By Ted AYALA
The news from Glendale City Treasurer Ron Barucki to the City Council Tuesday night was sobering. “This is less than stellar news about our financial markets,” warned City Manager Scott Ochoa before Barucki’s presentation of the annual report of the city’s investment portfolio.
“It was another year of frustration and disappointment in the treasurer’s office,” said Barucki. “Our portfolio is negatively impacted by historically low interest rates in the market.”
Aggravating the frustration for the city’s investments have been the Federal Reserve’s moves to keep interest rates down, mitigating returns for the portfolio. According to Barucki, the Federal Reserve is waiting for improvements in employment numbers before raising rates.
“The trouble is the wait is in its fourth year,” he added.
The portfolio, he reported, ended with a total worth of $393 million dollars, up $8 million from the end of the last quarter. However, these numbers still represent a loss of approximately $16 million since its value of $409 million last year.
Barucki noted that the city can take cold comfort in knowing that it isn’t alone, citing hits in earnings to the state’s own investment pool.
The treasurer was also quick to remind the council that the drop in numbers didn’t represent an actual loss of worth in the portfolio. Instead, it reflected shrinking returns due to drops in interest rates and money taken out for use in capital improvement projects. Drops in returns were explained by drops in the rate of return from 1.89% in June 2010 to 1.43% in June 2011 to 1.09% in June 2012.
“It hasn’t been easy out there,” said Barucki. But what can we expect in the coming fiscal year? His outlook was negative, citing the Federal Reserve’s commitment to low interest rates at least through 2014.
“Safe to say it’s not going to get better anytime soon. That leaves us with at least two more years of tough sweating. There is no silver bullet,” he said.
Barucki had at least a bit of positive news.
“[Our] portfolio is very safe, sound, and liquid,” he reported.