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2002 09 18 IAB Minutes MISSINGREPORT/INFORMATIONAL ITEM: I5 INVESTMENT ADVISORY BOARD Meeting September 18, 2002 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 Chairman Mahfoud, followed by the Pledge of Allegiance. PRESENT: Board Members Moulin, Lewis, Olander, Mortenson and Chairman Mahfoud ABSENT: Board Members Osborne and Felice 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.) Mr. Falconer advised Board that the two handouts were informational items only. The first handout was a Memorandum from the City Attorney, Kathy Jenson, which is being distributed, to all Boards and Commissions regarding the Campaign Contributions limitations. In response ' to Chairman Mahfoud, Mr. Falconer advised the Board that the second handout was a summary of the September 12' LAIF Conference, and that Chairman Mahfoud and Board Member Olander attended the conference and may want to discuss the conference under Board Member Items. IV CONSENT CALENDAR Approval of Minutes of Meeting on July 10, 2002 for the Investment Advisory Board. MOTION - It was moved by Board Members Moulin/Lewis to approve the Minutes of July 10, 2002. Motion carried unanimously. h �l Investment Advisory Board Minutes September 18, 2002 V BUSINESS SESSION A. Transmittal of Treasury Report for June and July 2002 Mr. Falconer advised the Board that the City was over the limit in Mutual Funds in the June Report, therefore the City is required to report this exception. On page 002 of the June Report this exception was documented along with the actions that were taken to correct it and dated as to when this was completed. Mr. Falconer advised the Board of the written action which stated that as of June 30, 2002, the City was over the limit in Mutual Funds and on the first available day, which was July 3rd, Staff invested $30 million in U.S. Treasury Bills from a recently completed bond issue to correct this exception. Mr. Falconer also advised the Board that in the month of June that there was a great deal of activity, due to the purchase of the Ranch Property, money going out (which was purchased the third week of June) and also the receipt of the bond proceeds, money coming in, which left a net affect with a decrease of $9 million in the City portfolio. In response to Chairman Mahfoud, Mr. Falconer advised the Board that the effective bond rate yield was a little over 5 %. Mr. Falconer stated in retrospect that he should have directed U.S. Bank, the custodian, to invest the proceeds directly into U.S. Treasury Bills rather into money market funds. Board Member Mortenson asked the Board if there was another alternative to the current money market that the City is currently invested in, he felt that rate at 1 % was quite low. Mr. Falconer replied that the rates are even lower. Mr. Falconer also stated that there are other state approved money market funds through Wells Fargo, and the Investment Advisory Board felt that the treasury money market fund was the most prudent for the City. Board Member Mortenson commented to the Board that the management fees paid at 40 basis points for the money market funds seemed high and recommended possibly checking into a fund that pays a lower management fee and a higher rate. Mr. Falconer stated that current market funds are the ones that U.S. Bank currently carries. In response to Board Member Olander, Mr. Falconer confirmed the average weighted maturity currently is at 132 days. 2 AM " i" tj Investment Advisory Board Minutes September 18, 2002 Board Member Mortenson asked the Board if the LAIF Pool .34 of 1 % reflected on page 008, if this was an annualized rate? Mr. Falconer replied that this rate is adjusted every quarter. Mr. Falconer advised that Board that on page 012, of the July report, the maximums reflected represent the previous year's maximums and not the current year, increasing the amounts from $3 million to $5 million (except Sallie Mae) and the ability to extend from two to five years. Mr. Falconer advised the Board that Staff is not recommending investing over two years at this time. These maximums will be reflected in the August report. MOTION — It was moved by Board Members Lewis/Olander to review, received and file the Treasurer's Report for June and July 2002. Motion carried unanimously. VI CORRESONDENCE AND WRITTEN MATERIAL A. Month End Cash Report - August 2002 Mr. Falconer advised the Board that the handout included with the Month End Cash Report was for informational purposes and to review the County's current investments. General discussion ensued by the Board regarding the County's investments in GSE's. In response to Board Member Mortenson, Mr. Falconer explained the Month End Cash Report is generated due to the delay in generating the complete Treasurers Report. Noted and Filed B. Pooled Money Investment Report for June and July 2002. In response to Board Member Lewis, Mr. Falconer commented that most people stay invested in LAIF as rates decline, and leave as rates begin to pick up. LAIF is used mainly as a short-term "vehicle." Noted and Filed 3 4.41 Investment Advisory Board Minutes September 18, 2002 VII BOARD MEMBER ITEMS LAIF Conference Chairman Mahfoud advised the Board that LAIF is handled by 15 to 20 State employees. Board Member Olander advised the Board that on an average day about $800 million is invested and is done in about an hour and a half. In response to Board Member Moulin, Mr. Falconer advised the Board, that in the Orange County situation, they had a run on their pool based on their cash flow strategy, and that LAIF would have adequate funds to cover any withdrawals. Mr. Falconer also advised the Board that LAIF has a buy and hold strategy and that LAIF does not time the market or sell before maturity. In response to Chairman Mahfoud's question, Mr. Bill Sherwood of LAIF stated that in the 30 years the Chief Investment Officer has been employed at LAIF, they have never had a loss. Mr. Falconer advised the Board that included in the handouts, there is a chart that refers to their maturities in million of dollars and the number of days they will come due. LAIF has a short-term investment strategy and is not subject to market risk. Mr. Falconer also advised the Board that during one of the conference presentations, they stressed that LAIF participants benefit from the fact that they are included with the general and state funds that are required by statute to be invested with the State Treasurer. Other benefits offered in the investment of LAIF are same day liquidity and the benefit of five-year investments. Also emphasized at the presentation was that 43% of the money (which represents LAIF) is due within 90 days. Chairman Mahfoud emphasized to the Board that the State Employees are very highly conservative in managing their portfolio. Chairman Mahfoud advised the Board that the LAIF funds are trust funds and are not touchable by politicians. There are two other types of funds that are borrowed against, the surplus and the general funds. There are five different groups that audit each transaction each day. Board Member Olander suggested to the Board that the LAIF percentage would be increased for next year's policy and to give staff more flexibility with other types of investments, due to the diminishment of other products. Board Member Lewis stated that he was not comfortable that LAIF invests in time deposits with local banks and mortgage backed products. 0 Investment Advisory Board September 18, 2002 Minutes Other Handout Mr. Falconer suggested to the Board that the memo handout on FNMA and Freddie Mac be added to the December Agenda for further discussion and consideration with other investment options. VII ADJOURNMENT MOTION - It was moved by Board Members' Lewis/Moulin to adjourn the meeting at 6:30 p.m. Motion carried unanimously. ZSubfitted by Vianka Orrantia Secretary 5 4t'3