Audit and Finance Committee
June 21, 2023
9:00am
Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940
REMOTE LOCATION VIA TELECONFERENCE
Any interested parties or community Committee Members may attend, and participate in, the meeting at the following addresses where Committee Members may also join the meeting from:
City of San Luis Obispo
City Hall
990 Palm Street, Hearing Room
San Luis Obispo, CA 93401
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The public may comment on the consent agenda and matters not listed on the agenda but within the Committee Members 's jurisdiction at the opening of the meeting. The Committee Members may not take action at this meeting on any item not listed on the agenda other than to refer the matter to staff or set it for a future meeting. The public may comment on a specific item listed on this agenda when the Committee Members consider that item. Speakers are limited to 3 minutes each.
In addition, Committee Members of the public may request and receive copies without undue delay of any documents that are distributed to the Committee Members, unless there is a specific exemption under the Public Records Act that prevents the disclosure of the record. (Cal. Gov’t Code Section 54957.5)
In compliance with Government Code Section 54957.5, non-exempt writings that are distributed to a majority or all of the Committee Members in advance of a meeting and that relate to an agenda item will be made available at 3CE’s offices located at 70 Garden Court, Suite 300, Monterey, CA 93940 during normal business hours and are also available on the 3CE website located at: https://pub-3ce.escribemeetings.com/
AGENDA
Welcome & Roll Call
Corrections or Additions
The Clerk will announce agenda corrections or proposed agenda additions of emergency, urgency, or continued items, which will be acted on by the Board as provided in Sections 54954.2 of the California Government Code.
Public Comment on the Consent Calendar and Items Not Listed on the Agenda The public may provide comments on the Consent Calendar or any item within the Board's jurisdiction but not on the agenda. The Board may not take action at this meeting on any item not listed on the agenda other than to refer the matter to staff or set it for a future meeting. Speakers are limited to 3 minutes.
CONSENT CALENDAR
1. Approve Minutes from the April 26, 2023 Meeting of the Audit and Finance Committee
REGULAR AGENDA
2. Receive Update on Banking Diversification
Adjounment
April 26, 2023
10:30 A.M.
Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940
City of Pismo Beach
City Hall
760 Mattie Road
Pismo Beach, CA 93449
City of San Luis Obispo
City Hall
990 Palm Street, Hearing Room
San Luis Obispo, CA 93401
MINUTES
The meeting was called to order at 10:30 A.M. with 4 members attending from 3 noticed locations and a quorum established
Members Present: 3CE HQ: Freeman, Harvey
City of Pismo Beach: Waage
City of San Luis Obispo: Chair Johnson
Members Absent: Mendez (arrived at 3CE HQ at 10:35 A.M.)
CONSENT AGENDA
The Chair opened the public comment period.
No public comment received.
The Chair closed the public comment period.
MOTION: Moved by Member Freeman, seconded by Member Harvey to approve the Consent Agenda.
ACTION: The Motion Carried with a roll call vote: 5/0/0 AYES: Freeman, Harvey, Mendez, Waage, Chair Johnson
NOES: None
ABSENT: None
1.1 Approved Minutes from the September 15, 2022 Meeting of the Audit and Finance Committee.
REGULAR AGENDA
2.1 Appointed Chair and Vice Chair of the 3CE Audit and Finance Committee.
The Chair opened the public comment period.
No public comment received.
The Chair closed the public comment period.
MOTION: Moved by Member Mendez, seconded by Member Waage to approve the appointments for Derek Johnson as Chair and Ed Waage as Vice Chair of the 2023 Audit and Finance Committee.
ACTION: The Motion Carried with a roll call vote: 5/0/0 AYES: Freeman, Harvey, Mendez, Waage, Chair Johnson
NOES: None
ABSENT: None
2.2 Adopted a Regular Meeting Schedule of the 3CE Audit and Finance Committee MOTION: Moved by Member Waage, seconded by Member Harvey to adopt a regular schedule of the Audit and Finance Committee that aligns with that of the Policy Board.
ACTION: The Motion Carried with a roll call vote: 5/0/0 AYES: Freeman, Harvey, Mendez, Vice Chair Waage, Chair Johnson NOES: None
ABSENT: None
2.3 Received Oral Presentation from Pisenti & Brinker, LLP on Central Coast Community Energy (3CE) Fiscal Year 2021/2022 Audited Financial Report.
The Chair opened the public comment period.
No public comment received.
The Chair closed the public comment period.
ACTION: Discussion item; no action required.
2.4 Received an Update on a Prepay Financing Transaction and Recommended the Operations Board to Support the Policy Board’s Approval and Authorization of the CEO.
The Chair opened the public comment period.
No public comment received.
The Chair closed the public comment period.
MOTION: Moved by Vice Chair Waage, seconded by Member Harvey to approve Staff’s recommendation.
ACTION: The Motion Carried with a roll call vote: 4/0/1 AYES: Freeman, Harvey, Vice Chair Waage, Chair Johnson
NOES: None
ABSENT: Mendez (left at 11:21 A.M.)
2.5 Received an Update of the Fiscal Year 2022-23 Mid-Year Budget Re-forecast and Support Seeking Policy Board Approval to Increase Appropriations.
The Chair opened the public comment period.
No public comment received.
The Chair closed the public comment period.
MOTION: Moved by Vice Chair Waage, seconded by Member Freeman to approve Staff’s recommendation.
ACTION: The Motion Carried with a roll call vote: 4/0/1 AYES: Freeman, Harvey, Vice Chair Waage, Chair Johnson
NOES: None
ABSENT: Mendez
Adjourned at 11:31 A.M.
Staff Report Item 2
TO: 3CE Audit and Finance Committee
FROM: Robert M. Shaw, Chief Executive Officer
PREPARED BY: Gina Urmatan, Senior Accountant
Mary Ann Federico, Billing Operations and Rates Analyst SUBJECT: Receive Update on Banking Diversification
DATE: June 21, 2023
RECOMMENDATION:
This memorandum recommends that the Audit and Finance Committee Receive an update on banking diversification in response to the spring 2023 regional and mid-size banking crisis.
BACKGROUND:
On March 10, 2023, Silicon Valley Bank (“SVB”) was unable to continue operating due to what was described as a “run on the bank”. This marked the third-largest bank failure in United States history and the largest since the 2007–2008 financial crisis. SVB was one of three spring 2023 U.S. bank failures, along with Silvergate Bank and Signature Bank, in March 2023. A fourth bank, First Republic Bank was acquired by JP Morgan Chase in an effort to avoid a SVB type failure.
The bank run began on March 7, 2023, after SVB announced that it would be suspending withdrawals from its accounts. This led to a panic among depositors, who rushed to withdraw their money from the bank. By March 10, SVB had exhausted its resources and was forced to close its doors.
These events have highlighted the risks that are associated with banking institutions and reinforced the importance of diversification of capital holdings and having a strong regulatory framework in place.
At the April 26, 2023 Audit and Finance Committee meeting, Director Waage requested an update on 3CE’s response to the regional and mid-size banking crisis.
DISCUSSION/ANALYSIS:
3CE is exploring diversification of financial institutions to mitigate risk associated with holding excessive capital reserves with one financial institution. Currently, 3CE utilizes two financial institutions, River City Bank (“River City”) and Royal Bank of Canada (“RBC”). Total assets held at these institutions are approximately $225 million with River City holding $148 million and RBC holding $77 million. River City functions as the agency operating accounts with assets in cash, certificates of deposits and interest earning accounts. RBC functions as the agency’s financial institution for investment activities with holdings in money market funds, cash sweeps, fixed income, and commercial paper. 3CE is evaluating the addition of a third financial institution or investment fund to broaden the agencies’ diversification while possibly allowing for a contingent operational institution. Initial analysis had determined that the amount of capital held at River City is in excess of the agency’s operational cash flow requirements and holding deposits at a third financial institution can reduce risk while also providing contingent operational functions.
Staff have continually evaluated the fiscal position of our current institutional banking and investment partners and have not found any concern as to their financial viability. It should be stated that this effort reflects agency staff’s diligence in the management of public funds and has not been undertaken due to any past or present concerns with our current financial institutions. An alternative option is to utilize a local agency investment pool or state investment pool such as the Local Agency Investment Fund (LAIF) or California Asset Management Program (CAMP).
Within the next 60-90 days it is anticipated that due diligence will be completed, and a decision(s) will be made on an institution and the amount of capital to be held. Staff will advise the Board when the determination has been made and the details of that decision, including the factors which were used to determine the institution selected, with supporting details.
FISCAL IMPACT:
There is no fiscal impact in receiving this report.
CONCLUSION:
The diversification of banking and/or investment institutions will reduce the risk of a single point of failure in the financial management of the agency.