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HomeMy WebLinkAbout01-22-18 Board of Finance SOU TH O - d N � U d PEACE y~ y " R 1865 OFFICE OF THE CITY CLERK KAREEMAH FOWLER,CITY CLERK BOARD OF FINANCE JANUARY 22, 2018 3:30 P.M. Council Members Present: Tim Scott, Randy Kelly, Dr. David Varner, Oliver Davis, Gavin Ferlic, Karen White Council Members Absent: Regina Williams-Preston, Jo M. Broden, John Voorde Others Present: Kareemah Fowler, Bianca Tirado, Graham Sparks, Bob Palmer Presenters: Jen Hockenhull, Paul Gifford, Rahman Johnson Agenda: Annual Board of Finance Meeting where the South Bend Common Council convenes as a local Board of Finance to elect its officers Board of Finance Secretary Dr. David Varner called to order the Annual Board of Finance Meeting at 3:30 p.m. He introduced Council members present and proceeded to open the floor to nominations for President of the Board of Finance. Councilmember Tim Scott nominated Councilmember Gavin Ferlic for President of the Board of Finance. There were no other nominations. Secretary Dr. Varner closed the floor to nominations for President. He then opened the floor to accept nominations for Secretary of the Board of Finance. Councilmember Ferlic nominated Councilmember Dr. David Varner for Secretary of the Board of Finance. There were no other nominations. Secretary Dr. Varner closed the floor to nominations for Secretary of the Board of Finance. Councilmember Ferlic was elected President of the Board of Finance unanimously by a voice vote of six(6) ayes. Councilmember Dr. Varner was elected Secretary of the Board of Finance unanimously by a voice vote of six (6) ayes. President Ferlic then gave the floor to the presenters. Jen Hockenhull, City Controller of the City of South Bend with offices on the 12th floor of the County-City Building passed out copies of the Annual Fiscal Report for Calendar Year 2017 (available in the City Clerk's Office). Ms. Hockenhull stated, Good afternoon and thank you for allowing us to provide this update on the finances of the City. We come before you to discuss our investments that are held by 1` Source Corporation. We have individuals here from 1't 455 County-City Building•227 W.Jefferson Boulevard•South Bend,Indiana 46601 Phone 574-235-9221 •Fax 574-235-9173•TDD 574-235-5567•www.SouthBendIN.gov JENNIFER M.COFFMAN BIANCA L.TIRADO JOSEPH R.MOLNAR CHIEF DEPUTY/DIRECTOR OF DEPUTY/DIRECTOR OF POLICY ORDINANCE VIOLATION CLERK OPERATIONS Source to provide more detailed information. There have been no changes to the State Investment Policy and that is where we find basis for our City Policy. There are no changes to the policy and we are also not asking for any changes to the policy. There is a schedule for quarterly meetings and they are open to your attendance. Rahman will report the stale dated checks policy as well as the interest reports. Our cash trends and reserve policy reports are also included in this report. However, since we distribute those on a monthly basis, we didn't plan to go into any detail on those reports. If anybody has any questions, we will be happy to answer them. Because of the timing of the meeting and the timing of the year-end's close, there are reports in front of you for the Controller's Report, the Trends Report and the Cash Reserves Report. They are all preliminary at this time. We don't foresee them changing but if there are any adjustments, we will send out revised copies. Paul Gifford, Chief Investment Officer of 1St Source Corporation with offices located at 100 N. Michigan Street, stated, Thank you for the opportunity to meet with you today. If you all could turn to page six (6) of the report, you will see the presentation. For the last five (5) or six (6) years, 1St Source has had the opportunity to work with the City and manage your excess cash in your portfolio. The original investment was $175 million. Today that is invested between money market,treasuries, agencies, CDs and Municipal Bonds which are all State-approved investments. You will see on page seven(7) a mix of those three (3) assets. On page eight(8) is actually a listing of all the holdings. As I've mentioned in the past, anything that is $250,000 or less in CDs is FDIC insured. As I'm sure you are aware, the State of Indiana has a Public Deposit Insurance Fund so any investment over$250,000 is on that list for approved depository institution fund. As money matures, we are buying and selling the securities for you and collecting the income. Then, the City gets paid the net-income every month out. On page nine (9) the CDs continue and on page ten(10) we are getting to the Government Agency Bonds. For the last year, I can say the CDs have been a more attractive investment vehicle given the investment policy and we are starting to see that change right now. I would expect in the next ye the amount in the Government Agency bucket would tend to increase. The next thing about what is going to happen in the portfolio is that you will see on page thirteen(13), there are a fair amount of maturities in the portfolio over the next several quarters. Most of those bonds, when they mature, we will be able to reinvest at approximately a one percent(1%)higher interest rate. So next year when we come, hopefully you will all see a nice jump in earnings again. And hopefully the next several years as the Federal Reserve has been raising rates. Right now it looks like you will see a one percent (1%) increase on somewhere around $85 million which would be really nice for the budget. Mr. Gifford continued, If you flip to page fourteen (14), in the last year,the portfolio was up about eight tenths of a percent(0.8%). That is ahead of the benchmarks we have agreed to with the City. This means the portfolio generated about an extra$350,000 of earnings. As Jen has said there really are no changes to the investment policy so we should be good to go with this year's investments. Secretary Dr. Varner asked, What was the overall rate of return? Mr. Gifford replied, It was point eight two percent(.82%). 2 Secretary Dr. Varner followed up, In our reduced evaluation of the bond,that is because interest rates are going higher? Mr. Gifford replied, You are correct. We have an agreement with the City that we are not going to sell them at a loss and we will just let it come back because it matures so quickly. Rahman Johnson, Director of Treasury for the City of South Bend with offices on the 121" floor of the County-City Building, stated, I will be walking you through pages fifteen(15)to twenty- seven(27). Page fifteen(15) deals with our Stale Dated Check Policy. He read from the policy, "The City has defined that payroll checks and account payable disbursement checks drawn on city accounts will have a two (2) year active life from the date of issuance as noted on the check. Un-cashed checks, beyond the two (2) year active life period, are no longer valid and shall be classified as a stale dated check."He went on, Pages seventeen(17) and eighteen(18)have a list of accounts payable checks that have expired. We do reissue those checks and do our best to locate those individuals. Page nineteen(19)has a gentleman by the name of Dr. Fred Ferlic, a former Councilmember, who has yet to cash his checks from April 2015. 1 believe we could track him down. Councilmember Karen White asked, Looking at the two (2) year policy timeline based on the month, most of these are past that two (2) year threshold. Have you notified these individuals of what the action will be? Mr. Johnson replied, Yes,they are notified one (1) more time and if there is no response or no subsequent action, the funds are absorbed back into our fund. Page twenty(20),twenty-one (21) and twenty-two (22) is the Monthly Controller's Cash Report. We provide this every month and it is basically a summary of cash and investments by Fund for a given month. Currently,the City has approximately one hundred seven(107) Funds. With the help of the various fiscal officers throughout the City, we are pretty accurate in placing the monies in the appropriate funds. I do rely heavily on the fiscal officers throughout the City to input the money correctly and at the end of the month,I have to reconcile and I trust that everybody has put the money in their correct Fund. Page twenty-three (23) deals with our interest summary. You just heard Mr. Paul Gifford speak about the interest. After their monthly activity, interest kicks in for me. This year, for 2017,the total was $2,737,881. Councilmember White asked, Is there any particular Department that gets the biggest share of the interest disbursement? Mr. Johnson replied, It would be the Fund with the most monies in its current balance and that is usually Fund#324. He continued, Page twenty-four(24) shows the same interest but in graph form. That data is from 2009 through 2017. There was a big jump in 2015. Pages twenty-five (25) and twenty-seven (27) show a different format of this summary that breaks it down by the Fund per year. President Ferlic opened the floor to Councilmembers for any other questions they may have. There were none. 3 Councilmember Tim Scott made a motion to accept the 2018 Annual Finance Report as presented. Councilmember Oliver Davis seconded this motion which carried unanimously by a voice vote of six (6) ayes. With no further business, President Ferlic adjourned the 2018 Annual Board of Finance meeting at 3:49 p.m. Respectfully Submitted, C�- Gavin Ferlic,President 4