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2002 11 13 IAB Minutes INVESTMENT ADVISORY BOARD Meeting November 13, 2002 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 Mahfoud, followed by the Pledge of Allegiance. PRESENT: Board Members Lewis, Olander, Osborne, Felice, Mortenson and Chairman Mahfoud ABSENT: Board Member Moulin OTHERS PRESENT: John Falconer, Finance Director and Vianka Orrantia, Secretary II PUBLIC COMMENTS - None III CONFIRMATION OF AGENDA - (This is the time set aside for public comment on any matter not scheduled on the agenda.) IV CONSENT CALENDAR Approval of Minutes of Meeting on November 13, 2002 for the Investment Advisory Board. MOTION - It was moved by Board Members Lewis/Olander to approve the Minutes of November 13, 2002, 2002. Motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for September 2002 In response to Board Member Lewis, Mr. Falconer advised the Board that Staff worked off cash in LAIF and Sweep Money Market Funds to pay debt service and interest. Board Member Lewis asked what is the City of La Quinta's Annual Budget? Mr. Falconer replied that the General Fund Budget is around Investment Advisory Board November 13, 2002 Minutes $20 million and the total Budget with the Redevelopment Agency and the Capital improvement projects are close to $100 million. In response to Chairman Mahfoud, Mr. Falconer advised the Board that for the month of October, one investment matured in the amount of $3 million, which was rolled over into a similar investment. Board Member Osborne asked if Staff was staying out of commercial paper? Mr. Falconer replied that Staff has not been looking at commercial paper as an investment. MOTION - It was moved by Board Members Lewis/Olander to review, receive and file the Treasurer's Report for August 2002. Motion carried unanimously. B. Discontinuation of Treasury Sweep Option Mr. Falconer advised the Board that in response to a previous inquiry about the Treasury Sweep Option and the Iow interest rate by Board Member Mortenson he was recommending discontinuation of the Treasury Sweep Option. Upon investigation of this account and due to the plummeting rates, Staff is recommending that instead we apply any cash balances against soft costs, which are basically bank fees. Credits will be earned which would be applied towards the monthly fees, which average $1,200a month. Mr. Falconer also advised the Board that the compensating balances would not be more than the bank fees. Board Member Osborne asked if Staff would continue to keep a balance of $500,000 at 1.6% to offset the $1,2007 Mr. Falconer stated that was the correct amount and he would like to keep the dollar amount under $500,000, however; due to the state budget, Staff was keeping a little extra. Board Member Osborne asked if the $1,200 included the aspect of a Sweep Account? Mr. Falconer replied to the Board that $250 is part of the Sweep Account, if this was discontinued it would go down to about $1,000. In response to Board Member Osborne, Mr. Falconer also advised the Board that a daily report is received from the bank with the actual cash balances and is compared to a daily book balance report. Board Member Olander asked the Board if the agreement was to keep a minimum of $500,000. Mr. Falconer replied to the Board that that was not the agreement, the agreement had a peg balance of $50,000. In response to Chairman Mahfoud, Mr. Falconer stated to the Board that if after reviewing the daily cash balances, the credit received is 2 Investment Advisory Board November 13, 2002 Minutes more than the actual bank costs and if interests rates are around 2%, then Staff could reconsider implementing a Sweep Account. Mr. Falconer stated to the Board that an email to a Vice President of the bank will be required to notify Wells Fargo Bank of the change. MOTION - It was moved by Board Members Lewis/Osborne to discontinue the Treasury Sweep Option. Motion carried unanimously. VI CORRESONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - October 2002 In response to Board Member Lewis, Mr. Falconer advised the Board that when the bond that was rolled over in October was extended to January 31st at 1.54% (actually 1.62%), at that time the comparable treasury was at 1.32%. Mr. Falconer also advised the Board that due to the current interest rates, that Staff has not extended maturity from two to five years. In response to Board Member Osborne, Mr. Falconer informed the Board that Staff has not had a chance to review the quality of 30-day commercial paper. Mr. Falconer also advised the Board that Staff could only purchase A-l, P-l, which would result in a lower rate than some of the Commercial Paper rates, listed on the report. Noted and Filed B. Pooled Money Investment Board Report - August, 2002 Mr. Falconer advised the Board that LAIF has other publications with a little more detailed information than the Pooled Money Investment Report. Board Member Lewis stated that in the break down of the investments the LAIF Report has two separate line items, Pooled Loans and General Fund Loans, but on the pie chart, which shows the portfolio compensations, the loans are lumped into the 14.7%. Board Member Lewis asked Mr. Falconer to find out what the difference between the Pooled Loans and the General Fund Loans was? Mr. Falconer stated he would provide the information at the next meeting. 3 Investment Advisory Board November 13, 2002 Minutes Board Member Osborne asked if any information is available in regards to the $20 billion and where it is invested? Mr. Falconer replied that he felt that it was part of the entire pool. Mr. Falconer also advised the Board that LAIF has a percentage limitation as to what the loan balances could be. Mr. Falconer advised the Board that he recalled in the past that one of the loan programs currently in place has to do with the construction of State Prisons. Money was needed, "seed money," which could be borrowed against, so the money was loaned on a short-term until the bonds were issued. It was considered that this program would be eliminated due to the commercial paper rates, which were much more favorable at the time, and they were doing away with loaning money from LAIF. Board Member Osborne advised the Board that at one time LAIF explained that the bonds had been approved, but not issued, and therefore, the LAIF funds would be repaid from bond proceeds. Chairman Mahfoud requested that Staff check on the loan program and report back at the next meeting. Noted and Filed VII BOARD MEMBER ITEMS Other Handout Board Member Olander made general comments on the PER's article and also asked howa person is appointed to the PER's Board. Mr. Falconer advised the Board that he received a ballot in the mail, and that he could vote for a representative running for the board. Mr. Falconer also advised the Board that the representatives were from the Bay area (rapid transit district), and were heavily involved in their unions. Mr. Falconer also stated that the PER's Board is different from the LAIF Board. VII ADJOURNMENT MOTION - It was moved by Board Members Lewis/Osborne to adjourn the meeting at 5:35 p.m. Motion carried unanimously. S//~dubl:p~tte by,_ Vianka Orrantia Secretary 4 INVESTMENT ADVISORY BOARD Business Session: A Meeting Date: December 11, 2002 ITEM TITLE: Transmittal of Treasury Report for October 31, 2002 BACKGROUND: Attached please find the Treasury Report October 31, 2002. RECOMMENDATION: Review, Receive and File the Treasury Report for October 31, 2002.