Permanent Fund Committee Meeting Minutes August 17, 2010

Session 10-05 a Special Meeting of the Permanent Fund Committee was called to order on August 17, 2010 at 12:02 p.m. by Chair Barbara Howard at the City Hall Cowles Council Chambers located at 491 E. Pioneer Avenue, Homer, Alaska.

PRESENT: COMMITTEE MEMBERS: REGINA HARVILLE, BARBARA HOWARD, JO JOHNSON, MATT NORTH, BETH WYTHE

APPROVAL OF AGENDA

JOHNSON/WYTHE - MOVED TO APPROVE THE AGENDA.

There was no discussion.

VOTE: YES. NON OBJECTION. UNANIMOUS CONSENT.

Motion carried.

PUBLIC COMMENTS REGARDING ITEMS ON THE AGENDA

There were no public comments.

APPROVAL OF MINUTES

VISITORS

STAFF & COUNCIL REPORT/COMMITTEE REPORTS/BOROUGH REPORTS

Finance Director Regina Harville reported receipt of statements from U.S. Bank since the funds transfer. As of July 31, 2010 administrative expenses were $521.87. Interest earned while the funds were held in the AML account were $340.35, which were transferred to U.S. Bank.

PUBLIC HEARING

PENDING BUSINESS

NEW BUSINESS

A. Teleconference with Rod Castelda, Clarence Hughes, and Sarah Viele, U.S. Bank, Re: Investment Policy Statement and Guidelines.

Rod Castelda, Clarence Hughes, and Sarah Viele were present by phone. Clarence Hughes, Portfolio Manager, stated the investment policy statement needs to be in place.

Beth Wythe asked if the investment strategy as provided by U.S. Bank was consistent with the provisions of Homer City Code pertaining to the Permanent Fund.

Mr. Hughes referenced the two Permanent Fund accounts, fixed income and equity growth. Assets from both accounts are combined into one account, working in tandem, allowing participation in a broad spectrum of assets.

Fixed Income Investment Policy Statement
Objectives order was amended to the following order of priority:
1. timely availability of cash
2. maximum income
3. safety of principal

Asset mix was amended to add international and high yield mutual funds.

Matt North requested international securities be added to investments. Beth Wythe requested the objectives order be re-arranged to allow access of the earnings. Council may choose to access the fund at their discretion. Chair Howard asked that there was enough assurance in the safeguards in the fund itself to list “safety of principal” as last priority. Beth Wythe indicated safety is needed in the investment of taxpayers’ money. The amended objectives allow for U.S. Bank to be conservative with the money, but not to the expense of the potential earnings.

Reporting Requirements were amended to provide monthly written statements to the Permanent Fund Committee at regularly scheduled meetings. Annual statements will be provided to the City Council at regularly scheduled meetings.

Mr. Hughes explained the bond portfolio includes: U.S. Government Corporate Bonds, U. S. Government Agency or Treasury Bonds, High Yield and International Fixed Income. There are two benchmarks, Barclays Intermediate Government Credit Index and Barclays Aggregate Index. The difference between the two is the aggregate index is 30% asset or mortgage backed security. The portfolio will be aggressive due to working in foreign securities; the government credit is a suitable benchmark.

Matt North commented once the benchmark is decided to gauge against, it will need to be visited to recognize patterns and how it works. It is fair to reference the same benchmark over and over again.

Performance was amended to use Barclays Intermediate Government Credit Index as the benchmark.

Equity Growth Policy Statement

Asset Mix was amended to add the account is to be invested in growth instruments. Stock will be purchased from a reputable stock exchange, such as New York Stock Exchange or NASDAQ.

Matt North recommended categorizing the assets into small, mid and large cap stock ranges. The investable ranges would be broken out to allow easier reporting to City Council. A table with the asset ranges applicable to each stock will be added.

Reporting requirements will be edited the same as on the fixed income statement.
Performance will be amended to add Far East (EAFE) index.

U.S. Bank will provide the amended statements tomorrow.

WYTHE/HARVILLE – MOVED TO ACCEPT THE FIXED INCOME AND EQUITY GROWTH POLICY STATEMENTS AS AMENDED AND AUTHORIZE THE CHAIR AND THE CITY CLERK TO REVIEW AND FINALIZE.

The authorization will prevent scheduling a special meeting.

VOTE: YES. NON OBJECTION. UNANIMOUS CONSENT.

Motion carried.

INFORMATIONAL MATERIALS

COMMENTS OF THE AUDIENCE (3 MINUTE TIME LIMIT)

There was no audience.

COMMENTS OF THE CITY STAFF

There were no comments from the staff.

COMMENTS OF THE COUNCILMEMBER

Councilmember Wythe had no comment.

COMMENTS OF THE CHAIR

Chair Howard had no comment.

COMMENTS OF THE COMMISSION

Commissioners had no comment.

ADJOURNMENT

There being no further business to come before the Committee, the meeting was adjourned at 12:54 p.m. The next Regular Meeting is scheduled for Thursday, October 14, 2010 at 5:15 p.m. in the Homer City Hall Cowles Council Chambers, 491 E. Pioneer Avenue, Homer, Alaska.

Submitted by Jo Johnson