How Tustin manages investment money was the topic again at the City Council meeting on August 4, 2009. The money Tustin invests is money that can be needed to pay bills (meet obligations.) The investment policy is designed to protect the principal and maintain liquidity. Not losing money but retaining the principal takes priority over making money. Another way of looking at Tustin's investment accounts is this is the savings account for Tustin (or money market checking account), not a stock market account.
A review of the current investments was made and it was determined that Tustin's investment policy had not been followed. A $3 million security (bond) issued by Merrill Lynch, now owned by Bank of America, rated single A had been purchased. Tustin's investment policy requires that corporate securities be rated AA or higher by Moody's or Standard and Poors.
City Treasurer George Jeffries admitted that he knew the rating of the security did not meet the requirements of Tustin's investment policy when he made the purchase. The clip below shows the discussion with Jeffries regarding the purchase of the security that does not meet required city standards.
Later in the meeting (available online), Jeffries makes a statement which sounds like he is saying that he can count on his hand the number of times he has purchased securities which met Tustin's investment policy. If this is what he meant to say and if this is what has happened, Tustin's stewardship of city funds is questionable at best.
After the discussion with Jeffries has ended (not in the clip but available online), Councilman Jerry Amante stated that he wants to change Tustin's investment policy to obtain a higher yield. The purpose of these investment accounts for Tustin is not to make money, but to hold the value of money that may be needed to pay obligations. These investments are, in effect, Tustin's saving account, not their stock market account. The objective of an investment pool like Tustin's is to match the yield of Treasury securities, not stock market or other funds. A good financial manager understands that different investments have different uses and yields. Changing Tustin's policy to make more money by allowing riskier investments does not make sense for Tustin's city savings account.
Review Tustin's investment policies for youself. Each policy has been signed off by Treasurer George Jeffries:
Quarterly investment report reviewed at August 4 meeting:
Download 07 QUARTERLY INVESTMENT REPT 08-04-09
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