The Finance Committee met 06/12/2023. During that meeting they received a presentation on the performance of the city’s bond portfolio. This presentation was given by Michael Maloney, a portfolio manager as US Bank who manages Appleton’s bonds. The presentation and discussion were fairly high level and only took up around 12 minutes.
I’ve prepared a transcript of the discussion.
I’ve probably admitted this in the past, and I’m going to admit it against up front right now: I am not a financial person, so I apologize if I inadvertently get something wrong in this recap.
Mr. Maloney reviewed slides 2-4 of the presentation. [The rest of the slides looked like they were just legally required disclosures and information.]
The main things I understood from the presentation were that
- Increased interest rates had caused bond prices to go down resulting in the city’s bond portfolio showed an unrealized loss of $5.8 million.
- That unrealized loss would eventually go to 0 or close to 0.
Mr. Maloney said Appleton’s investments were in a ladder with different investments maturing every year. Half the portfolio was coming due within the next three years. He said that was good news because interest rates were high, so as the bonds matured, he would be able to invest them at higher and higher and higher rates which would cause the interest on the portfolio to explode over the next several years.
Alderperson Katie Van Zeeland (District 5) said that her understanding was that the city had to guarantee the unrealized losses with assets. This was based on a conversation she had with the mayor, and she recognized she might not be using the correct terms as she asked her question.
Based on how Mr. Maloney and Director of Finance Jeri Ohman responded, it sounded like this was basically just an accounting issue and having the loss show up on the books was not a problem because the city was not going to have to sell any bonds early.
View full meeting details and video here: https://cityofappleton.legistar.com/MeetingDetail.aspx?ID=1101377&GUID=26C82262-831C-4420-BB3F-7944DD24C0EA
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