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City of Manteca has $140 million in investments

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POSTED August 15, 2013 1:47 a.m.

Manteca’s struggling general fund that pays for day-to-day municipal operations such as police, fire, streets, and parks has drawn the bulk of the attention since the start of the Great Recession in 2006.

Declining revenues forced a reduction of the municipal workforce with those employees still working taking compensation cuts in excess of 20 percent.

This fiscal year, the general fund structured deficit is expected to come close to disappearing dropping down to $145,720. The money to bridge the shortfall in revenue to cover annual expenses will come from dipping into general fund reserves.

Meanwhile, the city has $140 million is safely invested earning interest. The funds are restricted money ranging from growth fees collected for specific purposes and unspent redevelopment agency funds to capital improvement reserves for the water and sewer enterprise accounts.

Earlier this month the City Council authorized the firm that has been managing Manteca’s portfolio for 12 years —PFM Asset Management — to participate in Municipal Obligations as well as Local Government Investment Pools if they see fit to do so. The changes allowed by state law were part of revisions made to the City of Manteca’s investment policy.

The city’s long-term strategy of collecting fees before incurring expenses to avoid borrowing as much as possible is how Manteca managed to spend $18 million during the past three years on a new animal shelter transit center, vehicle maintenance facility, a fourth fire station, and the HOPE Family Shelter upgrade.

What is described as an effective investment strategy that has protected municipal funds while earning returns above expectations since 2001 is complemented by the city’s strong bond ratings.

Manteca in 2012 earned higher credit worthiness ratings on both their water and sewer bonds.

While other California jurisdictions had their bond ratings downgraded by Standard and Poor, Manteca received an improved rating going from “A+” to “AA-“on their outstanding water bond debt of $41.6 million.

Fitch — another one of the big three credit rating agencies that also includes Moody’s — earlier kicked up Manteca’s wastewater treatment bonds to “AA-“ from  “A+”. There is $45.8 million in outstanding wastewater bond debt.

That means the firms that determine risk to lenders rate bonds issued by Manteca as high grade where as just a year prior in 2010 they were considered upper medium grade. The ratings that run from a low of “D” to a high of “AAA” reflect an agencies’ financial worthiness, ability to repay debt, size of its cash reserves, and overall fiscal management. There are only three rating steps higher than what Manteca has.

The bond ratings are akin to personal credit ratings. The higher the rating, the lower the interest rate charged.

The ratings were viewed as good news by municipal staff as they re-affirmed how conservatively the city has managed its debt and finances. Manteca has no bonding debt secured by the general fund as some cities do.

Both Manteca’s water and sewer operations have gone five years without rate increases. At the same time, both systems have undergone major expenditures for system upgrade including multi-million dollar arsenic treatment plans.

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