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HomeMy WebLinkAbout1990-04-17 - City Commission Workshop Meeting MinutesCITY OF TAMARAC CITY COUNCIL WORKSHOP MEETING TUESDAY, APRIL 17, 1990 CALL TO ORDER Mayor Abramowitz called this meeting to order on Tuesday, April 17, 1990 at 1:30 P M in the Council Chambers PRESENT Mayor Norman Abramowitz Vice Mayor Bruce Hoffman Councilman Henry Schumann Councilman Henry Rohr ABSENT AND EXCUSED Councilman Dr H Larry Bender ALSO PRESENTS John P Kelly, City Manager Alan F Ruf, Interim City Attorney Ken Burroughs, Finance Director Bob Hoyt, Deputy Finance Director Thelma Fagelbaum, Chief Accountant Pauline Walaszek, Secretary INVESTMENT ADVISORY BOARD Leo Platz, Chairman Herman Gross Jerry Leibowitz Mayor Abramowitz said the purpose of this meeting was to discuss the investment of City funds He said the City Council was informed that there may be a difference of opinion concerning the investments of the City Mayor Abramowitz suggested that the Investment Advisory Board express their concerns before the Finance Department and City Council discussed this matter Leo Platz Chairman of the Investment Advisory Board, said there were several areas of concerns however the principle concerns were the provisions in the City's Code and Charter He said he understood the City was limited to keeping their investments in U S Government paper Mayor Abramowitz asked which provision provided this and Interim City Attorney Ruf said there was a provision in the Charter which indicated the City investments could be in anything the State of Florida invested their funds in He said the State Provisions were broader and more restrictive than the City Code Mayor Abramowitz asked what the provisions of the Code indicated and Interim City Attorney Ruf said the City funds should be in investments guaranteed by the U S Government Mayor Abramowitz asked if there was a discrepancy between the City Code and the City Charter Herman Gross, member of the Investment Advisory Board, said the City Code specifically differentiates between the funds that were currently needed and the funds not immediately contemplated for purposes intended within a reasonable time He said the Code directed itself to funds other than the money needed currently He said the City Attorney's comments only applied to medium and long term money Chairman Platz said the report from the State Pool indicated payment of 8 26% He said the Wall Street Journal indicated that treasury paper/U S Government paper paid at least 1/4 to 1/2 cents more for short term investments Page 1 4/17 /90-pw Chairman Platz said fundamentally, if the City was to spread out the investments in government paper for a maximum of 3 years, there would be a better return as opposed to investing in the State Board Chairman Platz said the City budgeting of investments would be easier because the City could determine what interest the City would be entitled to for the next budgeting period Chairman Platz said there would be flexibility of the scheduled investments and the City would have the ability to get into a higher rate or maintain the current rate depending on how the interest rates were He said the Board discussed several matters with bank representatives and brokerage houses and he was informed that the banks would handle the investments on a no fee basis He said the banks would provide an investment schedule which informed the City of what was practical to fit the City's needs Chairman Platz said he was not in a position to determine what was needed in 6 months or a year He said an analysis of the cash flow over the next few years would be a good opportunity He said he was concerned about what was currently needed and what was being placed in repos Herman Gross said a cash flow analysis would be very helpful to determine what funds were currently needed and what funds could be on a long term basis He said the Code indicated what should be done with funds not currently needed which he felt was good He suggested the City invest in securities of the U S Government He said he received a report from the State of Florida which analyzed how the money was being invested Herman Gross said approximately 50% of the commercial paper was invested in securities of the government and companies that were not located in this Country He said the companies may be very good; however the funds were equalizing the results and the City could get more by investing in U 5 Securities He said by doing this the City could predict the income to be received Chairman Platz said the Investment Advisory Board has been very concerned and has discussed this matter for approximately 6 months He said the Board was willing to assist the City in any way possible by advising how the investments should be applied Ken Burroughs Finance Director, said the City began investing with the State Pool in 1985 He said since he became employed with the City, which would be three year, next month, all of the investments were in the State PDoli He said the Florida Statutes allowed the Cities to participate in the pool and the City elected to do this Mr Burroughs said the proposed Code amendment was to place authorization to invest in the State Pool, which has been occurring for several years He said the State Pool was producing income equal to treasuries He said the Sun Sentinel recently indicated the one year treasury bills were 8 29% and the State Pool was 8 262% for the month of March 1990 He said from January, 1990, the percentage was 6 2799 therefore, the State Pool was competing with the treasuries Mr Burroughs said the Florida Statutes also provided that there be a six member Investment Advisory Council to the State Board of Administration, which was the State Pool He said the members were confirmed by the State Senate and the members had special knowledge, experience and familiarity with financial investments and portfolio managements Mr Burroughs said the Board advised the State Pool and the State Pool must follow the guidelines of the State Statutes He said the commercial paper held by the State Statute at the end of March, 1990 was 42 89% He said the State Statutes Page 2 4/17/90-pw provide that the State Pool could only invest in commercial paper that was grade A-1 quality, which was the highest type of investment He said if the investments were foreign or local, the investments were top quality Mr Burroughs said the City had 25% of their investment in long term strip coupons and zero base coupons with maturities up to the year 2011 He said the State Pool provided liquidity and the City was in the position to pay on demand an invoice the same day or next day and the monies were taken from the State Pool if the funds were not available He said if there were monies invested in treasuries, this would not be possible Mr Burroughs said he disagreed with the statement of Herman Gross concerning money going out over a year He said he recently attended a conference of Finance officers and the general consensus was to keep 60% of the portfolio in 180 days or less He said it was possible that the investments go out longer in some instances; however, the State Pool would be forever He said the money could remain for 365 days if it was needed He said if the funds were needed, the City could get the funds immediately Mr Burroughs said he felt the City has done well with the State Pool and the SBA was under the guidelines of the State Statutes as to what could be invested He said he was comfortable with the current investments Bob Hoyt, Deputy Finance Director, said he agreed with Mr Burroughs' statement He said if the City did invest 60 to 180 days in government securities, the return would be less than the return recently being received daily from the State Board investments V/M Hoffman said when the City invested in the State Pool the return was higher than any other type of investment and it was considered to be a safe investment He said if the City could invest in insured or guaranteed investments, he would hesitate keeping the investments in areas that were not secured He said 40% to 50% of investment in commercial paper was not really a 100% secured investment despite the fact that it was recommended by the State Pool V/M Hoffman said if the City was directing the funds and by- passing the State Pool to make investments, the City would not invest the funds in commercial paper He said to keep as much as 17 million dollars in the State Pool could be a risk He said the City should be more concerned with safety rather than a small increase in returns V/M Hoffman said if the City could receive the same investments in a fully secured and insured investments the City should reduce the amount invested in the State Pool and go to government securities Mayor Abramowitz asked what would occur if the State Pool investments were decreased He asked if there was any insurance against loss of principal He said safety of principal was most important; however, there was never anything that could insure loss of principal and Mr Burroughs agreed Mayor Abramowitz said he could understand the Finance Departments concerns He said by investing in the State Pool the City did not have to make decisions He said he would hate to have the City Council make the decisions on investments He said he could understand the Finance Departments' hesitancy in changing the investments Page 3 4/17/90--pw N Mayor Abramowitz said he was very concerned about the money+ at the end of day being placed in repos He said he was very concerned about repost however, he understood the Finance Department's concerns He said he was concerned when the major Japanese companies suffered a dramatic reverse He asked if everyone in the State Pool would suffer equally C/M Schumann said everyone would suffer proportionately to their investments Mayor Abramowitz asked if Mr Burroughs was concerned about someone making the decisions and Mr Burroughs said with his former employer, he ran the investment portfolio He said there was approximately 40 million dollars at that time and he made the decisions every day He said there were costs for staff time and processing, which was not very efficient regarding money Mr Burroughs said the decisions were made successfully and the employer had all of their money in the State Pool as well He said if the Japanese companies had problems there were many portfolio managers that would shut the investments He said there was presently 6 5 billion dollars which consisted of 489 governments and Tamarac was included C/M Schumann asked if the City lost principal in October, 1987, and Mr Burroughs replied, not however, the Pension Fund did Mayor Abramowitz said he could not dispute anything Mr Burroughs said because common sense and financial logic was being used He said he was concerned with what could occur V/M Hoffman asked if it would be difficult to reflect the cash flow needs for 6 months or 1 year and invest money in government securities He said the money would mature when the funds were needed He said 1 million dollars could remain in the State Pool for unforeseen contingencies Mr Burroughs said this would not be difficult, however it was time consuming He said the projections, internal control procedures for purchase and sale of the investments delivery, payment and safekeeping would be needed Mayor Abramowitz said Chairman Platz indicated that the bank would handle the procedures at no cost He said he would like this; however, he did not know the service would be performed for free Chairman Platz said there were two other Board members present and they would work with the City in any way possible He said the Board had representatives make a presentation and it was stated that they would handle everything without cost to the City Chairman Platz said he felt that there should not be a split in investments Mayor Abramowitz said it was not simple to forecast the future and the Finance Director would not do anything witlhcut authorization He said he understood that a change would be more time consuming and require more personnel Mr Burroughs said he could not determine what the costs would be and the need for more staff however it would be justification regarding the staff that the Finance Department presently needed He said the procedures would have to be created and it would take time V/M Hoffman asked if the process could be done on the computer and Mr Burroughs said one of the costs would be the program to monitor the investment portfolio 1 11, Page 4 4/17 /90--pw V/M Hoffman asked if it would be a one time cost and Mr Burroughs replied, yes; however, it would cost to maintain the investments He said there would be several procedures to follow and the investments would have to be wire transferred to a safekeeping bank, etc V/M Hoffman said the City had on demand in the State Pool approximately 17 5 million dollars He asked if the money belonged to the fixed funds Mr Burroughs said the money was the pool for all the cash of the funds in the City except the Pension Fund V/M Hoffman asked if the funds were fixed on any specific items for the future and Mr Burroughs said the strip coupons and zero bonds were long term Herman Gross said there was 15% in strip coupons and zero bonds and approximately 85% in the State Fund Mr Burroughs said some of the money could go out longer than others; however, the City needed the money every week V/M Hoffman asked how the City received their money from the County and Mr Burroughs said the City received the money when it was collected Mr Burroughs said this morning there was $146,000 00 from the County V/M Hoffman asked if the money was used for the day to day operation of the City and Mr Burroughs replied, yes; however, some of the funds were placed in the bond reserved funds, which depended on the type of collection V/M Hoffman said the amount in the State Pool would be used to operate the City and Mr Burroughs said beginning in May, 1990 through September, 1990 because there was not enough revenue generated to pay for the operations V/M Hoffman asked how much would be used from the fund and Bob Hoyt said this could not be answered because the reduction of the principal for costs and taxes had to be paid between May 1990 and September 1990 Mayor Abramowitz asked if there would be 10 million dollars remaining and Bob Hoyt replied yes V/M Hoffman said the money that was not needed should be placed into something more secure and keep what may be needed for the operation of the City Mayor Abramowitz asked what would occur if the market became catastrophic and the City wanted to pull their money out of the State Pool He said if the City had 15 million dollars in the State Pool and there was a drop in the market, the City may only receive 12 million dollars Mr Burroughs said the City would receive 15 million dollars from the State Pool Mayor Abramowitz said if the market became catastrophic, commercial paper that was selling for $100 00 would now sell for $70 00 He asked if the City would receive their 15 million dollars if they wanted to take their money out of the State Pool Mr Burroughs replied, he did not know Mayor Abramowitz said treasury bonds fluctuated on a day to day basis and could be sold for less or more than what they were bought at He said the State Pool fluctuated the same as the treasury bonds Bob Hoyt disagreed Bob Hoyt said if the City bought treasury bonds at $100 00 and next week the bonds had to be sold at 94%, the City would take a loss He said the State Pool did not fluctuate on a day to day basis Page 5 4/17/90-pw Mayor Abramowitz said if there was 47 38% in commercial paper it would affect the price of the City's share if commercial paper decreased Bob Hoyt said a few weeks ago the Japanese market had a tremendous decrease and each day the State Pool held level He said there was no reduction from the investments of the City He said the Japanese market decreased; however, the City's prinpipal in the State Pool remained He said ifIthe funds were in treasury bonds there would be a loss on tho sale of the bonds on that day C/M Rohr said each City was a participant of the overall value of the investments of the Pool He asked if each City would have to assume responsibility in a decrease of the investments Bob Hoyt said he explained about the decrease in the Japaln.ese market and the City took money out of the State Pool He said the Finance Department would be able to receive funds which were not reduced because of the drop in the Japanese market V/M Hoffman said he felt that the funds not immediately needed should remain in the State Fund He said he did not want to keep all of the funds in commercial paper Mayor Abramowitz asked the City Manager to submit a report to the City Council regarding what was involved in investing differently and what was needed by the Finance Department TAPE 2 City Manager Kelly said Bob Hoyt was retiring in June, 1§9D He said 25% of the money should continue to be in the Stalte Pool He said the Board has been very concerned about the difference in the State Statutes, City Code and City Charter He said Mr Burroughs was very concerned and the City Council had to authorize the Finance Department to place 25% of the funds to continue the City's operation Mayor Abramowitz asked what would be done with the balance of the funds and Mr Burroughs said a program would be established, which would take time He said he and Bob Hoyt would be retiring this year and there was work that had to be done, however, they would work as much as possible to transfer the funds to other areas He said the City would have to make arrangements with the Bank, set up a program for internal procedures and develop a program to monitor the portfolio City Manager Kelly said there would be internal control needed to make sure that the monies were being spent and invested properly Mayor Abramowitz said he was concerned with monitoring the funds and City Manager Kelly said staff has made a recommendation during the budget procedures to have an in-- house auditor He said this matter would be discussed during the budget review this year Mayor Abramowitz said staff was recommending that 25% remain in the State Pool and the balance be moved to federal insured securities Herman Gross asked if money for overnight deposits should be included in over night deposits for repos Mayor Abramowitz said he felt that 25% was very good and could be changed in the future, if needed Chairman Platz said when there were big decreases there was a panic and there may be Cities taking out their funds Mayor Abramowitz asked if 5 million dollars was appropriate and Mr Burroughs said the first thing that should be done I 1 Page 6 4/17/90-pw was to develop an investment policy He said there may be other areas to consider that were not being applied at this time Mayor Abramowitz said the City Council would not ob3ect providing the changes be brought before the City Council for approval Interim City Attorney Ruf said the Ordinance passed on first reading changed the Code to allow investments in over night repos in institutions already approved through another function He said this allowed for investments in the State Pool Interim City Attorney Ruf said he felt that this was how the Ordinance and Code should read He said the Code presently did not allow for the investments in the State Pool He said the standards could be set by administrative or City Council approval of a Resolution He said this matter should be part of the Ordinance or Code Mayor Abramowitz said there was no intent to place the amount of investments into the City Code He said the decision of where and how much money would be invested should be approved by the City Manager Finance Director and City Council Mayor Abramowitz said a proposal should be submitted to the City Council for approval and Interim City Attorney Ruf asked if the person would be making decisions based on the guidelines set forth by the City Council Mayor Abramowitz said he would lake a person to follow the guidelines; however, he did not want the investments made without informing the City Council Herman Gross said the present City Code did not permit the funds that were currently being used to be invested in instruments other than the U S Government He asked why the City needed to change the Code since it addressed itself to monies that were not currently needed He said the funds should be defined Interim City Attorney Ruf said this was an accounting decision as opposed to a legal opinion Herman Gross said 25% of 5 million dollars was more than enough for the operations of the City He said there should be a formula indicating what demand monies were needed Mayor Abramowitz said he would like the City Manager and Finance Director to create a formula for investments and submit the information to the City Council He said he would like a vehicle prepared concerning the investment of the monies V/M Hoffman said the perimeters should be created and City Manager Kelly said there had to be policies available for the staff Mr Burroughs said the City was at their limit in the State Pool and $146,000 00 was submitted to the City He asked what the City Council wanted ham to do with the money Mayor Abramowitz said the money should be put in the bank and Mr Burroughs said he would invest $150,000 00 in some treasury at a specific location Mayor Abramowitz said the City may have to set a limit in the State Pool and give latitude on daily money V/M Hoffman said the limit dad not have to be 5 million r - zdollars He said the City Council could request that 1/4 of ., the funds remain in the State Pool and allow 3/4 of the money for contingencies Page 7 4/17/90--pw C/M Rohr said the City Council could authorize the City Manager and Finance Director to invest the money, which was not invested in the State Pool, in government secured investments and to report to the City Council on the investments He said the City Council would be kept up to date and the investments would not be delayed Thelma Fagelbaum, Chief Accountant of the Finance Departmlent, said several years ago she experienced the purchase of treasury bills for the City She said the procedure requlired bidding She said the treasury bills fluctuated in moments and the Finance Director was required to make the decisions on how the investments should be made however, the City Council and City Manager were needed before the investments could be made Mayor Abramowitz said he felt the discretion of the investments would be the responsibility of the Finance Director He said if the Finance Director wanted to invest, he would like to be informed of the investments V/M Hoffman said the Finance Director could be given the authority by the City Council to invest a certain percentage in the State Pool and in treasury bills He said the City Council should not be involved with every transaction Mayor Abramowitz said he did not want to tell the Financeq Director how to invest the money He said the investments should be federally insured and guaranteed i V/M Hoffman said the City Council should limit the amount of money invested in the State Pool Chairman Platz said to get the best price on government payer there had to be a purchase of l million dollars or more He said the City bought treasury bills for short term monies! He said there were banks offering free investment advice and it was suggested that the investments be for 2 or 3 years Mayor Abramowitz asked if Interim City Attorney Ruf was recommending that the Ordinance recently approved on first reading remain as it was introduced and Interim City Attorney Ruf replied, yes, however, Herman Gross made a good point He said he felt safer by keeping the language as it was to avoid arguments concerning future investments Mayor Abramowitz said the City Manager heard the City Council and Investment Advisory Board's concerns He said a program should be prepared concerning investments as soon as possible Mayor Abramowitz said if the program submitted was not appropriate, it could be changed He said there would be plenty of workshop meetings held Mayor Abramowitz announced that there would be a Worksiop meeting on Thursday April 19, 1990 at 9 30 P M He said -he meetings to be scheduled for the review of the proposed Charter would be announced at the next meeting Chairman Platz thanked the City Council for calling this meeting With no further business Mayor Abramowitz ADJOURNED this, meeting at 3 45 P M R� EVANS, CITY CLELQR "This public document was promulgated at a cost of $67 5-0 4r $4 50 per copy to inform the general public, public office-s and employees of recent opinions and considerations of tUe City Council of the City of Tamarac " Page 8 4/17/90--pw