PonceInletFL - 08/20/2009 Special Town Council Minutes

5. Discussion of accounts with Riverside Bank: Mayor Goudie opened the discussion with an explanation of the Town’s banking issues. Currently Riverside Bank is the town depository bank and according to Florida Statute 280 they must collateralize these funds at a rate of 125%. The Federal Treasury in 2008 set up a Temporary Liquidity Guarantee Program (TLGP) which allowed banks such as Riverside Bank to participate in this program since they paid a rate less than 50 bases points or less. This program allowed Riverside to collateralize the town’s funds under the TLGP and not the F.S. 280. Riverside Bank has brought to the town a new agreement and that is what brought about this special council meeting. Ms. Clauss stated that the State of Florida has decided to no longer accept the TLGP as a form of collateralization for public funds since this program terminates in December of 2009. Ms. Clauss stated that all FDIC insured accounts are limited to $250,000 then these accounts would also have to be collateralized according to F.S. 280. On August 6^th, 2009 the town received a modified banking agreement from Riverside for approval to establish an Investment Sweep Accounts for the town funds. Ms. Clauss also stated that she did not sign the agreement due to the loss of FDIC insurance with a sweep account. The town has two other banks at the meeting for consideration if the Council does not authorize Ms. Clauss to sign the agreement with Riverside. Ms. Clauss stated that this was not in lieu of going through a RFP process with the Banking Services Selection Committee but only a temporary solution and that there is a provision in the Purchasing Code; section B-3, which allows the council to proceed in either direction. Mayor Goudie informed that SunTrust Bank has a Muni-Now Account which does allow interest to be earned at a 40% base rate. Riverside agreement is a sweep account that is done on a daily bases that purchases securities at the sweep interest rate. Mayor Goudie asked Council members for comment. Vice-mayor Davis asked Riverside Bank about the TLGP and why the State would not accept that program any longer. Dave Smith, representative of Riverside Bank based in Melbourne, Florida, stated that banks pay an additional fee for participating in that program but because the program expire in December 2009 the State of Florida Treasury Department will not adopt it which causes the banks now to collateralize these types of funds and to also FDIC insure them. This causes double coverage and cost to the banks but allows Riverside Bank to place the funds in a sweep account while keeping the collateralization while reducing the double coverage and cost. Councilmember Sturno asked if a sweep account was insured and Mr. Smith informed that it is covered by the collateralization and not by the FDIC. Mr. Smith explained how a sweep account operated and Riverside Bank interest rate is 20% base points. There was a brief discussion on the Waiver of Jury Trial with respect to litigation and arbitration. Vice-mayor Davis inquired if the investment policy and the Charter read that the town funds must be FDIC insured. Ms. Clauss stated that it does not but that has been the impression of this council. Councilmember McCormick and Councilmember Sturno stated that the town needs to be FDIC insured on its funds. Vice-mayor Davis read chapter 6.07 Depository of the Charter and informed that Council had agreed earlier on the interpretation of that section to mean FDIC insured. Mr. Smith informed that Riverside could place the town funds in CDARS program which gives the funds the FDIC insurance. Mayor Goudie informed that the yield from the CDARS program is lower with a bank distributing them and the town is trying to keep fund liquid. Mayor Goudie asked Mr. Ricker to approach council. Mr. Ricker, representative of SunTrust Bank, stated he was just here tonight to assist the council with any questions they may have concerning banking options. Mayor Goudie inquired on the Muni-Now Account that SunTrust offered. Mr. Ricker informed that 98% of municipal that bank in Florida are participating in this program which offers interest at 40% bases points. This account is called the Now Account and works like a checking account which allows the utilization of 100% of funds in a qualified public depository. FDIC does play a part but also collateralization amounts vary depending on the strength of the banks. Councilmember McCormick inquired on the fees that SunTrust charges. Mr. Ricker informed that SunTrust can provide a fee sheet and explained what the difference was on a direct collateralizations and being in a pool account. Mr. Ricker informed that the 40% bases rate will not go any lower in this program. Mayor Goudie thanked Mr. Ricker for his attendance. Mayor Goudie proposed to the council that on a temporary base to place the town’s funds with SunTrust Bank at the rate of 40% base rate points and still peruse a RFP with the Banking Services Selection Committee to solicit the best possible terms with a qualified banking institution and the town with a primary focus being preservation and liquidity of the town funds, seconded by Councilmember McCormick. Mayor Goudie asked for council discussion. Vice-mayor Davis inquired when the deadline was for the town signing the agreement with Riverside Bank. Mr. Smith informed that the deadline would be in the middle of September. Ms. Clauss stated that with BB&T Banks the closest is in Ormond Beach and their information is in the council packet for review. Councilmember Derr questioned if the funds at Riverside were collateralized now. Mr. Smith informed that the funds are both FDIC insured and collateralized. Mayor Goudie opened the floor for public participation. Gary Comfort, 85 Ocean Way Drive, was concerned with the language in the Charter regarding town funds and believed that all town funds should be FDIC insured. He also asked if SunTrust has any early withdrawal charges or penalties if the Banking Services Selection Committee chooses another bank. Councilmember Sturno informed the group that there was no such fee that according to his knowledge. Vice-mayor Davis inquired with the town manager would SunTrust work with the town on this issue even if it was only for a few months. Ms. Clauss informed that she realizes that there is no choice in this situation in order to insure FDIC insurance. At this time the town has placed over 2.2 millions in CDs but there is approximately four million in Riverside. Mayor Goudie stressed the bases point of 40%. This motion PASSED 5-0 to temporarily move the funds to SunTrust Bank with the following vote: Councilmember Sturno – yes, Vice-Mayor Davis – yes, Councilmember McCormick – yes, Councilmember Derr – yes, and Mayor Goudie – yes.

6. Discussion of the Town’s Investments/FMIVT: Mayor Goudie stated that the Florida Municipal Investment Trust has higher yield for investment with approximately 1½ to 2% rates. The town is allowed to invest up to 25% of its funds according to the investment policy. Ms. Clauss informed that the percentage rate is a little higher than what the town has been getting for CD and this would keep these funds 100% liquid as apposed to buying CD at a rate of .7%. Mayor Goudie stated the town has invested 14% and could go as high as 25% or approximately $250,000. Mayor Goudie asked for council comments by stating that this Florida Municipal Trust Fund would give a rate of 2.8% for two years and still keep the funds liquid. Council had no comments. Mayor Goudie proposed to invest an additional two hundred and fifty thousand dollars in the FMIVT for a one to three year high quality bond fund, seconded by Councilmember McCormick. Vice-mayor Davis asked if the Banking Committee had any input on this investment. Mayor Goudie stated no they have not. Mayor Goudie asked for Council questions or citizens comments. Gary Comfort, 85 Ocean Way Drive, concerned that the investment policy states that all funds are to be invested in safe investment and how does the town know if the investment is insured. Mayor Goudie informed that these funds are collateralized with high quality mortgage back securities. Mr. Shepard formed his legal opinion on the Charter and how it read concerning the Town funds by stating that it take account to mean all of town funds and does not exclude any and that they must be insured. Mr. Shepard also advised on a future amendment to the Charter to clarify the insured part with Federally Insured Accounts. Mayor Goudie withdrew his motion and Councilmember McCormick withdrew his second.