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Minutes_Investment Oversight Commission 7 23 14THE CITY OF Dui Masterpiece on the Mississippi Dubuque All -America City I r 2007 • 2012 • 2013 TO: Members of City of Dubuque Investment Oversight Advisory Commission FROM: Paul Lassance, Investment Oversight Advisory Commission Kenneth J. TeKippe, Finance Director RE: Un -approved Minutes of the July 23, 2014 Meeting of the Investment Oversight Advisory Commission DATE: July 30, 2014 Commission members Brad Chalmers, Gary Ruden and Paul Lassance were present. Ken TeKippe, Finance Director, Jean Nachtman, Assistant Finance Director and Tami Lansing, Finance Accountant were also present. 1. The oath of office was administered to reappointed commission member Paul Lassance at the beginning of meeting. 2. The meeting began at 3:00 p.m. in Conference Room A in City Hall. 3. Finance Director Ken TeKippe, certified that the meeting was in compliance with the Iowa open meetings law. 4. Gary Ruden nominated Paul Lassance to continue as chairperson of the commission and Brad Chalmers seconded. Motion carried unanimously. 5. Paul Lassance nominated Brad Chalmers as Vice Chairperson of the commission and Gary Ruden seconded. Motion carried unanimously. 6. Paul Lassance moved that the minutes of the April 23, 2014 meeting be approved. The motion was seconded by Gary Ruden and approved unanimously. 7. Dale Repass, Paul Kronlage, John Gonner and Steve McDonough (recent addition to firm who works with John) of First Community Trust (FCT) joined meeting and distributed a handout which provided information on economic and interest rate comments, five and ten year treasury yield history, performance review, sector allocation and portfolio detail. Dale indicated the firm is in its fourteenth year and is a federally chartered trust company which continues to grow with $600 million (up $40 million from last year) in assets currently with goal of $1 billion by 2020. Firm does not accept deposits or make loans. There was not any changes in management in past year, however Dale Repass planning to retire at year end with Paul Kronlage assuming duties. Firm has ten employees in Dubuque. Firm continues work with East Dubuque Savings Bank, Premier Bank, DuTrac and Dupaco in Dubuque and three other larger area credit unions. Firm representatives are located in Waterloo, Cedar Rapids, North Liberty and Quad Cities. John reviewed the handout. FCT has outperformed the index the majority of months since firm began managing city funds in months with positive and negative returns. The standard deviation of returns for the City are also better than the Barclay's Index. Feds have tapered the additional bond buying program from a high of $85 million monthly to none by October. Due to size of portfolio, $47 billion, will always buy some to replace maturing investments. Interest rates in May for the ten year treasury was 1.62%,projected to go to 3% by year end (2.45% today), and 3.5% in 2015. The benchmark's R squared is .61 since inception. This is considered in the average range (.40-.70). FCT is using the Barclay Short Term 1-3 year government bonds as its benchmark. This benchmark portfolio contains considerable treasuries. FCT does not have treasuries in the City's portfolio since treasury returns are lower. The lack of treasuries is the reason why the R square is lower. Foreign investors own 50% of Treasuries. These investors are not price sensitive. John's comments included: household debt is at the lowest level since 1980 and consumers are in a good position to spend. FCT likes callable agencies with a step up in rates since they are less volatile. The market pricing of a couple of these callable investments adversely affected calendar year end returns however, in 2014, as actual sales have occurred returns have significantly improved. During preliminary audit work, auditors raised an issue with brokered CDs in the portfolio that were acquired from out of state institutions. According to the State code out of state CDs are okay if acquired via the CDARS program. These CDs were not purchased through CDARS. All the CDs are 100% insured by FDIC, with the combined principal and accrued interest under $250,000. There is no default risk. City staff is reviewing the issue with auditors and instructed FCT to continue to hold in portfolio. The CDs may be sold easily and the City could not incur a loss. John Gonner confirmed that First Community Trust is in compliance with the City's current investment policy subject to final determination of CD purchases. 8. Ken distributed investment return and fee information as of June 30, 2014, for the four investment managers: Dubuque Bank and Trust, U.S. Bank, Dana Investment Advisors and First Community Trust. 9. Considerable unspent bond proceeds remain. Proceeds from Series 2014 A bond issue received recently, invested in American Trust & Savings Bank. The City withdrew $1.5 million from managers in 2014, first withdrawal since 2004. Ken indicated Landfill continues to spend some of its reserves so holding less CDs than a few years ago and Landfill may incur some debt for projects in the next couple years. 10. There was no communication from the public, commission or staff to report according to Ken. 11. The next meeting of the Commission is scheduled for Wednesday, October 22, 2014, at 3:00 p.m. in Conference Room A, City Hall. A representative from Dana will be invited to the meeting. 12. Brad Chalmers moved that the meeting adjourn. The motion was seconded by Gary Ruden and approved unanimously. The meeting adjourned at 4:05 p.m.