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TAMARAC, FLORIDA 33320
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March 7, 1985
NOTICE OF SPECIAL MEETING
CITY COUNCIL OF TAMARAC, FLORIDA
The Mayor has called a Special Meeting of the City Council
at 10:00 a.m., on Friday, March 8, 1985, at City Hall,
5811 NW 88 Avenue, Tamarac, Florida, in the West Conference
Room (if the Council Chambers on the first floor is available
at this time, this meeting will be held there).
The purpose of this meeting is discussion and possible action
on the following:
1 - Status report from City staff and consultants
on the ESM Government Securities financial
status as it affects Tamarac.
2 - The proposed general obligation bond bid opening
and sale presently advertised for Wednesday,
March 13, 1985.
3 - Discussion by Council as to related matters regard-
ing financial investments by the City in the future.
Carol E. Barbuto
Assistant City Clerk
Pursuant to Section 286,0105, Florida Statutes
If a person decides to appeal any decision made by the city
Council with respect to any matter considered at such meeting or
hearing, he will need a record of the proceedings and for such
purpose, he may need to ensure that a verbatim record includes
the testimony and evidence upon which the appeal is to be based.
AN EQUAL OPPORTUNITY EMPLOYER
POLICY OF NONDISCRIMINATION ON THE BASIS OF HANDICAPPED STATUS
CITY OF TAMARAC, FLORIDA
SPECIAL CITY COUNCIL MEETING
March 8, 1985
Tape 1 CALL TO ORDEER: Mayor Philip B. Kravitz called the meeting to order
on Friday, March 8, 1985, at 10:00 A.M., in the Council Chambers of
City Hall.
Mayor Philip B. Kravitz
Vice Mayor Sydney M. Stein
Councilman Jack Stelzer
Councilman Raymond J. Munitz
Councilman Allan C. Bernstein
ALSO PRESENT
Elly F. Johnson, City Manager
Jon M. Henning, City Attorney
Carol E. Barbuto, Assistant City Clerk
Patricia Marcurio, Secretary
Mayor Kravitz read the Notice of the Special Meeting into the re-
cord and called for a Moment of Silent Meditation and Pledge of
Allegiance.
,,9XNOPSIS OF ACTION: Reports
were given by the City Attorney
and Bond Counsel.
City Attorney Henning said this was discussed previously at the
Special Council Meeting on 3/6/85 and, as a brief introduction,
there is a local investment firm, ESM Government Securities, Inc.,
which the City was using to invest money. He said there has been an
injunction by the Securities Exchange Commission on the assets and
the City had Safe -Keeping Receipts of the government securities
involved that were collateral for the loans and investments the
City had. He said at the recommendations of the Bond Counsel and
the Financial Advisor regarding the bond issue, Special Counsel
would be needed. He said at the 3/6/85 Special Council Meeting, the
City Council authorized negotiations by the City Manager and City
Attorney to hire Special Counsel with a cap, until further notice,
of $10,000.
Mr. Henning said the City staff contacted several prominent law
firms and has engaged the firm of Morgan, Lewis and Bockius with
their local office in Miami. He said the City is dealing with
Lawrence Levy, Bond Counsel for the City of Miami Beach and the City
of Miami, as well as Morris Brown, who is a securities and
bankruptcy expert. He said the rates that have been quoted are from
$80.00 to $200.00 per hour depending on the particular associates
involved. He said present today is Gerry Heffernan, Tamarac's Bond
Counsel, and he is working with this law firm as well.
Gerry Heffernan, Bond Counsel for Tamarac, said he spoke to Larry
Levy yesterday and they are proposing to have one of their securi-
ties and bankruptcy experts in New York City attempt to locate and
place a claim on the collateral which Tamarac has. He said a sim-
ilar situation happened about 6 months ago involving the Dade County
School Board and Morgan, Lewis and Bockius was able to get their
security and money back before it was tied up in bankruptcy proceed-
ings. He said that is what they are attempting to do here.
Mr. Henning said the City wants to protect the interest in the
collateral and all or as much of the principal and interest of the
investments that is coming due over the next several months.
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Mr. Henning said this is not all of the City's investments but is a
significant portion of the portfolio of $17,000,000. He said
another factor is the important impact this might have on the bond
bid opening scheduled for Wednesday, 3/13/85. He said he will have
an update for Council at the next regular meeting. He said there
will be no bills yet and he confirmed with the attorneys that travel
time would not be included in the billing with the City receiving a
Letter of Engagement.
Morris Haber, resident, read a portion of an article from Baron
Magazine, referring to a similar situation and he concluded that the
City will not be able to recover the 7 million dollars easily. if
Mr. Heffernan said 6 months ago they were able to recover money in a
similar situation. C/M Munitz said the assets of the subsidiary
have been frozen and he questioned whether the assets of the parent
company have also been frozen. Mr. Henning said the Receiver for
ESM Group, Inc., ESM Government Securities, Inc., ESM Securities,
Inc. and ESM Financial Group, Inc., all collectively referred to as
the "ESM Companies", notified the City on 3/5/85 of the problem. He
said they can assume, therefore, that the assets of the parent
company were also frozen.
V/M Stein said he asked the City Manager and City Attorney to call
this meeting today to refute some irresponsible and detrimental
statements which have been made about the staff and the Council in
the handling of these funds. He said some of these statements came
from the former Vice Mayor of the City and the financial procedures
now used in the City were inherited from the previous Council. He
said this has happened to several other cities throughout the coun-
try as well.
Mayor Kravitz said there were 38 cities, counties and pension funds
that used this firm; however, it has been the policy that this City
Council never told the Finance Department where to invest money. He
said approximately two years ago, an Investment Advisory Committee
was formed to give input and serve only in an advisory capacity to
the Finance Department. He said it may well be that, had that
committee been in existence now, there would have been the same
result; however, it is also possible, that the City would not be in
this financial situation. He said this Council saw fit to remove
that committee and he voted against it.
Helen Massaro, resident, said there was an article in the newspaper
in which V/M Stein commented that she was responsible for hiring
Linda Baker, former Deputy Finance Director of Tamarac and
Steve Wood, Tamarac Finance Director. She said there were five
Council members who hired both these people. She said in the
article, the Vice Mayor's comments praise Steve Wood, even though
V/M Stein's previous comments chastised her for hiring him. She
said Linda Baker did not invest this money at any time since it was
invested from November, 1984 through February, 1985. She said the
last day that Linda Baker worked for Tamarac was 9/14/84. She said
she had criticized Linda Baker when she invested in GNMA because
they fluctuated in value and she suggested that Mrs. Baker meet with
Council at an open meeting or cease investing in them. She said
Mrs. Baker said they were coming due very soon and it was left
alone. She said from time to time she did review it.
Mrs. Massaro referred to comments by C/M Bernstein in the Minutes of
the Council Meeting of 11/28/84, "C/M Bernstein said he thinks every
member of Council has a personal obligation to be aware of what is
being done with the City's money and, because of this, he feels the
Committee does not really serve a function." She said the
Investment Advisory Committee was dismissed.
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/pm
Mrs. Massaro continued to read from the Minutes, "C/M
Council gets monthly reports from the Finance Director
complete analysis of every investment the City has."
Stelzer said
giving a
Murray Weiner, resident, said in May, 1983, the Investment Advisory
Committee was formed and in July, 1984, when Laura Stuurmans was
removed as City Manager, Steve Wood was appointed as temporary
Acting City Manager. He said Mr. Wood wanted to be paid the salary
of the Finance Director which, at that time, was higher than that of
the City Manager. He said Mr. Wood appointed Linda Baker as Acting
Finance Director and shortly after that, she left the City of Tam-
arac for employment with the City of Pompano Beach. He said there
was a farewell luncheon given by V/M Stein and V/M Stein said that
was not so. Mr. Weiner said on 11/28/84, the Council majority voted
to abolish the Investment Advisory Committee and two days later one
million dollars was invested in the ESM funds. He said on 1/3/85, 3
million dollars were invested in ESM and 2/3/85 another 3 million
dollars was invested. He said Linda Baker also invested 8 million
dollars in ESM funds for Pompano Beach. He said the responsibility
lies primarily with the Finance Department and Council.
Leo Isaacson, resident, said the money should be recovered and it
should be determined how such a thing could have happened. He said
he read a press release that was prepared by the City Manager which
stated that the repurchase agreements were placed with ESM as early
as March, 1984. He said this press release stated that the City
relied on a financial statement which was dated 1/30/85 for the year
1984. He asked how investments could have been made in March, 1984
when the financial statement was not received from the auditing
company until January, 1985. He said this matter deserves an
investigation since there may be civil responsibility in this.
Alice Norian, Charter Board member, said the Charter states in
Section 7.08, "Investment of City Funds - Any City funds on
deposit, not currently needed for public purposes, may be invested
in short-term United States Bonds, Treasury Notes and/or Bills and
any other investments, as authorized by law, up to the maximum
amount insured by an Agency of the Federal Government." She asked
Council to verify whether any of the money invested in ESM was
insured by the Federal Government. Mr. Henning said the Receipts
state that the City has security in United States Treasury Notes and
in GNMA Mortgages. He said that is the collateral for the invest-
ments. Mrs. Norian repeated her question as to whether these funds
were insured by an Agency of the Federal Government and Mr. Henning
said he cannot answer that question today. Mrs. Norian asked who
was responsible for placing this investment and Mr. Henning said the
actual work of signing the papers, phone calls, mailing notices,
etc. was done by the Finance Department. He said as far as who is
responsible, that is a management, political and philosophical
question.
V/M Stein said in the past, this Council was given a monthly one --
page report which showed where the investments were but they did not
receive any financial statements. C/M Stelzer asked if Mrs. Massaro
and the Charter Board had checked the investments over the past
years since they received copies of investments as well. He said
the companies that were invested in were approved by the S.E.C., the
State and the auditors.
e 2 Henrietta Selner, resident, asked why the City did not follow the
Charter and invest in Federally insured banks. Mr. Henning said
whether or not the City did invest in Federal insured areas has to
be investigated; however, the purpose of this meeting is to deter-
mine what should be done at this point with direction to staff.
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Morris Haber, resident, said he was the former Investment Advisory
Committee Chairman and they only met once because there were not
enough members for a quorum. He read from Section 7.08 of the
Charter which states, "Deposit and Investment of City Funds -- Depos-
itories - The Council shall, from time to time in its discretion,
designate banks or trust companies as City depositories. The Coun-
cil may, as provided by law, establish rules and regulations govern-
ing the deposits, withdrawals of funds, securities deposited by
depositories and other safeguards for the deposit of City funds."
He said Council said they would supervise these investments when
they disbanded the Investment Advisory Committee and he demanded an
investigation.
C/M Bernstein read from the Ordinance establishing the Investment
Advisory Committee, dated May, 1983, "The Committee shall have no
administrative authority and shall not be directly involved in the
ongoing process of investment of City funds." He said during the 6
months that he served on the Investment Advisory Committee, there
was never a question as to the propriety of the repos investments.
He said that was because Alexander Grant had furnished statements
regarding ESM on which anyone had a right to rely. He read from the
Minutes of the Council Meeting of 11/28/84, "C/M Bernstein said that
he was a member of this Committee for approximately 6 months and
has been liaison to the Committee since he was appointed to the
Council. He said he felt this committee could serve a useful
function as a watchdog Committee, however, it has not worked out
that way." He said the only thing this Committee determined was
that short --term investments were in the interests of the City more
than long-term investments.
2and sale
SYNOPSIS of ACTION: The proposed
General Obligation Bond Bid opening
and sale was postponed until further
notice. The Financial Advisor and
Bond Counsel were authorized to place
appropriate advertisements that the
bond sale has been postponed.
Mr. Henning said he was in conversation with Mr. Heffernan on the
telephone while the agenda was being typed for Wednesday's meeting
and, in lieu of having the bond sale on Wednesday, the item reads,
"Item 8. Investment of City- - A report by City Attorney
regarding the status of the City funds invested with ESM Government
Securities". Mr. Heffernan said he and the Financial Advisor re-
commend that the sale of the bonds be postponed for a period of time
until they can determine the status of the City's funds. He said it
is not prudent to move forward with a bond sale next week in light
of what has happened. He said they have a preliminary official
statement which they have circulated to all potential bidders which
does not represent what has occurred in the last few days. He said
that needs to be amended and restated. He said he has received
phone calls from a number of potential bidders nationwide who are
interested in purchasing these bonds.
V/M Stein MOVED to postpone the bond sale until further notice.
SECONDED by C/M Munitz.
VOTE: ALL, VOTED AYE
Mr. Henning said there is an advertisement question and he suggested
Council give staff authorization to allow the Bond Counsel and the
Financial Advisor to draft an appropriate advertisement to be placed
in the newspapers to explain that the sale is being postponed.
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3/8/85
/pm
C/M Munitz so MOVED, SECONDED by C/M Stelzer.
• _ 9113AP "TA
SYNOPSIS OF ACTIQ: The City
Manager will administratively
the policy for the City and
not invest in any other
itional repos.
•
Mr. Henning said by Ordinance 81-33, dated 6/24/81, the City Manager
and his designee were authorized to place investments pursuant to
law as opposed to having individual investments by separate
Resolution of the City Council. He suggested Council suggest
investments to the City Manager. V/M Stein said no one knows
whether GNMA's and Treasury Notes are guaranteed by the Federal
Government and it is his intention to instruct the City Manager to
direct the Finance Director not to get involved with repos.
Mr. Wood said the City has a sweep -account with NCNB bank and the
money at the end of each evening is swept into the Money Market in a
Repurchase Agreement and then deposited back in the morning. He
said the City has been under that Agreement since the City bought
this building as a provision of the 1965 bond issue. He said the
City will have to have that repo.
City Manager Johnson said he will set a policy in --house that the
City will not invest in any additional repos as of today. He said
this will be done administratively. He said the City Administration
has been instructed in the past to earn the most money possible with
investments and there is always a chance for problems.
Mayor Kravitz adjourned the meeting at 11:10 A.M.
-�.:• t�07
/ ••
ATTEST:
ASSISTANT CITY CLERK
This public document was promulgated at a cost of $88.80 or $3.04
per copy to inform the general public and public officers and
employees about recent opinions and considerations by the Council of
the City of Tamarac.
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3/8/85
/pm
CITY of TAMV
NMVED AT MEETING OF