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Glendale's investment portfolio continues to slide amid low interest rates

August 16, 2012

Glendale’s investment portfolio ended the fiscal year in June at $393 million, down $16 million from the same period last year, according to a city report released this week.

The city’s investment returns have been stifled by low interest rates and a still struggling economy.

“We haven’t lost $16 million, we have spent $16 million, but that hasn’t been replaced,” said City Treasurer Ron Borucki. “More dollars flow out of the portfolio than are coming in.”

The city’s interest earnings for the year finished at $4.3 million, down from $5.8 million in the previous year.

At a City Hall meeting on Tuesday, City Manager Scott Ochoa called the fiscal year-end report “less than stellar news.”

Interest rates have been historically low for the past four years and that is unlikely to change any time soon, Borucki said.

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The Federal Reserve has kept interest rates historically low to spur borrowing, and in turn, boost the economy. But that means the city reaps less from its investments — mostly corporate and government bonds. Without interest rates moving higher, it’s likely Glendale’s investment portfolio will experience a similar fate this fiscal year, according to the city report.

The rate of return fell to 1.09% from 1.43% for the year. Although upsetting, the tumble was better than expected. Borucki said increasing the share of corporate notes to 15% from 7% over the year helped buoy the rate of return.

-- Brittany Levine, Times Community News

Follow Brittany Levine on Google+ or Twitter: @brittanylevine

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