[0:00] Okay, let's call.

[0:14] Uh,

[0:16] >> member

[0:18] » member

[0:18] is passing.

[0:20] Uh, vice chairman

[0:23] >> here.

[0:24] » here.

[0:24] >> Fairville

[0:25] » Fairville

[0:25] >> here.

[0:26] » here.

[0:26] >> Member Jane

[0:27] » Member Jane

[0:27] >> here. Member Bridley

[0:29] » here. Member Bridley

[0:29] >> here

[0:30] » here

[0:30] >> and then Mayor Owen

[0:37] and uh Vice Mayor look

[0:42] around.

[0:45] » Uh are there any public comments? Anyone

[0:48] online?

[0:51] >> No, no one online.

[0:54] » No, no one online.

[0:54] >> Let's go to the regular agenda item.

[0:56] » Let's go to the regular agenda item.

[0:56] First is review include the draft

[0:59] minutes.

[1:11] » Any corrections?

[1:14] I mean there was a typo in section two

[1:17] of the public property tax.

[1:34] Do I have a motion to approve the

[1:35] minutes with the one change?

[1:37] >> I motion to approve the minutes. No

[1:39] » I motion to approve the minutes. No

[1:39] changes.

[1:54] Then you can sit next to Andrew. Sorry.

[2:04] So,

[2:05] >> so next item is uh review of the bars

[2:09] » so next item is uh review of the bars

[2:09] that have crossed the border ending

[2:12] September 3rd.

[2:14] >> Can we do a motion motion? I'm sorry.

[2:17] » Can we do a motion motion? I'm sorry.

[2:17] Motion.

[2:18] >> Yes.

[2:28] » Yes.

[2:29] >> Yes.

[2:38] Yes. Uh so before us we have um

[2:42] presentation just real quick on on this

[2:45] item. Item three is a review and discuss

[2:47] of PAR's OPEC OPEC trust program and a

[2:50] snapshot of the quarter ending September

[2:52] 30th 25 review presentation by

[2:55] administration in our um asset

[2:59] management group investment funds. We'll

[3:02] discuss

[3:04] George and then oh thank you

[3:08] funding and to the trust and we'll

[3:11] discuss the expense and investment

[3:13] discussion. So um with this item real

[3:15] quick I just want to give a background

[3:17] um in the staff report at that our

[3:19] September 9th um finance committee

[3:21] meeting the committee reviewed our roll

[3:23] forward oped valuation and liabilities

[3:25] and assets as of June 3025

[3:28] uh which provided the latest output

[3:30] actuality report and the balance of the

[3:32] par trust as of 63035

[3:35] and the staff report which showed a

[3:37] decrease in the oped liability of

[3:40] 171,000 and um uh 7.9 million against an

[3:46] increase in the town fiduciary fiduciary

[3:48] net position of 9,57,000.

[3:51] Uh this is an increase of 388,745

[3:54] and net position. They revealed our net

[3:57] opet balance of 1,70.

[4:00] So today's meeting we're providing an

[4:01] update to the annual program for the PAR

[4:03] trust as of November 30th 25 and then

[4:05] we're going to do an overview of the

[4:07] investment performance for the first

[4:08] quarter um ending uh September 30th 25.

[4:13] So in the staff report on page two, I

[4:15] had listed the um the roll forward that

[4:18] we reviewed at September 9th as our

[4:20] September meeting and then the 63025

[4:23] trust position updated as of 11:30.

[4:26] So um there was a the trust balance went

[4:30] up to 9.25 25 million to the OPED

[4:33] liability is 7.98 million and net OAP

[4:36] asset introduced about

[4:40] 7,000 to 1 million268.

[4:44] So um there's still a favorable asset

[4:47] experience um that contributes to

[4:49] decreasing our net liability. And again

[4:52] we have um our presentation here we have

[4:53] director Andrew Brown of PFM asset

[4:56] management to present today. I'm sorry

[4:58] we have

[5:00] administrative director uh Jennifer Mesa

[5:03] with PARS to discuss the outlook of the

[5:05] pre-unding trust program and I see that

[5:07] you just what was just handed to you was

[5:09] the actual hard copy of the presentation

[5:11] that was included in your graphic. Uh,

[5:15] so without further ado, I would like to

[5:16] turn it over to Jennifer Mensah of ours

[5:19] and Andrew Brown of management and I

[5:23] will pull up the presentation online so

[5:26] you'll be able to see it as well

[5:30] as they talk through it. So without

[5:32] further ado,

[5:33] >> All right. Perfect. Thank you so much.

[5:35] » All right. Perfect. Thank you so much.

[5:35] Um, and good evening or good afternoon

[5:36] everyone. Thank you for having us here

[5:38] today. I went ahead and put uh together

[5:40] a presentation here for you. We won't

[5:42] cover every single page, but we want to

[5:44] provide you as much information as we

[5:45] can in case you have additional

[5:47] questions that we can work to. Um, if we

[5:50] go to slide number two, just our contact

[5:52] information at any point in time, feel

[5:54] free to reach out to us if you have

[5:55] questions. If you don't have any today,

[5:57] but maybe in a couple days or after this

[5:59] meeting, something comes up. We're

[6:00] always available to assist you. Slide

[6:03] number three, just a little bit of a

[6:05] reminder of the trust team myself

[6:08] public agency retirement services. We do

[6:11] the administration of this account. So

[6:13] the record keeping, the audits, the

[6:15] reporting, all of that is done by force.

[6:17] US Bank holds the over $9 million that

[6:20] you currently have and safeguards those

[6:22] assets and overseas PFM where Andrew is

[6:26] from making sure that everything that

[6:28] the town has requested for the

[6:30] investments is being properly done and

[6:32] managed through PFM. So those are the

[6:34] different parties within the group. Um,

[6:36] if you have any additional questions, I

[6:38] can answer them.

[6:41] Slide number four, we go through the uh

[6:44] program. You have what's called a

[6:46] combination trust that allows you to put

[6:48] money aside for retiring healthcare

[6:50] obligations. Um and you also could

[6:53] technically put money aside for pension.

[6:55] That's something that we talked about

[6:56] maybe a little bit over five years ago.

[6:58] Now, that uh part of the bucket has not

[7:00] or that part of the program has not been

[7:02] utilized, but you have uh flexibility.

[7:05] Currently, you're only using the OPM

[7:07] side. As I mentioned, you have over $9

[7:09] million in that. Yeah. You select when

[7:12] to put money in and you have flexibility

[7:14] of taking that money out. You can take

[7:16] that money out to pay uh for any retiree

[7:19] uh related expense, whether you

[7:21] reimburse the town back for those

[7:23] expenses. If you have some kind of

[7:25] stipen that you provide them, we can pay

[7:26] them directly. We can pay a third-party

[7:29] provider that may be offering some of

[7:31] those benefits out of the trust. And for

[7:33] any actual evaluations, you can pay it

[7:36] out of the trust as well. So, a lot of

[7:38] different ways that you can utilize the

[7:39] asset. Um, when

[7:44] slide number five,

[7:47] top portion just shows you this program

[7:49] started back in May 16th of 2012. Uh,

[7:52] town manager, city manager is currently

[7:54] the plan administrator. So, on behalf of

[7:56] uh your city council and this committee,

[7:59] any changes would be done uh there by

[8:01] Jordan. The investment strategy is

[8:04] called the moderate index strategy which

[8:06] Andrew is going to go out and talk about

[8:08] in just a couple of slides. That is not

[8:10] something that is locked in. The city

[8:12] can or the town can make changes at any

[8:14] point in time to that investment

[8:16] strategy. And that's why we try to meet

[8:18] on a regular basis in case things happen

[8:20] or you know something else changes with

[8:22] the town and you want to make changes to

[8:24] the investment. So that can be done at

[8:25] any time of the year at any time uh that

[8:28] we needed.

[8:30] bottom portion are your assets. As of

[8:33] November 30th, you've contributed a

[8:35] total of $9.4 million into the account.

[8:39] That includes the initial June 2013

[8:42] contribution of 1.2 million plus the

[8:44] additional $8 million in there. You have

[8:47] taken money out. You've been taking

[8:49] money out almost every fiscal year. A

[8:51] total of over $5 million taken out of

[8:54] the truck. Your net investment earnings

[8:56] from KFF have been of over $4.8 8

[8:59] million on there and the account balance

[9:02] as I mentioned November 30th is $9.2

[9:05] million in the account.

[9:08] Line number six shows you this

[9:10] information uh based on the historical

[9:13] information on every fiscal year that we

[9:16] program. So you can see when the money

[9:17] came in, you can see your total assets

[9:20] there and then of course those

[9:21] reimbursements taken out of there in the

[9:23] center uh column for you. And you can

[9:26] see since 2024, we have not had any

[9:29] additional contributions into the

[9:30] program. As you'll see in the next page,

[9:33] the plan is very uh well established in

[9:36] a very healthy place. The town has done

[9:38] a great job of establishing the program,

[9:41] putting money aside, and really

[9:42] addressing those liabilities on the

[9:44] account. So all we are seeing in the

[9:46] last couple of years is reimbursements

[9:48] to pay down those retirey healthcare

[9:50] obligations.

[9:53] By number seven, this is the liability

[9:56] for this specific program. These reports

[9:58] are not done by PARs. Uh you currently

[10:00] use a company called Position Actuaries

[10:02] that does that for you. And what we went

[10:05] ahead and did is compared the 2024

[10:07] versus the latest 2025 on there. The

[10:10] discount rate or the long-term expected

[10:12] rate of return for this type of plan

[10:15] under this portfolio is about 6.5%. So

[10:19] that's what the actuary is quoting on

[10:20] there. That gives you a total OPED

[10:23] liability or what currently is due for

[10:25] this type of liability with your town of

[10:28] about 7.9 million. Now, the actual money

[10:32] that you have in the trust is over that

[10:34] at $9 million. So, as you can see,

[10:36] currently if you, you know, you had to

[10:38] pay the bill today, you currently have

[10:39] assets to meet all of those obligations.

[10:42] Now, again, that's a running number. It

[10:44] can change. That's why you do ask for

[10:46] evaluations at a minimum every two years

[10:48] because things can change, premiums and

[10:50] so forth, costs can change. So that is a

[10:53] floating number that we'll see from time

[10:55] to time. At this time, you're in a very

[10:57] healthy funded status. Uh you're funded

[10:59] at 113%.

[11:02] Uh but less than uh 5% of our agencies

[11:05] in California are that well funded. So

[11:07] good job to you to the town and staff

[11:10] for actually establishing this, funding

[11:12] it, and having it in such a healthy

[11:14] condition.

[11:15] And then the last number that I want to

[11:17] take a look at there is the annual

[11:18] benefit payments. The about half a

[11:21] million dollars that you currently um

[11:23] you know pay out for these type of

[11:24] liabilities. You can always take that

[11:26] out if you're currently doing to um

[11:28] other

[11:37] » sign number eight. Um I'll have Andrew

[11:40] touch base more as I mentioned on the

[11:41] investments. This is just historically

[11:43] what you have uh returned with the

[11:45] inception to date of 6.47. In the

[11:48] previous slide I had mentioned your

[11:50] discount rate is 6.5. So you're right

[11:52] there u meeting that discount rate from

[11:54] the actuary as well. That's that's what

[11:57] I'll point out there and then I'll have

[11:58] Andrew come back if he needs to to that

[12:00] slide.

[12:02] So that is the administrative portion of

[12:04] this program. Details on your assets and

[12:07] so forth and your liability. I'm going

[12:09] to turn it over to Andrew to discuss the

[12:11] investments. But are there any questions

[12:12] on the slides that I've touched on

[12:14] already?

[12:17] >> Okay,

[12:17] » Okay,

[12:17] >> Robert, I think there were some

[12:19] » Robert, I think there were some

[12:19] premeating questions. Uh, one of which I

[12:21] think was fairly much in the

[12:24] interpersonal role. Do we want to do all

[12:27] questions at the end or if you want to

[12:30] >> I think one of them was the

[12:31] » I think one of them was the

[12:31] reimbursement.

[12:32] >> You mean the funds?

[12:33] » You mean the funds?

[12:34] >> Um, yeah, we can handle that right now.

[12:36] » Um, yeah, we can handle that right now.

[12:36] Um uh report

[12:40] discussed it. Um correct. So uh PARS

[12:43] administers the retirey health benefits

[12:45] for us. So every month um through our

[12:49] retirees have to participate with

[12:50] CalPERS help. And so, um, because we

[12:54] have this, uh, trust with ARS, um, we

[12:58] get the bill every month from from, um,

[13:01] Kalpers, and then we verify based off of

[13:04] the individual retiree, whatever, um,

[13:08] plan reimbursement they get, we we we

[13:10] take that, we reconcile it against what

[13:12] their premium is, and then we reimburse

[13:15] them their um, retirey health. Um

[13:19] because Kalpers, what CalPKERS does is

[13:21] they deduct their retirey health out of

[13:23] their pension. So that comes out from

[13:27] Kalpers. They take out the retirey

[13:29] medical from the retiree, the annuity.

[13:32] Um and what we do through PARs is we

[13:35] reimburse the retirees their medical.

[13:38] And so every month we send that to PAR

[13:40] say a list of all the individuals. Um

[13:42] they already have their address, they

[13:45] have their bank information. and we set

[13:46] it up and we send every month um prior

[13:49] to the end of the month um before the

[13:52] annuitant's uh healthcare is taken out

[13:55] we send that list to um PARS and then

[13:58] PARS reimburse each individual annuitant

[14:01] their reimbursement amount health

[14:03] reimbursement amount and so on that

[14:05] slide that um previous slide on page six

[14:09] we saw the dispersements

[14:11] uh so the dispersements

[14:15] amount you can see are all in that

[14:18] column under the dispersement. So u as

[14:20] of June 26th and again this is on a

[14:23] calendar year as of June 26 we

[14:26] contributed 347,000

[14:29] and that's what was contributed in total

[14:31] to reimburse the annuitance their health

[14:34] um retirey health uh care. Uh so PARS we

[14:38] work in tandem with PARS on this uh and

[14:41] you could see it as of fiscal year 24 we

[14:45] stopped doing contributions because what

[14:47] we were doing prior the town would every

[14:50] month the town would contribute whatever

[14:53] um that retirey help for the month was.

[14:55] So if it was 35,000 we were contributing

[14:57] 35,000 to PARS and PARS was taking that

[15:00] amount and dispersing it to the

[15:02] individual retirees. So that's how the

[15:05] flow of funds work and that's how we use

[15:06] the retirement trust. We use the trust

[15:09] because it's um in doing so the retiree

[15:13] is not um taxed on that benefit because

[15:17] we're we're reimbursing through the

[15:18] trust. So um

[15:22] with the Jennifer mentioned that we do

[15:24] the OPEC act report that's precision

[15:27] actual does their actual report we work

[15:30] in tandem we send that to to PARs and

[15:32] that way we can kind of gauge and see

[15:35] where we're at based off of our assets

[15:38] and our liabilities. And so PARS helps

[15:40] us with that administering that

[15:42] reviewing it. And then Andrew is on the

[15:44] investment side making sure that we meet

[15:46] the investments for it. Um and and and

[15:50] also the uh the cost the expenses for

[15:55] the uh administrator and the investment

[15:58] also comes out of the cars trust and and

[16:01] I'll uh touch work on that after we talk

[16:05] talk about the investments. Um but

[16:08] that's that's all I have. Is there any

[16:11] questions? Um I just wanted that's how

[16:13] the process works with cars. Um, and

[16:16] then they they managed the they

[16:18] administered the plan for us.

[16:23] Any questions?

[16:27] So then I'll turn it over to Andrew.

[16:29] >> Let me let me have you go, Robert, if I

[16:31] » Let me let me have you go, Robert, if I

[16:31] could to 2.8 page uh number in the

[16:34] bottom right hand corner.

[16:40] » There you go. Yep.

[16:43] >> So it's good to be back here. Thank you

[16:45] » So it's good to be back here. Thank you

[16:45] for the invitation. Uh, as the finance

[16:47] director Baron highlighted in the staff

[16:49] report, I'm going to touch on

[16:51] performance. We'll take a look at the

[16:54] economic snapshot of PF and asset

[16:57] management, highlight positioning for

[16:59] the portfolio, and then I think there's

[17:02] also some supplementary questions uh

[17:05] submitted related to fees and expenses

[17:06] and investment policy statement. Uh so

[17:09] those are going to be the five topics

[17:10] but um any other topic that uh you want

[17:13] to uh discuss just feel free. Uh so this

[17:18] is my first investment uh presentation

[17:20] for calendar year 2026. Uh and so the

[17:24] the slide that we're looking at here the

[17:25] the quarterly uh market summary the

[17:28] factors to consider over the next six to

[17:30] 12 months. This is something we call our

[17:31] heat map. And what we do is we take nine

[17:33] economic and market variables and we

[17:35] apply some type of color-coded rating

[17:38] system to our outlook on these nine

[17:40] dynamics. Uh and it's designed to cover

[17:43] a 6 to 12 month horizon. Uh the color

[17:46] coding uh corresponds to red and yellow

[17:50] uh some type of negative view. Gray

[17:52] there in the middle would be a neutral

[17:54] outlook and then light green, dark green

[17:56] is some type of positive view towards

[17:59] one of these dynamics. uh upper right

[18:01] hand corner you'll see it's uh ending uh

[18:04] September 30th 2025. So we have not

[18:06] updated it officially

[18:09] um uh for for dissemination for the 1231

[18:13] period of time uh but but but I have

[18:15] people who who have uh shared our our

[18:18] views and um they haven't changed. So,

[18:21] so where you see the black dots on these

[18:23] nine dynamics are exactly where we are

[18:26] today and and certainly we can debate um

[18:29] you know maybe we should have moved

[18:31] something here and there you know when I

[18:33] think about the six to 12 month horizon

[18:35] you know predicting the future is

[18:36] difficult at any time I think we have a

[18:39] better handle on a six-month horizon

[18:41] versus a 12-month horizon and and if we

[18:43] were thinking about the next six months

[18:45] I think we're pretty constructive pretty

[18:47] positive I think growth in the in the

[18:49] United States is going to be pretty

[18:50] solid. Um and and a lot of uh that

[18:53] positive feeling really comes from, you

[18:56] know, where we have many of these black

[18:57] dots in the green regions, upper leftand

[18:59] corner. First off, monetary policy. Um

[19:02] we're still working through the positive

[19:04] impact of 2024 rate cuts. We got some

[19:07] rate cuts in the fourth quarter of 2025

[19:11] and and our best guess is we get one or

[19:13] two more here in 2026. So, so that was

[19:17] maybe some of the uh catalyst to uh

[19:19] putting that uh rating as as a positive

[19:22] outlook for monetary policy. Interest

[19:23] rates in our view are likely uh to t

[19:26] continue to trend downward. Uh financial

[19:29] conditions look excellent. Much of that

[19:31] really stems from the one big beautiful

[19:33] bill that was signed into law there on

[19:36] July 4th that has some tremendous

[19:38] provisions for corporations to expense

[19:41] R&D and capex as well as uh it is widely

[19:45] anticipated uh that that tax refund

[19:48] season uh in the upcoming quarter the

[19:51] later this quarter second quarter this

[19:53] year is going to see some uh pretty

[19:55] significant tax refunds for individual

[19:58] tax filers. Uh, and typically when you

[20:00] get a windfall of cash coming in,

[20:02] Americans typically spend it. So, so we

[20:04] think financial conditions are poised.

[20:06] And really, I mean, if if it was just a

[20:08] six-month horizon there at 12:00, we'd

[20:10] probably move economic growth uh to one

[20:13] of the shades of green there. Uh, and we

[20:16] also probably would move consumer

[20:17] spending to one of the shades of green

[20:19] there, right in the middle. Uh, with

[20:20] respect to inflation, the upper right

[20:22] hand corner, we do have it rated as a

[20:24] yellow. We did get CPI today. CPI

[20:27] headline was 2.7, core was 2.6.

[20:31] Still kind of closer to the 3% level

[20:34] versus the 2% level that the Fed is

[20:36] looking to target. Um, many economists

[20:39] out there, point to 2%. Kind of maybe a

[20:42] little bit hesitant to put my initials

[20:44] next to that. Uh, you know, I might stay

[20:46] at the mid 2% level. uh but but may

[20:50] maybe not so ownorous uh from a from a

[20:54] policy standpoint for monetary policy

[20:56] halting the Fed from cutting rates going

[20:58] forward. Uh labor markets we do have it

[21:00] rated as a yellow there at 3:00 and um

[21:03] yeah uh last five six months we've seen

[21:06] a slowdown in job creation. uh it's been

[21:09] sort of what's been termed in the media

[21:11] and and I hate reusing well you you know

[21:15] beat them into the ground phrases but I

[21:17] I will today low higher low fire um you

[21:20] know there's not a lot of terminations

[21:22] out there but there's not a lot of new

[21:24] job creation either um some economists

[21:28] point to well with the uh the slowdown

[21:30] in immigration maybe we only need

[21:33] something around along the lines of 50

[21:35] to 60,000 new jobs the Dallas Fed put

[21:38] out a report in the fourth quarter uh

[21:41] putting forth that that that uh

[21:42] potential data point that maybe 50 to

[21:44] 60,000 new jobs might be that that that

[21:47] that neutral rate of growth. Um maybe

[21:50] maybe not. Uh but but but certainly with

[21:53] the low number of new jobs that have

[21:55] been posted in the economy, we feel

[21:56] pretty comfortable still keeping it at

[21:58] yellow in terms of our rating. And then

[22:00] just two other quickly uh items that

[22:02] I'll touch on. um valuations,

[22:07] you know, some some argument, some push

[22:09] back there. At uh six o'clock, we have

[22:11] it at slightly negative. Sometimes uh

[22:14] clients would say, "Well, why should you

[22:16] put it at red?"

[22:17] >> And and maybe because of the textbooks

[22:18] » And and maybe because of the textbooks

[22:18] that I at least studied uh growing up,

[22:21] um yeah, it kind of feels a little bit

[22:24] expensive or or very expensive there at

[22:26] 23 times price to earnings ratio for

[22:29] large cap stocks in the United States,

[22:31] the S&P 500. Uh so so my inclination is

[22:35] to be a little more conservative. Um my

[22:38] other colleagues feel that yellow is

[22:40] maybe the the one that deserves the

[22:42] merit. Uh but but yeah, it the market's

[22:45] a bit overvalued to say the least. And

[22:48] that's worrisome because if we don't get

[22:49] the economic growth and the corporate

[22:51] earnings that that we anticipate in

[22:53] 2026, uh we're probably poised for a

[22:56] market selloff. And then we get to the

[22:58] fun part of the presentation where we

[22:59] talk about policy and political risks.

[23:02] Uh that always seems to be a hot topic

[23:04] with uh committees and whatnot. Um you

[23:08] know, three months ago, well, I guess I

[23:10] didn't totally lay out the the

[23:12] presentation format. When you see a

[23:13] white dot, a white dot is where we were

[23:16] maybe three months ago. So if this is

[23:18] for the 9:30 ending period, uh for that

[23:21] June uh June 30th to to uh end of

[23:25] September period, uh we had it at

[23:27] excessive risks. We moved it to yellow.

[23:30] Um and and I know what my colleagues

[23:32] were thinking about when they moved it

[23:34] from red uh highly negative to slightly

[23:37] negative. It was sort of the notion and

[23:39] it wasn't a debate of whether or not the

[23:41] the Trump policies were were disruptive.

[23:44] Yeah, they are disruptive. Um but but it

[23:48] was maybe the recognition that the

[23:49] market really wasn't caring too much

[23:50] about disruptions and and and maybe also

[23:53] uh not all disruptions yield negative

[23:56] outcomes and and so when when we think

[23:58] about some of the policies that have

[24:00] been uh enacted uh over over President

[24:03] Trump's first uh 12 13 months in office.

[24:06] You know there's been some highly

[24:07] disruptive policies but but with okay

[24:09] outcomes. one uh would certainly be the

[24:13] one big beautiful bill that's um going

[24:15] to be a huge catalyst for for the

[24:16] economy and it's always already been a

[24:18] very nice catalyst in some industries.

[24:21] Uh Operation Midnight Hammer that that

[24:23] that was certainly a positive. Um and

[24:26] then also some benefits coming from the

[24:28] initial deregulation uh policies

[24:31] enacted. So, so, so yeah, there have

[24:33] been some positives, but then you just

[24:36] kind of go through the first 11 12 days

[24:37] of 2026 and and it's one to make my head

[24:41] spin and um

[24:44] I just kind of jotted a few down.

[24:46] Venezuela, abduction of Maduro and his

[24:48] wife, cajoling, Trump, cajoling oil

[24:51] executives to invest hundred billion

[24:52] dollars in Venezuela, a country where

[24:55] many of them got kicked out several

[24:57] years ago. So, you know, how, you know,

[24:59] eager are are people to, you know, once

[25:01] burn, twice shy sort of thing. Strong

[25:03] overtures to invade Greenland. Directing

[25:06] Fanny May and Freddy Mack to purchase

[25:08] 200 billion in agency mortgage back

[25:09] bonds. Uh, truth social posting calling

[25:12] for prohibition of institutional

[25:13] investors to buy residential homes,

[25:15] preventing defense companies from buying

[25:18] back stock and issuing dividends. Um,

[25:21] and then just yesterday trying to cap

[25:23] swipe fees for credit card issuers at

[25:26] 10%. I mean, it's it's it's a lot. It's

[25:30] a lot for one administration in one

[25:31] year, not to mention 12 13 days. So, so

[25:34] I don't know if you want to push back in

[25:36] terms of, hey, why don't you guys put it

[25:38] back to red? I certainly wouldn't uh I

[25:40] wouldn't fight you. Um, but yeah, I

[25:44] don't know if hopefully it's nothing

[25:46] more than a debate about, you know, just

[25:48] the merits of, you know, where do you

[25:49] guys put it, red or or yellow, rather

[25:51] than, hey, you know, you highlighted

[25:54] some of the good benefits of of

[25:55] disruptive policies. You know, hopefully

[25:58] these current policies don't yield

[26:00] negative results um for for the

[26:03] remaining three years of of his

[26:05] presidential term. So, yeah, that wasn't

[26:08] much of an overview. It was maybe a

[26:10] little bit longer than I anticipated,

[26:12] but this is my first time in 2026, so

[26:14] I'll get better. Um, any any questions

[26:18] or or feedback on any of that?

[26:24] » Okay.

[26:26] All right. Uh, Robert, maybe page 2.9,

[26:29] which I think is in the next one. And

[26:31] and just a quick stop on this page. This

[26:34] covers our our asset allocation

[26:35] positioning and and and the the the one

[26:39] sort of u scarlet letter for us in 2025

[26:42] calendar year 2025 was we moved a slight

[26:45] underway position to equities there uh

[26:48] called maybe the third week in April. uh

[26:51] we got a little bit nervous about the

[26:52] the potential negative input of uh or

[26:55] impact of tariffs uh from from uh t

[26:58] liberation day there on April 2nd or 3rd

[27:02] and we moved from a 50% equity

[27:04] allocation to a 48% allocation in this

[27:07] portfolio. So it was a slight

[27:08] underweight. It wasn't a big move. Uh

[27:11] and and like I said the market didn't

[27:13] really seem to care. it kept on going up

[27:15] and and so maybe the third week in July,

[27:18] we moved back to a neutral allocation

[27:20] going back from 48% to 50% in equities.

[27:23] Uh and we've maintained that position

[27:25] across all of the asset allocation

[27:27] decisions within the plan. So when you

[27:30] look at this and you look at all the the

[27:32] black dots and the neutral uh section

[27:34] there in the middle of the page, uh US

[27:36] equities u international equities

[27:39] combining that together that's going to

[27:40] be 50% of the portfolio. fixed income is

[27:43] going to be 48% and your cash is going

[27:45] to be at a 2% allocation and that's

[27:47] where we've been since the third week in

[27:49] July and and that's where we maintain

[27:51] our current position today.

[27:54] Robert maybe page 3.1

[27:58] and and so this is going to be and um I

[28:03] think Robert you put the first quarter

[28:05] it is the first quarter of the fiscal

[28:07] year correct

[28:08] >> third quarter at least we're we're

[28:11] » third quarter at least we're we're

[28:11] mapping it on here

[28:12] >> correct

[28:12] » correct

[28:12] >> um

[28:13] » um

[28:13] >> and and so you know uh maybe

[28:17] » and and so you know uh maybe

[28:18] >> maybe the most relevant column to look

[28:21] » maybe the most relevant column to look

[28:21] at and I'll I'll be happy to look at any

[28:22] column here uh would be maybe the

[28:24] one-year column there. Third or fourth

[28:26] one over from the left. Uh and for the

[28:29] first line item, total portfolio. This

[28:31] represents the total portfolio uh for

[28:34] the pool that we're invested in. Uh you

[28:36] saw a page that Jennifer presented her

[28:39] her her last page in her presentation

[28:41] that actually um took a look at the cash

[28:43] flows for the town's uh uh portfolio and

[28:48] that actually would be maybe a more

[28:50] relevant period or re relevant uh

[28:53] exhibit to look at and maybe we can kind

[28:54] of finish off on that if if you want to.

[28:57] Um, so in terms of a 12-month period of

[28:59] time, the actuary says make 6.5%.

[29:02] And and we generated a a 9

[29:08] » 92.

[29:10] Does it show 9.65 up there?

[29:16] » Yeah. 9

[29:19] >> It says 9.65, but the

[29:21] » It says 9.65, but the

[29:21] >> the book shows 9.92.

[29:25] » the book shows 9.92.

[29:25] >> Oh, yeah. the basin.

[29:28] » Oh, yeah. the basin.

[29:28] >> No, of course.

[29:30] » No, of course.

[29:30] >> Yeah. Well, we're gonna go with 9.92

[29:32] » Yeah. Well, we're gonna go with 9.92

[29:32] because that's the book.

[29:33] >> The one in the book in the packet is

[29:35] » The one in the book in the packet is

[29:35] 9.92.

[29:37] >> Yeah,

[29:37] » Yeah,

[29:37] >> that's correct.

[29:38] » that's correct.

[29:38] >> We're going to go with 9.92. Apologies.

[29:40] » We're going to go with 9.92. Apologies.

[29:40] Apologies there. Uh, and so, yeah, way

[29:43] ahead of 6.5% for a 12-month period of

[29:46] time. Uh, how did we get there? Well, we

[29:48] certainly got there in the back of of

[29:50] the equity market. Uh, the domestic

[29:52] equity line item there, 17.2%.

[29:55] uh the international equity line item

[29:57] 17.3%.

[29:59] Uh when we do our capital market

[30:00] assumptions, we expect domestic equities

[30:02] to get about 7% and international get

[30:04] about 7.4. So, you know, heck, that's

[30:07] almost two and a halfx of of what we

[30:10] would expect to generate over a 12-month

[30:12] period of time. So, that's certainly

[30:13] indicative of a really good 12 months.

[30:15] Uh other growth is a category where we

[30:18] lumping together some diversifying

[30:19] assets, real estate as well as

[30:22] infrastructure. Uh thumbs up on the

[30:24] infrastructure investment um at 16.2%

[30:28] that was one of our best performing

[30:30] asset classes over the last 12 that

[30:32] 12-month period of time. Um real estate

[30:34] struggled real estate struggled over

[30:36] this period of time. I think investors

[30:38] were were kind of hoping they get a

[30:39] little bit more in the way of interest

[30:41] rate cuts uh to maybe spur that that

[30:44] real estate market. it it was actually

[30:46] the only category that that has a a

[30:48] minus sign in front of it over this

[30:49] 12-month period of time at 2.3%.

[30:53] Uh fixed income fixed income was at

[30:55] 3.3%.

[30:57] It's a better story when you look at um

[31:00] the 9-month period of time uh for for

[31:03] for this portfolio at 6.2% 2% and then

[31:07] when you throw on about a percent there

[31:09] in the fourth quarter uh we got about 7%

[31:12] from our real estate investments which

[31:15] it's important because in a 50/50

[31:18] portfolio half of it does come from real

[31:20] estate and and and real estate has been

[31:23] one of maybe the more disappointing

[31:24] areas uh for the portfolio for the plan

[31:27] and it's not really any of our doing

[31:29] because we're invested in in an index

[31:31] fund if you will for for fixed income.

[31:34] uh it's it's the more so the market and

[31:37] the low interest rate environment and

[31:38] also 2022 when the Fed increased

[31:41] interest rates up uh at a very high clip

[31:44] but over that 12-month period of time a

[31:46] 3.3%

[31:47] return and then finally rounding it out

[31:49] cash

[31:50] while the Fed is cutting rates and that

[31:52] is impacting some of our money market

[31:54] yields we were able to still generate

[31:56] about a four and a half% return on our

[31:57] cash we don't have a lot in cash as I

[31:59] said it's about a 2% allocation um but

[32:02] but it it wasn't

[32:04] detracting over that period of time. So,

[32:06] putting it all together just to shade

[32:08] under 10%. Very happy to uh very happy

[32:10] to show that to you. Um

[32:14] I I will give you the estimate based on

[32:16] um we don't have our our final numbers

[32:18] uh solidified just yet. Um but um it

[32:21] looks like we had about a 1.8 1.9%

[32:25] uh we'll call it the second quarter of

[32:28] the fiscal year, fourth quarter of the

[32:30] calendar year. Uh so maybe just a shade

[32:32] under 2%. So, not about three months to

[32:35] uh end the calendar year.

[32:39] Uh I said I was going to talk about

[32:40] positioning and maybe that that slide

[32:42] that we looked at previously does

[32:44] capture that at a 50/50 allocation. Uh

[32:47] that that is currently where we are at.

[32:50] Um Dr.

[32:52] >> Yes sir. Just to go back to what you

[32:54] » Yes sir. Just to go back to what you

[32:54] said at the beginning, the the total

[32:58] portfolio and then these other things

[33:01] you said isn't necessarily a portfolio.

[33:07] >> This would be the investment portfolio

[33:09] » This would be the investment portfolio

[33:09] that the town of Athetherton and I'll

[33:12] make up a number six to seven seven

[33:14] other agencies are invested in. Okay.

[33:17] >> So your your portfolio assets, your plan

[33:19] » So your your portfolio assets, your plan

[33:19] assets are in this portfolio. Um but but

[33:22] but it's not totally isolated to to the

[33:25] town.

[33:27] >> But why would So the town's returns

[33:29] » But why would So the town's returns

[33:29] would be exactly the same. Then

[33:32] >> it would be maybe a little bit more or

[33:34] » it would be maybe a little bit more or

[33:34] maybe a little bit less um than than

[33:38] what the other plan or whether the

[33:41] portfolio participants are are

[33:42] experiencing. The drivers of that would

[33:44] be cash flows going in and out. Uh the

[33:47] drivers also would be fees and expenses

[33:49] which we're going to touch on probably

[33:50] about 90 seconds. Um I think you're

[33:53] maybe maybe one of the more larger

[33:55] participants and so it's a gradiated fee

[33:58] schedule. So more the more assets you

[34:00] have the lower fees and expense that

[34:02] that you uh that you incur.

[34:05] >> The assets are segmented. So the buckets

[34:07] » The assets are segmented. So the buckets

[34:07] the pools are each each town, right? So

[34:11] their inflows and outflows are going to

[34:12] affect something. So when you're

[34:14] invested in bucket A, you're going to

[34:16] put more more in the equity. You're

[34:18] going to reallocate in that portfolio.

[34:20] Maybe bucket B doesn't have the cash

[34:22] available to do it. Or is it's just

[34:24] timing issues on all this stuff.

[34:25] >> It it's not

[34:26] » It it's not

[34:26] >> it's all of us having have same amount

[34:28] » it's all of us having have same amount

[34:28] of money, but one person needs a little

[34:30] bit more and one person is getting a

[34:32] little more.

[34:33] >> It's not segregated. So that's that's

[34:34] » It's not segregated. So that's that's

[34:34] the key point.

[34:35] >> It's not it's it's a pool.

[34:37] » It's not it's it's a pool.

[34:37] >> It it's a pool. So, so let's say for

[34:39] » It it's a pool. So, so let's say for

[34:39] example, uh, um,

[34:42] Selenus,

[34:44] I'm making this up. Selenus says,

[34:46] >> uh, Selenus needs a $7 million

[34:49] » uh, Selenus needs a $7 million

[34:49] distribution to play plan, paid plan

[34:51] participants.

[34:52] >> Yeah,

[34:53] » Yeah,

[34:53] >> they it will say, uh, portfolio manager,

[34:56] » they it will say, uh, portfolio manager,

[34:56] make sure that we have enough liquidity.

[34:58] Portfolio manager checks, yes, we have

[35:00] $12 million in liquidity. uh US bank as

[35:04] plan administrator would pull these

[35:07] seven million

[35:08] >> 12 is is if we're all each of town

[35:10] » 12 is is if we're all each of town

[35:10] that's all of our our that's our that's

[35:12] everybody's one and a half or so

[35:14] >> some but but but then but then upon um

[35:19] » some but but but then but then upon um

[35:19] at at a certain point in time the

[35:21] investment manager says oh well geez uh

[35:23] we are low on cash or we we've moved

[35:26] from our target asset allocation

[35:28] position yeah uh and then we have a

[35:30] decision to to potentially rebound

[35:32] balance that portfolio.

[35:34] >> Sure. So if it's pulled then then and

[35:36] » Sure. So if it's pulled then then and

[35:36] the why would

[35:39] I imagine these returns are really

[35:41] close. But why would it matter per city

[35:43] then? If we all have a big thing all

[35:45] together then we're all getting the same

[35:46] return. If you want $7 million it's

[35:48] coming out of that big pool.

[35:50] >> I I would offer well if you consistently

[35:52] » I I would offer well if you consistently

[35:52] put more money in well let's say you

[35:54] were the only agency

[35:56] >> right

[35:56] » right

[35:56] >> that that that was putting money.

[35:59] » that that that was putting money.

[35:59] I don't believe that that you're if you

[36:03] were putting money into an individual

[36:05] account, I don't think that that the

[36:08] cash flows would um the performance

[36:11] based on the cash flows would exactly

[36:14] foot to the performance based on

[36:16] >> maybe the thing that we care about is

[36:17] » maybe the thing that we care about is

[36:17] that we don't suffer as a result of

[36:19] other people's cash needs.

[36:22] >> Certainly appreciate. I don't think that

[36:24] » Certainly appreciate. I don't think that

[36:24] you do, but but but but there is a

[36:27] dynamic there,

[36:28] >> especially when we're overfunded. So,

[36:30] » especially when we're overfunded. So,

[36:30] we're overfunded, we could sit back and

[36:33] use and have Robert's cash needs met

[36:36] without too much trouble. So,

[36:40] >> it's maybe

[36:41] » it's maybe

[36:41] >> Robert's cash needs a question for next

[36:44] » Robert's cash needs a question for next

[36:44] time for you for for if if we want to

[36:47] get into the weeds. Um I don't want to

[36:49] get too far into the weeds because I

[36:50] think you missed things. But um maybe

[36:53] that's to are are we are

[36:57] is the mechanism and is the way that you

[36:59] operate and the policy the way that you

[37:00] operate it such that

[37:02] that towns that are overfunded so to

[37:06] speak are actually um

[37:09] um

[37:10] not benefiting from the overfunding. So

[37:12] to their we're we're we're helping the

[37:15] underfunded. We're actually the biggest

[37:18] draw you start

[37:20] definitely two different two different

[37:22] dynamics going on here. I mean, so so

[37:26] your your funding policy uh to to me I I

[37:29] began to think, okay, well, if you're

[37:31] 113% funded, which I think the marked

[37:33] market through November, uh then then we

[37:37] begin to think about, well, do we need

[37:38] to take 6.5 the risk commenserate with a

[37:41] 6.5% discount rate, which

[37:44] >> in in our in our recommendation is a 50%

[37:47] » in in our in our recommendation is a 50%

[37:47] equity, 50% portfolio.

[37:48] >> Yeah.

[37:49] » Yeah.

[37:49] >> So that's completely germanine to the

[37:51] » So that's completely germanine to the

[37:51] town. it doesn't really impact or or or

[37:53] or consider other agencies within this

[37:56] pool. Um the and our answer would be

[38:00] yes, we would still maintain we would

[38:01] recommend maintaining the course with a

[38:03] 50/50 portfolio

[38:05] because of the the cash requirements. I

[38:08] mean because right now what did you what

[38:10] did you disperse last year or where the

[38:13] town disperse

[38:14] >> um

[38:15] » um

[38:16] >> 4.5ish

[38:18] » 4.5ish

[38:18] almost 5%. So if you think about the

[38:21] dynamics here, uh you're assuming 6.5%

[38:24] but you're also kind of distributing

[38:27] four and a half um couple nickels for

[38:31] our fees and expenses. You have a little

[38:34] bit left in a perfect world, right? And

[38:35] this isn't even factoring in those years

[38:37] where we have down.

[38:38] >> Um

[38:38] » Um

[38:38] >> yeah,

[38:39] » yeah,

[38:39] >> you have a little bit left over for

[38:40] » you have a little bit left over for

[38:40] compound growth, but we're really not in

[38:42] growth mode. But I mean, we're we're

[38:43] using the assets for for what they're

[38:47] intended for to to support the the

[38:50] liability.

[38:51] >> As maybe even more, I'm just trying to

[38:53] » As maybe even more, I'm just trying to

[38:53] get the basic question as I can.

[38:55] >> Yeah.

[38:55] » Yeah.

[38:56] >> How are we affected by other towns? We

[38:58] » How are we affected by other towns? We

[38:58] could isolate our assets and stick them

[39:00] right here in our corner and have

[39:02] everybody else stay over there. Do we do

[39:04] better or do we do worse or we just do

[39:07] do the same? Is the pooling

[39:10] does the pooling allow you to do the

[39:12] administration that you need and pull

[39:13] this whole thing thing off at le less of

[39:15] a cost? That's why we pool or you

[39:18] >> Well, there are three questions there. I

[39:19] » Well, there are three questions there. I

[39:19] had I had the no, they had the yes and

[39:21] the um one one thing that that that we

[39:24] typically do is is in and this is well

[39:27] the Wii is the royal we but it's really

[39:29] the trustee. uh the trustee establishes

[39:33] a limit usually at $10 million uh to to

[39:36] have an individual account and and the

[39:38] town since day one has been under that

[39:40] that that limit

[39:42] >> 92 93 I mean potentially we could talk

[39:45] » 92 93 I mean potentially we could talk

[39:45] to the trustee um since my paycheck has

[39:49] the same name that the trustees has. I

[39:51] mean we could potentially look at an

[39:53] individual account. Key point though, we

[39:56] would not do anything different than

[39:57] what you see on the asset. You see the

[40:01] percent sign with the the allocation

[40:02] there. We would allocate it the same way

[40:04] we'd manage the same.

[40:06] >> But you wouldn't be potentially

[40:08] » But you wouldn't be potentially

[40:08] positively or negative. You wouldn't be

[40:10] impacted by other agencies cash flows in

[40:12] or cash flows out

[40:15] >> because it got effect.

[40:16] » because it got effect.

[40:16] >> Yeah.

[40:16] » Yeah.

[40:16] >> A smidge, but but it could be to the

[40:18] » A smidge, but but it could be to the

[40:18] positive. Uh

[40:19] >> it could be

[40:20] » it could be

[40:20] >> but but

[40:21] » but but

[40:21] >> the point is we don't know. So if you

[40:22] » the point is we don't know. So if you

[40:22] just sit there,

[40:23] >> I'll answer it in a maybe a slightly

[40:24] » I'll answer it in a maybe a slightly

[40:24] different way. When we put together our

[40:26] um portfolio composits, our investment

[40:28] composits, so when we when we show the

[40:31] world, you know, quote unquote, how much

[40:33] better we are than than the Calurge,

[40:35] right? We're going to an RFP and we put

[40:37] together our composits for the 50/50

[40:39] portfolio. Uh the the the variance in

[40:42] terms of our returns for our 5050

[40:44] portfolios, it's not too wide. So when I

[40:48] see that, it's not too varied. So when I

[40:50] see that, I say, well,

[40:53] the the whatever the cash flows in and

[40:55] out of those 10, 12, 15 accounts that

[40:58] make up our 50/50 portfolio, it's not

[41:00] really walloping one or pool. And it's

[41:05] pretty tight. But if as a homework

[41:09] assignment you want us to look into

[41:10] maybe doing a separate account

[41:14] >> we can look at

[41:14] » we can look at

[41:14] >> if you would just confirm why there

[41:16] » if you would just confirm why there

[41:16] would be if you would like I look into

[41:18] why there's a difference. It's cash

[41:20] flows, but I'll give it I'll write out

[41:22] to me would be the thing that would make

[41:24] sense would be

[41:27] that

[41:29] each each per each pool participant

[41:33] uh their return depends on their the

[41:36] timing of their inflows and outflows.

[41:39] At the portfolio level, it's like an

[41:41] average of that. But

[41:44] but we shouldn't be impacted by what

[41:46] anyone else is doing.

[41:48] I

[41:50] >> shouldn't be from a philosophical

[41:51] » shouldn't be from a philosophical

[41:51] standpoint or shouldn't be from a

[41:53] investment.

[41:54] >> Well, both.

[41:55] » Well, both.

[41:55] >> Well, I mean, you you should have a

[41:57] » Well, I mean, you you should have a

[41:57] system that doesn't impact us depending

[42:01] on what other people are doing.

[42:04] >> Well, so so then I would encourage you

[42:06] » Well, so so then I would encourage you

[42:06] to

[42:07] >> see if you can isolate it, right? That's

[42:08] » see if you can isolate it, right? That's

[42:08] I mean that's what I would do.

[42:09] >> I would encourage you then to discuss it

[42:11] » I would encourage you then to discuss it

[42:11] if if you do want to pursue individual

[42:13] account. Well, the first thing would be

[42:15] if you could maybe get back to Robert

[42:18] and explain exactly how differences can

[42:22] arise.

[42:26] » Sure. I'll give an official one pager.

[42:30] >> I got to think it's going to be really

[42:31] » I got to think it's going to be really

[42:31] hard to isolate that.

[42:33] >> Well, when you say isolate, I I can't do

[42:35] » Well, when you say isolate, I I can't do

[42:35] the the accounting.

[42:37] >> What if that's

[42:39] » What if that's

[42:39] >> Yeah. No, that I'm going to give it a

[42:41] » Yeah. No, that I'm going to give it a

[42:41] philosophical. These are the three

[42:43] reasons why you would anticipate a

[42:45] different return uh between an

[42:48] individual account where it's just your

[42:51] $450,000 coming in and whatever

[42:53] contribution you're putting in uh versus

[42:56] the experience of

[42:59] a coming pool that that has you know a

[43:03] very I mean the main thing Thomas is is

[43:07] okay well we ended the we ended the

[43:08] quarter there at 2.6% 6% cash.

[43:11] >> Um, other pools might have ended the

[43:13] » Um, other pools might have ended the

[43:14] quarter at 1 point something percent

[43:15] cash or maybe 5%. Maybe somebody got a a

[43:18] 10% contribution to cash that we were

[43:20] gradually dollar cost averaging in and

[43:23] we dollar cost

[43:26] on great days which slightly increased.

[43:29] You know, we bought low and then it went

[43:31] up after we we put that large

[43:33] contribution in and it gradually showed

[43:35] a little bit of upside in that pool

[43:38] experience.

[43:39] I mean, and like I said, I'll give you

[43:41] the memo, but but that's the main thing.

[43:44] >> I take a look at isolating it. It's it's

[43:46] » I take a look at isolating it. It's it's

[43:46] as if as if Tom and I got together and

[43:48] said, "Hey, let's combine our retirement

[43:49] accounts together and we'll have an

[43:51] accountant to kind of figure things out.

[43:52] We'll allocate it out. You might need

[43:54] some money and then I might need some

[43:55] money after

[43:58] I wanted to have my retirement account."

[43:59] He doesn't want mine either.

[44:01] >> Yeah.

[44:01] » Yeah.

[44:01] >> So, is it that you think it's similar

[44:04] » So, is it that you think it's similar

[44:04] expense ratio for for operating on a

[44:07] separate account versus a pool? We don't

[44:09] charge anything more for an individual

[44:10] account. So that's the you're charged

[44:13] based on your assets under management.

[44:14] Since that's one of our check boxes,

[44:17] let's let's knock that out right now. Uh

[44:19] at at let's see.

[44:23] >> So if we wanted it separate, it wouldn't

[44:24] » So if we wanted it separate, it wouldn't

[44:24] cost us anything. Is that correct?

[44:29] >> It doesn't cost any more. Yeah. uh the

[44:33] » It doesn't cost any more. Yeah. uh the

[44:33] blended um

[44:35] the expenses for the index funds the the

[44:37] the weighted average for the index funds

[44:40] is going to be 4.8 basis points.

[44:42] >> Uh and then I think I I calculated the

[44:45] » Uh and then I think I I calculated the

[44:45] uh expense for 9.2 million at 30.7

[44:50] or so. So I think we were just a shade

[44:52] under 36 basis points all in all in for

[44:55] investment management. So that's uh the

[44:58] embedded expenses for the index funds

[45:00] and what PFM asset management US bank uh

[45:04] charges.

[45:05] >> What what's the review process for that?

[45:07] » What what's the review process for that?

[45:07] One of the things I mentioned last time

[45:08] was Fidelity's got a 0% total market

[45:11] index. I think does

[45:14] a process in house to substitute lesser

[45:17] cost. Can we go from a third from 3 to

[45:20] 0.25? Is that something that's looked

[45:22] at? I respect your diligence in terms of

[45:25] trying to get below this cost. I think

[45:28] one of the things that we do think about

[45:30] I mean obviously we think especially

[45:31] with index ones we think about fees and

[45:33] expenses expenses

[45:34] >> because it's easy because you guys can

[45:36] » because it's easy because you guys can

[45:36] keep your management keep the fees

[45:37] related to it and run it to where you're

[45:39] running and drive the cost of the

[45:41] portfolio down. We need liquidity. Uh,

[45:44] and we also need need a provider that

[45:47] that won't tag you for a because

[45:49] sometimes if you if you if you pull

[45:51] money out within a 30-day window of

[45:53] time, they'll assess a a modest penalty.

[45:57] >> Yeah.

[46:00] » Yeah. I'm I'm not wondering about I'm

[46:03] wondering about what the process is for

[46:06] for not just us but for for the others

[46:09] where you look down your when was the

[46:11] last time you had a fund change. Do

[46:12] what's the process for looking down

[46:14] there and going I have Fidelity total

[46:16] market index. There's other total market

[46:18] indexes that are out there and they may

[46:20] be they may track the index similarly

[46:23] the same and they may be at less cost.

[46:25] Do you have a process where you go, you

[46:27] know, it's January, it's time for us to

[46:30] take a look at that?

[46:31] >> Well, it actually kind of follows that

[46:33] » Well, it actually kind of follows that

[46:33] that sort of rubric for index funds. I

[46:37] mean, it's it's probably going to be a

[46:39] once a year dynamic. I mean, it's not

[46:41] going to be a

[46:42] >> still I mean, we're just that's how you

[46:43] » still I mean, we're just that's how you

[46:43] got to.

[46:44] >> So, a manager research group would look

[46:46] » So, a manager research group would look

[46:46] at index funds pretty much on a on an

[46:48] annual basis. Uh determine liquidity,

[46:51] determine if there's any fund provisions

[46:52] that that change. uh index funds they

[46:55] don't raise their fees. So

[46:56] >> what about substitution? Does that

[46:58] » what about substitution? Does that

[46:58] happen often? Because there's fidelity

[46:59] >> doesn't happen often and when it does

[47:02] » doesn't happen often and when it does

[47:02] happen for index funds it's you know

[47:06] attracting the underlying venture. Why

[47:08] is

[47:09] >> well this international fund doesn't

[47:10] » well this international fund doesn't

[47:10] have exposure to Canada.

[47:12] >> Well who cares? It's only 6%. Well wait

[47:15] » Well who cares? It's only 6%. Well wait

[47:15] a minute we care because we're not

[47:16] tracking. So, so that's usually more of

[47:18] a catalyst um to to make us think about

[47:21] a replacement for for an index fund.

[47:24] >> Yeah.

[47:24] » Yeah.

[47:24] >> Uh yeah. Well, um

[47:26] » Uh yeah. Well, um

[47:26] >> I mean our plan here is to have I just

[47:28] » I mean our plan here is to have I just

[47:28] got the statements is to is to have all

[47:31] these funds, show what they are, look at

[47:34] what their tracking record is, look at

[47:36] what their expenses are, and see if

[47:37] there's a substitute for it. And then

[47:40] just ask, go, hey, there's a substitute

[47:42] for fidelity of whatever. Are you guys

[47:45] considering that? If we have our own

[47:47] pool, does it make any different or is

[47:49] this a policy decision that you make for

[47:51] everybody? Everybody's going to get the

[47:52] Fidelity B.

[47:53] >> It's a policy decision that everybody

[47:55] » It's a policy decision that everybody

[47:55] gets. Yeah. So, so

[47:57] >> that's a good one though. I think if you

[47:58] » that's a good one though. I think if you

[47:58] track the same you have less expenses,

[48:00] why not do it?

[48:02] >> Well, sure. I mean, all things being

[48:04] » Well, sure. I mean, all things being

[48:04] equal, but all things aren't always

[48:05] equal. And you do have the tracking with

[48:07] the underlying index. Um, and and

[48:09] liquidity is a big deal, too. Totally

[48:10] agree. And there's also some providers

[48:12] that that that will uh you know nickel

[48:14] and dime you in terms and remember I

[48:16] mean we have a lot of inflows and

[48:17] outflows.

[48:18] >> I get it.

[48:19] » I get it.

[48:19] >> The fund provider thinks that we're

[48:21] » The fund provider thinks that we're

[48:21] buying and selling and flipping things

[48:22] around and we're not.

[48:24] >> Um but yet they still want to give you a

[48:26] » Um but yet they still want to give you a

[48:26] little bit of a penalty and that's the

[48:30] >> fair. That's fair.

[48:34] » Yes. So just to piggyback on that on the

[48:37] the the investment uh cost. So the costs

[48:41] are about um as I mentioned about point

[48:45] 30 basis point um so it's about 26,000

[48:50] and then with the administration it's

[48:53] about 24. So the total

[48:55] >> expenses about 49,000 on

[48:58] » expenses about 49,000 on

[48:58] >> the 8.8 million

[49:01] » the 8.8 million

[49:01] >> is is the cost between the administrator

[49:03] » is is the cost between the administrator

[49:04] and the investment. Um so about you're

[49:06] looking at 48,000 um cost per year. um

[49:10] about 8.8 millions in assets.

[49:15] » This part of this discussion going to be

[49:16] on again on on shorts allocation um on

[49:19] our equity versus bond or is that

[49:24] >> yeah we we'll we'll bring that back um

[49:26] » yeah we we'll we'll bring that back um

[49:26] when we do our our end of the year we'll

[49:29] review we'll say um this is you know our

[49:32] investment strategies is the modern

[49:34] index um asset.

[49:36] >> Do we want to change it? We want to um

[49:38] » Do we want to change it? We want to um

[49:38] be more conservative.

[49:39] >> That was the last one we just did.

[49:40] » That was the last one we just did.

[49:40] >> Yes, that was the one in in June,

[49:42] » Yes, that was the one in in June,

[49:42] correct? And and and the committee

[49:44] recommended we just stay where we're at

[49:46] um because that one meets the uh at the

[49:49] time it was 6% um our our investment

[49:53] return, but through the actuarian

[49:55] mentioned that now it's 6.5%.

[49:58] So um in and see the plan is is the

[50:01] investment plan is making is

[50:03] >> next step up is is is the next step up

[50:06] » next step up is is is the next step up

[50:06] from ours is

[50:07] >> balanced balanced is something we we run

[50:10] » balanced balanced is something we we run

[50:10] uh the target allocation can be 60 40

[50:13] 60% equities 40% bonds

[50:16] >> the range is 50 to 70% equity so it can

[50:19] » the range is 50 to 70% equity so it can

[50:19] go as low as 50

[50:21] >> uh if you think that that's low I mean

[50:22] » uh if you think that that's low I mean

[50:22] that's our target and then as high as 70

[50:26] >> um I Yeah, I didn't come, you know, when

[50:30] » um I Yeah, I didn't come, you know, when

[50:30] I did my own internal pregame prep. I

[50:32] didn't come here thinking, uh, I'm gonna

[50:34] talk I'm gonna talk overunded plan to

[50:36] take more equity risk.

[50:38] >> Um,

[50:40] » Um,

[50:40] >> it's coming too.

[50:44] » Yeah, we we'll definitely bring that

[50:46] back. We always review um the investment

[50:49] strategy to see where we where we ended

[50:51] up by the

[50:52] >> at the end of the year,

[50:54] » at the end of the year,

[50:54] >> but we're bringing this because we

[50:56] » but we're bringing this because we

[50:56] wanted to start reviewing it as a

[50:58] quarterly um snapshot

[51:00] >> rather than the yearly that we doing.

[51:02] » rather than the yearly that we doing.

[51:02] So, this is just the the quarter review.

[51:05] So, we're we're about 200,000 more in

[51:09] the net position than we were in June of

[51:14] 25. So we made 200 something thousand

[51:18] even though we've been distributing um

[51:20] money out of it. So you know the first

[51:22] quarter is a positive 200. So if we do

[51:25] four more times it's positive 800 and

[51:28] we've expended 450,000. So we spent

[51:31] eight we earn 800 spent 450,000 we had a

[51:35] positive balance.

[51:36] >> Nice return.

[51:38] » Nice return.

[51:38] >> Yeah I like it

[51:39] » Yeah I like it

[51:39] >> when it works.

[51:40] » when it works.

[51:40] >> That's a good lubricate.

[51:42] » That's a good lubricate.

[51:42] >> So um yeah. So this is, you know, for

[51:45] » So um yeah. So this is, you know, for

[51:45] the first quarter, we're we're we're

[51:47] looking good. Um, but again, yeah, we

[51:50] we'll we'll do the snapshot reviews and

[51:53] then

[51:54] >> fabulous jobs for

[51:56] » fabulous jobs for

[51:56] great team. Great team,

[51:59] >> mayor.

[51:59] » mayor.

[52:00] >> How many like humans are participating

[52:02] » How many like humans are participating

[52:02] like retirees are participating in this

[52:04] plan? Is there any like oversight as

[52:07] we're not adding new people to it? We're

[52:10] adding more money like the interest is

[52:12] doing more than we're paying. Like at a

[52:14] certain point, we won't have enough

[52:16] people.

[52:18] We'll have a lot less people in this

[52:20] plan. Like is someone watching?

[52:22] >> Yes.

[52:23] » Yes.

[52:23] >> Number of humans.

[52:24] » Number of humans.

[52:24] >> Yes, we do that. Um when we do the

[52:26] » Yes, we do that. Um when we do the

[52:26] actar, we do the census um data on that

[52:30] and that's what you know every two years

[52:32] we do a census of who's on the plan or

[52:35] the in the future retirees. There's

[52:37] still a handful of current employees

[52:40] that do get some retiring help and

[52:42] majority get still get retirey help but

[52:46] they get that minimum amount right and

[52:49] that gets calculated in

[53:02] We're on 3.1. I don't know if there's

[53:04] any.

[53:05] >> There's no other exhibit um that I was

[53:08] » There's no other exhibit um that I was

[53:08] going to utilize in the presentation.

[53:13] » I think Yeah, we got to the end. All it

[53:15] was was the at the end was um the trust

[53:19] programs. Uh I'm just going to go

[53:21] through it real quick. Here's the

[53:26] uh strategies

[53:28] that was at the end the index

[53:30] at the end of the report. This is the

[53:33] there are different strategies there.

[53:35] We're in the moderate

[53:38] um

[53:39] be that 11.3% this month.

[53:42] >> That's true.

[53:44] » That's true.

[53:44] >> Yeah.

[53:47] » Yeah.

[53:47] >> Yeah. So this this is in your packet. Um

[53:51] » Yeah. So this this is in your packet. Um

[53:51] these are the different strategies that

[53:53] we have and then and you know how much

[53:56] uh percentage the strategic range.

[53:59] So the moderate 40 60 is 46 m to 20 and

[54:08] she's very in that 50%.

[54:14] And then here's here's where we in early

[54:17] in the report the one year the index

[54:21] we're at 9.65.

[54:23] So here it is these are the other five

[54:27] um strategies and we're in that middle

[54:30] moderate

[54:32] index.

[54:34] And then how Andrea mentioned the next

[54:36] one up would be the balance and then the

[54:39] highest more risky risk of risky one

[54:42] would be the capital appreciation

[54:45] strategy.

[54:47] Andrew,

[54:48] in measuring your own performance, if

[54:51] you went if you went to 55% equity, 35

[54:56] fixed income,

[54:58] would the benchmark go 5535 or would you

[55:02] stay at 5050?

[55:04] >> Oh. So, so if we're talking the moderate

[55:08] » Oh. So, so if we're talking the moderate

[55:08] strategy,

[55:08] >> Yeah.

[55:09] » Yeah.

[55:09] >> and we move to 55, the benchmark would

[55:11] » and we move to 55, the benchmark would

[55:11] still stay at 5050.

[55:13] >> Good. And so then the way to and we're

[55:17] » Good. And so then the way to and we're

[55:17] really interested in a bunch of index

[55:18] funds. So the way that we would either

[55:20] add value or detract value, you know,

[55:22] nine times out of 10 is is the asset

[55:24] allocation. It's not like we come up

[55:26] with a better index fund better than the

[55:28] index,

[55:36] » you know. So this is all included in the

[55:39] your packet. Um yeah, we wanted to bring

[55:43] the team out again just to kind of start

[55:44] on the quarter review and and you can

[55:48] see you know the September 385

[55:53] positive

[55:56] quarter and we'll continue to review

[55:59] that in the quarter ended the second

[56:01] quarter which ended 1239.

[56:04] We'll do an update in a couple months

[56:06] time on

[56:11] bring see where we're at and answer the

[56:14] question some of the questions about the

[56:15] investment expense the flow of funds how

[56:18] it's working

[56:21] we have great partners with PARs as the

[56:23] administrator overseeing and then Andrew

[56:25] and his team uh the investment

[56:30] and then we'll we'll Andrew and I will

[56:33] touch based on some of these questions

[56:34] and then we'll bring it back up answer

[56:38] when we see the second quarter.

[56:40] Hopefully it's another positive 200,000.

[56:43] >> You give me a martial art.

[56:46] » You give me a martial art.

[56:46] >> Is it possible to have too much money in

[56:48] » Is it possible to have too much money in

[56:48] this? I mean like you know no such thing

[56:50] as too much money but like

[56:53] >> but we can't really move it anywhere

[56:55] » but we can't really move it anywhere

[56:55] else, right? It has to stay in here.

[56:58] >> Yeah. And eventually

[56:59] » Yeah. And eventually

[56:59] >> substitute money, right?

[57:02] » substitute money, right?

[57:02] Yeah,

[57:03] >> I was gonna say eventually one of your

[57:05] » I was gonna say eventually one of your

[57:05] questions was, you know, you're starting

[57:06] to have less active employees. If if at

[57:08] the end of the the life of your plan,

[57:11] your your retired healthcare plan,

[57:13] you're done. There's no more employees,

[57:15] nothing left in there, any residual, any

[57:18] additional money in the trust goes back

[57:19] to your account, goes general fund. We

[57:22] don't have to like

[57:23] >> I'm just like, it's awesome that we're

[57:25] » I'm just like, it's awesome that we're

[57:25] getting so much more interest than our

[57:27] >> what we're paying. So, it's good that

[57:29] » what we're paying. So, it's good that

[57:29] we're building, but like at some point

[57:31] it might get too big.

[57:32] >> So, maybe 35 40 years or so, it might

[57:36] » So, maybe 35 40 years or so, it might

[57:36] get to that point. But if the town is

[57:38] still a town and pursive

[57:42] employees that get

[57:44] >> um the PMPA minimum and if the fund is

[57:47] » um the PMPA minimum and if the fund is

[57:47] way overfunded at that point, how does

[57:49] that work? So, the fund's got two

[57:51] million fund still has 8 million in

[57:53] there, but we only have PMPA minimum

[57:55] staffed moving forward. How do we

[57:58] address that?

[57:59] >> Well, and that's why you're not

[58:00] » Well, and that's why you're not

[58:00] contributing to the program any to try

[58:02] to stabilize that. Um, and then also you

[58:04] have to think the investments. The

[58:05] investments while I want to guarantee

[58:07] double digits or extra and won't let me,

[58:09] we will have um some down years.

[58:12] >> There's downturns. Yeah.

[58:13] » There's downturns. Yeah.

[58:13] >> And then if there's changes in the

[58:15] » And then if there's changes in the

[58:16] health care costs, right, I have those

[58:17] costs have been keep going up. So

[58:20] there's going to be compression whether

[58:22] the investments do well or they don't do

[58:24] well and then your costs keep going up.

[58:27] So right now in the last several years

[58:30] we've been fine but on the liability

[58:32] side the cost trends can go higher and

[58:35] on your census right in the healthcare

[58:38] plans um you know have been going up you

[58:41] know 10% 13% a year so when that happens

[58:44] and your investments

[58:47] I mean right now we're actuarial

[58:49] >> right it is in the actuarial and and

[58:51] » right it is in the actuarial and and

[58:51] they review it and then they kind of put

[58:53] in the the demographic assumptions on

[58:56] the healthcare care the the cost the CPI

[58:59] they also do mortality rates and all of

[59:01] that. So um the one thing is you know

[59:05] mortality rates improve uh then your

[59:08] your health care cost your retired

[59:10] health care cost continues. So um

[59:13] there's that part of it.

[59:14] >> At present there's nothing that the town

[59:16] » At present there's nothing that the town

[59:16] is paying that the fund can't pay. Is

[59:20] there any leakage of maybe wrong choice

[59:22] of words? Uh, no. We're we're also re

[59:26] getting reimbursed from the the amount

[59:28] that we the minimum pen that we pay the

[59:31] FAR to Calers. We're getting reimburse

[59:33] that as well through the the trust.

[59:36] >> There's no there's nothing there's no

[59:38] » There's no there's nothing there's no

[59:38] other switch, no other volume to have

[59:40] the bond pay more and the town pay less

[59:47] » other than Yeah. just the retirey help

[59:49] um that those components. Yeah.

[59:52] >> Agree. Correct. Yeah. I mean, you could

[59:54] » Agree. Correct. Yeah. I mean, you could

[59:54] have those actual evaluations, but

[59:56] that's just like a small fraction of

[1:00:00] >> Yeah. I mean, that's something easy. I'm

[1:00:02] » Yeah. I mean, that's something easy. I'm

[1:00:02] just thinking something.

[1:00:04] >> Would the change to a charter town

[1:00:07] » Would the change to a charter town

[1:00:07] affect any? Okay. So, that's

[1:00:12] » got to ask

[1:00:14] >> exiting from Calerts.

[1:00:17] » exiting from Calerts.

[1:00:17] >> Exiting from Calbert

[1:00:18] » Exiting from Calbert

[1:00:18] >> change things, but that is an

[1:00:19] » change things, but that is an

[1:00:19] astronomical con.

[1:00:22] Yeah.

[1:00:25] >> Got it.

[1:00:25] » Got it.

[1:00:26] >> The cost will go opposite. Yeah. We need

[1:00:28] » The cost will go opposite. Yeah. We need

[1:00:28] more money.

[1:00:30] >> Yeah.

[1:00:31] » Yeah.

[1:00:31] >> I know what last year you put in $3

[1:00:33] » I know what last year you put in $3

[1:00:33] million as a discretionary payment

[1:00:35] occurs.

[1:00:36] >> ADP.

[1:00:36] » ADP.

[1:00:36] >> ADP. I

[1:00:37] » ADP. I

[1:00:37] >> mean, have you considered doing the the

[1:00:40] » mean, have you considered doing the the

[1:00:40] PARs 115 trust instead of something like

[1:00:43] that?

[1:00:43] >> I said some Yeah. Um, we we we have

[1:00:46] » I said some Yeah. Um, we we we have

[1:00:46] discussed that and it's still

[1:00:49] >> established the trust, right?

[1:00:51] » established the trust, right?

[1:00:51] >> Correct. But it's not um as far as we

[1:00:55] » Correct. But it's not um as far as we

[1:00:55] presented those options of putting it in

[1:00:56] the trust and let it build up or

[1:01:00] making the contribution here and then

[1:01:02] and we've done that just making it

[1:01:04] directly to Calers and and let's see

[1:01:08] what it does instead of

[1:01:11] >> right just putting money aside into the

[1:01:13] » right just putting money aside into the

[1:01:13] trust for over time. So I think that

[1:01:16] could be the next

[1:01:19] proposition is okay, we've done the the

[1:01:22] ADPs, instead of doing that, let's set

[1:01:24] aside a savings, right?

[1:01:27] >> Yeah.

[1:01:27] » Yeah.

[1:01:27] >> 200,000 a year, 500,000 a year for the

[1:01:31] » 200,000 a year, 500,000 a year for the

[1:01:31] future for for council decision.

[1:01:36] >> It might depend on how the new

[1:01:38] » It might depend on how the new

[1:01:38] investment manager calers,

[1:01:41] >> right? Yeah. They just diversify your

[1:01:44] » right? Yeah. They just diversify your

[1:01:44] bets

[1:01:44] >> manager and uh uh yeah and the plan is

[1:01:48] » manager and uh uh yeah and the plan is

[1:01:48] has done well. Um they're staying at

[1:01:51] 7.8%.

[1:01:54] >> Uh they had that new portfolio approach

[1:01:57] » Uh they had that new portfolio approach

[1:01:57] that they were adding. So yeah, I mean

[1:02:00] there was only that one year where there

[1:02:03] was that negative

[1:02:05] >> but I mean yeah that's but that is an

[1:02:08] » but I mean yeah that's but that is an

[1:02:08] option is instead of doing ADP and we

[1:02:11] bring that up but I think what it was

[1:02:13] just to give the money to helpers let's

[1:02:15] reduce our cost now uh and see what what

[1:02:19] that

[1:02:21] and it has it's reduced our UIO

[1:02:22] component payments it's reduced our um

[1:02:26] normal cost uh rates

[1:02:28] 115 wouldn't do either of those two,

[1:02:30] would it?

[1:02:32] >> No, the 115 would just it's just

[1:02:34] » No, the 115 would just it's just

[1:02:34] building our what we've done with this

[1:02:36] trust with the OPE just putting money

[1:02:37] aside for the future. I mean, we're in

[1:02:41] essence what it is is we're taking

[1:02:44] 500,000 whatever we put in there and

[1:02:46] we're letting um Andrew's team go and

[1:02:49] say, "Okay, let's let's earn whatever we

[1:02:52] can on this interest." So this 500,000

[1:02:56] could be 5 million 10 years and then or

[1:03:01] or longer, right? Or

[1:03:03] >> and then take that money and then here

[1:03:05] » and then take that money and then here

[1:03:05] you go. Instead of it being an

[1:03:07] operations expense one year, it's like

[1:03:09] oh now we have 6 million in here.

[1:03:11] >> Uh and like this OPE trust, you know, it

[1:03:14] » Uh and like this OPE trust, you know, it

[1:03:14] started in 2012 2011. We didn't

[1:03:18] >> at that time. I mean it we contributed

[1:03:22] » at that time. I mean it we contributed

[1:03:22] to it. we did significantly 5 million to

[1:03:25] it. So we almost doubled our investment,

[1:03:27] right? What's in the truck.

[1:03:29] >> So we put in 5 million and now it's 9.2

[1:03:32] » So we put in 5 million and now it's 9.2

[1:03:32] million um you know in a matter of of

[1:03:35] what 14 years and and

[1:03:39] the you know with the liabilities have

[1:03:42] gone down on the OPE so that's helped um

[1:03:46] create that um positive net balance. Um

[1:03:50] but yeah I mean that can be an you know

[1:03:53] an option is

[1:03:54] >> your knowledge of this and you is

[1:03:57] » your knowledge of this and you is

[1:03:57] amazing and the comfort it brings to me

[1:04:00] is

[1:04:02] >> chs.

[1:04:03] » chs.

[1:04:03] >> Thank you. That's not to me it's

[1:04:05] » Thank you. That's not to me it's

[1:04:05] >> historical knowledge and your ability to

[1:04:07] » historical knowledge and your ability to

[1:04:08] fluidly move around in these numbers is

[1:04:10] pretty impressive.

[1:04:11] >> Thank you. Well just you see it a lot

[1:04:14] » Thank you. Well just you see it a lot

[1:04:14] right and and

[1:04:15] >> yeah don't discount yourself.

[1:04:17] » yeah don't discount yourself.

[1:04:17] >> Thank you. I appreciate it. appreciate

[1:04:19] » Thank you. I appreciate it. appreciate

[1:04:19] it. But I have a great team, you know,

[1:04:21] we're great great um counterparts and

[1:04:24] stuff. So that that assists us in in

[1:04:26] just staying on top of it and uh you

[1:04:29] know, making sure that we're we're doing

[1:04:31] what we can and you know, the council's

[1:04:33] director with let's pay down our

[1:04:34] liabilities and that's what we've been

[1:04:35] doing through the the retirey health and

[1:04:38] and through pensions.

[1:04:42] Thank you. Appreciate it.

[1:04:45] >> Any further questions?

[1:04:48] » Any further questions?

[1:04:48] Thanks Jennifer and Andrew.

[1:04:51] >> Thank you for coming personally.

[1:04:53] » Thank you for coming personally.

[1:04:53] >> We really appreciate it. We do

[1:04:58] our

[1:05:00] counterpart here and

[1:05:03] you know it adds more value. I know we

[1:05:06] do the Zooms and stuff.

[1:05:10] Jennifer came up from LA. Andrew came

[1:05:14] down from San Francisco. So

[1:05:16] >> she might meet me home. like anyone.

[1:05:19] » she might meet me home. like anyone.

[1:05:19] >> Oh, sorry. That used Yeah. But we we

[1:05:22] » Oh, sorry. That used Yeah. But we we

[1:05:22] really really do appreciate

[1:05:25] >> all you do for us, the partnerships.

[1:05:29] » all you do for us, the partnerships.

[1:05:29] >> We'll continue presenting this every

[1:05:31] » We'll continue presenting this every

[1:05:32] quarter and um continue to work, you

[1:05:34] know, refine what we can.

[1:05:38] >> Thank you.

[1:05:39] » Thank you.

[1:05:39] >> Thank you.

[1:05:39] » Thank you.

[1:05:39] >> Thanks. Thank you so much

[1:05:44] » and happy new year.

[1:05:46] 12 days into it like you said 13 days

[1:05:48] and going on.

[1:05:51] >> Take care. Byebye.

[1:05:59] » Okay.

[1:06:01] And last topic is

[1:06:05] Robert's going to go over the asset

[1:06:06] liability management

[1:06:10] process at Kalpers.

[1:06:12] >> Oh yeah. But before that, there's item

[1:06:15] » Oh yeah. But before that, there's item

[1:06:15] number three.

[1:06:16] >> I apologize. I was just I saw it as

[1:06:19] » I apologize. I was just I saw it as

[1:06:19] well.

[1:06:20] >> Uh item three was the um brief review

[1:06:23] » Uh item three was the um brief review

[1:06:23] and update on

[1:06:25] >> I'm sorry.

[1:06:25] » I'm sorry.

[1:06:25] >> No, you're you're you're fine.

[1:06:27] » No, you're you're you're fine.

[1:06:27] >> Um brief review and update on the AI

[1:06:30] » Um brief review and update on the AI

[1:06:30] applications in the town financial

[1:06:32] software reporting um and transparency

[1:06:34] metrics. Review and discuss AI

[1:06:36] applications tailored for municipal

[1:06:38] governments and financial reporting,

[1:06:40] dashboards and automations. Um this this

[1:06:43] came up as you know at our November

[1:06:45] meeting committee there was a question

[1:06:47] raised by uh uh members of the committee

[1:06:49] about uh the town considering the use of

[1:06:51] AI software or there's an existing

[1:06:54] software vendor to develop financial

[1:06:55] metrics dashboards um for the town

[1:06:58] finances um as the case with emerging AI

[1:07:02] there there are existing and developing

[1:07:04] um AI applications for for some of our

[1:07:06] software tool tools that are being

[1:07:08] custom made uh for our local government

[1:07:12] and not just local government at the

[1:07:14] state level and at the federal level. Um

[1:07:16] so uh again there's focus on helping

[1:07:19] financial reporting metric dashboards

[1:07:22] and some more transparency and automatic

[1:07:24] automated processing um that are being

[1:07:27] developed but developed for all our

[1:07:30] enterprise resource planning um software

[1:07:33] uh in the stock report I mentioned it

[1:07:34] it's ERP so that a lot of these that's

[1:07:36] what they call our financial softwares

[1:07:39] and that we use so um other than chat

[1:07:43] GPT is starting to become

[1:07:46] used within the AI applications. Uh

[1:07:49] there's uh also Excel, Chat, DPC, all

[1:07:52] these things that are being um kind of

[1:07:55] co- um created uh with uh open AI and

[1:08:00] also all these various software

[1:08:02] programs. So just you know in the stock

[1:08:05] report want to bring bring out what the

[1:08:07] town is doing. Um there's uh chatbot

[1:08:11] applications that are are are occurring

[1:08:14] uh taking place. There's some websites.

[1:08:16] There's also chatbot applications that

[1:08:18] are going to start be implemented in our

[1:08:19] software. So I just wanted to let you

[1:08:22] know and let the committee know that the

[1:08:25] our current software springbook software

[1:08:28] uh it has it's our handle financial

[1:08:30] management our payroll our general edge

[1:08:34] uh you know budgeting uh our accounts

[1:08:37] payable it's all in one module all in

[1:08:39] one software the modules are integrated

[1:08:42] so uh we've been with springbook

[1:08:44] software for 16 years there is over the

[1:08:47] years they've innovated just like every

[1:08:48] all these softwares

[1:08:50] um around uh they specialize in local

[1:08:53] small local governments and and they

[1:08:54] have over uh 500 or so um agencies,

[1:08:59] local agencies and then additional they

[1:09:01] have some uh county agencies but um over

[1:09:04] the years they've uh innovated and so

[1:09:07] now there is a cloudbased uh portion of

[1:09:10] that and so we're anticipating to u uh

[1:09:14] upgrade to that and migrate to their

[1:09:16] cloud-based. Right now we're not

[1:09:18] cloud-based, we are um site based

[1:09:21] application. So it's sitting in our

[1:09:22] servers.

[1:09:23] >> Uh but this cloud-based application is

[1:09:25] » Uh but this cloud-based application is

[1:09:25] more um integrated with uh Microsoft,

[1:09:30] integrated with other software um

[1:09:32] components that uh it's allowing us to

[1:09:35] have that opportunity for um AI

[1:09:40] interaction. Uh one of the things I

[1:09:42] mentioned the stack report is within

[1:09:45] this new uh um cloud-based they have an

[1:09:50] upgraded portion on the expenditure

[1:09:52] where there's an AI component docu AI

[1:09:56] reader document

[1:09:57] >> reader where invoices can be imported

[1:10:00] » reader where invoices can be imported

[1:10:00] they're read they're populated in your

[1:10:02] system you can verify the amount you can

[1:10:06] actually and it's more uh right now it's

[1:10:09] manual intensive And with this AI

[1:10:11] reading, it's going to be less. It's

[1:10:13] more it'll make the document processing

[1:10:16] easier, easier to identify invoices

[1:10:19] being paid or not being paid on time or

[1:10:22] just making sure the account numbers are

[1:10:24] done. And then you can interact with um

[1:10:28] your vendors as well through the

[1:10:29] software like you can uh import uh an

[1:10:34] invoice or you can take that and you can

[1:10:37] uh export you know a report from there

[1:10:41] uh to to the vendor. So it's very

[1:10:43] interactive. So um we're excited about

[1:10:45] that. That's one of the AI components

[1:10:47] that is um being developed not just in

[1:10:50] our software but other softwares to um

[1:10:54] to to uh reduce the labor intensity on

[1:10:57] the job.

[1:10:57] >> So does it automatically match?

[1:11:00] » So does it automatically match?

[1:11:00] >> Yeah, automatically matches and pays uh

[1:11:02] » Yeah, automatically matches and pays uh

[1:11:02] you can update uh

[1:11:04] >> without verification.

[1:11:05] » without verification.

[1:11:05] >> Right. Right. So it doesn't take away

[1:11:08] » Right. Right. So it doesn't take away

[1:11:08] it's not like you just throw it in there

[1:11:09] and it just Right. You have to approve

[1:11:11] it. You have to do the signing. I think

[1:11:13] that that um that those processes will

[1:11:16] still stay the same, but I think the um

[1:11:18] you're able to also interact with

[1:11:21] different departments, right? They can

[1:11:23] they can send uh invoices through the

[1:11:26] the software and they can it's more like

[1:11:28] of an approval workflow, right? The

[1:11:30] workflow here's this invoice we

[1:11:31] received. Uh do you approve it? Is this

[1:11:33] the right code? Put the code on there

[1:11:35] and the document reads code numbers and

[1:11:37] it assigns it. And it's again, you just

[1:11:39] George mentioned you verify that

[1:11:41] everything's in there. So it takes the

[1:11:44] uh the actual manual step of taking the

[1:11:47] invoice, reading it, reviewing it,

[1:11:49] coding it more automated. So that'll

[1:11:52] help us um um and just like they add,

[1:11:56] right? It's supposed to minimize

[1:11:58] transform

[1:11:59] uh productivity, right? In a sense where

[1:12:02] it makes everything more um the labor

[1:12:05] intensive stuff, it gets shortened where

[1:12:06] you can focus on other stuff, the

[1:12:08] analysis part and all of that stuff. The

[1:12:10] idea is to stay with who you have

[1:12:11] because it's got all this historical

[1:12:12] information and they've got a history,

[1:12:15] you know, updating themselves and so

[1:12:17] maybe there's another piece of software

[1:12:18] that's just a little bit better, but the

[1:12:20] conversion is just going to be crazy.

[1:12:22] So, we're just going to stick with who

[1:12:23] we have.

[1:12:23] >> Yes.

[1:12:24] » Yes.

[1:12:24] >> Because I mean, this is all very

[1:12:25] » Because I mean, this is all very

[1:12:25] familiar stuff.

[1:12:27] >> The area where I would encourage you,

[1:12:30] » The area where I would encourage you,

[1:12:30] you mentioned chat as an example. We're

[1:12:32] all watching out for privacy issues

[1:12:34] because when you let stuff out

[1:12:36] >> into chat then the rest of the world

[1:12:38] » into chat then the rest of the world

[1:12:38] learns from the town of Alton and also

[1:12:40] theoretically

[1:12:42] >> right

[1:12:42] » right

[1:12:42] >> the area where I think it could be

[1:12:44] » the area where I think it could be

[1:12:44] really interesting for you as a

[1:12:45] controller is if you take this document

[1:12:48] and the other hundred that you've done

[1:12:49] over the last however whatever period

[1:12:51] you have and feed it into the engine,

[1:12:54] >> right? that you could go back into it

[1:12:56] » right? that you could go back into it

[1:12:56] and all these questions that are coming

[1:12:57] up can be digested and and answered for

[1:13:00] you through an inquiry,

[1:13:02] >> right?

[1:13:02] » right?

[1:13:02] >> And it'll be unique to the task

[1:13:04] » And it'll be unique to the task

[1:13:04] information,

[1:13:05] >> right?

[1:13:06] » right?

[1:13:06] >> So when you ask, hey, how many people

[1:13:07] » So when you ask, hey, how many people

[1:13:07] are involved in there? You how many

[1:13:09] people are involved? You do this while

[1:13:11] you're, you know, watching Netflix, how

[1:13:13] many people are involved in and then out

[1:13:15] comes the answer. So I think I think

[1:13:18] it's beyond the accounting. No,

[1:13:21] >> it's going to be it's going to be a a

[1:13:24] » it's going to be it's going to be a a

[1:13:24] data lake of whatever you could p with

[1:13:28] with privacy introduced to that system

[1:13:31] and go I want you to learn from all this

[1:13:34] but we're just so it's just it's still

[1:13:35] far it's still far away. It's actually

[1:13:38] not. There's a hat that uh the mayors

[1:13:41] got that says, you know, I read the

[1:13:43] packet. It was provided by prophecy.com,

[1:13:47] which was at the last three managers

[1:13:49] conference. Prophecy.com does exactly

[1:13:51] what you're talking about. It mines the

[1:13:54] Africanonly website for every single

[1:13:57] document that's on there

[1:13:59] >> and then creates it for staff to be able

[1:14:01] » and then creates it for staff to be able

[1:14:01] to write staff reports, replicate

[1:14:03] information, and answer questions. Boy,

[1:14:05] you gotta watch privacy,

[1:14:07] >> right?

[1:14:08] » right?

[1:14:08] >> That stuff's got to be rock solid.

[1:14:11] » That stuff's got to be rock solid.

[1:14:11] >> Yeah. And

[1:14:12] » Yeah. And

[1:14:12] >> introduce documents to it. That

[1:14:15] » introduce documents to it. That

[1:14:15] >> and I think that's the the thing is and

[1:14:18] » and I think that's the the thing is and

[1:14:18] some of these some of these softwares

[1:14:20] are working in with open AI, right? And

[1:14:24] as you mentioned, right, you can get

[1:14:27] they're showing open AI what they do

[1:14:29] with their processes, right? They're

[1:14:31] reading it. said what what what can

[1:14:33] happen from that like whether

[1:14:35] information gets

[1:14:37] they get information on processes or or

[1:14:40] what is it what's the word I'm looking

[1:14:42] for um

[1:14:43] >> example we have now is we'll take

[1:14:44] » example we have now is we'll take

[1:14:44] information we'll put it in the one

[1:14:46] called claude claude then could actually

[1:14:49] h have

[1:14:51] a particular software can actually have

[1:14:52] your name and your salary and your

[1:14:54] whatever right a snapshot in time it

[1:14:57] then it then this is theoretic removes

[1:15:00] all that information right? Puts it out

[1:15:03] to

[1:15:04] the general like chat GPT to get his

[1:15:07] question answered, pulls it back in and

[1:15:08] then adds your name back on it again. I

[1:15:11] still don't have confidence that that's

[1:15:12] what's occurring, right?

[1:15:13] >> That that

[1:15:15] » That that

[1:15:15] >> that can achieve.

[1:15:17] » that can achieve.

[1:15:17] >> No, some of the stuff that you want.

[1:15:19] » No, some of the stuff that you want.

[1:15:19] >> Yes. And and and

[1:15:20] » Yes. And and and

[1:15:20] >> it's coming.

[1:15:21] » it's coming.

[1:15:21] >> It it's coming and and there is there's

[1:15:23] » It it's coming and and there is there's

[1:15:23] some um like some of the transparency

[1:15:26] stuff like Open Gov is is is creating

[1:15:29] that. They have AI tools within there

[1:15:31] where you can create a a procurement

[1:15:34] where you can um take a document and and

[1:15:38] and and throw it in the AI component and

[1:15:41] then it creates a whole procurement.

[1:15:43] >> Yeah, it's going to affect your staffing

[1:15:45] » Yeah, it's going to affect your staffing

[1:15:45] too.

[1:15:45] >> Yeah.

[1:15:46] » Yeah.

[1:15:46] >> So the the difference between open

[1:15:49] » So the the difference between open

[1:15:49] government open gov and spring box

[1:15:53] cirrus

[1:15:54] >> they're two different

[1:15:55] » they're two different

[1:15:55] >> they they're two different things.

[1:15:56] » they they're two different things.

[1:15:56] OpenGV is uh the transparency tool that

[1:15:59] that um we use to kind of we can show

[1:16:02] our actual reunion date and our budget.

[1:16:04] Um Springbook is our actual financial um

[1:16:08] software that where we keep all our

[1:16:10] financial data, our financial

[1:16:11] management. Um the the good thing with

[1:16:15] open gov is open gov reads springbrook

[1:16:18] and it takes our information every night

[1:16:21] and it it feeds it into open gov where

[1:16:23] you can do the transparency portal where

[1:16:25] you can create um graphs and charts and

[1:16:28] stuff. So that we use it in tando

[1:16:31] >> the transparency portal. Is that just

[1:16:32] » the transparency portal. Is that just

[1:16:32] the town's website?

[1:16:34] >> That's it's open gov but it's it's on

[1:16:37] » That's it's open gov but it's it's on

[1:16:37] the town's notified.

[1:16:38] >> Correct. Um but a lot of these agencies

[1:16:42] » Correct. Um but a lot of these agencies

[1:16:42] are working with each other like like

[1:16:43] open gov's working with open AI right

[1:16:46] and all they're they're creating all

[1:16:47] these things but um it it's it's like

[1:16:52] where's the control of someone some

[1:16:55] company can decide oh this is how they

[1:16:57] do it and we'll we can do it do it on

[1:17:00] our own right and they create a product

[1:17:02] that they beat the other person out on

[1:17:04] the product right because they created

[1:17:06] it

[1:17:06] >> it's overlap for sure

[1:17:07] » it's overlap for sure

[1:17:07] >> right overlap and and And and case in

[1:17:09] » right overlap and and And and case in

[1:17:09] point,

[1:17:09] >> it's a race to market.

[1:17:10] » it's a race to market.

[1:17:10] >> Open gov at the time was just a

[1:17:12] » Open gov at the time was just a

[1:17:12] transparency portal.

[1:17:14] >> Yeah.

[1:17:15] » Yeah.

[1:17:15] >> Where we would take and upload our data

[1:17:16] » Where we would take and upload our data

[1:17:16] in there and it would spit out the

[1:17:18] information. Well, in its infancy,

[1:17:21] OpenGV was partnered with Springbrook on

[1:17:26] reading the data and all that and so it

[1:17:29] worked. Well, what does open gov have

[1:17:31] now today? They have a financial

[1:17:33] software tool that does spring book

[1:17:36] does. So all this partnering and Eric

[1:17:40] it's great

[1:17:41] >> but at what cost right and so um as this

[1:17:45] » but at what cost right and so um as this

[1:17:45] AI component um kind of develops a lot

[1:17:50] of it is because the chat GPT they've

[1:17:53] been working with these softwares and

[1:17:54] and this is George just brought it up.

[1:17:56] So this stuff pulls in from our

[1:17:58] financial software. It read it's a read

[1:18:00] only to our financial software. It

[1:18:02] doesn't it all it does is take the

[1:18:04] information and then and and and we map

[1:18:07] it. But OpenGV

[1:18:12] has now not just this but it's a

[1:18:14] financial software. They have permitting

[1:18:17] and licensing

[1:18:18] uh all these things where they worked

[1:18:21] with other software developers like how

[1:18:24] does this work? How does this and and

[1:18:26] now they're they're competition for

[1:18:27] them. Um but uh with Spring Brook,

[1:18:30] Spring Brook also has I mentioned it,

[1:18:32] there's a Tableau which is similar to

[1:18:35] this

[1:18:36] >> but it's great from Springbrook.

[1:18:39] » but it's great from Springbrook.

[1:18:39] >> So um and yeah, so there's Open AI stuff

[1:18:42] » So um and yeah, so there's Open AI stuff

[1:18:42] where see these filters and these views,

[1:18:45] you can create them, right? Well, now

[1:18:46] OpenAI can can say go in there and say,

[1:18:49] "Okay, I want to know the property taxes

[1:18:51] for the town for the last 10 years." And

[1:18:53] it'll right. So the innovation's there

[1:18:56] and it's happening quick, but at the

[1:18:58] same time it's like we're um where

[1:19:02] governments are still having to create

[1:19:05] policies about the use of open AI

[1:19:08] >> um because it's just exploding uh so

[1:19:11] » um because it's just exploding uh so

[1:19:12] fast and and another thing they were

[1:19:14] talking about is open AI and these chat

[1:19:17] GPT applications create hallucinations,

[1:19:19] right? Where

[1:19:21] >> makes it seem like this is real but it's

[1:19:23] » makes it seem like this is real but it's

[1:19:23] not. you know, because you're reading

[1:19:25] it's taking data and it's just the

[1:19:26] supercomputer

[1:19:28] um and it could create um

[1:19:30] hallucinations. So that's where the the

[1:19:32] human element comes in. Oh,

[1:19:34] >> it's good that you're open to the idea

[1:19:35] » it's good that you're open to the idea

[1:19:35] and it's good that good that you're

[1:19:36] trying to control the idea because the

[1:19:38] two got to coexist.

[1:19:40] >> So So you're planning on converting to

[1:19:42] » So So you're planning on converting to

[1:19:42] the cloud based?

[1:19:43] >> Yes.

[1:19:44] » Yes.

[1:19:44] >> And is that with the $75,000

[1:19:48] » And is that with the $75,000

[1:19:48] >> and then what's the $10,000? Oh, so the

[1:19:51] » and then what's the $10,000? Oh, so the

[1:19:51] 10,000 is is we we reallocate that

[1:19:54] amount every year from the finance

[1:19:56] department to our equipment replacement

[1:19:58] fund. So we we've done that the last

[1:20:00] several years. So the amount that we've

[1:20:02] contributed

[1:20:03] >> that's just an annual,

[1:20:04] » that's just an annual,

[1:20:04] >> right? An annual allocation. So what

[1:20:06] » right? An annual allocation. So what

[1:20:06] we've contributed over the years pays

[1:20:08] for that 75,000 migration. So we

[1:20:11] >> So you don't spend that 10,000 every

[1:20:12] » So you don't spend that 10,000 every

[1:20:12] year.

[1:20:13] >> We all No, we don't. We just allocate

[1:20:15] » We all No, we don't. We just allocate

[1:20:15] for Correct. We've been building it. And

[1:20:18] so so there's $75,000 tagged. And then

[1:20:22] does that include the training also?

[1:20:24] >> Uh yes, this includes the training. Um

[1:20:27] » Uh yes, this includes the training. Um

[1:20:27] it could be it could be plus or minus,

[1:20:29] but it includes having the on-site

[1:20:31] training. And that's what I'm requiring

[1:20:33] is not to I've been through some um

[1:20:37] migrations into new software. Then the

[1:20:39] training is like three days and then all

[1:20:41] of a sudden you're on your own. So this

[1:20:43] is going to be walk us through

[1:20:44] everything. Um, and I meant I'm glad

[1:20:47] that you mentioned this, Steve, because

[1:20:48] changing from software, one software to

[1:20:50] another is it's a nightmare. Um, but

[1:20:53] Spring Brook is

[1:20:53] >> she'll lose your historical data no

[1:20:55] » she'll lose your historical data no

[1:20:55] matter what to tell you. Correct.

[1:20:56] >> Not if you But you can also do it to

[1:20:58] » Not if you But you can also do it to

[1:20:58] keep the historical.

[1:20:59] >> Oh, good luck.

[1:21:01] » Oh, good luck.

[1:21:01] >> Well, I've done it. Um,

[1:21:02] » Well, I've done it. Um,

[1:21:02] >> yeah, I know. It's all these buckets and

[1:21:04] » yeah, I know. It's all these buckets and

[1:21:04] multiple

[1:21:06] categories,

[1:21:07] >> but but are is there going to be much of

[1:21:10] » but but are is there going to be much of

[1:21:10] a conversion when you go to the

[1:21:11] cloud-based application? Um there there

[1:21:14] will be conversion as far as the

[1:21:16] interface um the way it looks like um

[1:21:20] where you go uh and h in processing

[1:21:24] things. Um right now it's more of a

[1:21:26] >> is it using the same database?

[1:21:28] » is it using the same database?

[1:21:28] >> Yes, it's using the same we're not

[1:21:30] » Yes, it's using the same we're not

[1:21:30] cloud-based now.

[1:21:31] >> No.

[1:21:32] » No.

[1:21:32] >> Uh

[1:21:33] » Uh

[1:21:33] >> no

[1:21:33] » no

[1:21:33] >> no. So there is going to have to be a

[1:21:35] » no. So there is going to have to be a

[1:21:35] conversion to the

[1:21:36] >> but within the same software provider.

[1:21:39] » but within the same software provider.

[1:21:39] >> Yes. Yeah. Within

[1:21:41] » Yes. Yeah. Within

[1:21:41] >> that's okay. Yeah. And and and what the

[1:21:44] » that's okay. Yeah. And and and what the

[1:21:44] what the good thing about this the the

[1:21:46] cloud cloud-based like any upgrades or

[1:21:49] any like

[1:21:51] >> it's automatic,

[1:21:52] » it's automatic,

[1:21:52] >> right? They'll do it and stuff but

[1:21:55] » right? They'll do it and stuff but

[1:21:55] >> and it's more it's more secure, right?

[1:21:57] » and it's more it's more secure, right?

[1:21:57] Um

[1:21:58] >> and so it it's just a it's a different

[1:22:01] » and so it it's just a it's a different

[1:22:01] look on the interface and what's good is

[1:22:03] they understand that. So you can when

[1:22:06] you you can toggle between what you're

[1:22:08] existing working for working in and the

[1:22:11] new interface. So I have staff that

[1:22:13] enjoy that is used to doing it this way

[1:22:16] and and I can find here in this module.

[1:22:18] >> So you can go back and forth. You're not

[1:22:20] » So you can go back and forth. You're not

[1:22:20] like it's not like okay once you're in

[1:22:22] this new one you're just working in this

[1:22:24] new one. So you can you can pivot

[1:22:26] >> and so which is I think is is is

[1:22:29] » and so which is I think is is is

[1:22:29] beneficial.

[1:22:30] >> One the information is already there. Uh

[1:22:33] » One the information is already there. Uh

[1:22:33] too, it also helps with the integration.

[1:22:36] Another thing too we want to do, there's

[1:22:38] um express bill pay uh so uh people can

[1:22:41] pay online through credit cards.

[1:22:43] >> Is that included in the budget? So

[1:22:45] » Is that included in the budget? So

[1:22:46] >> yes,

[1:22:46] » yes,

[1:22:46] >> and the AI portions of it

[1:22:48] » and the AI portions of it

[1:22:48] >> and the AI portion, right? Yeah. So

[1:22:50] » and the AI portion, right? Yeah. So

[1:22:50] that's another added benefit is it um

[1:22:54] everything is integrated. So on the

[1:22:56] payments right taking payments it'll be

[1:22:59] um through the express bill pay is is

[1:23:01] the payment

[1:23:03] >> uh application for springbook. So it it

[1:23:05] » uh application for springbook. So it it

[1:23:05] it it

[1:23:07] >> you pay and it it talks to your GL, it

[1:23:10] » you pay and it it talks to your GL, it

[1:23:10] talks to your cash receipts and and

[1:23:11] everything's integrated. Right now when

[1:23:14] we take credit card payments, we we take

[1:23:16] it but it's manual entry,

[1:23:18] >> right? This is seamless, right? So that

[1:23:21] » right? This is seamless, right? So that

[1:23:22] and it's it's a it's much needed and we

[1:23:25] need to move more to that direction

[1:23:28] >> and stuff. So

[1:23:29] » and stuff. So

[1:23:29] >> the budget also includes the AI modules.

[1:23:33] » the budget also includes the AI modules.

[1:23:33] for any other

[1:23:34] >> or anything that for now. Yeah. Unless

[1:23:36] » or anything that for now. Yeah. Unless

[1:23:36] and then if I think if there's anything

[1:23:38] that that gets created, there may be

[1:23:40] like that's not already in there, they

[1:23:42] may say, okay, um

[1:23:45] >> like Yeah, correct. An add-on. So, when

[1:23:47] » like Yeah, correct. An add-on. So, when

[1:23:47] we do this, we'll verify, okay, what is

[1:23:50] what is the future of this version of

[1:23:53] the cloud? Is there anything that's

[1:23:55] additional? Um

[1:23:58] yes, if it is, okay, what are the

[1:23:59] add-ons? And then going forward it's

[1:24:02] just up upgrades right whatever refresh

[1:24:04] upgrades were um you know if they find a

[1:24:08] bug on something right it automatically

[1:24:10] will update um the other thing is uh

[1:24:14] what was the other mention on the

[1:24:19] not the upgrades but um

[1:24:21] >> does it change the licensing fees

[1:24:24] » does it change the licensing fees

[1:24:24] >> the the license fee should be it's about

[1:24:27] » the the license fee should be it's about

[1:24:27] should be about half of that a year

[1:24:29] which means the license fee so it will

[1:24:31] go down.

[1:24:31] >> Yeah. The license fee fee would be about

[1:24:33] » Yeah. The license fee fee would be about

[1:24:33] 34,000 which includes um customer

[1:24:36] service, customer support. Um

[1:24:39] >> so that's

[1:24:41] » so that's

[1:24:41] >> and we already pay that right now. We

[1:24:43] » and we already pay that right now. We

[1:24:43] pay that.

[1:24:43] >> So the so in the budget

[1:24:46] » So the so in the budget

[1:24:46] >> our cost will go down.

[1:24:48] » our cost will go down.

[1:24:48] >> No no um this is the onetime cost,

[1:24:51] » No no um this is the onetime cost,

[1:24:51] >> right? That's

[1:24:52] » right? That's

[1:24:52] >> And then and then our maintenance cost

[1:24:53] » And then and then our maintenance cost

[1:24:53] is is already in the budget which is our

[1:24:56] our customer support which is for all

[1:24:58] the modules is sort of about 34,000 a

[1:25:01] year the same stay the same

[1:25:03] >> but the licensing you said so the

[1:25:05] » but the licensing you said so the

[1:25:05] licensing

[1:25:05] >> that is the licensing 34,000

[1:25:07] » that is the licensing 34,000

[1:25:07] >> because at first I thought I heard you

[1:25:08] » because at first I thought I heard you

[1:25:08] say it would go down but it'll stay the

[1:25:10] same.

[1:25:11] >> Yes it'll stay the same.

[1:25:13] » Yes it'll stay the same.

[1:25:13] >> Yeah. This I meant the one time would go

[1:25:16] » Yeah. This I meant the one time would go

[1:25:16] down.

[1:25:16] >> 75,000 one time

[1:25:18] » 75,000 one time

[1:25:18] >> and then the open gov work.

[1:25:22] » and then the open gov work.

[1:25:22] Does how much does that cost or is that

[1:25:25] >> that's about 30

[1:25:28] » that's about 30

[1:25:28] 32,000 or

[1:25:29] >> that's not included in the 75.

[1:25:31] » that's not included in the 75.

[1:25:31] >> Correct. And we're that's already

[1:25:33] » Correct. And we're that's already

[1:25:33] budgeted in our on our um annual budget

[1:25:37] that part through open gov. Um the same

[1:25:40] thing for the spring book maintenance

[1:25:41] that's already budgeted in our in our

[1:25:43] operation budget. And another thing with

[1:25:45] with um our spring broke is we have

[1:25:48] customizations in there that are

[1:25:50] specific to our agency um specifically

[1:25:55] customizations for

[1:25:58] this state our pension right. It's

[1:26:00] customcreated portion in our software

[1:26:03] that we can create reports run reports

[1:26:06] um because we have to download every two

[1:26:10] weeks we send the the pension uh data to

[1:26:14] calc and so that's a customization like

[1:26:16] there's a customization for the state of

[1:26:18] warrior right they have to customize

[1:26:19] their software for what what is required

[1:26:22] there so we have some customizations too

[1:26:25] in our software and that's what they're

[1:26:26] aware of it so that I think staying with

[1:26:29] them upgrading with them. Um it it it

[1:26:34] the best thing and then the

[1:26:35] customizations also are pretty

[1:26:40] » do you know like initial uses like do

[1:26:43] you have a list of initial uses of AI

[1:26:46] >> other than right now uh it's the the um

[1:26:51] » other than right now uh it's the the um

[1:26:51] >> the bills the bills I think there's

[1:26:53] » the bills the bills I think there's

[1:26:53] going to be an AI component on the

[1:26:55] reporting on the Tableau where you can

[1:26:58] say tell me the last Mhm.

[1:27:00] >> for property taxes and you enter the

[1:27:03] » for property taxes and you enter the

[1:27:03] account code and it should bring

[1:27:05] everything up. Um but right now I think

[1:27:08] the the biggest ones for us is the

[1:27:10] expense the AP component accounts

[1:27:12] payable and then the express bill pay to

[1:27:16] take on um pay online um pay via credit

[1:27:20] cards. When do you want to do it

[1:27:22] >> this? I'm I'm I'm working with Spring

[1:27:24] » this? I'm I'm I'm working with Spring

[1:27:24] Brook and hopefully

[1:27:27] not in the next two months or so.

[1:27:29] Probably towards the end it's

[1:27:30] summertime. Um right because my hiccup

[1:27:33] is don't want to do it when you're in

[1:27:36] the middle of budgeting.

[1:27:37] >> Right.

[1:27:38] » Right.

[1:27:38] >> Yeah.

[1:27:41] » Yeah.

[1:27:41] >> Middle closing the fiscal year. So yeah.

[1:27:43] » Middle closing the fiscal year. So yeah.

[1:27:43] So and it's just also making sure that

[1:27:46] it aligns with their time timeline with

[1:27:48] their consultants, right? because

[1:27:50] they're going to have to send them here

[1:27:52] um the time for them to uh to do this

[1:27:56] conversion switch over to the uh

[1:28:01] cloud and then thank you the cloud and

[1:28:03] then also the to organize the training

[1:28:06] right and the training will be I'm

[1:28:08] assuming two weeks but each module will

[1:28:10] be two days two and a half days

[1:28:12] >> do they also have to reintegrate it with

[1:28:14] » do they also have to reintegrate it with

[1:28:14] open gov

[1:28:15] >> uh I don't I don't think so I think Um

[1:28:19] » uh I don't I don't think so I think Um

[1:28:20] I think it'll just be because open of is

[1:28:22] an SQL reader I think or something like

[1:28:24] that that it just reads. is just making

[1:28:26] sure I I'll update making sure I'll

[1:28:29] verify um on the on the reader, but uh

[1:28:32] we had we didn't um only with Springbook

[1:28:35] when we worked with Open Gov, we just

[1:28:36] had to contact Springbook to have them

[1:28:40] the ability to to tag and read it. But

[1:28:43] other than that, it's shouldn't be so

[1:28:45] much

[1:28:46] >> if the database isn't changing.

[1:28:48] » if the database isn't changing.

[1:28:48] >> Correct. If the database isn't changing

[1:28:49] » Correct. If the database isn't changing

[1:28:50] shouldn't it shouldn't um be a big

[1:28:52] change. But thank you. Those are one of

[1:28:54] the things more asked.

[1:28:55] >> Things are never as easy to

[1:28:56] » Things are never as easy to

[1:28:56] >> No. Yeah, I I hear you. Yeah, you're

[1:28:59] » No. Yeah, I I hear you. Yeah, you're

[1:28:59] right.

[1:28:59] >> Does it increase your prospect pool for

[1:29:01] » Does it increase your prospect pool for

[1:29:01] employees because now you could have

[1:29:02] more work at home or is that something

[1:29:04] we don't do?

[1:29:05] >> Um the work from home is something we

[1:29:07] » Um the work from home is something we

[1:29:07] don't do. Um

[1:29:09] I think

[1:29:10] >> because of a management be here do work

[1:29:13] » because of a management be here do work

[1:29:13] kind of

[1:29:15] >> not so much that I think more we're

[1:29:17] » not so much that I think more we're

[1:29:17] we're a public servant. So how can we

[1:29:20] serve the public? We're at home. um more

[1:29:23] of that that approach but we we do I

[1:29:25] mean some of the directors work from

[1:29:27] home um but I think on the the the

[1:29:31] >> so that software in particular won't

[1:29:33] » so that software in particular won't

[1:29:33] contribute to that you couldn't have an

[1:29:34] AP person that's going to wants to work

[1:29:36] Friday from home and

[1:29:38] >> you can I mean

[1:29:40] » you can I mean

[1:29:40] >> where they go

[1:29:41] » where they go

[1:29:41] >> I mean the software will be available to

[1:29:44] » I mean the software will be available to

[1:29:44] log in right you can you can access it

[1:29:47] anywhere like a

[1:29:49] >> um a portal VPN

[1:29:50] » um a portal VPN

[1:29:50] >> yeah VPN portal Yeah,

[1:29:53] » yeah VPN portal Yeah,

[1:29:53] >> but I think it it just it'll help help I

[1:29:56] » but I think it it just it'll help help I

[1:29:56] guess streamline not just the workflow

[1:29:58] flow but also um the analysis to

[1:30:03] reporting um the cash module the bank

[1:30:07] record module um a lot of it will be um

[1:30:10] more

[1:30:12] I think streamlined and easier all

[1:30:15] windows based already but I think more

[1:30:17] now with these applications for data

[1:30:19] >> modern idea Yes. Yeah, they will. Yeah,

[1:30:23] » modern idea Yes. Yeah, they will. Yeah,

[1:30:23] I gave them a log. Here you go. Log in.

[1:30:24] You can pull it up yourself. Pull up the

[1:30:26] information. But yeah, but that that was

[1:30:30] my update on that

[1:30:32] just to let you know where we're at. And

[1:30:34] and then the AI component. We're still

[1:30:36] I'm still like evaluating it like with

[1:30:38] the open gov. They they working with

[1:30:40] chat gd. I'm creating the the components

[1:30:44] within their software. So, um, and in

[1:30:47] trying to see what other agencies are

[1:30:49] are dealing with and making sure that

[1:30:51] policies are set up, too, so it's not,

[1:30:53] um, you know, we run them up, right?

[1:30:58] But, um, that was for three. Any other

[1:31:00] questions on that one?

[1:31:03] >> Thank you.

[1:31:05] » Thank you.

[1:31:05] >> Yeah. And then on the ALM, I just want

[1:31:07] » Yeah. And then on the ALM, I just want

[1:31:07] to kind of highlight real quick just I I

[1:31:09] I attended the webinar back in early

[1:31:12] December and just and I I included in

[1:31:15] your packet um the ALM review and again

[1:31:19] this is a review that's every four years

[1:31:21] that Calpers is doing. Uh at page nine

[1:31:24] of the um packet is the kind of or the

[1:31:30] main the main meat of it is the the

[1:31:34] board adopted the total portfolio

[1:31:36] approach. Um and this was um I kind of

[1:31:40] briefly discussed about it this um at

[1:31:42] our last meeting. It's the they're doing

[1:31:45] the 7525

[1:31:47] uh equity bonds reference portfolio and

[1:31:49] then they're at they're allowing that

[1:31:51] active risk limit of 400 basis points.

[1:31:54] So 4% for within that portfolio risk um

[1:31:59] adjustment and I think that's um Tom as

[1:32:02] you mentioned hopefully the new

[1:32:03] investment person has that edge so it's

[1:32:06] extra tool so the the plans can move

[1:32:09] within that 400 basis point for the risk

[1:32:12] limit on the um the the actual portfolio

[1:32:17] and then there's no change to the

[1:32:18] current discount rate 6.8 A is going to

[1:32:21] be the same. Uh and the just you know on

[1:32:24] the adopting the portfolio approach

[1:32:27] there's no no changes to the board's

[1:32:29] authority. The ALM process is a four

[1:32:31] year cycle midpoint on review uh you

[1:32:34] know to verify that the the

[1:32:37] capital market assumptions are being

[1:32:39] met. If there's any if the expected

[1:32:41] returns are being met if there's any

[1:32:42] changes that need to be made. Um again

[1:32:44] they review the whole actuarials uh on

[1:32:47] the assumptions. Again, they just

[1:32:49] there's a reference portfolio, there's

[1:32:51] the active risk limit. Um, and this

[1:32:54] replaces that adopted target strategic

[1:32:57] asset allocation and ranges that they

[1:32:59] were um they were using before. And

[1:33:04] again, the the board will continue to

[1:33:05] review this uh total portfolio fund

[1:33:07] risk. Uh, and then that that's pretty

[1:33:10] much it. Just kind of it evolves into um

[1:33:14] you know, better outcomes. There's a

[1:33:17] they kind of put like a matrix a metrics

[1:33:20] of um improved internal governance

[1:33:23] reference portfolios on page 11

[1:33:26] simplicity better transparency greater

[1:33:28] accountability investment decisions for

[1:33:30] the whole and then um it kind of the

[1:33:34] rest of the report it kind of goes

[1:33:35] through uh what the process will be

[1:33:41] but um age

[1:33:47] 19 and 20. Uh 18 through 20 kind of

[1:33:51] discuss the actual assumptions. Uh you

[1:33:54] know the economic assumptions obviously

[1:33:56] the long-term investment return that

[1:33:57] they're looking at. The discount rate is

[1:33:59] is staying unchanged at 6.8. They're

[1:34:02] verifying inflation. Inflation has gone

[1:34:03] up the last um previous years. So they

[1:34:06] they're factoring that in there. uh

[1:34:08] other non-economic assumptions they're

[1:34:10] factoring in on the uh going forward is

[1:34:14] increase pay increases longevity

[1:34:16] retirement termination disability all

[1:34:18] these are getting factored in um in

[1:34:21] these new uh assumptions for uh the ALM

[1:34:24] process

[1:34:26] and then demographic assumptions uh

[1:34:30] shows on page 20 starts on page 20 on

[1:34:33] what's changing

[1:34:35] um retirement rates are staying the same

[1:34:38] but Some are increasing by some while

[1:34:40] some will also decrease. Uh mortality

[1:34:43] rates is something that they looked at.

[1:34:45] Uh there's a slight reduction in

[1:34:47] mortality rates. Uh projected mality

[1:34:50] rates slight reduction.

[1:34:53] There is a minimum changes. There's

[1:34:56] termination rates, minimum changes have

[1:34:58] been adopted.

[1:35:00] Um I think the biggest one is the

[1:35:02] discount rate because if the discount

[1:35:04] rate changed from 6.8 the whole asset

[1:35:06] allocation would change, your um

[1:35:10] investment opportunity um would change.

[1:35:13] So, uh they're keeping it the same. I

[1:35:15] don't think it's going to change um

[1:35:17] until another four years. We still have

[1:35:19] the funding risk mitigation policy that

[1:35:22] takes effect, but last year of April of

[1:35:25] 24, it's no longer automatic. It was

[1:35:29] automatic. Now if it gets triggered and

[1:35:32] this is if the investment rate of

[1:35:34] returns is 2% higher than the actual um

[1:35:37] discount rate then that it creates a a

[1:35:40] funding risk mitigation policy where it

[1:35:42] reduces the rate of return by 05%.

[1:35:46] That's not automatic. If it happens they

[1:35:48] bring it to the board. Again that

[1:35:50] happened this year. We had a positive

[1:35:52] what 11% increase in

[1:35:55] investment return. Um and so it it

[1:35:58] created an investment risk risk

[1:36:00] manuvation policy. The board uh

[1:36:03] presented the board not to recommend a

[1:36:05] reduction. So again discount rate be at

[1:36:08] 6.8%.

[1:36:09] I think eventually over time it could go

[1:36:12] from 6.8 to 6.5.

[1:36:16] Most investment portfolios are at that

[1:36:19] 6.5%. Question.

[1:36:22] >> Who's on the board? Are you on the

[1:36:23] » Who's on the board? Are you on the

[1:36:23] board?

[1:36:24] >> Helpers board.

[1:36:24] » Helpers board.

[1:36:24] >> Yeah. Who are these people? I wish they

[1:36:28] » Yeah. Who are these people? I wish they

[1:36:28] state appointed. Yeah,

[1:36:30] >> they're they're appointed by the state.

[1:36:31] » they're they're appointed by the state.

[1:36:32] >> They elected or I hope would hope not.

[1:36:35] » They elected or I hope would hope not.

[1:36:35] >> No,

[1:36:36] » No,

[1:36:36] >> there's um I think two

[1:36:41] » there's um I think two

[1:36:41] elected members, but that they're

[1:36:43] elected by retirees or by by members

[1:36:48] elect I think one or two members on the

[1:36:50] board, but majority of them are fable.

[1:36:53] Very smart.

[1:36:55] >> Yes. Yes.

[1:36:55] » Yes. Yes.

[1:36:55] >> Very smart.

[1:36:57] » Very smart.

[1:36:57] >> These are the There you go.

[1:36:59] » These are the There you go.

[1:36:59] >> I know there there's at least one union

[1:37:02] » I know there there's at least one union

[1:37:02] representative.

[1:37:03] >> Correct.

[1:37:03] » Correct.

[1:37:04] >> Yes. Union representatives. Um

[1:37:08] they look intelligent, right?

[1:37:11] >> Yeah. I I've I've watched a thing where,

[1:37:13] » Yeah. I I've I've watched a thing where,

[1:37:13] you know, they were in attendance and

[1:37:15] they were asking questions and they all

[1:37:16] seemed to be on top of things

[1:37:21] >> and seem to be confident.

[1:37:23] » and seem to be confident.

[1:37:23] >> Yeah,

[1:37:23] » Yeah,

[1:37:23] >> Robert, I don't think that was the

[1:37:25] » Robert, I don't think that was the

[1:37:25] biggest change for me. The biggest

[1:37:26] change was the postretirement mortality

[1:37:29] for men, the slight reduction in the

[1:37:31] projected mortality rate. I think that's

[1:37:33] correct.

[1:37:35] >> Is that assuming everyone's going to

[1:37:36] » Is that assuming everyone's going to

[1:37:36] live longer? So a reduction of a

[1:37:38] mortality rate is a longer life.

[1:37:42] >> Yeah.

[1:37:43] » Yeah.

[1:37:43] >> Plan accordingly.

[1:37:44] » Plan accordingly.

[1:37:44] >> Yeah. Exactly. Oh, and then I just want

[1:37:46] » Yeah. Exactly. Oh, and then I just want

[1:37:46] to point out

[1:37:47] >> Yeah. Live longer.

[1:37:57] » Thanks for bringing it up. I was I was

[1:37:59] but page 25 of the report, it kind of

[1:38:02] shows the the the funded ratio. So last

[1:38:05] year of 24 that you can see the funding

[1:38:08] ratio was um 74.4%

[1:38:11] and um current assumptions are in blue

[1:38:14] proposed assumptions are in green. So in

[1:38:16] 25 the funding ratio increased to 79% on

[1:38:20] the current assumption and then proposal

[1:38:22] assumptions it reduced by.

[1:38:25] >> So this is a key thing to me that 63025

[1:38:31] » So this is a key thing to me that 63025

[1:38:31] hasn't happened in terms of the

[1:38:33] allocations to U that's so when they say

[1:38:37] it's going to go down four.4% 4%. I

[1:38:42] think for sure what they're saying is

[1:38:44] there's going to be a UL layer added for

[1:38:48] assumption changes.

[1:38:50] And I think on the next page they they

[1:38:54] imply at least that depending on your

[1:38:57] plan things could be different. But if

[1:38:59] if that was just the average if we were

[1:39:01] at the average

[1:39:03] >> I've calculated it's going to be a added

[1:39:07] » I've calculated it's going to be a added

[1:39:07] layer of 300 to 350,000

[1:39:10] for all plans total bathroom plans

[1:39:14] >> on the UAO.

[1:39:15] » on the UAO.

[1:39:15] >> Yeah. It's going to add to that. It's

[1:39:17] » Yeah. It's going to add to that. It's

[1:39:17] going to be

[1:39:18] >> have to advertise advertised. Yeah.

[1:39:21] » have to advertise advertised. Yeah.

[1:39:21] >> Yeah.

[1:39:21] » Yeah.

[1:39:21] >> Right.

[1:39:22] » Right.

[1:39:22] >> Yeah. But also we know for 63025

[1:39:26] » Yeah. But also we know for 63025

[1:39:26] there's a huge investment gain that's

[1:39:28] going to go the other way. So

[1:39:31] >> uh in net I would think

[1:39:34] » uh in net I would think

[1:39:34] >> we're we're going to end up better than

[1:39:36] » we're we're going to end up better than

[1:39:36] we are right now.

[1:39:38] >> Correct. And then you got to factor into

[1:39:40] » Correct. And then you got to factor into

[1:39:40] the we we just made the 3 million ADP.

[1:39:43] >> Yeah.

[1:39:43] » Yeah.

[1:39:43] >> Oh and I didn't calculate that in what I

[1:39:46] » Oh and I didn't calculate that in what I

[1:39:46] came up with is 300,000.

[1:39:48] >> Yeah. So that that's going to be

[1:39:50] » Yeah. So that that's going to be

[1:39:50] benefit. Yeah. um we made it after the

[1:39:52] April deadline, so it didn't um it was

[1:39:57] it's not factored into the actual report

[1:40:00] we received, but it'll be in the next

[1:40:02] one at the end of of of 25. And then

[1:40:05] yeah, it just mentions that you know the

[1:40:08] there's new assumptions that'll be used

[1:40:10] for the June 30 to 25 actual

[1:40:12] evaluations. These um the changes will

[1:40:15] update our public agencies. they will

[1:40:17] affect our contribution rates in fiscal

[1:40:19] year 2728. So um two fiscal years from

[1:40:23] now um these changes in the ALM will

[1:40:26] take effect and then it'll be uh the ALM

[1:40:30] will be effective July 1st 2012

[1:40:38] » I mean 26 sorry

[1:40:41] that they they're they're voting right

[1:40:42] now and then in July 1. Thank you. I'm

[1:40:45] still in 25

[1:40:48] only 13 days in the new year. Okay. But

[1:40:51] yeah, so July 1st of 26, um these new

[1:40:54] ALM rates and assumption changes will

[1:40:56] take place. And that's why the it won't

[1:40:58] affect our our rates until the 27 28

[1:41:02] year.

[1:41:06] » That's all I should talk about agendas

[1:41:09] coming up.

[1:41:11] Uh

[1:41:12] >> sure. Um

[1:41:12] » sure. Um

[1:41:12] >> I have one question and that is uh

[1:41:17] » I have one question and that is uh

[1:41:17] the audited financials.

[1:41:20] >> Yeah, I'm working on those.

[1:41:21] » Yeah, I'm working on those.

[1:41:21] >> We have that for next.

[1:41:22] » We have that for next.

[1:41:22] >> Yes, we will have it next meeting in

[1:41:24] » Yes, we will have it next meeting in

[1:41:24] March. And then um the the other one I

[1:41:26] wanted to bring out was the uh Victoria

[1:41:29] talking about Kalpers is working on

[1:41:32] bringing um Julian and um the investment

[1:41:36] team out and they they couldn't come out

[1:41:38] this month um but u I'm hoping that

[1:41:41] maybe they come out in March

[1:41:43] >> as well.

[1:41:45] » as well.

[1:41:45] Anybody else have agenda items?

[1:41:52] So, are we ready to adjourn?

[1:41:55] Let's do it.

[1:41:56] >> Yeah. Will we adjourn?

[1:41:59] » Yeah. Will we adjourn?

[1:41:59] >> Okay.

Audit and Finance Committee Meeting January 13, 2026

Transcript