Minutes - Investment - 2009-05-20•
COSTA MESA SANITARY DISTRICT
MINUTES OF INVESTMENT OVERSIGHT COMMITTEE MEETING
May 20, 2009
CALL TO ORDER The meeting was called to order at 11:20 a.m. by Treasurer /Finance Director
Marc Davis
ROLL CALL Committee Members Present:
President Arlene Schafer (rotating committee member)
Director Gary Monahan (rotating committee member)
Mr. Rob Hamers, Manager /District Engineer
Staff Members Present:
Mr. Marc Davis, Treasurer /Finance Director
Mr. Thomas Fauth, Assistant Manager
Ms. Joan Revak, Board Secretary /Program Manager /Clerk of the District
Ms. Sherry Kallab, Management Analyst
Ms. Teresa Gonzalez, Accountant
NEW BUSINESS Review of Treasurer's Report
Mr. Davis reported that the District's portfolio was earning approximately
2.26% as of April 30, 2009, compared to LAIF earning approximately 1.60 %.
A large percentage of the portfolio is in LAIF and that is what is holding the
earnings percentage down. LAIF has a high balance because a second
large installment of property taxes was received in April. The County
released funds early and then came back with an additional payment. Mr.
Davis pointed out that the District is entering into a dry period of cash and
therefore, his plan is to keep the LAIF balance high and draw over the next
several months.
Mr. Davis made reference to the graphical representation of the District's
yield curve compared to the different benchmarks and noted that the District
is above all benchmarks. A couple of the securities with call dates in June
are expected to be called due to their current high yields of about 3.5% and
3.3 %.
President Schafer inquired about participation in the CaITRUST Investment
Pool and Mr. Davis responded that we are in the process of opening the
account. He intends to make the initial deposit in the Medium -Term Fund for
the purpose of obtaining a higher yield. The Medium -Term Fund restricts
access to the funds to once a month. Director Monahan, then inquired if
consideration for the CIP cash flow needs has been taken and Mr. Davis
responded that yes, approximately 60% of the District's portfolio is liquid and
immediately available.
MINUTES OF INVESTMENT OVERSIGHT COMMITTEE MEETING
May 20, 2009
Page 2
Investment Policy for Fiscal Year 2009 -10
• Mr. Davis distributed a working draft of the District's Investment Policy and
noted that only pages 7, 8, and 11 had changes. The California Government
Code has limited investment in Shares of Beneficial Interest, and so has the
District, down to 20 %; this includes investments in CaITRUST, money market
funds and money market mutual funds. The Investment Policy on page 8
clarifies that the audit of the District's portfolio is part of the annual audit of
the District, and on page 11 it details out that the auditors will perform
analytical review on cash receipts. The Investment Policy for fiscal year
2009 -10 will be presented to the Board at the July 2009 regular Board
meeting for approval.
Update on CalPERS Investment Losses
On May 14, 2009 CSMFO hosted a CalPERS teleconference on the topic of
CaIPERS investment losses and its relation to the retirement contribution
rates. In the fiscal year 2008 -09 CalPERS investment losses have fluctuated
between 25% — 30% and currently sitting at a 25% loss. The current
smoothing model requires an immediate adjustment on any gains or losses
greater than 20 %, or outside the corridor. It requires taking a hit in the
corridor year. The CaIPERS staff discussed how the model does not work in
this economic downturn, on what they are calling a catastrophic event and
therefore, they proposed to adjust the smoothing method. The proposal,
approved 6 -4 by the Board, proposes to isolate the year and to recover the
loss over a 3 -year period, then amortize over 30 years. The adjustments will
vary by agency, but approximately the retirement contribution rate will have a
16% increase in year 1, 14% in year 2, and 12% in year 3, then normal
adjustments for the next 30 years. The model will continue assuming an
investment rate of return of 7.75 %. The final loss numbers for June 30, 2009
will most likely not be available until October 2009 due to the market
adjustments on the real estate portfolio.
PUBLIC COMMENTS There were no items discussed under public comments.
ADJOURNMENT The meeting adjourned at 11:45 a.m
Approved by:
Secretary, Costa`' `sa'l'�rrft ry District (r4esident, Costa-Mesa Sa itary District
Board Directcrs Board of Directo