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2004 11 10 IAB Minutes INVESTMENT ADVISORY BOARD Meeting November 10, 2004 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 Lewis, followed by the Pledge of Allegiance. PRESENT: Board Members Lewis, Olander, Moulin, Mahfoud' and Deniel ABSENT: None OTHERS PRESENT: John Falconer, Finance Director and Vianka Orrantia, Secretary II PUBLIC COMMENTS III CONFIRMATION OF AGENDA - Confirmed. IV CONSENT CALENDAR A. Approval of Minutes of Meeting on October 13, 2004 for the Investment Advisory Board. MOTION - It was moved by Board Members Moulin/Olander to approve the Minutes of October 13, 2004. Motion carried unanimously. V. BUSINESS SESSION A. Transmittal of Treasury Report for October 2004 In response to Chairman Lewis, Mr.Falconer informed the Board that in the month of October in addition to the bond debt payment, an additional $ 3 million was paid out for SilverRock Resort and the Vista Dunes Mobile Home Park. Mr. Falconer also informed the Board that the scheduled date for the opening of SilverRock is the first part of January 2005. Board Member Deniel asked the Board if the construction of SilverRock Resort was on budget. Mr. Falconer replied that there have been some Investment Advisory Board November 10, 2004 Minutes overruns in some of the construction and there have been additional requested funds from reserves with Council approval. Board Member Moulin commented to the Board on the rising interest rates on U.S. Treasury Bills reflected on page 5 of the Treasurer's Report. He also commented on the purchase of the $2 million and $10 million in the month of September and the impact of the yield from the three month extension. Board Member Moulin also commented on the six month bench mark on page 10 and whether or not the City is higher or lower than the LAIF yield. Mr. Moulin advised Staff that the LAIF amount for the month of September should read 1.771 %, which Staff concurred. It was clarified by the Board that on page 11 of the Treasurer's Report, the annualized earnings and LAIF rate was not an error in reporting. Board Member Mahfoud advised Staff on page 3 of the Treasurer's report, listed under the column II All Funds Over (under), Securities amounts should also reflect a minus dollar amount, which Staff concurred. MOTION - It was moved by Board Members Moulin/Olander to approve, receive and file the Treasury Report for October 2004. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - October 2004 Mr. Falconer commented to the Board that LAIF continues to rise with the yield curve. Mr. Falconer informed the Board included in this month's report is the Treasury' Bill auction results for Boards review. Treasury Bills currently stand at 2%. Noted and Filed B. Pooled Money Investment Board Reports - August 2004 2 Investment Advisory Board November 10, 2004 Minutes Mr. Falconer informed the Board that at the previous months meeting and at the request of Board Member Olander, page 2 was included in the Pooled Money Investment Report. The information was obtained at the LAIF Conference. Noted and Filed C. LAIF Conference Materials Mr. Falconer summarized the October 27, 2004, LAIF Conference materials for the Board. Mr. Falconer went over the economic reports given at the conference which generally reflect interest rate increases, went over the future State budgets which will continue to be running in a deficit and went over the expanded use of asset backed commercial paper. General discussion and comments were made by the Board regarding some of the LAIF materials. Noted and Filed D. Meeting Minutes from September 28, 2004 Joint Meeting Board Member Deniel stated to the Board that upon listening to the taped minutes of the September 28, 2004 she didn't believe the typed minutes reflected the actual discussion that took place and did not feel there was any direction as to what step needs to be taken next. Board Member Deniel felt that the Board needs to discuss what steps should be taken next. Chairman Lewis asked Staff if Council approved the Investment Advisory Board's work plan. Mr. Falconer replied to the Board that the work plan was taken back for Council' s app~oval. The work plan was approved and now the Board is authorized to work up a request for proposal and also the changes the ordinance. Board Member Deniel requested the following be listed in detail: 1. Not recommending hiring a money manager now, just have the 3 Investment Advisory Board November 10, 2004 Minutes infrastructure in place, in case it is needed. 2. Money manager would not manage all of the funds of the city, just a portion of the funds. 3. During some of the discussion the following seemed to be a concern: The. City Attorney felt that the Treasurer was ultimately responsible, and asked how the Treasurer could be completely and totally responsible. The Board was in disagreement with what the City Attorney had said. Board Member Deniel stated that both are right; the intent is that a City Treasurer does not abdicate his responsibilities completely. As an example, if the City Manager hired a contractor, he is not responsible for every thing he does, but he is responsible for exercising due diligence, the selection of the contractor and the continuation of overseeing the contractor to ensure that the contractor is pursuing the ultimate goals of the City. In the same role, the Treasurer would be directing and overseeing the outside money manager, overlooking what the investments look like, the terms and so on; to ensure the money manager is constantly operating within the frame work the City has established. This does not mean that the Treasurer is responsible if the market moves the wrong way, etc... Board Member Deniel stated to the Board that she felt there was a perceived disagreement between what the City Attorney was saying and what was understood by the Board. The Treasurer is in deed responsible, no different when a consultant is hired, just do not advocate your responsibilities, delegating part of it and retaining the ultimate responsibility. Mr. Falconer advised the Board that diligence is done with LAI F, by attending the conference, if Staff returns from the conference not in agreement on how things are being handled, than the portfolio is adjusted accordingly. Mr. Falconer commented that in essence LAIF is a money manager. Board Member Deniel stated to the Board that if an outside money manager is hired to manage part of the City's funds, the Treasurer is still responsible on what the money manager is doing, the composition of the portfolio and the reporting from the money manager. 4 Investment Advisory Board November 10, 2004 Minutes 4. Board Member Deniel believes that there is no longer a risk of what happened to the City in the past. A money manager has control of the assets and has limited power of attorney to invest in the way they see fit. So, in essence a money manger can incur a market loss; but, not misappropriate the funds, having a third party custodian eliminates this risk of misappropriation. Mr. Falconer advised the Board that there could be several different criteria and/or guidelines set in conjunction with the money manager; such as getting the Treasurer's consent before a trade is made or may have total discretion, these are items that would have to be worked out during the development of the Request for Proposal (RFP). Chairman Lewis stated to the Board that there are a number of issues that need to be looked at and addressed, for example; will the money manager follow the same buy and hold description that is currently in place with City funds or will they be allowed a more active style of management. There also needs to be recommendations to change the City Code allowing the hiring of a money manager. Mr. Falconer advised that this step needs to be in conjunction with the City Attorney. In response to Board Member Deniel, Mr. Falconer suggested that the Board begin to work on the RFP and working through the course of the RFP will give the Boar~ an idea of what direction they are headed and once the direction is set a draft of the RFP can be given to the City Attorney. At that time, the Board can advise her that these are the items being looked at and how does the Board tailor these to fit within the City Ordinances and State Codes as she interprets them to be. Chairman Lewis asked if this was a hypothetical RFP for hiring a money manager. Mr. Falconer replied yes and that the RFP would be ready if the City decided to move forward with the hiring of a money manager. The RFP would have to be tailored to the City Ordinances so they are parallel with each other. Board Member Deniel asked the Board if the RFP was drafted before building into the policy of the City. Chairman Lewis clarified to the Board that the RFP of hiring a money manager will be created hypothetically, once the criteria is set than it can be compared against the city code and than any necessary changes to the city code will be made, once this is complete than the necessary changes to the Investment Policy will be completed. The goal of creating an RFP is to figure out what exactly the Board would require of a money manager. 5 Investment Advisory Board November 10, 2004 Minutes Board Member Moulin stated to the Board that he felt the title of RFP should be avoided at this time, it was agreed upon to be included in the work plan to enable it to happen. Chairman Lewis advised the Board again that the RFP would a hypothetical RFP. Board Member Deniel concurred with Board Member Moulin and felt at this time the Board should not refer to the RFP as such, at this time should be referred as a work plan. Board Member Moulin concurred 'with the comment made earlier by Board Member Deniel regarding the September 28, 2004 minutes, they felt the minutes did not reflect the tape and the substance of what occurred. Chairman Lewis advised the Board that the minutes received from the September 28th were more of a summary style versus a narrative style. Board Member Moulin advised the Board that he was misquoted on page 11, sixth paragraph. Board Member Moulin felt that the meeting minutes supported Council's position. General comments continued amongst the Board regarding the meeting minutes of September 28, 2004. Mr. Falconer advised the Board that if the City Council goes a step further and issues an RFP, the recommendation from Staff would be that a subcommittee is formed, members from the I.A.B. could serve on this subcommittee. Discussion ensued by the Board on some of the suggested criteria regarding the hiring of a money manager. Chairman Lewis suggested to the Board that this item be placed on next month's agenda as a business session item for discussion. Mr. Falconer advised the Board that Mike Harrsion of Conrad and Associates will be at the next scheduled meeting. The Financials were received by Staff and will be presented to Council on November 16th. Chairman Lewis suggested to the Board that due to the scheduled visit by the auditor at the next scheduled meeting, the Board would have a brief business session item to review the work plan and draft a schedule for the items on the work plan and how the Board will approach them. Noted and Filed. 6 Investment Advisory Board November 10, 2004 Minutes VIII BOARD MEMBER ITEMS VIII Adjournment MOTION - It was moved by Board Members Moulin/Olander to adjourn the meeting at 6:20 p.m. Motion carried unanimously. Vianka Orrantia Secretary 7