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1996 03 28 IAB Minutes INVESTMENT ADVISORY BOARD MINUTES March 28, 1996 I CALL TO ORDER Special 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, Frame, Irwin, Osborne, Rodriguez, , Sales and Chairman Lewis ABSENT: None OTHERS PRESENT: John Falconer, Finance Director and Debbie DeRenard, Secretary II CONFIRMATION OF AGENDA Confirmed III PUBLIC COMMENT- None IV CONSENT CALENDAR A. Approval of Minutes of MarCh 13, 1996 Investment Advisory Board Meeting. MOTION - It was moved by Board Members Irwin/Brown to approve the minutes of the March 13, 1996 Investment Advisory Board as submitted. Motion carried unanimously. V BUSINESS SESSION D. Review of Investment Policy The Investment Advisory Board reviewed the Investment Policy changes made at the March 13, 1996 meeting and reviewed the remaining policy. The following changes were made to the policy: Investment Advisory Board March 28, 1996 Minutes CHANGES MADE AT THE MARCH 13, '1996 MEETING (Shaded Items will be deleted and Bolded Items will be added) I General Purpose No Changes I/ Investment Policy Change wording to: It is the policy of the City of La Quinta to invest public funds in a manner which will provide a diversified portfolio with thc highc3t invcstmcnt roturn and thc maximum sccurity with with safety of principal and the highest investment return while meeting daily caSh flow demands. In addition, the Investment Policy will conform to all State and local statutes governing the investment of public funds. II/ Scope No Changes IV Objectives 1. Safety Safety of principal is the foremost objective of the investment program. Investments of the City of La Quinta shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio in accordance with the permitted investments. The objective will be a mitigated credit risk and interest rate risk. 3. Yield Securities shall not be sold prior to maturity with the following exceptions: Dolctcd - A 3ccurity swap would improvc thc quality, yicld, or targot duration in thc portfolio; Investment Advisory Board March 28, 1996 Minutes V Prudence Invcstmont3 shall bc madc with judgmont and carc - undor circurnstan~s thon prcvailing - which pcrsons, of prudcncc, di3crotion, and intclligcncc cxcrcisc in thc managorncnt of thcir own' affairs, not for spcculation, but for invcstmcnt, considcring thc probablc safoty of thoir capital as woll as thc probablc incomc to bc dcrivod. Thc standard of prudcncc to bc usod by invcstmcnt officials 3hall bc thc "prudcnt pcrson" standard and shall bc appliod in thc contcxt of managing an ovcrall portfolio. Invc3tmcnt officor3 acting in accordancc with writtcn proccdurcs and thc Invc3tmcnt Policy and cxorcising duc diligoncc shall bc rolicvod of porsonal rc3ponsibility for an individual sccurity's crodit risk or markct pricc changcs, providcd dcviation3 from cxpcctations arc rcportcd in a timcly fa3hion and appropri~tc action is takcn to control; and advcrsc dcvctopmcnts. The City shall follow the Uniform Prudent Investor Act as adopted by the State of California in Probate Code Sections 16045 through 16054., Section 16053 sets forth the terms of a prudent person which are as follows: Investments shall be made with judgment and care - under circumstances then prevailing - which persons of prudence, discretion, and intelligence exercise in the professional management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. VJ Delegation of Authority The City Manager or dc3igncc AsSistant City Manager shall approve in writing all purchases and sales of investments prior to their execution by the City Treasurer. Investment Advisory Board March 28, 1996 Minutes VII Conflict of Interest Therefore, the City Manager or dc3ignoc Assistant City Manager, and the City Treasurer shall adhere to the State of California Code of Economic Interest and to the following: All por30n$ The City Manager, Assistant City Manager, and the City Treasurer shall not personally or through a close relative maintain any accounts, interest, or private dealings with any firm with the City places' investments, with the exception of regular savings, checking and money market accounts, or other similar transactions that are offered on a non-negotiable basis to the general public. X/ Collateralization Collateralization will be required for two typc3 of invc3tmontsi Certificates of Deposits.The type of collateral is limited to City authorized investments. Dolctcd - 3. Rcpurcha3c Agrocrncnt3 In ordor to anticipatc markct changc3 and providc a Icvcl of sccurity thc collatoralization Icvoi will bc 102% of markct valuc of principal and accrucd intcrc3t. Xll Safekeepino and Custody All security transactions cxcopt for ropurcha3c agroomonts a3 di3cus30d bolow of the City of La Quinta shall be conducted on a delivery- versus - payment (DVP) basis. Securities will be held at a third party custodian as listed on the approved financial institution listing designated by the City Treasurer and evidenced by safekeeping receipts. Deleted 1. Ropurcha3c ^groomont of groatcr than 1.~1 day3 - Thc City mu3t takc dolivcry of thc 3ccuritic3, a3 li3tod in thc authorizod invc3tmonts and divcrsification scction, or havc roquirod collatcralizod 30curitic3 in a rc3trictod account Iocatod at thc Fodoral Rc30rvc Bank. Investment Advisory Board March 28, 1996 Minutes Deleted 2. Rcpur~a~c Agrcomonts of 1.~1 days or Ic3~ - Cccuritic3 a3 li'3tod in thc authorizod invcstmont and divorsification 3oction 3hall bc hold in' safckooping by a bankor or brokor in a dc3ignatcd trust dopartmcnt. Xlll Interest Earnino Distribution Policy No change Glossary Prudcnt Pcrson Rulc' Dolctc Add: Uniform Prudent Investor Act The State of California has adopted this Act. The Act contains the following sections, duty of Trustee, standard of care, diversification, review of assets, costs, compliance determinations, delegation of investments, terms of prudent investor rule, application. CHANGES MADE AT THE MARCH 28, 1996 MEETING XIV Maximum Maturities Change maximum maturity of fivc yoar3 to maximum maturity of two years XV Internal Controls f_ Written confirmation or telephone transactions for investments and wire transfers. Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions should be supported by written communications and approved by the appropriate person. Written communications may be via fax if on letterhead and the safekeeping institution has .a list of authorized signatures. Fax .correspondence must be supported by evidence of verbal or written follow-up. Investment Advisory Board March 28, 1996 Minutes XVl Porformancc Benchmark Standards The City of La Quinta will use the six month U.S. Treasury Bill as a benchmark when measuring the performance of the investment portfolio. Return on investment is of least importance compared to safety and liquidity objectives XVll Reportina Standards Cost to market value comparisons of all investments by authorized investment category, except for LAIF which will be provided quarterly; XVlll Investment of Bond'Proceeds No Change XlX Investment Advisory Board - City of La Quinta The lAB meets on a monthly basis to 1) review account statements and verifications-to ensure accurate reporting as they relate to an investment activity XX Investment Policy Adoption Thc Invc3tmont Policic3 will bc rcvicwcd and rcvi3ions, if any, proposod by thc Invc3tmont Advi30ry Board, City Managor, City Troa3uror, and City Attorncy. On an annual basis, the Investment policies initially be reviewed by the Investment Advisory Board and the City Treasurer. The Investment Advisory Board will forward the Investment policies, with any revisions, to the City Manager and City Attorney for their review and comment. A joint meeting will be held with the Investment Advisory Board, City Manager, City Attorney, and City Treasurer to review the Investment policies and comments, prior to submission to the City Council. Investment Advisory Board March 28, 1996 Minutes The Investment Policies shall be adoPted by resolution of the City of La Quinta City Council on an annual basis. The Investment Policies will be adopted before the end of June of each year. VIII Authorized Financial Dealers and Institutions , Statc of California Corporations ~,ction 1-916.~1.~15-3062 · State of California Department of Corporations 1-916-445- 3062 All Broker/Dealers selected by the City Treasurer to provide investment services will be approved by the City Manager subject to City Council approval. The City Attorney will perform a legal review of the trading resolution/investment contract submitted by each Broker/Dealer. Each securities dealer shall provide monthly and quarterly reports filed pursuant to U.S. Treasury Department regulations. Each mutual fund shall provide a prospectus and statement of additional information. Financial Institutions ii) Each 3ccuritic3 doalor 3hall providc monthly and quartorly roport3 filod pur3uant to U.S. Troa3ury Dcpartmont rogulation3. Each mutual fund 3hall providc a pro~pcctus and statcmcnt of additional information. IX Authorized Investments and Diversification Incorporate into a chart X Investment Pools The City of La Quinta has an investment with the State of California's Treasurers Office Local Agency Investment Fund commonly referred to'as IAIF. LAIF was organized in 1977 through State Legislative Section 16429.1, 2 and 3. Each LAIF account is restricted to a Investment Advisory Board MarCh 28, 1996 Minutes maximum investable limit of $20 million in addition LAIF will provide quarterly market value information to the City of La Quinta. IX Authorized Investments and Diversification The City Treasurer will be permitted to invest in the following types of investments subject to the maximum percentage compliance limits and bid process requirements: Bid Process Maximum Type of Investments 1 85% Savings accounts and other time accounts insured by the Federal Deposit Insurance Corporation. 2 60% Certificate of Deposits, limited to $99,000. with interest earnings paid monthly, and insured by the FDIC. 3 75% U.S. Treasury Bills, Strips, Notes and Bonds; 75% U.S. Government Securities and Federal Government Securities (except any collateralized mortgage obligation (CMO) derivative product or structured note " which contains embedded rate options) as follows: Government National Mortgage Association (GNMA) Federal National Mortgage Association (FNMA) Federal Home Loan Bank Notes & Bonds (FHLB) Federal Land Bank Bonds (FLB) Federal Farm Credit Bank (FFCB) Federal Intermediate Credit Bank Debenture (FICB) Federal Home Loan Mortgage Corporation (FHLMC) No one Federal Agency Obligation of one specific entity can exceed 25% of the portfolio. Chairman Lewis called for a vote to decide if the City should keep Bankers Acceptances as an authorized investment. Investment Advisory Board March 28, 1996 Minutes It was voted 6 - 1 to eliminate Bankers Acceptances with Board Member Frame voting to retain Bankers Acceptances. 3 ,~10% Bankor3 AccoPtancc3 - not cxccoding 270 days Chairman Lewis called for a vote to decide if the City should keep Prime Commercial Paper as an authorized investment at 180 days. It was voted 4 - 3 to keep Prime Commercial Paper at 180 days with Board Members Brown, Frame and Osborne voting NO. Discussion on Commercial Paper continued with the following motion being made to replace the previously adopted motion. Chairman Lewis called for a vote to decide if the City should keep Prime Commercial Paper as an authorized investment at 31 days. It was voted 7 - 0 to amend the authorized investment in Prime Commercial Paper at 31 days. 3 '30% Prime Commercial Paper- not exceeding 180 31 days and must be rated by Moodys or Standard & Poors A-l, P-1 4 Rcpurcha3c Agrcom~ts Chairman Lewis called for a vote to decide if the City should retain LAIF as an investment. It was voted 6 - 1 to retain LAIF with Board Member Irwin voting NO. Chairman Lewis called for a vote to decide the maximum percentage of investments in LAIF. It was voted 4 - 2 - 1 to have the LAIF maximum percentage 50% with Board Members Frame and Rodriguez voting NO and Board Member Irwin ABSTAINING. Investment Advisory Board March 28, 1996 Minutes $4 90%$0% Local Agency Investment Fund (LAIF) 65 60% Money market mutual funds regulated by the Securities and eExchange Commission and whose portfolios consist only of direct investments in US Government or US Agency Securities and maintaining a par value per share of $1. -7-6 N/A Investment Agreements for bond proceeds and/or reserve funds. Bid Process 1. Periodically conduct a bid process at least every four (4) years or sooner if considered necessary for banking and/or custodian services. Since banking services and custodian services are so closely related it is anticipated that the bid process would include the scope of both services. 2. The financial institutions can be either state or federally chartered, must be located in the State of California and must be insured by the Federal Deposit Insurance Corporation (FDIC). 3. At least two bids from broker/dealers that qualify under Securities and Exchange Commission Rule 15C3-1 listed on the Listing of Approved Financial Institutions in the appendices 4. Ropurchasc Agreornont3 can only bc cxocutcd with financial in3titution3 or brokcr/dcalcrs that havc 3igncd a Ma3tcr Rcpurcha3c Agroornont with thc City and arc li3tod on thc Li3ting of ^pprovod Institution3. ~.4. Completion of Investment Pool Questionnaire and City Council Approval. 10 Investment Advisory Board March 28, 1996 Minutes ~5. Money Market mutual funds must comply with Government Code Section 53601(k). The mutual funds must be rated Triple A by at least two (2) of the three (3) top rating agencies;. must be registered by the SEC and must include marking the portfolio to market daily. ¥.6. A formal bid process must be administered with at least three responses received. Investment Agreements must also meet the approval of all bond covenants and bond insurers requirements to include credit rating requirements. MOTION - It was moved by Board Members to continue the review of the Investment Policy to the April 10, 1996 Investment Advisory Board. Motion carried with Board Member Irwin abstaining. VI BOARD MEMBER COMMENTS - None VII INFORMATIONAL ITEMS VII ADJOURNMENT MOTION -It was moved by Board Members Brown/Sales to adjourn the meeting. Motion carried unanimously. 11