Fort Walton Beach Council minutes — 12-20-07 emergency minutes — reading text

MINUTES OF THE EMERGENCY COUNCIL MEETING 261 OF THE CITY OF FORT WALTON BEACH, FLORIDA DECEMBER 20, 2007 INTRODUCTION An emergency meeting of the City Council of Fort Walton Beach, Florida, was held on Thursday, December 20, 2007 at 6: 00 p. m. in the Council Chambers at City Hall, with the following members present: Councilmen: Mike Holmes, Virgil Miller, Dennis Reeves, Bill Garvie, Dr.Wayne Pullen, and Mike Minich Mayor Pro Tem). Absent: Mayor Mike Anderson and Councilman Jim Hartwell Also Present:Joyce Shanahan, City Manager; Lisa Absher, Finance Director; Helen Spencer, City Clerk; and Toni Craig, City Attorney CALL TO ORDER The Mayor Pro Tem called the meeting to order PLEDGE The Mayor Pro Tem led in the Pledge of Allegiance. INVESTMENTS IN THE SBA Report on the financial situation regarding investments in the State Board of Administration ( SBA), and possible action by the City. The City Manager stated the City Attorney has to leave shortly and will give an update on information learned late today about the situation, and then the Finance Director will brief Council. The City Attorney recounted a phone call late this afternoon with Jeff Mcinnis, attorney for the School District, based on some letters received about the School District sending notice to the SBA Board of Trustees and their position on the funds invested. She learned that the School District will hold an been communicating emergency meeting in the morning to discuss withdrawal of funds, and they have with all the other School Districts and Superintendents throughout the State who likewise are concerned and will be probably withdrawing funds if something happens. She relayed the School District found out through their financial investment advisor that Citizens Insurance, who holds $ 1. 9 billion in the Local Government Investment Pool ( LGIP) is an emergency meeting tonight to determine whether or not holding they will withdraw their funds on Monday. She felt if Citizens withdraws $ 1. 9 billion it would be a detriment to the City and any funds left. She said the question unanswered right now is whether or not Citizens is actually authorized to withdraw the money because those funds are part of the State Retirement System and some believe they are legally required to maintain their monies in that fund; but their Board of Trustees is meeting tonight in an emergency meeting to determine whether or not they can withdraw. She received a phone call from Mr. Mcinnis at around 5: 25 pm to let her know that Citizens is meeting tonight in an emergency meeting and it is not known what they will do. She said a lot of the local government most of the attorneys do not know what to do because it is a serious issue, but from a legal standpoint r t attorneys have the idea that 20/0 will be lost and probably will not be able to recover it in the State CFO has said they want to see full disclosure and the fact that they followed the rules the entire the State future unless when you those invested the money. She said if there is a class-action filed on behalf of against L investment brokers then the City may see some compensation for any loss, but the 20/0 is being imposed the funds. She by the Board of Trustees for the fund and they have full ability to invest and manage mentioned that most of the local government attorneys think that will not be recovered, is a guaranteed it loss, but if you consider all the other runs that may be made on the fund, financially it may be more secure than taking a risk. She mentioned that Okaloosa County also invests around $ 62 million with the SBA but they are not taking any action to withdraw funds. 262 Emergency Council meeting 12- 20-07 INVESTMENTS IN THE SBA Mr. Garvie requested clarification on a statement made in one of the letters from Mr. Mcinnis that said the funds already withdrawn were illegal and SBA was going to ask for those funds back. The City Attorney said Mr. Mcinnis included in the letter comments from the Clerk of the 14th Circuit in Hillsborough County and what he put in the letter was that it may have been illegal for them to invest in certain bonds. She said in reality when money is in an investment firm, there will be losses and increases, and it is all speculation; the entire letter was speculation and Mr. Mcinnis tried to couch it in litigation terms so that would not be a signal, but on the other hand the School Board is definitely at looking their withdrawing entire funds from the SBA. Mr. Garvie expressed his understanding that the legal position of the letter was that it was of the entities to withdraw the amount of funds they withdrew and the SBA was goingto illegal for some them to petition give the money back. The City Attorney explained the point of the letter was that by allowing people to withdraw prior to freezing the funds creates a disproportionate amount of the funds that are at I jeopardy for those remaining in the fund; so it is an equitable argument as there is nothing specific to say they violated the law by doing that so he is arguing that now everyone will suffer because some people withdrew and we are restricted and we will lose money if you withdraw now; and he referred to a certain part of the Florida Statute that outlines where the funds can be invested. She did not think any attorney disagrees they have full management authority of the funds and we are at their mercy by their rule. Mr. Miller expressed his understanding the Florida Statute says they can only draw out a certain percent and not all of it and the Director allowed them to withdraw all their funds instead of only a majority of the funds. The City Manager explained when these few localities pre- withdrew their money before there was a real red flag or a problem before the fund became frozen, once they froze the fund then set aside 140/0 of they the assets in a separate pool and she thought what the letter is representing is that those people should at least be required to repay the fund that 140,10 because that is what was inequitable. The Finance Director added that the attorney in Tampa quoted the section of the Florida State Statutes the SBA Management was supposed to be following and said that the SBA Management did not follow that section because after the SBA Management knew on October 31st that there was a section, or a portion of the funds, that may have been less in value the SBA Management was at fault to allow those other people to withdraw 1000/0 of their funds, and the fault lies with the SBA Management; and then said he would do a Writ of Mandamus. The City Attorney stated what they are dealing with is a legal fiduciary responsibility of the SBA Board of Trustees, the CFO, the Governor, and the Attorney General, and they are arguing that the result of it is that there are disproportionate losses to those staying in the fund. She said as a basis of where that disproportionate comes from they are arguing that they violated their fiduciary duties in allowing those withdrawals prior to the freezing. Mr. Miller asked if there were any bonds or securities that have stopped paying interest or dividends. The City Attorney said that is a financial question, but from a legal stand point there are very specific outlines of the investments they can make; and they either met those investment 1.. types or they did not. She said the big question is what happened if you met the requirement at one time and then the bonds, investments or papers went bad and were downgraded, and that is the real question from a legal stand point that they have been downgraded. She said they satisfied it at the time they invested the money but they may not satisfy it now when you start looking at it and that is when you bring in the actions and the fiduciary responsibilities of the Board of Trustees.