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CITY'S PORTFOLIO GROWING; SANTA CLARITA'S INVESTMENT REVIEW PAYS OFF.

Byline: Angela M. Lemire Staff Writer

SANTA CLARITA - A hard look at city finances two years ago and greater diversification of holdings has expanded by $19 million the amount of Santa Clarita's long-term investment portfolio.

Diversification of liquid cash balances into other forms of investments, such as federal Treasury and private corporation notes, along with increased property and sales tax revenues, has helped expand the city portfolio, said Steve Stark, director of administrative services for the city.

Cash value balances of all investments grew from roughly $36 million in January 1998 to $54.94 million by Nov. 30, Stark said.

Investments include: $21.28 million in callable agency investments - which generally offer higher interest rates, but can be called back by the issuing agency; $19.37 million in corporate bonds; $9.35 million in its local agency investment fund; $972,878 invested in the Los Angeles County investment pool; $2.9 million in noncallable agencies and $1.05 million in money market accounts.

City officials said Orange County's declaration of bankruptcy in 1994 served as a wake-up call to the state, bringing about tougher investment laws for municipalities. But it also prompted Santa Clarita officials to re-examine its own finances, they said.

``We've gone out and got some expertise to help the city invest as best as we can and as safe as we can,'' City Manager George Caravalho said.

In April 1998 the city hired an independent consultant to examine its investment portfolio and come up with ways to maximize returns safely.

Over the last two years, the city reduced its portion of liquid cash holdings of total investments from 50 percent to 20 percent, he said. Freeing up that money enabled the city to increase investments in Treasury and agency notes from 28 percent to 43 percent, and corporate bonds from 20 percent to 35 percent, Stark said.

Highest yields have come from callable agencies, he said.

Stark said city investors followed the state's new ``prudent investor'' laws that, for example, allow cities to invest only up to 30 percent of its portfolio in private corporations with minimum A bond ratings. The city typically invests only in companies with the higher AA and AAA ratings, he said.

``Safety, liquidity and yield'' are three guiding principles in city investments, Stark said. He noted that average returns of 5.6 percent to 5.7 percent demonstrate conservative but low-risk investments.

Major capital improvement projects such as Central Park and road and bridge construction have prevented the city from making more investments, city officials said, noting that cash values of all investment funds peaked in July of 1999 with $60 million.

The City Council has begun reviewing city investments as it enters the next budget season before adopting an annual spending plan in June for fiscal year 2000-2001. Although city staff members oversee daily finances and investments, and the city Investment Committee oversees investments beyond three years, the City Council has ultimate responsibility over long-term investments, officials said.

The council adopts an investment policy each year that guides the staff in decision-making and adheres to new state and federal laws, said Stark. Once adopted, it is submitted to the Municipal Treasurer's Association of the United States & Canada for certification. The city received the certification for its 1999-2000 investment policy.
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Publication:Daily News (Los Angeles, CA)
Article Type:Statistical Data Included
Date:Jan 10, 2000
Words:548
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