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1995 07 12 IAB Minutes INVESTMENT ADVISORY BOARD MINUTES July 12, 1995 I CALL TO ORDER Regular meeting of the La Quinta Investment Advisory Board was called to order at the hour of 5:30 P.M. by Vice Chairman Brown, followed by the Pledge of Allegiance. PRESENT: Board Members Frame, Irwin, Sales and Vice Chairman Brown ABSENT: Chairman Lewis OTHERS PRESENT: John Falconer, Finance Director, Lee Osborne, and Debbie DeRenard, Secretary INTRODUCTION OF NEW BOARD MEMBER Mr. Falconer introduced Robert Frame who replaces Board Member Helen Gilreath. FISCAL YEAR 1995196 Meetinq Schedule Ms. DeRenard advised that each Board Member is allowed three unexcused consecutive absences. Vice Chairman Brown advised that the proper procedure when you cannot attend a meeting is to call the Investment Advisory Secretary. It was the unanimous decision of the Board to accept the meeting schedule times and dates. APPOINTMENT OF OFFICERS A. Appointment of Investment Advisory Board Chairperson. Board Member Irwin nominated Chairman Lewis for Chairman Chairman Lewis was appointed by unanimous vote as Chairman. Investment Advisory Board 2 July 12, 1995 Minutes B. Appointment of Investment Advisory Board Vice-Chairperson. Board Member Irwin nominated Vice Chairman Brown as Chairman. Board Member Sales advised that he would be willing to serve as Vice Chairman. Vice Chairman Brown called for a vote. Vice Chairman Brown was appointed by unanimous vote for Vice Chairman. MOTION - It was moved by Irwin/Frame to appoint Board Member Lewis as Chairman and Board Member Brown as Vice Chairman. Motion carried unanimously. II CONFIRMATION OF AGENDA Confirmed. III PUBLIC COMMENT- None IV CONSENT CALENDAR A. Approval of Minutes of June 14, 1995 Board Member Irwin advised that on page 4, second paragraph of Item C of the June 14, 1995 minutes he said "that any significant enterprise or any significant organization that issues a financial statement that lacks the audited opinion of a major accounting firm has frequentlY not been prepared according to GAAP." MOTION - It was moved by Board Members Sales/Irwin to approve the minutes of June 14, 1995 as corrected. Motion Carried Unanimously. V BUSINESS SESSION A. Transmittal of Treasurers Report and Balance Sheet dated May 31, 1995. In response to Lee Osborne, Mr. Falconer advised that LAIF allows an investment of $15,000,000 per account. Investment Advisory Board 3 July 12, 1995 Minutes MOTION - It was moved by Board Members Sales/Irwin that the Board Reviewed, Received and Filed the Treasurers Report dated May 31, 1995. Motion carried unanimously. B. Continued Consideration of a Specific Task Outline. Mr. Falconer advised that at the July 6, 1995 City Council Meeting the Council made the changes to the Board Functions, Section 2.70.030 as recommended by - the Investment Advisory Board. He further advised that the Council added two Board Members to the Investment ^dVisory Board. MOTION- It was moved by Board Members Sales/Irwin to accept the changes to the Ordinance-Board FunctiOns and have the Finance Director incorporate the changes into a Mission Statement. Motion carried unanimously. C Continued ConsideratiOn of LAIF Investments 1. LAIF Contract In response to Board Member Irwin, Mr. Falconer advised that the City does not have a collateral agreement with LAIF. Mr. Falconer advised that Resolution 82-11 and RA85-1 serves as the City's Contract. This was confirmed by the City Clerk. Board Member Sales recommended that the City obtain a current Resolution. Mr. Falconer advised that unless changed the Resolutions in place are binding. He further advised that current signature cards are on file with LAIF and don't require a resolution. The Resolutions established the account with LAIF and the signature cards allows the respective individuals to handle the accounts. Vice Chairman Brown advised that having been in banking she confirmed that this is correct. Action Item Board Member Sales requested a copy of the document that give each individual authority to make changes to LAIF. Investment Advisory Board 4 July 12, 1995 Minutes 2. Investment Report furnished by Tom Lewis Noted. 3. Coachella Valley Treasurers Reports Noted. 4. LAIF Earnings Rate and Balances for FY 94/95 Board Member Irwin advised that he has spoken with the Board regarding his concerns with LAIF. He advised that the staff report indicates that each months earning for LAIF are below market. The rates/yields are under market. This is not an appropriate investment for the City of La Quinta. There is such a variety of investment vehicles available, bank CD's and Money Market Funds. Money Market Funds that limit their investment to Treasury Bills with average maturity in the neighborhood of 30, 40 or 50 days. Board Member Sales advised that the trade off is there because of the ease in which the City can make investments. To compare LAIF with a money market fund, he would choose LAIF because it has the general assurance of the State of California behind it. Board Member Irwin advised that he doesn't see any tradeoffs in LAIF. In terms of ease of getting money in and out would be the same as a mutual fund. Vice Chairman Brown advised that the Board needs to come to a clear understanding of Da, IF. The Board has received helpful information their Agenda packets. She further advised that for the record LAIF is an accepted investment under the current investment policy. The Board has voice with regards to how the funds are invested. She further thanked Staff for their work on collecting the Treasurers Reports from the other Cities. She noted that there are no Cities that are not using LAIF and this certainly endorses LAIF. Board Member Irwin advised that diversification is fine and the City should be diversified. There are other investments out there and why is the City fooling around with LAIF. It's an oddball entity. Investment Advisory Board 5 July 12, 1995 Minutes Board Member Frame - Advised that he has no exposure to LAIF, but. would feel uncomfortable with having as great amount of money in any particular fund as the City has. Mr. Falconer advised that LAIF is same day liquidity and the rates are 6%. Board Member Sales advised that if we are not comfortable with an investment, then we should change. He further questioned if at any time is there a possibility that the Board will find LAIF upside down some day and how do the other Cities feel about LAIF. Mr. Falconer advised that the Treasurers Reports from the other cities speak for themselves. Indian Wells has $49 million invested in LAIF. This doesn't mean that because Indian Wells has this much invested -it's a good investment, but they certainly feel comfortable with it. In response to Board Member Sales, Mr. Falconer advised that he would like to diversify the City's investments, not because he is uncomfortable with LAIF, but because the City can get a higher yield. Board Member Sales advised that there is an underlined soundness to · LAIF that the City could not find in an every day mutual fund. Vice Chairman Brown advised if the issues are whether we stay with LAIF or not, the Board can address it right now. Board Member Irwin advised that he has two separate issues. The first one is diversification and the second - is LAIF an appropriate investment for the City of La Quinta In response to Vice Chairman Brown, Board Member Irwin questioned if LAIF is an appropriate investment in its entirety. Vice Chairman Brown stated for the record that she would like each Board Members comments regarding LAIF as an investment. Board Member Frame advised that diversification clearly needs to be done. He shares Board Member Irwin's concerns. Unless more information is received regarding the investment objectives, the City could find something from a money market standpoint. Minimal funds in LAIF. Investment Advisory Board 6 July 12, 1995 Minutes Board Member Irwin advised that in context of diversification, the investment policy Ought to be amended to permit City/RDA combined put no more than 10 or 15% total funds in any one institution and mutual fund. As to LAIF, the City of La Quinta should not have a meaningful amount of money in LAIF. Vice Chairman Brown advised that she is a strong believer in diversification and believes this is what breought the beginning of the Investment Advisory Board. The struggle is the percentages and how the Board ends up managing the money in a responsible way. The Board will find the investment vehicles to diversify. Leaving LAIF entirely is not a good thing. She further advised that she is open to any type of investment vehicle that is strong and safe and on the conservative side. Action Item Board Member Sales advised that he is confident that there is a reason for LAIF over some other mutual fund. He advised that he would like to find the reason and 'asked Mr. Falconer for his help. He suggested discussing this with some of his peers. The City needs an account like this so that they can put money in and take money out. Board Member Sales adviSed that you can't compare LAIF to Fidelity Money Market. Board Member Irwin advised that 90% of the City's money is in LAIF and now the Board is searching for good reason to have it there. Board Member Sales advised that he wants to find out what LAIF has to offer over the regular day-to-day money market fund. Action Item Mr. Falconer advised that he wOuld call LAIF and discuss this with them and call a mutual fund and discuss it with them. He also advised that he would discuss LAIF with his peers. In response to Board Member Frame, Mr. Falconer advised that there is not a minimum amount to have in LAIF. In response to Board Member Frame, Mr. Falconer advised that the amount of funds needed on a daily basis varies. If a land deal comes through, the Investment Advisory Board 7 July 12, 1995 Minutes amount can reach as high as $3 to $4 million. Mr. Falconer advised that he prepared a Diversification of Investments worksheet included in the Agenda Packets. He advised that the City Manager has reviewed and discussed diversification. At the present time the City has $1 or $2 million that can comfortably be invested in a long term investment. Long term would mean no longer that one (1) year. The Board concurred, it's a good first step. Mr. Osborne advised that diversification is a given. In the diversification a big part is planning for the needs of the City. In review of the other Cities and their investments, planning is fundamental in how you want things to be available. In regards to LAIF, the value, return and liquidity, if we find something there with the same safeguards and return and liquidity then the City could look into it. If the City of Indian Wells is going to invest $49 million in LAIF, there has got to be a good reason. LAIF is something to keep on hand in liquidity, but not to put to the extent that the City has invested now. Action Item - Board Member Irwin Vice Chairman Brown advised that what the Board has been struggling with is exactly a number. The Board has been given an amount investible and there should be an investigation on some other instruments. She further advised that she would like to make a recommendation that Board Member Irwin research and identify a few for the Board to review so that the Board can begin the process of looking at some alternative investment. At the next meeting the Board will be looking at three things that will accomplish the same liquidity goal. The Board will need to identify percentages of a total as opposed to whether the Board should invest or not. Board Member Sales advised that the question needs to be answered about LAIF. 5. IAIF Investment Policies Noted. MOTION -It was moved by Board Members Sales/Irwin to continue the consideration of LAIF Investments. Motion carried unanimously. Investment Advisory Board 8 July 12, 1995 Minutes D. Continued Consideration of the Investment Policy Motion -It was moved by Board Members to 1. Investment Advisory Board Minutes of 6/22/94, 7/20/94, 8/17/94 & 8/31/94 Vice Chairman Brown advised at the meeting of August 17, 1995 the Board directed an investment to be made. She quoted the paragraphs: "He advised that the total operational funds available are $12,854,505. The portfolio maximum limit for investment in government pools is 90%. The portfolio compliance limit would be $11,569,055 for investment in government pools. As of July 31, 1994 the balance for government pools is $12,562,052. A negative figure means that the City is not in compliance with the Investment Policy. In order to come into compliance the City would need to invest $1,000,000 in another investment account other than a government pool." This Would mean that the City is not in compliance with the Investment Policy and in order to come into compliance the City would need to invest $1,000,000 in another investment account other than a government pool. She further advised that page 2 of the August 31, 1994 Special Meeting quote: "In response to Board Member Sales, Mr. Parzonko advised that the City is over invested in the Government Pools. In order to come into compliance the City would need to invest $1,000,000 into another investment account. In response to Board Member Sales, Mr. Parzonko suggested an investment in (2) year Treasury Notes. Board Member Brown commented that the Investment Advisory Board has been very successful in regards to the Investment Policy and its is incumbent upon the Investment Advisory Board to make the recommendation to come into compliance with what the City Council has identified as acceptable. Mr. Parzonko advised that it is not necessary for him to have Council's approval to invest the $1,000,000 in an approved investment account. Investment Advisory Board 9 July 12, 1995 Minutes MOTION -It was moved by Board Members Sales/Brown to recommend to the Finance Director to come into compliance with the City's Investment Policy that has been established. The Investment Advisory Board suggests that the Finance Director review the two (2) year Treasury Notes. Motion carried unanimously." Vice Chairman Brown questioned if this ever took place. Board Member Sales advised that this question has been previously asked and the Investment Advisory Board was advised that the Board is in compliance. Vice Chairman Brown questioned if the City is in compliance with the current Investment Policy and if they are not, this needs to be communicated to the City Council. Action Item Mr. Falconer advised, that he would research this and bring it back to the Board at the next meeting and if at that time the Board wants it brought to the Council, it can be. MOTION -It was moved by Board Members Irwin/Sales to Continued Consideration of the Investment Policy and have Staff come back to the Board with the calculation of an allowable investment and. with compliance of the Investment Policy and the last six months of the LAIF percentages have been. Motion carried unanimously. VI BOARD MEMBER COMMENTS Board Member Irwin stated that the Board has covered a lot of ground at the last two meetings. Board Member Sales advised that the City has the Custodial Agreement that needs to be executed and in addition the City will need to select broker/s. VII INFORMATIONAL ITEMS A. Update on Ordinance Governing Investment Advisory Board InveStment Advisory Board 10 July 12, 1995 Minutes Noted B. First Interstate Bank Custodial Account Agreement Noted C. Consolidated Balance Sheet Noted & Filed D. Mutual Fund Information Noted. VII ADJOURNMENT MOTION- It was moved by Board Members Irwin/Sales to adjourn the meeting. Motion carried unanimously.