From PATTI'S NOTES
BUSINESS & GOVERNANCE COMMITTEE on May 17, 2007

WATERFALL:
Progress of the elimination of Waterfall/ new instructions:
Chris Waddell reported that the Mayor, City Council and City Attorney agrees to continued payment of the Corbett/13th check. It is the process, not the concept that is the problem. The issue is not language.

The City Attorney was believed on board, but late last week the City Attorney put us back to his version, on square one.

Chris has not given up hope. The effort continues to have the Council vote on correcting the Waterfall, and not result in litigation because of missing instructions on how to pay Corbett and the 13th check.

All roads regarding ordinances go to the City Attorney. Pressure will not come from SDCERS, but from the Mayor and Council.

The City Attorney wants to pass his original ordinance and then fix the problems. Carmen, like many others at this committee meeting, felt the City Attorney's plan was a trap.

GROUP TRUST
The change of SDCERS from a single trust for Port, Airport and SD, to a Group Trust composed of three separate trusts, goes to the City Council June 18th.

ORDINANCES and the IRS
SDCERS is waiting for the Council to vote on ordinances to comply with IRS requests.  Kennedy was concerned about how long the IRS is waiting for the City to respond and suggested a news release on Tax-compliance/IRS issues. Chris said this was not yet the time for the SDCERS Board to write the SDU-T.

SDCERS is also asking the City to change the accounting year to calendar year, and no longer use the fiscal year. This would ease figuring the additional retirement payments from the separate Preservation of Benefits Trust the City set up for those who are receiving a greater percent for retirement than the IRS allows.

INVESTMENT COMMITTEE
Hebrank had heard, most recently, that SDCERS funds were being considered for a new City Hall. Chris and Doug responded:
1) Legal limitations: Same terms as other commercial investors, and limited to a small percent of the total amount required to build the arcade.
2) Why would SDCERS do a tax-exempt investment which has a lower interest rate, when SDCERS doesn't pay taxes? Such an action would drive down returns to CERS and increase the City's ARC. Why not offer the tax-free investment to private lenders, like the ballpark?
3) If SDCERS lent more money to the City, it would put SDCERS in a bad light.
More discussions and research of prohibitions regarding SDCERS investing in the City will follow in the future.