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HomeMy WebLinkAboutNovember 10• Finance and Investment Committee Meeting Town of Los Altos Hills Town Hall Council Meeting Room Monday, November 10, 2008 Chair Roddy Sloss who prepared these minutes called the meeting to order at 5:00 p.m. Members present: Allan Epstein, Frank Lloyd, Jean Mordo, Doug Norby, Roddy Sloss, Lalla Stark Members absent: Wilf Corrigan, Jim Lai, Karl Kneip, Stan Mok Staff present: None Public present: Nick Ward Approval of minutes: The minutes of the September 8, 2008 meeting were approved as submitted. Report by Jean Mordo – recent city council activities of interest: Nothing to report. Report by Nick Pegueros – recent finance department matters Mr. Pegueros was not present however he provided the following information reported by Roddy Sloss. CalPERS held a recent teleconference call for participating entities related to pension benefits. As of June 30, 2008, past service benefits were fully funded. Market ups and downs are typically averaged and amortized over a multi year period for the purpose of employer contribution rates. However, due to the dramatic recent financial market decline, CalPERS may make a special assessment of 4% of payroll if the market decline for the period from July 1, 2008 to June 30, 2009 is at least 15%. Mr. Sloss noted the S&P 500 market decline was 38% from June 30, 2008 to date. The Town’s fiscal June 30, 2008 Financial Statements are expected to be available for the FIC’s review in December. Report from PFM, Town investment advisor Carlos Oblites, representing PFM, the Town’s investment advisor, handed out a presentation prepared for the Committee’s October 7, 2008 meeting that was canceled due to the absence of a quorum. Mr. Oblites focused his comments on Section II of the handout related to the Town’s investment portfolio noting among other things: 1) as of September 30, 2008, approximately $12,200,000 is managed by PFM comprising 56% US Treasury securities, 44% Federal agency issued securities and approximately $14,000 in a money market fund; 2) performance (realized and unrealized returns) was close to Merrill Lynch 1-3 Year Treasury Index for the past 1.5 years, the period since PFM was engaged; 3) Presently PFM is only investing in securities issued by the US Treasury or Federal Agencies; 4) PFM’s present outlook for intermediate term Federally guaranteed securities is for interest rates to remain low; 5) in the past 12 months approximately 9 securities sales were made prior to maturity to take advantage market conditions. All of those transactions when compared to the alternative of holding to maturity produced superior yields; and 6) the Town’s portfolio is in compliance with the Town’s investment policy. Mr. Sloss noted he had received information prior to the meeting from Mr. Pegueros indicating that as of October 31, 2008, funds not managed by PFM comprise approximately $20,000 invested in LAIF, a State of California managed money market fund, and approximately $724,000 deposited at the Bank of America. Mr. Pegueros stated that funds at the Bank of America are collateralized by securities issued by the US Treasury. Changes to Town’s Investment Policy Mr. Sloss noted that it is Town Council practice to annually ask the Committee to review and comment upon the Town’s Investment Policy. The Committee reviewed member suggestions and made the attached recommendations. Presentations from the floor - none Future Meeting Calendar: Next meeting is 5:00 pm December 8, 2008. Adjournment - The meeting adjourned at 6:40 p.m. Attachment M E M O R A N D U M To: Los Altos Hills Town Council From: Finance and Investment Committee (prepared by R. Sloss, Chair) Subject: Changes to Town’s Investment Policy Date: November 12, 2008 As background, it is Town Council practice to annually ask the Finance and Investment Committee (“FIC”) to review and comment upon the Town’s Investment Policy (“Policy”). The FIC completed this review in its November 10, 2008 meeting and recommends: 1. Security Sales The FIC recommends that the Policy be clarified to make it clearer that investments may be sold prior to maturity when 1) it is advantageous to do so or 2) for cash flow requirements. Accordingly, paragraph 13.0 of the Policy titled “Maximum Maturities” should be amended as follows: Title of paragraph 13.0 should be amended to read “Maximum Maturities and Security Sales” An additional paragraph should be added to the end of paragraph 13.0 as follows: “Securities may be sold prior to maturity to accommodate the Town’s cash flow requirements or to take advantage of market opportunities.” 2. Delegation of authority The FIC recommends that the Policy be clarified to reflect existing practice with respect to significant changes regarding selection of advisor’s and changes in investment strategy. Accordingly, paragraph 2.0 of the Policy, “Delegation of Authority”, should add the following paragraph: “From time to time, the need may arise to adjust the investment strategy within the approved instruments. This may involve modifying the duration or the mix of instruments. Whether initiated by our Investment Manager, the staff or Finance and Investment Committee (FIC), such changes will be discussed by the FIC, which will then transmit its recommendation, together with the staff’s recommendation to Council for information.” 3. Investment Policy Review Paragraph 16.0 of the Policy calls for an annual review of the Policy by the FIC for the purpose of recommending modifications to the Town Council. The FIC does not recommend a change to this portion of the policy. However, the FIC believes that due to the present unusual circumstances in financial markets, it is worthwhile for the FIC to receive a quarterly review of the Town’s investment portfolio and investment strategy from the Town Manager or his/her designee for the purpose of considering changes it may wish to recommend to Town Council. Accordingly, the FIC suggests that the Council adopt a resolution for a term of one year, after which it shall be reconsidered for renewal, stating that the Town Manager or his/her designee present quarterly to the FIC the Town’s investment portfolio and strategy for the FIC’s review. Presently, it is the Town’s investment strategy to the extent practicable to invest in securities that are either issued by the US Treasury or guaranteed by the US Treasury. The FIC concurs with this practice.