By Ted AYALA
After a two-week break, the Glendale City Council – with the exception of Councilmember Laura Friedman who was absent – returned to session Tuesday night with several items on the agenda awaiting their attention. Among the most notable was the review of the city’s investment portfolio and investment policies, the first under City Treasurer Rafi Manoukian who was elected to the post in last year’s city election.
As Manoukian prepared to speak to the city council for the first time since assuming his role as treasurer, his former council colleagues joked about their “maiden voyage on the S.S. Manoukian.”
“You really miss being up here?” Mayor Dave Weaver jokingly asked.
“I miss the interaction,” Manoukian answered grinning.
Manoukian’s managing of the city’s investments demonstrated the same conservatism that characterized the stewardship of his predecessor, Ron Borucki.
The total portfolio in June 2013 stood at $517,867,000; total city cash investments at $374,521,000, a drop of approximately $30 million that, Manoukian noted, was due to the transfer of monies from the city’s former redevelopment agency.
Rate of return on investments dropped from 1.09 basis points to .84 from the last fiscal year in tandem with falling interest rates. However, Manoukian demonstrated that the returns beginning July 2013 were on the rise, a development that he called “positive.”
Asset allocations remained largely unchanged since the end of the last fiscal year, with the bulk of it taken up by federal agency callable bonds, the Local Agency Investment Fund (LAIF), and corporate bonds at 26%, 23%, and 21% respectively.
Debate was stirred when Manoukian explained that the city’s stake in corporate bonds exceeded the limit imposed by rules which stipulate that such investments should not exceed 20% of the portfolio. The rules were enacted over concerns with the potential risk that private sector investment can bring.
Mayor Weaver and Councilmember Frank Quintero both spoke in favor of raising the limit.
“We need more of our investments in corporate paper,” Quintero said. “I just think we’re not doing ourselves a service when we don’t allow ourselves these investments. I think it’s worth talking about … to at least move it to 25%.”
He added that more opportunities for investment yields are found in the private sector than in the federal government.
“The government doesn’t have money, but corporations do and we need to take advantage of that,” he said.
Manoukian welcomed an increase in private investment, citing the state’s own limit as being 30% – a limit adhered to by neighboring Burbank and Pasadena, among other cities.
“[Raising the limit] doesn’t mean we’ll invest all of the [allowed] percentage,” he said. “But it’ll be good to have a little leeway.”
City Manager Scott Ochoa, when asked by Mayor Weaver, also expressed a favorable opinion of raising the limits on the city’s stake in corporate investment.
“If you have the opportunities to invest in companies that have staying power, then it’s always a good thing to give council [the authority] to make policy in a way that benefits us long-term,” he said.
Dissent was heard from Councilmember Ara Najarian, who requested more time to study the issue. Though the opportunity to increase those investments may look good at the present time, Najarian invoked General Motors’ filing for Chapter 11 bankruptcy in 2009 as an example of a private company that may look strong on paper, but may be vulnerable to deep risks.
“The possibilities of these other companies going the same way may be remote,” he said. “I hate to keep waving that flag, but [this] deserves a little more analysis.”
Upon the request of the city council, Manoukian agreed to return with a study exploring the option to increase the city’s holding of private investment at a council meeting in the near future.