BOARD MEETING DATE: June 6, 2008
AGENDA NO. 30

RECOMMENDED ACTIONS:

Receive and file this report.
 

Michael Antonovich, Chair
Investment Oversight Committee

Attendance: Present at AQMD were Committee members Gary Burton and David E. Ertel. Michael Antonovich, Bill Campbell, and Michael A. Cacciotti attended by teleconference. Absent was Committee member Paul Sundeen.
 

Investment Committee Action Items:

Quarterly Report of Investments: Reviewed the quarterly investment report to the Governing Board. For the month of March 2008, the AQMD’s weighted average yield on total investments of $356,514,785, from all sources, was 3.84%. The allocation by investment type was 87.5% in the Los Angeles County Pooled Surplus Investment Fund (PSI); 11.1% in the State of California Local Agency Investment Fund (LAIF); and 1.4% in Negotiable Certificates of Deposit. The Committee approved the quarterly report.

Adopt Resolution and Memorandum of Understanding Directing the Specific Investment of Excess District Funds by the Los Angeles County Treasurer: The Committee reviewed the proposed Resolution and MOU between the AQMD and the Los Angeles County Treasurer related to the Specific Purpose Investment (SPI) portfolio. This new resolution and MOU replaces Resolution No.95-20 between the AQMD and Treasurer, adopted in September 1995, and better defines the exact roles and responsibilities of the AQMD and the Treasurer with respect to the SPI portfolio. The Committee approved this item for recommendation to the Governing Board at its June 6, 2008 meeting.

Approve Contract Extension for Investment Consultant Services for a Three-Year Period.

The Committee reviewed the recommendation to extend the AQMD contract with its investment consultant, Sperry Capital, Inc. Since 1996, the AQMD has competitively bid out these services three times. In all three bid solicitations, Sperry Capital’s bid received high technical scores and was considerably less in cost than the next lowest bidder. The cost in staff time and advertising to go out to bid far exceeds the $2,217 three-year cost increase to extend this contract. The Committee approved this item for recommendation to the Governing Board at its June 6, 2008 meeting.

Investment Committee Discussion Items:

Cash Flow Forecast: Rick Pearce reported on the cash flows for the current year and projected for the next three years. AQMD Investment Policy limits its Specific Purpose Investments to 75% of the minimum amount of funds available for investment during the Cash Flow Horizon. That limit, which includes all funds (General, MSRC, Clean Fuels, Carl Moyer), is approximately $197.5 million.

Financial Market Update: Jim Martling (Sperry Capital) provided the Committee with comments on the current investment market conditions. In summary, Mr. Martling’s comments stated that the yield curve has returned to a more normal shape with 6 month rates at 1.90%; 2 year at 2.44%; 10 year at 3.84%; and 30 year rates at 4.57% as of
May 16, 2008. Mr. Martling also spent some time discussing with the Committee California State Treasurer Bill Lockyer’s efforts toward Municipal Bond Rating Reform. Most municipal bonds are rated on a different, more conservative rating scale than corporate bonds. However, Triple A-rated U.S. corporate bonds have up to 10 times the historical default rate of single A-rated municipal bonds. As a result of the municipal rating scale, taxpayers are likely paying a larger premium to access the capital markets than corporations. As a consequence, the State Treasurer, along with many other state and local issuers are pushing for rating scale equivalency. Although rating scale integration is unlikely to resolve any of the market’s short-term problems, it would improve matters in the long term, by making it easier for money market funds to buy municipal bonds. The rules that govern the types of securities that money market funds can purchase, currently stipulate that these funds cannot purchase securities rated below AA and does not make a separate distinction for a municipal rating scale.

Other Business: None

Public Comment: None