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Minutes_Investment Oversight Advisory Commission 10 28 09M J THE CITY OF Dubuque DT ~'~ ~ A~-AmedcaChll ~J i ~ Masterpiece on the Mississippi 2007 TO: Members of City of Dubuque Investment Oversight Advisory Commission ,.--;-.~ FROM: Kenneth J. TeKippe, Finance Director '~"'^~~ `~Y `~"~~ RE: Un-approved Minutes of the October 28, 2009 Meeting of the Investment Oversight Advisory Commission DATE: November 3, 2009 Commission members Steve Reisdorf, Virgil Blocker, Gary Ruden, Hiram Melendez and Brad Chalmers were present. Ken TeKippe, Finance Director, and Jean Nachtman, Assistant Finance Director, and Tami Lansing, Accountant were also present. 2. The meeting was called to order at 3:00 p.m. in Conference Room A in City Hall by Acting Chairperson Steve Reisdorf. Finance Director Ken TeKippe certified that the meeting was in compliance with the Iowa open meetings law. 3. Steve Reisdorf nominated Virgil Blocker for Chairperson. Virgil respectfully declined. Virgil nominated Steve Reisdorf and Hiram Melendez seconded. Motion carried unanimously. 4. Gary Ruden moved that the minutes of the July 22, 2009, meeting be approved. The motion was seconded by Virgil Blocker and approved unanimously 5. Robert Leuty of Dana Investment Advisor provided a handout with information on the portfolio performance, holdings and third quarter market review. Year-to-date total return for our portfolio is 5.78% well ahead of the three month Treasury (.17%) and one year Treasury (.65%). The effective bond duration is 0.47% and ` the average months to coupon reset is 5.18. Our portfolio contains 30 year maturities with annual adjustments off the one year Treasury. Rate of readjustments lag market. As market rate falls value of portfolio increases. Bonds are held to maturity since no incentive to trade in this environment. Because of volume Dana is able to buy at round lot prices and allocate purchases to individual portfolios. The portfolio has no sub-prime exposure and bonds are all AAA rated. Bonds in portfolio are all valued at or above market. Dana expects the return to drop in the future with the annual resets. The average annual total returns since inception of account on June 30, 1989 are 5.79% (20 years) versus the three month Treasury returns (4.30%) and one year Treasury (4.87%), significantly outperformed benchmarks with low risk. Outlook Return: Fed is not in a rush to increase rates. Dana does not expect in#erest rates to increase until unemployment stabilizes sometime in 2010. When Fed does begin to tighten credit, expect 50-75 basis point increment. Robert expects a ~ (square root) bottom with flat line through 2011. Unemployment is keeping growth rate slow. Customers are still retrenching. GDP is not robust. Robert confirmed that Dana is in compliance with the City's current investment policy. 6. Ken distributed investment return information for September 30, 2009, from the four investment managers: Dubuque Bank and Trust (DB&T), U.S. Bank, Dana Investment Advisors and First Community Trust. Also distributed a recap of manager/ custodian annual fees based on September 30, 2009 market values. A discussion was held on fees. Ken may contact DB&T since they have the highest average fees to review if they would be willing to lower rates. Ken will draft a letter to the four managers to see what response we get to considering one set of fees for all managers and (perhaps .35%) and offer to pay fees monthly instead of quarterly. The Commission reviewed the September 2009 quarterly investment reports prepared by Jean Nachtman. Ken indicated that the City has begun to use a savings account option versus certificates of deposit. DB&T Premier and EDSB Advantage are providing rates considerably greater than the six month CD bids (area of 1 %). The rates are not fixed and the City is limited to number of withdraws per month. It is anticipated that the City will utilize investments in this vehicle and lower investment in CD's until the CD rates are more attractive. The City will be receiving approximately $14 million in bond proceeds in November. The bond sales were for various projects (largest being new parking ramp on Bluff Street) and had favorable interest rates (3.23% and 3.29%). Prior bond debt ($9 million) was refinanced due to favorable interest rate (2.66%). At the current time it appears only one local financial institution will be~idding for investing the bond proceeds. Local banks do not have need of cash at this time due to their loan demand. The Port of Dubuque parking ramp bond proceeds have not been closed due to a number of construction issues not resolved with contractor, architect and engineers and construction manager. The City will borrow approximately $8 million through State Revolving Fund (SRF) to finance the city wide water meter change out program. SRF has a 3% annual interest rate with a 0.25% annual administrative fee and a 1 % loan origination fee. The City is also receiving $1 million in SRF forgivable loan for the project. It was decided that any questions from committee members about City investments or for the managers could be forwarded to Ken TeKippe or Jane Glennon 7-10 days prior to quarterly meeting for distribution with agenda. 7. There was no communication from the public, commission or staff to report according to Ken. 8. The next meeting of the Commission is scheduled for Wednesday, January 27 2010, at 3:00 p.m. in City Hall. A representative from Dubuque Bank and Trust will be invited to the meeting. 9. Virgil Blocker moved that the meeting adjourn. The motion was seconded by Hiram Melendez and approved unanimously. The meeting adjourned at 4:20 p.m.