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HomeMy WebLinkAbout06-23-2015 C5 PadillaCouncil Memorandum TO: City Council FROM:. Wayne Padilla, Finance & I.T. Director DATE: June 23, 2015 VIA: Katie Lichtig, City Manager COUNCIL MEETING: C0 L3 Ldp ITEM NO.: CS SUBJECT:. Response to questions regarding Item C5 — Investment Management Plan update and proposed revisions to page C5 -25 ( #4 below) In response to questions asked by a Council member, I am pleased to provide the following responses in advance of tonight's meeting: 1. P. C5 -9 — Item #4 proposes that "No more than 5% of the total portfolio may be invested in securities of any single issuer..." This appears to be a reasonable recommendation, but does it require any significant adjustment to our current portfolio in order to comply with it? Do we need a "grace period" in order to sell any securities and reinvest them in a way that is not too precipitous or hasty? A. The portfolio requires no adjustments to comply with this standard. 2. P. C5 -10 - There are 9 items that are listed as "major guidelines and practices" at the bottom of this page. None of the nine items refers to the newly- recommended "Socially Responsible Investing policies on p. C5 -28. May we add that as an item #10? A. Yes, we should add a reference to the Socially Responsible Investment guidelines 3. P. C5 -11 - The last paragraph here under "Preparation and Administration of the Plan" calls for the Council to review Investment Management Plan at a "public meeting." Would this review better be described as a "public hearing ?" Also, on pp. C5 -32 and 33 the role of the Investment Oversight Committee is referenced, would it be appropriate to include a reference to the IOC here as well? A. The language here reflects that of the Government Code which does not require a public hearing to take place. With regard to a reference here for the IOC, there is language included in the document at C5 -33 (second numbered item) which provides for the IOC to review and make recommendations regarding changes to the policy at least annually. This would take place before the policy is brought before the City Council. 4. P. C5 -25 — Item #6 appears to now be recommended to blend into former item #7 — but the last sentence in item #7 appears to be incomplete after omitting the phrase following the term "Council approval is required ... for any finannial futures Tres or " Please clarify. Council Memo — Investment Management Plan Memo Page 2 A. The language that follows item #6 and was previously item #7 should be stricken from the document. The paragraph that is now item #7 should be amended to delete the words "....until such time as the Director /City Treasurer is confident that adequate regulatory reform has taken place that would make these securities consistent with the City's primary investment objective." This means that investment in mortgage pass- through and asset back securities is not allowed. P. C5 -28 — For purposes of the Socially Responsible Investing policies on this page, approximately what percentage of the City's investment portfolio is affected by the second set of bullet points, which covers "direct investments of City funds "? A. There is only one current investment that is affected which is a $700,000 Chevron corporate bond which matures in December 2017. This investment represents .7% of the total portfolio and is earning 1.03 %. The market conditions today indicate that selling this bond would result in a loss of $5,700. Because of this level of loss to the portfolio staff recommends that this investment be held either until it matures or until the loss on the sale becomes minimal (under $1,000) AND a permissible investment with a similar yield can be obtained with the proceeds. This is the approach that will be implemented unless otherwise directed by the City Council. 6. P. C5 -31 — The first paragraph changes the requirement for annual submittal of the Investment Policy from a "shall" to a "may." Is this necessary? Does the Council review our budget policies each year? I can recall doing so only during the adoption of the budget every TWO years. If that is our current practice and policy, let's modify this paragraph to reflect that — consideration of our Investment Policy being required only every two years as part of our regular budget policy, and as part of our overall budget policies. A. At page C5 -11 (last paragraph) there is language which indicates that the investment policy will be reviewed annually, which agrees with the timing of the renewal of the Treasurer's investment authority. The language at C5 -31 reflects the wording in the Government Code but staffs intent is actually to bring the policy back each year. 7. Do other cities carry their investment in public art as an asset? If so, do they update its value in any manner? A. The Government Code does not allow investments in artwork to be treated as part of the City's investment portfolio.