REPORT TO THE JOINT POWERS FINANCING AUTHORITY November 20, 2014 FROM: MICHAEL A. LIMA, Controller/Finance Director/(ex-officio)Treasurer Finance Department BY: KAREN M. BRADLEY, Assistant Controller Finance Department GREGORY S. WILES, Treasury Officer Finance Department SUBJECT ..Title Approve a Demand Promissory Note to the City of Fresno (the "City") for up to fifty million dollars ($50,000,000) in advances from the City, and authorize and direct the Treasurer and Controller of the Joint Powers Financing Authority (the "JPFA" or the "Authority") to invest the advances in the Local Agency Investment Fund ("LAIF") (Authority action) 1. RESOLUTION - Approving a Demand Promissory Note to the City for up to $50,000,000 in advances, and authorizing and directing the Treasurer and Controller to invest the advances in the Local Agency Investment Fund (Authority action) ..Body RECOMMENDATION Adopt the attached Resolution authorizing advances of up to $50,000,000 to the JPFA from the City, approving a Demand Promissory Note to the City for up to $50,000,000, and authorizing and directing the Treasurer and Controller to invest all advances in the LAIF. EXECUTIVE SUMMARY The City can effectively double the amount of money it can invest in LAIF, from $50,000,000 to one-hundred million dollars ($100,000,000). LAIF is currently the City's best investment alternative for safe and liquid funds. The City can accomplish this by lending $50,000,000 to the JPFA on the condition that the funds must be invested in LAIF and the interest earned on the investment be paid to the City as interest on the loan. This transaction is commonly done throughout California between other cities and their Joint Powers Financing Authorities. BACKGROUND The Treasurer's Office of the State of California operates LAIF for the benefit of local agencies. Essentially a short-term money market fund, LAIF is similar to funds run by other States. These funds are intended to provide a safe and liquid investment alternative for local agencies. LAIF offers each local agency within California a single account with a maximum deposit of $50,000,000. Local agencies benefit by obtaining a reasonable rate of return with a high degree of safety. Additionally, the funds are available for use daily, if requested before 10:00 a.m. The City utilizes LAIF as one of its investment alternatives, and has the maximum amount allowed, $50,000,000, invested in its LAIF account. Since the JPFA has no funds of its own, its account may be utilized by the City to effectively double the amount of funds that may be invested with the LAIF. This is accomplished by loaning the funds to the JPFA, with the requirement that the JPFA must deposit the funds into LAIF and pay interest on the City's loan in the exact amount that the investment earns with LAIF. The Promissory Note to be used for this transaction is a Demand Promissory Note. This type of note evidences a perpetual loan with no fixed term or set duration of repayment. It is an open-ended loan that can be recalled upon the lender's demand. The funds are lent to the JPFA with very specific terms as to the disposition of the money. It is to be invested in the JPFA's account with the LAIF. However, should the City ever wish to do so, it can demand repayment from the JPFA at any time. Accepting this Promissory Note from the JPFA will effectively allow the City to double the amount of funds that can be invested with LAIF, while allowing for on-demand liquidity. This transaction is commonly done throughout California by other cities and their JPFAs. The State Treasurer's Office is aware that cities engage in this type of transaction and has no objections to it. The attached Resolution has been approved as to form by the City Attorney's Office. ENVIRONMENTAL FINDINGS By the definition provided in the California Environmental Quality Act Guidelines Section 15378 this item does not qualify as a "project" and is therefore exempt from the California Environmental Quality Act requirements. LOCAL PREFERENCE Local preference was not considered because this Resolution does not include a bid or award of a construction or service contract. FISCAL IMPACT Approving the receipt of funds from the City, and signing a Demand Promissory Note to the City, will allow the investment of surplus funds in a pool managed by the California State Treasurer's Office, thereby securing a reasonable rate of return with little risk and a high degree of liquidity. There is no cost to the JPFA or the City associated with the recommended action, and there is no financial impact on any particular Council District as a result of the recommended action. Attachment: JPFA Resolution