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2009 04 08 IAB MinutesINVESTMENT ADVISORY BOARD MEETING April 8, 2009 CALL TO ORDER Regular meeting of the La Quinta Investment Advisory Board was called to order at the hour of 4:35 p.m. by Chairman Ross, followed by the Pledge of Allegiance. PRESENT: Board Members Moulin, Deniel, Ross, Rassi and Park ABSENT: None OTHERS PRESENT: John Falconer, Finance Director and Vianka Orrantia, Senior Secretary, II PUBLIC COMMENT - The following members of the public were present and are considering applying for the upcoming vacancies to the Investment Advisory Board: Jean- Gilchrist, Douglas Barr and Paul Rabbit. The potential candidates gave a brief .overview of their individual backgrounds in addition to answering questions from the Board. III CONFIRMATION OF AGENDA -None IV CONSENT CALENDAR A. Approval of Minutes of Meeting on March 11, 2009 for the Investment Advisory Board. Board Member Park requested that a correction be made on page 3, first sentence changing "discussed" to "discussion." Board Member Moulin requested that the following corrections be made on page 4, first sentence changing "Sniff" to "Henderson," and fifth paragraph changing "verifiable" to "background." MOTION: It was moved Board Members Park/Deniel to approve the minutes of March 1 1, 2009 as amended. Motion carried unanimously. V BUSINESS SESSION A. Transmittal of Treasury Report for February 2009 Mr. Falconer presented and reviewed the staff report advising the Board that the portfolio for February 28"' decreased by 56.9 million with an ending balance of 5180 million. The decrease was a result of pass-through payments from the RDA in addition to a 55.9 million second installment debt service payment to the State due on March 1, 2009. Mr. Falconer also advised that the yields continue to decease with the pooled cash investments ending at 1.1 1 % and the overall pooled yields and investments for the month ending at 1.3% with a continued decline in the portfolio with the maturity of investments. In addition, Mr. Falconer advised of the previous year's yields, which were at 3.85%. With the current market, staff continues to invest in short-term Treasury Bills in hopes that the rates begin to increase in the near future. Mr. Falconer commented that staff will be discussing with the Board the possibility of implementing the Temporary liquidity Guarantee Program as part of the Business Session, Item B. Mr. Falconer summarized the Treasurers Report for the potential IAB candidates, in addition to reviewing the investments and how they have changed within the past year as a result of the current economy. Board Member Deniel suggested a correction be made to page 9, forecasted property tax for the months of July and August, suggested that the "0" be replaced with "N/A." In response to Board Member Deniel, Mr. Falconer advised that the property taxes from the County are usually received in the months of January and May, in addition to supplemental taxes received throughout the year. Chairman Ross summarized the functions of the Investment Advisory Board for the potential candidates. In response to Chairman Ross, Mr. Falconer summarized the cash variance calculation on page 9. Board Member Deniel suggested that the actual expenses forecasted reflect positive numbers in lieu of negative numbers on 2 the cash flow page that staff has been in the process of revising. The Board and staff concurred with the proposed change. In response to Board Member Moulin, Mr. Falconer advised that staff will re-examine the large variance reflected in the RDA forecast and report back to the board at the next scheduled meeting. MOTION - It was moved by Board Members Moulin/Deniel to approve, receive and file the Treasury Report for February 2009. Motion carried unanimously. B. Continued Discussion of the Investment Advisory Board 2008109 Work Plan and 2009/10 Investment Policy Chairman Ross advised that the Board review the final changes made to page 9. Board Member Deniel reiterated her suggestion, that the actual numbers on page 9 reflect positive numbers in lieu of negative numbers. In response to Board Member Rassi, Mr. Falconer advised that changing the tiles of the revenue and expenditures variances to favorable and unfavorable is acceptable to staff. MOTION - It was moved by Board Members Moulin/Deniel to approve the final changes made as amended to page 9 to the Treasurers report and approve the 2008/2009 Work Plan. Motion carried unanimously. Board Member Deniel advised that previously, due to the economic environment, the Board recommended that staff abstain from investing in GSE's; but with staff looking for recommended investments, Board Member Deniel asked the Board their thoughts on reinvesting in GSE's. Mr. Falconer advised the Board of his thoughts on reinvesting in GSE's, have not changed, however the market views them as a safe investment. In response to Chairman Ross, Board Member Deniel advised the Board as to why she feels comfortable with the reinvesting in GSE's and would endorse staff's decision to do so. 3 Board Member Moulin voiced his concerns regarding the reinvestment of GSE's and was not in favor of investing in GSE's at this time. General discussion ensued amongst the Board and staff regarding investing in GSE's, FDIC guarantee and Orange County's history as an example of what can occur. Chairman Ross summarized the review of the policy for the IAB candidates and advised of the most recent program the Board is considering. Mr. Falconer expressed his concerns with investing in GSE's at this time. Mr. Falconer advised the Board of his conversation with Dan Dowell, Director of Investments for the State of California, regarding FDIC Temporary Liquidity Guarantee program (TLGP); Mr. Dowell stated that he is in favor of the TLGP but it is not used due to the fact that they invest in short-term funds. In response to Chairman Ross, Mr. Falconer advised that he did not ask Mr. Dowell on his views about investing in GSE's at this time, but upon review of the current LAIF portfolio, he believes Mr. Dowell's views on GSE's have not changed and they continue to invest in GSE's. Mr. Falconer referenced and spoke about his handouts on the TLGP and the full faith guarantee of the TLGP. Board Member Deniel advised that if the TLGP was considered a Corporate Note that there would be no need to modify the policy. General discussion ensued amongst the Board and staff regarding the TLGP. It was the consensus of the Board to have staff, along with Board Members Deniel and Park, devise a paragraph to be inserted into the investment policy for the Board's consideration at the next scheduled board meeting. Board Member Moulin suggested that a consensus be taken amongst the Board as to whether or not the Board is in favor of the TLGP and he advised that he was not in favor of the program. 4 Board Member Deniel advised that she was in favor of the program and she felt it was more favorable than the CDARS program. Board Members Park and Rassi concurred. Board Member Deniel advised Investment Policy as is, with paragraph referencing the TLGP. that she was in favor of the the exception of the pending Board Member Moulin suggested that the Board and staff review the internal controls sections of the policy to see if there is a need for any changes to be made. Board Member Deniel advised that the City continually receives excellent reports from the auditors, with the letters specifically addressing internal controls. In response to Chairman Ross, Mr. Falconer advised that staff does receive two internal control related letters in addition to a meeting usually in October or November to discuss internal controls with the auditors which includes the review of audit procedures as it relates to cash and investments. Chairman Ross stated that he felt there was an issue in previous years. Mr. Falconer advised there have been no issues in relation to internal controls. On behalf of Board Member Moulin, Chairman Ross suggested that staff review the language in the policy regarding internal controls and report back any recommendations and/or changes. Mr. Falconer advised that at the previous board meeting, staff was asked to come back with any upcoming work plan items to be considered; upon conversation with the City Manager regarding LAIF and the State's guarantee that the monies invested in LAIF do belong to those investing cities and there would be no liquidity issues, but with the State in a financial crisis and the overall economy, staff feels that it is prudent to have alternatives to LAIF. MOTION - It was moved by Board Members Deniel/Moulin to continue the review of the investment policy, the work plan and the review. of the TLGP to the next scheduled meeting. Motion carried unanimously. 5 VI CORRESPONDENCE AND WRITTEN MATERIAL A. Month End Cash Report and other selected Financial Data - March 2009 Mr. Falconer summarized the month end cash report for the potential candidates. Noted and Filed B. Pooled Money Investment Board Reports -January 2009 Noted and Filed VII BOARD MEMBER ITEMS -None VIII ADJOURNMENT MOTION - It was moved by Board Members Deniel/Park to adjourn the meeting at 5:45p.m. Motion carried unanimously. 6