City Council Minutes 2008 10 01 SP

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City Council Special Meeting Minutes October 1, 2008 Page 2 of 8 CDT has assets of approximately $275 million. The City is a participant in CDT through the main depository, First National Bank. The City's CDT account is used as a "sweep" account on the FNB general operations account. The City does not use CDT other than as a sweep account for the First National Bank. On September 27, 2008 all accounts at CDT were moved to another local government investment pool called Colorado Local Government Liquid Asset Trust, commonly known as Colotrust. The action was taken because CDT's investment pool included $5 million of commercial paper issued by Lehman Brothers. This holding represented approximately 1.8% of CDT's total assets. When Lehman Brothers filed for bankruptcy, 1.8% of CDT's investments were marked to zero value. When CDT was liquidated and all the CDT accounts were moved to Colotrust only 98% of the value was transferred. The CDT account had a balance of approximately $2.46 million at the time of the transfer. If the Lehman Brothers holdings are eventually valued at zero, the City could lose approximately $44,000. The recovery of this investment is dependent upon Lehman's reorganization plan in bankruptcy and its ability to sell assets. First National Bank is in the process of setting up .a new "sweep" account for the City. Finance Director Watson will update Council as information becomes available. Mayor Sisk asked for an explanation of a "sweep" account. Finance Director Watson explained a "sweep" account is a money holding account. Everyday after all the revenues are taken in and expenditures are paid, the balance in the general operating account is sent to a "sweep" account to be invested at a higher rate of interest. Mayor Sisk explained First National Bank is the designated bank for the City of Louisville and they selected the "swf:ep" account. Finance Director Watson confirmed the selection of the "sweep" account was made upon the signage of the banking services agreement. Mayor Sisk asked for the amount of interest earned in 2008. Finance Director Watson explained the City's main operational account is earning 0.1 %, while the "sweep" account was averaging 3.0~%, 300 basis points greater. Mayor Sisk stated once the issues were known, full disclosure was made, emails were sent to Council members and <~ news release was sent to the newspapers. He noted Boulder County also faces, the same issues. Councilor Sackett asked how long the City has used "sweep" account. Finance Director Watson stated it is a standard practice for municipalities to utilize "sweep" accounts and is included in banking services agreements.