INVESTMENT PORTFOLIO

The County treasury investment portfolio is summarized in Att. A - Investment Summary. It includes county funds and deposits from special districts and school districts totaling $455.3 million as of March 31, 2016. The portfolio consisted of 4.3% ($19.8 million) in cash at bank; 29.8% ($135.5 million) in short term investments in government investment pools such as the Local Agency Investment Fund (LAIF) and the California Asset Management Program (CAMP); 65.9% ($300.0 million) in an investment pool that is actively managed by a professional investment advisor, PFM Asset Management, LLP (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 FNMA (Fannie Mae), FHLMC (Freddie Mac) and Federal Home Loan Bank; corporate notes; commercial papers; and certificates of deposit. The detail of investments is shown in Att. B - PFM Statements. The decreases in the investments in government investments pools during February, 2016 was due to the distributing the first installment of property taxes out to agencies of the county in February, 2016. The balances started to increase again in March, 2016 as payments started to be received as the April 10th second installment of taxes neared.

In their quarterly investment review for the 3rd Quarter of the fiscal year (Att. C - Investment Performance 3Q16), PFM noted that interest rates have continued to remain at the same level since the action taken by the Federal Open Market Committee (FOMC) of the Federal Reserve Bank in December, 2015 where the FOMC raised the federal funds target rate to 25 basis points (0.25%). This was the first rate increase by the Federal Reserve in the last seven years. The FOMC expectations for rate hikes in calendar year 2016 appears to have lowered to two projected rate hikes acknowledging the global economic outlook and financial market conditions. 
The county is continuing with the approved strategy of maintaining a 30% short-term and 70% long term target. PFM reported that the portfolio complies with government code and county investment policy and is well diversified.

CASH BALANCES

The chart (Att. D - Cash Balances) depicts the cash balances of the three major operation funds of the County, and their combined balance. On March 31, 2016, this balance was $26.0 million; up $13.0 million from the prior quarter due to normal operating revenues and expenditures. The increase was primarily due to the receipt of property taxes by the General Fund during the month of February which is typical during this timeframe of the fiscal year.

CERTIFICATION

The Yolo County investment pool is in compliance with the Yolo County Investment Policy. Our analysis indicates that the investment holdings in the Yolo County Investment Pool are of proper amount and duration to meet the estimated cash flow requirements of the county an all pool participants for the next six months, barring substantial cash payment deferrals from the State government or other unforeseen cash needs.