10 u 2 3 FY) 15 16 7 18 19 20 2 22 23 24 25 TRANSCRIPT OF THE PROCEEDINGS oF ‘THE CITY OF MIAMI FINANCE COMMITTEE MEETING city Hall 3500 Pan American Drive City Manager's Conference Room, 2nd Floor Miami, Florida February 19, 2014 12:20 p.m, - 2:22 p.m. APPEARANCES Chairman B1i Feinberg Jose M. Fernandez Richard Brodsky Eric Zichella Daniel Alfonso, ACM, CFO Robin Jones-Jackson, Esq. Chris Rose, Budget Director Marisol Artiles, Liaison Alex Harne, legal intern Brian Dombrowski, Asst. City Attorney Calvin Ellis, Director of Risk Mgmt10 a 12 13 14 15 16 7 18 a9 20 ar 22 23 24 25 AGENDA I. Approval of Minutes A. October 30, 2013 Meeting November 26, 2013 Meeting January 15, 2014 Meeting II. New Business A. Discuss/Review Draft Report from Mr. Brodsky regarding City's Investments in callable U.S. Government agency bonds for 2012 & 2013 Discuss: Piggyback Seminole County on the Investment portfolio management III. Monthly Reports A, Budget Year-to-Date Reports (December) IV. Old Business A. Update of the City's Financial statement Audit B. Update on the City's Investment Policy c. Status Update on the FOP Labor Agreement/Negotiations V. Legal Updates Adjourn meeting10 a 12 13 14 15 16 a 18 19 20 21 22 23 24 25 (Thereupon, the following proceedings were had:) MR. FEINBERG: Tt is 12:20. We can convene the City of Miami Finance Advisory Committee. It is February 19th. We are down here at City Hall in the City Manager's conference room. I would like to go around the room to introduce board menbers, staff and guests. My name is Eli Feinberg. I am the Chair appointed by the Mayor. MS. ARTILLES: Marisol artilles, Finance Conmittee Liaison. MR. ROSE: Chris Rose, Budget office. Not much of a voice today. Sorry. MR. ALFONSO: Daniel Alfonso, Assistant City Manager and cro. MS. JACKSON: Robin Jackson, Senior Assistant City Attorney. And also will be joining us in a few minutes, Brian Dombrowski, Assistant City Attorney. And we have a guest with us today. Here comes Brian back. we said you were momentarily coming. And we have out quest today who is one of our legal interns. MR. HARNE: Alex Harne, second year at University of Miami. MR. FEINBERG: Welcome.10 a 12 13 14 1s 16 a7 18 ag 20 21 22 23 24 25 MR, ZICHELLA: Eric Zichella, a new member appointed by Commissioner Carollo. MR. FERNANDEZ: Jose Fernandez, I am appointed by the City Manager. MR. BRODSKY: Richard E. Brodsky, appointed by Conmissioner Sarnoff. MR. ELLIS: Calvin Ellis, Director of Risk Management. MR. FEINBERG: Eric, welcome. MR. ZICHELLA: Thank you. MR. FEINBERG: We have been kind of lobbying Commissioner Carollo to finally appoint somebody. You are a welcome addition to the committee. MS. JACKSON: Mr. Chair, Brian has checked with the clerk's office. So he will give an update here. MR. DOMBROWSKI: Eric is cleared for the Board. He will receive the welcome letter. But he doesn't have a prior oath, so he is here MS. JACKSON: He is an authorized -- MR. DOMBROWSKI: -- able to be here today. MS. JACKSON: He is new. And he is fully able to vote.10 ul 12 13 14 15 16 a7 18 19 20 aL 22 23 24 25 MR. FEINBERG: Great. We have a pretty full agenda today. We have three minutes to approve. However, one is still in hold. The January meeting is still at the vendor's office being worked on. So the Chair welcomes any motion to approve those minutes. MR. BRODSKY: I move to approve the October 30th and November 26th meeting minutes. MR. FEINBERG: The Chair seconds the motion, Any discussion? Any questions? All in favor say, I. (Multiple voices say, I.) MR. FEINBERG: Motion passes. Mr. Brodsky has received a lot of the accolades for putting this very very long and difficult draft report regarding the City of Miami's investment policies. We will begin with that. I am sure that most of you have received the investment policy from previous administrations, two previous and one draft. And then also, Mr. Brodsky's draft letter suggestions to the City Commissioner. Richard, why don't you begin with your priorities, as far as your presentation? MR. BRODSKY: First, at the last meeting10 i 12 13 14 1s 16 17 18 19 20 21 22 23 24 25 we passed resolutions that included sending letters to the inspector general and to the chairman of the commission. And I had forwarded to Marisol, under our very cumbersome way we have to communicate, in hopes that she would communicate them to you. And later, I spoke to Robin to find out if she knew what action, if any, had been taken. I think she may have sent them to you. can T ask you just to tell us where we are on those issue? MR. FEINBERG: Yes. I have given the chief of staff to Commissioner Gort’s office a general idea of what we are looking for, what we are trying to accomplish. and we will requesting an opportunity to address the full board. MR. BRODSKY: The commission? MR. FEINBERG: Yes. MR. BRODSKY: And what about the inspector general thing? We voted to send him a letter asking him to investigate. MR. FEINBERG: Yes. MR. BRODSKY: Where are we on that? MR. FEINBERG: I am not sure. The letter10 a 12 13 14 15 16 uw 18 19 20 21 22 23 24 25 vas fine -- I mean the request was fine. 1 haven't done that, not for any reason. But let's -- I will say let's get a -- get this thing passed today. And we can do a little parallel course with the letter to the inspector general. MR. BRODSKY: Thank you, I just wanted to get that -- in your pamphlet or your book are two documents under number two, separated by the orange tab. The first is an update -- as of I think Monday or Tuesday. I can't remember which. 1 think Monday -- of the draft that vas sent to everybody. And then the second document after the orange tab is a red line showing the changes from the draft that was sent to you to the draft dated February 18th. The changes are one, to update the fact that as of February 14th the interest rate for the comparable interest for five year bonds had dropped to 1.5 roughly. And so, I corrected that, because in the earlier draft that you received, they had it only for January 21st. And of course, that changes every single day. I gave you a date I gave you information as of Friday. I now how10 a 12 13 14 1s 16 a 18 1g 20 21 22 23 24 25 have yesterday's information. It has dropped a Little bit more. It has been trending downwards since the beginning of the year. Now, I am not enough of an expert to know whether or not I should be comparing these bonds to five year or three year, given the fact that most of them are now three and-a-half year. I made it clear in the draft in my report that, in any event, those numbers, the market interest rate numbers, which I have obtained from the Treasury Department's website are really there, in my opinion, for exemplary Purposes as a benchmark, not necessarily an exact measure of what our bonds are worth. Because among other things, these Treasury bonds, which are full faith and credit and they are not callable. So in any event, I thought it was relevant to know roughly what the five year bond market (inaudible) if the expert's think that it is more appropriate to look at three year or three and-a-half or whatever, I am amenable to that. I don't know if anybody had or sent to Marisol and comments on the draft, which was formally dated -- the one that I sent you -- January 24,10 FEY 12 13 14 15 16 uv 18 1g 20 21 22 23 24 25 2014. I hope it is not confusing. But T thought since -- I thought on Monday, since we are now almost a month after that date, it would make sense to update the interest rates to show any changes. And I didn't know -- I don't follow the bond markets. But I noticed that they had been trending downward, as they have since January Ist. I also made some editorial changes. We all know we can always fiddle with a document and get rid of words like such and the like. MR. FEINBERG: Yes. MR. BRODSKY: So the presentation, T should add one thing, and that is before the January 24th draft was provided to everybody, pursuant to the resolution or consensus of the committee at the last meeting, I met in my office with both Danny Alfonso and Robin Jackson. And we agreed on the draft that vas sent on January 24th. I don't want to speak for either Robin or Danny to say they would have written it exactly the way I wrote it. And it is important to me, not for the purposes of claiming credit, but of disclaiming responsibility of anybody else. I don't want10 4 12 13 14 15 16 ar 18 19 20 21 22 23 24 25 them to have to bear the responsibility for any mistakes that are made or bad policy expressed or the like. MR. FEINBERG: We understand. MR. BRODSKY: I will stand for that. MR. FEINBERG: Yes. MR. BRODSKY: But there was agreement among the three of us that this was appropriate to be sent out to the committee. And I think generally both agreed that it was accurate and fair as it stood. So I don't know if it is up to me to make a motion? But the goal, I think, is to see whether the conmittee will approve this report. MR. FEINBERG: Let's take about 15 minutes and go through it. MR. BRODSKY: Sure. MR. FEINBERG: One more time. MR. BRODSKY: Sure. Do you want me to sort of guide the discussion? MR. FEINBERG: Yes. MR. BRODSKY: The summary is -- MR. FEINBERG: Almost like a colloquy. If there are any questions or any points. MR. BRODSKY: Yes. One way to do this is 1010 1 12 13 14 15 16 7 18 1g 20 21 22 23 24 25 4 to say -- I don't want to put anybody on the spot. And of course, Eric, you have never seen this before? MR, ZICHELLA: My first time. MR. FEINBERG: Yes. MR. BRODSKY: One way to do it is to say, are there any questions about page one? Are there any questions about page two? And I do -- when I work on committees of draftsmanship, where people are familiar with the document, I ordinarily do that, because it is an efficient way of moving along. But since we are a small number, and I will adhere to the 15 minutes. The summary attempts to summarize what the document says. It describes the fact that the portfolio of investments made through June 2013 have left the City's portfolio -- the investment decisions made through June of 2013 have left the portfolio of investments in a highly unfavorable condition and in apparent conflict with the requirements of the existing investment policy. It appears as if there are ‘two sources of these problems. The first is that there are paper losses that were worse at December 31, 2013 than they10 u 2 13 1 15 16 u 18 19 20 aa 2 23 24 25 12 are now. They -- and if you look at footnote seven on page three, the update concerning interest rates through last Friday. As I said, as of yesterday, that number was 1.5. But I didn't have time this morning to redo the redo. And I thought that would be thoroughly confusing. And the point is that we don't know where the rates are going to go, so to believe necessarily that because they have been going down since January ist, they are going to continue to go down this year. To me, it's a fool's errand. That is impossible to predict. And the City shouldn't be in the prediction business quite like that anyway. That is okay for a hedge fund operator, who wants to speculate on bonds. So there is no way to count on the fact that decrease in rates since January 1st is going to continue. And then, because of the fact that these were five year bonds that depended on there not being five bonds on decreases in interest rates, when, in fact, as of May 2, 2013, interest rates jumped. We are in the situation, as you all know, that we are in. I believe that the situation could have been10 cry 12 13 14 15 16 a 18 19 20 a1 22 23 24 25 13 avoided had the investment policy been adhered to. There was instead, an apparent desire to chase yield, meaning seeking elevated returns, in order to, in my view, turn the investment portfolio into a profit center. The finance department is a cost center. It is not a profit center. The finance department is a service organization, which in part is responsible for running the investment program, s0 as to provide for the cash needs of the City as it goes along. And there is a temptation always to try to find extra cash here, there or everywhere in any business or any entity. And it has risks. And the risks came home last year. I will go over the fact that there was a no actual loss, no paper loss even until June or May of 2013. We then discuss some recommendations. I go into the provisions of the investment policy on page four, B 1 now. The existing investment policy describes what the ranking of factors is in making decisions: safety, liquidity, which means availability to turn an asset into cash without market10 i 12 13 14 15 16 7 18 19 20 21 22 23 24 25 14 disruption, meaning without taking a loss. And then finally, return, which is by its very terms, “of least importance" compared to the safety and liquidity as described above. Then it talked about the need for maturities of no more than five years. And the overall weighted average duration for the portfolio of less than three. Now, I am very mindful of the fact that the City is redoing the investment policy, And I looked very quickly at it. And it doesn't look to me maybe I -- I haven't looked at the red line version yet, But I just want to note to those of you who are working on this investment policy, I think you need to make it clear in section 10 A, which talks about the overall weighted average duration of principal returns that the portfolio shall be less than three years. I think you may need to make it clear. Are you talking about including cash, or are you talking about only investments? Obviously, if you include cash in that decision or that analysis, the weighted average maturity drops by the factor attributable to the cash. MR. FERNANDEZ: That would be exclusive of10 un 12 13 14 15 16 7 18 19 20 a1 22 23 24 25 15 cash. MR. BRODSKY: So it is exclusive of cash? MR. FERNANDEZ: It should be, It is five year -- MR. BRODSKY: That is how I interpreted it. MR. ALFONSO: Yes. MR. BRODSKY: On the other hand, I wasn't clear -- and I think when I drafted the report, I had to focus on that question. And I can't remenber how I came out on it. I think I was conservative including that includes cash. MR. ALFONSO: No. It should strictly be the it exclude cash. You can take your cash and turn into some very short instruments, even the overnight stuff. MR. BRODSKY: It is a balance sheet measure. So at an instant of time it is either cash or it is in money market or conmercial paper or a bond. I think you ought to make it clear -- MR. FERNANDEZ: okay. MR. BRODSKY: -- in that sentence what that covers. And then, of course, not to get into Robin Jackson's nightmare case about what10 4 12 13 14 15 16 17 18 19 20 21 22 23 24 25 16 is pending before Judge -- before the District Judge, there can be movements in and out of investments. But please don't MR. FEINBERG: Let me ask real quick, who is working on this? MR. FERNANDEZ: It is the Finance Department along with out financial advisors. MR. FEINBERG: PEM? MR. FERNANDEZ: Yes. MR. BRODSKY: Then I describe on page five, from five to seven, what I call the city search for higher returns, I try to describe in -- I try in this report to give the reader, who is going to be less sophisticated than any of the people around this table, about municipal or investment generally, some idea of the nomenclature and of the ideas of the basics. MR. FEINBERG: That was very well done, too. MR. BRODSKY: I appreciate that. But I mean, for those of us around the table, this is elementary stuff. And I apologize in that sense. So I go into those different characteristics and describe the GSEs, the10 a 12 13 14 1s 16 ar 18 1g 20 21 22 23 24 25 uy agencies, analyze how -- why callable agency bonds have a higher coupon rate than non-callable governments at the same duration. Show how the changes -- how the length of the bonds increased over time. which is in exhibit four to this. Which, T guess, is not attached. But it hopefully was sent to you before. Discuss how buying long bonds has its benefits. But we have to take the bad with good. And the risk is that interest rates would rise, in which case you are locked into, with a long bond, into a particular bond that is not going to -- that is a lower value. I state the editorial comment on the bottom on the middle of page seven, that it is the committee's view that the City should not be gambling on interest rate movements to increase yield. I think that is -- to me - that is a self evident proposition to recognize I don't have to balance a budget. we, in this committee, are not responsible for balancing the budget. The City legally, I guess, has to balance the budget. And the temptation is there to find sources of revenue that could help balance the budget. This is not one that10 4 12 13 14 1s 16 v7 18 19 20 aL 22 23 24 25 18 I think the City should avail of itself, because it puts the City in potential jeopardy, as we know, in terms of the availability of cash when it is needed. And we have been through that. And we understand where we are. Then I discussed the fact that the vacancies -- it turned out I wanted to get an exact rendition from the human resources of exactly when the vacancies occurred. But it turned out working for Robin, this was more difficult than untying a Gordian knot. And so, we just had to state generally that there were a lot larger number of vacancies. Apparently, it would have taken a good deal of work to come up with that. And I don't think it was necessary specifically to discuss which vacancy occurred at what point. MR, FEINBERG: Let's talk about that a little bit for Eric's knowledge and the situation. This all happened during a time when there was a lot of turmoil in the finance department. And the City's hiring, a lot of vacancies, this all happened at the same time. The Finance Director, Assistant Finance Director, Budget Director, people were doing10 aL 12 13 4 15 16 a7 18 19 20 21 22 23 24 25 19 multi-jobs to kind of fill major voids. This all happened at the same time. MR. ZICHELLA: So on every one of these purchases that the City makes, where is the initial recommendation come from? MR. FERNANDEZ: This particular one? MR. ZICHELLA: All of these purchases that were made May 2012 to May 2013, where did the recommendations cone fron? WR. FERNANDEZ: They were recommended, reviewed and approved by one person. MR. FERNANDEZ: And then, in hindsight, they were basically rubber stamped by the then CFO. MR. ZICHELLA: They didn't initiate from our financial advisor then? MS. JACKSON: No. MR. BRODSKY: As you will see on the top of page eight, it is even kind of more interesting than that even. The approximately 14 months ago, the end of 2012, there was wrangling between the acting CEO and the financial advisor of the -- MR. ALFONS The acting ~~ MR. BRODSKY: COO. MR. ALFONS I am sorry. You said CEO?1o aL 12 13 14 15 16 17 18 as 20 an 22 23 24 25 20 MR. BRODSKY: I did, My mistake. Acting CFO and the City's financial advisor over the bond issue refinancing, as I recall. The person within the finance department that was referred to just a second ago is the person who made the decision, reviewed and approved, etc. With complete respect for him, does not hold a position where he should be exercising all of those responsibilities. And on paper that wouldn't be the case, But there were all of these vacancies. He says, and has told three people, one of whom is not here, that he was told by the then acting CFO, who is no longer with the City, that he was not allowed to talk to the outside investment advisor. So he continued to make decisions akin to those that have been made for the last year or 0. We don't know the role that the brokers played. T haven't spoken to any brokers. I hope that this committee will approve a request to the auditor general. I want to find out -- I think the committee should find out where the brokers where, not just the financial advisor. I want to know whether the brokers are the one who made these recommendations. I have an open10 abe 12 13 14 15 16 a7 18 a9 20 ai 22 23 24 28 ai mind towards it. But for a City to be continuing to make these under those circumstances raises questions in my mind about the reliability of the brokers, who may have made recommendations. Particularly, if they knew that the City was bereft of authorized people. MR. FEINBERG: And going back to -- MR. BRODSKY: It remains to be seen. WR. FEINBERG: Going back to your original question, to me, the first part of the meeting, while we haven't quite acted on the letter to the auditor general, T am not sure if ve pass that resolution, if we, as a committee, can ask the auditor general to do this. I think -- MR. BRODSKY: We can. MR, FEINBERG: -- in our presentation to the City Commission, that we recommend that they do it. MR. BRODSKY: Well, we could do it that way. But I think Robin has already advised us that we have the authority to go directly to -- MR. FEINBERG: we can? MS. JACKSON: You do. You asked the question at the last meeting. And this10 4 12 13 14 15 16 7 18 19 20 21 22 23 24 25 22 committee, just like the City Commission, you do have the ability to make that recommendation. MR. FEINBERG: All right. MS. JACKSON: But you also can Commission and ask the Commission. a wide variety of ways that you can MR. FEINBERG: Or we could ask Commission for their permission to, go to the So you have go with it. the of course, go ahead and ask the auditor general. MS. JACKSON: You can do it either way. MR. FEINBERG: Yes. MR. BRODSKY: We have three choices. MR. FEINBERG: Yes. MR. BRODSKY: Four choices. We could not involve the auditor general. Because we can conclude there is no question that is worth asking. We can do it ourselves. Well, I think it is clear. one decision we have to make is it worth bothering the auditor general. Are there open questions that are material to the city? MR. FEINBERG: I think that question -- MR. BRODSKY: I think there are. MR. FEINBERG: Yes. I think that question10 aL 12 13 14 18 16 7 18 19 20 21 22 23 24 25 23 is going to create some discussion at the Commission meeting. MR. BRODSKY: It will be probably the Lightning rod of the entire discussion. MR. FEINBERG: Right. Right. MR. BRODSKY: And whoever is up there is going to have to have some specific investigative stuff. And I do, in my mind, investigative stuff, a term of art for things to investigate. MR. FEINBERG: The Commission likes having a lay boards advisory boards I am just a little concerned about overstepping our -- where we are on this. And maybe asking the Commission to either to let us ask or ve will recommend that they ask. MR. ZICHELLA: Don't you think it is our responsibility if I may, Mr. Chair? - to have that information before we take it to the Commission? MR. BRODSKY: Have what? MR. ZICHELLA: It is well within out authority, according to the City Attorney's Office, to request the auditor general, the inspector general to investigate these matters DP10 1 12 13 14 15 16 uy 18 19 20 21 22 23 24 28 24 and report back to us their findings. Don't think it is incumbent upon us to have that information in our possession before we approach the Commission? MR. FEINBERG: Well, after sitting on now three different boards, lay boards to the Commission, I sometimes get a gut feeling on what they want to hear from their boards. And yes, we can ask directly. I just have a gut feeling that maybe they want to. You have got five very independent commissioners up there. You have the longest sitting commissioner sitting as the Chair right now, trying to keep everything in tow, But I think that when we make our presentation we could perhaps have a choice. "Mr. Chair, Commissioners, we would like to suggest or recommend that we, as a board, contact the auditor general." or "We recommend that you contact the auditor general." MS. JACKSON: One fact historically that I think is important to understand is that even though the City does in its current investment policy have an investment committee internal that does that, there were just missing components of that because there were10 qu 12 13 14 1s 16 7 18 ag 20 21 22 23 24 25 25 vacancies. MR. FEINBERG: Yes. MS. JACKSON: Among the professionals that would be involved in that. They weren't there at the time. MR. FEINBERG: And Eric, going through this, Robin and T both use the expression the perfect storm. This was all happening when no one was there. MR. 2ICHELLA: Sure. MR. FBINBERG: And kind of lower level bureaucrat was given this tremendous amount of responsibility with not too much oversight. MR. BRODSKY: Can I ask -- Eric, I wasn't sure I understood your question. If I might? You said, if I recall, something like we ought to know the answer to the question, But T didn't know what the question is. You meant the answer to what question? I didn't follow. MR. ZICHELLA: Tt seems to me that you have laid out by report -- and I assuming that -- it is the first time that I seen it today -- that the information is factual. And that it is accurate. That it is a foregone conclusion that this should go before the auditor general10 aL 12 13 4 15 16 7 18 1g 20 21 22 23 24 28 26 or the inspector general. It seems to me that is the case. And this Board should take findings to the Commission and recommendations to the Commission on what to do, rather than place the problem before them and say, "how do you think we should solve this?” Rather than -- MR. BRODSKY: I don't think that either the way it is drafted or the way the Chair Would tweak it, would cause it to be as you suggested. In other words, we are going to make findings that -- let's assume that we pass this report. The report is going to speak for itself. We are going to have recommendations. The only question that I have, as a result of the Chair's raising this question, is whether or not we should be going to the IAG or whatever the auditor general, or whether or not we should defer to the Commission and put the burden on them, so to speak. Or at least give them the authority and put them in the position of saying, "No. This doesn't merit investigation." I don't necessarily agree with you that is ‘a foregone conclusion that it will go to the auditor general. And the reason I say that is10 ql 12 13 14 1s 16 a7 18 19 20 aL 22 23 24 28 27 that I think it is presumptuous I mean, 1 feel it is presumptuous for me to say that. If you see that as a newbie, who is viewing this report and saying, gee. This stuff should be investigated. Then I think that is a very valid observation or it is a very potent observation coming from you, because you are new and this is brand new to you and if you have that reaction. But I think we need to go through the committees -- the Committee has to go through that and make a decision as to whether or not it is going to make any reference to the auditor general in this report, whether it be ask the Commission to go to the auditor general themselves. And then if we decide, as the Chair is suggesting, I think we definitely need to have a list of issues that we think they should be investigation. Because I think the worst thing of all would be to go and not be prepared to say, these are the things among the issues that should be investigated. So that is my reaction to what you said. MR. ZICHELLA: Fair, fair, fair. MR. FEINBERG: One of the key points in10 an 12 13 14 18 16 17 18 1s 20 21 22 23 24 25 28 Mr. Brodsky's recommendations is the whole concept of transparency. We have got to make sure that the right people are looking at this issue, this problem. And the second thing is going forward. Around this table here are a lot of new people, who weren't involved, who weren't there. And their mantra right now is to recognize the mistakes of the past and move forward and correct them. Please continue. And we will circle back to that. MR. BRODSKY: I think I was up to page eight. MR. FEINBERG: Yes. MR. BRODSKY: Of course, it is citywide problem in any organization that has chronic vacancies or serious vacancies is going to run into this same exact problem. Water seeks its own level. And in turbulent times, when there is vacancies in an organization, stuff happens because you don't have the right people on the job. So it is bigger than just this issue. I go into an issue that I am hoping will not attract any ire or attention at the City. Which is letter B on pages eight and nine. and10 ut 12 13 14 15 16 17 18 as 20 21 22 23 24 25 29 that is the fact that in September, we took a $119,000 loss on the bonds. But we did it in order to save the money. And it is all explained here. And I tried to be very explicit and say this is not the decision is not problematic. The decision was wrong. The context in which the decision made was one that caused the City -- people around this table to have to make a strategic decision to give up -- to punt them far down. You needed to make that decision, You did it, And it vas wise under the circumstances. It wasn't your fault. It was first and 99 when you got the ball. Then we go into disclosure issues. And in looking at the disclosure in the 2012 financial statements and for years back, the conclusion was reached - I reached the conclusion. And I think the others who have signed off tend to agree that the disclosure was problematic, according to generally accepted governmental accounting standards. I explained it in some detail. I think we discussed it last time. rt is basically the indented portion of page ten, which is in a footnote on interest rate risk. It is incomplete disclosure. It doesn't10 11 12 13 14 15 16 Vw 18 19 20 21 22 23 24 25 30 disclose the risk. Tt is not -- so it is, in my opinion, both inadequate and incomplete. And I have been assured and happy to hear that improvements are going to be made to the CAFR that you guys are currently seeking to put, as I understand it, shortly over to & and Y for their to begin their heavy work. I think the disclose issue speaks for itself. I think that is unfortunate that it comes at a time when we are in the middle of a SEC investigation about the parking garage, as well as an SEC lawsuit about a completely different issue from years ago. But it is what it is. And I don't think it is our responsibility as committee members to duck an issue because it is harmful. Then I make the recommendation. Then I Grafted the recommendations in light of what we discussed at the last meeting. And that is it. MR. FEINBERG: Let's go through ~~ MR. BRODSKY: And by the way, T do want to thank both Danny and Robin and Miguel. what is Miguel's last name? MS. ARTILLES: Augustine. MR. BRODSK’ Augustine. For helping me,10 aL 12 13 14 1s 16 uy 18 19 20 21 22 23 24 25 31 for helping us in this process. I don't know if I deserve any accolades. But if there are any, they also belong on the shoulders of other people around this table. MR. FEINBERG: You already got your accolades. Let's go through the four specific recommendations. Let's begin with the let's talk about the issue of bringing in the independent auditor general. Does it come from us independently? Or do we seek the Commission's approval to ask for it or do they ask for it? Kind of go around the table. Any thoughts on that? MR. ALFONSO: None from the members? 1 will say the auditor general for the City of Miami reports directly to the City Conmission. Certainly, you have the ability to request something of him. I think you are right in your comment that the Commission might want to direct the auditor general. MR. FEINBERG: Robin? MS. JACKSON: From my standpoint, you asked what the possibilities are. I tell you what the legal possibilities are. But appreciate that you all have other sentiments10 eye 12 13 14 15 16 an 18 1g 20 au 22 23 24 28 32 and you have other abilities to consider. 1 will say it for the record, I don't consider anything of a political nature. And I only look at where the law is with the question of: Can you do it or can you not? It is within your authority. It is up to you all then to determine how you'd like to do it. MR. FEINBERG: In my opinion, I think it would make a bigger impact and a priority if the Commission directed it to the auditor general. With us making that recommendation to the City Commissioners and asking them to consider it. MR. FERNANDEZ: I like Eli's recommendation as well. I think it is, He has sat on a lot more boards than I have. And you have a better, I guess, feel for what is the best avenue to take. And I think I agree with you, I think we should just make a recommendation to them. And have them prioritize or what level they feel that this needs to be priority and engage them directly. MR. FEINBERG: It has just been my experience sitting on for a period of time on DDA, where a Commissioner shares the authority,10 un 12 13 14 15 16 17 18 19 20 a1 22 23 24 25 33 sitting on the City of Miami sports 6 Exhibition Authority. Where you have the Mayor and Commissioners sitting on the board, kind of rehearsing what they are going to be doing at the Commission meeting. And here, we are. MR. BRODSKY: Plus Rick Harbor (ph). Did you go back to Rick days? MR. FEINBERG: I do. I was an original member. And the Finance Committee, where the Mayor and Commissioners appoint us to the Board. And where we sometimes go back and brief them as to what is happening. I just think that they would appreciate getting that recommendation from us and letting them direct ite WR. BRODSKY: I think the decision has been made by the sounding of the votes. But I want to endorse it, And just give you the two reasons that I am in favor of it, Which are not different necessarily than anyone else's. MR. FEINBERG: In favor of asking then? MR. BRODSKY: Of your approach. And that is one, I think is properly deferential to the Commission, And it eliminates any idea that might occur to somebody that we are runaway or10 1 12 13 14 1s 16 st 18 19 20 21 22 23 24 25 34 out-of-our-minds or something like that. And that is always a possibility, because while this might be explosive stuff. I don't know. It is critical. and in politics and in government, there is not often a lot of hard hitting criticism, It is just not a way that politics works. And so, this pulls no punches, etc. It does pull some punches. But it is pretty -- it could be deemed to be pretty strong. So I think from a small p political point-of-view, it is smart for us to defer. But the second thing is it also puts the burden on the five commissioners to bear the risk to their constituency if for some reason they decide not to go to the auditor general when the committee that was created to blah, blah, blah, blah, blah says to them, we think you ought to make the recommendation. So if we make the recommendation, I can't imagine it is not going to be approved. Because I can't see that there would be any political reason for any commissioner to vote against a recommendation like that. And so, for those so I think in the second part of 2.2 (b), which is practicalities, I think it increases the10 aL 12 13 14 15 16 7 18 1g 20 a 22 23 24 25 35 chances that the auditor general won't take out letter and put it at the bottom of the pile. MR. FEINBERG: So in your -- I want to take these one at a time, MR. BRODSKY: TI have already drafted the way that I think it ought to read, very limited changes, if that is the vote. And I would say -- may 1? YR. FEINBERG: Absolutely. MR. BRODSKY: TI would say this is the top of page 12, the Finance Committee has also recommended that the City Commission direct the City's independent auditor general to conduct. That is how I would have it read. MR. ZICHELLA: May I ask a question? If a request is submitted to the auditor general, is there some sort of time line set forth in the code, in which the auditor general must respond? MR. ALFONSO: No, Not to my knowledge. MS. JACKSON: Not to my knowledge either. Because it depends on how long MR. ALFONSO: I think also you could be very specific on what it is that you want him to investigate.10 aL 12 13 14 15 16 ay 18 19 20 21 22 23 24 25 36 MS. JACKSON: Right. MR. BRODSKY: Well, this document has mentioned several items: The role of the independent public accountants, the role of the bond brokers and the role of the City's -- MR, ALFONSO: Right. The role of the independent accountant in what? MR. BRODSKY: In mine, it is in connection with the disclosure of interest rate risk. MR. ALFONSO: Okay. Disclosure issues. 1 think you need that specific. MR. BRODSKY: I don't know that it needs to be here. If it -- we can certainly put that stuff in there - MR. ALFONSO: Because you have a lot of issues that you are talking about. MR. BRODSKY: -- absolutely have to go -- when we go to the Commission, in my opinion, it is completely 100 percent a given that we have to be able, in case anybody says, "What exactly do you want to investigate?" We be prepared to say these are the issues we think ~~ MR. ALFONSO: Understanding that, there is difference of opinion on the adequacy of the disclosure statements, right? I mean, we can10 uw 12 13 14 15 16 ay 18 19 20 an 22 23 24 28 37 argue about whether it could have been better. And we agree that it could have been better. Because we are making those changes in the 13 CAFR. But to say, as a matter of fact, that they were inadequate, I don't think we can make that statement. MR. BRODSKY: Let me see what we said. Let me -- T mean, let me see what we say here. MR. FEINBERG: Welcome to your first meeting. MR. ZICHELLA: At least it is not boring. MR. BRODSKY: What we say is -- I mean, I don't want to say T pulled punches. But I was very careful not to write this in a way that could be taken as by the SEC and turned into paragraph 14 through 17 of a complaint. what we say is we want issues to be considered in reference to the variety of issues that are raised. Whether or not disclosure should be made of? And it doesn't actually say, as I read it -- and I will look at it again -- we believe that the financial statements were false, misleading, deficient or anything of the sort. We say what GASB requires briefly or we include GASB. We discuss what was10 an 12 13 4 18 16 17 18 1g 20 21 22 23 24 25 38 disclosed. MR. ALFONSO: Right. So my point is: What are you going to ask the internal auditor is to look at the disclosure and determine if it was sufficient or insufficient? or ask the internal auditor, Ernst & Young, did you bring our attention to that, or did you have any comment about that, or did you agree that was sufficient or insufficient? 1 would imagine -- MR. BRODSKY: Let me ask you this. 1 don't know MR. ALFONSO: I would imagine Ernst & Young is going to say, no. That was sufficient. otherwise, would have asked to change it. MR. BRODSKY: T understand that. I have to ask a question. And I don't know anything about the auditor general. I don't even know I mean, I got his name. I don't know anything about him. Do they have CPAs on their state? MR. ALFONSO: They do. Yes. MR. PERNANDE: Not everybody is a CPA. MR. FEINBERG: He is a CPA. MR. BRODSKY: Do they have the authority,10 aL 12 13 14 15 16 7 18 a9 20 aL 22 23 24 25 39 if necessary, to reach outside and get advice? WR. FERNANDEZ: 1 would presume that I am sure they do. MR. BRODSKY: I think one of the questions that we should ask them is to look at this issue and see whether or not the disclosure was adequate. And if they conclude it wasn't, they should talk to the auditor -- talk to the independent public accountant. If I were conducting an investigation -- and I have conducted many many investigations, whether it was when I was with the SEC or suing the accountants or defending accounts, which I have a ton of them. I know what I would do as step one on this particular issue, I would write a letter to Ernst & Young saying, "Please send me your working papers for the 2012 audit with respect to this issue of investments and interest rate numbers." 1 want to see what consideration they gave. 1 happen to believe that they gave virtually they gave less consideration than they did in prior years, because I know how audits work. It is just they -- the staff does what was done in prior years ordinarily. They don't ordinarily10 ua 12 13 4 1s 16 uw 18 19 20 a1 22 23 24 25 40 reinvent the -- WR. ALFONSO: But let's take that a step further? MR. BRODSKY: Yes. MR. ALFONSO: Hypothetically. So let's say that the internal auditor says, "Yes. They didn't give it enough, in our opinion, they didn't give it enough consideration." So we suggest that they do so in the future. well, we -- MR. BRODSKY: We suggest that the City -- if I am can I play the role for this discussion of the auditor general? MR. ALFONSO: Yes. Go ahead. MR. BRODSKY: What I would say is if T conclude, as the auditor general, that the disclosure was inadequate and the auditors dropped the ball in not seeing to it that proper disclosure was made. I would report back saying the finance department should be aware and working with auditors in the future, that is incumbent upon the auditor to pick up on GASB and to -- I don't know exactly how to say it. But -- MR. ALFONS No. I understand. So we10 iL 12 13 14 1s 16 ay 18 1g 20 a1 22 23 24 28 41 are going to be saying, Ernst & Young is a firm that you would think is up on the standards of disclosure, MR. BRODSKY: As a whole, they are. This is a public meeting. But I will say I have either sued or represented many many many accounting firms over the years. And I have seen -- Mr. Mayor (entered the room). MR. ALFONSO: Mr. Mayor. How are you? MR. MAYOR: I didn't come to -- I came to eat actually. But since it is almost official, I would like to say I am appointing Danny Alfonso as the new City Manager. (Clapping. ) MR. MAYOR: So you heard it first here. MR. FEINBERG: That is great. MR. ALFONSO: Tt is not a secret anymore. MR. MAYOR: It is not a secret anymore. MR. ALFONSO: Well, my point is -~ MR. BRODSKY: Let me just respond quickly to the issue of wouldn't £ & ¥ know? Yes. In the sense that within £ & ¥ is the know all, the knowledge of governmental and generally accepted accounting practices. Within the head of this audit partner is theoretically such10 ut 12 13 14 15 16 uy 18 19 20 21 22 23 24 25 42 knowledge. Attention to detail like this, focus by the manager, focus by the senior, adequate staffing by the auditing firm. Whether or not the person who is actually running the job -- which is the senior, who is four years out of college or four years out of business school -- really has experience in governmental, understands what a callable bond is, etc, ete? I am not -- I don't have the same level of confidence that you do. MR. ALFONSO: But beyond that MR. BRODSKY: If I were in the City -- MR. ALFONSO: No. I agree. MR. BRODSKY: I would have that -~ MR. ALFONSO: I agree. MR. BRODSKY: I'd want to know -~ in fact, one of the things that I always reconmend to boards when they are hiring an accounting firm is not to go with a name but to find out who you are going to have on this job. MR. ZICHELLA: The individuals. MR. BRODSKY: Who is going to be the senior? Everyone talks about the partner. The partner may or may not be doing substantive review. But it is the senior, who is four10 un 12 13 14 15 16 17 18 1s 20 aa 22 23 24 25 43 years out of college and the manager, who is eight years out, who are the ones who do 99.9 percent of the judgments. What do they know? What is their background? what is their knowledge base? MR. ALFONSO: okay, So we -- MR. BRODSKY: That is something for you guys to understand in working with auditors. You want to have -- unlike a profit making company, which may or may not want to blow things by the auditor for this year, so they can make their earnings. Let's be realistic. That is the real world. You don't have that generally speaking. 99.999 percent of the time there is no thought like that. You guys want and are professionally dedicated to and it is part of your job description and your own motivation to get these financial statements out correctly. That is not necessarily the same as private business. It should be. But realistically -- MR. ALFONS I agree. And back to the issue of disclosure, we have agreed that we can make them better. So we have already -- I don't know if you shared what we are doing for10 aL 12 13 14 15 16 aq 18 1g 20 2a 22 23 24 28 44 2013 yet with the Committee, But it is significantly more information in that footnote of disclosure. MR. BRODSKY: I am not at all surprised. MR. ALFONSO: Did we give the first or second draft -- did we get the draft this morning, by the way -- MR. FERNANDEZ: We are working on it. We spoke to them about it. And they are aware of it. MR. ALFONS So in that sense, T acknowledge that they could have been better. And we are there. So I just want to make sure that when we ask the question of the auditor, that he knows what specifically is he looking for. MR. FERNANDEZ: If I could just add a little bit for Eric's benefit. MR. ALFONS Yes. MR. FERNANDEZ: There is a disclosure that is required -- just to air it out and talk about it a little bit -- the disclosure requires that we disclose our investments that the weighted average of the maturity of an investment. And what we did with this disclosure -- and we actually say that we do10 aL 12 13 14 15 16 uy 18 1g 20 21 22 23 24 25 45 it. Instead of using the maturity date, we actually did it based on the callable date. But we specified that in the disclosure, that the weighted average is based on the call date and not the maturity date, Tt was specific. Now, could it have been more clear? ves. We should have just focused on the weighted average of the maturity date and not even discussed the callable date, because that is something that it can be called MR. ALFONSO: It is an unsure thing. MR. FERNANDEZ: It may or may not be called. But the maturity date is the maturity date. And the issue with the interest rate risk is that the longer the investment the more susceptible to interest rate risk that it is. So when you have a five year investment and the weighted average is five years, as a reader, you say this is five years. It is more susceptible to interest rate risk as something that is one year. So could we have made it a little bit more clear? Yes. For this year, we have stuck to the weighted averaging years. And not only that, but by investment class, we have put the10 an 12 13 14 15 16 7 18 19 20 21 22 23 24 28 46 value associated with those weighted averages. So that way, you can see we have 50 million dollars. And the weighted average is five years. So you, as a reader, can look at it and say, I know we have got five years, 50 million dollars that goes out to five years. 50 million in three years or whatever it is. It is a lot more clear this year. But I think that there is good, better and best. 1 think it was a good disclosure, in the sense that we talked about what investment rate risk was. The fact that it was susceptible to the length of maturity of it. Now, where we could have been better is we should have just stuck to the weighted average in years and not started getting involved with the call date. And we have already addressed that in fiscal year 2013. MR. BRODSKY: Can I speak to that point just for a second? MR. FERNANDEZ: Sure. MR. BRODSKY: I don't even ~~ I don't necessarily agree with you that you should ignore the callable feature and talk about the call date and the weighted average maturity on10 un 12 13 14 15 16 7 18 19 20 21 22 23 24 28 a7 a call date basis. You could omit that. But since they are callable. MR. FERNANDEZ: Right. Right. But -- MR. BRODSKY: You could include -- include what you got to do is show the weighted average, the maturity in terms of the underlying instrument, irrespective of the call feature. You could, in my opinion, include both. MR. FERNANDEZ: I don't want to include both because it is misleading. MR. BRODSKY: It is up to you. MR. FERNANDEZ: We have a weighted average of a year. And you are talking about how length of an investment effects the susceptibility to interest rate risk. I think if you look at them and you have one year, five year, you could mislead the reader. and say, well -- I want to paint worst case scenario or what is required to disclose. Now, somewhere else that is not part of the interest rate risk, we can definitely discuss about that these are all callable and they may be called before maturity and things like that. But I want to focus on the10 4 12 13 14 15 16 ay 18 19 20 ar 22 23 24 28 48 disclosure and make sure that we have that down where it is very easy for the reader and there is no confusion for the reader. MR. BRODSK’ That is great. 1 understand. MR. FEINBERG: Now, we have to decide on the exact language. Because the end result is on reconmendations two and three, those are where we can -- we need to request that the City Commission give the city Attorney's Office and the Finance Department some leeway and advantage to hire some outside counsel or consultants to prevent this from happening. MR. ALFONS And I think that City Attorney's Office will tell you they already have that authority. MS. JACKSON Yes. This is basically the City Attorney has the ability to do it if it is recommended that it should be done. MR. BRODSK’ That is why it says, authorization. MS. JACKSON: Yes. She has the ability to do it if the reconmendation is to do it. MR. FEINBERG: I think these are two very important end results of this whole discussion10 aL 12 13 14 1s 16 7 1s 19 20 21 22 23 24 28 49 before the Commission. So I want to really narrow down the first recommendation so we are all comfortable with it. Do you want to try to read us that? MR. BRODSKY: Are you talking about the City Attorney thing? MR. FEINBERG: No, no, no. About engaging the independent auditor. MR. BRODSKY: Well, are you talking now about the subject matters of the investigation? MR. FEINBERG: Yes. MR. BRODSKY: Let's say, including -- how about this? Including disclosure issues, the processes by which investments -- investment disclosure issues, investment processes and disclosure issues in investment processes. Strike the role of the City's blah blah blah through financial advisors, including disclosure issues and investment processes. The way I see it, if the Commission approves this, there is going to be a meeting between the independent auditor general and someone from this committee. Unfortunately, probably me. MR. FEINBERG: Yes. Fortunately, probably10 un 12 13 4 15 16 7 18 19 20 2a 22 23 24 25 50 you. MR. BRODSKY: I am being sarcastic. MR. FEINBERG: So am I. MR. BRODSKY: I think we can spell out to the AG informally what it is we are trying to MR. FEINBERG: Right. MR. BRODSKY: -- why we think this needs to be done. And offering advice on how to go about it. Or advice or at least request. I mean, if I were the AG, I would say to me, you have spent X number of time on this. What do you think I need to investigate specifically? I am prepared to tell him the issues that have been discussed around the table. MR. FEINBERG: Jose, you okay there? MR. FERNANDEZ: I just want to say disclosure issues or specifically say interest rate risk disclosures? Because that is really what we are talking about here. Narrow it down and give him specific things where he can really focus on. Like Danny said, you are giving him a clear scope as to what you want him to do. MR. FEINBERG: Right.10 aL 12. 13 14 15 16 ri 18 1s 20 Pa 22 23 24 25 51 MR. BRODSKY: Interest rate risk disclosure issues? MR. FEINBERG: Yes. MR. BRODSK’ And investment processes, which subsume within it the brokers and the investment advisors. MR. FEINBERG: Okay, Any questions on that first recommendation? Is there a consensus of approval on that? MR. ZICHELLA: I will approve the item. 1 still am of the belief that we are charged by the charter with having a directive for oversight. And we are enabled to do certain things or empowered to do certain things. One of those, the City Attorney advises us to send a letter. But I support the recommendation to take it to the Commission, if that is the overwhelming consensus on the committee. I just would be of the belief action is better than inaction for us. MR. BRODSKY: I want to say that I have become convinced by the suggestion and the ramifications of it that this is actually a more powerful instrument than doing it the way I first recommended it.10 FEY 12 13 14 15 16 ri 18 19 20 21 22 23 24 28 52 MR. ZICHELLA: Fair enough. MR. BRODSKY: So if the issue is getting action, I think this is going to get more action rather than less action. MR, FEINBERG: Let's move on to items two and three. city Attorney's Office has the opportunity, the right to engage outside disclosure counsel. MS. JACKSON: She does. And she has the authority to do that under the charter. MR. FEINBERG: Right. MS. JACKSON: Tt is really more in, if we look at it, that in discussions with her, it is more: Would the Commissioner then direct her to use that authority? To do it because, for example, even though she had the authority to do it, she was directed by the Commission ~~ MR. FEINBERG: Right. MS. JACKSON: -- to seek outside counsels in our other matters, our IRS matter, our SEC matter. So it is more of a request for the Commissioner to direct her. MR. FEINBERG: To direct. MS. JACKSON: To have disclosure counsel be able to assist. Does that make sense?10 a 12 13 14 18 16 v7 18 19 20 21 22 23 24 28 53 MR. FEINBERG: Yes. And your recommendation, you say ask the City Commission to approve the City Attorney being able to MR, BRODSKY: I actually don't really say that, do 1? MS. JACKSON: No. It isa MR. BRODSKY: I am rewriting it right as we are sitting here. MR. FEINBERG: This is in your first draft. MR. BRODSKY: Oh, yes. Well, I have changed it. MR. FEINBERG: I know you have. MR. BRODSKY: Actually, I changed it to try to -- I left out that sentence. So I think we should add that paragraph, the Committee recommends that the City Attorney -- the Commission give -- us. Request -- MR. Give the City Attorney the specific requisite authorization. MS. JACKSON: She has the authority. So it is not authority. It is not an authorization. It is a request or a direction. MR. BRODSKY: Well, it currently says10 a 12 13 14 15 16 17 18 19 20 21 22 23 24 25 54 MS. JACKSON: TI realize -~ MR. BRODSKY: Just for one second. You and I wrote this together. MS. JACKSON: I know we did. We did. MR. BRODSKY: Tt says, the second clause of that paragraph says, "The City Attorney currently lacks the authorization to engage independent experts disclosure counsel with respect to the CAFR. MS. JACKSON: And I said to you -~ MR. BRODSKY: Do you ~ MS. JACKSON: -- after looking at the charter, authorization is not the correct term. It is she currently has already been directed by the City Commission to engage bond counsels and disclosure counsels for bond deals. MR. BRODSKY: I got it. The City Attorney has not been directed to engage. MS. JACKSON: Right. We currently have outstanding ongoing we have assistance with SEC. We have assistance with IRS. We have bond counsel. We have those. And those are for specific matters. It is a matter of to request her also to do this. Does that make sense?1 2 12 13 14 1s 1 7 l 1 20 ar 22 23 2 28 55 MR. BRODSKY: Then I think we ought to change the word from "currently lacks the authorization." MS. JACKSON: Correct. MR. BRODSKY: To say, "has not been directed to engage.” MS. JACKSON: Correct. MR. BRODSKY: And then, at the end of that, we should say, "The Committee recommends that the City Commission direct the City Attorney to avail itself of such assistance.” MS. JACKSON: And you can say “direct” or "request" either one. Those are both -- MR. BRODSKY: I like "direct." MR. FEINBERG: Yes. MS. JACKSON: Those are both appropriate. And the thing is when you go back and look at the charter, she has the authorization. So T just wanted to clarify that. MR. BRODSKY: The way I think it ought to say is: The Committee recommends that the City Commission to direct the City Attorney to avail themself of that assistance. MR. ROSE: Can I make one suggestion there?10 4 12 13 14 15 16 ar 18 1s 20 21 22 23 24 25 56 MR. BRODSKY: Yes. MR. ROSE: And it will water down what you are saying. So I am not going to hide it. "as necessary" Can we put those words in there? I don't want to hire somebody and spend the money if we don't need them. Is that considered a friendly amendment? MR. BRODSKY: I don't -- no -- this is different from -- we went through this with the Finance Department and made that distinction. Because of the rather strong expression -- and understandable, that we have -- the City, we have CPAs with a great deal of experience. What do we need an outsider for? And we ended up with if you think you need one you can hire one. The City, everything is really different. The City Attorney really needs to have someone involved in the drafting or at least in the process of drafting the CAFR. This will -- MS. JACKSON: It is not even drafting. It MR. BRODSKY: Or reviewing. MS. JACKSON: It is trying to review on a disclosure. And so, it is specifically disclosure counsel.10 ul 12 13 14 15 16 a 18 19 20 aa 22 23 24 25 87 MR. BRODSKY: It is having to do with the CAFR. So I don't like that. Speaking only for myself, I don't agree. MR. ROSE: Understood. As the budget director, I am going to have to find the $35,000 she is going to have to pay -- MS. JACKSON: Tf ~~ MR. ROSE: -- to bring someone in -- MS. JACKSON: It is probably is not -- MR. BRODSKY: It is probably going to be hourly. MS. JACKSON: I will say to you it is probably going to be a very discrete look at the issues in the past. So the new board members and others understand, in the past the only things that the City Attorney's Office has assisted with -- which is historical -- we have done the litigation letters, which are always the response to outside auditors. when we have had some investigations, such as ve have the SEC and the IRS, we talk about those type of adninistrative procedures that are like litigations but not at that level. We have assisted when there were some unusual or very sophisticated debt instruments. For example,10 un 12 13 14 15 16 uv 18 19 20 an 22 23 24 25 58 we would help in how the definitions of the city's different bond financings are or they are section 108 loans or some of their other HUD instruments, those types of things. So we have looked at every sophisticated legal issues. Have we ever been requested to look at the interest rate? No. Until this time, we haven't looked at that. We don't look generally at finance this year. Ask us to look at the component units issues with them. And that was very good because they said here is something new we vant you to help us with in implementation. So that has occurred. But does the City Attorney's Office or disclosure counsel look at the whole CAFR? No. And they have never been requested to. MR. FEINBERG: You don't have any rainy day funds, do you? MR. FERNANDEZ: Any rainy day funds? There is always through vacancies and other things like that, I mean, there is always opportunity for us to be able to MR, FEINBERG: Find somebody to hire outside? MR. FERNANDE! Yes. Do we have a line up for10 4 12 13 14 15 16 47 18 as 20 aL 22 23 24 258 59 that this year in the budget? No. MR. ROSE: They have got line items for outside contracts, but they are all spoken for. We know what they are going to hire for the most part. The City Attorney has a section for that as well, a spot in their budget for outside contracts. But generally speaking, we are not putting any extra in anywhere in this budget. It is a lean lean budget. MR. FEINBERG: So morphing into that item, the request asking the Commission to approve the hiring of an as need qualified CPA with experience of governmental accounting standards and blah blah blah, that is okay? MR. BRODSK’ It is okay with me. And it has been modified as of the discussion -- on account of the discussion of last week, the last time. And it doesn't put a burden on the finance department to actually engage anybody. MR. FEINBERG: Right. MR. BRODSKY: It just says if you think you need one. MR. FEINBERG: Was there a fourth recommendation? MR. BRODSKY: The fourth recommendation10 ree 12 13 14 15 16 aq 18 1s 20 a1 22 23 24 28 60 was merely aspirational. It should would you please leave -- would everybody please leave the finance department alone and let them do their work, their job. That is the one starting on the second paragraph of the final page of the report says. But there wasn't a specific recommendation. YR. FEINBERG: All right. The Chair proposes that the Board accept the recommendations as presented as amended. MS. JACKSON: Mr. Chair, you are going to make the update and changes and then ask Marisol to get it back to the Board members to recirculate, so that people could see that? MR. FEINBERG: Yes. Could she do it maybe through you? And then you can send them out? MS. JACKSON: sure. MR. BRODSKY: We should decide what we are going to do with this report. Are we going to give it to the Commission? What are we going to do with the report? MR, FEINBERG: I am a big believer in you rattle before you strike, in snake talk. MR. BRODSKY: I am not from the west, so I have no idea what you are talking about.10 a 12 13 14 15 16 uw 18 19 20 21 22 23 24 25 61 MR. FEINBERG: Commissioners hate surprises. MR. BRODSKY: Yes. Of course. MR. FEINBERG: We can individually -- Eric could talk to Commissioner Carollo. You have good access to Sarnoff. I can tell the Mayor what is happening. I can also speak to Gort's office, too. Staff could talk to suarez. MR. BRODSKY: I can talk to Suarez. I know him pretty well. WR. FEINBERG: All right. Hardoman has really impressed me in his first few months. He reads everything. Carol Gardner has left the Committee. She had a conflict with another board. But I am sure if we can put one in his hands, he will have it properly digested before the meeting. So I really believe that we should have this in their hands before the meeting. MR. BRODSKY: And we should deliver them rather than e-mail them. MR. FEINBERG: Yes. MR. BRODSKY: I will take responsibility, if it is deemed appropriate, to deliver to10 a 12 13 14 15 16 an 18 1g 20 21 22 23 24 25 62 whatever commissioners you think. I can do sarnoff, 1 can do Suarez. And I can do Hardoman, if you wish. I know hima little bit. And I briefed him on this with Robin before the meeting. In fact MS. JACKSON: We have actually have briefed individually with all of the elected officials except for District 3. So we have had the opportunity to talk with -- we have had an opportunity with our City Attorney and sometimes with Brian, as our Assistant City Attorney, to talk with the Mayor and the other Commissioners. But we haven't had the opportunity yet for District 3. But we would welcome the opportunity to do it. MR. BRODSKY: Well, we did Suarez over the phone and Sarnoff was unavailable, so I briefed Ron Nelson. MR. FEINBERG: And Danny? MR. BRODSKY: Danny Goldberg. TI have not had the opportunity to talk with Commissioner Sarnoff about it. MS. JACKSON: And we saw Commissioner Gort. MR. FEINBERG: I would really make him10 un 12 13 14 15 16 at 18 19 20 21 22 23 24 28 63 find the time to see you. MR. BRODSKY: He is a busy guy. And I have got other matters with him of a civil nature involved with an effort to rewrite the City's alcohol and beverage codes, which has gone on for four years. Whom do you want me to brief? I will do Sarnoff, Suarez and Hardoman, 1£ you want me to. MR. FEINBERG: Why don't we send out to each one of the Board members one final last draft of this. And get a sign off on it. MR. BRODSKY: Can I suggest that we have done that now. This should be -- we should say this is the final report. MR. FEINBERG: Final report. MR. BRODSK’ I wouldn't ask for anymore sign offs. This is the final report of MR. FEINBERG: If you have any questions == if something pops up in the -- WR. BRODSKY: Well, yes. But to me, that is implicit. But if you make it explicit, then we have got to wait for everybody to come back. ‘They have had an opportunity. They were given 99 percent of - MR. FEINBERG: You have two board members10 u 2 Fe) u 15 16 u 18 1 20 2 2 23 2 25 who weren't here today. MR. BRODSKY: They weren't here today. MR. FEINBERG: I know. MR. BRODSKY: That is up to you. My view is not MR. FEINBERG: Can we do this in a week, Robin, Marisol? MS. ARTILLES: Do what in a week? MR. FEINBERG: Get a final draft of this? MS. ARTILLES: Yes. MR, FEINBERG: Circulated. MS. ARTILLES: He is going to do the revision. I can forward it. MR. BRODSKY: I will do it tonight. I will do it this afternoon, because I am leaving tomorrow for four days. T will send to Marisol the document in PDF format as a final. MR. FEINBERG: Today is Wednesday. You think we could have it by Monday or Tuesday? MS. ARTILLES: To forward it to all of the members? Yes. MR. BRODSKY: She will have it tonight. 1 will send Robin a copy. I will brief Sarnoff. Next week, whom do you want me to brief? I want to tie down what my responsibilities are. 6410 1 12 1 44 Lu 1 1 L 19 2 ar 22 23 2 25 6 MR. FEINBERG: Sarnoff and Suarez. Robin, who do you suggest with Hardoman? MS. JACKSON: We will go. We will go back with Richard. Because we had the opportunity with the Commissioner and his chief of staff, who is also an attorney, to be able to go through the preliminary. So every -- again, every one but one has already heard about the circumstance, has already had the information that finance and budget were very good at providing about the fact of why we needed the city when T say, "w " and I appreciate that, because T realize everyone tends to adopt “we” when they say that they mean the City. That the City needed to make the pension payment, which was their reason to sell early the long bonds of the maturity. And that was basically the issue. MR. ROSE: I will $120,000 to make $900,000 twice every day ~~ Ms. JACKSON: Correct. MR. ROSE: -- if you give me a chance. MS. JACKSON: And that was the reason. MR. FEINBERG: And Robin, which Commission meeting are we looking at now?10 aL 12 13 14 1s 16 a7 18 1g 20 21 22 23 24 28 66 MS. JACKSON: You are trying to -~ unfortunately, you are too late for the 27th. MR. FEINBERG: I know. MS. JACKSON: That is the problem because of the timing of it. But you would be okay for March the 13th, But here is the issue, you all are trying to get the CAFR going. And I need to know is the direction for us to reach out to disclosure counsel on the investment review, which the City Attorney can do. But the thing is to know that it is being recommended to it. on the review about the information that relates to the investments or what exactly is it that they are asking for the City Attorney to do? Are they asking for disclosure counsel to assist with more than that? Because I know you all are trying to look at the CPA, if you needed to, to look at only the issue related to the investments, as opposed to anything else, or are you just looking at if you need to spring board something? I think that is the question of if Jose and CAFR team needed to be able to talk to disclosure counsel about anything that they felt was important to do that.10 an 12 13 14 1s 16 ay 18 19 20 a1 22 23 24 25 o MR. FEINBERG: Between now and the 13th? MS. JACKSON: If they have the ability to do it. MR. BRODSKY: Can I speak to that? If in fact the City Attorney already has the authority under law to hire Joe smith to come in or Jane smith to come in and give advice to the City concerning the CAFR and disclosure issues, you don't need the City's authority, except you don't need the City Commissioners! authority to do it. Then given the fact that you are near the tail end of the responsibility of getting the CAFR done, of the process, it would elevate form over substance not to involve somebody promptly. And if asked, T think that it is still wouldn't harm the City Attorney or the Commission to have that be a formal direction at the next available meeting. But the conjugant of the two events suggest to me that if it is a good idea, then it ought to be initiated now. Particularly if the authority is there already. MR. ZICHELLA: I agree with you. MR. BRODSKY: That is how I look at it. MR. ZICHELLA: The City Attorney, if it10 aL 12 13 14 15 16 7 18 19 20 21 22 23 24 25 68 is empowered to do so, should initiate that. And then we, as a committee, can go forward and ask the City Commission to support that continually going forward, basically to endorse that action that they took. But they should take the action and begin the process immediately. MS. JACKSON: Because Jose could reach out right now. I know you want a draft and have disclosure counsel look at the investment language that you guys have updated with you to look at it. And then that way I see it that ‘the finance group CAFR group has then on call as their coming up through things. I don't know what other particular issues there are at this time. But for them to be able to have the ability to reach out. Jose, would that work for you all on basically on as needed basis? MR. FERNANDEZ: Yes. MS. JACKSON: Because that way, as something comes up, for example, when in earlier years we had new litigations that came up, and we would reach out with finance to disclosure counsels and others and say, we have this new thing that has come up. And we want10 a 12 13 4 18 16 ay 1s. 19 20 21 22 23 24 25 6 to make sure that we fully write it in subsequent events in the note. And so, that would be for them to have the ability, Mr. chair, if things come up that are in addition to what it is they need for just the review and revising on the investment note. And let me ask Mr. Brodsky and also our new member, does that make sense to you all for finance now to have that ability? But I believe that for it to ask. MR. BRODSKY: I must admit that I am having a little difficulty following what exactly you are asking me. Ms. JACKSON: what I am asking is the same thing like we have just gone through. MR. BRODSKY: Are we talking now about hiring a disclosure counsel? or are we talking about the other piece? MS. JACKSON: No. I think we are asking for us to be able to have the ability for disclosure counsel now to be able to assist. MR. BRODSKY: I think it should be done now, because I think if the conclusion of the city Attorney's Office, through you is that the advice is that you have the authority to do it10 cr 12 13 14 15 16 a7 18 19 20 2. 22 23 24 25 70 anyway. I think that you can do it. If the city Commission concludes that was a terrible thing and it should be stopped, they will tell you. Tt is not going to happen. But I am just using -- MS. JACKSON: It is a timing matter. Because as Jose said, they are in the middle right now of -- MR. ROSE: Not in the middle. They are at the end. MS. JACKSON: They are at the end. Excuse me. They are at the end. And they are at the time where they want to be able to have the ability to reach out to look to those things. So I think it would be counter productive to make that wait, when Jose, we know there is a matter right now of looking at the investment language with them with hindsight being this and what you have said, So that he has the ability for that occur now. Jose, how does that work for you? WR. FERNANDEZ: ‘That is fine with me. I am not worried about what happened in the past. What happened in the past is in the past. MR. FEINBERG: We are all looking forward.10 cb 12 13 14 15 16 uw 18 19 20 21 22 23 24 25 n MR. FERNANDEZ: That is it. MS. JACKSON: We are trying to have him have the ability now. VR. FEINBERG: Right. So by Monday, at the latest on Tuesday, we should have something in our hands and something that we can approve. MS. JACKSON: Great. MR. FEINBERG: All right. So -~ MR. BRODSKY: Just a second. TI hate to be technical. You want to -- are you saying that everybody should have one more chance to look at it? If that what your decision is, then I have to abide by that. But I think we have had enough discussion. But that is up to you. MR. FEINBERG: There won't be any discussion. MR. BRODSKY: But there ought to be a deadline to say if you have any questions get back to Marisol by -- MR. FEINBERG: Tuesday. MR. BRODSKY: One day. That way it puts the burden on people. MR. FEINBERG: Yes. If we get it by Monday of next week, the deadline is Tuesday. MR. BRODSKY: Good. I think that is fair10 a 12 13 14 15 16 17 18 as 20 au 22 23 24 25 72 to everybody. MR. FEINBERG: Do we need a motion to approve all of this now? MR. BRODSKY: I so move, if I can? am I allowed to? MR. FEINBERG: Absolutely. MR. BRODSKY: I so move to approve this draft as amended. YR. FEINBERG: As amended. I will go ahead and second that. ALL in favor say, I? (multiple voices say, I.) MR. FEINBERG: Any opposed? Okay. It passes unanimously. Can you work until two o'clock? MR. BRODSKY: yes. MR. ZICHELLA: I need to excuse myself, Mr. Chair. I have got a two o'clock appointment. 1 didn't plan on a two hour meeting. MR. PEINBER We didn't either. MR. ZICHELLA: I apologize for making it last longer. MR. FEINBER’ First of all, you are going to be a welcome board member. I can tell10 i 12 13 14 1s 16 a7 18 19 20 a1 22 23 24 25 13 already. MR. BRODSKY: Absolutely. MR. FEINBERG: It is our pleasure having you. MR. ZICHELLA: My pleasure to be here. I hope I can add something of value. MR. FEINBERG: You will. MR. 2ICHELLA: Thank you very much for your time. Good to meet all of you. MR. FEINBERG: Seminole County on investment portfolio management? MR, FERNANDEZ This is something that I had spoken back probably in July of last year, July of 2013, when we started looking at these investments and the bottom falling out and things like that. I spoke with Danny. We had PFM come in and talk. And we talked to them about actually them managing our portfolio for us. Where we basically give them the authority to buy and sell investments on our behalf. There would be a cost associated with that. Based on our portfolio of our size is based on ~~ it is tiered based on basis points. But the increased cost to the City for them doing and providing the service to us would be10 ua 12 13 uM as 16 uv 18 19 20 2a 22 23 2a 25 4 about $185,000 based on a portfolio our size, based on the investments that we have had over the last several years. Now, I think that the benefit of doing this is we have people that are paid professionals. We have people that it is not just one or two or three people working on this in addition to doing other things. We would have professionals that what they do all is manage portfolios for other municipalities. They are in touch with what is happening with not just the investment market but with the economy. So I think it would be a prudent thing to hand this over to someone that has the resources to ensure that our money would be invested in a place that is prudent. They would make sure that the City's cash would be safeguarded. And like I said, no matter how good of a treasurer we had and the resources that we provided this treasurer, it will never compare to the resources like an entity like PEM has. So we finally able to sit down with them. And they provided us a contract that they just10 a 12 13 14 15 16 ay 18 19 20 21 22 23 24 25 75 recently got with the Seminole County School Board. And we can actually piggy back on. So we thought before taking it to the Conmission, we would present it to this Committee, have the Committee look at it. WR. FEINBERG: When you say piggyback? MR. FERNANDEZ: Basically, instead of going through the whole RFP process of procuring it ourselves, we would basically just use this contract and what the terms and conditions of this contract would apply to us. The only difference between this and the our contract would be the rates that they are charged. Because Seminole County is charged eight basis points based on their portfolio. Our's would be tiered, where the first 50 million is eight basis points. And then it tiers down to five basis points. So it would be cheaper than the eight basis points that they are currently being paid right now. But I think it is a thing where we are giving professionals that do this the opportunity to manage it for us. And we still have -- we are still in control of it, as far as we are managing it and we are looking at it.10 a 12 13 14 15 16 17 18 19 20 au 22 23 24 25 16 But we are not -- we would get away from if everybody in this City left right now and had a similar situation like the one that we had two years ago, this wouldn't be a problem, because we have people that are managing our portfolio, looking at our portfolio and ensuring first and foremost that our principal is safeguarded. But also making sure that we are complying with the policy. They have already sat -- when we talked to them, one of the things that they would definitely do is work on that weighted average of maturity down from three years and putting us in a better position than we are today. MS. JACKSO! To the Committee, Jose and I haven't had the opportunity to speak with anybody about this beforehand. Does for something to be piggybacked it has to be exactly the terms of the contract. $0 does ~ MR. FERNANDEZ: I spoke to procurement. And procurement told me that the terms could be same. But if PEM was willing to change their rate that they charged, that is something that could be done. The terms of the contract, if it is a three year contract, it will still10 a 12 13 14 15 16 7 18 19 20 aa 22 23 24 25 7 apply. But the rates that they charge, if they are willing to charge us less money for the same services, that is not a problem. MS. JACKSON: I am going to ask respectfully, because the City has been through this and been through litigation on this previously, and there are some other court cases out there that hopefully have changed that position, so what I am going to ask respectfully is for us to have the opportunity to go back and look at it, Because the law had been that yes, you could make some types of changes. ‘Then we went through a period of time where the law said, no. It had to be absolutely the same. And I believe risk management has been through that. WR. FERNANDEZ: I am just doing it based on what procurement told me, as late as today. MS. JACKSON: I appreciate that. And the law could have changed since we were dealing with it a year or so ago. So hopefully that is the case. But I am going to respectfully say that I need to go back and talk with our procurement attorneys, go back to see if the law had changed. Because I know we went10 1 12 13 14 1s 16 4a 18 19 20 a1 22 23 24 28 18 through this with risk. MR. FEINBERG: Can we pass this with the Little counsel or qualifier that once it meets your legal test that ~~ MS. JACKSON: I think you can make the recommendation. Because remember, it has got to go to city Commission. So what you are doing is you are making a recommendation to do that. And that if legally it is allowed to make that change that you are doing it because you are trying to piggyback on the Seminole procurement to be able to do that. MR. FEINBERG: The Chair moves the item. Any discussion? All in favor say, 1? (Multiple voices say, I.) MR. BRODSKY: There is no second? MR. FEINBERG: You seconded it. MR. BRODSKY: I did not second it. MR. FEINBERG: I thought I heard you second it. MS. JACKSON: Start over. MR, FEINBERG: Chair moves it. And the (inaudible) seconds it. MS. JACKSON: And then discuss.10 a 12 13 14 18 16 un 18 as 20 21 22 23 24 25 79 MR. FEINBERG: Discussion? MR. BRODSKY: I have several possible questions, possible negative reactions. Although, I haven't -- this is the first time 1 have heard of this. The first is that I don't know the qualifications by comparison to other entities of PFM. There are 60 zoning investment advisors out there all claim to be experts. I don't know where this one rates or doesn't rate. I don't know whether their rates or charges are competitive, T don't know what their track record is. I don't know who we would be working with. And I don't know what the model is for how the City would actually monitor the responsibilities. Second, I am not certain of the idea of shifting the responsibility for making investment decisions from the to a private entity is a good one. I don't know whether or not it is a good public policy. I don't know what the state of the art is, so to speak, in terms of municipalities of our nature of our size. I think that -- so I don't know whether or not even if this were the right firm, it is10 a 12 13 14 15 16 u 18 19 20 21 22 23 24 25 80 a good idea to do it? I do like the idea of having City public officials to properly staffed and properly supported to be responsible to the manager and then through the manager to the Mayor and the Commission. Tome, it is hard to understand exactly how it works. But we know, at least on paper, how -- I like the idea of having public servants be responsible for decisions that effect the vitality of the city. I don't see the necessity of offloading this responsibility. I certainly see how the rails feel off under a prior situation, which was a combination of pressure, I believe, ultimately what we are going to -- if we ever find out. There was pressure on the finance department to make money. I think that is what happened. 1 don't know exactly where it came from, But I can't imagine it was otherwise. To me, water seeks its own level. I think it is just almost, to me, an automatic that is what, in fact, happened. 1 think that if nothing else, the present administration, this gentleman and the people10 un 12 13 14 1s 16 Ww 18 19 20 a1 22 23 24 25 81 who work with him have been -- if they needed it -- and I don't think he needed it. Because he was not involved in any of this stuff. He has been sensitized to the fact that at least this Committee wants to see the finance committee follow the rules and follow the objectives. And I don't have much doubt that under current leadership of City Manager Alfonso and the Finance Department, I don't have much doubt that these people are going to be capable of making appropriate investment decisions given the proper advice, etc. So I don't see the need for this yet. That is ny decision. MR. FEINBERG: The City has had a long history of using outside financial advisors. 1 remember when the City had a rotation system, they had three different Wall Street firms managing and also advising the City. MR. BRODSKY: Big difference. MR, FEINBER Yes. MR. BRODSKY: This is managing. MR, FBINBERC Right. MR. BRODSKY: Advising? For sure. Advising ought to be. You shouldn't ever have10 ul 12 13 14 15 16 7 18 19 20 21 22 23 24 28 82 a situation where a fully hassled and fully occupied head of the finance department should alone be making investment decisions. I wouldn't wish that on my worst enemy. Obviously, we need professional advice. But -- I am not personally knowledgeable about the delegation of responsibility issue. So I will vote no. MR. FEINBERG: Yes. I have seen how the finance department has multi-tasked in many ways in the past. I strongly feel that being able to allow them to monitor experts who -- or at least the people who have a track record of managing short-term money just might be better. Any concern about our -- the present management within the finance department, an ability to do something like that. But I think that the outside firms that do nothing but manage money and may have some liability to pay for -- make whole any errors on their part, changes or whatever. MR, BRODSKY: Well, may I make the following suggestion? I think T have not had an opportunity to look at the contract. 1 would ask (inaudible) on such a vote, that this item10 au 12 13 14 15 16 7 18 19 20 21 22 23 24 25 83 be deferred. I don't see that there is tremendous urgency to get it done by the next commission meeting, I think that I would like to have an opportunity to look at the contracts to see what it is we are recommending. And I would like the opportunity, if possible, to on my own time do my own study or talk with the City staff and understand better the reasons for it. And I could very well drop my concerns. These are concerns. They are not opposition. MR. FERNANDEZ: The intent of this today was not to make the decision, but rather an idea an disseminate the information and to look at it and just to bring it up at next meeting and talk about it further then. My intention was never to make a decision on this today, Tt was just to introduce it, because we were finally able to get it from PEM. PEM are our current financial advisors. We are not going to switch financial advisors. It would just be an extension of. MR. FEINBERG: Yes. MR. FERNANDEZ: And the way I look at it is even on our best day, if you get the treasurer, his staff and myself together, CFO, the budget10 11 12 13 14 1s 16 ar 18 19 20 ar 22 23 24 25 ea director, the City Manager, if we were to get together and discuss our investment options in a very conservative way within the constraints of our policy, I don't really think that we would have the window of vision or the broadness as someone like PFM does, where they have people not just locally but nationwide monitoring these kind of things. And just purely from a leveraging point of view, the price that you would get on an investment -- again, a very conservative investment within our policy, when you are investing billions and billions of dollars from other municipalities versus us calling a broker, I am sure that in itself would -- I think it provides a lot more benefit to the City from the perspective of we don't have the tools or the resources that they do. we don't have services like Bloomberg that we can monitor what is going on in the bond market. MR. BRODSKY: You don't have Bloomberg? MR. FERNANDEZ: No. We don't have anything. MR. BRODSK’ You don't even have Bloomberg? MR. FERNANDEZ: No, We don't have anything.10 aL 12 13 14 15 16 17 18 19 20 21 22 23 24 25 85 MR. BRODSKY: You don't even get the bond buyer? MR. FERNANDEZ: We don't have anything. so what I am saying -- MR. BRODSKY: You can get a Bloomberg for a lot less than 185 grand, too. MR. FERNANDEZ: Yes. But we are already paying for financial advisory services. This would just basically be in addition to the financial advisory services that they provide us, they would also manage our portfolio. MR. FEINBERG: Didn't First Southwest, when they were the previous consultant, multi-task also? MS. JACKSON: Yes. MR. FEINBERG: And give you -- and didn't they in the past also use the Sunshine State -- what is it called? MS. JACKSON: It used to be -- the Sunshine State Government Financing Commission. MR. FEINBERG: Right. Where we Piggybacked a lot of their -- as a courtesy to Board member Brodsky, I am going to withdraw my motion and defer it until the next meeting. MS. JACKSON: And Mr. Chair, I am still10 che 12 13 14 15 16 17 18 19 20 21 22 23 24 25 86 going to go find out about the law on piggybacks for everyone. MR. BRODSKY: That is a good idea. MS. JACKSON: So that can come back. MR. ELLIS: And Mr, Chair, I was just going to add the very fact that Seminole County School District competitively procured this contract with PFM is why we are able to piggyback. YR. FEINBERG: Yes. MR. ELLIS: So we don't have to go through the same competitive process. They were deemed the most responsive in that particular procurement process. MR. FEINBERG: Right. MS. JACKSON: And you could come back - which we have done in other situations where we have approved a piggyback, what we have done is we have gone to see who else -- how it was procured and who else responded. MR. ELLIS: And PEM specializes in governmental finance. And I think one of their former principals is Gil Gerard, now he is the head of Orange County Employee Retirement System in California. I think he is their10 un 12 13 14 15 16 uw 18 19 20 21 22 23 24 25 87 chief investment officer. MR, FEINBERG: But to give Mr. Brodsky some additional time to vet this, we will defer the item. MR. FERNANDEZ: Actually, I have a recommendation. Why don't we just wait to see what Robin has to say? Because I am not willing to pay the eight basis points that they are paying at Seminole County is paying. I don't have a problem paying the tiered rate that they quoted us, So let's just wait and see what Robin has to say. If we cannot change the rate, then it is a moot point and we don't even have to waste our time looking at the contract. MR, FEINBERG: Why don't you run a dual path. MS. JACKSON: I will do both. MR. FEINBERG: Do your own vetting and research. MR. BRODSKY: Well, I may or may not have time to do it this month. $o I will wait. MR. FERNANDEZ: I don't want to waste people's time on looking for something if Robin comes back10 aL 12 13 14 15 16 ay 18 1s 20 21 22 23 24 25 88 MR. BRODSK Can we get a copy of that now? MR. FERNANDEZ: Sure. MS. JACKSOR T would like a copy, too. MR. BRODSKY: Thanks. MS. JACKSON: Thank you. MR. FEINBERG: Let's go to a little budget report? MR, ROSE: I will go a little quickly this time. If I may though? Next time, 1 would Like to down shift just a little bit. This is the last month where I am just reporting facts. This Friday, T am going to be turning out the January report. And it will include my office's projections going forward. So first three months of the year is just year-to-date. January and following is always year-to-date and projections. This Friday, it is always the Friday right before the second commission meeting when we turn loose our stuff. So the highlights are there are no major anomalies in the budget with two exceptions. And that is the police department overtime and the fire department overtime. And we are monitoring that closely.10 an 12 13 4 15 16 17 18 19 20 21 22 23 24 25 89 I have met directly with both Chief Orosa and Chief Kemp to see what we can do about it. Police in a pretty good situation, where straight time is low enough to offset the overtime. So I am not as worried about police. Fire though, I am seeing a net over. and 50, T am, as a budget director, concerned about that. A couple of other things of note. No department is more than two percent above their 25 percent on the year so far three months in. And the overall revenues are 97 million dollars higher than they were a year-over-year. Which is a great thing until you realize they were late last year. So we are tracking about where we have been, both revenues and expenses for the last year. MR. FEINBERG: How serious or how expensive is it going to cost us to clean up these parks? MR. ROSE: Good question. And it deserves a longer answer than T can give. Although, we have spent considerable time, Robin, the CIP office, Mark Spinole (ph) and Danny and Alice Bravo and I, we have all sat. My budgeting10 coy 12 13 14 15 16 a7 18 19 20 au 22 23 24 25 90 interest lies in the capital side more than the operating side. Although now, operating is ny chief concern. gust to start with, we are looking at somewhere in the range of three million dollars. ut it is an extraordinarily preliminary look. We are also pursuing spending some bond dollars that we have. We are also pursuing getting a grant from the County that is for specifically these kind of things. Coincidentally or not, in the former department Twas in the County. So I know where to look. So we are seeing what we can do in those regards. MR. FEINBERG: Yes, How about the state and the Feds? MR. ROSE: Very little. Superfund is long gone. And these probably are so small they wouldn't have qualified under superfund anyway. And the State doesn't go anywhere near this stuff and really never has. So the County, what the County has done in the past is they give municipalities money for clean up in exchange for longer periods of signing on for the County's disposal system. It is a quid pro10 a 12 13 14 18 16 17 18 1s 20 au 22 23 24 25 91 quo. So we are pursuing that. And nothing is definite as yet. But we are pursuing it. MR. FEINBERG: Is there any T don't understand too much about it. But are there monies involved in Brownsfield? MR. ROSE: There is a possibility. 1 doubt it. Brownsfield is usually for larger and for new development. This is going to return to a park. So we are not putting something new on it when we are done. So I doubt it. We have opened discussions. It is not favorable moving forward. But I am going to look anywhere. It is always easier to spend somebody else's money. So the other thing to think about is even if we do get the money from the County, that is only for the magic words are "ninimum safe closure." So putting a tot lot back would be on the City's nickel no matter what. So there is going to be a cost. And I would not - if anybody quotes me on the three million, it will be incorrect. So I will just put that out there. But that is our first blush that we are looking at right now. But that is the budget report. We are10 un 12 13 14 15, 16 17 18 19 20 a1 22 23 24 25 92 tracking pretty much where we ought to be at this time of the year. But I am on high alert in those two areas. MR, FEINBERG: Let's quickly go through the audit. Investment policy we are okay with. FOP labor negotiations? MR. ROSE ?: Sure. We brought -- and I am going to add with the Chair's permission a D on old business. Actually, I guess we have to have new business somewhere in here. But I will segue into an agreement with the waste workers union, AFSME 871. So let me pass that out while I give the FOP report, if I may? MS. JACKSON: You recall that this was one of the items that was added to the purview of the finance committee? MR. FEINBERG: Yes. MS. JACKSON: A couple of years ago to be able to review. MR. ROSE: FOP, Fraternal Order of Police, we made what we considered a fair -~ and I editorialize, somewhat -- well, I won't editorialize -- a more generous offer to the FOP than the other bargaining units had received. It was taken to a vote to the10 ul 12 13 14 15 16 7 18 1s 20 au 22 23 24 25 93 membership of the FOP and was roundly denied. Tt was an eight percent in favor, 92 percent in opposition. So the membership did no vote the way of the leadership of the Fraternal Order of Police. So we are now commencing negotiations for the next fiscal year. MR. BRODSKY: In the words of Woody Allen, where did we go right? I am just kidding. MR. ROSE: So that is my update on the FOP. We had a few things that were moving parts in that agreement. One of which was a one time pay supplement on September 30, 2013 that every other employee of the City of Miami received. They chose to forego that to put in the larger mix. So now, there is a discussion as to whether they will avail themselves to that or not. City management has offered that to FOP management. And we have not received a response. There was also a three percent recurring increase in salaries in the Fraternal Order of Police effective April 1, that is built into the current year budget that is in the current collective bargaining agreement that will go10 aL 12 13 14 1s 16 v7 18 1g 20 21 22 23 24 25 94 forward, It is already there. We don't have to do anything. It is just an automatic. so that is pretty much everything I can tell you about the Fraternal Order of Police at the moment. More discussions to be had. I will go somewhat global for a moment and say, all four of the City's unions current contracts expire September of this year. So we are actively moving into a negotiation phase that I see as the major difficulty in me putting a budget together right now, in that I doubt that we will have agreement by the time July something rolls around when we propose a budget. So we will have to propose and amend as we finish these collective bargaining agreements. But T will keep you updated as the world turns. MR. FEINBERG: Please be more subtle than the County is in negotiating the employee health benefit issues. MR. ROSE: T have been on the management side of those issues as well. There are ways to go about things. And if I may? This is an agreement. This is a memorandum of understanding that we have10 ut 12 13 14 15 16 47 18 19 20 ar 22 23 24 28 95 entered into with AFSME 871, which is the sanitation workers. The meat of it are the three articles on the third page of the handout that I given you. Tt is a reclassification of three positions: Waste collector/operator I, waste collector/operator II and waste equipment operator to put them on parody with equipment operators in the rest of the City. So we have agreed to do that. The second piece is a two percent one time Pay supplement nonrecurring non-pensionable for everyone in the unit. And then the last is more of a housekeeping, which is any time there is a promotion, it will be a ten percent. And the only reason we need that is because we are off step everywhere right now. So we have those three. Management has signed the tentative agreement. Labor management administration has signed the agreement. It has been taken to the membership. It has been ratified by the membership. It will be going to the Commission at this next meeting on February 27, next Thursday. So I would respectfully request that the Committee review it and approve it or10 an 12 13 14 15 16 ay 18 19 20 21 22 23 24 25, 96 review it and provide comment. As Robin said, the financial integrity principles require that this Conmittee look at all agreements. My apologies for not getting it in Marisol's package. It came up even later Friday than she had moved it out. And I could have gotten it to you yesterday and did not. That is my fault. MR. FEINBERG: So you need a motion on the AFSME? MR. ROSE: That would be my request. Yes, sir. MR, FEINBERG: All right. Is there a motion? MR. BRODSK’ I move. MR. FEINBERG: Second? MR. FERNANDEZ: Second. WR, FEINBERG: All in favor say, 17 (tultiple voices say, I.) MR. ROS! You did not ask the magic question, which is: How much does this cost the City? MR. PBINBERG: It is on here. MR. ROSE: Is it on there? The $351,000 or 350 or somewhere in that range.10 a a2 13 14 1s 16 7 18 1g 20 21 22 23 24 25 7 MR. FEINBERG: I think it was a little more than that, I was reading the wrong page. MR. ROSE: On the back, those are three positions that are gaining parody with parks. This does cost the City $351,000 a year. so the bulk of our -- going global again now -~ the bulk of our negotiations are the City is coming out of the great recession. But we are not fully out. So let's take a measured approach as we go. And this is a one time pay supplement is probably a very good way to go right now. MR. FEINBERG: I think we only touched on the investment policies that were -- that is being worked up. When do think that you will have the final draft? MR. FERNANDEZ: Of the investment policy? MR. FEINBERG: Yes. MR. FERNANDEZ: As soon as I can get -- if you can get feedback from the Conmittee members, And we can give it back to PEM. And then put it on the Commission for April so they can approve it. We wanted to bring it to the Committee so they could take a look at it and provider their input. We can get the best10 aL 12 13 14 15 16 47 18 19 20 21 22 23 24 25 98 policy possible. MR, BRODSKY: Can I make a motion? MR. FEINBERG: Yes. MR. BRODSK’ I move that the Committee menbers direct it within as short of time as possible to submit any comments to Marisol on the proposal. And that I would suggest then Marisol provide those comments to the finance department, so that you guys can have the benefit of those comments. MR. FERNANDEZ: I don't know what people feel is a reasonable amount of time is. Two or three weeks? It is a pretty lengthy document. MR. BRODSK’ I want to focus on the differences. I know what the other policy says. Could you just do a 25 words or less explanation of the process so far? So we can understand who has worked on it and how it got to be where it is? And whether or not you think it is a final subject to -- in your views =- is it in acceptable form as it sits now? MR. FERNANDEZ: I think we have made -- I think PEM, when we tasked PFM to do was bring it current with regards to something that is a good working document. It allows for some of10 u 2 13 ua 15 16 u 18 19 20 2 2 23 24 28 99 the flexibility that we need. But also one of the things that we did was the investment committee was comprised of people from finance alone. So what we have done is we have opened that up to include someone from the budget director or his designee, the community development director or his designee and a finance committee member. MR. BRODSKY: Tell me briefly -- because we all want to go I assume -- just very briefly the process by which you got to this draft? MR. FERNANDEZ: We met with PEM. We told them that we wanted to update the policy to put benchmark language in there as far as what is best practices with municipalities in Florida that have the same restrictions as we do, similar size portfolios, same objectives as us, to preserve equity, to ensure that we have the cash flow that we need for operations. and based on that, make the recommendations to change the policy. And they but one of the biggest changes was we externalized, I guess, opened it up -- opened the investment committee out to other people, because that way we have input from other individuals outside the10 a1 12 13 14 15 16 v7 18 19 20 21 22 23 24 28 100 finance department. MR. BRODSKY: Just to summarize, this document represents the product of PEM, as a result of discussions with you -- and that if you tweak what PEM MR. FERNANDEZ: And it is given to us. We actually after that we had a subsequent meeting -- discussion with PEM. We raised our questions to some of the changes that they made. They addressed those changes. And then based on that, we either made changes or didn't make changes based on our discussions. And then after that, we finally went ahead and made this a quote/unquote "final draft." MR. BRODSKY: Thank you. MR. FEINBERG: Heretofore, there weren't any members of this committee on the investment policy committee? MR. FERNANDEZ: Prior? MR. FEINBERG: Yes? MR. FERNANDEZ: No. Prior was just finance director, the treasurer, the assistant finance director and the investment or portfolio person at the City. Now, it is opened up, where we have the budget director, the director of10 rb 12 13 14 15 16 7 18 19 20 aa 22 23 24 25 101 community development or his or her designee and also a menber of the finance committee. And normally, what we do is we have a meeting once a month with PEM to discuss our prior month's performance, where we are. And not only what we have done to make sure we have those means of the investment conmittee, is we take that time to get together and meet and talk. And it something that a committee menber does not have to be present. They can call in. Because it is usually a called in that PrM provides. So it wouldn't even be that they have to physically go to a location. They can call in and participate via phone. MR. FEINBERG: This is going by the Sunshine Law? MS. JACKSO! correct. MR. FEINBERG: Any further business? Old, new, law? MS. JACKSON: Just very quickly, as Chris said, we have been working with finance, budget, counsel, CIP in order to get the remedial monies for parks, which are eligible to be funded out of homeland defense neighborhood capital improvements. Park10 un 12 13 14 15 16 a 18 19 20 a1 22 23 24 25 102 improvement is an already authorized category. And clean up of those type of things has occurred previously and has already been blessed by the IRS. We are also with the SEC, I think I told you Mike Budrow (ph) did take an appeal to the 11th Circuit. The case is stayed, Discovery is stayed. We have been told that there is a required appellate mediation in June. And the City hopes to have an opportunity. That is Mike's mediation that hopes to have the opportunity to be able to participate in that as well, and is making that request. On the second S8¢ about the baseball stadium parking garage, testimony continues for that. And we continue to cooperate. In regard to the IRS no change letter that we received in October, the City continues to spin down the remaining funds from the homeland defense series two, which was 2007. And ve will making in the standard that you would do for an update on your audit report, because this is an examination with that, to take the steps with the City Commission to do those authorizations one at a time. We are doing10 an 12 13 14 15 16 v 18 19 20 aa 22 23 24 25 103 that. We are also doing that with the close out of the Sunshine State refunding bonds that were issued in 2011. So we are taking those City authorizations that are needed from an audit standpoint to comply. MR. FEINBERG: Thank you. MS. JACKSON Thank you. MR. FEINBERG: Thank you all for staying for almost two hours today. I want to thank Mr. Brodsky again for all the time he has put in on this. Again, we will get this draft turned around by Tuesday. MS. JACKSO! And I will now go touch base with the City Attorney and with finance. and we will also then touch base with disclosure counsel, so I can get to finance the person to be able to reach out for as soon as we can this week. Thank you. MR. FEINBERG: We stand adjourned. Thank you. (Thereupon, the above meeting was concluded.)