Fullerton City Hall - 303 West Commonwealth Avenue
Third Floor - Room 301
Administrative Services Department Conference Room
Thursday, August 21, 2003 4:00 p.m.
CALL TO ORDER
Chair Lauderdale called the meeting to order at 4:17 p.m.
| Members present:|| Don Bankhead, Mayor |
Phyllis Garrova, City Treasurer
Lynn Lauderdale, Citizen Member, Chair
Chris Meyer, City Manager
Glenn L. Steinbrink, Acting Director of Administrative Services
Item 1. Approval of Minutes of June 18, 2003
There were no suggested changes to the June 18, 2003, minutes. Chair Lauderdale asked for a motion to approve. City Manager Meyer moved to approve the minutes. Mayor Bankhead seconded. Motion carried.
Item 2. Status of Investment Portfolio
City Treasurer Garrova pointed out there had been a steady decline in the portfolio of about $2.9 million, which she stated was primarily a result of: loss of VLF (Vehicle In-Lieu Fees) between August and September (noting that VLF revenue in 2002 was $694,000 and in 2003 is $209,000); bond payments ($500,000); fire truck expenditure ($763,000); Sports Park payment ($864,000); and annual payment to the Orange County Water District ($417,000), all of which left little idle funds available for investment.
City Treasurer Garrova indicated there had not been much activity since the last quarters report. She reported that the Federal Home Loan Bank (FHLB) of New Yorks rating had dropped from stable to negative because of increased credit risk in the Banks portfolio. However, the fixed income investments of the FHLBank of New York were not affected and remained at AAA. The City buys FHLBank investments and this downgrade did not affect the Banks fixed income sector.
She stated that in September she would be looking at Farm Credit issuances, which is the only agency which has not been in the news, and that other investors are looking to Farm Credit to see what they will offer. She indicated that Farm Credit was in the process of structuring more securities trying to entice more investors because they know they are in a good position in todays market.
City Manager Meyer noted that 16% of the portfolio is in Home Loan Bank. Ms. Garrova pointed out that because the 12 Home Loan Banks are joined systemwide, this means if one fails, the other 11 banks are legally obligated to make good, i.e., its a systemwide debt.
Chair Lauderdale asked if there were any GSEs the City Treasurer was not purchasing or staying away from at this point in time. City Treasurer Garrova indicated she was looking at Farm Credits and staying away from Federal Home Loan Mortgage (FHLMC) obligations and Federal National Mortgage Association (FNMA) securities.
Ms. Garrova provided a summary of investments that occurred in July. She also noted that the City was at its maximum investment level with LAIF 40%, but that the City could use the Redevelopment Agencys LAIF account for a maximum of 60% of the portfolio. She indicated she had been hesitant to invest more in LAIF because its interest rate continued to drop.
Chair Lauderdale noted that commercial paper was still fairly flat. Ms. Garrova indicated that commercial paper was still a better investment choice than treasuries or discount notes.
Ms. Garrova pointed out that the drop in the portfolio from the previous quarter was due to running two fiscal year expenditures 2002-03 and 2003-04 concurrently expenditures for those items carried from 2002-03 into July, plus current year expenditures. She also noted some significant expenditures in July: $1.3 million water payment; $875,000 debt service payments; $330,000 Sports Park; progress payment of $477,000 for Police Department remodel.
City Treasurer Garrova pointed out that during the quarter there had been $25.5 million in maturities and $30.5 million in purchases. Chair Lauderdale asked if the maturity dates of purchases had been timed for quarter end to take advantage of favorable rates. Ms. Garrova noted that maturity is always considered and that timing may not accurately state how investments are selected.
Ms. Garrova noted the following investment purchases including rate during the reporting period: Fannie Mae at 1.5%, commercial paper at 1.12%, Farm Credit at 2.24%, Home Loan at 2.22%, Home Loan at 3.33%, Home Loan at 2.375%.
Chair Lauderdale asked if the purchases were still in the 3-5 year area. City Treasurer Garrova indicated she still targeted that time frame, with a rate of 2% or higher.
There being no further business, City Manager moved to adjourn the meeting. City Treasurer Garrova seconded. Chair Lauderdale adjourned the meeting at 4:30 p.m.
Next meeting scheduled for November 20, 2003, at 4:00 p.m. in the Administrative Services Department Conference Room.