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2007 08 15 IAB Minutes INVESTMENT ADVISORY BOARD Special Meeting August 15, 2007 CALL TO ORDER Special meeting of the La Quinta Investment Advisory Board was called to order at the hour of 4:30 P.M. by Chairperson Deniel, followed by the Pledge of Allegiance. PRESENT: Board Members Park, Moulin, Deniel, Rassi, and Ross ABSENT: None OTHERS PRESENT: John Falconer, Finance Director and Vianka Orrantia, Secretary II Public Comment - None III CONFIRMATION OF AGENDA Board Member Moulin requested that the City benchmark be added to Board member items for discussion. IV CONSENT CALENDAR A. Approval of Minutes of Meeting on July 11, 2007 for the Investment Advisory Board. Board Member Rassi advised that page 8, under Board Member Items, sixth paragraph should read: Board Member Rassi asked if the Beard Citv ~uncil had taken action or just discussed it. Page 11 should read: Board Member Rassi stated that City investments should be looked at as safety, liquidity and yield in tt\at ~r. Board Member Moulin advised that on page 6, sixth paragraph should read: Board Member Moulin stated that the City issued warrants which means that they are ~l)t due until they are honored. Investment Advisory Board Minutes August 15, 2007 Board Member Ross advised that on page 11 , third paragraph, second sentence should read: The Treasurer stated that he believed that it would be a de facto affirmation if the City Council tel€! took the final step in authorizing the release of the RFP and outlined the steps that the City Council would take after reviewing the Ordinance change. Page 8: Item C title: Distribution of Investment Policies for Fiscal Year 2007/2008 MOTION - It was moved by Board Members Moulin/Ross to approve the Minutes of July 11, 2007, as amended. Motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for June 2007 In response to Chairperson Deniel, Mr. Falconer summarized for the Board the basic fund structure of the City, Redevelopment Agency and Financing Authority. Mr. Falconer presented and reviewed the staff report advising that page 6 reflects numerous transactions for the month of June, with one-third of the portfolio turned over. In the month of July there will be $31 million in T-bills that will mature. Mr. Falconer advised that he will not be reinvesting in T-Bills, now that the City Council has allowed a little more flexibility in the investing of GSE's and other types of investments. Mr. Falconer also advised that the redu'ction of the portfolio size was due to the pass-through payments that were due at the end of June. The current portfolio yield is at 5.18%, the fiscal agent investments are currently at 4.88% with the overall portfolio at 5.01 %. Mr. Falconer advised that page 5 reflects unrealized gains and losses; this year the City experienced unrealized gains. Mr. Falconer also advised that he was able to extend out the average maturity in the month of July (extending GSE'.s to eighteen months) and was unable to purchase any Farm Credit at this time for that length of maturity. In response to Board Member Moulin, Mr. Falconer advised that the $5 million that was re-invested was an odd lot piece. 2 Investment Advisory Board Minutes August 15, 2007 In response to Board Member Ross, Mr. Falconer advised that he is unable to take advantage of any gains due to the restrictions of the investment policy. Chairperson Deniel advised that the view of the investment policy is to only invest the portfolio and not "trade" the portfolio. Mr. Falconer advised that the LAIF market values are not included in the Treasurer's report and are included at year-end by the auditor. MOTION - It was moved by Board Members Moulin/Rassi to approve, receive and file the Treasury Report for June 2007. Motion carried unanimously. B. LAIF Conference Mr. Falconer advised that Council approved two Board members to attend the annual LAIF Conference. Chairperson Deniel summarized the LAIF Conference for the new Board members and suggested they attend the conference if possible. Mr. Falconer suggested that the Board consider rescheduling the October Board meeting due to the LAIF Conference and several Board members schedules. Board Member Moulin suggested that the Board go dark for the month of October. Chairperson Deniel suggested that the Board make a decision at the next scheduled Board meeting as to whether or not to meet in the month of October. Board Members Ross, Rassi, Moulin and Deniel advised that they would not be able to attend the upcoming LAIF Conference. MOTION - It was moved by Board Members Moulin/Rassi to authorize Board Member Park to attend the LAIF conference. Motion carried unanimously. 3 Investment Advisory Board Minutes August 15, 2007 VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - July 2007 Mr. Falconer advised that the June LAIF rate is currently at 4.23%, with the overall state funds at $65 billion. Noted and Filed B . Pooled Money Investment Board Reports - May 2007 Mr. Falconer summarized for the Board the AB55 loans, which are LAIF funds loaned to the State Department of Corrections for the building of State prisons. The LAIF funds are then repaid from the bond proceeds when the bonds are issued. Noted and Filed VII BOARD MEMBER ITEMS Board Member Moulin referenced the handouts regarding the benchmark and advised that page 5, item XV 'of the Investment Policy, under "Yield" and page 15, item XV "Benchmark," divulges redundant content. He also advised that the benchmark is solely a basis for comparison. Board Member Moulin advised of conversations with City Council in regard to the benchmark. Board Member Moulin recommended changing the "benchmark paragraph," on page 15 of the Investment Policy to a "comparative return" paragraph. By possibly changing to a comparative return, it might take away the focus of a single benchmark issue that may not be relevant and use other returns from other instruments as a basis of comparison. Board Member Rassi advised that the six-month T-Bill rate is an arbitrary number for the City's benchmark and does not feel there needs to be a change. Chairperson Deniel advised that she concurs with Board Member Moulin and feels that the word "benchmark" implies that there is a comparison of performance and a performance target. The main objective is to gauge the City's portfolio performance. Board Member Ross stated that the word "benchmark" can be a very explicit term and also concurs with Chairperson Deniel. Board Member Park concurred. 4 Investment Advisory Board Minutes August 15, 2007 Mr. Falconer advised that the suggested language from Board Member Moulin does modify the existing language in the policy. In response to Board Member Rassi, Chairperson Deniel advised that the word "benchmark" would be dropped from page 15 of the policy. Chairperson Deniel also advised that the benchmark paragraph would be modified and the title changed to read either "Market Comparison" or "Comparative Returns" in the next proposed draft of the Investment Policy. Mr. Falconer advised that this information could be incorporated into the month end cash report. Board Member Moulin suggested listing the information on the table of interest rates under "historical information." Chairperson Deniel advised that she would also like to include the overnight Federal Funds rate as an item of consideration for the Investment Policy. Board Member Moulin suggested that this item be added to next month's agenda for further discussion. The Board concurred. Chairperson Deniel advised that the City offers the opportunity to order business cards to all Boards and Commissions. In the past, the Board has opted not to purchase business cards for the Investment Board, but she would like to revisit this subject with the new Board members. Mr. Falconer advised that this is not a requirement and is up to the individual Board member as to whether or not they would like them ordered. After discussion, it was agreed to purchase individual business cards for the entire Investment Board. Board Member Moulin advised that the discussion of the Professional Portfolio Manager was a continuation from the previous month's meeting. Board Member Moulin also advised that the City Attorney was asked by the City Council to draft an ordinance regarding the Professional Portfolio Manager. Mr. Falconer advised that the drafted ordinance will be presented to the City Council at the second meeting in September, with the second reading presented at the first meeting in October and would then go into effect 30 days after it has been approved. Mr. Falconer also advised that the City Council did not 5 Investment Advisory Board Minutes August 15, 2007 request a review by the Investment Advisory Board but the draft ordinance would be available in the September City Council agenda packets. Board Member Moulin stated that 'one of the factors of this issue is who assumes responsibility for the investments. Board Member Moulin advised that the City Attorney read the Attorney General's opinion and felt that the City Attorney still places the responsibility on the Treasurer. Both Board Member Rassi and Mr. Falconer stated that their recollection of what was said by the City Attorney in the June lAB meeting was that the responsibility would lie with the City Council. Chairperson Deniel suggested that the Treasurer extend invitations to the City Attorney and the City Manager to the next scheduled lAB meeting to review the draft ordinance and address any concerns or questions the Board might have. Board concurred. Board Member Moulin suggested that an invitation also be extended to the City Councilor possibly Councilman Osborne. Mr. Falconer advised that due to the Brown Act, only two members of the City Council could be invited. Board Member Rassi commented that he did not feel the invitation needed to be extended to the City Council. Board Members Ross and Park concurred. Mr. Falconer advised that Staff will draft an invitation to the City Attorney and City Manager to attend the September lAB meeting. Mr. Falconer advised the Board that the City will be preparing for the release of an RFP for banking services due to the expiration of the four-year contact on January 1, 2008. Mr. Falconer also advised that one of the functions of the Board is to serve on the interview panel and previously Board Members Moulin and Deniel served on the last interview panel. Staff will be submitting a draft RFP to the City Council in September and the Board would need to appoint two members by October to serve on the panel. Chairperson Deniel asked Staff if they were pleased with the current services provided by Wells Fargo. Mr. Falconer replied that they have done an exceptional job for the City and was very pleased with the current services provided. 6 Investment Advisory Board Minutes VIII Adjournment August 15, 2007 MOTION - It was moved by Board Members Moulin/Rassi to adjourn the meeting at 5:55 p.m. Motion carried unanimously. Vianka Orrantia Secretary ~~ 7