Minutes - Investment - 2009-09-170
COSTA MESA SANITARY DISTRICT
MINUTES OF INVESTMENT OVERSIGHT COMMITTEE MEETING
September 17, 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 Arthur Perry (rotating committee member)
Staff Members Present:
Mr. Marc Davis, Treasurer /Finance Director
Ms. Joan Revak, Board Secretary/Program Manager /Clerk of the District
Ms. Teresa Gonzalez, Accountant
NEW BUSINESS Review of Treasurer's Report
Mr. Davis reported that the District's portfolio was earning approximately
2.125% as of August 31, 2009, compared to LAIF earning approximately
0.80 %. We are above the 2.0% budgeted investment earnings. A large
percentage of the portfolio, approximately $5.8 million or 51 %, is in LAIF.
Mr. Davis pointed out that the District is half way through the dry period of
cash and typically this is the period that we keep a large percentage of the
District's portfolio in LAIF to have funds available to withdraw. Normally in
the periods with sufficient cash inflows the percentage of the portfolio
invested in LAIF drops down to the 25% to 40% range. Mr. Davis informed
the committee that he is about ready to execute investment in CalTrust and
this will create more diversification. The CalTrust medium -term fund carries
a target duration of 1 -3 years, with a rate of return from 1 % to 2 %. The rate
of return of investments in the CalTrust medium -term fund would be double
compared to our current rate of return.
Mr. Davis made reference to the graphical representation of the District's
yield curve compared to the different benchmarks and noted that the only
benchmark above the District's yield curve is the 5 year Treasury Note.
Update on Proposition 1 A Shift
The State suspended Prop 1 A (2004), and with the suspension, the
Constitution allows that up to 8% of local governments' property tax revenues
can be borrowed by the State and repaid within three budget years with
interest. The amount that can be borrowed is determined by the amount of
property taxes received by cities, counties, and special districts in the
preceding fiscal year 2008 -2009. The District's shift will be an approximate
MINUTES OF INVESTMENT OVERSIGHT COMMITTEE MEETING September 17, 2009
Page 2
• $17,000 reduction in the County's allocation of property tax revenue in the
fiscal year 2009 -2010. The Budget bill also included a hardship provision for
those local agencies that are in or in danger of bankruptcy or unable to
provide core services to apply to the Department of Finance for a reduction
or elimination of their property tax suspension. The hardship amounts will be
reallocated to all the other local agencies in the county to make up the
difference in property tax amount shifted to the state. As part of the Budget
package, local governments have the opportunity to receive the monies
being borrowed by the State upfront through a securitization financing offered
by California Communities. California Communities will issue bonds
securitizing the future payments by the State and remit the proceeds of the
bonds to the local governments who opt to participate in the securitization.
With only a $17,000 shift, Mr. Davis does not recommend the District to
participate in the loan securitization program.
Director Perry inquired about the delinquency of property tax payments and
Mr. Davis responded that it was still too early to know for the 2009 tax ledger
and that for the 2008 tax ledger a large amount of the assessments were
paid in April and therefore, we were not materially off in our annual charge
revenue.
Director Ferryman and Rob Hamers arrived at 11:30 a.m.
Update on CaIPERS Investment Losses
• CaIPERS has released preliminary investment returns for the 2008 -2009
fiscal year of negative 23.4 %. The final return for the year will not be known
until October when the final real estate and alternative investments returns
are available. CaIPERS is estimating that real estate and alternative
investments losses for the year ended June 30, 2009 will be approximately
28 %. The CaIPERS Board of Administration passed a decision at its June
meeting to take steps to mitigate the impact of expected losses in the current
fiscal year on public agencies' employer contribution rates. The CaIPERS
Board approved an enhancement to the current smoothing methodology,
which will use a 3 -year phase in of the 2008 -2009 investment loss and allow
some time for the economy to recover. This phased in approach will be
achieved by temporarily expanding the current rate smoothing corridor from
80% to 120% of the market value of assets (MVA) to 60% to 140% of MVA in
the first year, to 70% to 130% in the second year, then back to 80% to 120%
of MVA in the third year. In addition, the approach will isolate the asset loss
outside of the 80% - 120% corridor and pay for it with a disciplined fixed and
certain 30 year amortization schedule. The above smoothing methodology
will add a cumulative additional factor to the employer contribution rates of
1.25% for FY 11 -12, 2.0% for FY 12 -13, 2.15% for FY 13 -14 and 0.25% for
the subsequent 27 years. For the District this translates to estimated
employer contribution rates of 12.605% for FY 09 -10, 13.85% for FY 10 -11,
15.9% for FY 11 -12 and 18.05% for FY 12 -13. Despite the economic
downturn, retirement benefits remain secure.
• Director Perry asked when the Board had planned on re- visiting the
CalPERS retirement formula issue and Mr. Davis responded that the Board
had agreed to re -visit the CalPERS retirement formula issue when the
CaIPERS actuarial report becomes available sometime after October.
•
•
C]
MINUTES OF INVESTMENT OVERSIGHT COMMITTEE MEETING
PUBLIC COMMENTS There were no items discussed under public comments.
ADJOURNMENT The meeting adjourned at 11:45 a.m.
Approved by:
Secretary, Costa ese �un�tary District
Bodid of Di6ectors
September 17, 2009
Page 3
.;osta iviesa 5a nary ui
Board of Direct' rs