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HomeMy WebLinkAbout1985-03-08 - City Commission Special Meeting Minutesr4� VP V y n R1DP MAIL REPLY TO: P.O. BOX 25010 TAMARAC, FLORIDA 33320 5811 NORTHWEST 88TH AVENUE 6 TAMARAC, FLORIDA 33321 TELEPHONE (305) 722.5900 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. 1 3/8/85 /pm 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. 2 3/8/85 /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. 3 3/8/85 /pm 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. 4 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. 5 3/8/85 /pm CITY of TAMV NMVED AT MEETING OF