
Service Retirements in last 5 years 62,300 90,200 93,000
5 Average City provided pensions are based on City service & City benefit formula, and are not
representative of benefits for long service employees.
February 16, 2017 30
MEMBERS INCLUDED IN VALUATION -SAFETY
February 16, 2017 31
PLAN FUNDED STATUS -SAFETY
June 30, 2014 June 30, 2015
120,500,000$ Active AAL 117,600,000$
343,400,000 Retiree AAL 365,500,000
12,100,000 Inactive AAL 8,900,000
476,000,000 Total AAL 492,000,000
312,100,000 Market Asset Value 317,500,000
(163,900,000) (Unfunded Liability)(174,500,000)
February 16, 2017 32
FUNDED RATIO -SAFETY
6/30/16 & 6/30/17 funded status estimated.
February 16, 2017 33
FUNDED STATUS (MILLIONS)-SAFETY
6/30/16 & 6/30/17 funded status estimated.
February 16, 2017 34
CONTRIBUTION RATES -SAFETY
98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18
ER Normal Cost 11.9% 9.3% 11.2% 13.5% 13.9% 15.1% 15.3% 13.9% 14.2% 14.2% 15.0% 15.3% 15.4% 16.5% 16.1% 16.9% 17.5% 17.4% 18.1% 17.9%
Total ER Cont Rate 13.6% 6.3% 5.7% 5.2% 8.7% 17.6% 26.1% 28.1% 25.5% 26.1% 29.7% 28.8% 30.2% 35.0% 35.9% 39.3% 44.5% 60.2% 60.3% 65.6%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
February 16, 2017 35
CONTRIBUTION PROJECTIONS -SAFETY
Market Value Investment Return:
June 30, 2016 0.6%6
June 30, 2017 7.2%7
Future returns based on stochastic analysis using 1,000 trials
Single Year Returns at8 25th Percentile 50th Percentile 75th Percentile
7.0% Investment Mix 0.1% 7.0% 14.8%
6.0% Investment Mix 0.8% 6.0% 11.4%
Assumes investment returns will, generally be 6.5% (as compared to 7.0%)
over the next 10 years and higher beyond that.
No Other: Gains/Losses, Method/Assumption Changes, Benefit Improvements
Excludes Employer Paid Member Contributions (EPMC)
Tier 2 Police 3%@55 and Fire 2%@50 effective 11/24/12
New hire assumptions:
Assumes 50% of 2013 new hires will be Classic Tier 2 Members and 50% will
be New Members with PEPRA benefits
Assumes Classic Tier 2 Members will decrease from 50% to 0% of new hires
over 10 years
6 Based on CalPERS CAFR
7 June 30, 2017 return based on CalPERS return of 3.9% through 12/31/16 and assumed returns for 6 months.
8 Nth percentile means N percentage of our trials result in returns lower than the indicated rates.
February 16, 2017 36
CONTRIBUTION PROJECTIONS -SAFETY
Current Amortization
2014 Base – 17 years level % of pay
2014 Credit – 29 years (ramp up and ramp down)
2015 Loss - 30 years (ramp up and ramp down)
2016 Loss – 30 years (ramp up and ramp down), 1st payment in 2018/19
February 16, 2017 37
CONTRIBUTION PROJECTIONS -SAFETY
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Discount Rate Reduced from 7.5% to 7% over 3 Years
25th Percentile 50th Percentile 75th Percentile
February 16, 2017 38
CONTRIBUTION PROJECTIONS -SAFETY
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%Discount Rate Reduced from 7.5% to 7% over 3 Years
25th Percentile 50th Percentile 75th Percentile
February 16, 2017 39
CONTRIBUTION PROJECTIONS -SAFETY
60.3%
65.6%66.4%67.7%70.3%
74.3%
77.6%79.7%81.4%82.4%83.5%84.0%
18.1%17.9%18.5%19.0%20.2%19.9%19.9%20.1%20.0%19.9%19.7%19.6%
42.2%
47.7%47.9%48.7%50.1%
54.4%
57.8%59.6%61.4%62.5%63.8%64.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28
Discount Rate Reduced from 7.5% to 7% over 3 Years
Total Normal Cost UAL Payment
February 16, 2017 40
CONTRIBUTION PROJECTIONS -SAFETY
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 25/26 26/27 27/28
Discount Rate Reduced from 7.5% to 7% over 3 Years
Total Normal Cost UAL Payment
February 16, 2017 41
CONTRIBUTION PROJECTIONS -SAFETY
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Discount Rate Reduced from 7.5% to 7% Immediately
25th Percentile 50th Percentile 75th Percentile
February 16, 2017 42
CONTRIBUTION PROJECTIONS -SAFETY
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%Discount Rate Reduced from 7.5% to 7% Immediately
25th Percentile 50th Percentile 75th Percentile
February 16, 2017 43
CONTRIBUTION PROJECTIONS -SAFETY
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%Discount Rate Scenarios Comparison
Original 7.5%7% Immediately Reduce to 7% over 3 Years
February 16, 2017 44
CONTRIBUTION PROJECTIONS -SAFETY
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Discount Rate Scenarios Comparison
Original 7.5%7% Immediately Reduce to 7% over 3 Years
February 16, 2017 45
FUNDED STATUS -SAFETY
25%
50%
75%
100%
125%
150%
175%
Funded Status
Discount Rate Reduced from 7.5% to 7% over 3 Years
75th Percentile 50th Percentile 25th Percentile
February 16, 2017 46
FUNDED STATUS -SAFETY
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February 16, 2017 47
AGENCY COMPARISON -SAFETY
0%
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80%
90%
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Funded Status - Safety
*All results taken from most recently available CalPERS 6/30/15 valuation reports.
February 16, 2017 48
AGENCY COMPARISON -SAFETY
0%
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500%
600%
700%
800%
900%
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6/30/15 Unfunded Actuarial Accrued Liability as a Percentage of Payroll - Safety
*All results taken from most recently available CalPERS 6/30/15 valuation reports.
February 16, 2017 49
AGENCY COMPARISON -SAFETY
0%
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Normal Cost Rate - Safety
*All results taken from most recently available CalPERS 6/30/15 valuation reports.
February 16, 2017 50
AGENCY COMPARISON -SAFETY
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g
B
e
a
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h
C
i
t
y
o
f
B
e
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e
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l
y
H
i
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s
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a
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h
Total Employer Rate - Safety
*All results taken from most recently available CalPERS 6/30/15 valuation reports.
February 16, 2017 51
PEPRA
Target of 50% of total normal cost for everyone
New members must pay greater of 50% of total normal cost or bargained
amount if higher
Employer cannot pay any part of new member required employee contributions
Employer may impose Classic employees pay 50% of total normal cost (limited
to 8% Miscellaneous, 12% Safety) if not agreed through collective bargaining
by 1/1/18
Miscellaneous Plan:
Classic Members New Members
Tier 1
2.5%@55 FAE1
Tier 2
2%@60 FAE3
PEPRA
2%@62 FAE3
Employer Normal Cost 8.6% 5.8% 5.58%
Member Normal Cost 8.0% 7.0% 5.50%
Total Normal Cost 16.6% 12.8% 11.08%
50% Target 8.3% 6.4% 5.54%
February 16, 2017 52
PEPRA
Safety Plan:
Classic Members
New
Members
Tier 1
3%@50
FAE1
Tier 2 Police
3%@55
FAE3
Tier 2 Fire
2%@50
FAE3
PEPRA
2.7%@57
FAE3
Employer Normal Cost 18.6% 15.8% 14.2% 10.68%
Member Normal Cost 9.0% 9.0% 9.0% 10.50%
Total Normal Cost 27.6% 24.8% 23.2% 21.18%
50% Target 13.8% 12.4% 11.6% 10.59%
February 16, 2017 53
PAYING DOWN THE UNFUNDED LIABILITY
Pension Obligation Bond (POB)
Interest arbitrage between expected CalPERS earnings and rate paid on
POB
Not guaranteed
Borrow from General Fund
Pay GF back like a loan
Payments come from all funds
One time payments
City resolution to use portion of one time money
Internal Service Fund
Restricted investments
Likely low (0.5% - 1.0%) investment returns
Short term/high quality
Designed for preservation of principal
Assets could be used by Council for other purposes
February 16, 2017 54
PAYING DOWN THE UNFUNDED LIABILITY
Approximate Years to Attain Funded Percent
80% 90% 100%
Miscellaneous 12 17 23
Safety 14 18 24
Ad-hoc payments applied to all amortization bases will not shorten
amortization period but will reduce contribution
Only ways to shorten period are:
Request shorter amortization period of CalPERS
Higher short term payments
Less interest and lower long term payments
Make ad-hoc payment that targets specific bases with longer amortization
periods
Modestly lower (short & long term) payments
Less interest
February 16, 2017 55
IRREVOCABLE SUPPLEMENTAL (§115) PENSION TRUST
> 50 trusts established
PARS & PFM
Investments significantly less restricted than City investment funds
Designed for long term returns
Likely much higher (5% - 7%) investment return
Assets could not be used by Council for other purposes
Can only be used to
Reimburse City for CalPERS contributions
Make payments directly to CalPERS
Reasons agencies have established:
Mitigate Rate Volatility
Mitigate impact of Normal Cost minimum contribution
Pay down Unfunded Liability
Not as compelling
February 16, 2017 56
IRREVOCABLE SUPPLEMENTAL (§115) PENSION TRUST
GASB will almost certainly weigh in on certain accounting issues
Can Supplemental Pension Trust assets be included in Fiduciary Net
Position?
If assets can be included would inclusion impact discount rate?
Parameters:
Initial seed money?
Additional amount contributed in future years?
Target budget rate?
Year target budget rate kicks in?
Before or after CalPERS rate exceeds budgeted rate?
February 16, 2017 57
IRREVOCABLE SUPPLEMENTAL (§115) PENSION TRUST
February 16, 2017 58
IRREVOCABLE SUPPLEMENTAL (§115) PENSION TRUST
1 Last Updated 2/15/2017
Start Start
Est. Project Date Date
Priority Projects Cost (Design)(Construction)
8 FS 5 - CDM (& Library)5,125,000 2016 2017
9 FS 6 - Mariners (apparatus bay only)1,230,000 2016 2017
5 FS 2 - Lido (FS and Parking Structure)5,253,125 2017 2018
25 Sunset View Park w/Ped Bridges & Dog Park 5,979,031 2016 2018
3 FS 1 - Peninsula (& Library)7,074,130 2020 2022
6 FS 3 - Santa Barbara 9,990,904 2022 2025
29 Bonita Creek - Artificial Turf 2,497,726 2025 2025
33 Community Youth Center (CYC) - Grant Howald 4,392,578 2029 2032
34 Caroll Beek Center 1,360,517 2030 2033
1 2 ********
Total 42,903,011
3 4
Key Metric Target Max
Debt Svc as % of Revenues NA < 8.0%
Minimum FFP Reserve Balance (000's)$8,165 NA
Key Statistics Min Max Avg
GF Contribution to FFP (000's)$8,000 $8,500 $8,500
Debt Service (000's)$7,533 $8,165 $7,757
GF Contributions to FFP as % Rev 2.71%4.1%3.4%
Debt Svc as % of Revenues 2.40%3.9%3.1%
5 6 FFP Balance (000's)$21,574 $68,047 $44,349
Key Statistics Min Max Avg
GF Contribution to FFP (000's)$8,500 $8,500 $8,500
Debt Service (000's)$0 $8,165 $6,355
GF Contributions to FFP as % Rev 1.86%4.1%2.8%
Debt Svc as % of Revenues 0.00%3.9%2.2%
FFP Reserve Balance (000's)$22,464 $71,735 $36,896
7 8
Remaining Debt Capacity (Dbt. Svc < or = 8% of GF Rev):129.3$ Million
CITY OF NEWPORT BEACH FACILITIES FINANCIAL PLANNING DASHBOARD
30 Year
Council Debt Mgmt Policy (F-6)
15 Year
0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%10.00%
20
1
5
20
1
7
20
1
9
20
2
1
20
2
3
20
2
5
20
2
7
20
2
9
20
3
1
20
3
3
20
3
5
20
3
7
20
3
9
20
4
1
20
4
3
20
4
5
GF Contribution to FFP
as a Percent of GF Revenue
GF Contribution % Budget Debt Service - as % of Revenues
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
20
1
5
20
1
7
20
1
9
20
2
1
20
2
3
20
2
5
20
2
7
20
2
9
20
3
1
20
3
3
20
3
5
20
3
7
20
3
9
20
4
1
20
4
3
20
4
5
GF Contribution to FFP Compared
to Debt Service
GF Contribution to FFP Debt Service
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
20
1
5
20
1
7
20
1
9
20
2
1
20
2
3
20
2
5
20
2
7
20
2
9
20
3
1
20
3
3
20
3
5
20
3
7
20
3
9
20
4
1
20
4
3
20
4
5
FFP Reserve Balance
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
20
1
5
20
1
7
20
1
9
20
2
1
20
2
3
20
2
5
20
2
7
20
2
9
20
3
1
20
3
3
20
3
5
20
3
7
20
3
9
20
4
1
20
4
3
20
4
5
Project Funding
Cash Funded Construction Debt Funded Construction
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
20
1
5
20
1
7
20
1
9
20
2
1
20
2
3
20
2
5
20
2
7
20
2
9
20
3
1
20
3
3
20
3
5
20
3
7
20
3
9
20
4
1
20
4
3
20
4
5
Project Expenditures
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
20
1
5
20
1
7
20
1
9
20
2
1
20
2
3
20
2
5
20
2
7
20
2
9
20
3
1
20
3
3
20
3
5
20
3
7
20
3
9
20
4
1
20
4
3
20
4
5
Debt Service Capacity
Max Debt Service - 8% of Revenues Debt Service
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
20
1
5
20
1
7
20
1
9
20
2
1
20
2
3
20
2
5
20
2
7
20
2
9
20
3
1
20
3
3
20
3
5
20
3
7
20
3
9
20
4
1
20
4
3
20
4
5
Debt Service as % of GF Revenues
Debt Service - as % of Revenues
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
2015 2016 2017 2018 2019
Annual GF Contributions
Periodic GF or One-time Transfers
Private Contributions
Interest Earnings
Cash Contributions
Project Total Interest
Debt Service Description Year Proceeds COI Issue Rate Term Maturity
2010 Civic Center COPs 2011 123,000,000 1,289,442 124,289,442 4.4% 30 2041
Traunch 2 0 - - - 5.0% 30 30
Traunch 3 0 - - - 5.0% 30 30
GF contributions equal to $8.5m/year (level dollar)
GF contributions equal to 3% of annual General Fund revenue
GF contributions equal to 5% of annual General Fund revenue
GF contributions equal to annual discretionary transfers
1 of 5
2/15/2017
Active Projects
YR Repl Est $Current Age:Useful Years to Cost Est.Project FY Design Start FY Const Start FV Cost Est @ Private Net Proposed
Function Project Built Sq Ft /Sq Ft 2016 Life Start Date Estimate Year Year 2.5% Growth Contribtions Cost
Gen Gov Civic Center 2013 100,000 675 3 60 57 Jun-13 67,500,000 2070 2073 - -
Gen Gov Council Chambers 2013 29,000 675 3 60 57 Jun-13 19,575,000 2070 2073 - -
Gen Gov Civic Center Parking Structure 2013 450 16,000 3 60 57 Jun-13 7,200,000 2070 2073 - -
Police Police Station at Corporate Yard 1973 60,000 800 43 50 19 N/A 48,000,000 2032 2035 76,735,209 76,735,209
Municipal Operations Big Canyon Aux. Yard 2015 9,000 575 1 50 51 May-12 - 2062 2065 -
Fire FS 2 - Land Purchase **- 2017 2017 - -
Fire FS 1 - Peninsula (& Library)1962 5,000 800 54 50 6 Mar-14 6,100,000 2020 2022 7,074,130 7,074,130
Fire FS 2 - Lido (FS and Parking Structure)1952 10,000 800 64 50 2 Mar-14 5,000,000 2017 2018 5,253,125 5,253,125
Fire FS 3 - Santa Barbara 1971 10,000 800 45 50 9 Mar-14 8,000,000 2022 2025 9,990,904 9,990,904
Fire FS 4 - Balboa Island 1994 4,400 800 22 50 28 Mar-14 3,520,000 2041 2044 7,027,662 7,027,662
Fire FS 5 - CDM (& Library)1950 6,000 800 66 50 1 Mar-14 5,000,000 2016 2017 5,125,000 5,125,000
Fire FS 6 - Mariners (apparatus bay only)1957 1,500 675 59 50 1 Mar-14 1,200,000 2016 2017 1,230,000 1,230,000
Fire FS 6 - Mariners (Living Area Rebuild)1957 3,000 800 59 9 2024 2025 - -
Fire FS 7 - SAH 2007 6,500 800 9 50 41 Mar-14 5,200,000 2054 2057 14,311,390 14,311,390
Fire FS 8 - Npt. Coast 1995 11,027 800 21 50 29 Mar-14 8,821,600 2042 2045 18,052,587 18,052,587
Fire Lifeguard HQ Replacement 5,500 800 **25 24 Mar-14 4,400,000 2038 2040 7,958,394 7,958,394
Fire Newport Jr. Guard Building 0 2,225 575 **3 2,000,000 2018 2019 2,153,781 2,153,781 -
Library Library-Balboa (Construct w/ FS-1)1962 3,000 700 54 50 46 Jan-12 - 2059 2062 - -
Library Library-CDM (Construct w/ FS-5)1958 3,800 700 58 50 46 Jan-12 - 2059 2062 - -
Library Library-Mariners 2006 15,305 575 10 50 40 Jan-12 - 2053 2056 - -
Library Library-Central 1997 65,000 575 19 50 36 Jan-12 37,375,000 2049 2052 90,916,007 90,916,007
Rec Facility Marina Park 2015 22,000 575 1 50 49 Jan-12 12,650,000 2062 2065 42,418,952 42,418,952
Rec Facility Newport Coast Ctr 2007 16,865 575 9 50 41 Jan-12 9,697,375 2054 2057 26,689,023 26,689,023
Rec Facility Newport Theatre Arts Center 1973 12,000 575 43 50 14 Jan-12 6,900,000 2027 2030 9,749,519 4,874,760 4,874,760
Rec Facility OASIS Sr. Ctr 2010 43,232 575 6 60 44 Jan-12 24,858,400 2057 2060 73,675,527 73,675,527
Rec Facility Sunset View Park w/Ped Bridges & Dog Park 0 NA **∞2 Mar-14 10,450,000 2016 2018 10,979,031 5,000,000 5,979,031
Rec Facility Bonita Creek - Artificial Turf 2015 NA 8 1 10 9 Jan-12 2,000,000 2025 2025 2,497,726 2,497,726
Rec Facility Community Youth Center (CYC) - Grant Howald 1988 5,146 575 28 50 16 Jan-12 2,958,950 2029 2032 4,392,578 4,392,578
Rec Facility Caroll Beek Center 1980 1,555 575 36 50 17 Jan-12 894,125 2030 2033 1,360,517 1,360,517
Rec Facility Bonita Creek Community Ctr.1988 2,876 575 28 50 22 Jan-12 1,653,700 2035 2038 2,846,963 2,846,963
Rec Facility Cliff Drive Community Room 1960 750 575 56 50 20 Jan-12 431,250 2033 2036 706,653 706,653
Rec Facility Girls & Boys Club (East Bluff Park)1965 11,800 575 51 50 6 Jan-12 6,785,000 2020 2022 7,868,520 7,868,520 -
Rec Facility Lawn Bowling Facility (San Joaquin Hills Park)1974 2,750 575 42 50 23 Mar-14 1,581,250 2036 2039 2,790,291 2,790,291
309,751,650 431,803,489 19,897,061 411,906,429
FFP Project Planning
2 of 5
Item No. 5C1
Review of Facilities Financing Program
Additional Materials Received
February 16, 2017
12
3
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5
6
7
8
9
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2022 2023 2024 2025 2026
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247,386,973 254,808,582 262,452,840 270,326,425
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3 of 5
Avg 0 0 0 0 0 0 1 2 3 4 5 6 7 8 9 10 11
Debt 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Project Total Interest Service
Debt Service Description Year Proceeds COI Issue Rate Term Maturity (Net)
2010 Civic Center COPs 2011 123,000,000 1,289,442 124,289,442 4.4%30 2041 (7,710,107) - (682,755) (8,165,374) (6,740,633) (9,389,091) (8,194,455) (8,175,115) (8,162,614) (8,165,249) (8,153,810) (8,138,841) (7,688,278) (7,676,638) (7,665,428) (7,649,308) (7,610,933) (7,603,024)
Traunch 2 0 - - - 5.0%30 30 - - - - - - - - - - - - - - - - - -
Traunch 3 0 - - - 5.0%30 30 - - - - - - - - - - - - - - - - -
Traunch 4 0 - - - 5.0%30 30 - - - - - - - - - - - - - - - - - -
Traunch 5 0 - - - 5.0%30 30 - - - - - - - - - - - - - - - - - -
Traunch 6 0 - - - 5.0%30 30 - - - - - - - - - - - - - - - - - -
Traunch 7 0 - - - 5.0%30 30 - - - - - - - - - - - - - - - - - -
Traunch 8 0 - - - 5.0%30 30 - - - - - - - - - - - - - - - - - -
Traunch 9 0 - - - 5.0%30 30 - - - - - - - - - - - - - - - - - -
Traunch 10 0 - - - 5.0%30 30 - - - - - - - - - - - - - - - - - -
TOTAL DEBT (7,710,107) - (682,755) (8,165,374) (6,740,633) (9,389,091) (8,194,455) (8,175,115) (8,162,614) (8,165,249) (8,153,810) (8,138,841) (7,688,278) (7,676,638) (7,665,428) (7,649,308) (7,610,933) (7,603,024)
DEBT SERVICE
4 of 5
DEVELOPMENT AGREEMENTS AND PRIVATE CONTRIBUTIONS General TOTAL 1 2 3 4 5 6 7 8 9 10
Public Park Public Arts FFP Amount 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Agreement REF Description Trigger Benefit Benefit & Culture BENEFIT Total Paid
Hoag OASIS Pledge May 12, 2009 Pledge Letter Payment Schedule 500,000 - - 500,000 500,000 500,000
Hoag OASIS Pledge May 12, 2009 Pledge Letter Payment Schedule 500,000 - - 500,000 500,000 500,000
Hoag OASIS Pledge May 12, 2009 Pledge Letter Payment Schedule 1,500,000 - - 1,500,000 1,500,000 1,500,000
2,500,000 - - 2,500,000 2,500,000 2,500,000
Friends of Oasis Pledge Oasis Construction Restricted for Oasis Only 2,000,000 - - 2,000,000 2,000,000 2,000,000
North Newport Center 4.1 In Lieu Park Fees Paid within 5 Days of Award of OASIS Contract - 5,600,000 5,600,000 5,600,000 5,600,000
North Newport Center 4.1 In Lieu Park Fees 430 $$26,046.51 Milestone Pmts - 5,600,000 5,600,000 5,600,000 5,600,000
North Newport Center T2 4.1 94 Units x $26,046.51 Milestone Pmts 2,448,372 2,448,372 2,448,372 2,448,372 - -
North Newport Center 4.2 1 Issuance of First Building Permit 13,545,000 - 13,545,000 13,545,000 13,545,000
North Newport Center 4.2 Public Benefit Fee - 430 Units @ $31,500 Issuance of remaining 430 Residential Building Permits 13,545,000 - (270,900) 13,274,100 13,274,100 13,545,000
North Newport Center T2 Amended Agrmt Public Benefit Fee - 94 Units @ $63,000 Issuance of 431 st permit - 524 th permit 5,922,000 (118,440) 5,803,560 5,803,560 5,922,000
North Newport Center 4.4 Street Widening and Traffic Signals Within 30 Days of Reimbursement Request - - 2,500,000 -
North Newport Center Amended Agrmt Bayside Drive Walkway Connection Within 90 Days of written notice after award of contract 200,000 200,000 200,000 200,000
33,212,000 13,648,372 (389,340) 46,471,032 48,971,032 48,971,032
The Dart Development (24 units)(PA2012-146) - 600,875 600,875 600,875 52,250 600,875
Newport Bay Marina (27 units) (PA2001-210)- 186,147 186,147 186,147 186,147
Via Lido Mixed Use(2 units) (PA2010-081)- 104,500 104,500 104,500 104,500
2218 Channel Rd.Abell John & Helou Carol - 26,125 26,125 26,125 26,125
Plaza CDM (6 Units) (PA2010-061) - 156,750 156,750 156,750 156,750
214 Narcissus (1 Units) (PA2011-192)- - -
604 Acacia Ave (PA2012-005) - 26,125 26,125 26,125 26,125
610 Larkspur LLC (NP2013-003)- 26,125 26,125 26,125 26,125
819 W. Balboa NP2012-010 26,125 26,125 26,125 26,125
416 Orchid Ave.- 26,125 26,125 26,125 26,125
Cohen Galina - 309 Goldenrod - 26,125 26,125 26,125 26,125
112 30th St. MW (PA2015-149)26,125 26,125 26,125 26,125
1560 Placentia (PA2014-110)209,000 209,000 209,000 209,000
421 29th St (PA2015-174)52,250 52,250 52,250 - 52,250
3238 Clay (PA2015-114)26,125 26,125 26,125 26,125
128 29th St (PA2007-067)26,125 26,125 26,125 26,125
710 Goldenrod Ave (PA2016-036)26,125 26,125 26,125 26,125
612 Acacia Ave (PA2015-177)26,125 26,125 26,125 26,125 26,125
3125 Bayside Dr (PA2011-007)26,125 26,125 26,125 26,125
715 Heliotrope (PA2014-144)26,125 26,125 26,125 26,125
716 Larkspur (PA2014-068)26,125 26,125 26,125 26,125
422 Heliotrope (PA2015-071)26,125 26,125 26,125 26,125
715 Marigold (PA2015-046)26,125 26,125 26,125 26,125
404 Heliotrope (PA2015-081)26,125 26,125 26,125 26,125
429 Larkspur (PA2015-170)26,125 26,125 26,125 26,125 26,125
Friend of the Oasis 35,000 35,000 35,000
35,000 1,779,772 - 1,814,772 1,814,772
Hoag DA # 5 8.2 Semeniuk Slough Study $200K Fee Eliminated with with DA amendment in 2008 - - - - - -
Hoag DA # 5 8.2 Reimb City related to Superior Ave Medians Completion of Project Expenditures - - - - 1,500,000 1,500,000
Hoag DA # 5 8.2 Public Benefit (Park or Pub Safety)Paid June 2009 Xfred to Facilities Reserve 1,500,000 - - 1,500,000 1,500,000 1,500,000
Hoag DA # 5 8.4 Sunset View Park, Shrub & Groundcover Pending Improvements - 150,000 - 150,000 150,000 150,000
1,500,000 150,000 - 1,650,000 3,150,000 3,150,000
Santa Barbara Condos - - -
Santa Barbara Condos Section 3.3 of MOA Unrestricted Public Benefit Concurrent with Certificate of Occupancy 1,645,566 - (32,911) 1,612,655 1,612,655
Santa Barbara Condos Section 3.3 of MOA Unrestricted Public Benefit Concurrent with Certificate of Occupancy 3,354,434 - (67,089) 3,287,345 3,287,345
Santa Barbara Condos (NP2005-014)Section 3.2 of MOA 79 Units x $26,046.51 Fee due at building permit issue 2,061,834 - 2,061,834 2,061,834 2,061,834
5,000,000 2,061,834 (100,000) 6,961,834 6,961,834
Banning Ranch Section 3.1 1375 x 30,909 x 80% (Haircut Assumption)Each Building Permit 27,663,555 - - 27,663,555 27,663,555
Uptown Newport $32,500/Unit - 1,244 Units - - - -
Phase I - 680 Units a) 455 b) 225 PRIOR TO EACH BUILDING PERMIT 22,100,000 (442,000) 21,658,000 22,624,665 14,787,500 6,500,000
Phase II - 564 Units PRIOR TO EACH BUILDING PERMIT 18,330,000 (366,600) 17,963,400 18,594,856 18,594,856
PA2011-134 In Lieu Park Fees - Phase I PRIOR TO EACH BUILDING PERMIT-Less Park Credits - 10,143,361 10,143,361 10,143,361 3,700,000 2,000,000
In Lieu Park Fees - Phase II PRIOR TO EACH BUILDING PERMIT-Less Park Credits - 10,550,389 10,550,389 10,550,389 10,550,389
40,430,000 20,693,750 (808,600) 60,315,150 61,913,271
NB Country Club 3.1 54,819 x 10.00 Golf Club Clubhouse Issuance of First Building Permits 562,196 - (11,244) 550,952 550,952
Dunes Settlement Section C(e)Restaurant on Parcel B2 Issuance of Building Permit 50,000 - (1,000) 49,000 49,000 49,000
Dunes Settlement Section C(f)Family Inn Issuance of Building Permit 100,000 - (2,000) 98,000 98,000 98,000
Dunes Settlement Section C(g)Family Inn Prior to Occupancy 410,402 - (8,208) 402,194 402,194 402,194
560,402 - (11,208) 549,194 549,194
Golf Reality Fund (GRF)3.1 Tennis Club Reconstruction 3,725 x $10.00 Issuance of Building Permit 37,250 (745) 36,505 36,505 36,505
Golf Reality Fund (GRF)3.1 Single Family Homes $5 x $93,000 Single Family Homes 465,000 (9,300) 455,700 455,700 455,700
502,250 - (10,045) 492,205 492,205
Land Re Use Decisions
Monrovia Property Sale Actual 5,639,096 5,639,096 5,639,096
Lido House Hotel Lease Lease Ground Lease > of Base Rent or Percent Rents - - 75,000 150,000 250,000 328,303 338,152 348,868 358,746 369,488 380,594
Police Facility Concord Estimated Annual Financial Benefit Not Used 1,706,000 1,706,000 1,706,000
West Newport Gym - Lease Lease Ground Lease 289,055 289,055 289,055 203,936 208,015 212,175 216,419 286,971 292,710 298,565 304,536 310,627 316,839
1,995,055 - - 7,634,151 7,634,151
TOTAL 115,960,458 38,333,728 (1,330,437) 158,602,845 164,200,966 4,766,061 2,775,220 15,349,675 7,515,612 615,274 630,863 647,433 663,282 680,115 29,842,678
Paid Status
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