LAKE FOREST : Council Set to Vote on Fiscal Plan

Council members are expected to vote tonight on an interim investment plan in the wake of the county bond crisis.

The proposed policy stresses safety, liquidity and diversity. The plan will guide the city while its $9.5-million investment in the county pool is frozen by the county’s bankruptcy filing.

City finance director Dave Bass said that while the bulk of city reserves are frozen by the county, remaining funds must be quickly accessible in case of emergencies.

“The key element in this interim investment plan is to diversify so all of our unfrozen money is not in one place,” he said, “And what we invest in must be of a very short-term nature.”

Under the interim plan, no more than 50% of city investments will deposited with any single investment source.

Of the $4.5 million left in city reserves, about $3.5 million is in the Local Agency Investment Fund, a state pool run by the California treasurer’s office. The remaining $1 million is in a bank.

To diversify its remaining funds, Lake Forest will funnel about $2 million into federal securities, which do not include any risky derivative investments.

To make sure the city has quick access to its funds, all investments must mature within one year, while 75% of Lake Forest’s portfolio must mature in under six months. The proposed $2 million in federal securities investments could be completely liquidated by June, Bass said.

The city will consider permanent changes to its investment policy in the future. The job of deciding the nature of those changes will be handed to an investment review committee that will be appointed within the next several weeks.