CITY OF FULLERTON
INVESTMENT ADVISORY COMMITTEE
Fullerton City Hall – 303 West Commonwealth Avenue
Third Floor- Room 301
Administrative Services Department Conference Room
Thursday, December 6, 2007– 4:00 p.m.
CALL TO ORDER
Chair Lewczyk called the meeting to order at 4:07 p.m.
Members present: Frank Allen, Citizen Member
Phyllis Garrova, City Treasurer
Lynn Lauderdale, Vice Chair, Citizen Member
Stan Lewczyk, Chair, Citizen Member
Glenn L. Steinbrink, Director of Administrative Services
Members absent: Chris Meyer, City Manager
Shawn Nelson, Mayor
Guest: Dianna Fenton, Fiscal Services Manager, City of Fullerton
ACTION OR DISCUSSION ITEMS
Item 1. Approval of Minutes of April 10, 2007
Chair Lewczyk asked if there were any corrections to the minutes of April 10, 2007. With no corrections, Frank Allen moved approval of the minutes. The motion was seconded by Vice Chair Lynn Lauderdale, and the minutes were unanimously approved.
Item 2. Status of Investment Portfolio
The 09/30/07 quarterly report distributed by City Treasurer Phyllis Garrova provided the following:
1. Portfolio balances as of 07/31/07, 08/31/07, and 09/30/07.
2. Types of investments, with percentages of portfolio invested in each type, and change from last report.
3. List of maturities between 07/01/07 and 09/30/07.
4. List of purchases between 07/01/07 and 09/30/07.
City Treasurer Garrova began with the Summary by Issuer, noting that as of September 30, the City was holding 41 investments, with Federal Home Loan almost 50% over the Federal Farm Credits, but that five securities had been called (including three Farm Credits), all in the 5% area. She anticipates investments in the 5% area to be called.
She indicated she had purchased commercial paper (Morgan Stanley) at 4.92 with an early 2008 maturity, and she is looking at picking up more commercial paper, but being cautious, taking into consideration ratings (A1, P1 or better). Ms. Garrova later mentioned that she would be reviewing the Investment Policy regarding negotiable CDs, noting that they are short, but in the high 4's and low 5's, and appear to be an attractive investment at this point.
Chair Lewczyk asked City Treasurer Garrova what her expectation would be for the next three to six months, considering rates are moving downward. Ms. Garrova indicated that the FOMC would meet December 11 and the prediction is a 50 basis point drop, and with that action, what is going to happen in six months would be anyone's guess.
Vice Chair Lauderdale asked if Ms. Garrova would be going out a little farther, but within Investment Policy guidelines, in the current environment. Ms. Garrova indicated she would continue to layer investments, taking into consideration call dates, and noted that LAIF was still the premium investment for short-term interest.
Ms. Lauderdale asked what LAIF was comprised of and if there was any reason to be concerned about LAIF considering what's happening in the market. Ms. Garrova explained that in the early '90s, there was concern with LAIF, but that LAIF had built in even stronger Government Code that dictated that the money would never be used by the state and that it would always be safe. She further explained that LAIF is comprised of cities, counties, and special districts (all government entities).
Chair Lewczyk questioned how LAIF could always be a little bit higher. Ms. Garrova pointed out that LAIF will start to lag, that they are always six months behind or six months ahead, depending on what the market is doing. Mr. Allen and Ms. Garrova further explained that the higher rate could also be a result of the size of the issues, especially if LAIF were the sole buyer, which might provide them with a special rate, especially in commercial paper.
Chair Lewczyk asked if LAIF provides a summary of investments. Ms. Garrova explained that she receives a monthly report, and that anyone can go online to the State Treasurer's website and look at the portfolio, their average yields, daily yields, monthly yields, etc.
Ms. Garrova pointed out that the July-September quarter is typically slower for investments because it's the beginning of a new fiscal year, with new projects and programs beginning resulting in increased expenditures, and there are not a lot of surplus funds to invest.
She further noted that her projected yield of 4.75% for 06-07 had actually realized 4.46, and considering what was happening in the market, her projection for 07-08 of 5% would most likely need to be revised. Ms. Lauderdale noted that no one could have seen the magnitude of the current environment.
Ms. Garrova indicated that the goods news is that regardless of the market fluctuations, the City's portfolio has continued to grow every year.
With regard to the Quarterly Investment Summary, Ms. Garrova noted that there was a $5 million decrease from July to August, and explained that $4 million was for two debt service payments.
Chair Lewczyk asked what impact there might be on the City's budget if the projected interest earnings were not realized (e.g., a $1,000,000 shortfall). Mr. Steinbrink explained that it would depend on what is happening with other revenues, e.g., property taxes and sales taxes, but that the shortfall would have to be reflected in the budgeted revenues.
Mr. Steinbrink gave an example of property tax revenue, noting that this past year the City's property tax revenue projection was short $1 million because of delinquent property tax payments. He explained that eventually that money would be received but created a temporary shortfall, and further noted that while $1 million is a large sum, the City's property tax revenues are nearly $30 million.
Mr. Steinbrink indicated that another concern is the state's budget problems, and whether the state will come after the cities for more money. The state can no longer take city revenues, but are able to borrow from cities with a payback within 10 years, which would hurt the City in the short-term.
Ms. Garrova added that while Mr. Lewczyk's question regarding a projected interest earnings shortfall was pertinent considering what's happening in the market, she pointed out that her projections have never been off more than $200,000, which is a very insignificant amount considering the $3,000,000 interest earnings projected and received.
Item 3. Approval of Meeting Dates for 2008
Mr. Allen moved to approve the proposed meeting dates for 2008: February 21, May 15, August 21, and November 20. The motioned was seconded by Ms. Lauderdale, and unanimously approved.
Item 4. Election of Chair and Vice Chair for 2008
It was noted by Ms. Garrova that while the committee is not required to elect a new Chair and Vice Chair each year, historically, the committee members have chosen to do so, so that each citizen member has an opportunity to serve as Chair or Vice Chair. After a brief discussion, it was decided to proceed with an election of Chair and Vice Chair to serve during calendar year 2008.
Chair Lewczyk nominated Frank Allen for Chair. With no further nominations, the nominations were closed. Lynn Lauderdale nominated herself for Vice Chair. With no further nominations, the nominations were closed.
Mr. Allen was elected Chair by unanimous vote. Ms. Lauderdale was elected Vice Chair by unanimous vote.
There being no further business, Chair Lewczyk asked for a motion to adjourn. Mr. Allen so moved, Ms. Lauderdale seconded, and the meeting was adjourned at 4:52 p.m. by unanimous vote.