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Home My WebLink About2008-12-16; City Council; 19680; Annual Report of Investment PortfolioCITY OF CARLSBAD - AGENDA BILL 17 AB# 19,680 RflT/"*IVI 1 \si. 19/16/08 DEPT. Treasury ANNUAL REPORT OF INVESTMENT PORTFOLIO C/*^D \/c A D chmcrt n IMC OA OAAQrUK YbAK cNDcU JUNb oU, 2UUo DEPT. HEAD ^/^f CITYATTY. * '<<-<&* CITYMGR. (js-^ RECOMMENDED ACTION: Accept and file report. ITEM EXPLANATION: City Policy requires the City Treasurer to render an annual report of the City's investment portfolio. This report is for the fiscal year ended June 30, 2008 (FY 07-08). Assets in the investment portfolio totaled $562.4 million at the end of the fiscal year. The equity portion of the various funds at the amortized value of the total portfolio is summarized below: Fund Equity in Pooled Investments Cash Balance by Fund: General Special Revenue Debt Service Capital Projects Enterprise Internal Service Agency Funds Reconciling Adjustments Total Treasurer's Investment Portfolio at Amortized Cost 69,230,421 41,430,902 3,616,349 275,328,338 127,689,433 23,731,507 25,712,393 (4,345,433) 562,393,910 Fund equity balances are restricted for various purposes as listed above. This represents an increase of $5 million from the previous fiscal year. Cash and investments comprise an estimated 34% of the total assets reported by the City and its agencies. It is estimated that the investment portfolio will increase to $567 million by the end of FY08-09. For the last month of the fiscal year, the portfolio had a return of 4.03%. For the entire fiscal year, however, the portfolio averaged 4.45%. Cash interest income totaled $26.04 million in FY07-08 of which approximately $2.8 million went to the General fund. For the next fiscal year (FY08-09), it is expected that the average return for the portfolio will approximate 3.85%. EXHIBITS: 1. City Treasurer's Annual Report of Investment Portfolio for the fiscal year ended June 30, 2008. FOR CITY CLERKS USE ONLY. COUNCIL ACTION: APPROVED DENIED CONTINUED WITHDRAWN AMENDED n nn D n CONTINUED TO DATE SPECIFIC D CONTINUED TO DATE UNKNOWN D RETURNED TO STAFF D OTHER -SEE MINUTES D Council received the report. DEPARTMENT CONTACT: Nancy Sullivan 760-602-2473 nsull@ci.carlsbad.ca.us < ,^iS8w *ll 6/30/08 •-••-' _ (FY 07-08) City Treasurer's Annual Report of Investments For Fiscal Year Ended June 30, 2008 TABLE OF CONTENTS Page Letter of Transmittal 1 Market Review FY 07-08 2 Portfolio Analysis 3 Preview FY 08-09 7 Appendices: A: Risk Management and Disclosure 9 B: Portfolio Activities for Year Ended June 30, 2008 12 1635 Faraday Avenue, Carlsbad, CA 92008 Website: www. ci. carls bad, ca. us Prepared by the Treasury Department City of Carlsbad Office of the Treasurer November 2008 Honorable Mayor, City Council, And Citizens of the City of Carlsbad City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008 City Treasurer Letter of Transmittal 2007-2008 Annual Report of Investments I am pleased to present the Annual Report of Investments for the City of Carlsbad for the fiscal year ended June 30, 2008 (FY 07-08). The report is intended to provide reliable information as a basis for reviewing portfolio performance and making management decisions. It also provides an archival reference. The City Treasurer is charged with the design of an effective cash management and investment program for the City of Carlsbad and all of its agencies. Among other activities, this includes arranging for banking services; forecasting all cash receipts and expenditures; investing all inactive cash; managing investment risk exposures; and reporting all investment activities. This report summarizes and analyzes the activities of the investment portfolio for FY 07-08. Total portfolio assets, investment portfolio relative to total city assets, source of portfolio assets, asset allocations, yield achieved, unrealized gains and losses, and cash revenues are presented. To give perspectives to these measurements, a summary of movements in global and U.S. economic, as well as market interest rates are provided for the fiscal year ended June 30, 2008. Comparisons are also made with the preceding fiscal years. Finally, a statement is offered regarding the prospects for the fiscal year 2008-2009 commejicing July 1, 2008. Harold (Mac) McSherry City Treasurer 1 1635 Faraday Avenue • Carlsbad, CA 92008-7314 • (76O) 6O2-2473 • FAX (760) 602-8556 www.ci.carlsbad.ca.us CITY TREASURER ANNUAL REPORT OF INVESTMENT PORTFOLIO FOR THE FISCAL YEAR ENDED JUNE 30, 2008 FY07-08 MARKET REVIEW Fe 5.50% n 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% ^ ( deral Funds Target Rate FY 07-08 5.25% I 4.75%I . 4.50% ' <T 4.25% I 3.50% f 3.00% 2 25%* 200% 2 00% p\**v ^ ^ ^ ^ft^ ^ ^ tfp^ Federal funds rate is a key money market rate that correlates with rates of other short term credit arrangements. It is the interest rate that banks charge each other for overnight loans. In fiscal year 07-08, the Federal Reserve reduced the federal funds rate from 5.25% to 2.00%. Changes in short-term market interest rates are usually affected by the actions of the Federal Reserve. Six- month, two year, and five year market rates decreased substantially over the course of the fiscal year. SHORT-TERM IN U.S. Treasury I Percent | FiscalYear 4.50 4 .uu .uu 2.50 1 *tft TEREST Instruments 2007 - 2008 RATE S ^h"^».^i_- ^^ .00 i i i JUL AUG SEP OCT 1 1 JUL AUG—•—Five Year 7—--Two Year *— *— 6 Month .56 4.24 .52 4.13 .97 4.20 ^= NOV SEP 4.23 4.00 4.14 "^^ ^ <*^^ ^-*\ S.9 ***^ DEC JAN FEB OCTNOV DEC JAN 4.17 3.38 3.44 3.95 3.00 3.05 4.07 3.35 3.39 2.76 2.09 2.05 — r =»*«•.^^ MAR FEB M 2.47 1.62 1.82 2 1 1 .-^ ^ ]__^ V X X ^ > APR MAY JUN AR APR MAY JUN 44 3.01 2.32 58 2.25 1.31 48 1.62 1.10 3.33 2.62 2.15 YIELD CURVE 7/01/07, 12/31/07, 6/30/08 6 -i 5.5 - 5 , 4.5 4 - 3.5 3 2.5 - 1.5 - 1 Maiket Rates 1 . . » »f *. ... „. , » - .". " _ ----- 3 M th 2 Y r 3 Mth 2 Yr -"-07/01/2007 4864 -A-12/31/2007 3237 • *• 06/30/2008 4.841 3.047 O R-f C - " -- 5Yr 4.889 3.440 •3 OO7 - __ -^.-r"-* •»r** " :. 5Yr 10 Yr 10 Yr 4.989 4.023 Q OCO The yield curve is a graphic presentation of the difference between short- term and longer-term interest rates of U.S. Treasury instruments on a given day. Financial analysts use it to assess the market's expectation of recession or inflation. The normal shape of the yield curve has a moderately upward slope, with short- term rates lower than longer- term rates. If the upward slope steepens, the financial markets believe inflation may occur. An inverted yield curve is when short-term market rates are greater than longer-term market rates. An inverted curve indicates that the financial markets expect a slower economy, if not a recession. As of 06/30/2008 the yield curve shows a relatively moderate upward slope. PORTFOLIO ANALYSIS INVESTMENT PORTFOLIO Dollar Amount of Assets (Fiscal Year End) I Millions I $600.0 r $556.5 $51 2.6 * 516,9$550.0 $500.0 $450.0 $400.0 $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 562.9 $472,6 FY03-04 FY04-05 FY05-06 FY06-07 FY07-08 Total assets in the investment portfolio stood at $562.9 million at the end of the fiscal year 07-08, a $6.4 million increase. This increase includes but is not limited to interest earned, loan proceeds, and revenues in excess of expenses. CASH & INVESTMENTS RELATIVE TO TOTAL ASSETS OF CITY AND ITS AGENCIES* $ Mill ions FY03-04 FY04-05 FY05-06 FY06-07 FY07-08 Unaudited FY08-09 Estimate [Cash/Investments QTotal Assets CompiL-ln;Note ToialAswlsofCtty and Is unl lur KYSIIH & <i The City publishes a Comprehensive Annual Financial Report (CAFR) at the end of each fiscal year. Among other information, CAFR presents a balance sheet showing the total assets owned by the City and all its agencies. At the end of FY 07-08, cash and investments managed by the City Treasurer represent 31.5% of all assets reported by the City and its agencies. (Dollar Amounts in Millions) 6/30/07 General $75. Special & Other $39.6 $48.7 Agency & Enterpris General $ 69. 6/30/O8 Special & Other $ 65.O Capital $ 25 7 246.7Agency &"l Enterprise$ -127.7 Capital $275 Total Investments - $557.1 Million Total Investments - $562.4 Ivlillioii The portfolio is an internal investment pool that uses the inactive cash from the various funds of all City agencies, including the City, the Water District, and the Redevelopment Agency. The top three sources of portfolio assets are the Capital Projects fund ($275 million, 49% of the total), followed by the Enterprise fund ($127.7 million, 23% of the total), and the General fund ($69 million, 12% of the total). Together, these three funds account for 84% of total portfolio assets. Investments are made in financial instruments authorized by the City's Investment Policy and the California State Government Code. With the exception of bank deposits and deposits in the California State Local Agency Investment Fund (LAIF), all investments are in fixed-income instruments with known maturity dates. ASSET ALLOCATION (Dollar Amounts in Millions) 6/30/07 LAIF.CASH$44.0 6/30/08 CORPORATE LAIF/CASH FEDERAL $402.7 At the end of FY 07-08 (June 30, 2008), 72% of portfolio assets were invested in federal agencies, 15% in corporate notes, and 13% in LAIF and cash. The allocation of assets to federal agencies decreased, while the allocation to corporate notes, cash and LAIF increased from the previous fiscal year. Within the asset category of federal agencies, investments in the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Federal Farm Credit Bank, constituted 33%, 20%, 12%, and 5% of the total, respectively. Federal agencies are creations of the U. S. Congress and include agencies and government-sponsored enterprises. Total $556,524,708 Total $562,862,745 CLA IF/CASH •Corporate d Federal A gency PORTFOLIO YIELDS I PerccnD With 6 Month T-Bill Yields FY03-04 FYD4-05 FY05-06 FY06-07 FYD7-08 FY03-04 FY04-OS FY05-06 FY06-07 FY07-08 3.43 3.55 3.98 4.37 4.45 1.11 2.59 4.45 5.06 2.86 The average return of the portfolio for FY 07-08 increased to 4.45% from 4.37% the year before. The portfolio yield is heavily influenced by changes in short-term market interest rates since approximately 22% of total investments were required to mature within one year. The average interest rate for six- month U.S. Treasury Bills decreased to 2.86% from 5.06% the previous year. This graph shows the percent change in value of the portfolio over the last several years. Investments gain and lose value subsequent to purchase because of changes in market interest rates. When market interest rates decrease, investments made earlier at higher rates will gain value. The reverse is true when market interest rates increase. Accountants refer to these changes in value as unrealized gains and unrealized losses; newspapers report them as paper gains and paper losses. The gain/loss is not recognized until the investment is sold. Changes in value caused by changes in market interest rates are normal and are expected. Historical Unrealized Gains/Losses as Percent of Amortized Cost July 2OO4 — June 2OO8 2 000% ~ -1.5OO% " — Unreal G/L %|^~=* / \, / \S^\ / v- ^v \S VA. ^S^-S v_X N-. — ~~^^^ / ^~^f Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- 04 O4 OS OS OS OS O6 O6 O6 Oct- Jan- Apr- Jul- Oct- Jan- O6 O7 O7 O7 07 08 Apr- OS With a buy and hold policy, an objective of the City's Investment Policy is to achieve an average market rate of return over the economic cycle. The success in achieving this objective can be approximated with having unrealized gains and losses that are relatively equal over time. Tracking and measuring unrealized gains and losses could also reveal any presence of high-risk investments in the portfolio. The changes in asset values shown in the graph indicate that portfolio investments are within the acceptable interest rate risk identified in the City's Investment Policy. The total portfolio had virtually no unrealized gain or loss on June 30, 2008. An unrealized gain of approximately 2% occurred in March 2008, but due to sharp increases in called bonds and lower interest rates, the gain decreased. It is likely that a downward trend will occur in FY 08-09 as investments with higher interest rates are called and reinvested at today's lower market rates. <\ Cash income from portfolio investments represents an annuity stream of revenues from the Treasury. This annuity stream totaled $26.04 million, an increase of approximately $4.3 million from the previous fiscal year. Of the total cash interest revenues earned by the portfolio in FY 07-08, over $2.8 million was credited to the General Fund. Cash income is a function of assets in the portfolio, the market interest rates at the time of the investments, and the interest payment schedules of the issues. ANNUITY STREAM FROM TREASURY (Cash Interest Revenue) For Fiscal Years Indicated S26M FVOM4 FVVMtS FYOS06 FV06-07 FWMW FY 08-09 PREVIEW/ FORECAST National and international economic forces are the primary influences on market interest rates. Global Economy The global economy will experience a very sharp decline. International trade will be negatively affected by the decrease of available short term credit. North and South American, European, and emerging economies are expected to slow significantly. Emerging market economies will decline even faster than the industrialized economies. Global growth is forecast to decline to 2.0% percent this year. China, India and Russia the fastest growing Asian economies last year, will continue to slow significantly during the spring of 2009. Inflation globally is about 3.7%, emerging nations about 2.7%, and the United States is currently 4%. Rising food and fluctuating oil prices are contributing to lower economic growth and heightened inflation concerns world wide. Food prices will continue to increase due in part, to the increasing use of corn and other foods as a bio-fuel. Slower economies reduce medical and food subsidies to poorer nations. U.S. Economy The United States economy will recede in the second half of 2008, and is expected to remain so in 2009. The U.S. unemployment rate will rise to approximately 8%. The U.S. is probably in a recession which will last into the summer of 2009. This will cause the Federal Reserve to lower the federal funds rate still further. It is widely anticipated that the Federal Reserve will decrease the fed funds rate to .75% by fiscal year ending June 30, 2009. Governments will face significant decreases in personal and corporate tax revenues with no corresponding decrease in Congressional spending. This will result in increased borrowing by the U.S. (and Europe) at higher rates of interest, possibly putting the Federal Reserve in the position to have to increase interest rates even while the economy slows. Long term market rates will increase faster than short term rates resulting in a steeper yield curve. City of Carlsbad Approximately $97 million of investments with fixed maturity dates will mature in FY 08-09. An additional $83 million are likely to be called due to lower interest rates. Available proceeds from these investments will be reinvested at market rates significantly lower than the maturing and called investments. Yields on City LAIF investments will continue to decrease as interest rates decline. At the end of FY 07-08, LAIF investments had a yield of 3.1%, and all other investments had a yield of 4.0%. I anticipate LAIF investment yield will decrease to 2.3% by the end of the FY 08- 09. Yields on investments other than LAIF will decrease below 4% due to higher yielding investments being called and reinvested at lower yields. Throughout the fiscal year ending June 30, 2008 the yield of the total portfolio averaged 4.4%. In fiscal year ending June 30, 2009, the total portfolio is projected to have an average yield of 3.85%. Total assets in the investment portfolio stood at $563 million at the end of FY 07-08. I anticipate a very slight increase in FY 08-09. Interest revenue earned from portfolio investments will decrease in FY 08-09 to approximately $21 million. Property tax revenues and transient occupancy tax (TOT) revenues are expected increase by 4%, while sales tax is expected to decrease by 1%. 8 l\ APPENDICES TO ANNUAL REPORT OF INVESTMENT PORTFOLIO APPENDIX A: RISK MANAGEMENT AND DISCLOSURE All investments are exposed to risk of some type. The objective of risk management is to identify the risks involved and establish acceptable levels of risks that are consistent with the City's investment objectives. Risk management includes managing, measuring, monitoring, and reporting the various risks to which portfolio investments are exposed. Portfolio investments are exposed to the following types of risks: A. Credit risk. a. Custodial credit risk. a) Investments. b) Deposits. b. Default credit risk. c. Concentration credit risk. B. Interest rate risk. C. Event Risk. As of June 30, 2008, the portfolio had the following investments and cash in its internal investment pool. Investment U. S. agencies Corporate Notes Certif. of Deposit LAIF Sweep accounts Cash accounts Total Maturities Market Value Market Value Gain (Loss) July 2008 - June 2013 $405,753,000 July2008-May 2013 July 2008 - March 2009 88,035,000 33,000 67,762,000 3,868,000 664,000 $566,115,000 $3,400,819 320,343 ( 3,000) $3,718,162 Disclosures Custodial Credit Risk (Investments). The City uses a third party custody and safekeeping service for its investment securities. The Union Bank of California (UBC) is under contract to provide these custodial services. Custodial credit risk is the risk that the City will not be able to recover the value of its investments in the event of a UBC failure. All City investments held in custody and safekeeping by UBC are held in the name of the City and are segregated from securities owned by the bank. This is the lowest level of custodial credit risk exposure. Custodial Credit Risk (Deposits). The City maintains cash accounts at Wells Fargo Bank (WFB) and UBC. At the conclusion of each business day, balances in these accounts are "swept" into overnight investments. These overnight investments are pooled and collateralized with either U. S. government securities or U. S. agency securities. The California Code authorizes this type of investment. A small amount of cash is not swept from the WFB checking accounts to cover checks that may be presented for payment. Amounts up to $100,000 are FDIC insured. Default Credit Risk. Default credit risk is the risk that the issuer of the security does not pay either the interest or the principal when due. The debts of most U. S. agencies are not backed by the full faith and credit of the federal government; however, because the agencies are U. S. Government-sponsored, they carry AAA credit ratings. The default credit risk of these investments is minimal. California state code limits investments in medium-term corporate notes to the top three credit ratings (AAA, AA, and A). It is the City's policy, however, to limit investments to the top two credit ratings (AAA and AA). As of June 30,2008, two investments equal to approximately .9% of the investments in medium-term corporate notes had a credit rating below the AA limit set by the City's Investment Policy. These investments were made when the credit ratings were either AAA or AA. California State Code and the City's Investment Policy allow the City Treasurer to determine the course of action to correct exceptions to the Policy. It is the intent of the City Treasurer to hold these investments in the portfolio until maturity unless events indicate a sale should be made. The default credit risk for corporate notes with a credit rating of single A is greater than the default risk of U.S. federal agencies or LAIF, but is considered by the City Treasurer to be within acceptable limits for purposes of holding to maturity. A credit rating of single A is within State code requirements. The Local Agency Investment Fund (LAIF) is an investment pool managed by the California State Treasurer. Its investments are short-term and follow the investment requirements of the State. As of June 30, 2008, the average maturity of the LAIF investments was 191 days. The State Treasurer does not contract for a credit rating to be assessed for LAIF. California State Code section 16429.3 specifically excludes LAIF deposits from being transferred, loaned, impounded or seized by any state agency or official. The default credit risk of LAIF is minimal. 10 Concentration Credit Risk. Concentration credit risk is the heightened risk of potential loss when investments are concentrated in one issuer. The California State Code does not identify a specific percentage that indicates when concentration risk is present for any one issuer. The State Code does, however, require that total investments in medium-term corporate notes of all issuers not exceed 30% of the portfolio. As of June 30, 2008, approximately 17% of the City's total portfolio investments were in medium-term corporate notes. For concentration of investments in any one issuer, the City's Investment Policy requires that no more than 5% of investments in corporate notes be in any one issuer. There is no similar requirement in either the State Code or the City's Investment Policy for U. S. agencies. As of June 30, 2008, no investments in any one corporate issuer exceeded 5% of total portfolio investments. Interest Rate Risk. Interest rate risk is the risk that investments will lose market value because of increases in market interest rates. A rise in market interest rates will cause the market value of investments made earlier at lower interest rates to lose value. The reverse will cause a gain in market value. As of June 30, 2008, the portfolio had a .7% gain in market value. The City's investment policy has adopted two means of limiting its exposure to market value losses caused by rising market interest rates: (1) Limiting total portfolio investments to a maximum modified duration of 2.2, and (2) requiring maturing investments within one year be equal to an amount that is not less than 2/3 of the current operating budget ($187,100,000). As of June 30, 2008, the modified duration of the portfolio 1.86 was within the required maximum of 2.2. Investments maturing within one year were $159,800,000, exceeding the required minimum of $124,700,000. The City's exposure to interest rate risk is within acceptable limits. Event Risk. Event risk includes the chance that something unexpected will impede the ability of an issuer of a security to meet its obligations. These types of risks are usually short in duration, but can impair the City's ability to communicate with o.r use banking services. Such an event could cause a delay in collecting securities which have matured. Security risks are also within this category. 11 APPENDIX B: PORTFOLIO ACTIVITIES FOR FISCAL YEAR ENDED JUNE 30, 2008 The City's portfolio balance increased 1.1% from $556.5 million to $562.9 million in fiscal year 2007-08. The increase of $6.4 million does little to show the volume of cash that flows in and out of the portfolio in the course of one fiscal year. The following table illustrates that the City Treasurer managed over two billion dollars of cash inflows and cash outflows which prompted investment decisions during fiscal year 2007-08. Cash Flows: Bond Maturities $ 122,206,000 Bond Calls 186,835,000 Bond Sales LAIF Withdrawals 269,596,000 Sweep Withdrawals 636,923,000 Interest Income 26,037,000 Bond Purchases 286,574,000 LAIF Investments 301,335,000 Sweep Investments 633,246,000 Cash Investments (net) (210.000) Total $ 2.462.542.000 12 CITY TREASURER’SANNUAL REPORT OFINVESTMENTSFiscal Year Ended 6/30/08(FY 07-08)CITY TREASURERCITY TREASURER’’SSANNUAL REPORT OFANNUAL REPORT OFINVESTMENTSINVESTMENTSFiscal Year Ended 6/30/08Fiscal Year Ended 6/30/08(FY 07(FY 07--08)08) U.S.MARKET REVIEWFiscal Year Ended 6/30/08 Federal Funds Target RateFY 07-082.00%2.00%5.25%4.50%3.50%3.00%2.25%4.25%4.75%1.00%1.50%2.00%2.50%3.00%3.50%4.00%4.50%5.00%5.50%06/30/0709/18/0710/31/0712/11/0701/22/0801/31/0803/18/0804/30/0806/30/08 SHORT-TERM INTEREST RATESU.S. Treasury InstrumentsFiscal Year 2007 - 20081.001.502.002.503.003.504.004.505.005.50JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUNFive YearTwo Year6 MonthPercentJUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN4.56 4.24 4.23 4.17 3.38 3.44 2.76 2.47 2.44 3.01 2.32 3.334.52 4.13 4.00 3.95 3.00 3.05 2.09 1.62 1.58 2.25 1.31 2.624.97 4.20 4.14 4.07 3.35 3.39 2.05 1.82 1.48 1.62 1.10 2.15 YIELD CURVE7/01/07, 12/31/07, 6/30/08Market Rates11.522.533.544.555.563 Mth2 Yr5 Yr10 Yr07/01/200712/31/200706/30/20083 Mth 2 Yr 5 Yr 10 Yr4.864 4.841 4.889 4.989 3.237 3.047 3.440 4.0231.731 2.616 3.327 3.969 PORTFOLIO REVIEW INVESTMENT PORTFOLIODollar Amount of Assets (Fiscal Year End)$516.9$512.0$472.6$562.9$556.5$100.0$150.0$200.0$250.0$300.0$350.0$400.0$450.0$500.0$550.0$600.0FY03-04FY04-05FY05-06FY06-07FY07-08Millions CASH & INVESTMENTS RELATIVE TOTOTAL ASSETS OF CITY AND ITS AGENCIES*$511 $503$552$561$567$0$200$400$600$800$1,000$1,200$1,400$1,600$1,800$2,000$2,200$2,400$2,600FY04-05 FY05-06 FY06-07 FY07-08 FY08-09Cash/InvestmentsTotal Assets$1,122$1,122$1,548$1,548$1,662$1,662Estimate*Source: Comprehensive Annual Financial Report. Note: Total Assets of City and Its Agencies is an estimated amount for FYS 08 & 09$ Millions$1,415Unaudited$1,800 Major Capital Project ExpendituresFY 2007-2008•Encina Water Pollution Control$5,802,000•Fire Station #6 4,468,000•Library Learning Center3,250,000•StreetsCFD #3 Faraday 12,659,000 Rancho Santa Fe Road 2,803,000Pavement Management 3,679,000 Traffic Signals and Other 5,546,000 •Parks Golf Course2,802,000Poinsettia Community 1,240,000Other1,563,000•Lake Calavera Reservoir 4,231,000 SOURCE OF POOL ASSETS(Dollar Amounts in Millions)6/30/07$75.9$39.6$48.7$ 246.7GeneralSpecial & OtherCapital ProjectsEnterpriseAgency/InternalTotal Investments - $557.1 Million6/30/08$ 65.0$ 69.0$ 127.7$ 25.7$275Total Investments - $562.4 Million$146.2GeneralSpecial & OtherCapitalEnterpriseAgency & Internal GeneralSpecial & OtherCapitalEnterpriseAgency & Internal ANNUITY STREAM FROM TREASURY(Cash Interest Revenue)For Fiscal Years Indicated $18.37$15.68$15.23$21.76$26.04 $17.84$0.00$3.00$6.00$9.00$12.00$15.00$18.00$21.00$24.00$27.00FY02-03 FY03-04 FY04-05 FY05-06 FY06-07 FY07-08Millions FY 07-08 PREDICTIONS• Short-term interest rates will decrease slightly• Yield curve will steepen slightly • Average yield of portfolio for FY will be in 3.85% range (from 4.45%)• Investment portfolio will increase slightly to $567 million To Access Monthly and Annual To Access Monthly and Annual Investment ReportsInvestment Reports••Go to: Go to: www.ci.carlsbad.ca.uswww.ci.carlsbad.ca.us••Click on: Click on: City HallCity Hall••Click On: Click On: City TreasurerCity Treasurer QuestionsMac McSherryCity Treasurer