A.G. Gancarski
Last month, the Jacksonville City Council auditor offered a financial summary for the twelve months ending September 30.
As these things go, there were plenty of positive data points one could reference, including more favorable variances in funds than unfavorable, with cogent explanations for unfavorable variances, such as those in the Equestrian Center and the Performance Arts Center account.
The revenue side has a couple of areas of interest: State Shared Revenues, including sales and gas taxes, are outperforming budget by $6.184 million; however, charges for services are underperforming by nearly the same amount. That underperformance, claims the auditor, is driven by delayed writeoffs of uncollectible ambulance revenue, among other factors.
Expenditures, in total, have a favorable variance of $12.25 million.
Great news. But how does the future look, specifically regarding that driven by the investment portfolio?
Performance is trending downward, even ahead of anticipated Fed rate hikes this month.
“The Operating Portfolio’s performance, for the quarter ending September 30, 2015, came in at a positive 0.14% after fees. The Fiscal Year-to-date performance finished at a positive 1.16% but well behind the full fiscal year 2015 budgeted rate of 2.27%. During the past three and five years the portfolio has earned an average annual return of 1.06% and 2.08% respectively. This past year was marked by a great deal of global uncertainty as well as bond market adjustments for the anticipated rate hikes in the coming quarters and years,” the report asserts.
Furthermore, “market interest rates are more likely rise than they are to fall which makes it more difficult to produce a high level of returns on a forward looking basis. In light of this stance the portfolio is now, and has been for several quarters, positioned in a moderate to slightly conservative posture after having reduced risk in recent years. As interest rates revert back to higher, more historically normal, levels in the coming quarters and years, the portfolio may experience headwinds and see prices on current bond holdings fall.”
The city of Jacksonville has made some audacious plays during the current mayoral administration, highlighted by the decision to borrow $45 million for capital improvements related to the EverBank Field fan experience. Undoubtedly, the investment portfolio’s performance will be closely watched in the next few quarters, ahead of the second Lenny Curry budget in August.
