Investment Overview:

1. How to Approach From a Small to Medium Government’s Perspective – Given Limited Staff, Time, and Experience Investment Overview: FGFOA Annual Conference May 8, 201210 - 11:40am Jeff Larson, MBA, Larson Consulting Services Jeff Yates, MPA, City of Dunedin Linda Senne, CPA, City of Venice

2. Presentation Outline • I. Introductions FGFOA Moderator • II. Overview – Typical Florida Jeff Larson Investment Policy – Small to Medium Sized Governments • III. Overview – Best Practices Jeff Larson • of Public Funds Investments • IV.. Investment Approach: Linda Senne City of Venice • V. Investment Approach Jeff Yates City of Dunedin • VI. Panel Recommendations Panel • VII. Appendix Material

3. II. “Typical” Florida Investment Policy “THE KEY IS A POLICY THAT MAKES SENSE FOR YOUR GOVERNMENT”

4. II. Investment Policy Samples • Get samples from other organizations • Colleagues • Internet • FGFOA web site • GFOA sample investment policy

5. II: Policy Model • Florida Government Finance Officers Association • (407) 835-3471 www.fgfoa.org • View Resources for Sample Documents • Government Finance Officers Association • (312) 977-9700 www.gfoa.org • Search for “Sample Investment Policy” • Updated Comparable Florida Models: -- City of Dunedin -- City of Venice -- Clay County -- City of Treasure Island -- UCF -- Osceola County Schools -- City of Tamarac -- FGFOA Website, Your Local Chapter 5

6. State/Local Laws (F.S. 218.415) Scope/Objectives Standards of Care Investment Instruments Internal Controls Reporting Policy Approval II: Investment Policy Roadmap 6

7. II: Scope of Policy • Value of Investment Portfolio • Fund Types • General • Special revenue • Enterprise • Exclusions Typically Include: • Pension trust funds • Debt service reserve funds, bond proceeds 7

8. Safety of principal Security type Limit risk exposure Liquidity Portfolio Structure Transparency Transparency – more important than yield Yield Market influenced Watch credit risk II. Objectives

9. II. Standards of Care • Prudent investor rule • “Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.” • Ethics policy • Conflicts of interest • Delegation of authority

10. Investment Instruments • Types • List Allowable Investments • Florida Statutes 218.415 • Ratings - Credit criteria (Moody’s, S&P) • Establish acceptable minimums • Limits • Maturity restrictions may vary by fund • Maximum maturity

11. II: Investment Instruments • Types – Maximum % • U.S. Treasuries and Agencies • Government Securities • State and Local Governments • Local Government Investment Pool (LGIP) • State Board of Administration – A or Prime Fund • Money Market Funds • Repurchase Agreements • CD’s and Bank Deposits (“QPD”) • Corporate Securities, Commercial Paper • Other; Derivatives 11

12. II. Internal Control • Investment officer is responsible for maintaining internal control structure • Key issues: • Collusion • Separation of activities • Transaction confirmations • Wire transfer authority • Record to General Ledger • Review and monitoring

13. II: Reporting Requirements/Considerations • Quarterly (?) • City/County Manager, Superintendent, President or Executive • City Council/Board of County Commissioners School Board, or other Board • Investment Advisory Committee (if applicable) • Annual – Audit Report • Based on your Policy – You Should Tailor • Who is the “Investment Officer” Per F.S. 218.415? 13

14. III. “Best Practices” - Basic Rules of Public Funds Investments “STAY FOCUSED AND IN YOUR WORLD OF COMFORT” 14

15. III. Basic Rules of Public Funds Investments • Suitability • Risk return tolerance • Industry rules demand: “know your client” • Objectives and your responsibility – Understand the investment • Unique characteristics and today’s challenge – “Limited Time” to analyze and manage • Diversification 15

16. III. Basic Rules of Public Funds Investments • How do I get started if I inherited this “Investment Officer” role? • QPD – What does it mean? • What is a “yield curve”? • Should I be expected to predict interest rates? • Key questions often include…? 16

17. III: Suitability Key Issues and Recommendations Include: • Everyone is different, there is no “copy-cat plan”... • Understand what you, your boss, and elected officials understand • DO NOT invest in anything that you can not explain in 5 minutes or less or summarize on one page • Keep it simple and at your risk tolerance level • Ability to monitor and report - Do not create extra work unless your finance/treasury department has unlimited staff and not enough to do! 17

18. III: Diversification Key Issues and Recommendations Include: • Set objectives and then keep it simple! • Do not keep all of your eggs in one basket • Similar to a person wanting to diversify their personal investment portfolio - only shorter term • Always err on being conservative, and LIQUID • Protect principal versus chasing yield • Use maximum % and minimum ratings for various investment alternatives to force diversification 18

19. III: Qualified Public Depository and Investment What Does It Mean? • Florida Statutes 280 • Collateral backing bank's obligation to pay in addition to bank's own credit standing • “Joint and several” support agreement among banks • State puts responsibility on YOU to have original collateral letter on file (see Appendix example) • “Trust but verify” 19

20. III: Cash Flow Analysis • Liquidity • Money market, LGIP investments • 0-90 days • Banks • Enhanced cash • 90 days to 18 months • Short-term tier (1-5 years) • Reserves - longer term; 18 months to 5 years 20

21. III: LGIP NAV OPTIONS STABLE NAV Goal is to maintain $1 in/$1out Highest S&P rating is “AAAm” Short-term WAM for LGIP is < 60 days WAM for MMF is < 90 days SBA-A shares FLSAFE Day-to-Day Fund MMF’s VARIABLE NAV Designed to fluctuate to increase yield Highest S&P rating is “AAAf” Highest S&P volatility rating is “S1+” Medium to Long-term WAM is Bond Fund < 90 days FMIvT FLGIT SPIA The Core Fund Source: Prepared by Larson Consulting Services, LLC ,Orlando, Florida, market options available to Florida Governments constantly change. This is not intended to be a complete list. 21

22. III: Stable NAV Options in Florida Prepared by: Larson Consulting Services, LLC, Orlando, Florida The information contained herein is not guaranteed but was obtained from sources we believe to be reliable. Market options for Florida Governments constantly changing, not intended to be a complete list. No information in this document should be construed as a recommendation. Investors should independently evaluate each investment alternative based upon the needs, risk tolerance and suitability of their government entity. Check website or call entity for more information. 22

23. III: Variable NAV Options in Florida Prepared by: Larson Consulting Services, LLC, Orlando, Florida The information contained herein inot guaranteed but was obtained from sources we believe to be reliable. Market options for Florida Governments constantly changing, not intended to be a complete list. No information in this document should be construed as a recommendation. Investors should independently evaluate each investment alternative based upon the needs, risk tolerance and suitability of their government entity. Check website or call entity for more information. 23

24. III: Operating funds can be allocated into different tiers • Core Funds • Enhanced Cash Tier • Short-Term Tier • Each tier is distinct and can be benchmarked $4.8 M $4.0 M $3.2 M Liquidity Tier (0–90 Days, WAM) $2.4 M Enhanced Cash Tier (90 Days–1 Year) $1.6 M $800 K Short-Term Tier (1–5 Years) 0 Jan Feb March April May June July Aug Sept Oct Nov Dec Prepared by Larson Consulting Services, LLC, Orlando, Florida, For Discussion Purposes only. 24

25. Short -Term Cash Enhanced Cash Asset Backed Securities Mortgage Backed Securities Corporate Notes Taxable Municipals Certificates of Deposit U.S. Gov. Agencies U.S. Treasuries Liquid Cash Corporate Notes Taxable Municipals Certificate of Deposits Repos (Collateralized) U.S. Gov Agencies U.S. Treasuries Commercial Paper Bankers Acceptances Certificate of Deposits LGIP’s and MMF’s Repos (Collateralized) U.S. Gov Agencies U.S. Treasuries Return (%) Risk More Liquidity Less III: Investment Tools and Options – Portfolio Allocations By Time Horizon Source: Prepared by Florida Management and Administrative Services, Orlando, Florida, For Discussion Purposes. * Some securities require additional approval. 218.415 (16) h - Other investments authorized by law or by ordinance for a county or a municipality or local government. **Not all securities are suitable for every public entity. Each entity has their own unique risk tolerances. 26

26. IV. City of Venice Investment Approach • Overview of Venice • Location • Demographics • Finance Department’s Role - • Reporting and investments • City of Venice’s approach

27. City of Venice Demographics

28. City of Venice Demographics • In Sarasota County – SW Florida • Located ½ way between Tampa & Fort Myers • Incorporated in 1927 • In 2012 Celebrating its 85th Anniversary • Well known for its beautiful beaches • Population – Approx. 22,176

29. City of Venice Finances Governmental Services Police Information Systems Fire Parks & Recreation Finance Public Works Community Development: Engineering, P&Z, Bldg • Enterprise Funds Water & Sewer Solid Waste Stormwater Airport

30. City of Venice Finances • Finance Director reports to City Manager • Annual Budget - $ 80.2 million • Cash & Investment portfolio – Approx. $55.6 million • Limited resources (i.e. personnel and time) • Finance Personnel • 2000: 17 persons 2012: 12 persons • Budget • 2000: $41.4 M 2012: $80.2 M

31. City of Venice’s Approach • Amount at local operating bank, tied to services • Other sources of liquidity include AAAm rated money market funds, AAAm FL SAFE LGIP, Bank QPD’s • Analyze cash flows by fund, but invest on pooled basis • Working with PMA to Ladder our investments, Produce a Consolidated Report, Reduce Safekeeping Costs

32. City of Venice’s Approach • Cash & Investments Consist of Approx: • $28.3M Bank Deposits & Money Market Funds • $22.0M Government Agencies • $ 5.0M FLSAFE – LGIP • $ 0.3M SBA – LGIP • Balances vary month to month • Quarterly Updates to City Council

33. City of Venice’s Approach

34. IV. Treasure Island’s Enhanced Approach • New Finance Director met with bank representatives, then City’s Financial Advisor • Discovered City bank accounts established many years ago with no current rationale or logic • Updated Investment Approach in 2011-2012 with FA’s Help, FL SAFE/PMA Support (1) Source – City of Treasure Island, Finance Department, Active Portfolio changes but basic structural diversification and investment options continue.

35. IV. City of Treasure Island $502,040 (1) Source – City of Treasure Island, Finance Department

36. City of Venice’s Focus • Stay with Permitted Investments • Too Small to Have an Independent IA Firm • Working on: Leverage Cash Flow Analysis and Fixed Income Investment Program (FIIP) via FL SAFE team • Leverage Competitive Bidding Platform of PMA and Leverage Wider Range of Broker Dealers or QPD Banks

37. V. City of Dunedin Investment Approach • Overview • In Pinellas County, North of Clearwater • 35,000 Population, Largely Residential Community • Finances • Reporting and investments • Challenges and Lessons Learned • City of Dunedin’s approach

38. City of Dunedin Demographics • Established in June 1899 • 10 Square Miles • Median Age 51.3 yrs

39. City of Dunedin Finances • Finance Director reports to City Manager • Budget – Approximately $84.7 million • Investment portfolio – Approximately $ 30 million • Limited resources (i.e. personnel, experience and time) • Finance Personnel • 2000: 25 persons 2012: 19 persons • Budget • 2000: $1.4 million 2012: $2 million

40. City of Dunedin’s Approach FOCUS ON THE FUNDAMENTALS • Get CAFR’S up to Date • Separate Operations and CIP • Establish Reliable Cash Flows for Both • Update Internal Tracking of Projects

41. City of Dunedin’s Focus • Initially Majority of Funds at Local Bank, not earning a yield, above maximum % per old Investment Policy • Investment Policy Updated with Consultant’s Help • Diversification Phase I • Cash Flow Analysis via PMA FL SAFE • Diversification and Laddering Phase II – Competitive Bidding of QPD Bank CDs

42. City of Dunedin Summary (Limit 50%) 21.95%

43. City of Dunedin Summary Revised Portfolio BreakdownBased on April 19, 2012 (1) (Limit 50%) 15.94% (1) Prebond proceeds/bank placement reimbursement of Interfund loans

44. VI: Recommendations • Markets are Constantly Changing • Everyone is Different, There is no Copy Cat Plan • Understand What You, Your Boss, and Elected Officials Understand • DO NOT Invest In Anything That You Can Not Explain • This is Not Your Money-Be A Fiduciary 46

45. VI: Recommendations • Keep It Simple and At Your Risk Tolerance Level • Ability To Monitor and Report- Do Not Allow Investments or Process to Merely Create Extra Work • Seek Assistance, as Needed, with Investment Policy Review and Cashflows • Remember Suitability and Diversification • Stay True to Key Objectives 47

46. VI: Recommendations • Safety, Liquidity, Transparency, and Yield – Stay the course • Interest Rate Projections – Be realistic with your expectations • Defined Investment Plan – Develop Cash Flows • Look for opportunities to maximize investment duration • Identify factors you control – timing, diversification of investments, execution • Utilize and/or consider all investment options • Time Deposits, Collateral, FDIC insurance, Insured Money Market Account and local government investment pool • Use Ladders 48

47. Questions?

48. Bios • Jeff Larson, MBA • President, Larson Consulting Services • Banking and Investment Experience, Over 29 years • Linda Senne • Chief Accountant, CPA, CGFM, City of Venice • Jeff Yates • Finance Director, MPA, City of Dunedin

49. President, Larson Consulting Services Tel: 407.496.1597 | jlarson@larsonconsults.com Jeffrey T. Larson Based in Orlando, and as President of Larson Consulting Services (“LCS”), an independent SEC and MSRB registered financial advisory firm, Jeff has successfully closed a wide range of municipal project finance and corporate financings totaling over $6 billion. Florida projects have ranged from negotiating and structuring transportation/road improvement programs, higher education project financings, multiple utility acquisitions, extensive water and wastewater capital expansions, investments support services, economic development and redevelopment initiatives, utility enterprise restructurings, refinancing and restructuring, downtown redevelopment, CRA TIF financings, debt and lease purchase private placements, multiple public/private partnership project finance issues, multiple phased Charter School financing, and a $240 Million University / Developer PPP Project financing. In May of 2011, Jeff and FMAS was asked by the AAAm rated FL SAFE Local Government Investment Pool (“LGIP”), to serve as its Administrator and Executive Director. He has served many Florida governments since 1992 as an Investment Banker, Financial Consultant, Administrator, or Financial Advisor. Mr. Larson received his MBA degree on an academic scholarship from Emory University, Atlanta, Georgia, in 1982. As part of his MBA graduate work, Mr. Larson worked, studied and taught in Germany and Austria and was a Fulbright Scholar at the Johannes Kepler University in Linz, Austria. He received an A.B. in Business Administration with honors in 1980 from Franklin & Marshall College, Lancaster, PA. Mr. Larson’s professional licenses with the State of Florida, FINRA (previously the National Association of Securities Dealers (NASD)), and New York Stock Exchange (NYSE) include a Series 7 General Securities, Series 63, Series 53 Municipal Principal, Series 24 FINRA General Securities Principal and Series 9 and 10 General Securities Sales Supervisor licenses.  Jeff is a frequent speaker at industry conferences including the annual FGFOA, FCCMA, Florida Bond Buyer, FICPA, Florida Redevelopment Association (FRA), Florida Bar Association, Florida League of Cities, Ernst & Young Professional Development Conference, FGFOA Webinars, FINRA, Regional FGFOA Chapter meetings, FGFOA Career Seminars, Smith’s National Investor Conference, Annual FGFOA Institute (School of Governmental Finance) and Special District conferences on topics ranging from “the Bond Issuance Process”, “Best Practices in Debt Management”, “Best Practices in Investment Management”, “Planning and Capital Financing”, to “Public-Private Partnership Financings.” Jeff has also served as a member of the FGFOA Annual Conference Program Committee for over 15 years. 51

50. Linda Senne, CPA, CGFMChief AccountantCity of Venice Tel: 941-486-2626 Email: lsenne@ci.venice.fl.us Linda Senne is currently the Chief Accountant for the City of Venice. Prior to January 1, 2011, she was the Deputy Financial Services Director/Controller for the City of Cape Coral. Ms. Senne started in 2001 as the Controller for the City of Cape Coral managing the City’s Financial Management System including accounting, financial reporting, treasury, cash management and investments, debt issues, payroll, grant coordination, capital assets, capital construction projects, and customer billing services. Ms. Senne was the Project Manager for the JD Edwards EnterpriseOne v9.0 Financial Management Software System implementation and the Kronos HRIS/Payroll System implementation. Ms. Senne was also instrumental in leading the Accounting Division in early implementing GASB 34, the biggest change in the history of financial reporting for governmental entities. Ms. Senne worked for the Office of the State Auditor in North Dakota for 13 years prior to joining the City of Cape Coral. While working for the State of North Dakota she was selected by the National Auditor’s Association to be on the quality review team for the State’s of Rhode Island and Alabama. Linda has served on the FGFOA Host Committee for a number of years, has been the SWFGFOA Chapter President, and a SWFGFOA Board Member since 2006. Linda was selected by the participants to be a board member with FL SAFE, which is an AAAm rated Local Government Investment Pool in Florida. She was selected to be the Vice Chairman of the FL SAFE Board in 2012. Linda attended Moorhead State University –Minnesota where she earned a B.S. in Accounting and has been a Certified Public Accountant since 1988.