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
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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
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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
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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
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11,
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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
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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
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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
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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 "
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