Oxnard Treasurer’s Investment Committee Meeting- Lessons for Almost Any City

By George Miller

Oxnard Treasurer Phil Molina held a public City Treasurer’s Investment Committee meeting on 1-16-19. Unfortunately, this writer and a broker/consultant presenter were the only non-official attendees. Present were Molina, Consulting Expert to CDIAC (California Debt & Investment Advisory Committee) Kevin Webb, Assistant Treasurer Eden Alomeri, New CFO Kevin Riper, Citizen Committee Member Alphe Schulman (recently retired private sector Controller and wife of former INCO Chair Len Shulman) and Citizens Journal Publisher George Miller. Councilman Bert Perello was unable to attend.

There has been much concern about the city’s finances, due to mismanagement, cash flow, deficits, lack of internal controls, auditing, transparency and more. The city has about $222 million in invested funds, in the custody of Treasurer Phil Molina. He was elected out of a field of five candidates on a transparency and competency platform. He is a former Oxnard Financial Manager and former CPA. Molina’s very aggressive transparency, reform efforts and techniques have been met with some resistance, disagreement and resentment by multiple administrations. Since he is independently elected by the voters, he is able to maintain independence and resist pressure.

The Treasury Dept. is responsible for receiving, managing and disbursing all city funds. It also handles utility and some other billings.

The meeting objectives were: a summary look at city investments, “efficiency grade,” general investment criteria/requirements and metrics. A planned review of the City of Dixon’s financial/investment disaster was skipped due to lack of time. Molina urges people to view the movie “All the Queen’s Horses” on that subject to learn about it (Netflix?  Interview).

Investment Status

Molina told us that the investments are in excellent shape and conform to state and generally accepted standards and practices, which are quite conservative for CA municipalities. Kevin Webb and others present did not disagree. Webb later told us that the standards are less conservative for pension funds, which are managed by other state government entities are were outside the scope of this presentation.

Molina and Assistant Treasurer Eden Alomeri informed us that:

  • $222 million is invested, including $210 million in bonds and $12 million in various bank accounts. About $50 million is short-term.
  • 100+ investment positions, plus 17 bank accounts. Bonds, CD’s and Money markets are the permissible financial investments under state law.
  • Approximately 100 bond transactions annually
  • Aggregate rate of return is approximately 2.7%. The very conservative guidelines hold down returns but greatly reduce risk. Preservation of principal and meeting cash needs are the most important criteria.
  • Rate of return on new investments is about 3.1% and rising with interest rates
  • Total investment income is around $3 million annually
  • Investments are structured and “laddered” to help ensure that cash is available as forecast with contingencies.
  • Going to an annual CALPERS (pension fund) contribution saved the city $600,000.
  • Maximum investment duration permitted is 5 years

Oxnard issues quarterly investment reports which show all portfolio positions and associate data.  The City has won multiple awards in the last year for investment policy and its implementation.

 

Kevin Webb Presentation

Kevin Webb proved to be an entertaining and informative speaker. he is a broker, adviser to CDIAC (California Debt & Investment Advisory Committee)  and to municipalities. He mentioned that he will be making a major presentation to CDIAC. He got into some technical stuff, but did well with translating it into The Peoples’ language. We are not presenting  visuals, etc, due to their proprietary nature, but give you a summary of salient points …

He discussed philosophy, strategy and tactics of investment management. Webb said he promotes “sleep-adjusted” municipalities’ investments, presumably meaning conservative ones that conform to stringent, Conservative investment rules and don’t have to be worried about.

Webb stated that Microsoft’s Excel spreadsheet tool has greatly grown in power and sophistication and is the most widely used software for investment management by municipalities. He said it’s more commonly used than the mostly used municipal financial management software  systems.

He stressed the critical aspects of investment management:

  • Safety, including credit risk assessment by recognized rating companies- Moody’s etc.
  • Liquidity
  • Duration- 5 year max, “laddered” for projected cash flow needs
  • Yield

He mentioned that true inflation (vs CPI) is higher than current rates of return will deliver under state rules, that only investment grade securities- bonds, CD’s, Money market from reputable institutions, no private placements, no equities, are permitted. a maximum of 30% of corporate securities are permitted in portfolios.

He presented a series of spreadsheets organized like a”dashboard” of a city’s investment, with subsidiary sheets as hyperlinks which drill down into details. This was used to illustrate some of the concepts of applied investment management and could be a model for Oxnard to use. I asked if this exercise has been done for Oxnard and was told not at this time. There were no definite plans to do it. It is a question whether that increased level of analysis would provide quantitative benefits, since the Treasury Department is already using best practices investment policies. To us, it appears that the best effects of using it would be to help monitor the portfolio status, performance, adherence to policy and to provide more transparency to management, the Council, state Treasurer’s office and the public.

During the discussion, it came up that Oxnard’s financial software Sungard HTE holds some of the investment info, Per Ms. Alomeri, but that it is manually and tediously input to investment management spreadsheets. It might be possible to automate that process, if financially feasible, via interface/integration programming and to even facilitate that via API’s (Application Program Interfaces) available through vendors or user groups. The City has not investigated that alternative, we were told by Eden Alomeri.

Webb’s recommended reading/viewing: “The Devil’s Financial Dictionary,” “Against the Gods” and “All the Queen’s Horses.”

 

Oxnard Treasury Dept. wins awards

Considering Oxnard’s history of financial chaos, it seems surprising and encouraging  that the Treasury Dept. has done so well with outside ratings, most recently by the California Municipal Treasurers Association. The Treasury Dept. built on the previous policy and filed in the holes identified by audits, best practices review and dept. personnel. It was accepted by staff and approved by the City Council last year….


———- Forwarded message ———
From: Farrell, Shaun <SFarrell@ci.galt.ca.us>
Date: Mon, Oct 30, 2017 at 7:41 AM
Subject: City of Oxnard
To: phillip.molina@oxnard.org <phillip.molina@oxnard.org>
Cc: Lauren Brant <BRANTL@pfm.com>, Deborah Higgins <debbie@higginscapital.com>, doug@robinsoncapital.com<doug@robinsoncapital.com>, Yelena Martynovskaya (yelena@cmta.org) <yelena@cmta.org>, kschrimsher@cmta.org <kschrimsher@cmta.org>

Phillip,

Congratulations!!  You have passed the CMTA Investment Policy Certification Program evaluation.  In the next couple of weeks, you will be receiving the actual Certificate in the mail.  In the meantime, here are the scorecards to your evaluation.  Again, Congratulations and thank you for participating in the CMTA Investment Policy Certification Program.

Shaun

Shaun L. Farrell, CCMT

City Treasurer

City of Galt

380 Civic Drive

Galt, California  95632

209-712-0428 – Cell

Oxnard_Robinson_Scorecard

Resolution No. 15,092 (1)

Composite score sheet by the three evaluators- perfect score!-Source CMTA via Phil Molina

 

 

current quarterly Treasurer’s report- https://oxnard.granicus.com/MetaViewer.php?view_id=97&event_id=42757&meta_id=184501

City of Oxnard Treasurer’s Annual Investment Policy for 2018 

 

 

George Miller is Publisher/Co-Founder of CitizensJournal.us and a “retired” operations management consultant residing in Oxnard


Get Citizensjournal.us Headlines free  SUBSCRIPTION. Keep us publishing – DONATE

2 Responses to Oxnard Treasurer’s Investment Committee Meeting- Lessons for Almost Any City

  1. Sheryl Hamlin January 21, 2019 at 8:25 am

    Why 100 transactions annually? Seems agressive for bonds.

    Reply
    • Citizen Reporter January 21, 2019 at 4:56 pm

      For a city of over 200,000 with a $400+ million budget and a diversified, compliant $222 million in bonds, not really. Don’t forget, that is both buy and sell for multiple laddered positions.

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *