2007-08-14 Work SessionWork Sessions are informal meetings of the Assembly where Assembly members review the upcoming regular meeting agenda
packet and seek or receive information from staff. Although additional items not listed on the work session agenda are discussed
when introduced by the Mayor, Assembly, or staff, no formal action is taken at work sessions and items that require formal
Assembly action are placed on regular Assembly meeting agenda. Citizen's comments at work sessions are NOT considered part of
the official record. Citizen's comments intended for the "official record" should be made at a regular Assembly meeting.
CITIZENS' COMMENTS (Limited to Three Minutes per Speaker)
ITEMS FOR DISCUSSION
1. Investment Ordinance — Update from Finance Director Karl Short
PACKET REVIEW
PUBLIC HEARING
Ordinance No. FY2008 -04 Amending KIB Code Chapter 2 Administration and Personnel to
Increase the Mayor, Assembly, Regulatory and Quasi- Judicial Boards and Commissions'
Compensation.
Ordinance No. FY2008 -05 Amending KIB Code of Ordinances Title 4 Service Areas to Modify
Chapter 4.50, 4.80 and 4.120 to Permit the Delivery of Emergency Medical Services Within
Those Fire Protection Areas.
NEW BUSINESS
Resolutions
Resolution No. FY2008 -05 Accepting the Assignment of the City of Kodiak's Interest in Lot 2,
U.S. Survey 2538 to the Kodiak Island Borough for Pool Purposes.
Ordinances for Introduction
Ordinance No. FY2008 -03 Determining the Disposition of Tax Foreclosed Properties From
2005 and Prior Tax years, Establishing Intention to Surplus and Sell the Same, Finding That a
Public Need Does Not Exist for These Properties, and Authorizing Land Sale Number Sixteen's
Terms and Conditions.
MANAGER'S COMMENTS
CLERK'S COMMENTS
MAYOR'S COMMENTS
ASSEMBLY MEMBERS COMMENTS
On Leave:
Kodiak Island Borough
Assembly Work Session
Tuesday, August 14, 2007, 7:30 p.m., Borough Conference Room
(Rescheduled from August 9, 2007)
Abell — August 9 -19 (SWAMC) 1 Branson — August 24 -28 I Jeffrey — July 22- August 31
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KODIAK ISLAND BOROUGH
WORK SESSION MEETING
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Introduced by
Requested by
Drafted by:
Introduced:
Public hearing:
Adopted
Manager Gifford
Borough Assembly
Finance Director
KODIAK ISLAND BOROUGH
ORDINANCE NO. FY 200X -XX
AN ORDINANCE OF THE KODIAK ISLAND BOROUGH AMENDING KODIAK ISLAND
BOROUGH CODE OF ORDINANCES TITLE 3 REVENUE AND FINANCE CHAPTER 3.04
PUBLIC FINANCE — MANAGEMENT AND ACCOUNTING SECTION 3.04.020 PERMISSIBLE
INVESTMENTS SECTION 3.04.022 COLLATERAL REQUIREMENTS SECTION 3.04.051
FACILITIES FUND BY CHANGING THE TYPES OF INSTRUMENTS THE BOROUGH CAN
INVEST IN CHANGING THE INVESTMENTS ALLOWED IN THE FACILITIES FUND, AND
CHANGING DISBURSEMENTS FROM THE FACILITIES FUND FROM A PERCENT OF
INTEREST EARNED TO A PERCENT OF MARKET VALUE (POMV)
WHEREAS, the Borough Code pertaining to investments has become dated; and
WHEREAS, the list of allowed investments could be more clearly defined; and
WHEREAS, collateral is not available on all investment types, only repurchase agreements and
certificates of deposit; and
WHEREAS, because the principal amount of the investments held in the facilities fund is not used
for daily operations, investments can be held for a longer term and can have larger swings in value;
and
WHEREAS, generally, over a long period of time equities (stocks) show a greater return than
government securities; and
WHEREAS, because of GASB 31, the value of the Borough investments change on our general
ledger even though it will not change over the life of an investment; and
WHEREAS, because of these changes in value, both up and down, it is better to use a percent of
market value method to distribute earning of the fund than a percent of previous years' earnings;
NOW, THEREFORE, BE IT ORDAINED BY THE ASSEMBLY OF THE KODIAK ISLAND
BOROUGH THAT:
Section 1: This ordinance is of a general and permanent nature and shall become a part of the
Kodiak Island Borough Code of Ordinances.
Section 2: Title 3 Revenue and Finance Chapter 3.04 Public Finance — Management and
Accounting Section 3.04.020 Permissible Investments is hereby amended as follows:
Chapter 3.04
PUBLIC FINANCE — MANAGEMENT AND ACCOUNTING
Sections:
3.04.010 General treasury management.
3.04.015 Authority.
3.04.020 Permissible investments.
3.04.021 Terms defined.
3.04.023 Collateral safekeeping.
3.04.026 Diversification of investments.
3.04.027 Investment records.
3.04.030 Deposit of school money.
Kodiak Island Borough, Alaska Page 1 of 5
No—
3.04.040
3.04.050
3.04.051
3.04.052
3.04.053
3.04.056
3.04.056
3.04.057
3.04.060
3.04.065
3.04.070
Basis of accounting.
Funds.
Facilities fund.
Education fund.
Fern Fuller fund.
Land sale fund.
Penalties.
General fixed assets.
Distribution of funds.
Review of service fees.
Post audit.
3.04.020 Permissible investments. The teer finance director shall invest money only in the
following types of security instruments:
A. Bonds, notes, or other obligations, direct or otherwise, of the United States
Government;
B. Bonds and other evidence of indebtedness of the state of Alaska, or any municipality, or
political subdivision of the state of Alaska;
C. Savings accounts, certificates of deposit, banker's acceptances, repurchase
agreements, and such other legal security instruments; or
D. The Alaska Municipal League Investment Pool, Inc. made in accordance with the terms
of that Pool's "Common Investment Agreement ".
Section 3:
Title 3 Revenue and Finance Chapter 3.04 Public Finance — Management and
Accounting Section 3.04.022 Collateral requirements is hereby deleted as follows:
A. State and municipal Required for
bond3 and notcs: 100% of Dcpo3it
2. Fcdcrally guaranteed
issucs 100% of markct
3. Other statcs (Baa
rating or bcttcr) 120% of markct
B. U.S. Government obligations:
100% of markct
1. Dircct obligations 100% of markct
2. Federal agency
issucs 100% of markct
3. Fcdcrally guarantee
projcct notcs othcr 100% of markct (Ord 82 15 O(A) (part), 1982).
Section 4: Title 3 Revenue and Finance Chapter 3.04 Public Finance — Management and
Accounting Section 3.04.051 Facilities Fund is hereby amended as follows:
3.04.051 Facilities Fund.
A. The facilities fund is established as a separate special revenue fund which is distinct
from all other funds. The fund consists of all proceeds received
from the sale of Shuyak Island property to the Exxon Valdez Oil Spill Trustee Council. All
income from the fund shall be deposited to the fund. The assembly may, by ordinance, make
additional appropriations to the fund at any time. Any additional funds added to the fund,
aside of Shuyak Island proceeds, shall become part of the fund as a whole and subject to the
regulations of the facilities fund.
Kodiak Island Borough, Alaska Page 2 of 5
B. : a .. The
investment purpose of the facilities fund is growth through prudent investment of fund assets.
Notwithstanding the objectives of the borough policy for the investment of its operating and
other funds set out in 3.04.020, the investment of the facilities fund assets shall be made to
maintain safety of principal while maximizing total return. Investments shall be diversified to
minimize the risk of Toss resulting from a concentration of investments in a specific maturity,
issuer, class of security, financial institution or, with respect to equity investments, in a
specific company, industry or investment sector. Fund assets may only be invested in the
instruments and securities set out in the following:
1, United States Treasury obligations including bills, notes, bonds, and other debt
obligations issued by the United States Treasury, and backed by the full faith and credit of the
U.S. Government.
2. Securities issued or guaranteed by agencies and instrumentalities of the U.S.
Government, but not explicitly backed by the full faith and credit of the U.S. Government.
3. Securities issued or guaranteed by municipalities in the United States, rated in one
of the three highest rating categories by nationally recognized statistical rating organization
(NRSRO).
4. Corporate debt securities rated investment grade.
5. Asset - Backed securities rated investment grade.
6. Yankee debt (that is, U.S. dollar denominated obligations issued in the U.S. capital
markets by foreign issuers) rated investment grade.
7. Mortgage- Backed Securities (MBS) and Collateralized Mortgage Obligations (CMO)
comprising.
a) Agency MBS investments issued by Federal National Mortgage Association,
Federal Home Loan Mortgage Corporation, or the Government National
Mortgage Association.
b) CMO investments securitized by agency MBS issued by Federal National
Mortgage Association, Federal Home Loan Mortgage Corporation, or the
Governmental National Mortgage Association; provided that permissible CMO
investments include only sequential class CMO's or type I planned amortization
class CMO's.
8. Money market mutual funds regulated by the Securities and Exchange Commission
which comply with rule 2(a)7 and whose underlying portfolio consists of investment grade
securities; and the Alaska Municipal League Investment Pool, Inc.
9. A mutual fund, which is designed to replicate the Standard and Poor's 500 Index or
an ETF (Exchange Traded Funds) with the same purpose.
C. Allocation of investments. The borough may have all or part of the Facilities Fund
investments managed by an external money manager.
1. By external money managers.
Allowable
Minimum Percentage Percentage
Requirements of Issuer of portfolio
UST 100% 0 - 100%
Agencies 100% 0 - 100%
Bonds BBB 10% 0 - 25%
BA's A 2% 0 - 25%
Repo's A 5% 0 - 25%
CD's A 5% 0 - 10%
Mutual Funds 10 - 25%
AMLIP 0 - 50%
CD's over $ 100,000 must be collateralized at 102%
Mutual Funds must meet all of the above requirements.
Kodiak Island Borough, Alaska Page 3 of 5
2. By finance director or designee: The finance director or designee can invest in any of
the above except for mutual funds.
D. The following are prohibited transactions:
1. Purchase of non - dollar securities.
2. Purchase of private placement securities.
3. Short sale of securities (the sale and settlement of a security not currently owned
and a formal agreement to borrow the security to facilitate the settlement of the short sale)
4. Purchases of futures, forwards or options.
5. Borrowing to leverage the return on investments. Extended settlement of securities
purchases executed to facilitate or improve the efficiency of a transaction will not be
considered borrowing, provided that sufficient cash equivalent securities or receivables are
available to facilitate the extended settlement.
In the event a security currently held in the portfolio is downgraded below investment grade
the money manager shall provide written notification to the Finance Director and set forth in
writing a recommended course of action.
The fund may not be appropriated or spent, except as provided in this section. The earnings or
principle principal shall at no time run or supplement the running of government except as
specified in this section.
E. Four percent of the average market value (POMV) as of Dec. 31 of the preceding five
years may be appropriated for the following purposes:
1. maintenance and repair of existing borough facilities,
2. insurance paid by the borough for borough buildings,
3. upgrade and reconstruction of existing facilities, or
4. debt service on general obligation bonds issued for facilities construction - -up to fifty
(50) percent of excess may be used for this purpose.
F. A portion of the fund may be appropriated for another purpose only upon approval of an
ordinance ratified by a two - thirds (2/3) majority of the qualified voters at a regular or special
election.
G. Selection of money managers. The Finance Director may prepare an RFP to solicit
proposals from different money managers to manage a portion or all of the investments of the
Facilities Fund. After the proposals are evaluated a recommendation will be made to the
Assembly through the Borough Manager.
H. Money managers must meet the following minimum criteria:
1. Be a bank, insurance company, investment management company, or investment
adviser as defined by the Registered Investment Advisers Act of 1940.
2. Provide historical quarterly performance numbers calculated on a time - weighted
basis, based on a composite of all fully discretionary accounts of similar investments style,
and reported net and gross of fees.
3. Provide detailed information on the history of the firm, key personnel, key clients, fee
schedule, and support personnel. This information can be a copy of a recent Request for
Proposal (RFP) completed by the money manager.
4. Clearly articulate the investment strategy that will be followed and document that
the strategy has been successfully adhered to over time.
Kodiak Island Borough, Alaska Page 4 of 5
Selected firms shall have no outstanding legal judgments or past judgments, which may
reflect negatively upon the firm.
I. Duties and responsibilities of the money manager. The duties and responsibilities of each
money manager retained by the borough include the following:
1. Managing the borough assets under its care, custody and /or control in accordance
with the objectives and guidelines set forth herein.
2. Exercising investment discretion (including holding cash equivalents as an alternative)
within the objectives and guidelines set forth herein.
3. Promptly informing the borough through the finance director in writing regarding all
significant and /or material matters and changes pertaining to the investment of Borough
assets, including but not limited to:
a. Investment strategy
b. Portfolio structure
c. Tactical approaches
d. Ownership
e. Organizational structure
f. Financial condition
g. Professional staff
h. Recommendations for guideline changes
i. All legal material, SEC and other regulatory agency proceedings affecting the
firm.
4. Promptly voting all proxies and related actions in a manner consistent with the long-
term interests and objectives of the borough set forth herein. The money manager shall keep
detailed records of said voting of proxies and related actions and will comply with all regulatory
obligations related thereto.
5. Utilize the same care, skill, prudence and due diligence under the circumstances then
prevailing that experience, investment professionals acting in a like capacity and fully familiar
with such matters would use in like activities for like borough and Endowment Funds with like
aims in accordance and compliance with all applicable laws, rules and regulations from local,
state, federal and international political entities as it pertains to fiduciary duties and
responsibilities.
6. Acknowledge and agree in writing to their fiduciary responsibility to fully comply with
all of the objectives and guidelines set forth herein, and as modified in the future.
ADOPTED BY THE ASSEMBLY OF THE KODIAK ISLAND BOROUGH
THIS DAY OF , 2007
ATTEST: Jerome M. Selby, Borough Mayor
Nova M. Javier, CMC, Borough Clerk
KODIAK ISLAND BOROUGH
Kodiak Island Borough, Alaska Page 5 of 5