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

some of the people pulled their money out is because it was short time investments for them and they needed it to pay salaries, etc., and the City has that money in there for the long term and does not need the money right away.  12- 20- 07 Emergency Council meeting 265 INVESTMENTS IN THE SBA cant. The Finance Director said the City is in a situation like many cities in Florida, this is the richest time of the otherwise be withdrawing the SBA fund. year when they receive the ad valorem taxes and they would not Dr. Pullen wished to clarify in his mind that the money being considered for withdrawal is actually the safest money which will probably received a Triple A rating, and the shaky money is in Fund B which cannot be touched. r- The City Manager said they did not know that with any certainty and she would not be able to advise Council with any certainty that it will receive a Triple A rating. She said the question is one of liquidity and thought what the Finance Director shared about the investment policy; it is the safety of the principal, to liquidity and interest rate. She said her concern to Council is that if tomorrow the School Board starts withdraw those pull out their money that makes everyone' s investment less viable; the more people that monies there more concern there is that other people will withdraw their money. The Finance Director commented they need to focus on the fact that it is the lack of investor confidence and the possibility of a run on the bank that the City is considering taking a $ 155, 288. 83 expense right now; it has nothing to do with the qualities of the investments. She agreed that Fund A probably will come out to be what the SBA is saying and they will make the right adjustments to make that Fund A exactly Triple A rated. Dr. Pullen threw out the question on the chances of the State of Florida going bankrupt. The Finance Director, on the question whether there was any backup to the Fund, said there has always been a perception that the State of Florida considers it a guaranteed fund, but when the Governor made a negativecomment in a press meeting that he would not back up the local government with State funds is one of the reasons why there is a severe lack of investor confidence. Mr. Minich received clarification that the Finance Director heard of a statement by the Governor that said the publicly he would not back it up and wished to know if she had heard the Governor recanting statement. The Finance Director replied no. is Mr. Garvie received clarification that the City' s total exposure is approximately $2 million if a decision made to withdraw the funds. if it is not Mr. Holmes wished to know if there is a chance that the City would lose the $ 7 million withdrawn. The Finance Director replied she did not think that would happen, she did not think the City chance it could happen, if there would lose the $7 million. Mr. Holmes asked if there was a possibility or a is not a The Finance Director replied there is not a guarantee. guarantee. Mr. Reeves wished to know if there is a possible loss of liquidity in Fund A where the SBA could say no amount, and change the more withdrawals, that the School Boards have pulled out and there is a limited Director funds are withdrawn and there terms of the money market fund. The Finance replied as soon as r'" is a run, that could happen and the SBA could say no one can have their funds until they reach maturity and will not even give an option of the 20/0. it is only there Mr. Minich questioned why the SBA has given the 20/0 option. The Finance Director replied as a deterrent to investor panic. funds, the Mr. Minich received clarification that although the City Manager has the authority to transfer transfer of funds would cause a loss of money to the City and because it would be an expenditure of funds the SBA Account the City Manager is asking the City Council for authorization to remove the funds from the safety of the Fund A. The City Manager replied yes and stated for the record that her concern is which is why she makes the recommendation to corpus of that money and the liquidity of that money, withdraw the funds. 266 Emergency Council meeting 12- 20- 07 INVESTMENTS IN THE SBA cont. Mr. Garvie moved to authorize the City Manager to withdraw the $7, 764, 441. 61 from Fund A of the SBA and pay the 2% withdrawal penalty of approximately $ 155,288.83, and to reinvest at the discretion of the City Manager and Finance Director. Mr. Reeves seconded motion. Mr. Garvie reflected when the stock market lost money that if you got out early then the loss could be made up in a period of time but if you waited too long then the loss could not be made up. He commented the City could make up the loss over the long term if they at least get a good portion of the money out and there is nothing left if there is a run on the money by the School system and perhaps other cities in the State. Mr. Miller commented you did not take a loss until you sell something that is an investment and said the SBA is a State Fund administered by the State Statutes and he did not think it will go belly up. He commented the $ 7. 7 million is invested in top grade investment and the $ 1. 7 million were invested in I[ i,:. top grade but have been downgraded but it does not mean they have lost value, just that they are not as liquid. He said he is not willing to take a $ 155, 000 loss. Mr. Holmes expressed he is not comfortable taking a chance and agreed with Mr. Garvie that they will have a little better opportunity to recoup the loss and there is not a certainty that it will not happen. Dr. Pullen expressed that he did not think the State of Florida will go broke, that the City could ride it out. Mr. Reeves commented that he did not consider his money market fund an investment as it is something he goes to if he needs access to it. He hated the thought of losing $ 156, 000 in the fund but thought for security it would bring by having the funds and not receiving a letter saying they will have to freeze Fund A, his fear is the non- liquidity. He agreed the City could ride it out and eventually have access to the money again but at this point was unwilling to take that chance. Mr. Miller commented the $ 9. 5 is not all the liquid money the City has and questioned whether the $ 6 million included the $ 2 million already withdrawn from the SBA fund. The Finance Director an gave update that the $6 million in the checking account does comprise the $ 2 million cashed out of the SBA and tomorrow it would be in CDs. She went over the current pooled cash over $ 30. 3 million, excluding pension funds, held in various investments with $ 9. 5 in the State Board of Administration, around $ 12. 7 million in Certificates of Deposit, $ 5. 2 million in a repurchase agreement restricted funds, and then approximately $ 3. 9 in the checking account after payroll is done. Mr. Miller commented is not a question of the $7 million needed to be liquid because there are $ 16 million liquid funds and the $ 7 million is not needed to pay salaries or pay immediate expenses, it is investment and it will be there unless the City cashes it in and that is the only way the City will lose money if it is cashed in. Mr. Garvie mentioned he questioned earlier if there was any fund with the State that guaranteed it and that the Finance Director had answered the Governor had said no and has not come back to say yes. He said the $ 7. 64 million could be lost, that there is no guarantee anyone is looking out for it right now. He said whether or not the State goes bust has no bearing on it, the fund is