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1993 10 13 IAB Minutes CONSENT ITf~ A INVESTMENT ADVISORY BOARD MINUTES October 13, 1993 The regular meeting of the La Quinta Investment Advisory Board was called to order at the hour of 5:30 P.M. by Chairman Lewis, followed by the Pledge of Allegiance. PRESENT: Board Members Brown, Gilreath, Sales, Wilson and Chairman Lewis ABSENT: None OTHERS PRESENT: Thomas J. O'Reilly, Finance Director and Debbie DeRenard, Secretary I. PUBLIC COMMENT - None II. PRESENTATION A. Presentation by Cynthia L. Bonneau of. C L Bonneau & Co. regarding investment opportunities. Ms. Bonneau outlined the structure of investment agreements along with the advantages and disadvantages of various investment options. A sample investment contract was reviewed. Board Member Brown advised that she and Ms. Bonneau are friends and previous'co-workers and she would like to go on record stating that she will abstain from voting on any item regarding Ms. Bonneau. Mr. O'Reilly advised that Ms. Bonneau was not recommended by Board Member Brown. Ms. Bonneau contacted the City previously as a referral from one of the City's Financial Advisors. III. CONSENT CALENDAR A. APPROVAL OF MINUTES FROM THE MEETING OF SEPTEMBER 8, 1993. MOTION - It was moved by Board Members Brown/Gilreath to approved the minutes of September 8, 1993 as submitted. Motion carried unanimously. IV. BUSINESS SESSION A. TRANSMITTAL OF TREASURER'S REPORT DATED JULY 31, 1993. Mr. O'Reilly advised that the July 31, 1993 Treasurers Report was before the Board at their September 8, 1993 meeting in draft form. Information on the outstanding checks has been included in the Report. Investment Advisory Board 2 October 13, 1993 Minutes Mr. o'Reilly advised that the outstanding stale dated checks are scheduled to be canceled. In response to Board Member Sales, Mr. O'Reilly advised that the expiration date is not specified on the checks. Board Member Lewis advised that unless it is explicitly stated, its payable at the option of the bank. The bank cannot be held liable for paying a check. Mr. O'Reilly reviewed the Treasurer's Report balances with the Board. MOTION - It was moved by Board Members Gilreath/Sales to receive and file the Treasurer's Report dated July 31, 1993. Motion carried unanimously. B. APPOINTMENT OF INVESTMENT ADVISORY BOARD MEMBER TO THE ARBITRAGE SERVICES SELECTION COMMITTEE. Mr. O'Reilly advised that the IRS has established rules for arbitrage compliance. Arbitrage is the interest the City would make on investments. If the City makes more money on the interest from investing their money than is being paid to bond holders, this is called arbitrage. There have been industry abuses in the past and that the IRS passed guidelines in 1986 that were extremely complicated. The rules were updated in 1989 to simplify the existing rules. The government passed arbitrage rules and regulations that require any excess arbitrage that is made has to be turned over to the federal government. There is a 5 (five) year reporting period. The City will be doing an RFP and appoint a selection committee to select a consultant to perform the arbitrage services. The City Council. suggested that the' selection committee consist of 2 Staff Members - Tom O'Reilly, Finance Director, Geniene Croft, Account Technician, Stanley Sniff, Council Member and 1 member of the Investment Advisory Board. Mr. O'Reilly advised that the selection committee's duties will be to review the RFP, the RFP will then be mailed to the interested consultants, and the selection committee will meet and review the completed RFP's in order to make a recommendation to Council. This should not require an extensive amount of meeting time. In response to Board Member Brown, Mr. O'Reilly advised that this will probably be happening every 3 (three) years. InveStment Advisory Board 3 October 13, 1993 Minutes Chairman Lewis asked for volunteers. Mr. Sales advised that he would volunteer to be on the selection committee. Motion: It was moved by Board Members Brown/Gilreath to nominate Board Member Sales to the Arbitrage Selection Committee. Motion carried unanimously. Board Member Brown recommended that Board Member Sales reports back to the Investment Advisory Board on the procedures of the selection committee. C. CONSIDERATION OF REQUEST TO HAVE THE LA QUINTA CITY COUNCIL APPOINT AN INVESTMENT ADVISORY BOARD LIAISON. Mr. O'Reilly advised that at the September 8, 1993 Investment Advisory Board meeting, the Board requested that a method or process be identified for soliciting input from the City Council as to specific functions that the Council would like to see performed by the Investment Advisory Board. One possible alternative to achieve this input would be to request a Council Liaison to the Investment Advisory Board. This Liaison would provide the Board with the opportunity to gather input from the Council concerning the specific performance of the functions outlined in the Municipal Code that created the Board. Mr. O'Reilly presented a memorandum in the staff report for the Board to review. Board Member Wilson questioned if the Council wanted to meet with the Investment Advisory Board. He further advised that one Council Member cannot speak for the others and if the Council were to rotate, it would be diluted even more. Mr. O'Reilly advised that if the Board had specific questions, the Council Member could speak from his point of view, but could not speak for the Council as a whole. The Council Member could take this information back and report to the entire Council. Board Member Sales advised that if the Council expects the Investment Advisory Board to review the monthly financial reports and tie them into the records, the Board would like to know how far the Council would like them to research. Investment Advisory Board 4 October 13, 1993 Minutes Board Member Wilson advised that his opinion is that the Council does not expect the Board to research the records. He further explained that the City is well audited and the Board is not going to understand the financial process well enough. The purpose of the Board in his opinion is to recommend broad scale recommendations. Mr. O'Reilly advised that the Board was created as a recommendation from the Task Force after the Wymer incident. He advised that Council may have wanted another review process. Board Member Wilson advised that the Council is probably looking for positive input that would provide safety for the public's money. Board Member Brown advised that it is crucial that what the Council had in mind needs some clarification and that a member of Council should speak before the Board directly, or perhaps it would be simpler to have a specific task outline from the Council. The Board is speculating and in order for the Board to provide a service, the City Council needs to answer these questions directly. Chairman Lewis advised that the memorandum does not specifically state the number of meetings that Council should attend. Mr. O'Reilly advised that the options were left open for Council's pleasure. If the Board wants to identify something specific they can and then per the amendment, the memo will be sent to Council. Board Member Brown suggested that the Board give an either/or situation. This will provide Council with the option to choose the best method for guidance. Board Member Sales advised that this is a new Board and there is no real precedence to follow. Board Member Brown advised that the Council will act when they see something in writing. Board Member Sales advised that the Council may be going though the same process when they review the Treasurer's Reports. Investment Advisory Board 5 October 13, 1993 Minutes Mr. O'Reilly advised that this Board is reviewing the Treasurer's Report more thoroughly than the Council does at their meeting. Board Member Brown advised that maybe this is what the Council wants this Board to do. Board Member Sales advised that this Board is spending a lot of time on the Treasurer's Reports. Board Member Wilson advised that this Board has spent a lot of time determining how the Treasurer's Report is put together, but he advised that he is not sure that it is confirmed and balanced. The auditors know whether the report is confirmed and balanced correctly. This is what they are paid to do. Board Member Brown advised that the Board can tell if it is in balance. This may be a waste of the Boards time and if it is then it needs to be eliminated. Mr. O'Reilly advised that he will revise the memorandum and bring it back to the Board. Motion: It was moved by Board Member Gilreath/Wilson to continue this item until the November 10th Investment Advisory Board. Motion carried unanimously. D. CONSIDERATION OF CONSOLIDATING THE CITY AND RDA BANK ACCOUNTS. Mr. O'Reilly advised that this was brought up to the Investment Advisory Board at their last meeting. Currently, there are 4 (four) accounts with Bank of America. The City and the RDA each already use a pooled cash process for the various funds that fall under City or RDA control. This means that although each fund has its' own cash balance, one checking account is used and the checks specifically charge each fund per the account number coded. Staff is suggesting that the City and RDA accounts run under the same checking account. The coding on the checks would establish which account would be charged. In the valley, Rancho Mirage is the only City still operating with 2 accounts. Pooling the account does not eliminate the possibility of having a separate investment. The RDA could make an investment that is strictly RDA that is not pooled with the other fund~. The City is cutting the RDA checks now, because the system is old and cannot handle two warrant runs. Investment Advisory Board 6 October 13, 1993 Minutes In response to Board Member Wilson, Mr. O'Reilly advised that the State Code does not recommend it or prohibit it. Board Member Wilson advised that the public will sometimes have a misconception of how the funds can be used (by co- mingling the funds) and will this create a perception in the publics mind regarding the funds? Mr. O'Reilly advised that this perception exists already and we have run into this with Project Area No. 1. Mr. O'Reilly advised that this was brought before the Council and there was hesitation and that at the time the recommendation was to take this to the Investment Advisory Board. The concern at that point was that the monies are together and if someone wants to go after the RDA or City they would get all the money. Staff feels the courts would agree that there is no way they could freeze the entire account when different amounts belong to different entities, and there would be no risk in this. In response to Board Member Sales, Mr. O'Reilly advised that the amount of time this will save would be approximately 16 hours of staff time. Mr. O'Reilly advised that the cost savings will be minimal, its more of a work load and simplicity effort. In response to Board Member Sales, Mr. O'Reilly advised that the coding of the checks will not be different, just simpler. The coding that is going on now is more apt for error than the coding would be if the accounts were combined. Mr. O'Reilly advised that separate records will still be kept for the~different accounts. Board Member Sales stated that he did not feel the City should combine the accounts at this time. MOTION: It was moved by Board Members Brown/Gilreath to approve the consolidation of the City and RDA Bank Account. Motion carried with Board Member Sales voting NO. VI STUDY SESSION - None Investment Advisory Board 7 October 13, 1993 Minutes VII OTHER A. Staff Information Reports. a. Update on Time Capsule Mr. O'Reilly updated the Board on the Time Capsule items. Board Member Wilson suggested a aerial photo of the area. ********************* Mr. O'Reilly advised that he has contacted the trustees regarding LAIF as a permitted investment. The Bank of America seem straight forward, First Interstate had the individualized investments and right away they felt that LAIF wasn't specifically allowed in that investment, but if the Bond Counsel writes an opinion letter that states "the investments that LAIF is doing match the permitted investments", they did not feel they would have a problem with that. As a follow-up on that, as part of the research on what was presented concerning the bond issues for the RDA and the Financing Authority that actually have a reserve sitting with a Trustee, staff looked at the five bonds for the Assessment Districts for which the City has reserves in-house. Looking through some of the documents it appears the City may have to segregate out those reserves. Staff is researching old Resolutions when the Assessment Districts were formed, on what to do with the proceeds and where the reserves have to go. VII ADJOURNMENT MOTION - It was moved by Board Member Wilson/Brown to adjourn the meeting. Motion carried unanimously.