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2011 12 14 IAB MinutesINVESTMENT ADVISORY BOARD Meeting December 14, 2011 I CALL TO ORDER Regular meeting of the La Quinta Investment Advisory Board was called to order at the hour of 4:00 p.m. by Chairperson Spirtos followed by the Pledge of Allegiance. PRESENT: Board Members Mortenson, Blum, Spirtos, Park and Donais ABSENT: None OTHERS PRESENT: John Falconer, Finance Director, Louise West, Accounting Manager, Vianka Orrantia, Senior Secretary and Bryan Gruber, Lance Soil & Lunghard LLC, Audit Manager II PUBLIC COMMENT - None III CONFIRMATION OF AGENDA - Mr. Falconer requested that upon approval of the confirmation of agenda that Section VI, Item A be the first item of discussion. Board concurred. IV CONSENT CALENDAR 1. Approval of Minutes of Meeting on November 9, 2011 for the Investment Advisory Board. MOTION - It was moved by Board Members Blum / Donais to approve the Minutes of November 9, 2011. Motion carried unanimously. "At this time Section VI, Item A was discussed. V BUSINESS SESSION A. Transmittal of Treasury Report for October 2011 Mr. Falconer presented and reviewed the staff report for the month of October advising the Board that the portfolio decreased by $1.16 million ending the month at $166.3 million. Mr. Falconer further advised that the decrease was due to major capital improvement expenditure projects as follows: $403,000 spent on the "A" Street extension project, $199,000 spent on the Coral Mountain Apartment Project, $111,000 spent on the Phase 2 Washington Street Drainage Project and $100,000 on the Adams Street Bridge Project. Mr. Falconer advised that the investment activity resulted in an average maturity decrease of seven days from the prior, month ending the month of October at 117 days and the overall portfolio performance at four basis points ending the month at .35 %, with the pooled cash investments at a little over .50% basis points. Mr. Falconer further advised on the $17 million investment due to mature on December 15, 2011 and a reinvestment of $7 million in commercial paper and $10 million into LAIF. Mr. Falconer noted that the $7 million purchase in commercial paper was a short-term note to coincide with the anticipated $18 million payment due to the State of California in mid - January. In response to Board Member Mortenson, Mr. Falconer clarified that bond funds mentioned in the November meeting minutes on page 2, third paragraph were individual investments made listed on page 6 of the Treasurers Report. MOTION — It was moved by Board Members Mortenson /Donais to review, receive, and file the Treasurers Report for October 2011. Motion carried unanimously. VI CORRESPONDENCE AND WRITTEN MATERIAL *A. City of La Quints Fiscal Year 201012011 Audited Financial Report At this time Mr. Falconer clarified the audit process and introduced the City's audit representative Mr. Bryan Gruber of Lance Soil & Lunghard, LLP, Audit Manager. Mr. Gruber presented the Audited Financial Statement for year ending June 30, 2011. Mr. Gruber advised the Board on the audit and the audit process. He further advised that the audit process is conducted in two steps: 1) Interim is Audit, which is conducted during the fiscal year, at that time the City's internal controls are reviewed. These procedural controls are in place to protect the City's assets and to ensure proper financial reporting. In relation to cash and investments the procedures are also audited to ensure proper reporting of the City's cash and investment balances, in addition to the compliance of the City's Investment Policy with respect to the City's investment portfolio. 2) The second phase of the audit is conducted after the year -end (the second phase was conducted in the month of August, 2011); at this time the amounts of the disclosures that are reported in the financial statements are audited to ensure they are properly stated in all material respect. This is done through various procedures, i.e. the City's cash and investments, third party confirmations letters are sent to all banks for 100% cash balances to ensure proper reporting. In addition, a review of disclosures in the financial statements is also conducted to ensure compliance with the City's Investment Policy. In response to Board Member Blum, Mr. Gruber advised that that a blank confirmation is sent so that it is completed by the investment institution by June 30, additional follow -up procedures are also conducted after June 30 and prior to the initial audit. Mr. Gruber advised that the only item identified in the Auditor's report was a footnote related to the uncertainty of the Redevelopment Agency. Mr. Gruber reviewed for the Board the City's financial performance as follows: Pages 46 - 48: Footnote 3 is a review of the City's cash and investment balances and disclosures relating to Interest Rate Risk, Credit Risk (this item was added this year due to the downgrading long -term sovereign credit rating from AA+ to AAA), Concentration of Credit Risk, Custodial Credit Risk and Investment in State Investment Pool. Pages 17 — 19: Statement of Net Assets is the amounts which assets exceed liabilities. A decrease by approximately $30 million was noted this year due to the Coachella Valley Housing Coalition, Low- Mod apartment complex. Mr. Falconer advised that page 17 reflects approximately half billion in fixed assets, $319,278, 803 are included as part of this sum due to the fact that the City is required to capitalize their roads and right -of -way of roads. Mr. Falconer further advised that the decline in the net activity was due to the contribution of 3 the construction of the Wolff Water Apartments and the relinquishing of the apartments to Wolff Waters. Mr. Gruber advised that one of the two supplemental reports included as a hand -out to the Board and staff was a GASB 31 audit adjustment for LAIF and Bank of New York Investments of $269,103 and was recommended by the auditors as a journal entry to staff. In response to Board Member Mortenson, Mr. Falconer clarified that the line item on page 46 for U.S. Treasury Bills in the amount of $30,073,080 should be a one -year note. In response to Board Member Blum, Mr. Falconer clarified that the public safety overall total of $19,826,372 on page 26 includes various aspects of public safety and the break down for the total is referenced on page 28. Mr. Falconer further clarified that on page 105 is a budgetary line item for Public Safety of $2,000. This amount was a result of fallen officer Bruce Lee and the City Council's decision to contribute to any future fallen officers family. In response to Board Member Blum, Mr. Falconer clarified that $1,051,000 on page 15 was a carryover of appropriations from the previous fiscal year of unused funds budgeted for slurry seal of City streets. In response to Chairperson Spirtos, Mr. Falconer advised the Board that the corrected estimated population on page iv, third paragraph, second sentence should read 37,836. Mr. Falconer further advised that the final revision of the audit report had the reduced population number in it based on the 2010 consensus. Chairperson Spirtos commented on the current expenditures for Planning on pages 26 and 27 and the possible impact the State Supreme Court decision could have if the decision is made to abolish the Redevelopment Agencies. General discussion ensued amongst the Board and staff regarding the potential impact of the State Supreme Court's decision and the impact to the Redevelopment and the City. In response to Chairperson Spirtos, Mr. Falconer clarified for the Board the Developer Agreement Payable on page 53. 4 The Board and staff thanked Mr. Gruber for his attendance and review of the Financial Audited Report. Noted and Filed B. Month End Cash Report — November 2011 Mr. Falconer presented and reviewed the Month End Cash Report advising the Board that Rabobank's initial interest rate quoted to the City will not remain in effect until the end of the term of the contract, although the interest rate remains ten basis points below LAIF, as a result staff will actively manage the account and will begin drawing down on the account. Mr. Falconer advised that LAIF remains at 38 basis points and the overall portfolio at $67 billion. In response to Board Member Mortenson, Mr. Falconer advised that LAIF has been investing in Mortgages, with the current investments at 0.62 %. In response to Board Member Mortenson, Mr. Falconer updated the Board on his short-term interim appointment as acting City Manager and the current appointment of Mark Weiss as the Interim City Manager for approximately six months until a permanent City Manager is in place. General discussion ensued amongst the Board and staff regarding the request for proposal process of the recruitment of a City Manager. Noted and Filed C. Pooled Money Investment Board Reports — September 2011 Mr. Falconer presented and reviewed the Pooled Money Investment Board report advising the Board that the portfolio remains the same in comparison to the previous year, and the maturities slightly longer. Noted and Filed D. November 1, 2011 Joint Meeting Minutes with the City Council Noted and Filed E VII BOARD MEMBER ITEMS - None VIII ADJOURNMENT MOTION - It was moved by Board Members Mortenson /Donais to adjourn the meeting at 4:5, .a0. Motion carried unanimously. Vianka Orfantia Senior Secretary