Oscar Valdez AuditorControllerTreasurerTax Collector San Bernardino County AGA
Oscar Valdez Auditor-Controller/Treasurer/Tax Collector San Bernardino County AGA Inland Empire Chapter February 8, 2017
Oscar Valdez was appointed to the vacated elected position of Auditor. Controller/Treasurer/Tax Collector by the San Bernardino County Board of Supervisors on February 17, 2016. Prior to that appointment, he served as the Assistant Auditor. Controller/Treasurer/Tax Collector since May 2011, and was responsible for the management and oversight of the Auditor, Controller, Disbursements, and Treasurer divisions for the County of San Bernardino. Oscar has over 20 years of accounting, auditing, budgeting, finance, and management experience. Oscar began his career with San Bernardino County in 2000 at the Auditor-Controller-Recorder’s Office as an Internal Auditor II. He promoted through the ranks as General Accounting Supervisor, Accounting Manager, and Interim Chief Deputy Controller, where he directed activities for the General Accounting, Fund Accounting, Property Tax, Accounts Payable, and Payroll sections. Prior to his appointment to Assistant Auditor. Controller/Treasurer/Tax Collector, Oscar held the position of Chief Deputy Controller where he directed the daily activities for the General Accounting, Fund Accounting, Property Tax, Management Services, and Reimbursable Project sections. Prior to the County, Oscar was an Audit Supervisor for Vicenti, Lloyd & Stutzman LLP, planning and performing financial and compliance audits for a variety of areas, such as Colleges, School Districts K-12, and Non-Profit Organizations. From 1986 -1991, Oscar served honorably with the United States Army as a Sergeant in the 782 nd Maintenance Battalion, 82 nd Airborne Division, and with the 758 th Maintenance Company, attached to 18 th Airborne Corps, in Operation Desert Storm. Mr. Valdez is a graduate of California State University, San Bernardino with a Bachelor of Science Degree in Business Administration with an emphasis in Accounting. 2 2
Treasury Organizational Chart Oscar Valdez Auditor-Controller/Treasurer/Tax Collector Johnson Asst. Auditor. Controller/Treasurer/ Tax Collector Vacant Chief Deputy Treasurer Parth Bhatt Wendy Sieruga Investment Officer Robin Dixon Asst. Investment Officer Ian Capule Investment Analyst Treasury Manager Vacant Investment Analyst (Trainee) Lupe Perez Accounting Technician Isabel Morales Fiscal Assistant 3 3
Mission Statement To preserve the safety and liquidity of all investments within the County Investment Pool while obtaining the highest attainable yield within established credit guidelines through effective investing and management of banking services; to provide Pool participants with timely, accurate, understandable reports and information. 4 4
Treasury Division • Management of $5. 043 billion* County Investment Pool – Approximately $56. 6 billion in trades each year – AAAf/S 1 -rated by Fitch Ratings • Operates as County’s banker – Records County Investment Pool deposits – Clears all warrants issued by County and School Districts – Processed 850 K warrants paid, 428 K check deposits, 713 K Image check deposit, 98 K incoming ACH and wires, and 525 K outgoing ACH and wire transactions (including payroll). • • * Invest County funds, school district operating funds, bond proceeds, and special district funds. As guardian of the public’s money, we employ conservative County investment policies focused on the principles of safety, liquidity and yield. FY 15 -16 average daily book value 5 5
Pool Participant Composition 46% 4% 5% 27% Special Districts Schools General Fund County 6 18% Voluntary (Including Courts) Schools Misc (Including Bonds) 6
Investment Pool Rated AAAf / S 1 7 7
Investment Process 8 8
Investment Process 9 • Daily Compliance and Reporting---Internal and PFM • Daily Monitoring of Credits and Ratings Actions • Quarterly Earnings Review and Tear-sheets on Credits • Bi-Weekly Analysis and Recommendations---PFM • Bi-Weekly Investment Strategy Meetings and Pre-Approval of Trades • Monthly Analysis and Statements with full pricing---PFM • Quarterly Audits for Interest Apportionment and Treasury Pool • Quarterly Stand-Alone Financial Reports for the Treasury Pool • Quarterly Review by Treasury Oversight Committee • All trades are documented for Strategy and Trading Practice Compliance 9
Investment Strategy 10 10
Investment Process 11 11
Market Conditions • Market is pricing in 3 rate hikes for 2017, as communicated by the Fed • Oil prices have stabilized near $50 per barrel after OPEC countries agreed to limit production • US economic data continues to show strong labor market conditions and increasing wage pressure • Yields have moved up across the yield curve since November, 2016 election in anticipation of tax reform, infrastructure spending and regulatory reform • US stock markets measured by the S&P, DOW and NASDAQ have all touched all time highs • US Dollar has strengthen to multi-year high against major currencies • Germany, France and Netherlands to hold elections in second half of 2017 12 12
2 Year US Treasury Yields 13 13
Probability of Rate Hike 14 14
Market Conditions US Treasury Curve 15 15
Libor 16 16
Market Conditions Leading Economic Indicators Yo. Y 17 17
Market Conditions Economic Growth 18 18
Market Conditions Unemployment Rate 19 19
Market Conditions Nonfarm Payrolls 20 20
Market Conditions Inflation 21 21
Market Conditions Consumer Confidence 22 22
Market Conditions US Nonfarm/Nonfinancial Capital Expenditures 23 23
Market Conditions Housing Starts & Permits 24 24
Market Conditions US Agency Issuance and Spreads 25 25
Market Conditions Corporate Issuance and Spreads 26 26
Market Conditions Potential Impact of the Election 27 27
Pool Characteristics 28
Pool Characteristics (12/31/2016) 29 29
Sector Distribution (12/31/2016) 30
Pool Characteristics (12/31/2016) 31
Pool Characteristics (12/31/2016) 32
Pool Characteristics (12/31/2016) 33 33
Cash Flows (12/31/2016) 34 34
Cash Flow Management 35 35
Pool Balance 36 36
Current Investment Strategy • Incrementally adding duration exposure using Treasuries to take advantage of higher yields, as Agency spreads are tight. • Generally avoiding adding convexity due to low vol’s and narrow spreads to bullets. Yield curve is still steep and offers roll-down • Continued focus on US, Canadian, Australian, & European issuers for short credit extensions. • A to AAA rated corporate spreads are still very tight, but adding exposure when attractive. • Taking advantage short floating rate debt in light of anticipated Fed rate increases. • Maintaining plenty of liquidity to while extending duration to take advantage of higher yields. 37 37
Investment Strategy 38 38
Investment Strategy 39 39
Investment Strategy 40 40
Investment Strategy 41 41
Investment Strategy 42 42
Investment Strategy 43 43
Recent Credit Changes • Added Bank of the West collateralized deposit account to increase cash holding capacity in money market instrument • Wells Fargo continues to be on hold in light of the consumer banking scandal 44 44
Near-Term Challenges • Changing main operating bank from Bof. A to Wells Fargo • Implementing new Enterprise Financial System (SAP) • Filling vacant Treasury positions: Ø Chief Deputy Treasurer Ø Credit Analyst/Trainee • Broker-Dealer RFI 45 45
Treasury Contact Information Wendy Sieruga wendy. sieruga@atc. sbcounty. gov 909 -382 -3008 Parth Bhatt parth. bhatt@atc. sbcounty. gov 909 -382 -3033 46 46
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