Vol. 1, No. 4, Published August 6, 2015
Debt Issuance, Investments and Treasury Activities
Debt Issuance
California State and local governments issued a total of $36.7 billion in debt during the first six months of 2015, a 33.4 percent increase from the same period in 2014, when $27.6 billion in debt was issued, according to data received by the California Debt and Investment Advisory Commission (CDIAC) as of July 22.7 (See Figure 5.)
The favorable economy and the possibility of rising interest rates appear to still be driving State and local governments to move forward with borrowing to acquire or replace infrastructure assets used to deliver services to the public.
A total of $8.3 billion in State and local debt issuance was reported for June 2015, an 8.7 percent increase from June 2014 ($7.6 billion). (See Figure 6.)
Of the $8.3 billion issued, $8.0 billion was issued by local entities, while $320 million was issued by the State and its agencies or related entities. (See Figure 7.)
So far in 2015, the Treasurer has carried out six different refinancings that will together save taxpayers more than $1.8 billion over the life of the bonds. The State is planning more refinancing activity in late August. As long as interest rates remain favorable, this pattern will likely continue for some time.
For the period from June 16 through July 15, a total of $10.4 billion in debt final sale reports were received by CDIAC. (See Figure 8.)These are the top five areas of volume within the reported final debt sales:
- Cash Flow, Interim Financing: $3.1 billion
- K-12 School Facility: $1.8 billion
- Redevelopment, Multiple Purposes: $1.5 billion
- Multiple Capital Improvements, Public Works: $808 million
- Wastewater Collection, Treatment: $656 million
In June and July, school districts and counties took part in short-term borrowing to smooth their cash flows. This is the peak season for that to occur.
7 Issuers have 21 days from sale of the debt to report issuances. Since some data is reported late, the Treasurer's Office regularly updates monthly totals as more information becomes available.
Figure 5: Cumulative California Public Debt Issuance (In Billions)
Source: California Debt and Investment Advisory Commission
Figure 6: California Public Debt Issuance, June (In Millions)
Source: California Debt and Investment Advisory Commission
Figure 7: State* Vs. Local Debt Issuance, June (In Millions)
* State issuers include the State of California, its agencies, commissions, authorities, departments and The Student Loan Corporation.
Source: California Debt and Investment Advisory Commission
Figure 8: Total Reports of Final Sale Received
6/16/2015 Through 7/15/2015, By Purpose (In Millions)
Source: California Debt and Investment Advisory Commission
Read more about debt issued so far this year. See the calendar.
Investments
The Treasurer�s Investments Division manages the State�s excess or idle cash.
The Treasurer invests taxpayer money through the Pooled Money Investment Account (PMIA). This is a commingled pool with three primary sources of funds: the State�s general fund, special funds held by State agencies, and money deposited by cities, counties and special districts in the Local Agency Investment Fund (LAIF).
As of June 30, the PMIA balance was $69.6 billion, with an average effective yield of 0.299 percent and an average life of 239 days. (See Figure 9.) In addition, the average daily PMIA balance was $69.0 billion. The year-to-date average PMIA balance was $59.1 billion.
The Treasurer�s Office anticipates that the investment returns for the PMIA will continue to follow the market as shown in Figure 10.
Because these funds may be required on very short notice, the investment objectives for the Pooled Money Investment Account are safety, liquidity and yield, in that order of importance.
The year-to-date earnings rate for the PMIA is 0.269 percent, which reflects the prudent investing of a short-term portfolio in this unprecedented low interest rate environment of the last seven years. As the Federal Reserve begins to raise interest rates, the PMIA is positioned to follow those moves.
Figure 9: Pooled Money Investment Account Stats as of June 30, 2015
Ending Portfolio
$69.6 billion (See Figure 11 for details.)
Average Workday Investment Activity
$1.905 billion
Average Effective Yield
0.299 percent
Average Investment Life
239 days
Local Agency Investment Fund Ending Portfolio
$21.5 billion (2,488 participating agencies) (See Figure 12 for details.)
Read more about the Pooled Money Investment Account
Figure 10: Average Monthly Yield Comparison
June 2010 Through June 2015
Source: State Treasurer's Office
Figure 11: PMIA Portfolio Composition – 6/30/15
Source: State Treasurer's Office
Figure 12: Local Agency Investment Fund
Participation as of 6/30/15: 2,488 Agencies
Source: State Treasurer's Office
*Includes regular and trustee bond accounts.
Read more about the Local Agency Investment Fund.
Centralized State Treasury System Activities
The Treasurer�s Centralized State Treasury System provides banking services for the overwhelming majority of State departments and agencies.
The system handles the flow of more than $2 trillion per year in cash funds.
During June, deposits totaled $112.7 billion, while disbursements totaled $112.9 billion. (See Figure 13.)
These amounts include all federal, State and local funds flowing through the Centralized Treasury System.
Figure 13: Deposits and Withdrawals By Month, June 2014-June 2015 (In Billions)
The system also determines the amount of idle State funds available in the Pooled Money Investment Account for investment by the Treasurer�s Investment Division. (These investments were discussed in the Investments section and are reflected in Figure 11.)
During June, total new and rollover investments reached $17.9 billion. (See Figure 14.)
Figure 14: Total Investments By Month, June 2014-June 2015 (In Billions)
Source: State Treasurer's Office
Each day, the system also processes hundreds of thousands of State transactions -- including department checks, State Controller�s Office warrants, Women Infant Children (WIC) food instruments, Employment Development Department unemployment and disability checks - submitted by banks and other entities for payment.
During June, total items processed reached 6.1 million. (See Figure 15.)
Figure 15: Number of Items Processed, June 2014-June 2015 (In Millions)
Source: State Treasurer's Office