City portfolio dips again

CITY HALL — With interest rates remaining at historic lows, Glendale's municipal investment portfolio earned nearly $4 million less than last year, according to the city treasurer's year-end report.

The city's portfolio generated about $8.5 million in investment earnings, compared with $12.4 million last year and $19.4 million in 2008, according to the report.

The portfolio is tied almost entirely to investments that depend heavily on interest rates set by the Federal Reserve, which in keeping rates near the bottom has hampered investors' ability to grow their returns.

"The Fed kept waiting for the employment rate to improve before it would increase interest rates, and that day never came," said City Treasurer Ron Borucki.

The portfolio ended the year at $448 million, down $35 million from last year, according to the report.

The majority of the hit was attributed to the $23 million the city paid in January to secure methane gas from the Scholl Canyon Landfill through 2014. City officials expect the purchase to save the city at least $9 million in the next five years.

After dropping by more than a percentage point last year, the city's rate of return on investments dropped an additional 0.91% to 1.89%, according to the annual report.

"It's as good as it can possibly be considering the interest rates are as low as they are," Borucki said.

The reduced investment earnings are one of many local effects of the protracted recession — such as reduced sales and property tax revenues — that are placing increasing pressure on city finances, officials said.

"Obviously, the rates are at historic lows," said Glendale Finance Director Bob Elliot. "So we are just having to deal with the reduced revenue stream."

The bright side, Elliot said, the city didn't lose any money and steered clear of risky investments.

"The important thing to remember is our investment policy is pretty conservative," he said. "

Borucki warned the economic picture could remain bleak throughout the next year, with few opportunities for investment earnings growth.

Still, the city's portfolio has a significant amount of liquidity built in, which means if things improve, investments can be moved quickly to capitalize on higher rate of returns.

"We are hoping that maybe interest rates will turn, and we can return more to the city coffers, because lord knows we need it," Borucki said.

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