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HomeMy WebLinkAboutMinutes 01-27-2009 UNOFFICIAL UNTIL APPROVED BY THE INVESTMENT COMMITTEE ST. LUCIE COUNTY INVESTMENT COMMITTEE _________________________________________________________________ Date: April 20, 2009 Convened: 8:20 a.m. Tape: 1 Adjourned: 10:20 a.m. _________________________________________________________________ Present: Howard Conklin, Chairman; Todd Bevan; Chris Fogal, Joseph E. Smith, Clerk of Circuit Court; Shai Francis, Finance Director; Lauri Heistermann, Deputy Clerk Absent: Mike Dillman, excused; T.J. Buckley, excused ________________________________________________________________ Due to equipment failure the entire conversation of the meeting may not be reflected in the minutes. Tape 1 I MINUTES The meeting was opened by the Clerk of Circuit Court. The minutes from the January 27, 2009 were reviewed. It was moved by Todd Bevan and seconded by Chris Fogal to approve the minutes from the January 27, 2009 meeting; and upon roll call motion carried unanimously. II. PRESENTATION OF QUARTERLY INVESTMENT REPORT The Finance Director presented the quarterly investment report for St. Lucie County for December 31, 2008. 1 The Finance Director outlined the Investment Portfolio. She stated that as of December 31, 2008, the portfolio was $397,981,153. She informed the Committee that the Money Market increased to $195,364.221 due to tax revenue in November and December. She stated that by October or November, 2010 it will decrease to about $80,000,000. Howard questioned the yield of .26% on the Cash in the Bank. The Finance Director stated that the bank was Seacoast National Bank and the yield is based on the contract. She informed the Committee that we can not give them more than $11,000,000 because the bank is not willing to put in the collateral. She stated that the yield was based on Fed Fund plus 10 basis points. Howard Conklin asked why we kept such a large amount of money in this account. The Finance Director stated that this is the operating money. She stated that this is needed for outstanding checks. Todd Bevan stated that this did not seem to be an unreasonable balance. Howard Conklin stated that there are things that could be done with the Money Market to get the yield up, that still provides the liquidity. Shai Francis stated that last year they had money in the Reserve Primary Fund, which broke the buck. This was 97 cents to the dollar. She stated that it is hard to determine which funds are safe at this point. She informed the Committee that she had just received notification from Florida Local Government Investment Trust that they had just established a day to day fund. She stated that the County has $38,000,000 with the Florida Local Government Investment Trust. She stated that there has not been any dividend earned in the last 9 months. Anytime the fund goes above $38,000,000 the County receives the overage back on a quarterly basis. She asked the Committee if we should take our money back or if we should continue to invest with them. She stated that she considers the Florida Local Government Investment Trust as one of the Money Managers. Howard Conklin stated that before anything is done, FLGIT should be entitled to phone conference with the Investment Committee. The Finance Director stated that FLGIT is trying to get the county into their new Money Market Fund. 2 Howard Conklin requested that a phone conference with FLGIT be scheduled for the next quarterly Investment Committee meeting. Todd Bevan asked if the collateralizing issue with Seacoast was a problem. The Finance Director stated that it has only been a problem a couple of times, which was when a large sum of money was to be received from the Tax Collector. In the past it was difficult to time the wires coming in from the Tax Collector. According to the contract with Seacoast we can not exceed a certain amount of money overnight. She informed the Committee that she spoke to the Tax Collector and this issue had been resolved. Todd Bevan suggested that when the banking contract is renewed through the RFP process, he recommended obtaining a little more leeway with the amount of money they are willing to hold from deposit. The Finance Director stated that the Certificate of Deposits had been increased to $27,000,000. She outlined the detail of the banks which we currently have Certificate of Deposits with. She informed the Committee that there were two local banks, First Peoples and Oculina, who were not willing to participate. She informed the Committee that she had attempted to get local banks involved, but many are not willing to participate. Howard Conklin asked if there were any local banks that were offering CD’s with no penalties for early withdrawal. Mike Dillman and Todd Bevan stated that they were not aware of any. Todd Bevan stated that CD rates currently are very low. With the economic conditions they will go lower. He stated that the Feds have the rates as low as he has seen them. The Finance Director reviewed the bank ratings with the Investment Committee. She stated that Gulfstream Business Bank is the only one with a B rating and all the others are not in good shape. She informed the Committee that all the banks are Qualified Public Depositories. She stated that all of the County’s investments are collateralized. She asked the Committee if the CD holdings should be increased. She stated that the rate is not good right now, but it is better than the Money Market rate. 3 Howard Conklin stated yes, however, he wanted to get the opinion of Steve Alexander from PFM. Todd Bevan stated that they should have some type of projected cash flow so there is a sense about when the County would need the money. He stated that if money was going to be around for nine months to one year than the CD would be an alternative. The Finance Director stated that from the history last year the lowest point in the Money Market was about $80,000,000. Over the past 5 years the cash level has never dropped below $50,000,000. The Clerk of Circuit Court stated that the County in the past had laddered the T-notes and that has since stopped. He asked the Committee why they had stopped that process. The Finance Director stated that the reason why it had stopped is because now there are Money Managers to handle the long term investments. She stated that all the Money Managers can invest in are Treasuries and Agencies and the liquidity would be managed in house. Todd Bevan stated that the time period we are in right now is pointing out the flaws in portfolios. Mike Dillman asked for a return on the entire portfolio for last year. The Finance Director stated that they had never done an annual analysis. She informed the Committee that on a monthly basis she submits the portfolio to Standard & Poor‘s to do a rating. She informed the Committee that whatever she provided to Standard & Poor’s she could provide to the Investment Committee at the meeting. The Committee reviewed the SBA Newsletter. Howard Conklin requested that the Clerk of Circuit Court get with the County Attorney to determine if any governmental entity was in litigation with the State Board of Administration. He stated that we do not want to be the last County in the pool after all the litigants are paid off. 4 III.PRESENTATION BY MONEY MANAGER – CAPITAL GUARDIAN – TELEPHONE CONFERENCE Steve Alexander from PFM introduced himself to the Committee. He outlined his background. He informed the Investment Committee that the one page Monthly Market Update & Outlook was available via e-mail. The Recording Secretary will provide Steve Alexander with the e- mail addresses for the Investment Committee members. Steve Alexander reviewed the Investment Performance Review for Quarter ended September 30, 2008. Howard Conklin stated that it did not appear that they beat the benchmark. Steve Alexander stated that they would not beat the benchmark because of the quality of Securities. This portfolio has some Treasuries but is not 100% Treasuries. Todd Bevan asked if Freddie Mac and Fannie Mae were getting an Agency yield with a Treasury Credit. Steve Alexander stated that the spreads were not that close yet. He stated that from a credit respect they are being viewed very closely. Howard Conklin asked for Steve Alexander’s view on Fund B of the SBA. Steve Alexander stated that the clients feel that they are going to take some loss on the B Fund. He stated that the B Fund will be around for awhile. He informed the Committee that within the last 4 years about 99% of the portfolio was in debt. This was the largest state pool in the Country with the highest yield. Howard Conklin asked Steve Alexander if he was familiar with any litigation against the SBA. Steve Alexander stated that initially there was a lot of discussion about litigation, but he has not heard about anyone pursuing litigation at this time. Howard Conklin asked the Clerk of Circuit Court to get with the County Attorney to determine if any governmental entities are in litigation with the State Board of Administration. 5 Steve Alexander reviewed the report for the Quarter Ended December 31, 2008. He stated that every portfolio is a customized portfolio. He advised the Committee that none of the portfolios are in a pool. Steve Alexander informed the Committee that they have a unique Money Market Fund. He stated that PFM created the first Local Government Investment Pool. When the SBA fell apart, a lot of their clients asked for a Money Market option. He stated that it is a fully registered SEC Fund, but it is only for local governments. He stated that the prime fund is over 1% and the Government Fund is 70 basis points. He stated that the Government Fund is strictly Treasuries and Agencies. The Prime Fund does have some exposure to bank CD’s and FDIC Paper. The Prime Fund has 48% exposure to Agencies. Howard Conklin suggested that they look into investing in the PFM Money Market. Steve Alexander stated that he could provide the prospectus. Steve Alexander stated that the limit in the individual money market fund is no more than 25%. It was moved by Todd Bevan and Seconded by Mike Dillman to research the possibility of investing in PFM’s Money Market. IV.REVIEW OF FLGIT PERFORMANCE The Finance Director stated that FLGIT was considered as a Money Manager. Howard Conklin stated that with FLGIT that money could be obtained within 24 hours. The Finance Director stated that the plan with FLGIT was every quarter, anything above $38,000,000 would be returned to the County. This is treated as an investment earning. She stated that based on the December statement for FLGIT it appears to be going back up. She stated that she did not feel that they just purchased Agencies and Treasuries. Todd Bevan stated that at one point they were in Commercial Paper. 6 The Finance Director reviewed the Florida Local Government Investment Trust portfolio with the Committee. They reviewed the list of things that FLGIT was investing in. Todd Bevan stated that it appeared that they had liquidated all the liquid paper. Todd Bevan asked if the Municipals were taxable Municipals or tax free. Howard Conklin stated that Commissioner Coward sits on the FLGIT Board and he may have some answers. The Finance Director stated that FLGIT’s return is 0. She reviewed the FLGIT net value history. She informed the Committee that the last time money was received from FLGIT was March 31, 2008 in the amount of $527,520. Mike Dillman asked if the Commissioners were aware of the issues with FLGIT. The Clerk of Circuit Court stated that he would touch base with Commissioner Coward and send a letter to the Board of County Commissioners. V.MODIFICATION OF INVESTMENT POLICY PER RECOMMENDATION OF CAPITAL GUARDIAN The Finance Director reviewed the November 5, 2008 letter from Capital Guardian. She informed the Committee that they had some recommendations to amend the Investment Policy as follows: Section VIII. D.2 to read: “The maximum length of maturity of any direct investment in government securities is five and on half (5.5) years.” Section VIII. E.2 to read: “The maximum length of maturity of any direct investment in Federal Agency Securities is five and on half (5.5) years.” VIII. F.2 to read: “The maximum length of maturity of any direct investment in Federal Instrumentalities is five and on half (5.5) years.” XIII.A. Exempting government bonds from the competitive bid requirements. They suggested adding a new sentence after the second paragraph of Section XIII stating: “The competitive bid procedures in A. below shall not apply to securities issued or guaranteed by the United States Government or issued by government Instrumentalities. 7 In addition, Capital Guardian stated that they think that the new government-guaranteed bank debt issued pursuant to the Troubled Asset Relief Program (TARP) may be appropriate for the account when the details of such securities become known. They believed that these securities would be permitted under VI.C and/or VI.D. Howard Conklin asked for Steve Alexander’s input on the Investment Policy modification request from Capital Guardian. Steve Alexander stated that he felt the increase in the maximum length of maturity from 5 years to 5.5 year would be fine. Steve Alexander stated that they are big believers on doing everything on a competitive bid basis. This keeps all investments arm length. He stated that 3 bids is the national standard. The Finance Director informed the Committee that Capital Guardian had concerns with the 3 bid process with the investments of the Troubled Asset Relief Program. This bid process has a very short window. She informed the Committee that in the past they had waived the bid process for the TARP investments. Steve Alexander stated that they are still obtaining bids for the TARP investments. He stated that it is of a nature that it does move very quick. He informed the Committee that on page 10 of the Investment Policy it states that in certain circumstances where a dealer/bank informs the County of a potential sale that must be complete within minutes notification the competitive bidding process could be waived. He stated that the County already has the capacity to waive the bidding process. Howard Conklin stated that the policy should be amended to allow the purchase of the TARP investments. It was moved by Todd Bevan and seconded by Mike Dillman to approve the increase of the maximum length of maturity from 5 years to 5.5 years and to decline the waiver of the 3 bid process along with creating a new section under Section D, Page 6 of the investment Policy to allow for the TARP Investments and upon roll call motion carried unanimously. Steve Alexander will create language for this section and submit it to the Investment Committee members for their review and input. 8 VI.COMMITTEE COMMENTS/RECOMMENDATIONS Howard Conklin recommended that the minutes be provided to the Board unapproved, indicating that they are unofficial until approved. VI. SELECT DATE OF NEXT MEETING The next scheduled Investment Committee meeting is scheduled for April 20, 2009 at 8:05 a.m. VII. ADJOURN There being no further business the meeting was adjourned at 9:45 a.m. 9