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2006 11 08 IAB Minutes INVESTMENT ADVISORY BOARD Meeting November 8,2006 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 Chairperson Deniel, followed by the Pledge of Allegiance. PRESENT: Board Members Moulin, Deniel, Olander, Rassi and Egbert ABSENT: None 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.) Chairperson Deniel requested the letter she sent to Council be added to Board Members items for discussion. Board Member Rassi requested to comment on the joint meeting with City Council under Board Member Items. IV CONSENT CALENDAR A. Approval of Minutes of Meeting on October 11, 2006 for the Investment Advisory Board. MOTION - It was moved by Board Members Moulin/Rassi to approve the minutes of October 11, 2006. Motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for September 2006 Mr. Falconer presented the Staff report and stated that the portfolio performed similar to the performance in the month of August, with one basis point behind placing the portfolio at 4.99%. He also said that the report reflects a decrease in the portfolio balance due to the bond service payment made the first of September. Investment Advisory Board Minutes November 8, 2006 In response to Board Member Moulin, Mr. Falconer advised that Staff switched to a money market sweep account due to the rise in interest rates; this was based upon an analysis of hard dollar costs. The City is now paying hard dollar costs for all services provided; these costs are offset by the interest earned on the sweep checking account. Mr. Falconer also advised that this account has been averaging $2,000 to $3,000 every month, which equals approximately $25,000 a year. This account has been very successful. In response to Board Member Moulin, Mr. Falconer advised that LAIF does not have to adhere to dollar in dollar out requirements of the SEC; therefore they are able to invest longer than 90 days. General discussion ensued among the Board regarding LAIF's investment process. MOTION - It was moved by Board Members Olander/Moulin to approve, receive and file the Treasury Report for September 2006. Motion carried unanimously. B. Continued Consideration of the Fiscal Year 2006/07 Work Plan - Review of Investment Policy Chairperson Deniel reviewed the work plan items that have been discussed and agreed upon by the Board; she also referenced the continuing items to be further discussed and voted upon by the Board. Board Member Deniel asked the Board Members, that attended the joint meeting with City Council, if they had any comments in reference to the meeting. Board Member Rassi stated that he felt the City Council was divided regarding the use of a money manager and he was concerned that the Council was given some incorrect information by Chairperson Deniel, and that the buy/hold policy was waived for an outside money manager. Board Member Rassi also shared his reservations on the hiring of an outside money manager. Chairperson Deniel clarified that Council approved an Appendix for 2005/06 Investment Policy. This appendix allows an outside money manager, if hired, to do certain things that are not permitted to the 2 Investment Advisory Board Minutes November 8, 2006 Treasurer. This sets forth a framework if and when a money manager is hired. LAIF is an example of the use of an outside money manager and the different restrictions used by LAIF vs. the ones used by the Treasurer. Mr. Falconer advised of the current steps taken towards the purchase of an investment. General discussion ensued among the Board in regards to the hiring of a money manager, their fees, the possible yield earned, the amount of risk the Board will allow the money manager to take, and the guidelines they follow when investing public money. Chairman Deniel referenced the letter she wrote to City Council to clarify her statement made at the joint meeting. She wanted to clarify that the Treasurer is very capable of investing the City's money but does not have the appropriate infrastructure that a money manager has. Chairperson Deniel stated that in her opinion, there are two Council members that are in favor of hiring a money manager and two that are currently against, and there was no opinion from the Mayor for or against the hiring of a money manager. In response to Board Member Moulin, Mr. Falconer advised that he is currently not in favor of changing the buy/hold policy. Along with the City Council, he would like the Board to consider the purchase of Callable GSE's. Staff is in support of increasing the maximum amount of commercial paper and corporate notes from $3 million to $5 million. Mr. Falconer also advised that he would like to see the Board discuss either increasing the dollar limit or percentage on GSE's. Chairman Deniel clarified that the total limit for an instrument is different than a total limit for an issuer. She advised that she would be in favor of a higher dollar limit for GSE's, but not all invested in the same issuer. General discussion ensued among the Board in regards to the investing of GSE's and whether the Board should specify specific paper purchased and dollar limits per issuer. Chairperson Deniel suggested that Mr. Falconer devise a table of what investments he might like to see, (i.e. limits up to three years, commercial paper with dollar amounts per issuer, no individual issue) and report back at the next scheduled meeting. 3 Investment Advisory Board Minutes November 8,2006 Mr. Falconer requested that a poll be taken from the Board regarding GSE's so their feedback could be considered when he prepared the requested table for the next meeting. Board Member Moulin stated that he would not place an investment in Fannie Mae at this time, but would not reflect this in the policy. Board Member Moulin also stated that he would like to see each issuer with a maximum amount, 10% of surplus funds per issuer, 30% of surplus portfolio, with a limit of $10 million per purchase. In response to Board Member Moulin, Mr. Falconer advised that Federal Home Loan, Fannie Mae, and Freddie Mac are more or less equal in quality and Farm Credit is a bit higher. Mr. Falconer asked the Board if a cap was going to be set per trade. Board Member Moulin suggested a $10 million cap on GSE's. Board Member Egbert stated that he would like to see 5% per issuer with a 25% maximum. Board Member Rassi advised the Board that he is satisfied with the current policy. Board Member Olander stated he would like to see 10% per issuer. In response to Chairperson Deniel, Mr. Falconer advised that most investment policies allow up to 100% on GSE's; this is what the State Code allows. The State Code does not have dollar limitations or percentage limitations like the City's current policy. Mr. Falconer also advised that he would be in favor of increasing the percentage and would be in favor of what was proposed by Board Member Moulin. Chairman Deniel concurred. Mr. Falconer advised Board Members Rassi and Egbert that if Board Members are not in agreement with the investment policy, they have the opportunity to submit a minority report to be included with the proposed investment policy to Council. General discussion ensued among the Board regarding Commercial Paper and Corporate Notes. It was agreed upon by the Board to increase Commercial Paper and Corporate Notes from $3 million to $5 million with 20% in Commercial Paper and 10% in Corporate Notes. 4 Investment Advisory Board Minutes November 8, 2006 In response to Chairman Deniel, Mr. Falconer clarified that' he would invest per instrument, (i.e. GE Credit Capital, GE Corp.). MOTION - It was moved by Board Members Moulin/Olander to continue the discussion of the 2006/07 Investment Policy to the December meeting. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - October 2006 Noted and Filed B . Pooled Money Investment Board Reports - August 2006 Noted and Filed B. Assembly Bill 2011 - Certificate of Deposit Account Registry Service (CDARS) Mr. Falconer advised that Assembly Bill 2011 is a new investment product which will go into effect on January 1, 2007. The bill will allow cities or private individuals to investment in amounts over $100,000 and will have FDIC coverage. This will be discussed at the City's November CSMFO luncheon and Mr. Falconer would like to extend an invitation to the Board for additional information regarding this bill. Mr. Falconer also advised that this currently is not included in the City's investment policy and this is something for the Board's consideration. In response to Chairperson Deniel, Mr. Falconer advised that the policy is due by June. Council may want to review the suggested changes and/or additions mid term. VII BOARD MEMBER ITEMS - None 5 Investment Advisory Board Minutes November 8, 2006 VIII Adjournment MOTION - It was moved by Board Members Moulin/Olander to adjourn the meeting at 7:00 p.m. Motion carried unanimously. Vianka Orrantia, Secretary 6