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1997 09 10 IAB Minutes INVESTMENT ADVISORY BOARD Meeting September 10, 1997 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 Chairman Sales, followed by the Pledge of Allegiance. PRESENT: Board Members Frame, Irwin, Lewis, Osborne and Chairman Sales ABSENT: Board Member Brown and one (1) Vacancy OTHER PRESENT: John Falconer, Finance Director and Debbie DeRenard, Secretary II CONFIRMATION OF AGENDA Confirmed III PUBLIC COMMI=NT Phil Sham, CPA spoke regarding his background and his interest in joining the Investment Advisory Board. IV. CONSENT CALENDAR A. Approval of Minutes of Meeting on July 9, 1997 for the Investment Advisory Board. Board Member Frame advised that on page 3, 3rd paragraph it should read Board Member Irwin, not Board Member Frame. MOTION - It was moved by Board Members Osborne/Frame to approve the minutes of the July 9, 1997 Investment Advisory Board meeting as corrected. Motion carried unanimously. Investment Advisory Board September 10, 1 997 Minutes V. BUSINESS SESSION A. Transmittal of Treasury Report for June and July, 1997 Mr. Falconer presented the staff report and advised that Staff has noted the monthly amortization in the June report. The City Auditors have requested that the amortization be prepared on a monthly basis. Future reports will reflect this change. Mr. Falconer advised that on the July Treasurers Report the Deferred Compensation has been deleted. One of the key issues during the Orange County problems was the fact that the creditors wanted to go after the Deferred Compensation. There has been recent legislation by Congress that clarifies Deferred Compensation. The City will need to record Deferred Compensation on the Books, but not in the financial statements. Mr. Falconer advised that another change was LAIF investment percentage being reduced from 40 to 35 percent. In response to Chairman Sales, Mr. Falconer advised that the City is required by the bond indenture to have the arbitration calculated every other year. The City contracts with MuniFinancial for arbitrage calculations. In response to Board Member Frame, Mr. Falconer advised that a line item could be added to the treasurer's report that would indicate any expected changes in the balances. Mr. Falconer advised that he would add this to the August Treasurers Report. MOTION - It was moved by Board Members Lewis/Frame to Accept, Receive and File the Treasurers Reports for June and July, 1997. Motion carried unanimously. Investment Advisory Board September 10, 1997 Minutes B. Investment Plan Mr. Falconer presented the Staff Report and indicated that the Investment Policy and the Cash Flow have been produced and to get a better sense on what the City's cash needs are and when to invest in certain vehicles an Investment Plan has been presented. The staff report lists some background information in terms of the Investment Policy and Cash Flow. He further explained the Graphs indicating that they represent Cash and Investments changes. In response to Board Member Irwin, Mr. Falconer advised Staff did not go into much historical trend. He advised that seasonal revenue "trend graph" for the last two or three years could be produced. He further advised that most of the historical investments would be in LAIF. In response to Chairman Sales, Mr. Falconer advised that the City has a 5-year forecast. Mr. Falconer advised that the last page of the staff report displays the past strategy. He advised that the current investment plan has been to identify the amount of funds that will not be required for at least two years. He questioned whether the Board would want to consider Commercial Paper, LAIF or Treasuries as a temporary investment on a shorter term basis. Board Member Irwin questioned what the transaction costs would be on short term basis for T-bills. Mr. Falconer advised that when you purchase a T-bill the transaction cost are included in the yield. DisCussion continued with the Board discussing short term investments and deciding on safety first. Mr. Falconer advised that as an example in January the City receives approximately 6-million dollars. Pass-through payments are due in February and March. There is a 30-day period that the monies can be invested and they cannot all be invested in LAIF because of the maximum percentage investable. Investment Advisory Board September 10, 1997 Minutes Board Member Irwin advised that there are several investment vehicles. Mr. Falconer advised that he can stay within the 35% percent LAIF limit during the entire course of the year, except for twice a year when property taxes are distributed. This happens at the end of January and the end of May. During these periods of time, an alternative investment vehicle is needed for 30 days. Board Member Frame advised that he would recommend maximizing the amount within the government securities for those periods of time. He further advised that within the risk parameters, his input would be to try within some safety issues to maximize the yield. In response to the Board, Mr. Falconer asked if the Board was interested in using commercial paper as an investment vehicle for a thirty-day period and what would the perimeters be. Board Member Lewis advised that the Board has put together the rating guidelines in the Investment Policy and the percentages. An investment in commercial paper that fits in these perimeters would be within the guidelines. Mr. Falconer advised that he would not feel comfortable investing more than a million dollars in any one entity. This isn't a restriction in the policy, but a personal preference. Board Member Frame advised that the Board would just like to be ' informed of the perimeters that will be used in regards to investing in commercial paper. Board Member Irwin agreed further advising that the Board should be 'choosing entities for investment in commercial paper. Discussion continued regarding commercial paper with the Board deciding that they would like to see cash projections through the end of the fiscal year so that they may get an ideal as to when these funds would be invested and bring them back to the Board. Investment Advisory Board September 10, 1 997 Minutes MOTION -It was moved by Board Members Lewis/Osborne to continue the Investment Plan to the next scheduled Investment Advisory Board Meeting. Motion carried unanimously. C. Change in Custodian from Wells Fargo to Bank of New York Western Trust Company Board Member Frame advised that Bank of New York is a very creditable institution and he has no problem with the change. In response to Chairman Sales, Mr. Falconer advised that Bank of New York's (BNY) main office is in New York, but that they have an office in Los Angeles. Board Member Irwin advised that a lot of the large banks are getting out of the custodial business. In response to Chairman Sales, Mr. Falconer advised that the notice from Wells Fargo advising that their custodial business was being sold to BNY was received on July 21st, 1 997. In response to Board Member Irwin, Mr. Falconer advised that the change will be a smooth transition. He further advised that he has spoken with other Finance Directors and they indicated that the only transition will be BNY tying in with our computer system. In response to Board Member Frame, Mr. Falconer advised that the costs for this service will remain the same. He further advised that he will research the costs to determine if it would be worth going out to bid. In response to Chairman Sales, Board Member Lewis explained that this transaction is occurring because Wells Fargo purchased First Interstate Bank and this is how the City ended up with Wells Fargo Bank. The Bank of New York is purchasing the trust assets from Wells Fargo Bank and this is how the City is ending up with Bank of New York. Both transactions are occurring because the original company that was contracted with was purchased. He further commented that there is no change other than with the company that is being dealt with. Investment Advisory Board September 10, 1 997 Minutes Chairman Sales disagreed. He advised that Wells Fargo was responsible to the City for their securities and they are no longer going to be responsible. In response to the Board, Mr. Falconer advised that the fees will remain the same. He added that the City is required to go out for competitive bid every three (3) years and this will take place in fifteen months. MOTION - It was moved by Board Members Lewis/Frame to approve the change of Custodian from Wells Fargo to Bank of New York. Motion carried with Chairman Sales voting NO. VI. CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report -July and August, 1997 In response to Board Member Frame, Mr. Falconer advised that this report is an informational item and is not apart of the Treasurers Report. Board Member Irwin reiterated how much he appreciates this report. B. LAIF Handbook Mr. Falconer presented the Staff Report advising that the LAIF handbook has been updated. He added that LAIF has a web site that gives current information as well. The handbook has not changed significantly since the last book. He advised that he has spoken with the City Auditor Ken Al-Imam with Conrad and Associates regarding GASB 31. Mr. Al-Imam advised that LAIF is required to follow GASB 31 on the requirement of mark-to-market. LAIF will initiate this next fiscal year. Board Member Irwin commented that the LAIF report appears to have more information on investment tactics. He further added that LAIF has added a section regarding the determination that the State of California cannot declare bankruptcy under federal regulations. Investment .Advisory Board September 10, 1997 Minutes C. Pool Money Investment Board Report - May 1997 Noted and Filed. D. Distribution of Budget for Fiscal Year 1997/98 Noted and Filed. VII BOARD MEMBER ITEMS A. Next Meeting Date The Board concurred on meeting in October. VIII ADJOURNMENT MOTION - It was moved by Board Members Osborne/Irwin to adjourn the meeting. Motion carried unanimously.