Auto sales are helping drive City of Manteca investments — literally.
Investments in corporate securities issued in connection with vehicle firms, their receivables, leasing and credit arms — installment debt owed by car owners — accounted for more than a third of the $21.5 million the city had invested in corporate securities as of June 30.
Overall, the city as of June 30 had $144 million in its investment portfolio.
U.S. Treasury issuances accounted for $54.7 million or 38 percent of the city’s overall investments.
The snapshot of Manteca’s investment portfolio is being shared with the City Council on Tuesday.
The quarterly reports have been made to the council since former City Manager Miranda Lutzow informed elected leaders three years ago that the city’s financial accounting was in disarray to the point it wasn’t clear if upwards of $68 million was being properly accounted by the finance department.
Those issues were related to the general ledger not being kept up to date as well as redundant expense entries as well as revenue placed in the wrong accounts.
While there were never signs of theft or such detected, it was determined money was being borrowed from restricted accounts and used for purposes other than what it was legally collected for that must be paid back with interest.
That amount — placed as high as $20 million at one point— involved growth fees collected for work such as road improvements that were used for water and sewer projects.
The exact amount of what needs to be paid back by ratepayers will require rate hikes for sewer and water services. Studies determining what those rate hikes may need to be will be brought back to the council later this year
The final amount is expected to be large enough that the water rate study under way may be broken down into two rate hikes adopted at different times spread across multiple years. The city needs to not only pay back interfund loans made on behalf of the water fund but they need to collect funds for needed capital improvement projects involving aging water infrastructure as well as cover the cost of ongoing maintenance and operations.
A sewer rate hike study is also underway.
Neither the water nor the sewer rates have been increased for 13 years.
Most of the funds in the investment portfolio represent money the city has either collected for a specific purpose or has received from the state or federal government for specific purposes. As such it can’t be tapped for day-to-day city operations such as police and fire or to expand staffing in either department or throughout the city.
A chunk of the funds represents reserves including those in general fund accounts. It also reflects property tax receipts that are paid to the city twice a year as well as quarterly sales tax receipts.
Property and sales tax represent the city’s largest source of general fund revenue. While the funds come in two to four times a year roughly 85 percent of the city’s general fund costs involve payroll and benefits that are spread out fairly evenly across 12 months.
The bookkeeping snafu for the most part has been all corrected and procedures put in place to guard against it happening again.
Among the debt instruments the city holds in its portfolio handled by PFM Asset Management that are automotive related are tied to BMW, Ford GM, Harley-Davidson, Honda, Hyundai, Mercedes-Benz, Nissan, Toyota, Volkswagen, and CarMax.
All of the debt is in the top tier of ratings issued by S&P, Moody’s and Fitch, the three firms that judge credit worthiness of corporations and municipalities.
To contact Dennis Wyatt, email firstname.lastname@example.org