Minutes_Investment Oversight Advisory Commission 7 28 10Masterpiece on the Mississippi
Dubuque
AI- AmedcaCNy
11111f
A
2007
TO: Members of City of Dubuque Investment Oversight Advisory Commission
FROM: Kenneth J. TeKippe, Finance Director
RE: Un- approved Minutes of the July 28, 2010 Meeting of the Investment
Oversight Advisory Commission
DATE: August 4, 2010
Commission members Stephen Reisdorf, Virgil Blocker, Gary Ruden and Brad
Chalmers were present. Ken TeKippe, Finance Director, Jean Nachtman, Assistant
Finance Director, Tami Lansing, Accountant and Vicki Kluesner, Finance Department
Intern were also present.
1. The meeting began at 3:00 p.m. in Conference Room A in City Hall with Stephen
Reisdorf and Gary Ruden taking the Oath of Office as newly reappointed
committee members. Ken indicated that Hiram Melendez would not be able to
attend the meeting.
2. Finance Director Ken TeKippe, certified that the meeting was in compliance with
the Iowa open meetings law.
3. Virgil Blocker nominated Stephen Reisdorf as chairperson of the commission and
Gary Ruden seconded. Motion carried unanimously.
4. Virgil Blocker moved that the minutes of the April 28, 2010 meeting be approved.
The motion was seconded by Brad Chalmers and approved unanimously.
5. Dale Repass, John Gonner and Ryan Piechocinskin of First Community Trust
(FCT) distributed a handout which provided information on performance, economic
and interest rate outlook, and five year treasury yield history and recent history of
spreads and market commentary.
Dale indicated the firm is in its tenth year and is a federally chartered trust
company which continues to grow with $340 million in assets (900 accounts). FCT
continues to receive good exam results and has two outside audits per year. The
firm continues to provide trust services to four local financial institutions: East
Dubuque Savings Bank, Premier Bank, DuTrac Community Credit Union and
Dupaco Community Credit Union. Dale indicated FCT's appreciation of recent
reallocation of funds managed by the firm.
John reviewed their report and provided the following comments: focused on the
low risk low volatility investments; index has more volatility than the City portfolio;
returns have beat the index overall for positive and negative returns since
inception; Since firm began managing City funds, treasuries have outperformed
government agency investments; yield curve has been steep for some time. There
are additional treasury bonds available due to stimulus plans. Inflation concerns
over increased money supply has been offset by a slow down in the velocity of the
money supply. Higher unemployment percentage and longer lengths of
unemployment along with a national rise in savings will work to keep inflation in
check.
The firm goal when they began managing City funds seven years ago was to have
higher returns at a lower risk which they have met.
City's portfolio has more months with a positive return than the index and less
months with negative returns; continued to buy government agencies, not
treasuries; have bought agencies and mortgage backed securities because they
are callable; managed fund for total returns; growth has slowed, a subpar
economic recovery; possible to have a double dip recession, however not
predicting; forecast difficult times in this portfolio; 50% of the past year 5.02; return
will be good the next year; the standard deviation for returns has been 5.43%
versus the index of 6.666 %.
John Gonner confirmed that First Community Trust is in compliance with the City's
current investment policy.
6. Nick Zimmerman, Mike Maloney, Chris Johnson and Taylor Harwood of US Bank
provided a handout which provided information on performance, maturity
distribution and fixed income market outlook. Chris Johnson of Madison,
Wisconsin will now be the City's client relations manager replacing Nick
Zimmerman. Taylor Harwood of Minneapolis, Minnesota will now be the City's
portfolio manager replacing Mike Maloney. Nick and Mike will be moving to other
positions with the bank, but will still be available for assistance.
Taylor reviewed the U.S. Bank report. His comments included: don't expect a
double dip recession; economy will slow; focusing on callable agencies (10 basis
points advantage), do not foresee them being called, but believe enough like
product in the market to replace; held considerable cash at year end; did not want
to use laddered approach for investments and lock in at lower rates; shortened the
duration ladder by acquiring three investments subsequent to year end with
maturities in 2012 thru 2014; bank had large cash build up with intentions to invest
in Fed Notes, but expected interest rates did not materialize; returns running under
the indexes partly because of assets held to maturity; firm has begun taking fees
monthly and implementing new fee rates.
Taylor Harwood confirmed that U.S. Bank is in compliance with the City's current
investment policy.
7. Ken distributed investment return and fee information as of June 30, 2010, for the
four investment managers: Dubuque Bank and Trust, U.S. Bank, Dana Investment
Advisors and First Community Trust.
Commissioner Brad Chalmers expressed an opinion over the simple ladder
approach used by the managers and the fees charged. Perhaps other investment
strategies are available.
The recent switch in software by custodian American Trust and Savings Bank has
resulted in issues relative to reconciling the accounts, categorizing the assets and
reflecting the amortization of premiums and discounts. The custodian will change
future reports to discontinue amortization which is consistent with reports prior to
the conversion to new software.
8. The Commission reviewed the June 2010 revised quarterly investment reports
prepared by Tami Lansing which were distributed at the meeting. Ken indicated
that the City will be receiving considerable bond proceeds in the next couple
months (approximately $14 million) for a variety of projects and a refunding of 2002
bonds outstanding. At this point it appears a number of local banks will be bidding
on investing the bond proceeds. The City will also be borrowing $65 million in
State Revolving Fund Loan from the Iowa Finance Authority for the Water Pollution
Control Plant project. The City's bond rating is Aa1 which is a very strong rating.
9. There was no communication from the public, commission or staff to report
according to Ken.
10. The next meeting of the Commission is scheduled for Wednesday, October 27,
2010, at 3:00 p.m. in City Hall. A representative from Dana will be invited to the
meeting.
11. Gary Ruden moved that the meeting adjourn. The motion was seconded by Virgil
Biocker and approved unanimously. The meeting adjourned at 4:40 p.m.