Receive and file the Yolo County Treasurer's Report on Investments for the quarter ended June 30, 2024. (No general fund impact) (Haynes)

The County Treasury investment portfolio is summarized in Attachment A (Investment Summary) and includes the Treasurer's Investment Pool and the investment accounts managed by the Treasury that are not pooled together for investment returns. The pooled portfolio includes county funds, deposits from special districts, and school districts totaling $1 billion as of June 30, 2024.  

The portfolio consisted of 2% ($19.8 million) in cash at the bank, 51.2% ($515.7 million) in short-term investments in government investment pools such as the Local Agency Investment Fund (LAIF) and the California Asset Management Program (CAMP), and 46.8% ($472.5 million) in an investment pool that is actively managed by the County’s investment advisor, PFM Asset Management, LLC (PFM). These investments consist mostly of fixed income securities as authorized by government code, such as: U.S. Treasuries; securities issued by federal agencies, such as Fannie Mae, Freddie Mac, and Federal Home Loan Bank; corporate notes; commercial papers; and certificates of deposit.

The investment details for the pooled portfolio along with the investment performance are shown in Attachment B (PFM Performance Report) while the non-pooled holdings are shown in Attachment C (Non-pooled Holdings).  The non-pooled portfolio of $134.4 million consists of specific investments for various entities and programs. These include $46 million in government medium-term funds (LAIF and CAMP) for various districts and the 2017 Lease Revenue Bonds, $27.6 million in investments managed by PFM for various county programs (Landfill Closure, Cache Creek, etc.), $60.6 million in section 115 trusts held by PARS for County OPEB (Other Post-Employment Benefits) and pension funding, and $180 thousand in cash in money market accounts.

In their quarterly investment review for the second quarter of 2024, PFM continues to monitor economic conditions and the Federal Reserve (Fed) activities. They noted signs of moderating economic growth, while inflation is edging closer to the Fed’s 2% target. Up to the June meeting, the Fed had not implemented any interest rate cuts, keeping the overnight target rate range steady at 5.25% to 5.50%. It is projected that one or more rate cuts may still occur in the latter half of the year. In anticipation of possible rate cuts, County staff performed cash-flow analysis to determine whether there is excess liquidity that could be invested in the longer-term portfolio to lock in higher rates, which may enhance future investment earnings as rates decline. Staff will work with PFM to finalize the cash-flow analysis and if it is determined that sufficient liquidity exists to move funds into the investment portfolio, the information will be shared with the board in the next Treasurer's investment report. 

CASH BALANCES
Attachment D (Cash Balances) depicts the cash balances of the three major funds of the County and their combined balance. On June 30, 2024 unaudited balance was $65.9 million. It should be noted that at the time the Treasurer’s investment report was prepared, fiscal year 2023-24 had not been closed. The General Fund encompasses multiple operating and revenue funds, including the General Fund, Health and Human Services’ Operation, Public Health, and Social Services. The cash deficit depicted on the graph in the General Fund is due to transfers between Health and Human Services’ operations and revenue funds that have not been completed.  It is anticipated that transfers will be completed before closing the books for fiscal year 2023-24.

Other agencies having deposits in the pool include: school districts, special districts and cities. A copy of the report is posted and available on the Department of Financial Services' website. The Financial Oversight Committee reviews investment performance quarterly. All reports from the County's investment advisor PFM  Asset Management LLC are available in the County Treasurer's office.