Loss in City’s Investment Value Due to Lower Bond Market
Manoukian details Glendale’s Investment portfolio changes
Although Glendale’s Investment portfolio continued to slide, City Treasurer, Rafi Manoukian was upbeat with his latest forecast, due to an uptick in interest rates that suggests good news for Glendale’s investment opportunities.
The city’s investment portfolio sank to a new low of $372 million that was $20 million less compared to last year, according to a report Manoukian gave to the City Council on September 10, 2013. The portfolio has been in a downward spiral for the past five years. The portfolio had about $410 million in June 2011, but historically low interest rates means lower bond prices in a market in which Glendale invests its treasury.
For the fiscal year ending June 30 Interest earnings totaled just $3.2 million, a $1.1-million drop compared to the previous fiscal year, according to a city report. In addition, the treasury suffered a setback last year as Glendale officials had to hand over tens of millions of dollars to the state of California, to reimburse the state for monies advanced from its former redevelopment agency that was dissolved last year that was previously earmarked for economic development.
Even with higher property taxes that increase proportionately with new development in Downtown Glendale, most of it now gets allocated to other City agencies. A notable change in the city’s portfolio as of this past June was the recent increase of corporate notes, representing bonds issued by corporations. Corporate notes made up about 20% of the city’s portfolio, a jump from 15% the prior year.
It’s has been the city’s policy to keep investments in corporate notes low because officials have preferred safer governmental-type investments, such as treasury bills, said City Manager Scott Ochoa.
But Manoukian encouraged the council to raise a 20% cap on corporate notes to 25% or 30%, a change welcomed by Councilman Frank Quintero, who has long called for more corporate investment. Glendale has invested in corporate notes from well known companies such as General Electric Capital Corp, J.P. Morgan Chase and IBM Corporations, according to city records. Manoukian said he would return to the council with a revised proposal to tweak the City’s investment policy.