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2005 03 09 IAB Minutes INVESTMENT ADVISORY BOARD Meeting March 9, 2005 CALL TO ORDER Regular meeting of the La Quinta Investment Advisory Board was called to order at the hour of 5:40 P.M. by Chairman Lewis, followed by the Pledge of Allegiance. PRESENT: Board Members Olander, Moulin and Deniel (5:40), Chairman Lewis (5 :37) ABSENT: Board Member Mahfoud OTHERS PRESENT: John Falconer, Finance Director; 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 A. Approval of Minutes of Meeting on February 9, 2005 for the Investment Advisory Board. MOTION - It was moved by Board Members Olander/Moulin to approve the Minutes of February 9, 2005. Motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for January 2005 Mr. Falconer informed the Board that the City received its distribution of property taxes from the Auditor/Controller's office in the amount of $16.25 million; this is reflected on page 8 of the Treasurer's Report and also reflects an increase in the balances from the previous month. A portion of the money was used to pay pass through amounts to the County of Riverside along with other taxing organizations, the balance was invested in LAIF due to a debt service owed in February; this is reflected on page 2 of the Treasurer's Report. MOTION - It was moved by Board Members Moulin/Olander to review, receive and file the Treasurer's Report for January 2005. Motion carried unanimously. Investment Advisory Board Minutes March 9, 2005 B. Request for Proposal for Portfolio Manager Board Member Deniel reminded the Board at the previous meeting in February all Board Members were to review the RFP and make any additional changes and/or corrections. A redline draft was completed by Mr. Falconer which was presented at the February meeting for Board's review. Mr. Falconer informed the Board that at the recent CSMFO Conference, he attended a segment pertaining to Portfolio Managers. One item of interest discussed was the minimum amount to be invested by the Portfolio Managers, and the consensus for the minimum amount was $10 million. Board Member Deniel suggested that the Board recommend changing the maximum amount to be invested from $5 million to $10 million. The Board discussed changing the amount from $5 to $10 million and why $10 million is the minimum amount invested by a Portfolio Manager. Mr. Falconer suggested to the Board that the amount to be invested be disclosed in the RFP. Chairman Lewis concurred. Chairman Lewis asked if the Board had any additional corrections and/or changes to make to the RFP since the previous meeting. Upon review by the Board the following changes to the RFP were made: Page 5 - Item D-5-S (last sentence) the word IICity" should crossed out. II II _ Item D-89- (first sentence) the word lIthe" should be deleted. Page 6 - Item E-1 the following word should be added to the sentence: Ilby teams or one individual. Page 7, Item 2 will be broken down to 3 sentences and renumbered. Item G-2 Pleasè re ort Item G-Ilndicate whether your returns are calculated and compiled in accordance with the Association 2 Investment Advisory Board Minutes March 9, 2005 for Investment Management and Research (AIMR/CFA Institute) standards. Items G-3, 4 and 5 will be renumbered to 5, 6 and 7. Item J-1 the following word will be deleted; Seven (7) ef The Board agreed to include a copy of the Investment Policy and a current Treasurer's Report to accompany the RFP. Mr. Falconer suggested to the Board that the type of account be clarified within the RFP. The following was suggested by the Board: Page 1, first second sentence should read; interested firms for the provision of a discretionary investment management services for City of La Quinta. Chairman Lewis informed the Board that the governmental code is much more liberal than City policy, is the Board going to request that the Portfolio Manager follow government code or City code. Board Member Moulin asked if the Board should let the proposer make a suggestion. Board Member Deniel suggested the Board present both government and City code and the proposer make a recommendation to Board for their consideration. Chairman Lewis felt this suggestion was to broad. The Board discussed various investments not currently used by the Treasurer. Mr. Falconer reminded the Board that the reason they are considering the use of a Portfolio Manager is to actively manage the investments. Mr. Falconer shared his concerns with the Board regarding state code and the allowables listed within the state codes, (i.e. reverse repos, banker's acceptance, and reverse CD's). Mr. Falconer suggested to the Board that staff chart the permissible investments and present the chart at the next scheduled meeting in April. Chairman Lewis reminded the Board that the Portfolio Manager was going to use a portion of the portfolio for a longer term. Mr. Falconer advised the Board that the current investment policy limits the Board to 2 years and the government code to 5 years, with Council approval the term can be extended beyond 5 years. Mr. Falconer asked the Board if they would like to add the length of the term within the policy. The Board agreed to place the term within the policy. Board Member Moulin advised the Board that the framework of the Portfolio Manager should mirror that of the City. Board Member 3 Investment Advisory Board Minutes March 9, 2005 Moulin shared with the Board Council's primary concern for safety of principal and over the return. Board Member Moulin asked the Board what will be the term given to the Portfolio Manager. Board Member Deniel replied that in order to assess performance the term should be at least 2 - 3 years. MOTION - It was moved by Board Members Moulin/Deniel to continue the review of the request for proposal for portfolio manager. Motion carried unanimously. C. Consideration of Fiscal Year 2005/06 Investment Policies Mr. Falconer informed the Board that a redline draft of the policy was drafted for Board's review. Board Member Moulin suggested that the draft RFP be made as an appendix to the Investment Policy. Chairman Lewis suggested that the Board incorporate a paragraph within the policy referencing the Portfolio Manager; for example: Money Managers/Portfolio Managers are subject to maximum maturity of 5 years. Mr. Falconer suggested that the RFP have a separate section that deals with the 5 year maturity, the dollar amount $10 million and the types of investments that differ from the Investment Policy and recite this section in the Investment Policy. Chairman Lewis stated that the RFP is giving the Portfolio Manager all the different reporting criteria; does the Board want to include the guidelines as well. Board Member Deniel suggested that a one page appendix be included with the Investment Policy with sample language possibly stating IIhere are the investment instruments allowed for the portion of the portfolio assigned to the Portfolio Manager and here are the maturities, or in addition to the regular investments these additional instruments are allowed for the Money Manager and maturities are extended to 5 years. Chairman Lewis advised that there needs to be a statement stating that they will abide by the policy. Mr. Falconer advised that a one page appendix is something that Council could review. In response to Board Member Moulin, Mr. Falconer advised the Board that he is ultimately responsible for the external managers oversights and he also has, but with due diligence to monitor the Portfolio Managers activities. Mr. Falconer suggested to the Board that he poll other cities to see if they have specific language in their ordinances 4 Investment Advisory Board Minutes March 9, 2005 that deal with this particular issue and will report back at the next scheduled meeting. Mr. Falconer informed the Board of the City's protocol for trades and the City Manager/Assistant City Managers role for checks and balances. Chairman Lewis reminded the Board that on page 16 with the new number IXX being added the sections following will needed to be renumbered. MOTION - It was moved by Board Members Moulin/Olander to continue the review of the Fiscal 2005/06 Investment Policies. Motion carried unanimously. D. California Municipal Treasurer's Conference - San Diego, California April 20 - 22, 2005 Mr. Falconer requested that any Board Member that would like to attend please notify Staff no later than March 11, 2005. MOTION - It was moved by Board Members Moulin/Olander to appoint two Board Members to attend the CMT A Conference in San Diego, California on April 20 - 22, 2005. Motion carried unanimously. VI CORRESONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - February 2005 Noted and Filed B. Pooled Money Investment Board Report - December 2004 Noted and Filed VII BOARD MEMBER ITEMS VIII ADJOURNMENT MOTION - It was moved by Board Members Olander/Moulin to adjourn the meeting at 6:55 p.m. Motion carried unanimously. 5 Investment Advisory Board Minutes Vianka Orrantia Secretary ******************** NEXT MEETING APRIL 13, 2005 ******************** March 9, 2005 6