Proposals for Changes in Oceanside's City Treasurers Office

By James H. "Jimmy" Knott, III

Proposals for Changes in Oceanside's City Treasurers Office

Provide Alternative Points of Economic Views and Strategies: Because all expenditures will eventually affect all other expenditures, savings or investments

Open the process instead of treating the Treasurers Office like a cloistered secret society and the Citizens like Children:

1) Do like other Cities have done and come into the 21st Century via use of Technologies like the internet & Public postings and:

• a) Post pertinent economic information like the City's Investment Policy
• b) Post the City's Investment Schedule on the internet and in public
• c) Post the Returns on Investments and provide a link to these companies-bonds-etc so everyone can equally & daily know and understand how these investments made on behalf of the city are doing
• d) Open the Contact with the Office of City Treasurer using the city's web site and e-mail link
• e) Treat the Office of City Treasurer as an Equal to other elected Officials and their Offices

• a) List in the City's Advisory Groups on the City's web site the City Treasurers Investment Advisory Board instead of seemingly keeping their meetings in secret
• b) Post the Investment Advisory Boards Agenda on the city's web site and other predominant areas
• c) Post contact information for members of this Investment Board
• d) Initiate a Citizens forum of at least twice a year so the public can have direct input into the investment strategies and process. Then this input would be compiled and included into the mandated yearly report and proposal from the Treasurers Office for proposed Investment Strategies at the Annual Budget review by the City Council to consider.

• a)Use KOCT as an public educational tool in this area and
• b)Have at every council meeting where the spending of taxpayers funds is discussed a report, verbal or written, as to alternatives, impacts &/or potential consequences of actions from the City Treasurer. This is the right and duty of citizens and all who serve the public as it can directly affect other economic areas like our city's investment portfolio and Reserves

• 1)Land + less than 5 % left, acquire, use, set aside or sell if we really need to
• 2)Local Businesses + Invest in Oceanside instead of just elsewhere- thus improving the tax base, Job creation, enhances O'side standard of living and keeps businesses/companies in Oceanside
• 3)Cash reserves + not laying off city personnel except for due cause, not cutting city departments for reasons of budget. Use these funds here first then repay and build this reserve.

• Let our Openness Confound them...
• Most all Problems lay at the feet of Management or improper actions of decision makers...
• Follow the money then you shall know the truth....
• If managers, like the City Council, don't have enough background info. or potential alternatives then we are at fault for not providing that necessary information that may lead to their poor decisions.....
• Everyone needs to be educated on basic understanding of accounting and economic flow dynamics so we all become more responsible citizens....
• As with a picture all parts work together to achieve beauty and insight...
• All tax monies are the Citizens possessions not the elected/appointed Officials personal cash box...
• Elected Officials are the people's stewards and servants not their masters. ___________________________________________________

By Jimmy Knott III Sunday, August 29, 2004

As with my former reflection on the handling of the City's Treasury in my "Thoughts on Oceanside's Investment Policies as Compared with Other City's In San Diego County" here are some specifics and questions on Oceanside's Investment Policy alone.

Oceanside has a mandate that the Treasury must meet the City's budgetary expenditures for at least a six (6) month period of time. This presents some questions and concerns:

• 1) What values and standards are these expenditures being considered for in this period of time?
• 2) Is it full total operations or barebones operations? There are neither specifics listed nor referral to any other reference ordinances, codes, reference material or guidance given as to this point and as such it can be loosely interpreted to mean many things.
• 3) And is a 6 month period of time really logically needed? What basis is there for this time mandate? Why not 45 days or longer or whatever period of time? Should this be altered to reflect the needs of /for a realistic crisis or emergency period of time only? Or should this be based upon better clearly, specifically defined values and standards?
• 4) Is this a mandate to have 6 months worth of callable investments or not? Or can it be expressed in other potential investments?
• 5) Since this is limited to "budgeted" expenditures. With the ability of the city to adjust budgets as needed should this also include all budgeted programs? CIP's and other special projects included?
• 6) Since the Federal and State Governments have in the recent past taken city anticipated revenues for their needs and/or have altered the regulations/implementation/structure of programs or laws that have reduced potential returns on governmental and private investments and have given the city "Unfunded Mandates" should these factors be included into the projection of sums needed to cover this 6 month period of time?
• 7) And are the sources of the city's income, expenditures for these callable investments secure and realistic anymore?
• 8) And should the city include all potential transfers of mandates from both the State and Federal Governments?

• 1) Should the City only consider certain money markets of investments that isolate the city's diversity of its portfolio? Right now the City owns no Commercial Paper in local expanding companies, nor do we consider land a prudent investment, yet both of these are secure and the values and returns of each have been far greater than the money markets we are invested with. Just today this benefit of investing in local companies was confirmed in the North County times with the graph of comparison of local companies contrasted with the listed market for the nation in general. If we had of had included in our investment portfolio just these two (2) far broader investment concepts we could have generated a far greater investment return income.
• 2) Should the City buy some sizeable Commercial Paper from local companies or local large employers? The returns in this type of invest can be expressed in a far broader concept because in addition to short term fiscal gains on the investment, strictly monetarily, we could as well locally generate returns in additional jobs, increased local business trade, increased local tax generation, and future security in case of a money market failure, further state or federal take backs or restrictions on returns or collapse as in the case of the ability of taping Pension funds by various parties.
• 3) Property holdings are part of the prudent investment policy of most families, businesses, corporations and even the county, state and federal governments. In some cases they are called land reserves, resource or mineral holdings, home sites, vacation property, farming enterprises, etc. but in any case land is a severely limited commodity in especially coastal southern California. The Current City Treasurers office denies that this is an allowable investment strategy but the City has used this recently as an investment strategy with the Collins property contrary to this stance, and it worked to the benefit of the City and it has occurred many times in the past. Almost every government entity uses this strategy as well. Soon the El Corazon property may generate on part of it similar benefits in sale or lease of the property. And with less than 5% buildable land left we are only investing in Money Markets and federally "secure" investments. Should we invest in property as a prudent risk? If it isn't used as investment now it can be sold or used at a higher value in the future, and by the future we need to look 100 or more years ahead like in most major Cities unless we anticipate a total overturn of our governmental system or catastrophic disaster that has been used in other world cities to redevelop their land and holdings.
• 4) Seeing the temporal benefits and not the long term benefits. Should this section of the Investment policy be adjusted to include both short term and long term investments? We need a wider view of the economic system and what is prudent and secure. Former legislation was based upon former economic realities. Gold at one time was the only secure investment and any other holding was consider foolish, commodities were considered the only investment as well, then property was, then money exchanges and transfers were, then armaments was, then it was based for a while on the nuclear power, then at time industrial output and production, then technological innovation, on and on I can go. Even today many of these are of value, but the City of Oceanside's Treasury Department seems to concentrate on just 2 investments even though there are others. In light of this our City's authorized and actual investments may not be meeting the primary investment goals and need to be revamped.

The City's Investment Policy only recognizes the funds that are being invested as "the Monies" and City Treasurer, being a publicly elected official, is only guided by a semi-vague philosophy that is economically biased and slanted towards money markets that benefit mainly global investments and government bonds. They have forgotten whose funds are these, these funds, these "investment pools" are the taxpayers funds not the City's, the Councils or Treasurers and we need to include the public in most every step we can as part of the intent of the sun shining laws and the desire to be as transparent as possible to avoid even the sense of impropriety. When the funds are referred to in the investment policy they need to be given the source and ownership of those funds, the Citizen Taxpayers/Ratepayers!

• 1) Neither the City Treasurers Office purpose, vision, the Investment Policy, who the City is invested with, links to those investment sites, the Treasurers full contact information, nor even the Investment Oversight Committees Agendas, work plans or even meeting times and locations are posted on the internet to provide enhancements of this communication pathway According to the Current City Treasurer there has been a request for such but there are imposed barriers to these postings by our city's I.T. department who is controlled by the City Manager and who is directed by the City Council. In the past the City Manager proposed to merge the City's CFO office with the City Treasurers Office as many of the activities and duties overlap, the Council after input by the City Treasurer and City Manager decided against this. Could this failure be at the root cause of this slow inclusion of the City Treasurer and the Treasurers Office inclusion on the City's Web site or is it due to Item #4 in this list?
• 2) The Treasurers office is not required to hold even a yearly public meeting to gain information, concerns or ideas. This is an optional choice of an elected official and can be scheduled into the working of the office and even be formalized and codified included into city's ordinances and codes, but it isn't. After all it is the taxpayers funds not the City's or Treasurers and we need to include the public in most ever step we can as part of the intent of the sun shining laws and the desire to be as transparent as possible to avoid even the sense of impropriety.
• 3) When one approaches the Counter of the Treasurers Office it is intimidating, a window and Telephone unlike most all other city Departments. This problem could easily be solved by either stationing a person at this location or combining the Clerks Counter and Treasurers Counters Service areas with someone there to greet folks and help with their problems, ideas or concerns.
• 4) And the City Treasurer has not asked that these and other types of open and public communication enhancements be included onto the City Councils agenda for consideration either nor were they allocated for in the yearly budget process/review as a goal or planned public service of the City Treasurers Office.
• 5) The composition of the Citizens Oversight Investment Committee is solely at the Choice of the City Treasurer with little public input, concurrence or recommendations even by the City Council. And since these folks serve at the pleasure of the City Treasurer alone, this board is unlikely to disagree with the suppositions of the City Treasurer or bring forth alternative perspectives or ideas in an actual real review of the investment portfolio and budgetary impacts. This oversight board is not really an oversight board as it has no power to do anything except discuss items and is merely advisory. And since their membership is not commonly disclosed again the public has reasonable input.

• a) Safety of Principal
• b) Liquidity
• c) Return on Investment Each of these can be interpretive as well as long as capital loses are avoided, the risks are not extreme, the liquidity basically is based upon having sufficient funds to operate the city via immediate call ability and structured maturity dates, and its returns are above market average limited by economic cycles. So again we see the potential for expanding our scope of investment strategies. However there is an absence of long term investments due to state law and by this Investment Policy that provides only limited choices of investments unless creative methodologies are used.

Another section of this Investment Policy is good but it has a severe lacking in potential ethical standards. This lacking is a form of secondary Pay for play scenarios. This lacking presents a potential of huge problems especially with PACs and donations to campaigns through other organizations and political parties and other favors under the guise of political education from those who have had business transactions with the city funds and its investment portfolio. This is a common factor of issues before the City Council and being the city council is the final approval and certification body of this Investment portfolio they should act according to this section of the policy but often they do not and they accept donations from providers and clients of the City especially in preparation and during election season. In the Investment Policy there is only a requirement of disclosure and as such also there is no measure in this section for reclusal from any further association in dealings and a lack of other interests impacts than only "personal business activity". So the impartiality potential is at risk for any and all who transact or govern the City's Treasury.
As to actual investments governed by the City's Investment Policy it appears as this:

• US Treasury Bills, Bonds and Notes Unlimited
• US Government Agencies Obligations Unlimited (Except that only 25%can be with a singular agency investment of the total invested in this area)
• Bankers Acceptances up to 20% of the portfolio (For no more than 180 Days, with 5% in any one bank)
• Time Deposits up to 15% of the Portfolio

(Real Estate Mortgages may not be accepted as collateral, but there is no prohibition of investments in property or property holdings)

• Repurchase Agreements up to 30% of the portfolio

(For no more than 30 days)

• Reverse Repurchase Agreements up to 15% of the portfolio

(For no more than 60 days)

• Commercial Paper up to 15% of the portfolio

(For no more than 270 days and no more than 5% of the Portfolio in any one company)

• Medium Term Notes up to 15% of the portfolio

(For A rated companies a limit of 24 months, for AA rated companies no more than 36 months and no more than 5% of the portfolio in any one company)

• LAIF up to the maximum amount allowed by LAIF
• Restricted Investments no more than 10% of the portfolio

_____________________________________________________
For a loose Total of:
120% plus

The pathway the world of economics is taking involves extensive electronic transfers and there is a concept that is taking hold in our society of a cashless society. There are no provisions in the Investment Policy for this advancement or for the safe and prudent electronic transactions, such as:

• a) long term data storage,
• b) Duplication back and storage of real time and daily transaction records,
• c) Electronic Recordings of transactions made
• d) Safeguarding procedures and policies against an inside or outside party manipulation of the funds and their transfers,
• e) Requirements for insurance on the transactions to cover the city in case of hacking, intrusion, manipulation, entry errors or unauthorized access
• f) Responsibility of the City Treasurer to have a regular review and certification of the electronic-calculating systems and programs used either internally by the City's IT Department for the Treasurers office or externally supplied certification by those entities the City is invested with.

Thank You, Jimmy Knott III

Thank You....Jimmy Knott for Oceanside City Treasurer