HomeMy WebLinkAbout12-01-1994 - Emergency MeetingCITY OF NEWPORT BEACH
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PLACE: Council Chambers
Tffi:: December P.M.
DATE: December 1, 1994 INDEX
Present
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ROLL CALL
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The City Attorney advised that the
purpose of this emergency meeting was
to brief the City Council on the
announcement by the Orange County
Treasurer /Tax Collector that recent
increases in interest rates have
resulted in a decline in the market
value of the funds held by the Orange
County investment pool. The City has
approximately $19 million in bond and
general fund revenues invested in the
fund.
The City Manager stated that the
City's investment represents
approximately .002% of the total
investment in the pool. Also,
representatives from the County will
be meeting next Tuesday in New York
with representatives of Standard &
Poor's, and Moody's Investors Service,
Inc., and following those meetings,
the staff should be able to provide
some additional information to the
Council.
Dennis Danner, Finance Director,
distributed copies of his report
regarding Orange County Pool dated
December 1, 1994, as well as his
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report dated May 4, 1994 regarding
City Investment Practices which
included copy of Council Policy F -1,
Statement of Investment Policy. He
reviewed both reports and the City's
current investments to date which
total an estimated $54 million.
Mr. Danner referenced the press
release from the Orange County
Treasurer/Tax Collector which was
distributed at 3 p.m. this afternoon
and a fax received from Kidder,
Peabody Company, describing some of
the concerns they have with respect to
the Orange County Investment Pool.
Mr. Danner summarized his meeting
earlier today with the Orange County
Treasurer's office, in part, as
follows: the County indicated they
have a liquidity problem in that they
have enough cash to fund normal cash
flows for any agency for the next 30
days, and at this point, they will
also be receiving their property tax
funds which is estimated over $400
million dollars; what they are really
concerned about is people withdrawing
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their investments and placing them
elsewhere in hopes of receiving a
higher rate of return, and if all of
the investors did that, they would
have a liquidity problem; the County
is contemplating restricting the
withdrawal of funds from the Pool to
avoid a "run on the bank" and the
possible loss of principle of the
Volmme 48 - Page 463
CITY OF NEWPORT BEACH
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December 1, 1994
INDEX
investments; it is the County's intent
to honor "regular cash flow need
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withdrawals" from the Pool at 100% of
principal, but to restrict other
withdrawals to 80% of the principal of
the investment.
The City currently has approximately
$16,000,000 held in the Orange County
Investment Pool made up as follows:
City General
Investment Funds $ 1,074,702.68*
City TRAM proceeds 4,339,956.66
Water Revenue Bonds 10,886.537.34**
* At one time, during its period of
peak performance, the City had
approximately $18 million of General
Investments in the Pool. As rates
declined, and City funds available
also declined, staff has been
gradually moving funds elsewhere or
withdrawing them to meet normal cash
flow needs.
** The Water Revenue Bonds are held in
a separate Bond investment pool
because of the requirement to track
arbitrage earnings for the Federal
Government. This is the balance after
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recording a withdrawal effective on
December 5, 1994.
Discussion ensued wherein it was
pointed out that the Investment Pool
manages the operating and reserve
monies of approximately 180 public
agencies, some of which are:
8
Orange County and its.
special districts 37
School Districts 13
Sanitation District 6
Transportation
Authority 15.3
Transportation Corridor
Agency 4.73
Irvine Ranch Water
District 4
City of Irvine 2.78
City of Anaheim 2.25
City of Santa Ana 2.40
County Retirement System 1.79
City of Newport Beach .002
The City Manager stated that he is
going to obtain from the County a
listing of everyone that is in the
Pool, how much they have invested, and
just where those funds are invested.
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He also is going to ask the City
Attorney to review the guideline
documents the City has relative to the
Pool to determine how much the City
can withdraw from the Pool (if deemed
necessary) and what kind of notice the
City must give the County.
Volume 48 - Page 464
ROLL
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CITY OF NEWPORT BEACH
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December 1, 1994
The Finance Director noted that if the
City were to make a "normal cash flow
requirement withdrawal" from the Pool,
it would be received within 48 hours.
If the City were to make an "out of
the ordinary" withdrawal from the
pool, it would only receive 80 cents
on the dollar.
Council Member Edwards indicated that
prior to taking any final action on
this subject, he would like staff to
bring back information relative to: 1)
what the County legally can and cannot
do to the City, and 2) what
confirmation letters have been
received by the County of the
approximate 86% participants that
choose to stay in the Pool.
Council Member Cox, also Chairman of
the Orange County Sanitation District,
stated that it is his understanding
that "all the major players" are
remaining in the Pool, and in his
opinion, it only makes good sense to
stay in the Pool; the County has made
a commitment to honor the draw -downs
for scheduled or cash flow
requirements; and the County Treasurer
and his task force have been working
on this issue for several months and
are evaluating every strategy possible
in order to maximize the best outcome
for this situation.
Following discussion, motion was made
by Council Member O'Neil to take no
action at this time, but that the City
Manager be directed to keep the
Council abreast on this issue, and
that this meeting be adjourned to 5:00
p.m., Monday, December 5, 1994, for a
further status report.
Meeting adjourned at 6:50 p.m.
/J
Mayor
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Volume 48 - Page 465
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