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2008 06 12 IAB MinutesINVESTMENT ADVISORY BOARD Meeting June 12, 2008 CALL TO ORDER Regular 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 Moulin, Ross, Deniel, Rassi & Park ABSENT: None OTHERS PRESENT: John Falconer, Finance Director, Vianka Orrantia, Secretary, Tom Genovese, City Manager and Kathy Jenson, City Attorney 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.) None. Mr. Falconer requested that an amended copy of page 3 of the May 14`" minutes be added to the agenda to reflect the change of the June meeting date as requested by Chairperson Deniel. Mr. Falconer advised of a handout submitted by Board Member Moulin and requested that that this item be added for discussion under the investment policy. In addition, Mr. Falconer requested that Business Session -Item B, be moved as the first item of the agenda for discussion. IV CONSENT CALENDAR Approval of Minutes of Meeting on May 14, 2008 for the Investment Advisory Board. Board Member Ross advised that page 2, Business Session Item A, first paragraph, second sentence should be consistent with Mr. Falconer's comments within the paragraph and the second sentence should read: Mr. Falconer also advised that the portfolio .has continued to decline with the average maturity at 74 days, "...' MOTION - It was moved by Board Members Moulin/Park to approve the minutes of May 14, 2008, as amended. Motion carried unanimously. Investment Advisory Board Minutes June 12, 2008 (*ITEM "A" OF THE BUSINESS SESSION WAS DISCUSSED AT THIS TIME) V BUSINESS SESSION A. Transmittal of Treasury Report for April 2008 Mr. Falconer presented the April 2008 Treasurer's report and advised that the portfolio was down by approximately S3 million due to the Avenue 48 construction project payments, with the yield still decreasing based upon the current economic market. Mr. Falconer also advised that LAIF had declined below 3%, also due to the economic market with staff keeping investments short. In addition, Mr. Falconer referred to the maturities page 7, which also reflects the general market condition. In response to Board Member Ross, Mr. Falconer advised that the amortization of premiums and discounts on page 2 are calculated by historical costs derived from page 7. In response to Board Member Ross, Mr. Falconer clarified that the additional equipment purchased listed under bank fees is listed correctly and the purchase of the additional equipment is deducted from interest earnings. MOTION - It was moved by Board Members Rassi/Ross to approve, receive and file the Treasury Report for April 2008. Motion carried unanimously. Board Member Moulin suggested that his handout, handout "B" (ad for recruitment of board members) be considered as part of the Board's upcoming work plan. Board Member Moulin advised that there were two items that needed to be revised; 1) definition of qualification of service on the Board, that knowledge of securities should be part of the qualifications and 2) terms of service and their expiration date. Board Member Moulin stated that the Board's terms should be staggered. Board Member Moulin advised that his handout does include suggested language for the Board's consideration. In response to Board Member Rassi, Board Member Moulin clarified the ad's request for a background for "accounting for securities." Board Member Rassi stated that he was in favor of the original ad, which read background in investment field or related experience. Mr. Falconer suggested that the Board incorporate Board Member Moulin's handout as part of the upcoming 2008/09 work plan. Board 2 Investment Advisory Board Minutes concurred. June 12, 2008 B. *Continued Consideration of the Fiscal Year 2008109 Investment Policy Chairperson Deniel welcomed the City Manager and City Attorney. Chairperson Deniel advised that there were significant changes to the 2008/09 investment policy, with some of the changes being; placing permissible investments within the body of the policy, removing investments that are permissible by the state but not allowed by the city into appendices and removing the responsibility of a professional portfolio management firm from the City Council and placing it with the Finance Director/Treasurer. Chairperson Deniel further advised that the changes were agreed upon by the Board with the exception of the section of "Conflict and Interest." Board Member Moulin advised that the section the Board could not agree upon within "Conflict of Interest" was the area of "reporting," and further advised of the two suggestions for the Board's consideration. General discussion ensued regarding the section of "Conflict and Interest" and it was agreed upon by the Board to implement the following language; toe involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain "..." (Second paragraph) Is1 ltt fl? may conduct personal business with banks, brokers, and other financial institutions "..." Board Member Ross suggested that the Executive Summary be linked somehow to the section of "Conflict of Interest" and suggested the following to page 2 (Attachment 1 -redlined copyl, Executive Summary. Deletion of the seventh paragraph; , 3 Investment Advisory Board Minutes June 12, 2008 Replacing with second paragraph from page 7, "Conflict of Interest"; Ms. Jenson suggested the following change to section VIII "Ethics and Conflicts of Interest, first paragraph, second sentence; The City Manager, Assistant City Managers, City Treasurer and city employees involved in the City's banking and investment process shall conduct the City's business in an ethical manner and refrain "..." Any questionable activity or relationship shall be reported immediately and ~~~ y ~~P... with the procedures of Section 1.40 "..." Board concurred. Board Member Moulin suggested that on page 35 (Attachment 2 -draft copy), the source from which Appendix 1 derived be added to the bottom of the page. The source should read: Chapter II. Fund Management Local Agency Investment Guidelines 2007 Issued by California Debt and Investment Advisory Commission Board concurred. Board Member Moulin advised that he would like to leave the last two suggested paragraphs from the Local Agency Investment guide within page 35 (Attachment 2 -draft copy) . General discussion ensued among the Board as to whether or not the last two paragraphs from the Local Agency Investment guide would be included with Appendix I and it was agreed by the Board to just include the following paragraph; 4 Ms. Jenson advised that on page 35 (Attachment 2 -draft copyl, after the sixth paragraph, if an article is going to be quoted and the entire article is not included than there should be an ellipsis I[...II added to identify omitted language. Investment Advisory Board Minutes June 12, 2008 Mr. Falconer advised the Board that all changes and/or deletions will need to be made by June 13th for distribution and any changes should be completed by Staff. In response to Board Member Ross, Chairperson Deniel clarified that when the policy mentions the liquidity needs of the city and also the portfolio needs, they are one in the same. Along with Board Member Ross, Chairperson Deniel suggested the following changes to eighth paragraph on page 3 (Attachment 1 - redlined copy), of the Executive Summary; The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All Broker/Dealers and financial institutions w,~,~ ents~r~ii ®subject to City Council approval. Board and staff concurred. Board Member Ross suggested that on page 4 (Attachment 1 -redlined copy) first paragraph, that the Board incorporate within the sentence a maximum of $8 million. Chairperson Deniel stated that she was not in agreement of adding a dollar amount within the "Executive Summary" portion of the policy that this information can be found within the detail of the policy. Board Member Ross suggested that on page 8 (Attachment 2 -draft copy) second paragraph be consistent with the policy. Mr. Falconer advised that a change would be made to mirror the "Executive Summary" as follows; Deletion of the following paragraph: Replaced with the following paragraph: The City Treasurer maintains a listing of financial institutions which are approved for investment purposes. All BrokerlDealers and financial institutions ,y~ pr~~fefe i se ~ ~ ~~ lal subject to City Council approval 5 Investment Advisory Board Minutes June 12, 2008 In response to Board Member Ross, Mr. Falconer and Chairperson Deniel clarified a "call report." Mr. Falconer requested the Board's consideration, on page 10 (Attachment 2 -draft copy) on eliminating the cap on GSE's. Chairperson Deniel advised that the objective of the cap is to limit the amount invested in GSE's. General discussion ensued among the Board and Staff regarding the possible elimination of the GSE cap and the following vote was taken by the Board; Ayes -Board Member Rassi Noes -Board Member Moulin, Park, Ross and Deniel It was the conclusion by the Board to leave the current GSE's cap as is within policy. In response to Board Member Moulin, Mr. Falconer clarified for the Board that the discussion of a change to an ordinance would be discussed at the July meeting as part of the Board's upcoming work plan. MOTION - It was moved by Board Members Moulin/Park to approve the Fiscal Year 2008/09 Investment Policy with the recommended changes and forward to the City Council. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL A . Month End Cash Report Noted and Filed B. Pooled Money Investment Board Report Mr. Falconer commented that LAIF's 2007 March balance was at S57 billion and the March 2008 at S64 billion, with increase of investments in LAIF at $6 billion. Noted and Filed C. Update on California Municipal Treasurers Association Conference (CMTA) Mr. Falconer advised that this item was carried over from the previous 6 Investment Advisory Board June 12, 2008 Minutes month's meeting due to time constraints. Board Member Park advised that the overall general comments at the conference were negative in regards to the housing market, credit market and Wall Street due to the high cost of fuel. Board Member Park further advised that it was the consensus that a turn in the economy was two to threes years away. General discussion ensued by the Board in regards to the current economy and the impact on the Valley's economy and the City's local housing market. VII BOARD MEMBER ITEMS -None VIII Adjournment MOTION - It was moved by Board Members Moulin/Ross to adjourn the meeting at 6:25 p.m. Motion carried unanimously. Submi Vianka Orrantia, Senior Secretary 7