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1995 09 13 IAB Minutes CONSENT CALENDAR ITEM: A INVESTMENT ADVISORY BOARD MINUTES September 13, 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 C'hairman Lewis, followed by the Pledge of Allegiance. PRESENT: Board Members Brown, Irwin, Osborne, Rodriguez, Sales and Chairman Lewis ABSENT: *Board Member Frame OTHERS PRESENT: John Falconer, Finance Director and Debbie DeRenard, Secretary *Excused II CONFIRMATION OF AGENDA Mr. Falconer advised that Board Member Irwin has requested that a report that he has prepared on LAIF be added to Business Session Item B. III PUBLIC COMMENT- None IV CONSENT CALENDAR A. Approval of Minutes of July 12, 1995 MOTION - It was moved by Board Members Irwin/Sales to approve the minutes of July 12, 1995 as submitted. Motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for June 30 and July 31, 1995. In response to the Board, Mr. Falconer advised that the Treasurers Report is in a new format. After review of the treasurers reports from other cities and comments from the Investment Advisory Board, the new format was created. MOTION -It was moved by Board Members Irwin/Brown to receive, accept and file the Treasury Reports dated June 30, 1995 and July 31, 1995. Motion carried unanimously. Investment Advisory Board ' September 13, 1995 Minutes B. Continued Consideration of LAIF Investments 1. LAIF Contract Board Member Sales advised that this contract consists of a resolution. 2. Investment Report furnished by Tom Lewis Noted. 3. Coachella Valley Treasurers Reports Noted. 4. LAIF Earnings Rate and Balances for FY 94195 Noted. 5. LAIF Investment Policies Board Member Irwin advised that he has listed nine major reasons why LAIF may not be an appropriate investment vehicle for the City of La Quinta. He advised that he feels there are a lots of other investments besides LAIF that don't have the problems that LAIF have. In response to Board Member Sales, Mr. Falconer advised that the City has information on the LAIF Board. The LAIF Board consists of five Board Members designated by statute. The Chair is the State Treasurer or designated representative, two members qualify by training and experience in the field of investments and finance and two members are treasures, finance or fiscal officers or business managers employed by any city, county or local district. In response to Board Member Sales, Board Member Irwin advised that the concept of corporate government calls for an Independent Board that are responsible to the share holders. This LAIF Board is not necessarily responsible to the shareholders. We do not elect/appoint the LAIF Board. Board Member Sales advised that the shareholders elect the people that appoint the Board. Investment Advisory Board September 13, 1995 Minutes Board Member Irwin advised that if the City invested in mutual funds - the City would be electing the directors themselves. Mr. Falconer advised that the LAIF administrator, Ms. Pat Beal will be speaking at the October 20, 1995 CSMFO meeting. The Investment Advisory Board is invited. 6. Diversification of Investments Board Member Irwin stated that he would like to have a motion made that will reduce LAIF significantly. MOTION - It was moved by Board Member Irwin that the Investment Advisory Board resolve that the City reduce its investment exposure to LAIF to less than 10% percent and redeploy those funds to some combination of mutual funds that invest strictly in treasury bills with average maturities in the neighborhood of 60 days and direct investments in treasury billS. Motion died from lack of second. Chairman Lewis advised that its appropriate for the Board to consider diversification of investments. It's not appropriate to have all investments in the same investment account. Board Member Osborne advised that he has requested information from a colleague at Merrill Lynch regarding options available that are comparable with the LAIF rates. Board Member Osborne distributed information on Merrill Lynch. Chairman Lewis advised that the Board needs to discuss percentages of investments for diversification. Mr. Falconer advised that the Investment Policy suggests that the broker-dealer be located in the City of La Quinta or Riverside County. In terms of the process, the City Attorney and City Manager felt Staff could make the analysis and decisions. He further requested a list from the Investment Advisory Board of those individuals who the Board felt qualified as broker-dealers. Investment Advisory Board September 13, 1995 Minutes In response to the Board, Mr. Falconer advised that he had previously presented to the Board his recommendation that the City has one to two million that can be invested for approximately 2 years. He recommended U. S. Treasury obligations. Mr. Falconer read a portion of the Investment Advisory Policy "U.S. Treasury and Agency Investments shall use a formal bidding procedure where rates will be received from at least two institutions with the investment placed with the highest yielding bidder, providing the institution meets the City investment criteria". Chairman Lewis requested each Board Member give their suggestions for potential brokers that the City can consider for a "approved brokers list". Board Member Osborne - Ron Meraz - Merrill Lynch Board Member Brown - Reid Jenkins, Telephone-779-9112 Board Member Sales - A National Firm Board Member Irwin - Wells Fargo or 1st Interstate Chairman Lewis - Frank Mescari- 1st Tennessee- Memphis Branch Board Member Brown recommended reducing LAIF by 20 to 30 percent. Discussion continued regarding investments with the following motion made: MOTION - It was moved by Board Members Brown/Osborne to recommend to the City Council that five million dollars of the total currently invested in LAIF which is approximately 60 percent be diversified to be determined at a later point (date not defined) as to how the Board structures the diversification. Board Member Irwin advised that still leaves eleven million in LAIF and states that he feels that this is a bad idea. Motion carried with Board Member Irwin voting NO. Chairman Lewis advised that staff is directed, that the Investment Advisory Board feels five million dollars should be withdrawn from LAIF to be invested in a different investment vehicle. Mr. Falconer advised that the "at a later date" was not defined in the motion. Mr. Falconer advised that there was a recent bond issue that raise approximately $20 million dollars that is invested in mutual funds. If we reduce LAIF and invest Investment Advisory Board September 13, 1995 Minutes the money in mutual funds, its going to Change the mix. This needs to be considered. Mr, Falconer advised that by the next Investment Advisory Board meeting the Broker/Dealer list should be finalized, The Board concurred on the following changes to the investments: Investment Type Maximum % 'Change to % Savings/Operating Accounts 85% Certificates of Deposit 60% U.S. Government & Agency Securities 75% 30% increase of Present Balance Government Pool 90% 30% reduction of Present Balance Money Market & Short Intermediate Term Bond Funds 60% MOTION -It was moved by Board Members Brown/Sales to recommend to the · City Council to reduce Government Pools by 30% Percent of present amount and increase U,S, Government and Agency Securities by 30% Percent of present amount and would require continual review and maintenance by the Investment Advisory Board and would encourage the evaluation of broker/dealers to be forthcoming to further make a definitive date of closure, Board Member Irwin stated for the record that there is still too much money in. LAIF, Motion carried with Board Members Rodriguez and Irwin voting NO, 7. Mutual Funds Discussed in Item No, 6 above, C. Continued Consideration of the Investment Policy 1. Investment Advisory Board Minutes of 6/22/94, 7/20/94, 8/17/94 & 8/31/94 MOTION -It was moved by Board Members Sales/Osborne to table the Consideration of the Investment Policy. Motion carried unanimously. VI BOARD MEMBER COMMENTS - None Investment Advisory Board September 13, 1995 Minutes VII INFORMATIONAL ITEMS A. Percentages of Investments Noted. B. LAIF Primary Dealers and Direct Issuers Noted. C. LAIF Authorized Personnel Noted. VII ADJOURNMENT MOTION -It was moved by Board Members Irwin/Sales to adjourn the meeting. Motion carried unanimously.