Permanent Fund Committee Meeting Minutes May 10, 2007

Session 07-01 a Regular Meeting of the Permanent Fund Committee was called to order at 5:37 p.m. on May 10, 2007 by Dennis Novak at the Homer City Hall Cowles Council Chambers located at 491 E. Pioneer Avenue, Homer, Alaska.

PRESENT: COMMITTEE MEMBERS: REGINA HARVILLE, JO JOHNSON, FRANK MULLEN, MATT NORTH, DENNIS NOVAK, BETH WYTHE

APPROVAL OF AGENDA

The agenda was approved by consensus of the Committee.

PUBLIC COMMENTS REGARDING ITEMS ON THE AGENDA

APPROVAL OF MINUTES

VISITORS

STAFF & COUNCIL REPORT/COMMITTEE REPORTS/BOROUGH REPORTS

PUBLIC HEARING

PENDING BUSINESS

NEW BUSINESS

A. Election of Chair and Vice Chair.

Dennis Novak was elected as Chair and Beth Wythe was elected as Vice Chair by unanimous consent.

B. Establish a Standard Meeting Date.

Regular meeting times were set for the second Thursday of each month with the exception of July by consensus of the Committee.

C. Review of Ordinance 05-14(S), HCC 3.10.130 and HCC 3.12 Homer Permanent Fund.

Discussion on anticipated funds from Exxon Valdez ensued. Distribution will likely be in 2008 and it is important to have a plan in place. Funds are allocated at 60/40; 60% allocated to an income sub-fund and 40% allocated to a growth sub-fund. Criteria needs to be developed for an RFP for investment firms. The proposals need to give the investors direction so they can show us how they will do it and the costs involved. The Permanent Fund Committee must become informed to know what the proposals should include.

Section 3.10.130 (3)(a)
Discussion: If there is no ability to distribute realized gains it is possible if your equity investments perform well your fund would increase annually. Realized gains could be distributed.

Councilmember Wythe explained the intention was the base of the fund would grow. Balancing of the fund as to percentages can be reallocated to allow more earned income. The fund was to be an income generating engine to help build the general fund. It was made as tight as could be to reduce and limit the possibility of it being distributed excessively. It is not to be depleted and cashed out. Future generations will benefit from the fund if it is large enough to supply expenses of the general operating budget. That will give everyone the longest term investment.

Section 3.10.130(8)
The Committee discussed the need to include financial custodians, along with bank custodians to hold the securities of the permanent fund. Conflict of interest for committee members Mullen and North was discussed. If they take an active role in refining an RFP to benefit the people within the City, are they eligible to compete in the RFP process? The appearance of an impropriety may exist. City Clerk Johnson is to obtain an opinion from the City Attorney regarding a conflict of interest.

Discussion ensued about using the principle of the permanent fund to grow money. The fund will be used as a last resort to bond. Spelling it out in the RFP with a flow chart was suggested.

Committee member Mullen provided portfolio models depicting alternative allocations. The more aggressive the portfolio the more risk for loss. Defining risk tolerance was discussed; the level needs to be established.

INFORMATIONAL MATERIALS

COMMENTS OF THE AUDIENCE (3 MINUTE TIME LIMIT)

There was no audience.

COMMENTS OF THE CITY STAFF

City Clerk Johnson said there is a lot to be learned.

COMMENTS OF THE COUNCILMEMBER

COMMENTS OF THE CHAIR

Chair Novak commented it was interesting; he is looking forward to learning more.

COMMENTS OF THE COMMISSION

Committee member North said we all have a lot to learn and it should be fun.

Committee member Mullen commented we do not need to reinvent the wheel totally. There was thorough work in putting the permanent fund concept together.

ADJOURNMENT

There being no further business to come before the Committee, Chair Novak adjourned the meeting at 6:41 p.m. The next Regular Meeting is scheduled for Thursday, June 14, 2007 at 6:00 p.m. in City Hall Cowles Council Chambers located at 491 E. Pioneer Avenue, Homer, Alaska.

______________________________
JO JOHNSON, CMC, CITY CLERK

Approved: _____________________