Results are in for Yorba Linda's contract with private financial firm for investing funds

Results are in for the initial year of what is believed to be Yorba Linda's first-ever contract with a private financial firm for active management of a significant portion of city funds available for investment, since the city was incorporated in 1967.

Based on a report compiled by consultants at the city-hired Public Financial Management's Los Angeles office, total returns were 0.62 percent since the company began managing the city's $44.6 million portfolio in March 2017.

Return for the 2017-18 fiscal year ending June 30 was 0.42 percent. Both return levels were above benchmark securities of 0.20 percent and 0.08 percent, respectively. Total returns are based on market value earnings, according to the firm's report.

“The total return continues to outperform the benchmark. However, the decline in the portfol-io's market value, due to rising interest rates, has reduced the absolute level of total returns,” the company's consultants noted.

Looking forward, the consultants stated: “Overall economic conditions remain strong with only a slight chance of a recession in 2019. However, trade wars, higher interest rates and political events could impact economic growth over the longer-term.”

And, based on an anticipated additional Federal Reserve rate hike this year and three increases in 2019, the consultants noted: “Higher interest rates will increase the city's interest earnings but will result in additional market value depreciation in the portfolio.”

So far, under the financial firm's management, the portfolio has been diversified to mitigate risk and enhance long-term performance, and maturities have been positioned at modestly shorter periods to mitigate the impact of rising interest rates.

Also, active management added incremental value to the portfolio. For example, according to the consultants, a federal agency note was sold and another security purchased for a net gain of $1,762, and a Colgate-Palmolive note was sold and a Charles Schwab note purchased for a net gain of $1,739.

And the company has diversified portfolio holdings to make broader use of security types to reduce the allocation to any one sector or issuer “to add value and manage risk.” State law and a City Council-adopted policy each restrict the type of investments the city can hold.

Also in Yorba Linda, the four-story parking structure in the Town Center development was accepted as complete by the city last month, with certifications from the state and Orange County Fire Authority in place.

Roadways, perimeter landscaping and pedestrian improvements leading up to the structure were completed earlier this month so the free parking opportunities could open to the public. The grand opening for the facility at 18423 Arroyo St. was scheduled for Nov. 20.

The structure has 446 vehicle spaces, motion sensor LED lighting, a car-count system and infrastructure for electric vehicle charging stations.