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2005 10 12 IAB Minutes INVESTMENT ADVISORY BOARD Meeting October 12, 2005 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 Vice Chairperson Deniel, followed by the Pledge of Allegiance. PRESENT: Board Members Olander, Moulin and Vice Chairperson Deniel ABSENT: Board Members Lewis and Mahfoud OTHERS PRESENT: John Falconer, Finance Director and Vianka Orrantia, Secretary II PUBLIC COMMENTS III CONFIRMATION OF AGENDA Board Member Olander requested that GSE's be added for discussion under Board Member items. Mr. Falconer requested that two items be added to the agenda, the resignation letter from Board Member Mahfoud, to be added to Section VI., as item C. and the second item is handouts from the LAIF Conference (attended by Mr. Falconer) to be added also to Section VI., as item D. In addition there are two revised pages to the Treasurer's Report, to be discussed under Section V., item A. IV CONSENT CALENDAR A. Approval of Minutes of Meeting on September 14, 2005 for the Investment Advisory Board. MOTION - It was moved by Board Members Moulin/Olander to approve the Minutes of September 14, 2005. Motion carried unanimously. V BUSINESS SESSION Investment Advisory Board Minutes Ocotober 12, 2005 A. Transmittal of Treasury Report for August 2005 Mr. Falconer informed the Board of the revised pages of the Treasurer's Report, pages 3 & 4. Upon review of the GSE's, staff noticed that the amounts were correct but the allocations between federal and home loan, (Farm Credit and Freddie Mac) were incorrect. Board Member Deniel stated that as of August 3151, page 4 reflects $14 million in cash with no interest and asked staff why no interest is reflected. Mr. Falconer replied that the $14 million consisted of two items: one was a $10 million debt service payment, which was due on September 151 and the second was from the sale proceeds from land for the new Sam's Club site, (located near the Super Wal-Mart), which is noted on page 9. The City received $5.9 million at the end of the month but was not allowed to invest these funds until September 151. Board Member Moulin suggested to staff that items such as these be footnoted. Board Member Deniel stated that on page 5, the service agent was at 3 % million in the money market, which is invested at very low interest rate. Mr. Falconer clarified for the Board this page reflects the fiscal agent investment as indicated, which reflects money in T-Notes and T-Bills, currently being invested in a ladder manner. There are also some short- term monies held in some city housing projects and this is why these funds are kept short-term. Board Member Deniel asked staff if they direct the fiscal agent as to how much is to be kept "liquid". Mr. Falconer replied that the funds are held at U.S. Bank and they are directed, with the approval of the City Manager, as to what types of investments should be made. Mr. Falconer stated the funds under his management are traded through a fiscal agent. Board Member Deniel asked staff how much cash is placed in the City's account. Mr. Falconer replied that it varies month to month and is sometimes at a negative. General discussion ensued among the Board regarding the City's investments and their maturities. The Board commented that the City's buy and hold strategy expects that the returns will lag in a rising interest rate environment, and will out 2 Investment Advisory Board Minutes Ocotober 12, 2005 perform in a declining market. General discussion ensued among the Board regarding the City' s buy and hold strategy. Board Member Deniel advised staff of the formula error on page 9, second column from the right, expenditure amount equals zero. Mr. Falconer replied that the number should read $571,081.00, also affecting the LAIF balance. MOTION - It was moved by Board Members Olander/Moulin to approve, receive and file the Treasury Report for August 2005. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - September 2005 Mr. Falconer advised that page 2 currently reflects in the cash report a balance of negative $977,000 as of the end of September. Mr. Falconer also advised the Board of the current LAIF rates, which have begun to climb. Noted and Filed B. Pooled Money Investment Board Reports - July 2005 Board Member Olander stated that LAIF has cleaned out their commercial paper in the last couple of months. Noted and Filed C. Board Member Mahfoud's Resignation Letter Mr. Falconer informed the Board a resignation letter was received on October 4, 2005 from Board Member Mahfoud. Board Member Mahfoud had informed the Board at the August meeting that he would eventually be moving to the San Diego area. 3 Investment Advisory Board Minutes Ocotober 12, 2005 In response to Board Member Moulin, Mr. Falconer informed the Board that the City Clerk's office will advertise for the current Board vacancy. Board Member Moulin asked staff, with the tentative upcoming resignation of Board Member Lewis, placing the Board at an interim 3 members, will all three members have to be present to conduct business or are 2 required to be present to conduct business. Mr. Falconer replied that he will check with the City Clerk's office for clarification. (All three members will have to be present to conduct business.) Noted and Filed D. Correspondence from LAIF Conference Mr. Falconer reviewed for the Board the LAIF handouts. General discussion ensued by the Board regarding the handouts, LAIF's investments and the current economy. Noted and Filed VIII BOARD MEMBER ITEMS Board Member Olander presented to the Board an article from the Wall Street Journal entitled" Adult Supervision, with failure to discipline Fannie Mae and Freddie Mac could lead Financial Meltdown." Board Member Olander also shared his ongoing concerns regarding Fannie Mae and Freddie Mac. With the current situation with Fannie Mae and Freddie Mac and current events (i.e. hurricanes, earthquakes, etc..) with $30 million in GSE' s how would the City's portfolio fare, should the city tighten up in other areas. Board Member Moulin advised the Board that the accounting issue regarding Fannie Mae was largely a dispute on how they marked to market their obligations and commitments; these were balance sheet issues that do not affect cash flow. Freddie Mac was deferring income to smooth variance. Discussion continued by the Board regarding the article and its possible effects on the city's portfolio. It was agreed by the Board since the current rating is A-1 , P-1 that City did not have to make any changes to the portfolio at this time and will continue to monitor. 4 Investment Advisory Board Minutes Ocotober 12, 2005 VIII Adjournment MOTION - It was moved by Board Members Olander/Moulin to adjourn the meeting at 6:25 p.m. Motion carried unanimously. '--.,'" Submitte~ by, / I / / { 6 ,/,...._l//, (/ /' /('/, .____/(.( ,/ (v{-( r, ¡ Vianka Orrantia Secretary 5