■ Melissa Diaz Hernandez / Reporter
Ever since Councilwoman Karlee Meyer has taken her seat at the dais, she has contested the city’s investment portfolio, stating multiple times that the city’s return should be higher. As recently as the June 27 Hemet City Council meeting during the discussion of future agenda items, Meyer made yet another comment.
“On the investment work study,” began Meyer, “I would – besides the fact that we need to improve our investment policy because we have not done that for a few years – like you [City Manager Alex Meyerhoff] to bring us maybe three different professional investors that have gone over our portfolio and can speak on them.
“I would like this to be part of the work study, especially as we are budgeting,” she continued. “I have been told that we can get more money and have less risk. If we need another $100,000 or two, it would be well worth it.”
A work study was held on July 11 prior to the regularly scheduled council meeting to discuss the city’s investment portfolio. The result of the half-hour meeting was the creation of an ad-hoc committee consisting of Mayor Linda Krupa, Councilwoman Karlee Meyer, the finance director [formerly Jessica Hurst; administrative services consultant Joy Canfield is now in this role] and City Treasurer Judith Oltman. No professional investors were present.
Krupa suggested an ad-hoc committee after admitting that some things needed to be reworked. City Attorney Eric Vail commented that council may want to create a standing committee.
An issue sparked at the dais as to whether or not there are procedures in place for selecting and maintaining investments. Oltman stated that “the procedures are the policy.”
The city has a total of slightly more than $65,000,000 invested in local government bonds, certificates of deposit, managed pool accounts, passbook/checking accounts, medium term notes, negotiable CDs and Federal Agency Issues – Coupon.
A closer look at the investment portfolio begs some questions. The most important – Is the City of Hemet getting the most for its money? The newly established ad-hoc committee should be able to answer that question.
The City of Hemet invested $494,000 in a CD with the Bank of Hemet at an APY of 0.4 percent maturing on Sept. 6, 2021. Previously, the same amount had been invested at an APY of 0.5 percent and matured after three years on Sept. 6, 2016. According to the FDIC’s website, the current national average for a 60-month CD for a Jumbo Deposit (anything over $100,000) is 0.83 percent with a rate cap of 1.58 percent.
The city also invested $249,000 with Citadel Federal Credit Union at an APY of 2.0 percent maturing on Oct. 20, 2020 with a purchase date of Oct. 20, 2015.
The city has money invested in Negotiable CDs with other banking institutions in amounts just under $250,000 with rates between 1.000 percent and 2.500 percent.
City Treasurer Judith Oltman stated in a one-on-one meeting that the investment with The Bank of Hemet was “a local thing and that The Bank of Hemet had been trying to get the city’s business for some time.”
The city also invested just under $500,000 in Atlantic City, New Jersey.
Mayor Pro Tem Michael Perciful asked if any safeguards are in place to protect the people’s money and does the city monitor the ratings of the investments?
Oltman replied when they are purchased they are within that rating. With regards to rating throughout the term of the investment, it is a “judgment call because it would depend on the circumstances of what happened – the length of time or if it is near maturity. You just monitor it and see how it is going.”
Perciful responded to Oltman, stating, “I am sure that you and your department are doing an outstanding job; however we still have to make sure and we need to have some sort of a procedure in place on how those investments are being monitored and when they drop below a certain level, what procedure is in place to make changes to that investment?”
Perciful’s main point was that “there needs to be oversight.”
What is currently in place?
The Valley Chronicle obtained a copy of Resolution 4588, “Statement of Investment Policy of the City of Hemet” passed, approved and adopted on July 8, 2014.
The resolution states, “Management responsibility for the investment program is hereby delegated to the City Treasurer” [Judith Oltman.] As part of the monthly reporting, Oltman “submits a monthly investment report to the City Council.
This report will describe all investment transactions during the month, as well as all required elements of the monthly report as prescribed below: type of investment, institution, date of maturity, amount of deposit or cost of the security, current market value of securities with maturity in excess of 12 months, rate of interest and statement relating the report to the Statement of Investment Policy.”
Oltman stated that she creates the report with information from the Finance Department.
The purpose of the document is to “identify various policies and procedures that enhance opportunities for a prudent and systematic investment process.”
One of the objectives listed in the resolution is that “the investment portfolio shall be designed to attain a market-average rate of return throughout budgetary and economic cycles, taking into account the agency’s risk constraints, the cash flow characteristics of the portfolio, state and local laws and city policy that restricts investments.”
The resolution also states that “all participants in the investment process shall act as custodians of the public trust. Investment officials shall recognize that the investment portfolio is subject to public view and evaluation. The overall program shall be designed and managed with a degree of professionalism that is worthy of the public trust.”