TREASURY BOARD COMMONWEALTH OF VIRGINIA February 20, 2008 9:00 a.m. TREASURY BOARD CONFERENCE ROOM James Monroe Building 101 N. 14th Street, 3rd Floor Richmond, Virginia
Members Present: J. Braxton Powell, Chairman Dr. Kenneth N. Daniels Robert C. Goodman, Jr. David A. Von Moll Janie E. Bowen K. David Boyer, Jr. Douglas W. Densmore Janet Aylor Jeanine Black Leslie English Thelma Ingle Margaret Layne Kristin Reiter Kathi B. Scearce John Small Evie Whitley Robert S. Young Bryar Nettles Nelson L. Bush Suzanne Youst John Bennett Michael Walsh Kevin Davenport Richard Grattan Treasury staff and others attended. Department of the Treasury Department of the Treasury Department of the Treasury Department of the Treasury Department of the Treasury Department of the Treasury Department of the Treasury Department of the Treasury Department of the Treasury Department of the Treasury Hunton & Williams LLP PFM Asset Management, LLC SunTrust Robinson Humphrey Virginia Commonwealth University Virginia Commonwealth University Virginia Commonwealth University Wachovia
Members Absent:
Others Present:
Call to Order and Approval of Minutes Chairman Powell welcomed Board members and called the meeting to order at 9:00 a.m. He asked if there were any additions or revisions to the minutes of the January 16, 2008 meeting. There being none, Mr. Goodman moved the approval of the minutes as submitted, Dr. Daniels seconded, and the motion carried unanimously.
Board Minutes Public Comment None Agenda Items
February 20, 2008
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Robert S. Young updated the Board on bills Treasury staff was monitoring. The Securities for Public Deposits bill which would allow Federal Home Loan Letters of Credit to be used as collateral has passed without opposition and has gone to the Governor for signing. Mr. Young indicated that a new bond bill was submitted that would finance 2.4 billion in educational capital projects. Another bill staff has been monitoring is the legislation that would exempt Local Government Investment Pools from FOIA requirements. This bill has passed without opposition. . Mr. Young also provided the Board with an updated on staff’s budget work with the General Assembly. Restructuring Virginia Commonwealth University General Revenue Pledge Bonds, Series 2006A and Series 2006B Evie Whitley briefly reviewed the action item (Attachment A) with the Board before introducing John Bennett, Kevin Davenport and Michael Walsh from Virginia Commonwealth University (VCU) to answer questions about the restructuring of the VCU bonds. Mr. Bennett explained that the VCU Board of Visitors had approved a resolution to restructure the variable rate demand bonds, which are currently in a daily mode, and are insured by Ambac Assurance Corporation. Rating downgrades in the bond insurance sector has caused interest rates on VCU’s bonds to rise materially, which directly increases the University’s interest expense. VCU proposes to incorporate a direct pay letter of credit from Wachovia Bank into the structure, and thereby reduce reliance on the bond insurer and reduce the interest cost on the bonds. . VCU requested Treasury Board’s approval of the resolution, which would permit the restructuring. Discussion ensued as to how VCU would deal with a change in the credit rating of the issuer of the Letter of Credit, whether enrollment assumptions were being met, and the cost of action versus inaction followed by Bryar Nettles, VCU’s bond counsel with Hunton, Williams, reviewing the resolution with the Board. Chairman Powell asked if there were any further questions. There being none, the Chairman asked for a motion to approve the Resolution. Mr. Von Moll moved that the Resolution be adopted. Mr. Goodman seconded, and the motion carried unanimously with Dr. Daniels abstaining.
Board Minutes
February 20, 2008
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Staff Reports: Debt Management Ms. Whitley reviewed the Debt Calendar as of February 13, 2008, the MELP report as of January 31, 2008, and the VELP report as of January 31, 2008. Security for Public Deposits Ms. Reiter reviewed the Security for Public Deposits report for the month ending December 31, 2007. She reported that three banks were under collateralized in December. Additionally, three new Qualified Public Depositories were approved to hold public deposits in December. There was one merger and no changes in the IDC rankings from last month’s reporting.. Ms. Reiter added that staff had sent a letter to the FDIC regarding the use of Federal Home Loan Bank Letters of Credit as collateral as directed by the Board. State Non-Arbitrage Program (SNAP) Mr. Small reviewed the SNAP report for the month ending January 31, 2008. Investments Mr. Small reviewed the Investment Report for February 2008. He indicated that inflation fears are beginning to rise, but concerns of recession still dominate. The housing market in all segments as well as consumer confidence and spending is weak as is employment. Mr. Small reviewed the Total Return Pool with the Board, and Dr. Daniels asked when Black Rock Financial Management would be reviewed. Mr. Small indicated they are continuously being monitored by staff and Wachovia. T.C. Williams will be coming to the March meeting to outline those managers currently under review. Mr. Small also provided the Board with an update on Countrywide and stated that Bank of America had reiterated their intent to buy the mortgage company. Axon passed a critical date in their restructuring on February 15th with many of the guidelines being met.
Mr. Goodman asked about the recent relative performance of Western Asset Management and Mr. Small explained that their performance has been adversely affected by a 20% overweight position in mortgage backed securities and a concurrent 20% underweighting in U.S. Treasuries which has been the best performing sector. Western’s performance is being closely monitored.
Board Minutes
February 20, 2008
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Chairman Powell asked if there was any further business to come before the Board. There being none, the Chairman asked for a motion to adjourn. Mr. Goodman moved the approval of the moved adjournment, Dr. Daniels seconded, and the motion carried unanimously. Other Business: None Respectfully submitted,
_______________________________ J. Braxton Powell, Chairman Commonwealth of Virginia Treasury Board
Attachment "A" Documents are available for review at The Department of the Treasury