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City portfolio is healthy

Model for funds is being switched up a bit to reflect market, treasurer says.

March 25, 2009|By Christopher Cadelago

BURBANK — The city’s investment portfolio grew by more than $30 million over the last year, despite an economic crisis.

Burbank’s $396-million portfolio has a market value of $383 million and a monthly yield of 3.76% as of December, City Treasurer Donna Anderson said.

Anderson expects the portfolio’s market value — the total amount at which a security is trading and could be sold — to reach 100% of face value once the city settles its lawsuit with Lehman Brothers, which filed for bankruptcy in September, she said.

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The city receives priority repayment in the event of the company going bankrupt, Anderson said.

“We’re hearing [it will be] 18 months [before the city gets repaid],” she said. “The important thing here is that we have priority and are safe.”

Investments issued by the federal government comprise $148 million of the city’s portfolio. Another $93 million is made up of corporate notes, and $155 million is tied up in the Local Agency Investment Fund, a pool of money managed by the state treasurer’s office.

The city has historically adhered to a model of 55% federal, 25% corporate notes and 20% state-managed funds, Anderson said. However, it now earns more with the state, about 1.87%, than it could by tying up its money in a one-year security earning less than 1% or even a two-year security at 1.4%, she said.

To reflect realities of the market, the city treasurer has temporarily adopted a model of 37% federal, 24% corporate notes and 39% for state-managed funds, she said.

Another advantage of the state-managed pool is that there are fewer stipulations as to how much is needed daily or how much can be moved around, Anderson said.

“When securities start to change, we will go back to more of the norm,” she said.

At a recent Burbank City Council meeting, Anderson compared the current financial climate and the state of the city’s investments with numbers from 2007. At that time, the portfolio’s face value and market value totaled about $364 million. Its monthly yield was 4.92%, or .2% higher than the state-managed pool paid out and almost a full two percentage points higher than a two-year treasury, which at the time paid 3.05%, Anderson reported.

Monthly yield today has dropped to 3.76%, with the state-managed pool collecting 2.42% and a two-year treasury collecting just .77%. The weighted average of the portfolio is 736 days, or two years, she said.

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