City finance staff reports Q4 2024 investment performance, proposes policy tweak and internal financing for small ULID

Christie Wolf, Lacey’s financial services manager, presented the city’s fourth-quarter 2024 investment report at the Feb. 25 work session, saying the city’s core investment portfolio “narrowly over performed against the investment strategy benchmark for this quarter.”

Wolf said the portfolio had a total unrealized loss of about $1,900,000 at quarter end and attributed most of that on‑paper loss to rising Treasury yields related to fiscal-policy uncertainty. She explained that the unrealized loss reflects fair‑market valuation at year‑end — “an on paper loss, but we're never gonna sell those investments ahead of time, so we're not gonna realize that loss,” she said in response to a question from Councilmember Vasquez.

Wolf reported that two‑ and five‑year Treasury yields rose during the quarter, that the city’s book yield decreased slightly (from 3.485% to 3.441%), and that GPA Portfolio Advisors had helped the city increase the core portfolio book yield over the year while keeping investments compliant with the city’s investment policy. Wolf said the portfolio remained slightly overweighted toward Treasuries because of tight corporate spreads.

GPA conducted a 2025 strategy review and made a single recommendation: increase the weighted average maturity target from 2.0 years to 2.5 years to align with the city’s stated 0–5 year investment range. Wolf said the change would be brought to council as a formal investment‑policy revision in June, with illustrations and a full presentation at that time.

Wolf also presented a separate financing proposal for the Ptomey Park Estates ULID 2025 (a Utility Local Improvement District). Because the assessment amount is small — “under $350,000” — and the term would be 15 years, staff said a direct market placement or bank loan would be difficult and proposed an interfund loan/bond structure in which the city would finance the ULID internally, similar to a prior 2023 ULID arrangement. Staff said the internal financing option keeps the issuance internal and is appropriate for small deals that do not fare well on the open market.

Council members asked clarifying questions about market conditions, liquidity, and whether staff was satisfied with GPA’s work. Wolf said staff was satisfied with GPA’s performance and cited the advisor’s review of liquidity and maturity timing. No formal council action or vote was taken on the policy change or the ULID financing at the work session; Wolf said both items would return to a future council meeting for formal consideration.