Finance Committee Agenda and Packet 2013 10 15

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City Council Finance Committee Meeting Minutes 09/17/13 Page 2 of 4 CASH & INVESTMENT REPORT AS OF AUGUST 31, 2013 — UPDATE FROM SCOTT PRICKETT, DAVIDSON FIXED INCOME MANAGEMENT, CITY INVESTMENT ADVISOR Mr. Prickett reviewed with the Finance Committee upcoming changes in the financial market and how those changes may affect the City's investments in the future. Specifically discussed were proposed Money Market Reform, a new Federal Reserve Chair, and Housing Finance Reform for Fannie Mae and Freddie Mac. Mr. Prickett indicated a decision would be made on Money Market Reform within the next 4 — 6 weeks and that he anticipates funds will continue to transact at a stable share price under the Stable NAV proposal. If a Floating NAV is adopted, Colorado State Statutes would need to be revised to incorporate the changes and allow for the continued legal investment of public funds in such products as offered through CSafe and ColoTrust. Scott Prickett informed the Committee that Federal Reserve Chair candidate, Larry Summers dropped out of the race for Chair and that it is anticipated that Janet Yellen will be approved as the new Federal Reserve Chair. Based on interviews and market reaction to her impending appointment, it is expected that the same policies as currently exist will continue keeping interest rates low. Mr. Prickett reviewed with the Finance Committee a Senate Bill and a House Bill that have been presented regarding the financial reform of the Fannie Mae and Freddie Mac mortgage agencies. The Senate bill (Corker - Warner GSE Bill) has bi- partisan support and seems favored. This bill would create a "Federal Mortgage Insurance Corporation" (FMIC) and would provide that mortgages be fully backed by the Treasury up to approximately 80 %. The House Bill, introduced by Jeb Hensarling (R -Tex) (the PATH Act) does not have much support and would totally privatize the mortgage market. Mr. Prickett reviewed current unemployment, CPI and Housing data with the Committee and also the historical quarterly rate of return earnings for the City of Louisville. The City's yield average from 4/30/10 — 8/31/13 was 1.20% as compared with CSAFE at 0.15 %, Colotrust Plus at 0.17% and 2 Yr. Agency at 0.81 %. Mr. Prickett re- emphasized Davidson Fixed Income Management's commitment to the investment goals of the City to protect against any loss of principal, ensure funds are available to meet the City's obligations as necessary, and to receive optimal returns within the appropriate safety and liquidity constraints. 3