public is here so let's get started the july th meeting of the santa barbara city council finance committee will now come to order and seeing no members of the public i will close public comment and go to the first item miss nimes good afternoon chair manager for the finance department and we have a very short agenda today just one item the quarterly investment report for june th two thousand and fifteen i'll be going over about five items today first i'll be going over the current and future interest rate environment second the city's investment strategy and approach third some long term trends both on earnings and interest rates for the benchmarks benchmark comparisons and last quarterly investment performance and activity first a little on the interest rate environment the treasury rates continue to perform at very low levels but we did see that they slightly increased from march st two thousand and fifteen  we do think it's possible the interest rates will increase within the calendar year or maybe early two thousand and sixteen but we also wanted to point out that it'll be several years before we'll see a material benefit to the city so we have to wait till treasur and investments mature or called before we can invest back into the market so there is that time lag the city's investment strategy and approach i wanted to point out that first of all our objective really is safety first than liquidity then yield and we try to maintain a steady maturity over a five year period really that's to make sure that we have adequate liquidity to pay our bills as i mentioned at third quarter we have some very large purchases primarily related to the drought we had a very large water purchase just in third quarter that was about three million dollars and by having this five year ladder it allows us to make those payments and also ensure that we're not having to invest too heavily in a bad interest rate environment i also wanted to point out that we did have some in sun certainly related to the loan for the d cell plant and some uncertainty regarding the reimbursements from the state and that all happened in the fourth quarter due to that we wanted to increase our cash on hand and we did not make any investment activity in the first couple months of the quarter however those loan terms were determined in june or may june period so we were able to invest in june so we invested about ten million dollars in june two thousand and fifteen this chart shows some key rates in the four year trend for those key rates i wanted to point out a couple things here we are showing about the five year note the two year note the city portfolio lathe also the ninety day t bell and what i wanted to point out here is that a couple of these rates are looking like they're slightly going up some are leveling off the this city has been decreasing and now they look stable think overall what this shows to us is that it looks like things have finally bottomed out  they are kind of leveling off and hopefully going in the right direction going up it's always possible they can go back down but we are hopeful that they're now starting to go back up the other thing i wanted to point out as i mentioned earlier that the five year and the two year are showing some slight increases the five years very slight and that the city portfolio is stable it hasn't increased yet and that's due to that time lag it takes this time to invest back into the market so it'll be a couple years before we will see any increases increases with the five year and two year continued this graph is showing the historical earnings for the city portfolio the red line is the interest earnings and the blue line is the portfolio rate this should look familiar we went over this at third quarter i hate to point it out again in two thousand and one we were earning about eight million dollars on a six percent interest rate on a one hundred forty three million dollar portfolio and in two thousand and fifteen a little less than two million on a one one percent interest rate on a hundred and seventy million dollar portfolio so it just shows how much the city is impacted on these these decreased interest rates what's important here with this chart is that this is a comparison on the city's portfolio rate to the five year treasury note and what you'll see is that the city really does trend with the five year note and so if you saw a very big difference between the trends between the city portfolio rate and the five year note then that would cause that would cause us to have to look into it further it should always trend at the same time but there is going to be that time lag so you'll notice that the five year note is just slightly going up now at the end of two thousand and fifteen so it'll be a couple years before you would see our portfolio rate go up but if you did see any big discrepancies then we would need to look at it further because that should try in the same way as to the quarter performance the portfolio yield did slightly go down for the fourth quarter and went from about one point two oh seven percent to one point one five eight percent this resulted in total interest earned of about four hundred and fifty six thousand dollars that was about seventeen thousand dollars less than the prior quarter and the general fund portion was about a hundred and twenty nine thousand dollars this is a summary of the investment activity for the quarter as i mentioned earlier we did not invest in the first couple months of the quarter but we did invest ten million dollars in june so this first part is the purchases we made in june about ten million dollars we had fifteen million dollars that were called in investments and a little over four million dollars matured that includes a hundred and thirty nine thousand dollars of the semi annual principal payment for the airport note what this overall what this means is about nine million dollar difference in our total portfolio balance but the main difference is in the different items so we show about nine million dollars less in federal agency issues and nine million dollars more and what we call it liquid balance that would be our checking balance checking account and our life and that's due to we had seen a pretty significant decrease in our checking account due to some of those large purchases the water purchases and so we had mentioned it third quarter and fourth quarter we are looking to reinstate our cash balance and that's what we did and also that uncertainty related to the loan terms for decel we also increased our our cash balance not knowing how that was going to turn out now that everything has been finalized we are looking to reinvest and as more securities mature or called will be ruined in those as well