BCC Minutes 05/02/1995 R REGULAR MEETING OF HAY 2, 1995,
OF THE BOARD OF COUNTY COHMISSIONERS
LET IT BE REHEHBERED, that the Board of County Commissioners in
and for the County of Collier, and also acting as the Board of Zoning
Appeals and as the governing board(s) of such special districts as have
been created according to law and having conducted business herein, met
on this date at 9 a.m. in REGULAR SESSION in Building "F" of the
Government Complex, East Naples, Florida, with the following members
ALSO PRESENT:
present:
CHAIRPERSON:
Bettye J. HAtthews
Timothy J. Constantine
John C. Norris
Timothy L. Hancock
Pamela S. Hac'Kie
W. Neil Dotrill, County HAnager
Kenneth B. Cuyler, County Attorney
Item #2 & #2A
AGENDA AND CONSENT AGENDA - APPROVED WITH CHANGES
CHAIRPERSON MATTHEWS: Everybody ready? Call to order
the Hay 2nd meeting of the Board of Commissioners, Collier County.
Mr. Dotrill, will you lead us in an invocation and pledge?
MR. DORRILL: Heavenly Father, we thank you this
morning, as always, for your wonder and your saving grace. We thank
you in particular for Collier County and what it means to so many
people, the opportunity to enjoy retirement years or to start a
business or to raise a young family. We thank you for the wonder of
the life that you have given us. As always, we ask and it's our
prayer this morning that you bless and guide this county commission as
they make important decisions that affect our community here, and we
ask that you bless our time together here today. And we pray these
things in your son's holy name. Amen.
(The pledge of allegiance was recited in unison.)
CHAIRPERSON MATTHEWS: Mr. Dorrill, are there changes to
the agenda?
MR. DORRILL: I have none today. I have a couple of
reminders for me under staff communications, but otherwise I don't
have any changes.
CHAIRPERSON MATTHEWS:
changes?
COMHISSIONER NORRIS:
CHAIRPERSON MATTHEWS:
COMHISSIONER HANCOCK:
CHAIRPERSON MATTHEWS:
COMHISSIONER MAC'KIE:
Commissioner Norris, are there
Nothing further.
Commissioner Hancock?
No, ma'am.
Commissioner Mac'Kie?
I have just one communications
item where I wanted to pass out copies of the report that I've done
for the development services review.
CHAIRPERSON MATTHEWS: Okay. Commissioner Constantine?
COHMISSIONER CONSTANTINE: Just one question. Item
10-C, you had issued a memo suggesting that will be the 16th, and I
see that on today's.
CHAIRPERSON MATTHEWS: Yeah, I was going to bring that
up when it came my turn to talk about changes, which I will do now. I
had seen it on Thursday when the agenda came out that item 10-C was on
the agenda and sent a memo to each of my colleagues requesting that it
be continued, that it's on the agenda in error and that we continue it
until the the. And if there's no --
COHMISSIONER CONSTANTINE: Motion to approve.
CHAIRPERSON MATTHEWS: -- discussion on that, we'll do
that.
COHMISSIONER CONSTANTINE: Motion to approve the agenda
as amended or as not amended in today's case.
CHAIRPERSON MATTHEWS: As -- as changed without item
10-C. We have a motion. Is there a second? COHMISSIONER MAC'KIE: Second.
CHAIRPERSON MATTHEWS: We have a motion and a second.
All those in favor, please say aye. Opposed?
There being none in opposition, the motion passes.
Item #3
MINUTES OF REGULAR MEETING OF APRIL 11, 1995 - APPROVED AS PRESENTED
COMHISSIONER CONSTANTINE: Madam Chairman, motion to
approve the minutes of April llth, 1995, of our regular meeting of the
Board of County Commissioners.
CHAIRPERSON MATTHEWS: We have a motion and a second to
approve the minutes of April 11. All those in favor, please say aye.
Opposed?
There being none, motion passes.
Item #4A1
PROCLAMATION DESIGNATING THE WEEK OF APRIL 30 - MAY 6, 1995, AS GUNNAR
PEDERSON WEEK - ADOPTED
Next item on the agenda is proclamations and service
awards. The first item is a proclamation, and it's indeed my pleasure
to read this proclamation. Is Mr. Gunnat Pederson here? Mr.
Pederson, you want to come forward? And if you could turn around and
let the people out in Collier County see what you look like while I
read this proclamation, because it gives me great pleasure.
A proclamation: Whereas, Mr. Gunnat Pederson has served
the community as president of the Immokalee Friendship House for a
period of six years; and,
Whereas, Mr. Pederson's service to the community and
Immokalee Friendship House has been an inspiration to this community
and its citizens; and,
Whereas, Mr. Pederson has given unselfishly of his time,
talent, and treasured in the support and assistance of those in need
in our community; and,
Whereas, Mr. Peterson has recently stepped down as
president of the Immokalee Friendship House; and,
Whereas, it is appropriate that we recognize Mr.
Pederson as -- for his years of service and dedication to the poor and
homeless of Immokalee and Collier County.
Now, therefore, be it proclaimed by the Board of County
Commissioners of Collier County, Florida, that the week of April 30
through May 6 be designated as Gunnat Pederson Week.
Done and ordered this 2nd day of May 1995, Board of
County Commissioners, Bettye J. Matthews, Chairman.
And my colleagues, I move that we accept the
proclamation.
COMHISSIONER CONSTANTINE: I'll second that.
CHAIRPERSON MATTHEWS: We have a motion and a second.
All those in favor, please say aye. Opposed?
There being none, we accept the proclamation.
(Applause)
MR. PEDERSON: Thank you very much.
CHAIRPERSON MATTHEWS: Thanks for all your good work.
Item #4A2
PROCLAMATION DESIGNATING THE WEEK OF APRIL 30 - HAY 6, 1995, AS VERY
SPECIAL ARTS WEEK - ADOPTED
Next item on the agenda is another proclamation, Very
Special Arts Week, Commissioner Hac'Kie.
COHMISSIONER HAC'KIE: Yes, if Dee Dee Cox is here and
she'd come forward, we'd like to read this proclamation and ask her to
accept it.
Whereas, Very Special Arts enriches the lives of over
600,000 people each year through programs using drama, dance,
literature, music, and the visual arts as a means to integrate persons
with disabilities into the mainstream of society; and,
Whereas, Very Special Arts International conducts
year-round programs in 50 states, the District of Columbia, and Puerto
Rico, featuring workshops, performances, and training for children,
parents, educators, and others in over 15,000 communities; and,
Whereas, Very Special Arts Florida-Collier will provide
opportunities for people with disabilities to celebrate and share
their accomplishments in the arts through a noncompetitive hands-on
arts festival on HAy 6th, 1995; and,
Whereas, Very Special Arts Florida-Collier is being
sponsored by the designated local arts agency, the United Arts
Council, and cosponsored by Collier County Public Schools and Collier
County Parks and Recreation. There are over 450 festivals throughout
the nation; and,
Whereas, Very Special Arts Florida-Collier stimulates
interest and support of the arts for people with disabilities through
its festival using an arts festival to reach the artistic, disabled,
and educational communities, as well as the general public.
Now, therefore, be it proclaimed by the Board of County
Commissioners of Collier County, Florida, that the week of April 30
through HAy 6, 1995, be designated as Very Special Arts Week.
Done and ordered this 2nd day of HAy 1995, Board of
County Commissioners, Bettye J. Matthews, Chairman.
And I'd like to move approval of this proclamation.
COHMISSIONER NORRIS: Second.
CHAIRPERSON MATTHEWS: We have a motion and a second to
move approval of the proclamation. All those in favor, please say
aye.
Opposed?
There being none, it passes. Congratulations.
(Applause)
MS. COX: On behalf of the United Arts Council and the
Very Special Arts Florida, we would like to thank the council for
making this Very Special Arts Week, and we hope this is the first of
many festivals for Collier County. Thank you.
COHMISSIONER HAC'KIE: Thank you.
Item #4A3
PROCLAMATION DESIGNATING SATURDAY, HAY 6, 1995, AS AT YOUR SERVICE,
COLLIER COUNTY GOVERNMENT DAY - ADOPTED
CHAIRPERSON MATTHEWS: Next item on the agenda, another
proclamation, At Your Service, Collier County Government Day.
Commissioner Norris.
COHMISSIONER NORRIS: Thank you, Miss Chairman. This is
a good little event that we put on every year up at the Coastland
Mall. It gets a lot of participation and gives the -- a lot of our
divisions a chance to showcase what they do, and the public gets a --
we have a good response from it. And I think it's a nice thing to do
so people sometimes get a better idea then of -- of what county
government is doing. Here to accept this award on behalf of the
Collier County government is Neil Dotrill, and the proclamation
reads:
Whereas, Collier County Government has again been
invited and is eager to participate as an event host in the
community's Tropicool festival which began April 28th and concludes on
HAy 14th, 1995; and,
Whereas, as an event host, Collier County Government
will celebrate its fifth annual At Your Service Government Day on
Saturday, HAy 6, 1995, from 10 a.m. to 5 p.m. at the Coastland Center
Mall; and,
Whereas, county staff is eager to showcase the many
services provided to the community through visual displays and
literature inside the mall as well as interaction with staff and their
vehicles and equipment located in the mall parking lot.
Now, therefore, be it proclaimed by the Board of County
Commissioners of Collier County, Florida, that Saturday, HAy 6th,
1995, be designated as At Your Service Collier County Government Day.
Done and ordered this 2nd day of HAy 1995, by the Board
of County Commissioners of Collier County, Florida.
And, Ms. Chairman, I'd like to make a motion that we
accept this proclamation. COHMISSIONER HANCOCK: Second.
CHAIRPERSON MATTHEWS: A motion and a second to accept
the proclamation. All in favor, please say aye. Opposed?
There being none, motion passes.
(Applause)
CHAIRPERSON MATTHEWS: And we'll be there Saturday for
judging. We've all got our little ballots.
COHMISSIONER HANCOCK: We'll be doing judging, so
division heads, send guests early.
MR. DORRILL: I just wanted to remind the commissioners
that for those of you who can, if you can be at the mall sometime
between the time they open and noon, each division -- and in addition,
I believe for the fourth or fifth year the sheriff will also have a
very good exhibit and display there as well.
We'd like to have the commissioners participate in
judging the various exhibits that are there. It has been very popular
on the part of the staff. And we should also thank the Chamber of
Commerce for incorporating us in this particular day in the Tropicool
because it has made a major positive benefit to this particular
community event program, and the ability to use the mall gives us
thousands of people coming by our exhibits as opposed to what we used
to do here in the parking lot at the museum. So we'll see you all
Saturday. Thank you.
CHAIRPERSON MATTHEWS: Good. Next item on the agenda --
and that fair at the Coastland MAll is really interesting for those
that want to go by and see what county employees do and the innovative
thinking that they can come up with. It's great.
Item #4B
EMPLOYEE SERVICE AWARDS - PRESENTED
Next item is service awards. Commissioner Hancock.
COMMISSIONER HANCOCK: Yes. Thank you, Madam Chairman.
It gives me pleasure this morning to present three service awards.
The first is a ten-year service award to Walter Suttlemyre in
permitting and inspections. Walter, are you here? There you are.
(Applause)
CHAIRPERSON MATTHEWS: Thank you. Good job.
COMMISSIONER HANCOCK: The second service award today is
a five-year service award to Matthew Vila of EMS. Matthew.
(Applause)
Did you save any lives yet today, Matthew?
MR. VILA: Not yet.
CHAIRPERSON MATTHEWS: He's working on it.
COMHISSIONER HANCOCK: Congratulations.
And our last service award today is also a five-year
service award in helicopter operations for Mike Manning. Mike.
(Applause)
CHAIRPERSON MATTHEWS: Have we had helicopters five
years now?
COMMISSIONER HANCOCK: We all want to know where we can
get one of those suits.
CHAIRPERSON MATTHEWS: Thank you.
MR. MANNING: Five years of this, and I'll buy you a
suit.
COMHISSIONER HANCOCK: Deal.
CHAIRPERSON MATTHEWS: Is that all?
COMMISSIONER HANCOCK: Yes, that concludes our service
awards today.
Item #5A
BUDGET AMENDMENTS 95-256, 95-266 AND 95-271 - ADOPTED
CHAIRPERSON MATTHEWS: Thank you. Next item on the
agenda are -- is approval of budget amendments. Mr. Smykowski.
MR. SMYKOWSKI: Good morning, Commissioners. For the
record, Michael Smykowski, acting budget director. There are three
budget amendments on the report that require your approval this
morning.
CHAIRPERSON MATTHEWS: Are there questions?
COMMISSIONER CONSTANTINE: Motion to approve.
CHAIRPERSON MATTHEWS: Motion to approve. Is there a
second?
COMHISSIONER NORRIS: Second.
CHAIRPERSON MATTHEWS: Motion and a second to approve
the budget amendments. All those in favor, please say aye.
Opposed?
There being none, motion passes.
MR. SMYKOWSKI: Thank you.
CHAIRPERSON MATTHEWS: Thank you.
Item #SA
REQUEST BY DEBBIE STOKES FOR WAIVER OF BUILDING PERMIT FEES - APPROVED
Next item on the agenda as we move to the county
manager's report under community development, a request by Debbie
Stokes for waiver of building permit fees.
COHMISSIONER CONSTANTINE: Madam Chairman, I don't know
if we need a long explanation on this. They were burned out of their
home and want to put a home right back on the same spot they were, and
we're talking only about $200. They've been in kind of a tough
situation themselves. I'll make a motion to approve the item.
COHMISSIONER HAC'KIE: Second.
CHAIRPERSON MATTHEWS: Motion and a second. Is there
discussion? There being none, I'll call the question. All in favor,
please say aye.
Opposed?
There being none, motion passes unanimously. That's --
that's a good one.
Item #SB1
RECOHMENDATION TO WAIVE THE PURCHASING POLICY AND AUTHORIZE STAFF TO
APPROVE A RIGHT-OF-WAY PERMIT AND PURCHASE ORDER IN THE AMOUNT OF
$48,312.08 FOR ROADWAY IMPROVEMENTS TO IHMOKALEE ROAD IN THE VICINITY
OF OAKS BOULEVARD - EMERGENCY DECLARED; STAFF RECOHMENDATION APPROVED
Item 8-B-l, a recommendation to waive the purchasing
policy and authorize approve right-of-way permits. Mr. Archibald.
MR. ARCHIBALD: Good morning, board members. Agenda
item 8-B-1 involves a proposal that's been submitted to the county by
the developer of the Huntington project to go ahead and expand the
intersection improvements at Immokalee Road and Oakes Boulevard to
include not only the improvements at the intersection with Northbrook
Drive to the west but extended all the way to the east to Valewood
Drive. So instead of undertaking site improvements that involve
roughly 300 feet of Immokalee Road frontage both east and west of the
intersection, the developer's gone ahead through a permitting process
and has offered to go ahead and straighten out a problem that the
county was going to address by including that in his intersection
work. And, again, we're looking at expanding his scope of services
under his development requirements from about three hundred feet to
over twenty four hundred feet.
The staff has analyzed it from both a timing and cost
standpoint. There is a substantial savings in the net cost to the
county under the proposal was $48,312.08. So the staff is bringing to
the board today the recommendation to approve the developer's
proposal. But to do that requires the board to, one, declare an
emergency based upon both the timing and the cost savings. Also it
would require the board to approve the dollar expenditure currently
appropriated in fund 313 for Immokalee Road and to also authorize the
chairman to approve an agreement that staff would finalize and that
the county attorney would review and approve.
CHAIRPERSON MATTHEWS: Thank you. Commissioner
Constantine.
COHMISSIONER CONSTANTINE: Mr. Cuyler, we need a
separate motion to declare an emergency?
MR. CUYLER: No, sir. You can just make that part of
your motion. Since this is not an ordinance, this is -- would just be
the emergency for the approval.
COMMISSIONER CONSTANTINE: I make a motion we declare an
emergency and follow staff recommendation. COMMISSIONER HANCOCK: Second.
CHAIRPERSON MATTHEWS: We have a motion and a second. I
have one question before I call the vote on this. The area that
you're talking about from, I guess, Northbrook to Valewood Drive, this
contract is going to straighten out all that meandering lane switching
and so forth because there's been several accidents there now because
it's all jumbled up. Also there's questions in the area about a
traffic control device. Any idea when that's going to be coming
forward?
MR. ARCHIBALD: No. At this point in time we're in the
process of completing our annual review of over 30 locations. This is
one location where we would expect that very likely a signal would be
programmed, but the actual timing of that will be brought back to the
board most likely about four to five weeks from today in June with the
idea that we would be recommending to the board the final signal list
for the upcoming year, recognizing that there's no funds in our
current year to expand our signal program.
CHAIRPERSON MATTHEWS: Now, are you envisioning a signal
at the exit at the on and off ramp or at Oakes and Immokalee?
MR. ARCHIBALD: No. We're looking at -- recognizing
that there's a large density to be developed just north of Immokalee
Road at Oakes, so as a part of this project, Oakes Boulevard and
Immokalee Road will become a fairly heavily used four-way
intersection. A light at that location will create a gap both for the
interstate traffic and for the Valewood traffic. So we're looking
right now most likely at just one signal.
CHAIRPERSON MATTHEWS: One signal at Oakes and
Immokalee?
MR. ARCHIBALD: Yes.
CHAIRPERSON MATTHEWS: Okay, fine. We have a motion and
a second. If there's not further discussion, I'll call the question.
All in favor, please say aye. Opposed?
There being none, motion passes 5 to 0. Thank you, Mr.
Archibald.
Item #SH1
RECOMMENDATION THAT THE BOARD OF COUNTYY COMMISSIONERS A_MEND THE
IMMOKALEE AND EVERGLADES AIRPORT LEASES WITH THE COLLIER COUNTY AIRPORT
AUTHORITY TO ENSURE THAT EACH "LEASE SHALL CONTINUOUSLY HAVE AN
EFFECTIVE TERM OF NOT LESS THAN TWENTY-NINE (29) YEARS" - APPROVED
Next item on the agenda is 8-H-l, a recommendation that
the Board of County Commissioners amend the Immokalee Everglades
Airport leases.
COMMISSIONER CONSTANTINE: MAdam Chairman, as it
currently reads --
CHAIRPERSON MATTHEWS: Just a second. Commissioner
Hancock.
COMMISSIONER CONSTANTINE: I'm sorry.
COMMISSIONER HANCOCK: Probably about to say the same
thing I was hearing to my left, and that is that this is really just a
matter of semantics, changing numbers so that we can operate business
at the airport as -- as we should regarding future lease space and so
forth. Unless you have anything outstanding, Mr. Drury, this seems
fairly straightforward and doesn't really impact the county
significantly. Is that a fair assessment?
MR. DRURY: That is a fair assessment. John Drury for
the record.
COMMISSIONER HANCOCK: With that I would like to make a
motion to approve staff recommendation. COMMISSIONER CONSTANTINE: I'll second.
CHAIRPERSON MATTHEWS: We have a motion and a second.
All those in favor, please say aye. Opposed?
There being none, motion passes 5 to 0.
Item #8H2
RECOHMENDATION THAT THE BOARD OF COUNTY COHMISSIONERS ENTER INTO A
THIRTY (30) YEAR LEASE AGREEMENT WITH THE COLLIER COUNTY AIRPORT
AUTHORITY TO LEASE THE MARCO ISLAND EXECUTIVE AIRPORT - APPROVED
Next item on the agenda is a recommendation that the
Board of County Commissioners enter into a 30-year lease agreement for
the Marco Island Executive Airport.
COMMISSIONER HANCOCK: Madam Chairman, same similar type
item. One goes with the other. Anything special about this, Mr.
Drury?
MR. DRURY: No. Same -- same type lease.
COMMISSIONER NORRIS: I'd like to make a motion to
approve.
CHAIRPERSON MATTHEWS: Okay. We have a motion to
approve. Is there a second?
COMHISSIONER MAC'KIE: Second.
COMHISSIONER CONSTANTINE: I'll third it.
CHAIRPERSON MATTHEWS: We've got a host of seconds. One
question, Mr. Drury. This 30-year lease now makes it consistent and
concurrent with the other leases that we just kind of did some
housekeeping on?
MR. DRURY: That's correct. All three airports will now
be 30-year leases that go back to 29, get renewed a year, so there
will be sort of continuous 30-year leases all in the same --
CHAIRPERSON MATTHEWS: All at the same time?
MR. DRURY: All at the same time.
CHAIRPERSON MATTHEWS: Great. Okay. I'll call the
question. All in favor, please say aye.
Opposed?
There being none, motion passes 5 to 0.
Item #8H3
RECOHMENDATION THAT THE BOARD OF COUNTY COHMISSIONERS AWARD THE FIRST
COLLIER COUNTY AIRPORT AUTHORITY CONSTRUCTION CONTRACT TO AMERICAN
UNDERGROUND UTILITIES, INC. IN THE AMOUNT OF $666,168.70 TO COMPLETE
IHMOKALEE REGIONAL AIRPORT PROJECTS I-AIP-94-1, AND I-AIP-94-2 AIRPORT
ENTRANCE ROAD AND UTILITIES, BID #95-2347 - APPROVED
Next item on the agenda is a recommendation the Board of
County Commissioners award the first Collier County Airport Authority
construction contract. Mr. Drury.
MR. DRURY: John Drury, executive director for the
Collier County Airport Authority. Bid number 95-2347, were opened up
a couple of weeks ago on April 5th. Seven bids were received. The
low bid was $666,168.70. American Underground Utilities, Inc., was
the low bidder in this case. This includes the construction of the
new airport entrance road, the signage, all of the utilities, the
electric, the water, and the sewer for the new airport industrial park
and kicks off the first project for the airport authority.
We had a 12.5 percent DBE goal. We met that goal --
actually exceeded that goal. And the low bid falls within the
budget. When we look at the total budget item at the bottom, we will
have about $20,000 remaining to take care of any unforeseen items, and
the airport authority is recommending that the award be given to
American Underground Utilities, Inc., in the amount of $666,168.70 for
that project. I'd be happy to answer any questions.
CHAIRPERSON MATTHEWS: Thank you. Commissioner
Hancock?
COHMISSIONER HANCOCK: Two questions. Mr. Drury, am I
to understand the original estimate for this was about 750,000?
MR. DRURY: Yeah. We had several alternative bids that
added certain things, because we found ourselves getting to a point
where we were beyond what we had budgeted, and that is consistent with
most of the bids that you'll see came in in the 730 to 750 thousand
dollar range. And with seven bidders we were fortunate to have one
person really low bid the item, which is a local -- local contractor,
and so --
COHMISSIONER HANCOCK: Okay. Thank you. My second
question -- and I just want to clarify this -- they exceeded a 12.5
percent disadvantaged business enterprise goal; is that correct? MR. DRURY: That's correct.
COHMISSIONER HANCOCK: And are most of those local
DBEs?
MR. DRURY: Yeah, actually a lot of them are local.
Some of them are from the Fort Myers area. The airport authority has
a DBE plan in order to accept federal funds, and our plan calls for
12.5 percent participation with contracts, and we encourage
contractors. It's not a mandate. It's just a goal.
COHMISSIONER HANCOCK: Okay.
MR. DRURY: We ask contractors to try to assist us in
meeting that goal. And normally they do that with subcontractors and
in areas that have either minority women or blacks or Hispanics or
those that fall within the category. And this contractor was able to
meet and actually exceed our 12.5 percent requirement, which is good
for us because when we go for federal funds, one of the things I have
to do every year is fill out a report as to did I meet my goals or
didn't I and why, and so this will be helpful for future grants.
COHMISSIONER HANCOCK: Well, thank you. No more
questions.
CHAIRPERSON MATTHEWS: Thank you. Commissioner
Constantine.
COHMISSIONER CONSTANTINE: I think I speak for all of
us, but particularly the three who are involved in the creation of the
authority when I say it's kind of exciting. We had a vision a couple
of years ago, and now to be turning the first shovel to be doing the
initial work and enter into this first contract. So with some
enthusiasm I will make a motion to approve the item.
CHAIRPERSON MATTHEWS: We have a motion. Is there a
second?
COMMISSIONER MAC'KIE: Second.
CHAIRPERSON MATTHEWS: We have a motion and a second to
approve the item. If there is not any further discussion, I'll call
the question. All in favor, please say aye.
Opposed?
There being none, motion passes 5 to 0. Thank you, Mr.
Drury.
MR. DRURY: Thank you. And as a follow-up I should say
that we are having our ground-breaking ceremonies on May the 15th at
10 a.m. And this is the first of many, many projects that we're doing
up there, and you will all probably have already received the
invitations. If you have not, it will be very shortly. Thank you.
Item #8H4
DISCUSSION RE THE POSITION OF COMHUNITY AND ENVIRONMENTAL SERVICES
ADMINISTRATOR - CONFIRMATION OF MR. VINCENT CAUTERO APPROVED
CHAIRPERSON MATTHEWS: Thank you. Next item on the
agenda is 8-H-4, a discussion regarding the position of Community and
Environmental Services administrator. Mr. Dorrill.
MR. DORRILL: As I indicated to you last Tuesday, I
would be nominating today Mr. Vince Cautero for the position of
community and environmental services administrator. I've sent to each
of you last Tuesday afternoon a copy of his biographical sketch and
his resume. I'm just -- I'm going to hit the high points again just
for the purposes of presentation.
Mr. Cautero has about 15 years of combined experience.
He has over ten years with his current employer, which is Citrus
County, Florida, and the various similarities between there and here
that I alluded to last Tuesday. He has been either the acting or the
director of what they call their department of community development,
which is the same as our division of community development, for the
past six years. He was appointed the permanent director at the end of
1990. He had served as the interim director prior to that. His
references are very, very good, not only the references that he gave
us, but we sought out without his knowledge some additional
references, and I want to share those with you.
The leading environmental group in Citrus County is
called Concerned Citizens of Citrus County. I am just acquainted with
a former commissioner. He and his wife founded Concerned Citizens of
Citrus County. They have very good positive things to say about Mr.
Cautero in terms of striking a balance. There is not a Greater Naples
Civic Association or a -- what I would call a good government group,
but the leading good government group in Citrus County seems to be the
Greater Crystal River Area Rotary Club, and we spoke to their
president who also had very positive things to say.
In addition, we did a background check through the
assistance of the sheriff's department to make sure that there were no
surprises there. That came back. Mr. Cautero has received what I
call a letter of offering, and he understands that his position is
subject to your confirmation, is subject to a negative drug screening
test as part of a necessary preemployment physical, and is subject to
his written acceptance of our offer. His proposed start day would be
June the 5th, which is pretty quick. He will and has made plans to
attend our quarterly senior management training program that is
scheduled for the end of May. So he'll be traveling down here in
order to participate in our professional development. Proposed
starting salary is $64,000. He currently makes a little over
$57,000. And it's a pleasure in this particular case and after some
of the difficulties to be able to nominate him to you today.
CHAIRPERSON MATTHEWS: Other questions? Commissioner
Hancock, I believe, was first. You're second; and, John, you're
third.
COMHISSIONER HANCOCK: I agree, Mr. Cautero, like
others, is impressive on paper. I had the opportunity to speak with
him on the phone at length last week. And the one thing that
impressed me that Mr. Cautero had was a grasp of the physical reality
of the job that he would be assuming. In essence, I was very
concerned, as I discussed this with Neil, that he was very active in
the American Planning Association, which sometimes is based more in
theory than in reality. We talked about that at length, and, again, I
think we're -- we're dealing with -- with someone who, unlike what
we've had in that position in the past, understands that the focus of
that job is to determine the physical lay of the land in Collier
County and to get that where the residents want it to go. And I was
very comforted with -- with his understanding that this is not
theory. This is not voodoo. This is not witch doctor work. It's
physical building, construction, maintenance, and so forth. So,
again, I really enjoyed that. It was a very practical approach, and
if the board confirms it, I think we're going to have something in
there that we haven't had in the likes of our past administrators. So
I -- I hope to see that.
CHAIRPERSON MATTHEWS: Thank you. Commissioner
Constantine.
COHMISSIONER CONSTANTINE: Well, first, I need to
apologize. I did my research based on the fact it was witch doctor.
COHMISSIONER MAC'KIE: Oh, darn.
COHMISSIONER CONSTANTINE: No. Contrary to the opinion
of some that thinks we should not do any background checks on these, I
think it would be foolish for the board to vote blindly on someone.
County ordinance requires us to either confirm or deny the person. I
think we need to make an informed decision if we are going to fulfill
that ordinance.
I spoke with county administrator, and I'll give you
some of the quotes -- county administrator from Citrus County. I'll
give you some of the quotes he had to say. First word out of his
mouth was a fantastic employee, one of his best staff people. He said
totally reliable, well thought of throughout the community. Perhaps
most important of what he said was heads off problems before they
occur, does planning and is proactive, very competent. He closed his
comments by saying he was dynamite. He said he had mixed feelings.
He had -- while he -- on a personal note he was pleased to see Vince
have an opportunity to go elsewhere, he said he is going to be very
hard to replace. So on a professional level he hated to see him go.
I also spoke with some folks. My dad has a couple of
friends, very good friends, who live in the area up there who have
absolutely nothing to do with county government, and I thought it
would be interesting to get their perspective. They were only vaguely
familiar with Mr. Cautero. However, they had some friends in the
contracting industry to whom they put me in touch with, and all three
of those folks either just through business or through the planning
and review board up there had good things to say. He was motivated,
said he was efficient, very personable. And the final quote I got
was, the sort of person you need. So with all four of those
references, I am very comfortable that we will fill that need.
MR. DORRILL: I might add at least Tony Shumacher
(phonetic) I've probably known for 15 years is the county
administrator there. He and I are even now. Several years ago Tony
was city manager of Tarpon Springs, and he stole Tom Krandell
(phonetic) who was our utilities administrator, probably the best one
we ever had. And Tom went to work for Mr. Shumacher in Tarpon
Springs, so I'd like to think we're even.
CHAIRPERSON MATTHEWS: Because we got them back, huh, or
we will depending on the vote today.
Commissioner Norris.
COHMISSIONER NORRIS: Thank you.
CHAIRPERSON MATTHEWS: I'm -- I'm presupposing, and I
guess I shouldn't.
COHMISSIONER NORRIS: Mr. Dorrill, this -- this
gentleman came down to see us on our -- when we first advertised this
position some time back; is that correct? MR. DORRILL: Yes, sir.
COHMISSIONER NORRIS: Where did he rank at that time in
your ranking back in the original rankings?
MR. DORRILL: You'll remember, we used a committee to do
the short listing, and they did that independent of any involvement
from me, and he was a short-listed candidate from our committee. He
did -- and as part of the interview process, he was first on my
original list. Mr. Cautero was second on my original list.
COHMISSIONER MAC'KIE: You mean Ms. Bernstein?
MR. DORRILL: In that particular regard, the committee
could not reach consensus on anyone, and we were originally going to
invite the top two back. And I think it was safe to say that the top
two were from the committee's perspective Mr. Cautero and also Ms.
Bernstein, but I had him first on my list.
COHMISSIONER NORRIS: Okay. Let me see if I can refresh
my memory. Seems to me I recall, Commissioner Constantine, that you
were taken to task the last time for conducting your own private
investigation. Is that correct? Is my memory correct on that?
COHMISSIONER CONSTANTINE: I was taken to task for doing
background research and check on the individual we were asked to
confirm, yes.
COHMISSIONER NORRIS: My, how things change, huh?
CHAIRPERSON MATTHEWS: I'm not sure that's an
appropriate remark, Commissioner Norris. There are others, I'm sure,
in -- in the area and maybe on this board who feel that the background
check that he has done on this person, even though we may all agree
that he is a good candidate and probably will be confirmed, but that
background check may not have been a necessary thing. So I'm not sure
that's an adequate remark at this point. But, anyway, do we have a
motion?
COHMISSIONER MAC'KIE: Yes. I'd like to move approval
of Mr. Dorrill's recommendation and -- and also just my little side
comment would be that there's no question in my mind that everybody on
this board does what they do with the best possible motivations and is
doing what they think is the best possible job they can to serve
Collier County. And I am -- have the highest respect for the job that
everyone is doing and have no criticism of the process. If people
feel that it's appropriate to check individually, you know, God bless
them. I just would like for us to bring Mr. Cautero in with a strong
endorsement and a commitment to work with him, and I know he's going
to have that from -- from all of us. So I move approval.
COHMISSIONER CONSTANTINE: I'll second that.
COHMISSIONER HANCOCK: And I'd like to thank
Commissioner Hac'Kie for her comments. I think this is a very
important position. And it's important we should stand firmly behind
this decision, and I'm very much in line with your comments.
CHAIRPERSON MATTHEWS: I think it's the second-most
important position in the county directly behind the county
administrator. And I've read over the resume, and I'm -- I'm totally
pleased with what I see and can -- and can wholeheartedly support.
And I too believe that each of us do what we think we need to do in
order to support whatever vote that we're going to give. So I don't
have any problem with us doing our jobs, whatever they may be.
I'll call the question. All those in favor, please say
aye.
Opposed?
There being none, motion is approved.
MR. DORRILL: Thank you.
CHAIRPERSON MATTHEWS: We have a new development
services administrator.
MR. DORRILL: He's anxious. So while you're talking to
CPAs, I think I'll slip downstairs and give him a congratulatory phone
call and tell him we'll see him the 5th.
COHMISSIONER HANCOCK: While we're talking CPAs, can I
slip downstairs?
COHMISSIONER MAC'KIE: When is it that we expect he'll
be able to join us?
MR. DORRILL: He expects to be here June the 5th, but he
will be here in the interim attending that senior management training
session.
COHMISSIONER MAC'KIE: Great.
CHAIRPERSON MATTHEWS: Good, great.
Item #10A
RECOHMENDATION THAT THE BOARD OF COUNTY COHMISSIONERS REVIEW THE THREE
PROPOSALS TO PERFORM THE AUDIT FOR COLLIER COUNTY FOR FISCAL YEARS
ENDING SEPTEMBER 30, 1995, 1996 & 1997 - STAFF TO BEGIN NEGOTIATIONS
WITH ARTHUR ANDERSEN & CO., S.C.
Next item on the agenda is the Board of County
Commissioners -- item 10-A is a recommendation the Board of County
Commissioners review three proposals. I believe we have --
COHMISSIONER CONSTANTINE: Each of them will have 30
seconds to make their proposal.
CHAIRPERSON MATTHEWS: Well, I think when we said this
on the 18th we promised them 10 minutes. But, of course, if they want
to do it in less time -- but talking the numbers and talking
accounting, I'm not sure it's possible.
COHMISSIONER MAC'KIE: As bad as lawyers.
CHAIRPERSON MATTHEWS: I don't think there's any
particular method for doing this. Miss Hankins, do you -- I don't see
her. Miss Hankins? I need my glasses to see.
COHMISSIONER MAC'KIE: No, she's not in the room. Maybe
-- maybe Sue would want to call her and tell her we're --
COHMISSIONER HANCOCK: Bonus points will be given for
brevity, however.
MS. LEAMER: My name is Jo-Anne Leamet. I'm the
controller for the county. Kathy is supposed to be here. So if you'd
like, I can try and locate her, or I can answer any questions that you
have.
COHMISSIONER MAC'KIE: Maybe Sue is going to give her a
call.
CHAIRPERSON MATTHEWS: Yeah, if we can get Miss Hankins
here. We're going to listen to three proposals from the three firms
that have been short listed. And if this board doesn't mind, for lack
of any other way to do it, I'll call them alphabetically. And if the
other two firms would step --
COHHISSIONER CONSTANTINE: Into our soundproof booth.
CHAIRPERSON MATTHEWS: -- into our soundproof -- I have
no idea where that's going to be. I think there's sound all over the
building. But if they would do that.
COHMISSIONER MAC'KIE: Excuse themselves is basically
what we're asking.
CHAIRPERSON MATTHEWS: We're asking you to excuse
yourselves into some quiet area where the speakers are turned off. I
have no idea where that is.
COHMISSIONER HANCOCK: Representative Saunder's office
is right across the hall.
CHAIRPERSON MATTHEWS: Arthur Andersen alphabetically is
the first group, and you are here to make a presentation on a
three-year proposal for auditing.
COHMISSIONER HANCOCK: 10 minutes?
CHAIRPERSON MATTHEWS: 10 minutes.
MR. BRADLEY: Good morning. My name is Tom Bradley.
I'm a partner with Arthur Andersen, and we are very happy to be here
this morning. I understand you are talking to three firms. You have
a lot of business to do, and we will try to keep this brief, but we
also want to make it informative and really focus on the question of
why should you select Arthur Andersen for this project, which is a
very, very important project, and talk about how we exceed your
expectations and how we deliver value to our clients.
We have passed out a little booklet that you're looking
at this morning. We put some color in here so it would be nice and
lively and keep you awake this morning while you're talking to the
accountants. What I'd like to do is, we're just going to walk you
through this presentation. And if we could turn to page 1, that
covers the key people that are going to be working on the Collier
County engagement.
As I said, my name is Tom Bradley. I'm the partner in
charge of the Arthur Andersen government practice in Florida, so I
spend a very significant amount of my time -- majority of my time
working with large governments in Florida. Also two other very
important people that are here with me this morning, Victor Fields.
Victor is also -- or is an experienced manager with Arthur Andersen,
and Pam Kline, another experienced manager. Both Pam and Victor have
a great deal of experience working with counties, between them audit
three of the largest counties in Florida and in addition to that many
municipalities, school boards, and other government entities.
So let me just introduce a couple of other people that
aren't here today but will be very important to the team. First is
Brant Mackey and also Marie HcKenzie. Both Brant and Marie are
experienced government auditors, and they have experience, for
example, with Palm Beach County and Martin County and will work on the
Collier County engagement.
They will be on site 100 percent of the time that they
are assigned to the Collier engagement, will have no other jobs to
work on at that time. We feel it's very important that we have
experienced people working on -- on the team, people that are going to
be here working on the Collier County engagement to serve you in the
best way.
Moving forward to page 2, let me just spend a moment
talking about the way we serve our clients, something we call the
client relationship cycle. And again, as I said, our focus is to
exceed your expectations. Now, we start by at the top of this circle
here listening to our clients, understanding their business and
understanding their needs. Just like with any other client we work
with, we know that government is a business, and it's our job to help
you be successful and run your government like a business. And that's
how we've been able to be successful for the other government clients
that we have.
I'm not going to hit every point on here. I just want
to tell you the second item is teamwork. We believe very much in
working closely with your staff to make sure that we have a very
smooth transition to new auditors, and Victor is going to talk in a
minute about the benefits of changing auditors and the benefits that
we can bring, but it's very important that this is a team effort. And
our goal is having more phase time, more ideas that add value to you
in communicating our results to you, not just working with the people
in finance. Finance is important, but we will get outside of the
finance department, work with operating people, and, of course, always
report back to you, the board, which is -- is the group that we're
really working for, the taxpayers actually, but the board as a
representative of the taxpayers.
As I said, there are a great number of benefits we
provide by doing audits of governments, and I'm going to let Victor
now talk about that.
MR. FIELDS: Thanks, Tom. I just want to spend a few
moments talking about some issues that we think are important in
helping you make your decision. And we really want to start in
talking about our relevant experience and the benefit that that brings
to Collier County. In the last four years Arthur Andersen has audited
-- had more first-time through audits or, in other words, transition
audits than any other firm in Florida. And on page 3 there's a list
of some of our clients, including Palm Beach County, Martin, Fort
Lauderdale, and City of Hialeah. Those are some of the larger
governments that we have had first-time-through experience on.
There's a few key issues in a first-time-through
engagement, and the first is a smooth transition, because we want you
to be as happy with us when we finish our work as you were in
selecting us. And so we need to make sure that we don't disrupt the
operations of the various finance departments and other departments
within the county as well as we need to provide you with a -- a fresh
look at your operations. On these engagements we've averaged more
than 40 management comments in our initial audit. More significantly,
over 50 percent of them have been business or computer related. So in
addition to conducting a very timely audit, we're also concerned with
helping you improve the operations and efficiency of the county. The
balance of them are -- were internal control, so we're also obviously
concerned in enhancing controls.
The other point that we want to bring to your attention
is as you look further on this page, the other clients that we have in
our Florida practice is the -- the depth of our experience. We have
over 40 qualified government auditors in our practice fully available
to serve Collier County, our needs, and we've identified a client
service team. So with them we bring a ton of diversity and experience
to be able to provide those meaningful recommendations to improve
operations.
The other thing that we think that's -- that's important
in a transition in that we think has been successful for us in
obtaining clients and retaining them is designing a specific action
plan for our clients, and I'm going to have Pam Kline just talk about
our action plan for Collier County. Pam.
MS. KLINE: Thanks, Victor. I get to talk to you about
the specifics. There's five points that we are going to address, and
you'll see those on pages 4 and 5. These have been successful, and we
think they're really important to follow. The first is having a
Collier County focused team orientation training, getting everybody in
the same room, both within the firm and within your -- our firm and
your -- your staff, getting everybody oriented to get to know each
other, to know the basic operations of the county. We will provide
specific training with respect to each of the constitutional officers
since each of their organizations are different and getting everybody
to ground level before we take off instead of using your audit as a
training ground for them. As Victor said, we have over 40 government
trained auditors. They already have a basis for governmental
accounting, but county government is somewhat different with respect
to each of the constitutional officers, and we have that experience
that we can provide to them.
The second is standardized tools for routine
nonvalue-added tasks. We don't want to spend our time doing all the
administrative stuff when we can be out reviewing your operations and
everything. So we have standardized a lot of the administrative
paperwork that takes place.
The third is global best practices. We'd be happy to
discuss this at greater length, but since we're limited with time,
I'll just touch on it briefly. Global best practices is a tool that
Arthur Anderson has developed which improves -- or we use to improve
our client's operations. It's a CD-rom-based tool. It's a knowledge
base which pulls together information about how the best organizations
in the world, both businesses and governments, perform various
processes, such as payroll, accounts payable, and closing the books.
We'll review the processes with respect to each of these and suggest
ideas or ways for you to improve in each of those areas.
The fourth part of our action plan relates to an HIS
operations review. We will have -- beginning the audit, we'll have
somebody come in, computer expert, and review your HIS operations and
controls and provide you with suggestions, also determine at what
level we may place reliance to limit some of our audit testing.
And the last and the key point of our action plan is
that we have timely continuous communication. Without that you will
not end up being as happy with us at the end as you are in the
beginning. That's something we really pride ourselves on. We want to
have regular meetings. We will involve ourselves. Tom said more face
time. If that -- if you guys request weekly meetings, we'd be happy
to do that, but timely continuous communications so that nothing is a
surprise to you when we either present our audit report or our
management letter. And with that, Tom will close.
MR. BRADLEY: I'd be very happy to answer any questions
that you all may have.
CHAIRPERSON MATTHEWS: Any questions? Commissioner
Constantine.
COHMISSIONER CONSTANTINE: Just one, Brant Mackey, Marie
HcKenzie, the two folks who will be here full time. MR. BRADLEY: That's right.
COHMISSIONER CONSTANTINE: How much experience do they
have, A, overall, and, B, in a government this size?
MR. BRADLEY: Pam, why don't -- since you're more
familiar with Brant, why don't you talk for Brant.
MS. CLINE: I can speak specifically with Brant Mackey.
He is my senior on Palm Beach County. He has been with the firm going
on five years. He's nearing his five-year mark and has been on the
audit of Palm Beach County for three years now. He was involved in
the first-time through when we did Palm Beach County.
MR. BRADLEY: Marie HcKenzie has four years with the
firm. She's worked on the audit of the City of Fort Lauderdale and
also Hialeah. So she's an experienced government auditor and a very
experienced with our three also.
COHMISSIONER CONSTANTINE: Thank you.
CHAIRPERSON MATTHEWS: Commissioner Hancock.
COHMISSIONER HANCOCK: One of your points in your action
plan is an HIS operations review. My question is, how extensive is
that operations review based on -- are you trying to point out
weaknesses that affect the audit, or are you taking a comprehensive
overall view that may benefit the county beyond the parameters of the
audit?
MR. FIELDS: Right. What we have to do is first
identify all the information systems within the county and how they
interface with one another.
COHMISSIONER HANCOCK: Or how they don't.
MR. FIELDS: Or how they don't and what information
we'll utilize for our audits. And in doing that we identify where you
can make improvements, and so we share that knowledge with you as well
as designing approaches for our testing on where we can rely on
controls, whether we'll have to audit around the box or not.
COHMISSIONER HANCOCK: Okay.
MR. BRADLEY: If I could just add to that briefly, one
of the things -- because we didn't have a lot of time to talk this
morning -- that we didn't go into a great deal about is the background
of Arthur Andersen. And many people have heard about Arthur Anderson,
happens to be the world's largest professional services organization.
And I'm a person that doesn't really think big is better, but Arthur
Andersen got there not by merging with other firms, but because of the
quality of the work we do. We're the largest consulting organization
in the world. And, again, we have gotten that way because of the work
that we've done. And like Victor was talking about, our HIS group --
we have more computer consultants than really any other organization.
And on a job like this, we'll have those people come in really for the
audit, but the whole range of services that Arthur Anderson has are
certainly available to Collier County.
CHAIRPERSON MATTHEWS: I -- I have just a couple of
questions really. I've been over this proposal a couple of times. I
guess one of my questions is you're suggesting in the proposal that
2,800 hours is the time that you think you can accomplish the audit
for Collier County in. And if you're going to be the new auditors and
you have a certain amount of time to acquaint yourself with our system
and so forth, though, I know all governments are similar, is 2,800
hours enough? And how much time are you figuring to need for the
learning curve?
MR. BRADLEY: Right. Pam, would you like to address
that question?
MS. KLINE: I was actually very involved in the 2,800
hour estimate. That is right now, without going through all the
detailed books and records, my best guess, if you will, as to what it
will take to get us through a first-time through. Obviously the
second year will be significantly less. By significantly, I couldn't
tell you, maybe five hundred, a thousand hours less. The initial year
we are not only meeting people and trying to find out who does what,
where, when, why and how, we're also documenting that. We are to some
extent drawing on our standardized forms that I had addressed earlier
and also drawing on our resources that we've got locally with our
experience in the other counties. I don't think that's an unrealistic
-- I don't think it's too low. That is my honest best guess --
CHAIRPERSON MATTHEWS: Okay.
MS. KLINE: -- and I would expect to see 500 less --
MR. BRADLEY: When Pam says best guess, that's a
scientific estimate. It's based on our work recently over the last
three years of taking over the Palm Beach County audit and their
first-time through there and then the Martin County audit, which is
somewhat -- somewhat more comparable in size than Palm Beach County.
So it's based on what we've done there and, again, taking experienced
people that understand what's a county, how is a county different than
a municipality or a school board and not using a cookie cutter
approach but using the tools that we already have so that where it
doesn't make sense to create a different wheel, then we don't need to
do that. So that's why we can focus the hours where they really need
to go.
CHAIRPERSON MATTHEWS: But I noted in here that the Dade
County audit was -- you've committed 6,500 hours to that. MR. FIELDS: Yes.
CHAIRPERSON MATTHEWS: And they're considerably more
than twice our size.
MR. FIELDS: Oh, yes.
CHAIRPERSON MATTHEWS: I'm just trying to get a
relationship of what the start-up time is going to be.
MR. FIELDS: That was after five years on that
particular engagement, so those hours were substantially reduced.
Also that was only a segment of Dade County. They have their public
health trust, which is a separate audit, as well as the airport
authority is a separate audit as well. So that's, in essence, the
general government, for lack of a better term.
CHAIRPERSON MATTHEWS: Okay. So I -- I'm just trying to
get a feel. You would expect in the second year and the third year
for the twenty-eight hundred dol -- for the twenty-eight hundred hours
to be reduced to somewhere around twenty-two, twenty-three hundred.
MR. BRADLEY: I would think so.
MS. KLINE: Possibly around 2,000 if your county, in
fact, turns out to be comparable with that of Martin County. The
hours on Martin County are approximately 1,800.
CHAIRPERSON MATTHEWS: Okay. 1,800, I thought I read in
here a thousand?
MR. FIELDS: That's considered reduced by.
MS. KLINE: Reduced by a thousand.
CHAIRPERSON MATTHEWS: Okay. All right, I'm sorry.
Thank you.
MR. FIELDS: Thank you very much.
MR. BRADLEY: Thank you.
CHAIRPERSON MATTHEWS: Our next presenter.
MR. CUYLER: Madam Chairman, I just spoke to Mr. Brock.
He indicated to me that he has seen some case law -- apparently there
is a case out there that talks about the auditor's ability to sit in
on the other auditors' presentation and whether that is a sunshine
consideration. So I would suggest to you -- I haven't read the case.
I haven't seen the case, but Dwight tells me he's comfortable that
that needs to be done.
CHAIRPERSON MATTHEWS: That the other auditors sit in on
the presentation?
MR. CUYLER: Yes. So I'm going to go with the chair's
COHMISSIONER CONSTANTINE: Can I make a suggestion that
we inquire with them all if there's any objection to not doing that
since with the first we didn't do that.
MR. CUYLER: He says that the case speaks to the
argument of the county being we didn't tell them they had to. We just
asked them to, and they went out. And they, you know, felt that they
needed to do that. So I haven't seen this case. Apparently it's some
-- some case that Dwight has seen.
COHMISSIONER MAC'KIE: He says it's a Florida case -- I
mean Second District case. Do we have any idea if it's -- give you
any details?
MR. CUYLER: He didn't say. It's probably at least a
Second District case.
MR. BRADLEY: I would -- I would just say that many
times -- I've proposed on many, many government jobs, and usually as a
professional courtesy we'll all just agree to not be in the room when
the others make their presentations. I've seen it both ways, but
normally that's what we do. And, you know, we're very happy to --
CHAIRPERSON MATTHEWS: As a CPA, that's why I asked it.
MR. BRADLEY: That's fine with us. I'm sure the other
firms --
MR. CUYLER: Let me talk to the third group.
CHAIRPERSON MATTHEWS: Okay. If you would, before we
get started, if you will do that. We'll take about a one-minute
break, Mr. Cuyler, while you do that. If Coopers and Lybrand wants to
get set up but not yet start the presentation until Mr. Cuyler comes
back.
CHAIRPERSON MATTHEWS: Okay. Do you want to go ahead
and get started?
MR. MEYER: Yes, good morning. My name is Rudy Meyer.
I'm the managing partner of Coopers and Lybrand's offices in Naples
and Fort Myers. Collier County has been a very, very important client
to these offices over the past eight years. I'm here to assure you
that my firm will continue to be committed to providing quality
services to the county.
When you hear -- when you hear what we have to say, I
believe that you will also go along with the idea that Coopers and
Lybrand continues to be the best firm for Collier County. Phyllis
Jones will be the engagement partner. Phyllis has spent a
considerable amount of time in connection with the county and has
shown a great deal of pride in her service to the county. Phyllis
will discuss some changes we're making to the engagement team to bring
in a fresh look. She will also address the benefits using the local
firm and Coopers and Lybrand's experience in the government sector.
Jim Caylor, the engagement manager, will review our engagement
approach, identify the broad range of services we use to audit the
county. At this time I'd like to bring up Phyllis Jones.
MS. JONES: Good morning. My name is Phyllis Jones.
Just as a sideline, I think this is -- I recall back eight years ago
when I walked in here the very first time. I think I had a baby that
was four weeks old, was waddling in here trying to fit into a suit so
that I could make my very first presentation. Eight years later now
I've got many more wrinkles, a few more pounds, but I'm still just as
pleased to be here as I was eight years ago.
COMHISSIONER NORRIS: How old is the child now?
MS. JONES: I only know how old she is because I know
how long I've served Collier County, because I know how old she is.
She'll be eight shortly.
In the past eight years I've seen a lot of changes here
at Collier County. I've been involved with a lot of them. I've given
advice when asked. I've tried to bring in services when they're
needed and have tried to be here whenever you needed my advice.
You know, in public accounting our experience shows that
there's four reasons why you would change auditors. One is
relationship issues. Two is service issues. Three is fees, and
fourth is a mandatory rotation policy. In dealing with relationship
issues, that's really what my relationship is and the continuity of
relationship that we have with -- with Collier County. When the main
person changes, then very often counties will look at their
relationship with their auditors.
As the continuity here since 1987, I've seen -- helped
new people come into the county. I've helped indoctrinate them and
also have been involved in bringing new team members in. For example,
just last year we brought -- you brought on board -- a new finance
director was brought on board to Collier County as well as a promotion
of a new controller. As they can attest, I've spent many hours with
them over the last year discussing with them the various issues that
the county faces and really items that I know that they needed to be
aware of.
Quality of service relates to the performance of the
audit as well as the type of services that we provide on a year-round
basis. I think our track record over the last eight years for quality
services is exceedingly good.
The third item is fees. Our fees for the last eight
years have been within the range of what is charged to other counties
of your size and complexity.
And lastly is mandatory rotation policies. Initially
auditor rotation sounds like a good idea. However, there are very
real risks involved in mandatory auditor rotation. Included in these
are the very real possibility that you're not going to receive the
same level of service that you've enjoyed in the past. The second is
that new auditors are going to spend a lot of time just trying to
learn who you are. And in the first year they're going to be doing
that rather than necessarily spending the time auditing your
services. Auditor rotation is appropriate if there are relationship
issues, service issues, or fee issues. Absent that, we find that
auditor rotation just is not worth the risk.
There are several examples right here in southwest
Florida of counties who have considered auditor rotation. For
example, DeSoto County and Charlotte County, we've been the auditor
since 1979 there. Every few years we go through this process with
them so they can evaluate what our services have been with them. And
since 1979 they have decided also that changing auditors is -- is not
in their best interest. They also have concluded that change does not
necessarily produce a better audit.
Since a couple of you are new since I made my last
presentation, I wanted to show you just briefly our county government
experience. There's 17 different counties that are listed here whom
we have provided audit services for. I need to mark in that very far
left county right now is Escambia County, because we were just hired
to be their auditors also, so we're now up to 18. Coopers and Lybrand
considers government auditing, particularly county auditing, to be a
cornerstone of our practice here in Florida. I spend a tremendous
amount of my time, as you know, auditing governmental units throughout
the State of Florida.
At Coopers and Lybrand we have divided our practice into
industry specializations. We realized a long time ago that you had to
know your client's business before you could audit them, and because
of that the teams that we have that serve government clients are
specialists in the government industry and spend the majority of their
time auditing governments. We don't audit just one or two or three.
We audit many governments.
The key point that differentiates us from our
competition is our local presence. We are the only big six national
accounting firm with offices in Naples and in Fort Myers. Neither
Peat Marwick nor Arthur Andersen have offices here. We are local
taxpayers. They are not. And in spite of pledges to the contrary, a
firm whose closest office is two or three hours away cannot provide
the level of service that a locally based person can. You know, an
audit is a three- or four-month effort. Quality client service is a
year-round commitment. Telephones and faxes do not replace the human
touch that being here on a year-round basis affords.
Our local presence here also means that we're aware of
all your issues. As local taxpayers and local residents, we know not
only on a professional basis, but a personal basis what problems are
facing the county and trying to help with solutions. The people --
many of the people who are assigned to this job are local taxpayers
and local homeowners.
If you can read this, you're doing very well, but I'll
point it out to you. It's kind of small. This is our engagement team
chart, and there's two things I want to point out to you about this
chart. Here I'll be the engagement partner. I'm the continuity for
the job. Having been here for eight years, I do know the issues that
face the county and have been involved in a lot of what's been going
on.
However, because we do believe in bringing in a fresh
look and having fresh eyes look at things, we have brought in Jim
Caylor who will be our engagement manager this year for the first
time. Jim has a tremendous amount of experience in public accounting
and in governmental accounting. He is -- has been the engagement
manager for DeSoto County, also the City of Punta Gorda, as well as a
number of other governmental units here in southwest Florida.
Wayne Burks will serve as my concurring partner. He has
in excess of 20 years of government accounting experience and brings a
wealth of knowledge of government and particularly county issues to
you. He will serve as my backup if I'm not available and as a second
set of eyes for me.
Also with us today is Karen Harris. Karen will be our
lead senior associate and will serve on the board and a single audit
as our lead person this year on this. She is also a new fresh look
that's coming in to the audit. Karen has prior experience just last
year at Charlotte County working on the engagement so brings relevant
experience to Collier County for you.
Looking forward, the county faces a number of
challenges. We've got growth. We've got demands for extra services.
We've got additional revenues coming in because of this growth.
However, as we're all aware, revenues are not going to be covering the
demand for new services, so we have to be innovative in our
approaches. You can rely on Coopers and Lybrand to help position
Collier County for growth. We have specialists in privatization who
can help you consider this option in a variety of areas, for example,
in the area that you've just been considering with the landfill. We
are committed to Collier County. I'm personally committed to
continuing year-round, day-to-day service to you. Jim.
MR. CAYLOR: Good morning. I'd like to have a brief
discussion about the Coopers and Lybrand's government services
approach to the Collier County audit. First on the list here, as
Phyllis mentioned, the firm has some specific industry
specialization. I would also like to add that the firm has a state
and local government practice group that serves as a national
resource. That group is responsible for identifying issues, of
course, communicating problems common to governments, and filtering
that information back to the local offices including the Naples and
Fort Myers offices.
In addition, another important part of our audit
approach is -- includes the use of firm specialists when needed. For
example, when we look at your self-insurance program, we bring in our
own actuaries to review your information and evaluate it. In
addition, the firm has a risk management questionnaire that has been
used in the past and has been very beneficial in communicating with
your key people what the risks are in that particular program. Also
your computer system is subject to review and evaluation by our own
computer specialist. Her name is Maggie Thoeni, who was on the chart
earlier. She is responsible for insuring that we audit through your
computer, not just around it.
Next on the list I'd like to just point out EDP
auditing. As I mentioned, we have assigned a computer specialist to
the audit engagement this year. And in the past we've considered the
county's overall organization structure --
CHAIRPERSON MATTHEWS: Your ten minutes has expired, so
you're going to have to wrap it up.
MR. CAYLOR: All right. I just wanted to say that we
will continue to evaluate your computer and your controls relevant to
the data processing environment. And, lastly, I just wanted to point
out that this year we'll be introducing what's called class
implementation. It's the Coopers and Lybrand audit support system,
which we believe will help computerize what we do during the audit,
streamline the information flow, help us deal with issues more timely,
and the end result is to provide a more efficient audit. Thank you.
CHAIRPERSON MATTHEWS: Are there questions?
Miss Jones, I had one question. On the proposal that
was given to us some time ago, you had a different person's name as
the lead senior associate.
MS. JONES: That's right.
CHAIRPERSON MATTHEWS: Would you give me a little more
biographical sketch of Miss Harris?
MS. JONES: I'd be glad to. Let me mention what
happened. Since the time of the proposal a few weeks ago, Laurel
Czerwinski came into my office last week and said, "Phyllis, I've got
good news and bad news." And I said, "Well, what is that?" She says,
"I'm pregnant for the third time." And I said, "That's wonderful
news, Laurel. I'm so happy to hear it." And she said, "The bad news
is I'm going to work for a client." And so as of -- she's not even
resigned yet, but that is -- so I quickly decided rather than keeping
her on the list as if she were going to work here, I wanted to let you
know that we were changing that.
Karen Harris, I did bring her along. Karen has four
years of experience. She has been working on a number of the local
districts here in Collier County. She's worked on Charlotte County,
was their lead senior associate there last year and has attended -- I
think we've got about 200 hours of CPE credits for Karen, again, in
the government industry. She is well qualified, and we're real
excited to assign her to the Collier County engagement this year.
CHAIRPERSON MATTHEWS: Okay, Commissioner Hancock.
COMMISSIONER HANCOCK: My question is regarding your
rotation of senior people on the team. I think it's great that you're
doing it this year. My question is, one, have you done it in the
past, not through attrition, but for the purpose of bringing in fresh
people. I mean put mind at ease that you're not doing this simply
because there's competition this year.
MS. JONES: There was competition in the past. Yes, we
have done that in the past. We have brought in senior people two
years ago. A gentleman by the name of John Abbott worked on the job
for the last two years and was one of my -- I'm left-handed, so I'll
call him my left-hand man in helping get through the audits. He's
very, very experienced. He's now in our Miami office, and I preferred
using people who were more accessible to me. And he was willing to
continue on the job, but I felt a fresh look after two years was an
excellent idea.
CHAIRPERSON MATTHEWS: Okay. Are there other
questions?
On -- on the proposal, Miss Jones, you indicate that the
audit you estimate twenty-one hundred -- twenty-one and eighty hours
for the upcoming audit procedure. And, of course, if your company is
retained, there won't be a learning curve or so forth. MS. JONES: That's right.
CHAIRPERSON MATTHEWS: Well, I guess there might be
because the engagement manager's changing and Maggie --
MS. JONES: Well, Maggie Thoeni's been here before.
CHAIRPERSON MATTHEWS: She's been here before?
MS. JONES: Yeah. Maggie Thoeni has been here -- was
here last year as well as our two other senior associates that we have
associated -- listed. Roxanna and Jonathan were both here in the
prior year also.
CHAIRPERSON MATTHEWS: What type of learning curve are
you anticipating for Mr. Caylor and for Miss Harris?
MS. JONES: Minimal at most. Their experience with
county governments already puts them ahead. They've already looked
through our files. They know how we audit this place. We know what
the issues are. So I -- I think our budget reflects the fact that we
have become very efficient at the audit process here. It also
reflects the fact, very honestly, that we'll have some returning
people at the county staff level also from last year. And so I think
there's going to be a synergistic effect here of being able to reduce
the time.
CHAIRPERSON MATTHEWS: Commissioner Norris.
COHMISSIONER NORRIS: Miss Jones, you're estimating
2,180 hours, I believe it is?
MS. JONES: Uh-huh.
COHMISSIONER NORRIS: What did you actually bill last
fiscal year?
MS. JONES: We have a fixed fee. Our actual audit hours
last year were approximately 2,500. That was due to some stopping and
starting of the audit because of some staffing issues at -- at the
county level and some additional time that was required this year that
we don't anticipate next year.
COHMISSIONER NORRIS: Okay. Thank you.
CHAIRPERSON MATTHEWS: Thank you.
MS. JONES: However, I will say, though, that if our
hours are higher than that, we do have a fixed fee. So if we do come
in higher, we don't charge you more.
CHAIRPERSON MATTHEWS: Okay. I don't think there's any
further questions.
MS. JONES: Thank you very much.
CHAIRPERSON MATTHEWS: Will you let KPHG know that we're
ready for them?
MR. JONES: Good morning.
CHAIRPERSON MATTHEWS: Good morning.
MR. JONES: We're the best. I'll match any price you
have and promise you the best of service. So did we get points there
now?
CHAIRPERSON MATTHEWS: It's a great start. Now back it
all up.
COHMISSIONER HANCOCK: What about meeting any price we
have?
MR. JONES: Okay. We want the work. No, it's a
pleasure to be here to talk to you. I wish we had more than ten
minutes, and I know that's a limitation on us and on you, but I also
know that it's not the most exciting thing to talk about. But we are
excited about the opportunity to work with Collier County as you go
into the 21st century and helping you address the needs and the
changes that are happening all around us.
With me today is Lori Hissen who is the designated
engagement manager as well as Jodi Whitcomb who would be the primary
engagement senior. There are some other people listed on our proposal
as part of the engagement team, but we have our annual government
roundtable in Atlanta this week. In fact, we flew down from Atlanta
last night to do this presentation, so some of the people are up
there.
I hope you had an opportunity to read the proposal. I
know they're quite long and detailed, and by their nature, try as we
want to, they're not something that really commits or connects on the
enthusiasm that we have about serving Collier County. But we are
enthusiastic. We feel like we have the best team possible.
Also I wish I had the opportunity to meet with you each
individually because the most important thing on doing these audits,
understanding what your needs, issues, and concerns are as elected
officials for Collier County. That would be something we would do
immediately after being appointed as auditors. It's probably one of
the most critical phases, because you're the ones that are accountable
to the public, and it's our object to serve the board and to meet your
needs as well as the basic needs of the audit.
I want to just mention a couple of things regarding what
I think differentiates KPHG, and then I'm going to turn it over to
Lori who is going to talk about how some of these things will impact
Collier County, and then Jodi will talk about our audit process. But
there's primarily two differences. I think if you looked at our
proposal, there were a lot of differences that we tried to highlight.
But the two that I'd like to focus on is that; first, we are the only
accounting firm that is structured along the lines of business. All
the other accounting firms have their audit, consulting, and tax
departments. We have five lines of business; government, financial
services, manufacturing, retail, and information and communication.
And we have done that -- we did that about a year and a half ago,
because we found that our clients had much more specialized needs than
they had in the past.
I'm sure we all sometimes just wish things would slow
down a little bit and not have so much change, but we realize our
clients are going through a lot of change, and they need people that
understand their businesses better than anybody else. So by going
this route, essentially the three of us focused a hundred percent of
our time in government services. And the same goes with the
consultants that are designated to government services and the tax
people. There are state and local tax issues that you all are
affected by. We work very closely as a group. This -- this
roundtable we had was our consulting people and our audit people. And
our objective is to provide you with the best possible service.
The second thing that I think differentiates our work
that we do is our public accountability audit, which Jodi will talk
about. But there are two main things there. One is the concept of
materiality. We recognize that materiality is not so much, you know,
a dollar amount in relation to financial statements as much as it's
what's going to be in the headlines in the newspaper the next day. I
mean our goal is to be sensitive to those issues even though
dollar-wise they may not be material, but we know they are a concern,
and so our auditor is heavily focused on that. They are things that
we believe firmly that the audit takes place throughout the county.
It doesn't take place in the finance department. It's an audit of the
county government including all of their operations, and we devote a
lot of time to that.
I'm going to turn it over to Lori now to talk a little
bit about some specifics regarding Peat Marwick.
MS. HISSEN: Good morning. I'm Lori Hissen. As Chip
said, I'm the designated engagement manager. As Chip mentioned
earlier, Peat Marwick is now structured on the lines of business
approach, and in doing so the firm has identified government services
as an important market where they want to focus their efforts. The
importance of the government service practice is further enhanced by
the fact that the firm has designated a significant amount of
resources and developing and also in training professionals in
providing services to our governmental clients beyond the traditional
attestation services. Some of these include cost allocation plans,
activity based costing, reengineering government, benchmarking,
performance measures, and those type of things to mention a few. Some
of our local government clients have already reaped the benefits of --
of our experience here. We now prepare cost allocation plans for
Hillsborough County. We either are performing or have recently
completed performing performance audits on the Hillsborough County
Library Department, on the Tampa Sports Authority, and on the Juvenile
Welfare Board of Pinellas County. Even -- even if these clients had
not selected Peat Marwick to do this work, I think the important thing
is that through our training and through our experience, we have the
ability when we're doing audits to identify areas of improvement that
we can bring to your attention.
I'm sure in reviewing the proposals you could see that
between the firms proposed, experience between us was probably fairly
similar. Maybe some had more county or more city or independent
district, but basically our experience was probably pretty
comparable. And I think the thing that sets Peat Marwick apart from
the others is that we can provide more a full-service engagement as
opposed to just an audit. As Chip mentioned, we're out at the
departments. We go out to utilities or public works or wherever they
may be and look at the operations and try to identify areas that they
can improve upon while we are auditing the financial statements.
For Collier County we have identified several of our
best professionals to be a part of this full-service engagement team.
All of them have specific relevant government experience that will be
beneficial to the county and insure that there's a smooth transition
to Peat Marwick as the auditor if you should so select. Of the
individuals identified in the proposal, Chip, Jodi, and I would
maintain primary responsibility throughout the term of -- of the
contract unless one of us would win the lottery or something.
To Collier County we extend our commitment to -- to most
-- what we do for most of our governmental clients, and that is we
would provide members of the county staff with eight hours of CPE that
could be done either here or at our local training conference. And
also we usually give 40 hours to the county, which at your discretion
we would spend looking at an area where maybe you had some concerns in
the county government. In the past some of these reviews have
included assistance in computer acquisition, reviewing of purchasing
and payroll policies and procedures, and -- and in Naples we looked at
their beach parking practice. And with that I'll turn it over to Jodi
to talk about the public accountability audit.
MS. WHITCOHB: Hi, I'm Jodi Whitcomb. I will be the
engagement in charge, which I will be primarily responsible for the
day-to-day performance of the audit. I will be on site during the
interim process and the final phases. You will see my face every
day. I am talking about the public accountability audit that Chip has
mentioned.
We go a step further beyond the traditional financial
audit where that just gives you your general comfort, your general
control. We go beyond in saying we know that as public officials, you
are agents to your citizens, and you are accountable to everyone at
large, and with that comes demands. With that there is a perception,
so we give you those additional assurances that the controls that
management has set up are there; they are adequate; and they are
functioning as they should be.
And as has been said, we will go out to each of the
departments. This is a county-wide audit. We are not going to focus
in the finance department. I will be primarily responsible for
talking to people from the staff all the way down to supervisors,
everyone. I will be trying to find out the controls, make sure
they're there, and make sure they're functioning properly. We go --
we can provide the attention and the service that we think you need,
so we hope you will give us that opportunity.
MR. JONES: In closing, I think what we offer you is a
very fresh perspective to the audit of Collier County, one that's
different than you've had in the past. Sometimes you get a fresh
perspective with different faces on the job. But, you know, I think
all the firms have different approaches. I think this is something
that would be of benefit to the county.
In our proposal we had a total-hour budget of about
3,000 hours. Roughly 800 hours of that was our first-year time that
we anticipate to get that detailed understanding of the county and its
operations. We think future audits would be about 2,200. We had a
fee that was quoted in there. Obviously we don't have the benefit of
the incumbent of knowing specifically how long it talks (sic), but
we're willing to be very competitive on our fees.
We don't have a physical presence as far as an office in
this area, but we have a long list of very prestigious clients that we
list in our proposal. In fact, we rent condominiums down here for a
big part of the year where our people reside. Two of our partners,
believe it or not, live in the Naples area, and is that the ten-minute
sign?
CHAIRPERSON MATTHEWS: That's your ten-minute sign,
yes.
MR. JONES: Okay. Well, I guess just to wrap it up, we
would love to work with Collier County. We think we've got the best
people. We've been able to demonstrate a successful relationship with
our other clients here, and we think that you would get excellent
service. I make a personal commitment that I will meet with each of
you on a regular basis and make sure you're satisfied with the service
and that it hopefully is exceeding your expectations. We'd be happy
to respond to any questions that you have.
CHAIRPERSON MATTHEWS: Are there questions?
My general line of question has been hours and the
learning curve, and you've already addressed that, so I don't have any
additional questions other than the -- you mentioned 40 hours and kind
of -- we pick it kind of work. Is that in your base bid, or is that
MS. MISSEN: Yes, it is. And usually what we do in the
planning process is if we would meet with -- I don't know if you have
the audit or a finance committee. And we would mention to them, you
know, it's at the discretion of the board what we -- what we would
focus on for those 40 hours.
MR. JONES: Gives a little extra service, and usually
there are some things that you like to have your auditors look at or
internal audit so --
CHAIRPERSON MATTHEWS: Are there additional questions?
Doesn't seem to be any. Thank you. MR. JONES: Thank you very much.
CHAIRPERSON MATTHEWS: Yeah. Miss Hankins, there --
there is a great deal of discussion, and I'm going to rely on Mr.
Cuyler to stop me if we need to to halt this line of investigation.
But there was a great deal of discussion in the audit selection
committee about the audit that was recently completed, and I was
wondering if you would share with the -- with this board some of the
difficulties you experienced.
MS. HANKINS: In terms of the overall consensus of the
audit committee, what we heard was that they can work with any of the
three firms. There is obviously an advantage to a firm that has been
working the job versus the learning curve with new firms. On the
other hand, the last year was a particularly difficult one. As
Phyllis had indicated, I was new, my controller was new; and -- and
several staff members were new. So from our end it was -- it was hard
getting on the learning curve, but we also had difficulty with the
team that was assigned this year in terms of their newness. Phyllis
was without a doubt the person who pulled it off. She -- she stayed
focused, and she gave us answers when we needed them. We've addressed
these concerns with Phyllis if she were to be selected, and she's
assured us that the composition of a new team would be different.
I felt that some of the issues that the audit committee
talked about were the amount of time that the staff was spending
assisting the auditors. It seemed to be higher than most of us had
experienced in -- in other places. And, again, that may have been
just the combination of everybody appearing to be new. But those were
some of the issues that we ran into as the audit committee.
CHAIRPERSON MATTHEWS: Commissioner Hancock.
COMMISSIONER HANCOCK: Again, my learning curve now
kicks in. I assumed that there is -- we heard discussion of hours and
fixed fee and so forth. Do we set a fee, or do we negotiate a fee
based on who we choose? Please explain that process.
MS. HANKINS: Yes. The process is according to the
statute that you as the board will rank the three firms that you've
heard. Based on that ranking, the number one firm, your chair will
open that sealed bid envelope. It has not been opened at this time.
The intent is that you look first to qualifications and then next to
price. You'll open that up, see if that's an acceptable bid or if you
want to negotiate. You may stop that negotiation and -- and reject it
and go to the next one and open the envelope and the same thing with
the next one. You may stop that negotiation, go to the third one,
open that envelope. At any time you're not to be having all three of
them go at one time but, rather, that you're talking to one firm at a
time, and you stop your negotiation and go to the other. You have the
option of going all the way down to all six of them. But, generally
speaking, the top three will -- will suffice in terms of coming up
with a good audit firm that you select.
COMHISSIONER HANCOCK: Thank you.
CHAIRPERSON MATTHEWS: Commissioner MAc'Kie.
COMMISSIONER MAC'KIE: Is there some sort of industry
standard about this rotation question?
MS. HANKINS: There's not actually an industry
standard. There's really two schools of thought. One is that
bringing in new firms gives you a fresh look and lets you renegotiate
what you as the client want to see and how much you're going to have
your staff do. The second line of thought is that as long as the firm
that you're using continues to rotate the staff internally, you should
get a fresh look, and you should be able to renegotiate that each
year.
COMMISSIONER MAC'KIE: Is there a pattern among local
governments that you have experience with or -- I'm just -- I can sort
of see the logic behind both of those lines of thought, and I'm
curious what -- which of them -- if one of them is more often adopted
by governments.
MS. HANKINS: My experience overall is that generally
after five years commissions tend to look at rotation.
COHMISSIONER MAC'KIE: The concept makes sense to me.
And then I had the concern that, Commissioner Hancock, I didn't
understand the process either; and the price issue, of course, comes
into play.
MS. HANKINS: It's very unusual. It's just for
auditors.
CHAIRPERSON MATTHEWS: Commissioner Hancock.
COHMISSIONER HANCOCK: Question for Mr. Cuyler. I
assume because we're doing individual rankings that the board cannot
have general discussion because I'm in a position here where I have a
CPA on my left and a gentleman with a financial background on my
right, and I value their opinions and thoughts. Can the board have
discussion on their preferences prior to doing the individual
rankings?
MR. CUYLER: That's what the purpose of this discussion
is --
COMMISSIONER HANCOCK: Okay.
MR. CUYLER: -- is to talk about it.
COMMISSIONER HANCOCK: So if I were to ask Commissioner
Matthews, golly, gee, what do you think, she can answer me, and we
don't have a problem in the ranking process; is that correct?
MR. CUYLER: That is correct. We have gone through this
process before, and that is what this part of the discussion is for is
for the ranking.
COMMISSIONER HANCOCK: So if I could ask for the benefit
of my colleagues -- MR. CUYLER: You can internally discuss the pros and
Cons.
COMMISSIONER HANCOCK: Thank you.
CHAIRPERSON MATTHEWS: Okay. Are there further
questions? Commissioner Constantine.
COMMISSIONER CONSTANTINE: Mr. Cuyler, I assume for the
purposes of the record -- we have our little ranking sheets here -- we
should either sign or initial those sheets when we turn them in? MR. CUYLER: Correct.
CHAIRPERSON MATTHEWS: Miss Hankins, I have one more
question. I'm sorry. When we awarded the audit contract a couple of
years ago, there was a stipulation that we put on that about a
rotation of management for -- for Coopers and Lybrand. Did they
accomplish that?
MS. HANKINS: I wasn't here. It's my understanding that
was raised in our -- in our audit committee meeting. And we went back
and asked Coopers about that, Commissioner, and what we were told is
that, yes, they did comply by bringing in a second manager that was --
that was working with that. Is that correct, Phyllis? Phyllis did
continue with the job, and I think that there was some -- some
confusion about how that worked.
CHAIRPERSON MATTHEWS: Yeah. We -- we were -- we were
looking for a change in the top management team of the audit -- MS. HANKINS: Yes.
CHAIRPERSON MATTHEWS: -- as long as at least one of
those persons changed. I think initially we were looking at a
flip-flop between the two, but there was a change. I just need to
know that there was a change. Commissioner Mac'Kie.
COMMISSIONER MAC'KIE: Just a question maybe for Ken. I
feel a little shroud of concern. What was -- what was the legal
issue? Maybe I'm just being dense. What is the legal issue that
Commissioner Matthews was concerned about in your -- in her
questioning about the -- this year's audit committee's discussions?
MR. CUYLER: I'm not sure except I think she -- she was
aware that there were some -- some discussions of issues, and she was
trying to figure out whether those had been resolved to the
satisfaction of --
CHAIRPERSON MATTHEWS: Right. I just wanted Mr. Cuyler
-- if he saw this discussion going in a direction that he felt it
shouldn't go, and I didn't -- I don't know. I'm not an attorney, so I
don't know. I'm just look -- relying on him.
COMMISSIONER MAC'KIE: There weren't some legal issues
with -- that arose in the discussion or --
CHAIRPERSON MATTHEWS: No.
COMMISSIONER MAC'KIE: Okay.
CHAIRPERSON MATTHEWS: Commissioner Hancock.
COMMISSIONER HANCOCK: I'd just like to -- to kind of
openly ask my colleagues. I feel fairly comfortable in sitting right
now the way I've ranked the three firms, but if there is something
that your background may draw out that was not evident in the
presentation, you feel it's important, I'd appreciate the benefit of
your experience. If you feel the presentations were pretty much on
mark, then that's fine too.
CHAIRPERSON MATTHEWS: I think the presentations were on
mark. I mean there's -- there's some personal preferences as to the
way it was given to us. The -- the -- we had two firms, Coopers and
Lybrand and Arthur Anderson, who took a very traditional auditor's
methodology to -- to what they had to say. And we had Coopers -- I
mean we had KPMG offering a slightly different methodology in the way
that they structure their business team more along industry lines
rather than functional lines. And those are -- those are some of the
differences that were going on.
The other thing that we may want to consider is the
location of the -- of the three firms. One, I believe, is out of
Miami; another is out of Tampa; and the third one is out of Fort
Myers. So those are things to also consider on that. So, you know,
we're looking at methodology and what the preferences are.
COMMISSIONER NORRIS: From my perspective, all -- all
three of these firms are obviously very highly qualified, and any one
of the three would do us a good job. The -- the question about
proximity and their location -- well, if they're in Fort Myers, they
might as well be in Tampa or someplace else. The point is, they're
not here in town, so I don't know that that makes a whole lot of
difference.
I think the question that each board member needs to
decide is whether or not you feel it may be time for a rotation or
whether you feel it's more important to stick with what you have
because of the familiarity issue. No matter which of the firms
happens to end up with the selection, I don't think we need to be
concerned at all about the quality of the work that we get done. I
think that all three -- any one of the three would do a good job.
CHAIRPERSON MATTHEWS: That's true. That's true. Any
other questions? Then why don't we go ahead and do our ranking.
COMMISSIONER NORRIS: Let me see. Were we -- did -- was
the answer to the question yes, we are supposed to initial our --
CHAIRPERSON MATTHEWS: Yes.
COMMISSIONER NORRIS: Yes?
CHAIRPERSON MATTHEWS: Yes. And then, of course, once
they've been tallied, we will then open the -- open the envelope of
the -- I guess the lowest points, whatever method is used.
MR. BROCK: Commissioner, may I address that particular
issue? From the standpoint of the chief financial officer in terms of
negotiating the contract, I think the statute breaks it down into two
parts. You make the selection; then you negotiate the contract. And
price is certainly a factor that would be taken into consideration in
that negotiation. But as opposed to making that decision today and
the conversation I just had with Mr. Cuyler, what I would prefer that
take place is that staff get together and try to work with them, bring
back a negotiation with the top ranked firm detailing some of the
covenants of the contract that we would like to see in it and go from
that point as opposed to making that decision solely upon price
today.
CHAIRPERSON MATTHEWS: I would think that we would open
this envelope and reveal the price and begin a negotiation. If it's
too high, and if it's -- you know --
HR. BROCK: That's fine.
CHAIRPERSON MATTHEWS: -- you work it out.
COMMISSIONER HANCOCK: If it's a steal, we'll run with
it.
HR. BROCK: You have to do it the way you want to do it,
but I mean I just wanted to convey to you my concerns that there be
more in the contract than just the price, that we do some definite
timetables --
CHAIRPERSON MATTHEWS: Oh, yeah.
MR. BROCK: -- and things of that nature in the
contract. Thank you.
COHMISSIONER CONSTANTINE: All we're doing today is
seeing how we ended up ranking them and then let Dwight and his team
do their thing as far as the negotiations. MR. BROCK: And Mr. Cuyler.
CHAIRPERSON MATTHEWS: And Mr. Cuyler. So are we going
to get a final ranking on this today, Hiss Hankins? MS. HANKINS: Yes.
CHAIRPERSON MATTHEWS: I don't mean to rush you but --
COHMISSIONER CONSTANTINE: I'd have to have those
tabulations audited.
CHAIRPERSON MATTHEWS: Thank you. Okay. The final
ranking is -- the one with the lowest points is the highest ranked,
and that is Arthur Anderson. Next is KPHG, and third is Coopers and
Lybrand. So we will begin the process with Arthur Anderson. Am I to
open this envelope now?
COHMISSIONER MAC'KIE: Like at the Oscars.
CHAIRPERSON MATTHEWS: And the winner is -- where is
Arthur Anderson? There it is. I guess this makes it official;
right?
COHMISSIONER MAC'KIE:
high sight unseen.
CHAIRPERSON MATTHEWS:
have a knife?
COHMISSIONER HANCOCK:
COHMISSIONER MAC'KIE:
CHAIRPERSON MATTHEWS:
Whatever it is, the price is too
I love Tyvek envelopes. Anybody
I hope not.
Chivalry lives.
What? Am I to read the price of
this or just give it to you to negotiate or to what?
MR. CUYLER: Whatever your preference is.
CHAIRPERSON MATTHEWS: The fee proposal is 189,775.
COHMISSIONER NORRIS: Oh, that's way too much.
COHMISSIONER MAC'KIE: Way too high.
COHMISSIONER HANCOCK: We cut that in half.
CHAIRPERSON MATTHEWS: Mr. Dwight, I turn them over to
you.
MR. BROCK: We agree, Commissioners.
COHMISSIONER MAC'KIE: Shocking.
CHAIRPERSON MATTHEWS: Do I turn the rest of these
envelopes to you, or do I keep them for safekeeping?
MR. BROCK: I think we would turn them over to my
official records and minutes section, and they will keep them.
CHAIRPERSON MATTHEWS: Thank you.
MR. BROCK: Thank you.
CHAIRPERSON MATTHEWS: With that, why don't we take a
short break until eleven o'clock. Thank you.
(A short break was held.)
Item #10B
RESOLUTION 95-320, APPOINTING KEN FAIRCHILD AND VICTOR TATAK TO THE
COUNTY GOVERNMENT PRODUCTIVITY COHMITTEE - ADOPTED
CHAIRPERSON MATTHEWS: Are we ready? Let's reconvene
the board of commissioners meeting for Hay 2nd, 1995. Next item on
the agenda is item 10-B.
COHMISSIONER NORRIS: Ms. Chairman.
CHAIRPERSON MATTHEWS: Yeah.
COHMISSIONER NORRIS: We've got two openings and two
applicants. I'll make a motion to approve. COHMISSIONER HANCOCK: Second.
CHAIRPERSON MATTHEWS: Motion and a second to approve.
Wait a minute. I've got to go find the names.
COHMISSIONER HANCOCK: Victor Tatak.
COHMISSIONER CONSTANTINE: And Ken Fairchild.
CHAIRPERSON MATTHEWS: Okay. Ken Fairchild and Victor
Tatak to the County Government Productivity Committee. All those in
favor, please say aye.
Opposed?
There being no opposition, motion passes 5 to 0.
COMMISSIONER NORRIS: Ms. Chairman, you had mentioned
last week that perhaps today we would give you our recommendations for
the landfill committee from each district, or are you going to do that
now or '-
CHAIRPERSON MATTHEWS:
communication section.
COMMISSIONER MAC'KIE:
deliver those to Chris.
CHAIRPERSON MATTHEWS:
on the --
COMMISSIONER NORRIS:
CHAIRPERSON MATTHEWS:
COMMISSIONER NORRIS:
Why don't we do that in the
I thought we were supposed to
That's fine too, but that's not
Okay.
-- on the printed agenda.
All right.
Item #11A
AN INFORMATION AND ADVISORY UPDATE ON THE INVESTMENT PORTFOLIO - COUNTY
EMPLOYEES INVOLVED IN INVESTMENT PORTFOLIO TO BE INTERVIEWED
CHAIRPERSON MATTHEWS: So we'll move forward with the
next item on the agenda, which is item ll-A under other constitutional
officers and information and advisory update on the investment
portfolio. Mr. Brock.
MR. BROCK: Madam Chairwoman and members of the Board of
County Commissioners, during the last several months I have spoken
with four of the commissioners individually, and I think that Mr. Tom
Grady has spoken to Miss Hac'Kie individually about some of the things
that the clerk of the circuit court has discovered in examining the
Collier County portfolio which the clerk is responsible.
To go back and give you some of the history of how I
have discovered what I have discovered and dealt with the portfolio in
the manner that I have dealt with it since that point in time, I'd
like to take you back to February of 1994. At that point in time I
assigned my internal auditor the responsibility of auditing the
investment portfolio and the transactions that were being made in that
particular portfolio. At that point in time my internal auditor
reported to me that he felt uncomfortable with some of the things that
he had observed, and he did not feel that he had the qualifications at
that point in time to do what needed to be done.
I brought on board in my office Mr. John Kannengeiser
who at that point -- who had extensive experience in portfolio
management around the country. He was an individual who had
essentially retired at one point in time to Naples, Florida, from
large banks in the area and decided that he no longer liked
retirement. He came out of retirement.
We began looking at the portfolio, and what we observed
in the portfolio and the transactions that had taken place in that
portfolio became even more of a concern to us at that point in time.
And at his suggestion back in September of 1994, I contacted a local
securities attorney named Thomas Grady. Now, Tom Grady practices in
the area of securities law locally. I will be glad to go through his
resume if you would like. It's approximately a page long. He has
extensive background in that particular area. He is very well known
with the SEC whom I have been in contact with. And I have asked Mr.
Grady to look at the portfolio, make suggestions to me as to what
action I need to take in terms of the portfolio. And Mr. Grady has
asked a Dr. Stewart Brown, who will be identified to you by Mr. Grady
-- he is a professor or was when I went to school at Florida State
University, because he taught me in one of the courses there, but he
is in private practice also. And also we contacted a corporation
called APAM, and they did an analysis of some of the securities in the
portfolio, looked at what had transpired. And today I think it is
time that the general public and you find out what has taken place
with the portfolio, where we are, and where we need to go.
I'm going to ask Mr. Grady to come forward and make a
presentation to you at this point in time. And if there are any
questions, we will be available for questions after the presentation
is made.
CHAIRPERSON MATTHEWS: Thank you.
MR. BROCK: Mr. Grady.
COMMISSIONER MAC'KIE: Just while Tom's coming up, if I
can tell you, if anybody doesn't know Tom, I could tell -- I would
certainly vouch for his reputation in this particular area. He is
very well respected in this field on a national level, so just thought
I'd throw that in.
MR. GRADY: Thank you. Commissioner Matthews, good
morning, members of the board. It's a pleasure to be here and talk
about this situation. As Mr. Brock told you, he contacted me sometime
in early September of last year. He didn't give me a particular
charge other than he identified some concerns that he had pertaining
to the investment portfolio of the county and some particular
securities contained within that portfolio.
Anytime that a question arises on behalf of a customer
-- and I refer to customers in a broker-customer contact, which may
be a client of my firm or may become a client of my firm. I make it
my business to do as thorough an investigation as I can into the facts
and circumstances giving rise to the potential problem and try to
learn as much about the portfolio and the players as I can.
In this particular case beginning in September I tried
to learn as much as I could about the county portfolio itself, how it
was managed, who managed it, who the broker-dealers were or advisors
were that the county was dealing with, what the investment objectives
were for those monies upon the part of the county, and what the
products were that were purchased within the portfolio.
The products generally that we were looking at were
mortgage-backed securities, collateralized mortgage obligations, and
they are known genetically generally as derivatives. You've read a
lot about derivatives, and it has a certain connotation to it.
Sometimes perhaps it's fair; sometimes it is unfair. But there was a
concern in September of 1994 that certain securities owned by the
county had deteriorated in value rather significantly, about 5 or 6 or
7 million dollars at that point. It's hard to be precise because you
cannot value some of these securities as precisely as you could, for
example, treasury obligations of the United States Government, but
there was a concern that there was a real dollar loss there.
The inquiry that I wanted to begin and that I had been
working on was to verify to the extent that I could whether, in fact,
the securities had suffered a loss and whether there was anybody who
might be responsible for that loss or whether it was simply a result
of market forces that were unavoidable and persons had been acting in
conformance with the policies that had been established by the
predecessor board in 1987.
In looking at the particular products, they are very,
very complex securities. On the surface they're fairly
straightforward, and Dr. Brown will address a lot of the typical
characteristics of these kinds of securities. But in analyzing each
individual security and in analyzing how each security impacts the
total portfolio, it's a very complex thing to do. I wanted to learn
more about the products, and early on in the fall I contacted Dr.
Stewart Brown and asked if he would be willing to help me review the
products in the portfolio and determine what he thought of the
products and whether they were consistent with the objectives of the
county. Dr. Brown was willing to do that at my request. We have
worked together before. He is a professor of finance at the Florida
State University. I think he has been there, as Mr. Brock in some way
hinted --
COHMISSIONER HAC'KIE: Way back, way back.
MR. GRADY: -- about 21 years. And he is very well
known with the regulators in Florida and has served for and with the
Florida Division of Securities and the SEC and North American State
Securities Administrators, and other regulatory organizations and has
actually been retained by the division and by the SEC to teach them
about certain aspects of finance and how finance may impact securities
regulations and securities laws in the State of Florida.
Very recently Dr. Brown has been asked to join the
Florida Association of County Clerks and Comptroller's task force on
derivatives, and he is an ex officio member of that organization.
He's also been asked to provide a presentation in June to the Florida
Division of Securities, which is also a joint NASSA, North American
States Securities Administration, event in Fort Lauderdale regarding
certain aspects of CHOs. So I thought he was very well qualified to
assist me in looking at the product and trying to determine whether
the product was appropriate or whether it may have been inappropriate
or to look at the product and tell me what else I might want to look
for.
As soon as I contacted him, he indicated he was willing
to assist. He also said although he has a significant analytic
capability, he did not have adequate analytic capability to determine
what we would need to determine with respect to these securities, so
he suggested that we contact a firm in Orlando known as APAM or
Atlantic Portfolio Analytics and Management. APAM is a much easier
way to refer to them. And Dr. John Knight is with us today from
APAM. Dr. Knight has his Ph.D. in economics and is the vice president
and chief investment officer of that firm. That firm currently
manages somewhere between 7 and 8 billion dollars in monies, almost
all of it, as I understand it, in derivatives and collateralized
mortgage obligations. His largest domestic client is the State of
Florida, and many of the individuals at APAM came from the State Board
of Administration, so they do have an SBA public finance type of
background, so I thought that added a lot of capability.
They also have internally tremendous Cray super computer
analytic capabilities which very few firms have. And as I have come
to understand, those are necessary in order to really understand these
kinds of securities and to determine most importantly as it affects me
and what I think I was asked to do by Mr. Brock, what kind of risk
characteristics these securities had, what kind of volatility they
had, what their maturities were, and whether all of those things
lumped together met the policy set forth by the board in 1987 and
presumably under which the county was required to operate with respect
to these various funds.
Dr. Brown is going to begin our presentation, and we'll
speak to you generally about these kinds of securities and these
products, what he found in the county portfolio. And following Dr.
Brown, Dr. Knight will give a presentation, and Dr. Knight will refer
to the report that I believe the members of the board received Friday
afternoon that APAM prepared at my request which goes through in some
detail the analysis of each individual security as well as a portion
of the portfolio of securities owned by the county to determine
primarily whether it met the investment objectives stated in the
county policy. So I will turn it over at this point to Dr. Brown, and
I believe he's going to use the overhead. Mr. Cuyler, I hate to
unseat you, but if that is all right, I think -- it's the only slide
that we have, and it -- is it required that the mike be used, because
I think it might be easier --
CHAIRPERSON MATTHEWS: It's required. There's a
hand-held mike on the corner there that he can use.
COHMISSIONER MAC'KIE: Tom, just while he's setting up,
did I understand you to say that APAM manages 7 to 8 billion dollars,
their biggest client is the State of Florida, and most of that 7 to 8
billion dollars is -- is derivatives?
MR. GRADY: Host of the 7 to 8 billion dollars, as I
understand it, is in derivative securities. The largest domestic
client is the State of Florida. Not all of their work is in
derivatives, but I'm sure that Dr. Knight can explain what they're
buying if that's the question.
COHMISSIONER MAC'KIE: Well, the question that came up
was the State of Florida is a significant investor in these derivative
securities. Is that -- that was the conclusion I was drawing. And
I'm seeing the doctor telling me I'm drawing an incorrect assumption.
MR. GRADY: I think that will become clear as the
presentation goes on, but it's probably a good time to point out, as
Dr. Brown will certainly emphasize, that derivatives refer to a large
number of products, and they're not all bad things. So with that, Dr.
Brown.
DR. BROWN: Thank you. Good morning.
CHAIRPERSON MATTHEWS: You need to use the microphone,
Mr. Brown.
DR. BROWN: Okay. Is this better?
CHAIRPERSON MATTHEWS: Either that one or the hand-held
One.
DR. BROWN: Okay. I'm used to projecting, so talking
with microphones is not something I do a lot of. I'm sure we'll work
it out.
The -- the first thing that I look for when I get
presented with a problem like this -- and I -- I see dozens of these
things -- is to look for the nature of the funds that are being
invested and see if I can come up with some implied or real investment
objective, written investment objective. Fortunately in this case the
Board of County Commissioners in '87 came up with a very specific
well-crafted investment policy, essentially the first paragraph of
which is presented up there on the board. It's very clear that the
primary objective of the Board of County Commissioners' investment
activities is the preservation of capital and the protection of
investment principal. So everybody knows right out of the gun what
the rules are. You're supposed to protect your principal. Income is
secondary to that.
Now -- so that -- that's in essence the essence of the
policy. Then there are certain implementing restrictions, if you
will. The nature or the general principles of those implementing
restrictions are that youwre not supposed to take on credit risks, the
possibility that whoever you have lent money to will not pay it back
in some sense, and youwre supposed to have limited market risk. As we
know, there are certain relationships in financial markets between the
principal value or the market value of fixed income securities, which
are appropriate here, and interest rates.
Now, the -- the way that you limit market risk in this
sort of a portfolio is through what are called -- well, maturity
matching techniques in general portfolio limitations. The basic
notion is that you should match the maturity of your assets with the
maturity of your liability so that you never have to sell an asset
prior to maturity and then perhaps take a loss on it. And the other
restriction has to do with general restrictions as to how diversified
the portfolio can be, or the general principles are maturity matching
and portfolio limitations. And you can see about on the first page of
the policy, unless matched to specific cash flow requirements, funds
of the Board of County Commissioners will not be directly invested in
securities maturing in more than ten years from the date of purchase
except for federal instrumentalities. No more than 10 percent of the
Board of County Commissionersw total investment portfolio shall be
placed in securities maturing in more than ten years.
COMMISSIONER MAC~KIE: Could I ask you a question? How
much of that is the stated policy, and how much of it is your
interpretation?
DR. BROWN: The -- the first paragraph and the last
paragraph are the stated policies. The general principles are my
talking points.
COMMISSIONER MAC~KIE: Okay. Thank you.
DR. BROWN: Now, there are much more specific
restrictive clauses in the policy. Itws several pages long, but the
basic notion is that youlre supposed to conserve principal. The --
and the basic news today is that that objective was not met, that
there are substantial losses in the portfolio. Again, nailing them
down is a little bit difficult depending on when you do the analysis,
but itws in the range of 4 to 8 million dollars, and itws changing and
CHAIRPERSON MATTHEWS: Would you say that number again
so that we get it clearer?
DR. BROWN: It~s in the range of 4 to 8 million dollars.
CHAIRPERSON MATTHEWS: 4 to 8, not 48.
DR. BROWN: 4 to 8, yes.
COMMISSIONER HANCOCK: Just starting off, your
contention is that principal was, in fact, jeopardized?
DR. BROWN: Yes, very clearly. The losses have occurred
in mortgage derivative securities. Now, the mortgage derivative
securities that were purchased were not the super off-the-scale
derivatives that were purchased in Orange County, leveraged inverse
floaters. What were purchased were derivatives that were still
substantially risky; but, again, they were not the inverse floaters.
And the source of this, of the major losses, are what are called PAC
or TAC bonds. And wewll have substantially more to say about that in
a second. The -- so what you have is a situation where on the face of
it the policy was violated.
Now, you can talk about the specific subrestrictions,
but principal has not been conserved. And unfortunately something
needs to be done about this. You are left with a -- the problem is
not going to go away. You are left with a portfolio that right now is
subject to a substantial amount of volatility, so the problem could
get better depending on market conditions. The problem could get far
worse.
COMMISSIONER MAC'KIE: May -- may I ask you a question
on that point?
DR. BROWN: Yes, ma'am.
COMMISSIONER MAC'KIE: One of the things I have heard
said about this investment is that it is going to solve itself in all
likelihood. Nobody can predict the future, but that interest rates
indications are that if we will be patient this will only be a paper
loss. Now, you -- you're saying that something has to be done? The
problem won't solve itself?
DR. BROWN: The -- there is some logic there. The
problem will solve itself perhaps 20 or 30 years down the road.
COMMISSIONER MAC'KIE: Huh.
DR. BROWN: That is, in my view, not acceptable. The
losses -- if you need that money today -- the basic notion behind the
policy is that if you need the money, it will be there, and you won't
have to take losses. The simple fact of the matter is that if you had
to have that money today, you would not have it. So in that sense the
losses are real. If you choose not to do anything about it, things
could get much worse. They could get better. They could get much
worse. If you are willing to wait 20, 25 years -- it's impossible to
really nail it down -- perhaps you might get the original principal
value back, but in an opportunity cost sense you will have foregone a
lot of income. In my opinion, there is a serious problem here.
CHAIRPERSON MATTHEWS: Commissioner Norris, you had a
comment?
COHMISSIONER NORRIS: Yes. I just would like for you to
clarify for me when you -- I was kind of taken off guard when you said
that our principal is at risk. I have been led to understand that
these are instrumentalities that we're dealing with -- DR. BROWN: That's correct.
COHMISSIONER NORRIS: -- backed by the federal
government.
DR. BROWN: Right.
COHMISSIONER NORRIS: And then when you say our
principal is at risk, I find that to be a bit of a conflict in the two
statements. If you're saying that we have a market risk, I can
certainly understand that. But if you say our principal is -- if you
just make the flat statement that our principal is at risk and has not
been conserved, I can't see where you're basing that statement.
DR. BROWN: Your -- your insight is correct. There is
no -- essentially no credit risk per se. There is a substantial
amount of market risk, the notion being that these funds by their
nature should not be subjected to the situation where you will take a
loss. And if you need the money today -- these are public funds. If
you need the money today, there will be a loss.
COHMISSIONER NORRIS: Okay. Now, that's a very good
question with that "if" in there. Is there a chance that we are going
to find ourselves in a situation where we do have to liquidate these
assets at any given moment in the near future, or is there not? I
mean --
DR. BROWN: I have -- that was the first question that I
asked, and I have not been able to answer that question in any sort of
detail because we do not have a liability profile. But on the surface
of it, if you did need the money, it wouldn't be there right now.
COHMISSIONER NORRIS: Well, yes, if. I mean it's really
going to be hard to base any kind of flat statements on ifs. We
really need to deal in realities and not hypothetical situations,
don't we, Doctor?
DR. BROWN: Well, I would suggest that the reality is
that we can't know what the future will bring. The future is very
uncertain.
COHMISSIONER NORRIS: Well, you say that and not two
minutes ago you said that, in your opinion, it would be 20 or 30 years
for us to get our principal back on this. But is it also your opinion
then that we will not see an interest rate cycle in that 20 to 30
years that would allow us to have our market value restored and
perhaps even make a profit as we have on some of these investments
already in the last year?
DR. BROWN: That's the whole notion behind risk. We
can't know what the future is. The purpose -- what you have right now
is a very risky position, and it's speculative by its nature.
COHMISSIONER NORRIS: You're arguing two sides. On one
side you're not willing to accept the if of it, the if interest rates
come back; but on the other side of it you're basing one of your
statements on if, a hypothetical situation. You know, please be
consistent.
DR. BROWN: They don't seem contradictory to me at all.
There is the policy, the policy that says you need conservation of
principal. A reasonable person would look at this and suggest that
there was a substantial amount of unreasonable volatility imposed on
this portfolio as a result of which your position right now is very
speculative. I don't know what to do about that. What I can do is
point out to you that the portfolio as it sits today is very risky,
and it is not consistent with that policy. Now, what you want to do
about it is -- it's a dilemma.
COHMISSIONER NORRIS: Uh-huh.
CHAIRPERSON MATTHEWS: I disagree with you.
DR. BROWN: But there is a lot of risk in that
portfolio. And I as somebody who has looked at these things on the
surface say that this policy has been violated.
CHAIRPERSON MATTHEWS: It's a scare tactic.
DR. BROWN: Now, you can ask what if questions or not
what if questions. I am very confident in saying there's a lot of
risk in this portfolio. There should not be that much risk in the
portfolio.
COHMISSIONER NORRIS: Okay. All I meant to say by that
previous line there was that if you're going to use hypothetical
situations to make one side of an argument, you must be able to accept
hypothetical situations on the other, and you did not do that, so I
want you to be.
DR. BROWN: Well, I would point out that I was asked a
question as a hypothetical. COHMISSIONER NORRIS: Okay.
CHAIRPERSON MATTHEWS: Dr. Brown, I need to pick up
something too on what you've said because I'm a little bit concerned
that you've -- you've used a phrase by saying our portfolio is at
risk. And it seems to me only a small portion of the portfolio is at
risk. So, you know, this is going out live to -- DR. BROWN: Sure.
CHAIRPERSON MATTHEWS: -- the people watching on TV.
And I don't want them to have the impression that all of the monies
that they have paid to Collier County for various reasons and has been
invested while we -- while we wait to conjure up something to spend it
on -- excuse me for talking that way, but some people have that
perception, but I want to be -- be careful that we talk about the size
of the portfolio --
DR. BROWN: Sure.
CHAIRPERSON MATTHEWS: -- which is in excess of what?
200 million?
MR. BROCK: It's approximately 200 million. May I
address part of your --
CHAIRPERSON MATTHEWS: Just a moment. And the amount of
money that we have invested in these CMOs is what, about 30 million or
less now because we've recycled a lot of it?
DR. BROWN: As of August it was about 70 million. A
good part of it has been liquidated.
CHAIRPERSON MATTHEWS: That was last August. We're
talking about right now.
DR. BROWN: Right. The -- it is in the range of 30 to
40 million. Mr. Cuyler has those details.
CHAIRPERSON MATTHEWS: 30 to 40 million. Okay. So
we're talking about 15 percent of the total portfolio. So I mean I
don't want the citizens of Collier County to think that we've got 200
million dollars invested in something that is at a substantial risk,
okay. That's not true.
DR. BROWN: That's correct.
CHAIRPERSON MATTHEWS: Okay.
MR. BROCK: Commissioner, I think if you'll go to table
5, you will find essentially -- I mean it's changed some, but it is --
essentially the structure of the portfolio is very similar today to
what it was on 8-31-1994 in terms of those portions that are sitting
out there in the extended position. And I think if you will look,
there is maturity distribution, approximately 77 million dollars
setting out there that the average maturity is 2013. So unless there
are a lot of -- unless there is a lot of money in this portfolio that
you have not earmarked for any particular project, business is not as
usual in Collier County.
CHAIRPERSON MATTHEWS: Thank you. Commissioner
Constantine, you had some questions.
COHMISSIONER CONSTANTINE: Just to follow up to your
comment first, Commissioner Matthews, and that is we've had the name
Orange County thrown out there a couple of times. And I think you
said, but I need you to emphasize again for the purpose of those
watching on television, we are nowhere near a situation -- this is not
comparable at all to Orange County.
DR. BROWN: That's absolutely correct.
COHMISSIONER CONSTANTINE: Thank you.
DR. BROWN: The losses which occurred here occurred in
securities which are generally perceived to be less risky than the
securities which were purchased in Orange County, California, and
there was no leverage used here.
COHMISSIONER CONSTANTINE: Those losses, you said, are
paper losses of 4 to 8 million dollars as opposed to Orange County's
complete collapse of their financial structure.
DR. BROWN: Yes, with losses in the billions. Yes,
that's correct.
COHMISSIONER CONSTANTINE: I need you to go back.
Commissioner Norris asked the initial question market risk versus
credit risk. I need you to help me with that a little bit. DR. BROWN: Sure, be happy to.
COHMISSIONER CONSTANTINE: John does that for a living,
but I don't.
DR. BROWN: The basic notion is that we are dealing with
marketable securities. The market prices of those securities go up
and down. Now, it's a complex area, but there's a -- there's a basic
principle that you can use to think about it. And the basic principle
is that the longer the maturity of the security, the more volatility
you get. Now, that volatility cuts in both directions. It can either
be a price increase or price decrease. And that -- those price
increases or decreases move opposite to the general level of interest
rates. So when interest rates go up, the market prices of securities
go down. The market prices of long-term securities go down more than
the market prices of short-term securities.
The way that you handle market risk in this sort of a
portfolio, there's a couple of ways. You do maturity matching. So if
you're going to need the money in five years, you buy a five-year
bond. If you're going to need the money in three years, you probably
have to use a three-year bond. And you put restrictions on how -- you
notice that it says no more than 10 percent can be placed in
maturities maturing in more than ten years. That's directly to what
we're talking about. Longer term maturities have much more volatility
than shorter term maturities. So if I have funds that are needed next
year and I buy a 15- or a 20-year bond, and in the meantime interest
rates have gone up so that the market price of that bond has
decreased, I -- if I need those funds, and I have to sell them, I will
have to take a loss. That's in the nature of market risk. And that
occurs even with treasury securities and with agency securities where
the principal amount at maturity is guaranteed, but there's no
assurance that the market price of the security will be in a favorable
range at the point that you need the funds.
Now, what is -- in a nutshell what has happened here was
that securities with a lot of what is called extension risk, or the
risk that the maturity would increase dramatically were purchased.
Interest rates went up. The market price of the portfolio went down,
and the portfolio was underwater 4 to 8 million dollars.
COHMISSIONER CONSTANTINE: I just need to emphasize one
of the last points you made. Principal is guaranteed if you ride it
out.
DR. BROWN: That's correct.
COHMISSIONER CONSTANTINE: So it's not as though these
things are worthless or we're just -- absolutely all hell's going to
break loose, and we're out a ton of money. DR. BROWN: That's correct.
COHMISSIONER CONSTANTINE: If we find ourselves in a
position where we absolutely positively have to liquidate these
tomorrow, then we would take a loss of 4 to 8 million dollars. DR. BROWN: Yes, sir.
COHMISSIONER CONSTANTINE: Thank you.
CHAIRPERSON MATTHEWS: Commissioner Norris.
COHMISSIONER NORRIS: Doctor, I think a few minutes ago
you said that as of August, I believe, we had 70 million dollars of
derivatives in the portfolio. Is that about right?
DR. BROWN: That was my notion, yes.
COHHISSIONER NORRIS: Okay. And now we have somewhere
in the thirties, so about half of that now we have? DR. BROWN: Yes.
COHMISSIONER NORRIS: So I assume we have sold half of
the derivative portfolio? DR. BROWN: Yes.
COHMISSIONER NORRIS: Was the -- was that sold at a
loss, or was that sold at a profit?
DR. BROWN: It's my understanding that the -- that what
was sold were the variable rate instruments and that they were sold
either at a slight profit, or they were sold --
COHMISSIONER NORRIS: Would you answer that one more for
me, sir?
MR. BROCK: The instruments that we have sold are the
ARMs, adjustable rate mortgages. And they were the instruments that
we were able to liquidate without taking a loss to preserve the
principal and to comply with that first paragraph on the board. So
everything that we liquidated was after we discovered it, and the only
thing that we were able to liquidate was the ARMs. And there is still
approximately 77 million dollars in these mortgage-backs in our
portfolio today.
COHMISSIONER NORRIS: And so it's not 35; it's 77?
MR. BROCK: Seventy-seven today.
COHMISSIONER NORRIS: Do you have 4 million dollars --
MR. BROCK: We liquidated approximately 49 million
dollars of adjustable rate mortgages between February and the date of
this particular report.
COHMISSIONER NORRIS: And on those derivatives did you
make a profit or a loss?
MR. BROCK: We sold those at a profit.
COHMISSIONER NORRIS: Okay.
MR. BROCK: We sold what we could, Commissioner, without
taking a loss.
COHMISSIONER NORRIS: Okay.
MR. BROCK: And that's what we were trying to do was to
create in the portfolio, because of just exactly what Dr. Brown is
talking about, that extension that has taken place. COHMISSIONER NORRIS: Uh-huh.
MR. BROCK: We were trying to create liquidity. And I
think the doctor from APAM will discuss in great detail some of --
COHMISSIONER NORRIS: That's fine. I would assume that
as market forces change and the other mortgage-backed securities would
come back to market or above that you would liquidate them in the same
manner. Is that your plan?
MR. BROCK: That -- well, the problem associated with
that is as I said before. I mean I've got 77 million dollars of
funds, which the average maturity is two thous -- 2013. We have been
unable to find 77 million dollars worth of projects that are going to
be built beyond 2013.
COHMISSIONER HAC'KIE: In other words, that can wait
that long to make the sale?
MR. BROCK: That's correct. I mean that's the problem
that we're having. You know, we've tried to build into the portfolio
since this was discovered as much liquidity as we can. We've tried to
advise you of the problems that we perceived and get you acclimated to
the fact that, you know, some of this money that we have out there is
not available to be used because it is in these products, that in
order for us to get the money to use, we would have to liquidate and
take a loss.
CHAIRPERSON MATTHEWS: Commissioner Hancock.
COMMISSIONER HANCOCK: Again, for base understanding,
we've been focusing on the derivatives and CMOs that if sold would
potentially have a current loss of 4 to 8 million dollars. Help me to
understand. With exempting those -- let's pull those out of the mix
-- everything else that Collier County has invested in, if we had to
liquidate everything else today, would we realize a loss on any one of
those investments in principal?
DR. BROWN: In principal -- now, I have not looked at
that specifically. My understanding is that a large part of it is in
short-term treasuries, the SBA and in principal you would not suffer
any losses at all. There might be a couple of the treasuries that are
underwater just a little bit, but in no real sense would there be
losses.
COMMISSIONER HANCOCK: So even in treasuries when you do
an initial investment, if you have to pull out before the term of the
investment, you can sustain a loss in principal; is that correct? DR. BROWN: Yes. That's correct.
COMMISSIONER HANCOCK: Okay. So it's not foolproof.
Even T-bills and so forth are not foolproof.
DR. BROWN: That's why the general principle is to match
maturities. So if I need the money in three years, if I buy a
three-year treasury, no matter what, the money is going to be there in
three years.
COMMISSIONER HANCOCK: So the question here now is
changing for me. Instead of focusing on loss of principal, because
that can happen even in the safest of circumstances, what we're really
talking about is maturity.
DR. BROWN: That's essentially correct, yes.
COMMISSIONER HANCOCK: Okay. Thank you.
DR. BROWN: So the -- the question becomes, how do you
think about this, or what do you do about it. And, you know, my
general posture is that you should not bring frivolous lawsuits, that
you should look at things very carefully. You should look at this,
and you might find perhaps there were just mistakes in judgment. You
might find that there was some negligence involved. You also might
find that there was some fraud involved.
Now, there are certain red flags or things to look at
when you start talking about a very serious charge of fraud. The
beginning point is to look at the duties of the parties involved. And
now what I'm about to say is a legal issue, and I'm not an attorney,
although I testify about these things frequently. The basic notion is
as follows: That a brokerage firm or a selling broker as an
investment professional has a duty to his or her client, and the duty
is to make only recommendations which are suitable for that client in
light of the investment objectives or the investment policy of the
funds. This is the NASD suitability rule from the NASD rules of fair
practice. You can read it. It just says that brokers are subject to
a suitability requirement.
Now, there are some legal issues here, but the point is
that there were some securities sold which apparently on the face of
them were not consistent with the investment objectives of the county,
and Mr. Knight will go into that in much more detail. The question
becomes if you're going to start making serious charges of fraud, you
should look at motivations, and you should look at the whole
situation. So it needs to be examined.
Now, there is -- the one point that we need to talk
about is the compensation from buying and selling those securities.
You probably think of those sorts of things in terms of commissions.
And with these types of securities what happens is you have what are
called markups and markdowns, which is the difference between the
market price of the security and what the client gets charged. On the
-- on the face of it it appears as though too much was paid for these
securities. It appears as -- Mr. Knight, who is an expert in these
areas, will go through that in much more detail, but it appears as
though there was a problem with the amount of compensation in one
sense or another -- and these things are ambiguous -- that went to
certain brokerage firms. So this -- this issue needs to be looked
at.
The -- the -- the point -- we need to talk a little bit
about mortgage-backed securities, because this perhaps might not be
too clear in your mind. Starting about -- between 15 and 20 years
ago, there was a trend in this country called securitization, and
basically what happened is that what came out of the S&L crisis was
that instead of financial institutions directly investing in mortgages
on individual homes, these mortgages were put together in pools and
sold as securities. So what we are talking about here -- you may get
lost in all of this -- that the instrument underlying these
derivatives is by and large single-family mortgages on -- secured by
the homes and guaranteed by the government. It's currently about a
1.5 trillion dollar market. Now, that started in the late '70s.
And what has happened is that since then there has been
a trend towards -- the generic terms is CMOs or collateralized
mortgage obligations where parts of these mortgage pools are sliced
up. And these slices are given different investment characteristics,
and those slices are sold to investors with different investment
needs. So some of the CMOs that we're talking about are very safe;
others are not so safe; and some are extraordinarily risky. So you
can't -- you can't make a general statement that all CMOs or all
derivatives are very risky. It's just not true. What you have to do
is look at the specific circumstances.
There is one thing in looking at these things -- and
what I can tell you is that when you get into the details, it can be
absolutely mind numbing. I mean the level of complexity is
extraordinarily high, which is why APAM has to literally use a Cray
super computer to analyze these things. However, there is one
principle that if you once grasp the one principle, and it's a
principle of extension risk that is -- that is useful in understanding
how these things work. In other words, the distinguishing feature of
mortgage-backed securities, the thing that makes them difficult and
different from other fixed income securities, is that there is
uncertainty as to when you're going to get your money back. And that
uncertainty arises out of the simple nature of the mortgage contract,
that individuals can pay off their mortgage early at their option, or
they can choose not to pay it off.
The -- now, what I would -- what I have put together is
an example to talk about this notion of extension risk or the risk of
when you get your money. Now, this example is very stylized and
simplified. It's not meant to be an actual example. What it's meant
to do is to iljustrate the basic principle that we're talking about.
And what I did was to look at -- the way I like to think about this is
to look at the notion of a zero coupon bond. A zero coupon bond is
the one that doesn't pay any interest, but you just pay a certain
price, and later on it matures at a higher price. I want to stress '-
I'm not stressing -- I'm not saying that there were any of these
things in the portfolio. I'm using this to iljustrate a principle.
Let's suppose that you have a one-year zero with a 10 percent yield,
and it matures in one year for a thousand dollars. Its market price
today would be $909 dollars. If you paid $909, a year later you'd get
a thousand, or you get $91 in interest, which would be 10 percent. If
it matured in two years at 10 percent, its market price would be
$826. And if you held it for two years, it would be worth $174 more.
The maturity value would be a thousand dollars. Very basic point, the
further into the future a payment is received, the lower its market
value today.
Now, carrying this example further, a bond -- a zero
that matured in five years would have a market price of $621. A zero
that matured in 90 -- in 25 years would have a market price of $92.
Well, this is -- what you can see from this example is
the basic notion behind extension risk. If it works out that you
under normal assumptions expect to get your money in five years, let's
say under normal prepayment assumptions for -- for the mortgage pool
that you're looking at, and there are certain imbedded interest rate
assumptions that go along with this. You think you're going to get
your money in five years. Something happens, and you don't get your
money for 15 years. Well, what you can see is that instead of your
instrument being worth $621, by that maturity being extended from 5
years to 15 years, its market value goes from 621 to $239. Well,
that's a decrease of 70-some percent. Now, this example again is
extreme and stylized, but the basic notion is that mortgage securities
present more or less uncertainty as to when you get your money.
Now, essentially what happened in this portfolio was
that some bonds were purchased -- the first bond that Mr. Knight is
going to talk about had an average life of 3.1 years when it was
purchased and -- now this is an extreme example. When he did the
analysis, its life had extended out to 18 years. So that's the sort
of riskiness that we're talking about. When maturities extend, that
occurs basically when interest rates go up, because when interest
rates go up, there is no incentive for people to refinance their
mortgages. And because they don't refinance their mortgages within
the parameters of what you assume, you may get your money much further
into the future than you originally assumed. What this means is that
there's a premium placed on being able to do an analysis of the bond
before you buy it and being able to -- to do the analysis to assume
that it will get you what you want given your investment policy.
So basically here's what happened. The -- there were
some CHOs, not the riskiest, not the safest, intermediate-type CHOs
that were purchased. Interest rates went up. There was a substantial
amount of extension risk, and because of that the market prices in
varying degrees of the portfolio fell. It appears as though too much
was originally paid for those bonds given Mr. Knight's analysis.
Now, there are -- there is one other thing. In looking
at the portfolio for a couple of years, it appears as though that
there was some trading that took place in the portfolio that should
have taken place. It appears as though there was some bonds sold and
other bonds, essentially similar, purchased -- repurchased at the same
time. It's what -- in a retail security case this would be called
churning. It needs to be looked into in more detail to determine if
that, indeed, took place.
And the other thing that happened that -- that we can --
that's already been mentioned, there were also a substantial number of
ARMs or variable rate securities that were purchased, and they came
close to hitting their caps, and their market prices went down a
little bit, but they subsequently came back, and a good part of them
were sold.
That's -- my assignment was to give you a general
overview of what happened. I feel as though I've done that. Mr.
Knight has done a much more in-depth analysis, and I would like to, if
I could, turn it over to him to talk about that.
CHAIRPERSON MATTHEWS: Are there other questions of Dr.
Brown? Dr. Knight.
COMMISSIONER MAC'KIE: Do we need to stay in the dark?
Do you have overhead slides also, Dr. Knight?
DR. KNIGHT: Yes, ma'am.
COMHISSIONER MAC'KIE: Okay.
DR. KNIGHT: It's even worse. As Dr. Brown said, my
name is John Knight. I'm the chief investment officer for Atlantic
Portfolio Analytics and Management or APAM. We manage large
portfolios of mortgage derivative securities as well as ordinary
mortgage pass-throughs and treasury securities. We manage for both
domestic and international clients. Our domestic client base is about
a billion dollars. Our international clients are about 6 billion
dollars, mainly large institutional buyers and investors in the U.S.
mortgage markets.
Now, what I was asked to do was to try to look at a
portfolio, which happened to be your portfolio as it was structured on
August 31st, 1994. And I was asked to look at Collier County's
investment policy as defined by -- by you and try to make several
different determinations. One, I was just asked to ascertain the
nature of the contents of this portfolio and the -- I was asked to
look at -- you know, see what you had and -- and, you know, how is
that portfolio structured relative to the investment policy. I was
asked to update -- and also to look at the risk of the portfolio and
the particular instruments involved. I was asked to update the market
value of the positions as I saw them on 8-31 and see what they were
worth at another date. In this case I was asked to update to March
10th of this year, and then I was asked to provide an assessment of
the prices paid for the securities at the time of purchase to
determine if -- if those were fair market prices for an institutional
investor involved in investing, you know, 172 million dollars worth of
securities. And then I was asked to assess the risk parameters of the
portfolio as -- relative to what was defined in the investment policy
of Collier County and see if the portfolio actually complied with --
with those risk parameters. So what we have then is, you know, these
five main points I'm going to try to address.
Just as a pie chart to take a look at what you own,
basically you own a portfolio that, at least on August 31st, involved
about a hundred million dollars in government securities that were
backed with the full faith and credit of the U.S. Treasury. Those
were all short-term obligations. The maturities of those securities
-- in point of fact, all those that you were invested in on August
31st have since matured and been reinvested some other way. You were
invested in about 5.3 million dollars of federal agencies involving
whose credit quality was the full faith and credit of the United
States, and that was about 3 percent of your position. And then you
had about 72 million dollars involved in federal instrumentalities,
which while are not backed by full faith and credit of the government,
they have so-called moral obligation of the government. They've never
been allowed to fail. When they've gotten into trouble, the
government has in the past stepped in and bailed them out, although,
you know, there is no necessary reason for them to do it in the future
other than they're supporting some particular government policy or
objective.
So -- but in general the credit quality of the portfolio
as defined by this overview is better than what would say be triple A
securities. So the credit is prime, and it's, you know -- in a -- in
a cursory examination of the outline or the structure of the
portfolio, there is no credit risk.
If we look at the specific securities that were in the
portfolio at that time, what you'll notice is that in terms of the
investment policy categories, investments in federal instrumentalities
and federal agencies and government securities, again, you have that
-- that pattern of -- of portfolio weights that we talked about
before. You can look at the maturities of the securities that were in
those portfolios and figure out what the average maturities is, which
is one of the concerns in your investment policy. What we see is that
for the federal instrumentalities, the average maturity at that time
was about August of nineteen -- or 2019 for the federal
instrumentalities portfolio.
Now, we need to understand there's a lot of terms get
bandied around in the mortgage security world. There is a difference
that is often not made but -- or should be made, but it isn't made
between maturity and life of securities. These securities often trade
in terms of the average life as say the average time in which
principal payments will be received by the bondholder. But in reality
they also have a maturity, which is the time we see the last principal
payment will be received. Those numbers can vary dramatically.
Your investment policy was conservative in the sense
that it defined things in terms of the maturity characteristics of the
portfolio and not the average life. Now, that distinction has to be
made to understand whether or not the portfolio was in or out of
compliance with your policy. So we have a -- then, like I say, the
three components of the portfolio. You have the federal
instrumentalities portfolio, which is something that is defined and
called out in the -- in the investments policy, which has an average
maturity that is average of all the instruments, and they have
maturities in 2019. You have the federal agency portfolio, which has
an average maturity in 2023; and then you have the government
securities, the T-bill portfolio, which had a maturity in 1995, in
February of 1995.
COMMISSIONER MAC'KIE: I'm sorry.
DR. KNIGHT: So that that was the structure of the
portfolio and its maturities.
COMMISSIONER MAC'KIE: Could you repeat the first two?
I heard the 1995 and the 2013. What was the other?
DR. KNIGHT: Well, I'm sorry. 2019 was the average
maturity of the instrumentalities portfolio. 2023 was the federal
agency portfolio; and the government securities portfolio, which is
primarily T-bills, was in last February. COMMISSIONER MAC'KIE: Thank you.
DR. KNIGHT: On average the whole portfolio has a
maturity of two thousand -- the year 2005, which would kind of define
its risk characteristics to say that the average maturity of all the
securities in there would be off in about ten years.
The issuers -- you had three primary issuers from which
you bought two instrumentalities, were Fannie Hae and Freddie Mac, the
Federal National Mortgage Association; the Federal Home Loan Mortgage
Corporation. Your U.S. Government agency that you bought from was the
Government National Mortgage Association. The securities were divided
both in -- so you had three different issuers that were your primary
-- that you bought their instruments. You also bought both
floating-rate securities and fixed-rate securities. What we're
talking about there is the coupon on some securities would rise and
fall with short-term interest rates or with some interest rate and the
-- on about 37.7 million the fixed-rate coupons had a fixed coupon
over the life no matter what that life was and -- and that was about
138 million dollars.
Now, if you look at the overall portfolio, you have
about 44 percent of your securities mature in a period longer than ten
years. About 56 percent of your securities mature in less than 10
years, most of those much shorter than that.
On its face valuing securities is a pretty simple
thing. All securities are valued as -- in terms of the present value
of the expected future cash flows. There are only two small
problems. One is at what rate do we discount those future cash
flows. You know, what interest rate do we use to discount back, and
then what are the cash flows. In many instruments there are, you
know, credit risks which means there's uncertainty of whether or not
you'll be paid at all either coupon or principal. In these securities
there is no uncertainty of that or virtually no uncertainty of that as
long as, you know, the U.S. Government can still print money.
Instead we have contingencies about the cash flows which
means you don't know when the cash flows will be received. And there
are two basic types of contingencies involved; one, the -- there is a
so-called prepayment risk that Dr. Brown talked about. And that is
fundamentally every American, whether it's granted in the Constitution
or the Ten Commandments or somewhere, has the inalienable right to pay
back his mortgage whenever he wants to at par. So when you buy a
security that is backed by mortgage secure -- by mortgages, the
mortgagor can put that back to you at par whenever he wants.
Therefore, you are short an option. You have sold an option to him
when you buy that security, and that's one of the reasons you have a
higher yield on those types of securities.
Now, you know, that -- the problem is is that the
mortgagor will always exercise his option to your disadvantage. When
interest rates are low, he will repay his mortgage and leave you with
cash that you have to reinvest then at low rates. When interest rates
are high, he will hold on to that mortgage so he had a low coupon
payment, which is your coupon payment. So the mortgage will tend to
extend, and mortgage securities will tend to extend in high-rate
environments which makes them most sensitive to interest rates.
what -- you know, the question is, are you being properly compensated
for taking that risk, I suppose, and is that risk appropriate to your
goals and objectives.
Then there are other options that are imbedded in some
of these CHO securities. In particular there are so-called caps on
the coupons of the floating-rate securities which may cause them to
have dramatically varying market values. So -- so we'll have to talk
a little bit about each of those when we talk about the specific
securities that you own. And in particular, I guess, going back to
the prepayment risk, one of the issues here is that these bonds were
-- many of these bonds -- in particular if you look at -- at the
portfolio itself -- you have that table in your handout. If you look
at the -- if you look at the specific securities -- that's table 1 in
that book that was provided -- you have bonds in this portfolio that
were bought to have relatively stable principal paydowns. That is
they were supposed to come in on a very strict schedule. The problem
is is that those bonds evolve and change depending on what happens to
interest rate paths.
Now, what happened in this case is after they were
bought, interest rates fell dramatically. And when those interest
rates fell dramatically, the other bonds that were in the CMOs that
protected the stability paid off. And then these bonds took on the
role of stabilizing higher priority charges or bonds. And, you know,
you got a very complex interaction which caused them to -- to first
shorten and then extend in an amplified way much more than say an
ordinary -- the underlying collateral or mortgage pass-throughs would
have extended so that we have a circumstance where you have bonds that
-- that as Dr. Brown noted, would extend from 3-year average life at
which it was purchased, to around 18 years because of the way interest
rates changed. And that rendered that portfolio much more susceptible
to market changes over time.
COMMISSIONER MAC'KIE: May I ask you a question?
DR. KNIGHT: Yes, ma'am.
COMMISSIONER MAC'KIE: That susceptibility to extension
that you were just describing, how -- what's the methodology for
anticipating that at the point in time when you are making the
decision to purchase the instrument or not?
DR. KNIGHT: Well, what we do is we have -- we simulate
going forward the impact of interest rates on, you know, what happens
to the average life and will interest -- will simulate different paths
of interest rates, see how those bonds pay down and how their
associated companion bonds pay down. And you just have to do a
computer simulation to see whether or not those things will be done.
It is, in fact, incumbent upon -- if you don't internally as an
investor have that capability, then it is incumbent upon the selling
party today in our community to assure that you are fully aware of the
risk that you take.
COMMISSIONER MAC'KIE: So that would have been just --
that would have been the responsibility of the broker who was advising
the investor?
DR. KNIGHT: That would normally be -- the broker would
normally inform him of the risk involved in securities of this sort
and fully inform him. You know, I invest about right now about 7 and
1/2 billion dollars for the most sophisticated clients in the world.
The broker-dealer community comes to me and not only assures that I
understand, I go through committee after committee of review by the
dealers. And that's updated, you know, sometimes annually nowadays
after we've been in the business for ten years. But, in fact, they
actually go to my clients and make sure that I have fully disclosed to
them the risks of these types of securities.
COMMISSIONER MAC'KIE: Are the types of securities that
Collier County purchased -- that would be the normal process?
DR. KNIGHT: Of CMO bonds. Now, you know, whether or
not -- you know, certainly the broker-dealer community, you know, the
major primary dealers do make a significant attempt to ascertain the
suitability and assure that the client understands -- the investor
understands the risk he's taking.
COHMISSIONER HAC'KIE: I guess my point being that I
just want us to be careful again that we are having to discuss CHOs
generally or mortgage-backed securities generally and that the risks
that you're describing, I hope, is relevant to Collier County's
investment and not just generally CHOs. That's what I'm asking you.
DR. KNIGHT: You have had a situation where you had
bonds which, you know, extended by a factor of five an average life.
That was a risk you not only had potentially, but you realized --
COHMISSIONER HAC'KIE: Right.
DR. KNIGHT: -- and suffered from. So presumably that
risk existed at the time you bought it because it happened, and some
of that should have been disclosed to you.
CHAIRPERSON MATTHEWS: I'm going to interrupt this. Mr.
Brock, at our break you had said that this presentation would take
about an hour. And I know that we're asking questions, but we're a
little more than an hour into it now, and this gentleman is -- so far
from what I've heard, is pretty much telling us the same thing that
Dr. Brown has told us. When are we going to get to the substance of
what we're trying to get to today?
MR. GRADY: Yeah, I'd like to address --
CHAIRPERSON MATTHEWS: You have to come to the
microphone. I mean I don't want to sit here and have several people
regurgitate the same information that we've already heard.
MR. GRADY: No, we respect your time. The intention was
to have Dr. Brown speak more generally about the kinds of securities
that were involved here and then have Dr. Knight address specifically
your portfolio and your securities. Dr. Brown was asked a lot of
questions about the specific securities in the portfolio, and that
took a lot of time that he -- we hadn't anticipated spending, but we
certainly want to try to answer your questions as they arise.
Dr. Knight, the remainder of his presentation is going
to focus specifically on your securities and your portfolio. When he
is through with his presentation, then I will, in as summary fashion
as possible, tell you what practical conclusions I can reach as an
attorney who has reviewed his work product and Dr. Brown's work
product and the other evidence that I have gathered in this case. As
far as the timing, I suspect that Dr. Knight may have 10 or 15 more
minutes on --
DR. KNIGHT: Whatever you want to hear. I can talk to
you -- I can talk five.
COHMISSIONER MAC'KIE: Please don't cut it to five.
COHMISSIONER HANCOCK: Yeah, I think in essence we all
have a firm understanding now of where we are of the term extension,
of what it means to us, of what losses may or may not be realized. My
attitude is let's cut to the chase and talk about why we're here
because, again, I haven't -- that's just me speaking. I haven't
really heard a lot today that I wasn't fully aware of, and maybe --
maybe I'm alone, or maybe I'm not on that.
CHAIRPERSON MATTHEWS: Commissioner Hac'Kie.
COHMISSIONER MAC'KIE: I think there's a twofold purpose
of this hearing. One is we have had the benefit of private
discussions with most or some of these people, and part of the reason
-- I'm sure Mr. Brock would have done this anyway, but -- but my
discussion with him was that I was troubled with having information
that the general public didn't have. And I think there is another --
there is an additional value to getting this -- getting these
questions answered for the public generally, and this is the forum for
that. So I wish that we would let all of the information come out for
the public's consideration in addition to ours.
CHAIRPERSON MATTHEWS: Yeah, I agree --
MR. BROCK: I'll ask him to speed it up, you know, get
to the points and address them and move on. I think we can get that
information across to you in that particular fashion and not reiterate
the same things. I understand where you're coming from, and I think
he does too, and we'll move through the issues as rapidly as we can.
CHAIRPERSON MATTHEWS: Thank you. As I was saying, you
know, we've had some repetition now of what's going on, and I -- and I
think we'd like to move a little closer to the substance of where we
need to go and what our choices are. Dr. Knight.
DR. KNIGHT: Sure. One substantial point, according to
our analysis as of MArch the 10th, from -- and I don't know -- from
the purchase price you've suffered a market loss of about 4.3 million
dollars strictly from the fact of the market loss in the portfolio.
So that's, you know, kind of one main point. The reasons we've talked
about. You had a portfolio which extended in the face of rising
interest rates.
The second main -- the second main point is that what
did you pay for these securities in the first place, okay, versus, you
know, what should you have paid for these securities. You know,
that's a -- may be a difficult question to answer. We know what you
paid for them. We also know basically what an institutional buyer
should have paid for these securities who traded in these things
competitively every day. We see daily marks on -- and offerings on
securities like this from the primary dealer community and from the
regional dealer community routinely.
We went back and looked at the trade dates. We looked
at what interest rates were on each trade date for each of the
securities that was purchased. We looked at the spread of the
portfolio -- or of the -- the securities that -- or where similar
securities were trading in institutional sizes, and what we found was
that you paid about $678,000 more than should have been paid for the
approximately 43 million dollars worth of securities if you had been
buying in institutional-size blocks, that is to say 5 million or more
block sizes. You didn't. You bought million dollar -- 1 to 2 million
dollar block sizes in general.
What that meant was that you were actually buying
securities, that if I were to buy them in the market, would discount
them significantly because of the operational difficulties of dealing
with large numbers of small pieces of paper with all different cash
flow and risk characteristics. So you probably -- even under this
conservative analysis, if these were economic lot sizes, which they're
not -- they would be considered odd lots in the institutional market
-- you paid about $678,000 more than what we would expect to pay on
the offers side of the market and the institutional market.
COMMISSIONER MAC'KIE: But that's because of the
volume. I mean when you're purchasing -- when you have -- I forgot
what you said -- an 8 million dollar portfolio, you can purchase these
kinds of securities at a much lower rate than we who have a much
smaller portfolio. That's a factor, so the -- so the $678,000 might
or might not be the number by which this investment should be judged.
DR. KNIGHT: These were -- when I look at the -- you
know, I'm not talking negotiated prices. These are offer sheets that
are provided by the dealer community to institutional buyers. You
know -- you know, could you have -- I mean there are a number of
ways. You could hire someone like APAM, which I'm not here doing a
commercial at all, or any number of money managers who trade in these
securities, and you could, you know, do it cheaper. COMMISSIONER MAC'KIE: Okay.
DR. KNIGHT: Okay. Or you could have the internal
capability to trade these securities as an institutional player with a
-- with 170-odd million dollars of buying power. You certainly can
buy in institutional sizes.
CHAIRPERSON MATTHEWS: Commissioner Constantine.
COMMISSIONER CONSTANTINE: You've indicated we overpaid
600 and something thousand dollars due to volume. If we had purchased
in larger volume, there would have been a discount. At the --
DR. KNIGHT: No, no, that's not what I said. What I
said was even if these were economic lot sizes, were not odd lots,
priced as if they were, you know, say 5 million or 10 million dollar
pieces, you lost $678,000 on execution. Had they -- if you had bought
odd lots, you could have bought them substantially cheaper.
COMMISSIONER MAC'KIE: Huh.
COMMISSIONER HANCOCK: Ahh, the sound of confusion.
CHAIRPERSON MATTHEWS: So either way, we paid a lot more
money for them than we should have.
DR. KNIGHT: Well, that would be my opinion.
CHAIRPERSON MATTHEWS: Okay. I mean your -- we could
have purchased in round 5 or 10 million dollar segments and paid less
to purchase them, or we could have gone to the odd-lot market -- DR. KNIGHT: And bought them cheaper.
CHAIRPERSON MATTHEWS: -- and bought them cheaper.
DR. KNIGHT: Yes.
CHAIRPERSON MATTHEWS: Either way, we could have bought
them cheaper than what we paid for them.
DR. KNIGHT: Exactly.
CHAIRPERSON MATTHEW: Okay.
COHMISSIONER CONSTANTINE: At what point does it become
the buyer's responsibility to buy at the best price? Where I hear
this -- where I hear this headed is that the seller was responsible
for that, and perhaps to some extent they are. But at some point the
person who is buying this has to take some responsibility. In this
case the county has to take some responsibility for the price at which
they purchased and the product which they purchased.
DR. KNIGHT: And you have. You've lost, you know, 5
million dollars.
CHAIRPERSON MATTHEWS: We're responsible.
DR. KNIGHT: I mean that's the ultimate responsibility.
MR. GRADY: Commissioner Constantine, I planned to
address that, but I'm happy to speak to that issue now. It is
somewhat a legal question, and we didn't ask Dr. Knight to give legal
opinions. We wanted him to tell us what happened. As far as the
interpretation of what happened, reasonable persons could disagree on
many things. But what we know is that duties do exist upon the part
of persons, whether they're professional accountants, professional
attorneys, professional investment advisors, or stock broker. There
are certain duties that those people owe to the people that they do
business with. And there is a concept of best execution, which is
known in the securities industry. And Commissioner Norris as being
one in the securities industry would perhaps be very familiar with
that concept. And firms owe a duty to their customers to obtain best
execution, and basically what that means is they have a duty to get
the best price. And if they don't get the best price, they've
violated that duty.
Given these kinds of securities, it is -- it is probable
-- I can't say for certain, because I have not spoken to many people,
including Mr. Yonkosky, but it is probable that the county did not
have the independent analytical capability to run these models and
determine that, yes, this is the best price and this is what I should
be paying for those securities. Under those circumstances, the firm
selling those securities would have a duty to get the best price.
Whether you call it a fiduciary duty or some other kind of duty, they
have a duty to get execution and give the county the best price. It
appears that that did not happen.
COMHISSIONER CONSTANTINE: How long have you been
working on this, Tom?
MR. GRADY: Since September of last year.
COHMISSIONER CONSTANTINE: I'm just curious why you
haven't spoken to Mr. Yonkowsky in the past eight, ten months when he
was the primary person associated with this.
MR. GRADY: I did speak with him on the telephone, and I
asked him to meet with me personally, and he declined to do so.
CHAIRPERSON MATTHEWS: Dr. Knight.
DR. KNIGHT: Okay. My last series of points. First of
all, the last thing is to compare what -- the portfolio risk structure
with your risk parameters. The ones that is enunciated in your -- in
Collier County's investment policy, which I think was noted, was
constructed to provide both objectives for the fund and to limit the
discretion and risk-taking ability of the investment manager. In
particular, the investment primary objective was to be safe and
liquid. It's basically said four different ways in the first four
paragraphs of the policy. And then it laid some constraints on both
credit risks in terms of diversification and market risk, which was in
terms of limits on the maturity of the securities purchased. This was
a well constructed investment policy which seemed to address the main
points, that it's -- you know, certainly was consistent with the
objectives. The constraints were consistent with your objectives.
And it took a very, I would say, extremely conservative
view of credit risk. On a point-by-point basis, you had several tests
of the securities they had to meet to be included in your portfolio.
Number one, you had an average maturity test for the entire portfolio
which said that it was not to exceed five years on average or 1,825
days excluding variable rate instruments.
Now, this portfolio on its face failed the test. This
was in section 10, sub part A. As you noted in -- in table 5 in your
-- in -- in the book, the average maturity of the entire portfolio
was in the year 2005. If you exclude the adjustable rate products,
the average maturity was 2001 -- or actually December of 2001, an
average of 7.3 years.
COHMISSIONER NORRIS: Dr. Knight, could you clarify
something for me here? It says the average maturity of the
portfolio. Does that mean the entire investment portfolio? DR. KNIGHT: That's right.
COHMISSIONER NORRIS: Okay. So then below when you say
the market weighted portfolio maturity is 2005, is that the -- once
again, the entire investment portfolio --
DR. KNIGHT: Including the treasuries and including
everything.
COMMISSIONER NORRIS: Right, and not just with the CHOs
separated out?
DR. KNIGHT: Right. That's the complete 176 million.
So again, excluding the adjustable rate products, the portfolio still
failed the test because its maturity was in year 2001. The second
criterion, the investment maturity and liquidity test, which said that
no more than 10 percent of the portfolio can be placed in securities
that mature in more than ten years -- and I think we already pointed
out that almost 44 percent of the portfolio had maturities in excess
of ten years, so clearly this test has been failed by the existing
structure of the portfolio.
This particular test is -- is problematic in its
terminology, so it may or may not pass this test. But you have a
specific security -- specific maturity test which says that direct
investments in government securities are limited to five-years
maturity. You have Ginnie Mae pass-throughs which are, in fact,
government securities but may also be classified as government agency
securities. So whether or not it passes or fails this, it depends on
that interpretation. But in any case, you do have these three Ginnie
Mae pass-through securities which are actually direct obligations of
the U.S. Treasury, which mature in the year 2023. That may be
quibbling on that.
In your agency securities you have a restrict -- you
have -- you define which government agencies you can invest with,
which are direct obligations of the treasury, and then you tell us
that only 25 percent of the agency portfolio -- so you subcategorize
the portfolio. Of all those securities invested in government agency
securities, you say you can't have more than 25 percent in any one
agency. And, of course, the portfolio violates this test or fails
this test because it -- all of its agency securities were in from one
agency.
And, finally, this -- I was getting confused here
because I mistyped -- entered something -- written something here.
But you also have an instrumentalities diversification test which
means that you said, okay, you can invest in certain defined federal
instrumentalities or government sponsored enterprises. And then you
say that a maximum of 25 percent of this portfolio may be invested in
one particular agency, any one of those issuing agencies. And it says
security type, but that's under the paragraph which is talking about
the agency diversification. And in this case the portfolio fails the
test because you've invested 44 1/2 percent in Freddie Mac issues,
Federal Home Loan Mortgage Corporation issues, and 55 percent in
Federal National Mortgage Association or Fannie Mae issues.
So I guess the bottom line is that at least by these
five criteria, the portfolio does not comply with the risk parameters
that are defined in your policy. I guess you paid too much for the
security -- the CMO portion that contains the risks that you have and
that you lost money in the parts of the portfolio where it did not
comply with the -- with the policy you set forth. And, finally, if
the portfolio had been in full compliance with the -- with the policy,
you would have not lost as much money as you did.
COMMISSIONER MAC'KIE: Just one question. Any analysis
-- that last one sort of got my attention. Did any analysis of --
naw, it wouldn't work. Never mind. I was going to say -- I was going
to ask a really dumb question, which was if we had complied with the
policy, can you give us any estimations of, you know, what the
portfolio would have done? But that's way too wide a question to be
answering.
DR. KNIGHT: It could have happened with a lot of
things. There are a lot of ways to lose money.
CHAIRPERSON MATTHEWS:
figuring that one out.
COHMISSIONER MAC'KIE:
more fun than this.
CHAIRPERSON MATTHEWS:
get the lights?
COHMISSIONER NORRIS:
We could have been imaginative in
Yeah, it would have been fun,
Thank you, Dr. Knight. Can we
While we're waiting to get the
lights back on, I think it's important for the public to know that we
haven't lost a penny. We're down in market value. Our experts have
told us here today that we haven't technically lost a penny yet --
COHMISSIONER MAC'KIE: It's not gone yet.
COHMISSIONER NORRIS: -- and it's important for the
public to know.
CHAIRPERSON MATTHEWS: Yeah. That loss would only
materialize if we were to have to sell that portion of the portfolio.
DR. KNIGHT: Yes, ma'am. I mean the loss is
materialized. You only have to account for it if you sell it.
CHAIRPERSON MATTHEWS: Mr. Grady.
MR. GRADY: I'd like to build on what they've presented
to you and also address some of the questions that have been presented
by the commission and provide you with some of my practical and legal
observations and conclusions. I will try to do that in as short a
time as possible. Please slow me down if you'd like to or give me a
signal to speed me up, and I'll try to do that. But I want to
emphasize that from my standpoint, as I understand the law that
applies to securities transactions generally, and I'm not an
accountant, so I'm not giving an accounting or an auditing opinion,
but the issue as to whether is realized or unrealized is largely a tax
issue, which doesn't apply to the county as a nontaxpaying
organization. If you don't sell these securities, you don't realize
the loss, yet the loss is there. I don't think that it is an
appropriate way to look at this package of securities and say we don't
have a loss because we haven't sold them. The loss is there. Whether
you realize it a year by year by year until 2010 or 2023 or 1997, the
loss is real. You could sell those securities today, realize your
loss if you were a taxable entity, reinvest at higher yields, and it's
exactly the same thing. So the loss is real, and I don't think we
should be focusing on -- on whether it has been realized or not. It's
a real dollar situation.
Also earlier I think Commissioner Norris had asked Mr.
Brock -- no, actually Dr. Brown -- whether we need these funds in the
future. Why are we focusing on hypotheticals. Are these what-ifs
really applicable to us or the county? Well, certainly it's not our
position to tell you whether you will need these monies and when you
will need these monies, although in order to comply with the policy, I
believe it is necessary for Mr. Brock to know the answers to those
questions and for this board to formulate what the liabilities are
that will correspond with the assets that are maintained in this
portfolio. But it is not speculating, and it is not saying what if
when we look at these particular securities and conclude that they do
not meet the investment parameters contained in your policies. Your
policies are real. Your policies are not what if.
Commissioner Mac'Kie asked a question and then withdrew
it a short while ago saying what if we had complied with the policy.
Well, we can't say exactly what would happen, but you can say that you
would have significant volatility in the portfolio because you
wouldn't have had that same kind of extension of risk. If you know
you're going to spend the money in three years, you can go out and by
a three-year bond. If you buy a CMO that has an expected life of
three years, it might be a three-year bond. It might not have a
loss. It might have a loss because that 3-year bond could become an
18-year bond, which is exactly what happened to portions of the
securities in your portfolio.
Now, I have focused in looking at this on three areas of
losses, and you've heard mention to them. I won't dwell on them, but
I want to highlight them, because that's the bottom line as I
understand the situation.
Number one is there was an overpayment as I mentioned a
short while ago, for the securities. If there was an overpayment that
violated duties owed by brokers to the county, then that is a legal
cause of action, and I think that a claim could be asserted for
reimbursement of the overpayment of those funds. Additional research
would be necessary, and additional documents would be required in
order to review them and reach that conclusion, but it's a relatively
objective thing to do.
An additional area where we focused on is what Dr. Brown
referenced briefly, and that is the concept of excessive trading or
churning. Now, those words have certain magic meanings to people,
especially in the securities industry and -- and people disagree on
what it means. But in the context of this portfolio, I went back, and
Dr. Brown and Dr. Knight looked at the portfolio being in about 1989
and continuing to the present time. There were a number of securities
that were purchased in those early years that were not held to
maturity, that did not have losses, that were not problem securities
that were sold and reinvested in comparable securities. Why was that
done? Well, I haven't spoken to the broker involved, Mr. Lipp. And
I'm talking about securities that were sold by Meridian Securities
when we're talking about the successive trading. And I haven't talked
to Mr. Yonkosky about those transactions. But I cannot think of a
reason; Dr. Knight and Dr. Brown cannot think of a reason why you
would sell a security that otherwise was in compliance with your
policy or at least was consistent with other securities that you were
buying, that you would sell it and turn around and buy the same
thing. The only reason I can conclude is that there was a commission
there or a fee there or a transaction charge there. And that's
important for a couple of reasons. One, it's important because you
might have paid more to own, purchase, and sell those securities again
than you had to even if they were sold at a profit. If you bought
them at 100 and they were sold at 101, but there were 2 points taken
out or 4 points taken out in the process, you lost money, and there
may not have been any reason for that to have taken place. That's
something that should be investigated. That is one reason.
Another reason is that that suggests to me, as someone
who has seen lots of these kinds of cases, that this particular
account appears to have been controlled largely by Meridian Securities
and Robert Lipp. As I understand it, Mr. Lipp developed a close
business and personal relationship with Mr. Yonkosky and was
responsible for about 85 percent of the trades executed in the
account. There's nothing per se wrong with that. But if one broker
and one brokerage firm assumes, in essence, control over a portfolio,
the duty goes up. The duty on that broker goes up because that broker
knows or should know that that customer is relying almost entirely on
that broker to make very important decisions about these funds.
COMMISSIONER MAC'KIE: Tom, what percentage?
MR. GRADY: 85 percent. Now, the question that comes
up, is it reasonable for the county to rely on some other broker in
making recommendations of various securities. I think it is. Does
that -- is that in actuality what happened? Again, I need to talk to
additional people, but it seems to me that it was.
Other things that I've looked at that are red flags to
me that suggest that there may have been improprieties in the way the
account was handled by the brokerage firm and, again, principally
Meridian in dealing with the county's funds, include things like the
registration history for Mr. Lipp. Now I'm not saying that he's
guilty of anything because he's been associated with firms that have
had problems in the past, but if you were hiring an auditor or a
county manager or an attorney, you would look at the background of
these people and try to figure out where they've been before and what
they've done before. Virtually every firm that Mr. Lipp has been
associated with has had significant regulatory problems, including one
government securities firm that was shut down by the State of
Florida. Another one was Drexel. Does that mean he did anything
wrong because he worked for Drexel? No. Does it mean you might want
to investigate that if you were hiring that person to do something for
you? In my mind, yes. Does it mean that Meridian Securities who
employed Mr. Lipp would want to do some research about that person
before hiring the person? Yes. And I can't tell you whether or not
that was done, but those are legal issues that pertain to theories of
liability including negligence on the part of the firms and the people
that you were dealing with.
It also is my understanding that during the relevant
time period there was no investment committee of any kind. There was
no investment advisor or any kind of an oversight board or anything
like that to whom Mr. Yonkosky reported, and certainly the brokerage
firms knew that. And, again, that affects the duty. If there's
somebody up here, and a broker -- I'm dealing with a customer over
here, and I know that there's some person over here who's calling the
shots and looking at what I'm doing, that affects the duty in a real
and a legal and a practical sense that a firm may owe to a customer.
But under these circumstances, it's my understanding that did not
exist.
Some other things that suggest to me problems -- I've
got some materials. I would like to just hand these out to the
members. I will -- I will refer to them very quickly because I know
that you've got some time constraints, but I do want you to have the
materials. It's a compilation of exhibits that I think are all
relevant. Tab 1 is simply biographies of the people you have heard
today.
At tab number 2, this is a regulatory report that is
available through state or federal regulators, and it describes the
regulatory background of Mr. Lipp, and it references the various firms
that he has worked for. And there were 14 employers since 1981
through Meridian Securities, and it's my understanding that he
resigned last week from his employment with Meridian Securities. I
have not been able to verify the circumstances of that resignation,
but it's something -- I think it's important.
At tab number 3 I have an excerpt of a regulatory report
for a firm called Government Securities Dealers. And if you did look
through that, you will see that Mr. Lipp is referenced in there as a
respondent. This is an action that was brought by the Florida
Division of Securities in the late 1980s to discipline this firm and
to discipline Mr. Lipp for activities involving government
securities.
At tab number 4 is a report for Meridian Securities, and
it's simply biographical. There's no information about adverse
disciplinary history.
At tab number 5 --
COHMISSIONER HAC'KIE: Could you just tell us what's
CRD?
MR. GRADY: I'm sorry. CRD stands for the Central
Regulation Depository, and it's a master database that is maintained
by the National Association of Securities Dealers and into which all
of the various state securities regulators tie in so that if any one
of the state securities regulators or the SEC or the NASD or other
regulators need to access that information, it's all live and on line,
so it's a computer database. And that information is generally
publicly available. There are different things in different states
that get reported, but it's generally publicly available information.
At tab number 5 there's a letter addressed to Mr.
Dotrill from the compliance director at Meridian Securities.
Apparently someone asked -- I don't know who asked, but somebody at
Meridian or perhaps here at the county asked for an analysis to be
performed on the spreads or commissions or markups or however you want
to describe the transaction costs associated with the securities sold
by Meridian to the county or purchased from the county. And I've
included this report in here because I think it -- it speaks loudly in
terms of what we don't know.
What we don't know is what they earned on the commission
-- on the transactions that it had with the county. I made similar
inquiries -- I did not make this inquiry. I did make an inquiry of
Meridian. I also made inquiries of two other firms that the county
had dealt with, and I received that exact information. I know the
markups or the spreads that were paid or received in connection with
those transactions, but Meridian refused to provide that information.
It is not required to. All right. I want to make that point, but it
would come out in the course of discovery, any kind of adversary
proceeding. And the fact that they are not willing to share that
information again is a red flag and suggests to me that there is
something to hide.
And, indeed, if you look at their report, they talk
about markups or spreads of as much as 4.41 percent, which in an
institutional trade is extraordinary, even if it only happened once.
And they say that most of the trades had markups of less than 2
percent, and I don't know what they mean by markup, because there are
two separate issues. And, again, I'm going very quickly, but you can
have a profit or a loss if you're holding a security in your
inventory, and you might call that a markup or markdown. You can also
have a spread, which is in essence a profit, when you resell that
security. So there are a lot of questions unanswered here. And the
fact that they went to the trouble to hire a big six accounting firm
like KPHG Peat Marwick to present this kind of report with all kinds
of hedges saying this really doesn't mean much except I've done what
you asked me to do, sends up a red flag and causes me great concern.
At tab 6 is a letter that we received from Sun Bank and
also some enclosures from Sun Bank, and you will see that they were
quite cooperative responding to our request. They did provide
information on the revenue that they earned on the transactions with
Collier County. And although I havenwt questioned them to verify that
this is the extent of it and this is the total revenue earned, if you
look at the numbers, it works out to something like .14 percent.
Thatws an institutional rate. Thatws a reasonable rate. If I
understand this correctly, .14 percent is a reasonable price for you
to pay as an institutional investor in purchasing these securities.
4.41 percent is unheard of and should never be contemplated. In fact,
in -- in the next page youwll see in Sun Bankws procedures manuals
they have maximum profits per ticket that they will allow. This is a
normal paper that youill find with broker-dealers or investment
advisors.
We asked for it from Meridian. They said, we donlt have
to give it to you, and we donlt want to give it to you and we wonlt
give it to you. And theylre not required to. Iim not suggesting that
they are, but we donlt know. Sun Bank voluntarily gave us that
information. And you can see for treasury and federal agency
securities 16/32 is the maximum profit for a ticket or half a point
essentially; treasury bills a lot less, as you can see in paragraph
one; paragraph 3, mortgage-backed bonds, 2 points. Now therels a big
caveat on the next page. It says, all of the markups outlined are
maximums. In most cases the markups will be less. And if youlre
talking about a 5 million dollar bond, it will be much, much less as
evidenced by what they charged you for these transactions.
The letter is important for another reason, the one of
October 13 at tab 6, and I wanted you to see this. It states in the
bottom paragraph in the middle that an additional test be provided to
the county in August of 1993 on all their CMOs was the FIFIC stress
test, a test that is required for CMOs purchased by banks. It is not
applicable to the county, but it is a test. Continuing it says,
although many of the securities owned by the county at that time
failed the test, Mr. Yonkosky did not consider that a factor in
evaluating whether to buy or hold the CMOs.
I assume that he did not consider it a factor, if thatls
correct -- this is the letter writer, and I canlt tell you that itls
true or false or what Mr. Yonkoskyls position in response to that is.
But if it is true, that he did not consider the failure of this test,
which is a risk type of test to be important, Iim assuming and would
like to verify that he was relying on somebody else in reaching that
conclusion, and I have assumed that itls Meridian Securities. These
assumptions can be verified, and I think itls important that the board
or the clerk take the steps to verify those assumptions.
Iive included those tests at tab 13. And the test is
the Federal Financial Institutionls Examination Council investment
suitability guidelines. Now, I wonlt go through it in detail, but if
you take the time to look at it, youill see that it basically measures
volatility-type risks, which is exactly what you were exposed to in
the portfolio and exactly what you shouldnlt have been exposed to in
accordance with the investment policies. Now, Iive got the actual
printouts for some of these tests for these securities, and you can
see that most of them failed the tests. Thatls an indicia that the
securities are risky, and that seems to me to be inconsistent with
your stated investment objectives.
CHAIRPERSON MATTHEWS: Mr. Grady, question. These --
this test was applied on the date of the purchase and not subsequent
to them having purchased?
MR. GRADY: My understanding from Sun Bank is that they
applied the test in August 1993, which would have been prior to the
losses appearing because the change in interest rates hadn't occurred
at that particular point in time. What you see in these materials is
a printout that was prepared about a year later in August of 1994 that
says that these same securities at that time failed this test.
COMMISSIONER MAC'KIE: At which time?
CHAIRPERSON MATTHEWS: At which time?
MR. GRADY: August of 1994. We could go back and
reconstruct. It would be expensive, but we could go back and
reconstruct the same test for August of 1993. We didn't do that
because the security characteristics hadn't changed between August of
'93 and August of '94. They were still what they were. They would
react to different -- different interest rate swings --
CHAIRPERSON MATTHEWS: But the market had changed.
MR. GRADY: -- market changes in the same way. We
happened to have gone through a very significant movement in interest
rates which realized some of these risks, but the measurement is
designed to tell you in advance the exposure that you have to that
kind of risk.
COMMISSIONER MAC'KIE: You're saying you measured it in
August of '94, but you believe that they would also have failed this
FIFIC test in August of '93?
MR. GRADY: That's correct. And, in fact, Sun Bank did
those tests, but I don't have them. So Sun Bank did perform -- or at
least I have been told in this letter that Sun Bank did actually do
the same performance in August of '93, but what you're looking at in
these materials are not the Sun Bank reports. These are reports we
did in August of '94 which confirm what they have told us they did.
CHAIRPERSON MATTHEWS: Okay.
MR. GRADY: Moving to tab 7 is a letter from a firm
called Fixed Income Securities, Inc., which is an affiliate, a fixed
income broker-dealer for Securities America. Securities America was
another firm that the county did business with. Two purposes of
including the letter. The first paragraph it says that the average
markup -- and again clarification is appropriate on the term. The
average markup for these trades was less than 1 percent, .877 percent,
considerably higher than Sun Bank, considerably lower presumably, but
we don't know for sure, than Meridian, the primary broker and advisor
to the county during this time period. If you'll notice in the last
paragraph, not the one-liner, but the last paragraph, in -- in this
particular letter this firm is saying that I would also like to point
out that all the trades conducted for this account were directed
trades. Directed means that somebody else was calling the shots. The
firm wasn't -- in the words of this broker, and it could be a
self-serving statement, but in the words of this broker, somebody was
directing these trades. Colin, who was the account executive, gave us
specific information on the types of offerings that the client was
interested in seeing. Colin was dealing at that time, I believe, with
Mr. Yonkosky, who would have been telling him what he wanted to buy.
These details were very specific in terms of average life, coupon,
volatility, price, et cetera. We provided the rep with analytic
models on the volatility for each of the offerings we made. Typically
these analytics show how the investments react in different interest
rate markets.
I haven't seen the reports that they claim to have
provided to the representative, and I do not know whether they were in
turn provided to Mr. Yonkosky or someone else within the county, but
this is what Dr. Knight and Dr. Brown were referring to a short while
ago in terms of the duty to make these kinds of disclosures to
customers. Theywre saying that they did it. It implies that therews
a need to do it, but it also says -- and Iwll get back to the directed
trade issue. There is a memorandum that I saw that was prepared by
Mr. Yonkosky saying that he only did business with Securities America
to get Mr. Brock off his back. I donlt know what that means exactly
except that itls my understanding Mr. Brock wanted some
diversification and didnlt want to deal exclusively with a single
broker-dealer. But it suggests, again, that it might have been a
directed trade, and the information for that trade, what you should
buy, could have come from Meridian which, again, was responsible for
the majority of the trades that the county was involved with. In paragraph 8 --
COMMISSIONER CONSTANTINE: Just on that last comment,
you said it might indicate. Do you have to indicate that, or thatls
just an assumption on your part?
MR. GRADY: Anything to indicate that the -- that
Meridian actually gave financial advice with respect to the securities
purchased by Securities America?
COMMISSIONER CONSTANTINE: Yeah, you just said it was a
directed trade. It might indicate that that direction came from
Meridian, and Iim paraphrasing.
MR. GRADY: No. I am drawing a tentative conclusion
based upon everything that I have looked at and providing you with an
opinion. I have no document that says that Meridian looked at the
securities prior to Mr. Yonkosky purchasing them in his portfolio. I
do not have that. I donlt know whether it exists. Iim not saying it
doesnlt, but I have not seen it.
In paragraph 8 or tab 8 we turn to a somewhat different
heading. And in the interest of time I want to address it but I wonlt
get into it in detail. But this is a preliminary draft report that
was prepared by Coopers and Lybrand for the audit for the county for
the fiscal year ending September of 1994. This is not what ended up
being used and included in the final report as I issued by Coopers and
Lybrand, but I think itls important, because if you look at the
comments on paragraph 1, gains -- Iim sorry, paragraph 4, investment
practices may not be in compliance with current policy. COMMISSIONER MACIKIE: Third page.
MR. GRADY: Itls on -- actually the page is not
numbered. I apologize, but itls paragraph 4. Current investment
policy requires the county not -- and then they quote from the policy
-- not be directly invested in securities maturing more than ten
years from the day of the purchase except for federal
instrumentalities. The county has acquired CMOs that may not conform
with the maturity guidelines of the investment policy. In addition,
we noted that the current investment policy was approved in 1987, and
they talk about the need to potentially improve the policy.
In the final report they edited that to say -- to not
reference that there may be a violation of the policy. And itls my
understanding they did that based upon some comfort they obtained from
a letter that Raymond James had authored sometime in March -- sometime
in March. And I think that members of the commission have that, and
itls also included in these materials, and Iill comment briefly on
it. But the significance of not only the draft statement but my
referring to Coopers and Lybrand is, as an auditor they have certain
duties that they owe to the county, just as brokers have duties in
dealing with the county, and other professionals have duties in
dealing with the county. And I have not spent the time at this point
to research claims that may exist against Coopers and Lybrand, but I
do want to point out that there may be those claims. Coopers and
Lybrand may have had a duty to point out to the board in prior years
that the kinds of securities that the county was investing in were
inconsistent or may have been inconsistent with the policy. And if
you go back and analyze the investments during each of the prior
fiscal years, I believe that you would see that there were violations
of the policy. Coopers did point out in prior years that -- what the
yields were on these funds that were being earned by the county, and
they compared them to various benchmarks including treasuries and
other safe obligations. There was no discussion that I've seen about
a differential risk exposure that the county might have had, which
would justify a slightly higher yield in some of those securities, or
whether that was permitted under the investment policy of the county.
COMHISSIONER MAC'KIE: And one conclusion could be that
Coopers didn't include that in their audit report because they don't
share their opinion that they were risky investments. I mean that's
one conclusion that could be drawn, and another one is that they left
it out in reliance on this Raymond James analysis.
MR. GRADY: Well, at this point if you're talking about
the current portfolio for the year ended September of 1994, I have
reviewed a memo that confirms a telephone conversation between
somebody in the clerk's office and Coopers, and I believe they did
confirm that the reason they took it out was because they relied on
the Raymond James report. Now --
MR. BROCK: May I interrupt for a second? Commissioner,
when Jo-Anne Leamar who is my comptroller came to me and indicated to
me that Coopers and Lybrand had changed their audit comment, I
directed her to contact Coopers and Lybrand and speak to -- I can't
even remember her name now.
COMHISSIONER MAC'KIE: Phyllis Jones.
MR. BROCK: Jones, Phyllis Jones, and find out from them
why they changed the audit comment to delete those portions. And we
were instructed, according to the memo, in response to my request of
Miss Leamar, that she had conversed with the county manager's agency
and that the county manager's agency in -- through the process of
demonstrating or giving them the report of Raymond James had convinced
them that they were not in violation of the county's investment
policy.
COMMISSIONER MAC'KIE: And Raymond James serves in what
capacity to the county?
MR. BROCK: Raymond James is presently the financial
advisors of Collier County.
MR. DORRILL: I'd like to elaborate on that. They're
the independent financial advisor to the county commission and in --
in previous days I've spoken to each commissioner and told you
initially in protecting your interests and trying to obtain
information in advance of today, we did seek out the commission's
independent financial advisor. And I have also asked and questioned
Mr. Yonkosky and as well inquired as to whether any information had
been received or should it be from the board's Counsel of Economic
Advisors. And we had authorized Raymond James to do an analysis on
your behalf. Why Mr. Grady or Mr. Brock did not seek out either the
Council of Economic Advisors or Raymond James, don't know, didn't
bother to ask. I've had at least one commissioner specifically
requested the Raymond James analysis. It was prepared, shared with
each one of you. They are here today, and at some point I would like
to think that you might ask your -- your financial advisor what their
analysis of the various concerns are.
COHMISSIONER HAC'KIE: I -- I hope that we're going to
have time to hear from Raymond James too because that's one of -- one
of the things that causes a dilemma for me is I had spoken to Mr.
Grady. I had heard what his analysis was of this, and it was a huge
red waving flag, danger zone. And then I also got to speak with the
gentlemen who are here from Raymond James who said, doesn't look like
a problem to us. So I hope that we'll take the time to hear a little
bit from both sides.
MR. GRADY: The -- the reason why, Mr. Dorrill, we
didn't consult with Raymond James is that we thought it would be
preferable to have a totally independent source review these materials
and provide what we thought to be an unbiased report. And I'm not
suggesting that there is a bias in the Raymond James report that is
unfair, but there obviously a bias because there is an existing and a
contemplated future relationship there between those firms. We wanted
a completely independent organization to review the data.
At tab 9, these are just excerpts of some materials out
of the clerk's files discussing some of the transactions. This is
what I was referring to earlier and what Dr. Brown was referring to
when we were looking at a series of trades that we can't explain. We
do not understand the motivation for those and think that it was
probably commission oriented.
At tab 10 is the Raymond James report that we are
talking about, and we were prepared to address this. And Dr. Knight
has certainly studied this and has some opinions about some of the
conclusions in the report. And time permitted, we'd be happy to
address those now or at some future date.
Let me say just as sort of a short summary and not as a
financial analyst or financial advisor, that this appears to be a
tentative report. I do not know what the assumptions are. All I have
seen are these few pages. I think that some of the conclusions and
assumptions that appear evident in the March 10th letter I think could
be disputed and have been directly disputed by the report that you
have received from Dr. Knight and the report that you have received
from APAM.
I will also point out that in any kind of adversary
proceeding that I have ever been involved with involving security
transactions, there will always be someone on the other side saying
that what I say is incorrect and someone's right and someone's wrong.
But some of these issues are fairly clear and fairly black and white
and fairly objective.
And I think the biggest discrepancy between the two
reports results from an interpretation of the average maturity or the
maturity of the securities in the portfolio. And I believe as I read
this that Raymond James thinks that maturity and life are
interchangeable, and if you buy a security that today has an
anticipated life of three years, that's okay. It's not a five-year
bond. But if it matures really and truly in 2023, we look at it as a
30-year bond, because that is the maturity of that bond. It may
prepay. As you heard, mortgagors can prepay anytime they want, but it
is a 30-year bond. That makes a fundamental difference in the
conclusions reached, and I think that's primarily the key difference
that you would find in analyzing the two reports side by side.
I've included at tab 11 another CRD report, and this one
is for James Clark who'll you see was the author of the Raymond James
letter. And you can see that he's been employed by Raymond James for
about a year, and his other employments are also listed there as well,
and I think that's relevant in comparing the two reports.
At page 12 is another tab. This was is for --
COMMISSIONER MAC'KIE: Was there anything -- you can
read these better than I can. You have more experience. Do you see
anything on this report of Mr. Clark, I guess it is, that causes you
concern?
MR. GRADY: It's Mr. Camp. No, there's no adverse
disciplinary history reflected on the report. It reflects the date of
his birth in 1964 and that he became registered with Raymond James,
took a series 7 examination in March of 1994 and passed that
examination and had several prior apparently financially related
employers. There is no adverse history.
COHMISSIONER HAC'KIE: It's an inquiry you would have
made if you were checking references to hire?
MR. GRADY: Absolutely. We obtained the Raymond James
report. I do not know Mr. Camp. I wanted to know who he was within
the Raymond James organization. I think it's a normal routine thing
that you should do in trying to assess the credibility of a report and
the motivations of an author, so I wanted to provide that to you, and
there is no adverse disciplinary history reflected there.
Neil Keen, again, he is someone, as I understand it, who
is advising the county on behalf of Raymond James, and I thought you
would also be interested in having his report there. In anticipation
of your question, Commissioner Hac'Kie, there is one arbitration
complaint that is filed here, but it was successfully defended. And
other than that, I don't believe there is any adverse history reported
on behalf of Mr. Keen.
COHMISSIONER HAC'KIE: And when you say successfully
defended, the result is that the claim was found to be without merit?
MR. GRADY: That is correct. That is correct.
Now, where does that bring us as a practical matter? I
think at this point what the clerk would like, as I understand it, and
what I would also be in agreement with as far as a recommendation, is
-- is that the board cooperate or direct others within the county to
cooperate with an ongoing investigation such that in three or four or
five weeks' time I would have the opportunity to meet with other
people that I think should be met with in order to form more
definitive conclusions. Unless I discover something that would change
my present opinion, and my present opinions I would like to share with
you, and that is that I do think the county has or the clerk has a
cause of action against Meridian Securities, possibly against the
other firms, and possibly against Coopers and Lybrand, but from what
I've seen, against Meridian Securities and, again, in the three areas
we've gone over in terms of the excessive trading and the overpayment,
the failure apparently to get best execution, which could apply to
other firms as well, and the losses that I think are very real in the
portfolio, although they may not at this point be realized.
Commissioner Hac'Kie asked at one point how at the time
of purchase you would size up this extension risk, and this ties into
some other questions that other commissioners had asked also. And the
real answer to that is within the context of your investment policies,
you don't. If you cannot predict the maturity of a security, you
cannot predict where it falls within the scope of your investment
policies. So you either need to amend those policies if you want to
buy or conceivably hold these securities since holding them violates
the policy, or you act in conformance with the policy, and you
liquidate those securities, which would result in a realized loss.
But it's important to note that -- as I believe it was Commissioner
Norris pointed out, in the sense that it's hypothetical in one way
that the security value could come back, that's true. You can make a
lot of money with risky securities. You can also lose a lot of money
with risky securities. And what you own is not authorized by your own
investment policy, so should you choose to hold and do nothing, you
have that additional risk that you would not have had if, going back
to Commissioner Mac'Kie's question, the original investment policy had
been complied with.
CHAIRPERSON MATTHEWS: Commissioner Hancock.
COMMISSIONER HANCOCK: I know that after a lengthy
presentation that to me boils down to very two major points, the first
of which I think is important for the public to know, and that is that
the Chicken Little scenario does not apply. The sky is not falling.
The county is not in a position that Orange County was or is. A great
proportion of our portfolio is not in jeopardy of losing principal
unless we all of a sudden need that -- that principal, which has not
happened historically in this county to liquidate that amount of
money. So that is an important point that I greatly appreciate has
come through today.
In addition, I think there is a valid concern regarding
the financial advice, level of involvement, and responsibility
regarding trades on the part of Meridian. I can't stick my head in
the sand on that because of what I've heard today because there is
some questions I would like answered. Where we go from here, I don't
know. But I at least wanted my colleagues to know where my questions
still remained and at this point unanswered and will go so until
either we take action or -- or the clerk's office comes up with those
answers. But that's -- those are really the two major points I
derived from an hour and a half worth of presentation.
MR. BROCK: Commissioner, before we move on, I would
like to address Mr. Dorrill's concern as to why I did not consult
Raymond James. And I will point out to you that I'm sure all of you
have read about the circumstances that presently exist in Escambia
County with their involvement in these types of securities. Mr.
Thomas Tew who is the counsel -- who is the securities attorney
representing Escambia County, is present here in this courtroom whom I
have consulted with on numerous occasions. And Mr. Tew has advised
me, and I will let him expound on it if you would like, that Raymond
James is one of the principals that was involved in selling the
securities to Escambia County. And as a consequence of that, the
reason that I did not go to Raymond James is because I felt that they
had at least the appearance of a conflict of interest. If they have
sold these securities in the marketplace, obviously there would be a
concern that they might not have a truly objective approach.
Therefore, I went to the people here who do not sell these securities
in the marketplace, period, so that I could get a truly objective
opinion as to what took place. That was my purpose for not consulting
with Raymond James but, rather, taking Mr. Grady's recommendation to
consult with APAM and these individuals.
COMMISSIONER NORRIS: I have a couple of questions,
short ones.
CHAIRPERSON MATTHEWS: Commissioner Norris.
COHMISSIONER NORRIS: Short ones.
CHAIRPERSON MATTHEWS: They're real short; right?
COHMISSIONER NORRIS: Probably Mr. Brock would be the
one to ask these to. The first question is what is the lowest dollar
amount that our portfolio has been say in the last five years?
MR. BROCK: Our portfolio, I'm not sure of that
particular figure, Commissioner Norris, but I can find out for you.
COHMISSIONER NORRIS: Would you say it's ever dropped
below a hundred thousand -- a hundred million, for example? MR. BROCK: In the last five years.
COHMISSIONER NORRIS: Doesn't it normally just kind of
float between 150 and 200 million?
MR. BROCK: Probably about a hundred in the last five.
COHMISSIONER NORRIS: And the second question would be
what is our -- you're currently rolling T-bills with -- with the
money, and what is our current T-bill rate?
MR. BROCK: I do not have that figure off the tip of my
tongue, but I'll be glad to get that to you.
COHMISSIONER NORRIS: Could you get it within a point,
four and a half?
MR. BROCK: I do not know. Commissioner Norris, you
have to understand that I do not deal with the portfolio on a daily
basis. I have someone who I pay to deal with the portfolio on a daily
basis who does theoretically have that expertise. But I will be glad
to get that information to you and provide it to you.
COHMISSIONER NORRIS: Is there anyone in the room that
can answer that at the moment?
MR. CAMP: A little over six.
COHMISSIONER NORRIS: So that's what we're currently
investing in?
MR. DORRILL: Hang on one second. The reporter needs
whoever -- CHAIRPERSON MATTHEWS: We need a name, and we need it on
the microphone.
MR. GRADY: I just asked the question of Dr. Knight, and
he said roughly a little over six percent for a six-month treasury
bill.
COHMISSIONER NORRIS: So That's what we're currently
investing in?
MR. DORRILL: Hang on one second. The reporter needs
whoever --
MR. CAMP: My name is James Camp from Raymond James.
MR. DORRILL: Thank you, and if you all would please
just come to the podium.
COHMISSIONER NORRIS: So that's -- that's at around 6
percent, and we are currently making probably 50 percent more on those
while we hold these CHOs, so --
MR. BROCK: Well, I mean in terms of yield,
Commissioner, I think if you will look at the yield that we're
experiencing based on those today, we're not getting that at all. I
mean that may be the coupon. But if you look at the yield, I think
you will find, taking into consideration those losses, that we're
looking at considerably less.
COHMISSIONER NORRIS: Looking at the coupon, I don't
believe the yield is shown on my sheet.
MR. BROCK: Okay. I mean in terms of coupon -- I mean
the coupon may be higher in terms of the treasury bill at six months.
But if you will look at the treasury bill, which is comparable in life
to these mortgage-backed securities, we're probably still looking at a
deficit because these securities have extended out there beyond ten
years. So I could invest them in a treasury bill, which is really
risk free, and get comparable or better interest than what we're
getting off of these highly risky and volatile securities.
CHAIRPERSON MATTHEWS: At -- at this point I think it's
important that we hear from Raymond James since they are our financial
advisor, and they did produce a report that has a differing opinion.
I'd like to hear more from them.
MR. CAMP: Is that agreed? Good afternoon. My name is
James Camp, and I didn't prepare buys. I apologize for that. I am a
chartered financial analyst, which for the uninitiated is roughly
equivalent to a CPA in the accounting field. It is a 3-year program,
18 hours of exam work in the investment management field. It
involves, among other things, portfolio management analysis, as well
as a very rigorous ethical and professional standards portion of the
exam of which each year I'm required to fill out ethical and
professional statements about my dealings with clients. As a research
analyst that duty of care is completely removed from the sales and
trading operation. The issues of objectivity, while important, I
don't feel apply. We do not do institutional bond business with the
county. My interest in looking at the county's portfolio -- my
interest with all counties in the State of Florida is that I'm a
citizen of the State of Florida, and I'm a citizen of the
broker-dealer community.
I have concerns, as folks that have spoken this morning
about practices in the industry. I also, when I take that part of the
equation out and look at the portfolio management side of this, feel I
have very relevant experience to be able to answer those questions as
well. I have an engineering degree from Vanderbilt and an MBA with
highest distinction from Emory University in finance. I spent the
first four years of my career with a company International, another
lending -- which you may have heard of, ING Bank. They're involved in
the Barrings (phonetic) transaction. They're an international
insurance and banking operation. I was responsible for 7 billion of
mortgage assets where I ran the Quant (phonetic) program basically,
the analytics. To suggest that my tenure at Raymond James is two
years long -- I've actually been in the business for about five years
exclusively in this sort of product.
Part of, I think, the distinction between my analysis
and the analysis done by APAM -- and let me preface this by saying I
have the highest esteem for the APAM organization. They are extremely
thoughtful, extremely good, technical, and analytical people. We have
a relationship with APAM, and I have absolutely no reason to suggest
that their analyses are not top-notch. In fact, it is. It may be
cutting edge. It may be the best in the country.
My analysis and my differing conclusions may be more
semantic than they are substantive. And when I say semantic, I think
about the three questions that we were explicitly asked. I explicitly
denied or declined to comment on market levels at times of transaction
and markups. I don't have the resources and wherewithal to go back
and reconstruct history.
COMMISSIONER MAC'KIE: And that issue -- pardon me, but
that is the issue of whether or not we paid too much?
MR. CAMP: Correct.
COHMISSIONER HAC'KIE: Okay.
MR. CAMP: That is a very, very difficult issue. As
with all issues surrounding mortgages, we are reconstructing history,
and we're building models. Don't forget that all these numbers that
we've talked about today, average lifes, average finals, the semantics
notwithstanding, we're talking about projections. Now, the legal
stated final on a mortgage security, to me it's irrelevant. To a
litigator it may not be. To somebody who writes a perspective in the
SEC, it isn't. To somebody who's a practitioner and investor in
mortgages, it has no bearing on the investment decision opinion
process, in my opinion, whatsoever.
COHMISSIONER HAC'KIE: What is that?
MR. CAMP: The legal stated final. That is the last
date that a cash flow will be received. What is important is the
stream of cash flows remembering that each month principal and
interest is generated off a pool of mortgages, that just like your
personal home loan reduces the balance naturally over time, and in
fact, your exposure to this asset class is almost self-liquidating.
50 percent of the fixed-rate CHOs have already begun to return you
principal. In other words, the risk -- the meter, while still
running, and you still do have some downside from here, you are
starting to get the principal back.
On the adjustable rate portion all the bonds are
prepaying. So to suggest that this notion of legal stated final and
the absolute last payment date is an approach measure of riskiness to
me isn't relevant.
Now, does that conform to the letter of the policy?
That's where maybe my semantic interpretation may differ from some
others, and that's an important distinction. When I look at portfolio
average maturity, I think of, just like most investment practitioners
think of, the average time to receive the principal. Otherwise I
couldn't compare a bond that matured in three years and ten years. I
could never put fully matured, right, because I have to blend the two
together.
I also took into account the SBA monies in the given
hundred million dollars that was reserved for liquidity. So I looked
at the portfolio in total, and we also looked at it at a point in time
to models that we build at Raymond James. So I think in terms of the
ambiguity of the policy, those distinctions about average life and
average final of all that I've heard today are the most important to
be understood.
Now, the second thing that we haven't heard much about
is the economic value of fixed income investments. At one extreme we
could put 200 million dollars in the SBA. We would have absolute
liquidity, and we would have absolutely zero economic return, i.e.
inflation adjusted. To me in all the municipalities that I deal with
that have liability schedules, which is the most important part of the
investment policy for a municipality, they balance the need for
income, the need for real rates of return to hedge projects that are
going to be built seven to eight, nine years down the road against
immediate cash flow demands. That is prudent and that is the constant
offset of liquidity versus return, income, capital preservation, and
real rates of return.
Now, in terms of volatility of these mortgages, were
they the safest of the safe? The answer is clearly no. Within the
mortgage sector these ideas of planned amortization classes can be
misnomers in highly volatile rates that we've seen over the last
couple of years.
COHMISSIONER HAC'KIE: In fact, I mean that's what
happened in this case, right?
MR. CAMP: That's absolutely the case. And a number of
institutional investors began to learn that mortgage prepayments,
because of a lot of fundamental changes in the mortgage banking
industry as well as interest rates, have become much more efficient,
which is both -- which is a double-edged sword. They refi quicker
than they used to, and they may slow down a little quicker than they
used to. But we still believe that over the long term we have rate
cycles. We have natural mobility. We have demographic turnovers
which are not captured by the interest rate incentive. And in our
research that we'd certainly like to share with you at a greater point
in time, is that the natural rate of mortgage prepayments has a
baseline high enough to keep most of these mortgage securities within
a reasonable time frame in terms of average life, not absolutely final
stated.
CHAIRPERSON MATTHEWS: Okay. Commissioner Hancock.
COHMISSIONER HANCOCK: I'd like to ask -- ask a question
you may not have the answer to because it may not have been part of
your base three questions. In looking back at trades and so forth, if
you tried to put yourself in the shoes of, let's say, Meridian at the
time in question when these trades were going on, do you feel that at
that time a -- someone in that capacity should have been able to see
the market trend and advise the county differently than the way in
which the transactions occurred?
MR. CAMP: If we can take the equation out, the Meridian
part of the equation, because I certainly -- I don't want to do that.
COHMISSIONER HANCOCK: I'm not looking to --
MR. CAMP: There are certainly rigorous analytical
exercises that APAM is familiar with, that Raymond James is familiar,
that our models do to tell us how wide the highway is. I can't you
whether to pass in lane two or lane three all the time with mortgages,
and we disclosed that. We certainly have inherent volatility of the
-- what we're asking here is is that volatility assumable, and are we
compensated for it. At the end of the day you don't put your risk
money in CDs because over the long time your pace and volatility will
be seen, and history shows us that. The question is, did you take
volatility that was higher than even the letter of the law of your
investment policy guidelines, which I have an interpretation of which
may be different, or the spirit of the law. In my opinion, given the
hundred million dollars in the SBA, given a 200 roughly million dollar
portfolio with a 4 million dollar loss, which equates to around 2
percent, if I'm not mistaken -- and above market yields probably to
the tune of 125 basis points of treasuries, I don't see the concept of
radical imprudence.
I also was asked to talk about diversification, which in
the context of mortgage securities we take credit risks out of the
equation. That's one of the nice things we have with mortgages. Our
principal is guaranteed. It will come back if we buy the right types
of securities. Now, there are mortgages where we can't make that
statement. So how do we diversify within a mortgage pool? Well, we
diversify by buying different interest rates, because a person with a
9 percent rate has a different interest rate prepayment profile than a
person with 6. And if you look at the collateral underlying these
mortgage loans and that distribution, there's a fair amount of
diversification there. That is what diversification means to me in
mortgages. You know, that may be subject to some interpretation.
The other thing that I was explicitly asked to look at
is the prudence standard. The prudence standard is a series of tests
for investment policy makers and investment practitioners about
diversification, about asset liability schedules, and about getting
properly compensated, and you can see in my narrative how I analyzed
that.
The final thing that I just want to summarize -- I know
you guys have been up there for an awfully long time -- is we did read
yesterday a point about the depth of the analysis. But what you see
in front of you is an executive summary. That was what I felt was an
appropriate vehicle to communicate with this -- this county commission
at this point in time. The supporting documentation, supporting
analytics, are certainly there and certainly disclosable. Please
don't believe that I sat down behind my computer and typed up a
two-page document. That isn't how I do business. It isn't the kind
of analyst and the kind of professional that I am. And that
supporting documentation is certainly there for you to look at. These
conclusions were based on a twice-through reading of the investment
policy, having not discussed the spirit of it, but reading my
interpretation of the letter of it and what I knew from limited sorts
of contact with the county at this point.
CHAIRPERSON MATTHEWS: You had a question?
COMHISSIONER MAC'KIE: I'm just trying to -- well, one
question is this prudent person standard. Were you asked to apply
that standard in particular, or is it your opinion that the prudent
person standard is the appropriate test for county investments?
MR. CAMP: I was not explicitly asked. I was asked
about the concept of prudence. I chose to apply the prudent
standards.
COMMISSIONER MAC'KIE: Because my question is, I'm
trying to analyze is this FIFIC test, for example, which is a test
that's used to decide whether or not banks can make an investment --
MR. CAMP: I'm glad you brought that up.
COMMISSIONER MAC'KIE: Is that an appropriate standard,
or is prudent person an appropriate standard?
MR. CAMP: In my opinion, the FFIEC test, I would even
argue its appropriateness for banks. I would argue a lot about it.
But certainly for a municipality it's putting a regulatory standard
that may have some merit in banking but very short term demand
deposits. Realize what happened to the S&Ls. Realize the
disintermediation that happened in the late 80s. That's what they're
guarding against. The qualifying bonds for banks are much more
rigorously tested for average life variability. I don't -- I have
some problems with the structure of the test to begin with, but
notwithstanding that, pension, longer term money, money managers have
no use for it whatsoever.
COHMISSIONER MAC'KIE: We're a short term money manager
MR. CAMP: Okay. So that's why there's a hundred
million dollars in this. And, again, we sat in here without a
liability schedule, and I believe my colleagues at APAM would say the
same thing, that you can't really do this. You can't really do a
proper analysis without looking at the liabilities because that's your
benchmark.
COHMISSIONER MAC'KIE: And so what basically your
summary is that on balance with, for example, the hundred million
dollar liquidity, that that factor and others tips the scales for you
in analyzing the portfolio overall as opposed to applying, for
example, a FIFIC standard.
MR. CAMP: That's well summarized.
COMHISSIONER MAC'KIE: The question I had for you guys,
Tom, was did I correctly understand that -- that Raymond James used
average life as a standard and APAM, or others used an absolute final
date of sale as the measuring standard?
MR. GRADY: That's correct. And I think Mr. Camp
pointed that out, and I think it's very important to keep in mind that
much of Mr. Camp's perspective, as I have heard it, has to do with his
being in the trenches and being familiar with this market and buying
and selling securities and advising clients appropriately.
COMHISSIONER MAC'KIE: My understanding is that you
don't do that.
MR. CAMP: Not currently.
MR. GRADY: The policy that governs this county defines
what risks you can assume, not what risk an advisor thinks is
reasonable. You have already defined that risk, and while it may seem
unreasonable to an advisor, that's what it is.
COMHISSIONER MAC'KIE: And my question is, in our
definition of the policy, are we measuring by absolute final date of
sale? Does our policy -- maybe, Dwight, you're the right person to
answer this question. Is our policy to measure by final date of sale
or to measure by average life?
MR. GRADY: We think the only way that the policy can be
interpreted is by looking at the final date of sale because you cannot
pick. Yes, you can use models, and you can say we think within a
statistical degree of probability that the life of this portfolio will
be seven years. You don't know that. And if you have a portfolio
today or a bond -- let's look at a bond today that has an expected
life. You think it's going to be a three-year bond. In three years
it will have a different life. And you have a 3-year bond that became
a 17-year bond. It could tomorrow be a three-year bond again, but the
only thing we know for sure is the final date, which is the maturity
date, which is, I think -- and my legal interpretation of the policy
is what the policy refers to. That may be impractical for some
institutional investors or for some advisors because the reality is
most of these mortgages will rarely, perhaps never, see that final
date. But it is the only date that you know for sure, and this policy
doesn't say sort of maturities. It says this is what you should do.
And that's -- and that's perhaps our biggest point of disagreement.
COMMISSIONER CONSTANTINE: So that's your interpretation
of it that was not clearly spelled out apparently in your policy.
That's your interpretation, though, of our policy.
MR. GRADY: It is clear to me in your policy. Could
other people disagree? Yes.
MR. CAMP: Mr. Commissioner, one of the things that does
show up in your guidelines is the ability to buy 30-year mortgage
securities. That is explicitly stated. So by definition we've
created the benchmark of five years as an average, because clearly
some will fall out of that in absolute sense, because if you have a
30-year pass-through, for instance, we've done that already. We've
already violated it. So there's either an inconsistency, or the
interpretation has to be it's a blended maturity that we're looking
at. That's my guess is what the spirit is. Now, I think it needs to
be explored.
CHAIRPERSON MATTHEWS: I think I'd like to bring this
discussion back to the two points that Mr. Grady has asked us to
support the clerk in moving on, and that is the possibility of having
paid too much for the investments that we had and the possibility of
excessive trading and/or churning, whatever -- whatever that
constitutes. It seems to me that that's the message that Mr. Grady
has -- has brought to us, and that's what he's asking us to either
support them and give direction to our staff under our control to
cooperate with a further investigation. And this -- this continued
discussion on the validity of CHOs and their extended life and so
forth is -- I mean we could discuss this for ten years and still not
MR. GRADY: We could.
CHAIRPERSON MATTHEWS: -- get an answer.
MR. CAMP: Hay I make one just closing point about the
losses in the portfolio to date? The loss in the portfolio -- this
idea of unrealized and realized, a lot of people make some very good
arguments about it. An unrealized loss can be construed as an
opportunity, because if the money was here, you could reinvest it in
higher yields. That is a fair statement. But to pursue unrealized
losses unless liquidity is needed is -- if the pursuit of those losses
involves a lot of costs, all we've done essentially is monetize the
loss today. I'd recommend not doing that based partially on a
prepayment forecast but also partially because why increase the cost
basis of the portfolio by trying to recapture losses that may not be
needed today.
MR. GRADY: That may be a perfectly legitimate economic
recommendation, and I'm not here to advise you economically. But if
it is inconsistent with your policy, and there may not be agreement on
that issue, then you need to recognize that it is inconsistent with
your policy. And if you do not sell and you continue to carry these
securities, that's your choice. But you are, in my opinion, modifying
your policy by so doing.
MR. BROCK: Commissioners, you know, let me bring you
back just one moment. The inconsistency with the policy that we're
talking about here, you know, I think there have been some
inconsistencies with the policy that have been identified by these two
gentlemen. Separate and apart from whether we're talking about
maturity or weighted average life, even though if you look at the
numbers that come across Bloomberg, you have one that says maturity
and one that says weighted average life, so in the marketplace there's
a very clear distinction. And what your policy says is maturity. But
separate and apart from that, totally separate and apart from that you
have certain parameters in your investment policy that are purely
quantitative. I mean you just set there and figure out what it is
that you're talking about, what type of security it is, and you do a
calculation to determine whether or not there's been a violation of
the policy. These have been identified by these individuals as
existing in the policy. Raymond James has indicated to you that there
is no violation of your investment policy. I suggest to you, ladies
and gentlemen, that purely on that quantitative level that there is,
in fact, a violation of your investment policy which has caused or is
the but for the position that we are in today.
CHAIRPERSON MATTHEWS: Okay. Commissioner Constantine.
COHMISSIONER CONSTANTINE: Mr. Grady, I need you to help
me here. And hopefully we can funnel this, again, as Commissioner
Matthews suggested, back down to two core issues, that being the items
you mentioned, whether or not to pursue the idea of overpayment and of
excessive trading. But whether -- if we've -- if our policy hasn't
been followed, again, I go back to the question I had for you
earlier. At what point do we bear responsibility ourselves for
adhering to our own policy? And at what point -- where is the line
drawn there between the responsibility we bear for our own policy and
that a broker bears for that policy? Also if there were directed
trades -- as part of that question, if there were directed trades to
one broker, is there indication that some of the direct -- some of the
trades quoted from Meridian were directed trades as well?
MR. GRADY: They could have been. I can't tell you that
they were not. What I will say, that it is very common in these kinds
of disputes to say that the customer, in this case the county, had a
duty to look out for its own best interests. And that's certainly
rational. And certainly everyone should take some steps in order to
look out for their own best interests. But from a legal standard
there is a duty owed by a broker to a customer, and that can't be
analyzed in a vacuum. That will be analyzed in the context of the
customer -- with the customer. What does the customer know? What are
the stated investment objectives? How articulate is the customer?
What are the resources available to the customer? And I don't think
the county -- although it had a lot of money, I don't think the county
had any analytical tools available to it to analyze the different
risks and other characteristics of these securities, which creates a
greater duty on the broker. Could the county, if it wanted to, using
internal resources have run these models and determined what
prepayment assumptions they would use? Could it have done what
Raymond James does or what APAM does or what we presume Meridian does?
I don't think so. I don't know for certain. I think in a very
short conversation with Mr. Yonkosky and some other representatives --
I could confirm my suspicion, but I think it would be highly
unlikely. I don't think the county even subscribed to Bloomberg prior
to 1994, so I don't think those resources are available. But it's a
very common defense for a brokerage firm to say I'm not liable to you
because you were negligent and didn't discover my fraud. If you had
been more careful in reading your statements and paying attention, you
would have known that I'm defrauding you. Therefore, you can't
recover from me. It's an argument that's frequently made.
COMMISSIONER CONSTANTINE: On that point then, what
specific steps do you recommend we take, particularly in the areas of
overpayment and of excessive trading?
MR. GRADY: I would like to have the opportunity to
interview several additional employees of the county and then present
my recommendations to the clerk and the board. And as I said earlier,
at this point my recommendation, which is preliminary, would be that
you would take legal action in order to recover losses resulting from
those three separate areas that we've discussed.
COMMISSIONER CONSTANTINE: What kind of a time frame do
you need to interview those employees and put together a report to
return to us?
MR. GRADY: Four or five weeks.
COMMISSIONER CONSTANTINE: So moved.
COMMISSIONER MAC'KIE: I have one question.
CHAIRPERSON MATTHEWS: I think we have one more
question.
COMMISSIONER MAC'KIE: As I understand it, there are
three points and not -- instead of two, that there's the did we over
pay, was there churning, and I think I hear that there's a possible
third question, which is, is Meridian or other brokers -- are they
liable for the losses to the county for having invested in a way
that's violative of county policy, and that's the biggest dollar
amount that we're talking about is the third prong there.
MR. GRADY: That's correct. There are three separate
issues, and you have identified them. And I think it's important to
point out that -- that while 4 or 5 or 6 or 7 million dollars may be
an acceptable level of profit or loss for a 200 million dollar
institutional portfolio, in my opinion, as an attorney it is not an
acceptable level of loss for any individual security or group of
securities if they were purchased based on either misrepresentations
or in violation of your stated policies. That's what those policies
are for is to define your risks that you're willing to assume.
CHAIRPERSON MATTHEWS: Will the motion maker incorporate
the third item into the motion?
COHMISSIONER CONSTANTINE: I certainly will, and as part
of your report back to us in that four or five-week span, perhaps you
can further clarify the responsibility they -- they, being Meridian in
this case, hold for following -- us following our own policies. I
just have a real problem with that. Today's lawsuit-happy world,
nobody takes responsibility for themselves. If we can recoup some
losses there legitimately, by all means, we want to do that, but I
need a little further explanation where that responsibility line is
drawn.
COHMISSIONER MAC'KIE: I second the motion.
MR. GRADY: Absolutely.
CHAIRPERSON MATTHEWS: Commissioner Norris. Discussion.
COHMISSIONER NORRIS: Let me see if the motion maker
will add also direction to our -- I don't know who handles this -- our
investment policy committee possibly. Let's give direction to go in
and revise our -- our investment policy. I don't think that's been
done for quite some time.
CHAIRPERSON MATTHEWS: There has been a proposed policy
that's been on the table for a couple of years now.
MR. BROCK: I'm unaware of a policy that's been on the
table for a couple of years now.
CHAIRPERSON MATTHEWS: Well, I read one a year ago
that's a proposed investment policy.
MR. BROCK: I think, Commissioner Matthews, you're on my
advisory board --
CHAIRPERSON MATTHEWS: Uh-huh.
MR. BROCK: -- that's in the process of developing a
policy. We have a policy that has been developed through the advisory
board process, which consists of two private individuals in the
community who are retired from the industry, and Guy Carlton, the tax
collector, you as a county commissioner, and myself. What I am
waiting for to present it to the board is that there is presently
legislation pending before the state which addresses the investment of
county's funds, and I'm a little concerned about what they're going to
have in that legislation. So I'm waiting to see what hits the floor
so that we can insure that what we do have conforms to the final
product that's passed by Tallahassee as it is being presented today.
Left unamended it does, and we will.
CHAIRPERSON MATTHEWS: Okay. We have a motion and a
second on the floor. Commissioner Hancock.
COHMISSIONER HANCOCK: I have a question. We've heard
from Mr. Grady and two experts today for a considerable length of
time. What cost to the taxpayer is this procedure going to be? Where
are we now? I just want to know the cost of what wewre asking to be
done here before we step into it.
MR. GRADY: At this point, as I discussed, I was first
consulted in September of 1994. I did consult with Dr. Brown and also
with Dr. Knight.
Dr. Knightws firm, APAM, has prepared the report that you have seen.
That was done at a cost of $5,000, which is probably a fourth of what
would normally be the cost that would be attributable to that kind of
work product. He is appearing here today without charge. Dr. Brown
is appearing here today without charge, although they stayed at a $59
a night hotel and would request that that be reimbursed. And I would
recommend and also request that that be reimbursed.
I was retained initially by the clerk and proposed that
I would work on an hourly fee basis for the clerk to conduct an
investigation to provide my recommendations and conclusions. Iwve
also had conversations with Mr. Brock making very clear to him that
while I am tracking time that has been incurred in this matter, that I
am very willing to sit down with him at such time as we reach a
consensus and have a final conclusion to discuss what kind of an
appropriate overall fee arrangement would be meaningful and reasonable
to the parties in this case. At this time I am tracking time on an
hourly basis. Iwve not presented the county with a bill. I would
expect to do that at some point, but it may be that if the county or
the clerk determines to go forward, that there would be an arrangement
discussed that would be something -- that would be an alternative to
an hourly billing arrangement.
COMMISSIONER NORRIS: And how much was that in dollars,
that long statement? How much did that turn out in dollars? MR. GRADY: Iwm not sure.
COMMISSIONER NORRIS: The question related to dollars,
and we got a very long statement.
MR. GRADY: I gave you the specifics that exist. Thus
far the county has paid $5,000, and that was to APAM for the report.
COMMISSIONER NORRIS: Youwre tracking hours. How many
hours have you tracked?
MR. GRADY: I donlt know. I would say probably in the
area of twelve to fifteen thousand dollars. And if we were to meet in
a monthls time and determine that we wanted to go forward on some
basis other than hourly, that would not be a liability of the county.
COMMISSIONER HANCOCK: So in laymenls terms if we decide
to go ahead and there is a financial settlement, chances are your fees
will come out of that settlement. However, if we decide not to go
ahead, weill be receiving a bill from you? MR. GRADY: I think thatls correct.
COMMISSIONER HANCOCK: And that bill already is twelve
to fifteen thousand dollars and will grow larger in the next four to
five weeks.
CHAIRPERSON MATTHEWS: Thatls a fair arrangement.
MR. GRADY: Yes, sir.
COMMISSIONER HANCOCK: Okay. I just wanted to know the
fiscal impact of what welre asking you to do before stepping forward.
MR. CUYLER: I think that when you say the term will be
receiving the bill, I think that Mr. Brock has contracted with Mr.
Grady.
COMMISSIONER HANCOCK: Same tax pockets.
MR. CUYLER: Sure.
MR. BROCK: I'm glad you said that. You're absolutely
correct. It all comes out of the taxpayers' pocket.
CHAIRPERSON MATTHEWS: Whether we pay it or you pay it,
It doesn't matter.
MR. BROCK: That's correct.
CHAIRPERSON MATTHEWS: We have a motion on the floor and
a second. I'm going to call the question. Is there further
discussion? All those in favor, please say aye. Opposed?
Motion passes 5 to 0.
COHMISSIONER MAC'KIE: I have one other related issue
that I just wonder if there's any consensus on the board to have some
investigation about the possibility of having our portfolio
professionally managed outside of the county as opposed to done
in-house. I know --
CHAIRPERSON MATTHEWS: I think -- I think he's already
hired a professional investment counselor, haven't you, Mr. Brock?
COHMISSIONER MAC'KIE: What I'm suggesting as opposed to
an in-house person who makes those decisions, that we turn our
portfolio over -- that we investigate the possibility of turning our
portfolio over to a professional.
MR. BROCK: And I agree totally that that is an
appropriate process, and I will tell you that as a consequence of this
being -- this particular problem that we're experiencing here being
pervasive in local governments throughout the nation, that the sharks
are circling in the money management field, and we are going through
resumes that are being sent to us almost on a daily basis. But I can
also tell you that everyone seems to be wanting about ten basis points
to do that. With a two million dollar portfolio, that's quite a chunk
of change.
CHAIRPERSON MATTHEWS: That's a chunk of change.
COHMISSIONER MAC'KIE: I think that it might be -- well,
I assume that you'll get resumes from other interested money managers,
because people who have spoken to me are substantially lower than that
-- that basis points that --
MR. BROCK: We are more than welcomed to talk to anyone
that wants to come to us and talk to us about managing the portfolio.
That is something that through my investment board and my investment
committee that I have organized is looking at as we speak.
MR. GRADY: As you may be aware, the City of Naples has
recently gone through that process of requesting proposals, and I
understand that perhaps tonight they will be considering one of their
final or tomorrow, one of their final --
CHAIRPERSON MATTHEWS: Thank you.
MR. GRADY: Thank you very much.
CHAIRPERSON MATTHEWS: Commissioner Constantine.
COHMISSIONER CONSTANTINE: At the beginning of the day I
did not use the word consent when I said approve the agenda. So if we
need to, Mr. Cuyler, when we approve the agenda, did that also confirm
the consent agenda, or do we need a separate motion to --
MR. CUYLER: I believe that it did, but I wasn't
specifically listening. So if you want to be sure, you can go ahead
and make a --
CHAIRPERSON MATTHEWS: I don't remember hearing the word
consent agenda in the motion.
COHMISSIONER CONSTANTINE: Yeah, I did not say it. So
for the purposes of being clear, I'll make a motion we approve today's
consent agenda as well.
CHAIRPERSON MATTHEWS: There's a motion and a second to
approve the consent agenda. All those in favor, please say aye.
Opposed?
There being none -- did you say aye?
COMMISSIONER MAC'KIE: I did.
CHAIRPERSON MATTHEWS: Okay. There being no opposition,
motion passes. Mr. Dorrill.
MR. DORRILL: Some quick direction because I wasn't
clear, the existing policy, the board's investment policy that gives
direction to the clerk, the '87 policy, one of the suggestions that I
had made was that perhaps you have your Counsel of Economic Advisors
review that for no other reason than they are your stated collection
of the best banking and finance appointments within the community.
And I think that if we're seeking objective opinions, you may want to
have them review the investment policy that is there.
Also with respect to Raymond James, it's your chief
fiscal officer who is the clerk twice today questioned whether or not
if they were objective. But if the county commission has any
questions at all as to whether your independent financial advisor is
truly objective or has your best interests at heart, I would like to
think that that needs to be a fourth area that needs to be explored
over the course of the next four weeks or so. It just -- it troubles
me when the chief fiscal officer of the county stands up and expresses
concern about the board's independent financial advisor. And if that
is, in fact, true, I think that we need to do something about that.
CHAIRPERSON MATTHEWS: I -- I think I agree with that.
We can't have these perceptions that are -- that our clerk is doubting
the veracity --
MR. DORRILL: You may recall that Mr. Sammit (phonetic),
who is our contract representative, recently went and changed to
Raymond James. I'll say that occurred within the last 12 to 18
months, because I remember us assigning the former contract. But if
-- if there's a concern there, I think, frankly, we need to get to
the bottom of that.
MR. BROCK: Commissioners, you know, I deal very little
with Raymond James. I can tell you, however, that my finance director
deals with them on a regular basis in the bond issues and the debt for
the county. And I can tell you that she has expressed to me concerns
about the quality of the product that you're getting. There was one
occasion I think in which Herrill Lynch presented a proposal to us
that she went through and, as I recall, had to send back to them
either two or three times before we got a product that we felt
comfortable with. They're your advisors, Commissioners.
CHAIRPERSON MATTHEWS: Commissioner Hac'Kie.
COHMISSIONER MAC'KIE: Just a question. We reviewed
auditors today. What's the -- what's the normal schedule? What would
be the normal point in time when we would review the contract for --
our whatever they are -- financial advisors?
MR. DORRILL: That -- that contract is typically running
a two- to three-year cycle, may have been extended as a result of Mr.
Sammit changing firms, but I'll be happy to share that with you.
CHAIRPERSON MATTHEWS: Will you get to us --
MR. DORRILL: I'll probably have that information before
the end of the afternoon.
CHAIRPERSON MATTHEWS: -- as to when this contract
recycles and a recommendation from your office as to what we should do
about this contract, if we are having doubts about the financial
advisor we have and in -- with relation to Mr. Brock's comments?
COHMISSIONER CONSTANTINE: Didn't we just renew that
last year sometime?
CHAIRPERSON MATTHEWS: A year and a half I think.
MR. DORRILL: We may have, as a result of assigning it
to the -- to the Raymond James firm when Mr. Sammit went over and
began work with them. That's what I need to check, when that date
Was.
CHAIRPERSON MATTHEWS: It's been about a year and a
half. Commissioner Mac'Kie.
COMMISSIONER MAC'KIE: Just in addition to that report,
Mr. Brock, I would appreciate if Miss Hankins could give us a more
thorough assessment. If you're familiar with this one scenario or
this one problem with Raymond James, maybe she could give us a more
thorough assessment of her satisfaction or lack thereof.
MR. BROCK: And I think that would be totally
appropriate as opposed to you relying -- and I was going to go to her
and direct her to get in touch with you all. And I'll be glad to have
her do it in whatever forum you would like, whether it be an open
forum or in the meetings that we have with each of you on a biweekly
basis.
COMMISSIONER MAC'KIE: I personally would like to have
some sort of a memorandum and then maybe to be able to discuss it.
MR. BROCK: I will direct her to do just that.
CHAIRPERSON MATTHEWS: I think that's a good idea.
MR. BROCK: Thank you.
Item #14
BOARD OF COUNTY COMMISSIONERS' COMMUNICATIONS
CHAIRPERSON MATTHEWS: That concludes the agenda for the
Board of County Commission meeting. We're into communications, and we
have communications, and I believe, Commissioner Hac'Kie, you had
something.
COHMISSIONER MAC'KIE: I do. I just want to conclude my
responsibility to you as having -- having headed up more or less the
investigation into the allegations of problems with the development
services division by giving you a -- a written report. And attached
to it is a written report that Mr. Dotrill provided to me in
conjunction with that review. And my suggestion, my -- my purpose in
providing this in this forum was -- my goal was to provide you with
this report first and then have you review it. And if it's something
that you feel like we should discuss further or -- you know, whatever
response you would like to have in the future would be your choice. I
just wanted to fulfill what I see as my responsibility by delivering
this report to you. And if you find that it's necessary to discuss
anything further in the future, we could do that. I also think that
it might be appropriate, since what you have also attached here is a
report from Mr. Dotrill, for him to give you some advice about what
actions he's taken to date. That could be under this communications,
Mr. Dotrill, or you may want to --
MR. DORRILL: Just since the board had instructed me to
work with Commissioner Hac'Kie, when she advised me last Friday that
she was going to do this today, she wanted me to share with you the
same information that I gave her last week concerning this issue.
This is in bullet form, and I'll send you a memo this afternoon so
that you can have this.
We have already directed each division to determine
potential problems or similar needs in their divisions. We have also
reviewed and directed that all departments review the existing sexual
harassment policy and the associated training program that is -- that
is part of that.
We have already drafted and sent to our labor attorney a
policy on fraternization, a dating policy between county employees. I
met and directed the Employee Advisory Council to report any incidents
of intimidation to me directly as elected Employee Advisory Council
members from each division in county government. I have directed an
immediate review of the human resources department's role with respect
to confidential employee conversations or their awareness or knowledge
of problems that may have predated the community development
problems. We have directed an inventory and justification for private
phones that may be installed off the county switchboard throughout the
county. We have -- I have directed the suspension and revision of all
bid practices as they relate to abating public nuisances, be they weed
mowing or demolition of unsafe buildings, at community development and
have directed revised procedures be developed for responses to code
enforcement or permitting issues involving public officials.
Now, I will propose, after you have an opportunity to
review and digest Ms. Mac'Kie's report, some additional areas. Those
include that the board amend their existing sexual harassment policy
to require mandatory training for all management positions. We sent
over a hundred people to sexual harassment training last year, but
your policy does not state whether that is required or mandatory
training. We are going to incorporate that sexual harassment policy
into the new employee orientation for any employees that are hired
subsequent to today. We're going to amend the existing code of
conduct to require employees to report their knowledge of sexual
harassment, intimidation, or any improper requests upon the part of
management or county commissioners. We will review and propose a dual
signatory process on any development permitting permits involving
public officials. And, finally, to continue the investigation of any
improper activities within community development, coordinate that back
through the state attorney's office for those criminal issues, or back
through Ms. Mac'Kie if they involve county policies or procedures,
which was her stated task. And I'll provide this to you later, but
she had asked me to update you on those things that I have already
done or will do where I need some direction from you.
COMMISSIONER MAC'KIE: My -- my only response to that,
of course, whatever the board wants, but I -- I see my role as the
conduit at this point as unnecessary for future communications between
the manager and the board about future actions unless you would like
for me to continue to act as a conduit for that purpose. I think he
should just communicate with all of us at the same time.
MR. DORRILL: Some things will need the board's
approval, specifically adopting, considering, or amending policies
that you have in place. And I'll either work through Ms. Mac'Kie, or
I'll schedule those on board meetings as we finalize those efforts.
CHAIRPERSON MATTHEWS: Mr. Dotrill, is there any
contemplation to reinstitute exit interviews?
MR. DORRILL: Part of the review of the human resource
department does include that question as to -- as to the rationale and
justification, and then what do you do once you have them, the
investigation of express concerns. Yes, that's correct.
CHAIRPERSON MATTHEWS: Because I'm -- I just can't help
but think that this problem would not have gone as far as it did if
exit interviews were being conducted.
MR. DORRILL: Well, we suggest that, and, Ms. Mac'Kie, I
have not seen the report. I would like to have a copy of it so that I
can look at it, but in meeting with her last Friday, she indicated
that one of the areas was going to be a stronger role for the Employee
Advisory Council, and that's what I'm contemplating.
CHAIRPERSON MATTHEWS: Yeah, because I -- I can't help
but feel that it would not have gone as far as it did were we doing
that, that we -- we would have -- there would have been particularly a
note of employees who were taking voluntary demotions, lateral
transfers, resigning to a substantial degree, and that if exit
interviews had been conducted, not only from the county government as
a whole, but from department -- for inner department purposes, I know
it's -- takes some labor time and so forth to do that, but it would
help us safeguard against these problems in the future.
Are there -- is there any other communication items?
Commissioner Constantine?
COMHISSIONER CONSTANTINE: Apparently there's some
confusion over whether we're doing it in a meeting or doing it in
writing to Chris Breiden (phonetic), but I don't care how we do it, if
we can get each individual commissioner's appointment to the ad hoc
committee on the landfill siting in the next several days, because I'd
like to call that group together next week sometime.
CHAIRPERSON MATTHEWS: I believe the memo or the
conversation that I heard was that we would get the names to Chris and
that she would then pass them to you for contact. COHMISSIONER CONSTANTINE: Great.
CHAIRPERSON MATTHEWS: And that I presume is what we
will do.
Commissioner Norris, do you have anything?
COHMISSIONER NORRIS: No.
CHAIRPERSON MATTHEWS: Commissioner Hancock?
COHMISSIONER HANCOCK: No.
CHAIRPERSON MATTHEWS: Mr. Cuyler?
MR. CUYLER: No, ma'am.
CHAIRPERSON MATTHEWS: Mr. Dorrill.
Item #15
STAFF'S COMMUNICATIONS
MR. DORRILL: Just for your calendars, you need to
remember -- we have received a final draft agenda for the joint
Lee-Collier Water Management District workshop that is a week from
tomorrow and begins at 1 p.m. in Bonita Springs. I'll share that with
you this afternoon. I was at a lunch, working lunch, yesterday with
the Lee County administrator and the Charlotte County administrator,
and outside of this workshop it is time for us to have another joint
Lee-Collier-Charlotte County meeting, and I had shared that yesterday
with the chairman. She asked me to bring that up today. Their desire
is to try to do that within 30 days.
There are two principle issues. One is the concept of a
regional jail stockade or alternative correctional facility that would
be jointly owned between either the urban coastal counties or all of
the counties in the judicial circuit. Lee County seems to be the
driving force behind that, but they would like to make a
presentation. And Ms. Matthews had also suggested that we have a
legislative wrap-up meeting and potentially with our delegation,
because by then the session would have concluded. And I'm passing
along that request. That meeting is not scheduled. You did not
schedule one as a result of your last joint meeting with them. That
is something I need some direction on.
COMMISSIONER CONSTANTINE: Can we try to make that
happen in May, because June -- between budget hearings and a couple
other public hearings and our regular meetings, we are jam-packed so
CHAIRPERSON MATTHEWS: We had -- Mr. Dotrill and I had
talked yesterday about early June, getting this in before the budget
hearings begin so that we're not swamped with many, many meetings.
And I presume you're going to contact your counterparts.
MR. DORRILL: The only problem with the end of May is
you have one of your own fifth Tuesday workshops, and there's already
an agenda there. And I didn't want you to have three workshops in one
month in addition to your normal meetings.
COMMISSIONER CONSTANTINE: No, but I don't want to have
any more meetings in June. June, it's always hard for us to do
whatever we regularly do.
MR. DORRILL: That's my dilemma. If you prefer May,
I'll do May. Perhaps -- COMMISSIONER CONSTANTINE: Wherever you can best balance
it out amongst our other meetings.
CHAIRPERSON MATTHEWS: Yeah. I would think the last
week of May, first week of June, somewhere in there.
MR. DORRILL: Okay. That's all that I have.
CHAIRPERSON MATTHEWS: Fine. Miss Filson.
MS. FILSON: I just want to remind you that you have a
one o'clock city-county meeting on the first Wednesday in June if it's
needed.
CHAIRPERSON MATTHEWS: Okay. Thank you. We're
adjourned.
There being no further business for the Good of the County, the
meeting was adjourned by Order of the Chair at 1:54 p.m.
***** Commissioner Constantine moved, seconded by Commissioner Mac'Kie
and carried unanimously, that the following items under the consent
agenda be approved and/or adopted *****
Item #16A1
RESOLUTION 95-306 RECORDING OF THE FINAL PLAT OF "REPLAT OF LOT 3 OF
JAEGER COHMERCIAL INDUSTRIAL CENTER"
See Pages
Item #16A2
RESOLUTION 95-307 RE FINAL ACCEPTANCE OF THE OARDWAY, DRAINAGE, WATER
AND SEWER IMPROVEMENTS FOR THE FINAL PLAT OF "KENSINGTON PARK, PHASE
ONE"
See Pages
Item #16A3a
RESOLUTION 95-308 COMPLIANCE SERVICES CASE NO. 40816-066, NAPLES
ORANGETREE LTD
See Pages
Item #16A3b
RESOLUTION 95-309 COMPLIANCE SERVICES CASE NO. 40930-168, EDWARD AND
LAVERDA PELC
See Pages
Item #16A3c
RESOLUTION 95-310 COMPLIANCE SERVICES CASE NO. 41017-055, AJUAD ABOU
ASALI
See Pages
Item #16A3d
RESOLUTION 95-311 COMPLIANCE SERVICES CASE NO. 41025-055, RAFAEL E.
BEJARANO, ET AL
See Pages
Item #16A3e
RESOLUTION 95-312 COMPLIANCE SERVICES CASE NO. 41026-022, BERNEST
BROOKS
See Pages
Item #16A3f
RESOLUTION 95-313 COMPLIANCE SERVICES CASE NO. 41115-007, ORPIN
HOLDINGS LTD.
See Pages
Item #16A3g
RESOLUTION 95-314 COMPLIANCE SERVICES CASE NO. 41117-034, JUAN AND ANA
D. VAZQUEZ
See Pages
Item #16A3h
RESOLUTION 95-315 COMPLIANCE SERVICES CASE NO. 41129-009, SIDNEY AND
LIBBY BARBET
See Pages
Item #16A3i
RESOLUTION 95-316 COMPLIANCE SERVICES CASE NO. 41206-095, JOSEPH R. DE
ANGELO
See Pages
Item #16A4
APPROVAL FOR RECORDING THE FINAL PLAT OF "THE SEVEN SAILORS" - WITH
STIPULATIONS
See Pages
Item #16A5
ACCEPTANCE OF WATER FACILITIES FOR CASCADES AT FALLING WATERS
See Pages
OR Book Pages
Item #16A6
ACCEPTANCE OF WATER FACILITIES FOR INFRASTRUCTURE FOR LELY RESORT,
PHASE 1, TRACT 31 EAST - WITH STIPULATIONS
See Pages
OR Book Pages
Item #16A7
ACCEPTANCE OF WATER FACILITIES FOR BAYPOINTE CONDOHINIUHS, PHASE ONE -
WITH STIPULATIONS
OR Book Pages
Item #16A8
ACCEPTANCE OF SEWER FACILITIES FOR KETCH CAY AT WINDSTAR, UNIT 3 - WITH
STIPULATIONS
OR Book Pages
Item #16A9
ACCEPTANCE OF WATER FACILITIES FOR YHCA OF COLLIER COUNTY
See Pages
Item #16A10
RESOLUTION 95-317 RE GOPHER TORTOISE MANAGEMENT PLAN RELATIVE TO
SOUTHAMPTON UNIT ONE AND ACCEPT CERTAIN PRESERVATION EASEMENTS WITH
RESPECT THERETO
See Pages
Item #16All
APPROVAL OF THE FINAL PLAT OF "LOT 155 - J & C INDUSTRIAL PARK"
Item #16B1
APPROVAL OF A PROJECT TO ASSURE THAT MOCKINGBIRD LAKE IN PINE RIDGE
SUBDIVISION IS GENERALLY MAINTAINED AT A LEVEL CONTROLLED BY AN OUTLET
PIPE AT THE EAST SIDE OF THE LAKE
Item #16C1
RESOLUTION 95-318 RE NAME CHANGE IN THE NAPLES FINE ARTS SOCIETY, INC.
TO THE UNITED ARTS COUNCIL OF COLLIER COUNTY, INC.
See Pages
Item #16D1
GRANT EASEMENT TO UNITED TELEPHONE COMPANY OF FLORIDA
See Pages
Item #16El
AWARD BID #95-2359, "H.V.A.C. RENOVATIONS, BUILDING 'F' FIFTH FLOOR",
TO B & I CONTRACTORS INCORPORATED - IN THE TOTAL AMOUNT OF $68,700.00
Item #16E2
APPROVAL OF A BUDGET AMENDMENT TO APPROPRIATE THE MAINTENANCE SERVICES
REVENUES THAT ARE IN EXCESS OF THEIR BUDGET
Item #16F1
APPROVAL OF THE TRANSFER OF MONIES FOR THREE (3) EHS MATCHING GRANTS
AWARDED BY THE STATE EHS OFFICE FROM EHS FUND 490 TO EHS FUND 491
Item #16H1
APPROVAL OF A WORK AUTHORIZATION UNDER THE PELICAN BAY SERVICE
DIVISION'S CURRENT PROFESSIONAL ENGINEERING AGREEMENT WITH WILSON,
MILLER, BARTON & PEEK IN AN AMOUNT NOT TO EXCEED $5,000.00, TO PREPARE
THE PRELIMINARY AND FINAL ASSESSMENT ROLL FOR THE NON-AD VALOREH
ASSESSMENT FOR MAINTENANCE OF THE WATER MANAGEMENT SYSTEM, AND
LANDSCAPING MAINTENANCE
See Pages
Item #16H2
EXECUTION OF A UTILITY EASEMENT TO THE IHMOKALEE WATER AND SEWER
DISTRICT FOR THE CONSTRUCTION OF A WATER LINE TO SERVE THE AIRPORT
INDUSTRIAL PARK AT IHMOKALEE REGIONAL AIRPORT
See Pages
Item #16H3
APPROVAL OF A WORK ORDER UNDER THE CURRENT ANNUAL PROFESSIONAL SERVICES
AGREEMENT FOR ENGINEERING SERVICES RELATED TO A WIDE AREA NETWORK (WAN)
INTER-CONNECTION OF RAW WATER SUPPLY, NORTH REGIONAL WATER TREATMENT
PLANT AND SOUTH REGIONAL WATER TREATMENT PLANT
See Pages
Item #16H4
WORK ORDER FOR THE CURRENT ANNUAL PROFESSIONAL SERVICES AGREEMENT FOR
ENGINEERING SERVICES RELATED TO A REDUNDANT TELEHETRY SYSTEM FOR THE
WATER DISTRIBUTION SYSTEM
See Pages
Item #16H5
RESOLUTION 95-319 RE CONSERVATION EASEMENT TO THE SOUTH FLORIDA WATER
MANAGEMENT DISTRICT TO RETAIN A CONSERVATION AREA EXCLUSIVELY AS
SUITABLE HABITAT FOR FISH, PLANTS AND WILDLIFE AS PART OF THE GOLDEN
GATE PARKWAY SIX LANING PROJECT
See Pages
Item #16H6
APPROVAL OF A WORK ORDER WHBP-95-7 FOR PROFESSIONAL ENGINEERING
SERVICES RELATED TO THE COLLIER COUNTY MAINTENANCE FACILITY MASTER
PLANNING TO WILSON, MILLER, BARTON & PEEK, INC.
See Pages
Item #16H7
APPROVAL OF CHANGE ORDER NO. ONE TO CONTRACT NO. 94-2293 WITH NAPLES
DOCK AD MARINE SERVICES, INC., FOR THE VANDERBILT BEACH PEDESTRIAN
ACCESS RAMPS PROJECT - IN THE AMOUNT OF $3,490.99
See Pages
Item #16H8
APPROVAL OF A BUDGET AMENDMENT TO RECOGNIZE ADDITIONAL CARRY FORWARD
FROM FY 93/94 IN FUND 151, SABAL PALM ROAD EXTENSION
Item #16H9
APPROVAL OF BUDGET AMENDMENTS REQUIRED TO ESTABLISH THE DEPARTMENT OF
REVENUE
Item #16J
MISCELLANEOUS CORRESPONDENCE - FILED AND/OR REFERRED
The following miscellaneous correspondence as presented by the
Board of County Commissioners has been directed to the various
departments as indicated:
Item #16J1
CERTIFICATES OF CORRECTION TO THE TAX ROLLS AS PRESENTED BY THE
PROPERTY APPRAISER'S OFFICE
1992
Tangible Personal Property
No. Dated
169 4/10/95
1994
Real Property
152-154 4/19/95
Item #16L1
AUTHORIZE THE SATISFACTION OF LIENS FOR RESOLUTION NO. 94-495 AND
NO. 92-112 FOR WEED ABATEMENT LIENS
See Pages
BOARD OF COUNTY COHMISSIONERS
BOARD OF ZONING APPEALS/EX
OFFICIO GOVERNING BOARD(S) OF
SPECIAL DISTRICTS UNDER ITS
CONTROL
BETTYE J. MATTHEWS, CHAIRPERSON
ATTEST:
DWIGHT E. BROCK, CLERK
These minutes approved by the Board on
as presented or as corrected
TRANSCRIPT PREPARED ON BEHALF OF DONOVAN COURT REPORTING
BY: Barbara A. Donovan