Okay, let's call.
Uh,
>> member
» member
is passing.
Uh, vice chairman
>> here.
» here.
>> Fairville
» Fairville
>> here.
» here.
>> Member Jane
» Member Jane
>> here. Member Bridley
» here. Member Bridley
>> here
» here
>> and then Mayor Owen
and uh Vice Mayor look
around.
» Uh are there any public comments? Anyone
online?
>> No, no one online.
» No, no one online.
>> Let's go to the regular agenda item.
» Let's go to the regular agenda item.
First is review include the draft
minutes.
» Any corrections?
I mean there was a typo in section two
of the public property tax.
Do I have a motion to approve the
minutes with the one change?
>> I motion to approve the minutes. No
» I motion to approve the minutes. No
changes.
Then you can sit next to Andrew. Sorry.
So,
>> so next item is uh review of the bars
» so next item is uh review of the bars
that have crossed the border ending
September 3rd.
>> Can we do a motion motion? I'm sorry.
» Can we do a motion motion? I'm sorry.
Motion.
>> Yes.
» Yes.
>> Yes.
Yes. Uh so before us we have um
presentation just real quick on on this
item. Item three is a review and discuss
of PAR's OPEC OPEC trust program and a
snapshot of the quarter ending September
30th 25 review presentation by
administration in our um asset
management group investment funds. We'll
discuss
George and then oh thank you
funding and to the trust and we'll
discuss the expense and investment
discussion. So um with this item real
quick I just want to give a background
um in the staff report at that our
September 9th um finance committee
meeting the committee reviewed our roll
forward oped valuation and liabilities
and assets as of June 3025
uh which provided the latest output
actuality report and the balance of the
par trust as of 63035
and the staff report which showed a
decrease in the oped liability of
171,000 and um uh 7.9 million against an
increase in the town fiduciary fiduciary
net position of 9,57,000.
Uh this is an increase of 388,745
and net position. They revealed our net
opet balance of 1,70.
So today's meeting we're providing an
update to the annual program for the PAR
trust as of November 30th 25 and then
we're going to do an overview of the
investment performance for the first
quarter um ending uh September 30th 25.
So in the staff report on page two, I
had listed the um the roll forward that
we reviewed at September 9th as our
September meeting and then the 63025
trust position updated as of 11:30.
So um there was a the trust balance went
up to 9.25 25 million to the OPED
liability is 7.98 million and net OAP
asset introduced about
7,000 to 1 million268.
So um there's still a favorable asset
experience um that contributes to
decreasing our net liability. And again
we have um our presentation here we have
director Andrew Brown of PFM asset
management to present today. I'm sorry
we have
administrative director uh Jennifer Mesa
with PARS to discuss the outlook of the
pre-unding trust program and I see that
you just what was just handed to you was
the actual hard copy of the presentation
that was included in your graphic. Uh,
so without further ado, I would like to
turn it over to Jennifer Mensah of ours
and Andrew Brown of management and I
will pull up the presentation online so
you'll be able to see it as well
as they talk through it. So without
further ado,
>> All right. Perfect. Thank you so much.
» All right. Perfect. Thank you so much.
Um, and good evening or good afternoon
everyone. Thank you for having us here
today. I went ahead and put uh together
a presentation here for you. We won't
cover every single page, but we want to
provide you as much information as we
can in case you have additional
questions that we can work to. Um, if we
go to slide number two, just our contact
information at any point in time, feel
free to reach out to us if you have
questions. If you don't have any today,
but maybe in a couple days or after this
meeting, something comes up. We're
always available to assist you. Slide
number three, just a little bit of a
reminder of the trust team myself
public agency retirement services. We do
the administration of this account. So
the record keeping, the audits, the
reporting, all of that is done by force.
US Bank holds the over $9 million that
you currently have and safeguards those
assets and overseas PFM where Andrew is
from making sure that everything that
the town has requested for the
investments is being properly done and
managed through PFM. So those are the
different parties within the group. Um,
if you have any additional questions, I
can answer them.
Slide number four, we go through the uh
program. You have what's called a
combination trust that allows you to put
money aside for retiring healthcare
obligations. Um and you also could
technically put money aside for pension.
That's something that we talked about
maybe a little bit over five years ago.
Now, that uh part of the bucket has not
or that part of the program has not been
utilized, but you have uh flexibility.
Currently, you're only using the OPM
side. As I mentioned, you have over $9
million in that. Yeah. You select when
to put money in and you have flexibility
of taking that money out. You can take
that money out to pay uh for any retiree
uh related expense, whether you
reimburse the town back for those
expenses. If you have some kind of
stipen that you provide them, we can pay
them directly. We can pay a third-party
provider that may be offering some of
those benefits out of the trust. And for
any actual evaluations, you can pay it
out of the trust as well. So, a lot of
different ways that you can utilize the
asset. Um, when
slide number five,
top portion just shows you this program
started back in May 16th of 2012. Uh,
town manager, city manager is currently
the plan administrator. So, on behalf of
uh your city council and this committee,
any changes would be done uh there by
Jordan. The investment strategy is
called the moderate index strategy which
Andrew is going to go out and talk about
in just a couple of slides. That is not
something that is locked in. The city
can or the town can make changes at any
point in time to that investment
strategy. And that's why we try to meet
on a regular basis in case things happen
or you know something else changes with
the town and you want to make changes to
the investment. So that can be done at
any time of the year at any time uh that
we needed.
bottom portion are your assets. As of
November 30th, you've contributed a
total of $9.4 million into the account.
That includes the initial June 2013
contribution of 1.2 million plus the
additional $8 million in there. You have
taken money out. You've been taking
money out almost every fiscal year. A
total of over $5 million taken out of
the truck. Your net investment earnings
from KFF have been of over $4.8 8
million on there and the account balance
as I mentioned November 30th is $9.2
million in the account.
Line number six shows you this
information uh based on the historical
information on every fiscal year that we
program. So you can see when the money
came in, you can see your total assets
there and then of course those
reimbursements taken out of there in the
center uh column for you. And you can
see since 2024, we have not had any
additional contributions into the
program. As you'll see in the next page,
the plan is very uh well established in
a very healthy place. The town has done
a great job of establishing the program,
putting money aside, and really
addressing those liabilities on the
account. So all we are seeing in the
last couple of years is reimbursements
to pay down those retirey healthcare
obligations.
By number seven, this is the liability
for this specific program. These reports
are not done by PARs. Uh you currently
use a company called Position Actuaries
that does that for you. And what we went
ahead and did is compared the 2024
versus the latest 2025 on there. The
discount rate or the long-term expected
rate of return for this type of plan
under this portfolio is about 6.5%. So
that's what the actuary is quoting on
there. That gives you a total OPED
liability or what currently is due for
this type of liability with your town of
about 7.9 million. Now, the actual money
that you have in the trust is over that
at $9 million. So, as you can see,
currently if you, you know, you had to
pay the bill today, you currently have
assets to meet all of those obligations.
Now, again, that's a running number. It
can change. That's why you do ask for
evaluations at a minimum every two years
because things can change, premiums and
so forth, costs can change. So that is a
floating number that we'll see from time
to time. At this time, you're in a very
healthy funded status. Uh you're funded
at 113%.
Uh but less than uh 5% of our agencies
in California are that well funded. So
good job to you to the town and staff
for actually establishing this, funding
it, and having it in such a healthy
condition.
And then the last number that I want to
take a look at there is the annual
benefit payments. The about half a
million dollars that you currently um
you know pay out for these type of
liabilities. You can always take that
out if you're currently doing to um
other
» sign number eight. Um I'll have Andrew
touch base more as I mentioned on the
investments. This is just historically
what you have uh returned with the
inception to date of 6.47. In the
previous slide I had mentioned your
discount rate is 6.5. So you're right
there u meeting that discount rate from
the actuary as well. That's that's what
I'll point out there and then I'll have
Andrew come back if he needs to to that
slide.
So that is the administrative portion of
this program. Details on your assets and
so forth and your liability. I'm going
to turn it over to Andrew to discuss the
investments. But are there any questions
on the slides that I've touched on
already?
>> Okay,
» Okay,
>> Robert, I think there were some
» Robert, I think there were some
premeating questions. Uh, one of which I
think was fairly much in the
interpersonal role. Do we want to do all
questions at the end or if you want to
>> I think one of them was the
» I think one of them was the
reimbursement.
>> You mean the funds?
» You mean the funds?
>> Um, yeah, we can handle that right now.
» Um, yeah, we can handle that right now.
Um uh report
discussed it. Um correct. So uh PARS
administers the retirey health benefits
for us. So every month um through our
retirees have to participate with
CalPERS help. And so, um, because we
have this, uh, trust with ARS, um, we
get the bill every month from from, um,
Kalpers, and then we verify based off of
the individual retiree, whatever, um,
plan reimbursement they get, we we we
take that, we reconcile it against what
their premium is, and then we reimburse
them their um, retirey health. Um
because Kalpers, what CalPKERS does is
they deduct their retirey health out of
their pension. So that comes out from
Kalpers. They take out the retirey
medical from the retiree, the annuity.
Um and what we do through PARs is we
reimburse the retirees their medical.
And so every month we send that to PAR
say a list of all the individuals. Um
they already have their address, they
have their bank information. and we set
it up and we send every month um prior
to the end of the month um before the
annuitant's uh healthcare is taken out
we send that list to um PARS and then
PARS reimburse each individual annuitant
their reimbursement amount health
reimbursement amount and so on that
slide that um previous slide on page six
we saw the dispersements
uh so the dispersements
amount you can see are all in that
column under the dispersement. So u as
of June 26th and again this is on a
calendar year as of June 26 we
contributed 347,000
and that's what was contributed in total
to reimburse the annuitance their health
um retirey health uh care. Uh so PARS we
work in tandem with PARS on this uh and
you could see it as of fiscal year 24 we
stopped doing contributions because what
we were doing prior the town would every
month the town would contribute whatever
um that retirey help for the month was.
So if it was 35,000 we were contributing
35,000 to PARS and PARS was taking that
amount and dispersing it to the
individual retirees. So that's how the
flow of funds work and that's how we use
the retirement trust. We use the trust
because it's um in doing so the retiree
is not um taxed on that benefit because
we're we're reimbursing through the
trust. So um
with the Jennifer mentioned that we do
the OPEC act report that's precision
actual does their actual report we work
in tandem we send that to to PARs and
that way we can kind of gauge and see
where we're at based off of our assets
and our liabilities. And so PARS helps
us with that administering that
reviewing it. And then Andrew is on the
investment side making sure that we meet
the investments for it. Um and and and
also the uh the cost the expenses for
the uh administrator and the investment
also comes out of the cars trust and and
I'll uh touch work on that after we talk
talk about the investments. Um but
that's that's all I have. Is there any
questions? Um I just wanted that's how
the process works with cars. Um, and
then they they managed the they
administered the plan for us.
Any questions?
So then I'll turn it over to Andrew.
>> Let me let me have you go, Robert, if I
» Let me let me have you go, Robert, if I
could to 2.8 page uh number in the
bottom right hand corner.
» There you go. Yep.
>> So it's good to be back here. Thank you
» So it's good to be back here. Thank you
for the invitation. Uh, as the finance
director Baron highlighted in the staff
report, I'm going to touch on
performance. We'll take a look at the
economic snapshot of PF and asset
management, highlight positioning for
the portfolio, and then I think there's
also some supplementary questions uh
submitted related to fees and expenses
and investment policy statement. Uh so
those are going to be the five topics
but um any other topic that uh you want
to uh discuss just feel free. Uh so this
is my first investment uh presentation
for calendar year 2026. Uh and so the
the slide that we're looking at here the
the quarterly uh market summary the
factors to consider over the next six to
12 months. This is something we call our
heat map. And what we do is we take nine
economic and market variables and we
apply some type of color-coded rating
system to our outlook on these nine
dynamics. Uh and it's designed to cover
a 6 to 12 month horizon. Uh the color
coding uh corresponds to red and yellow
uh some type of negative view. Gray
there in the middle would be a neutral
outlook and then light green, dark green
is some type of positive view towards
one of these dynamics. uh upper right
hand corner you'll see it's uh ending uh
September 30th 2025. So we have not
updated it officially
um uh for for dissemination for the 1231
period of time uh but but but I have
people who who have uh shared our our
views and um they haven't changed. So,
so where you see the black dots on these
nine dynamics are exactly where we are
today and and certainly we can debate um
you know maybe we should have moved
something here and there you know when I
think about the six to 12 month horizon
you know predicting the future is
difficult at any time I think we have a
better handle on a six-month horizon
versus a 12-month horizon and and if we
were thinking about the next six months
I think we're pretty constructive pretty
positive I think growth in the in the
United States is going to be pretty
solid. Um and and a lot of uh that
positive feeling really comes from, you
know, where we have many of these black
dots in the green regions, upper leftand
corner. First off, monetary policy. Um
we're still working through the positive
impact of 2024 rate cuts. We got some
rate cuts in the fourth quarter of 2025
and and our best guess is we get one or
two more here in 2026. So, so that was
maybe some of the uh catalyst to uh
putting that uh rating as as a positive
outlook for monetary policy. Interest
rates in our view are likely uh to t
continue to trend downward. Uh financial
conditions look excellent. Much of that
really stems from the one big beautiful
bill that was signed into law there on
July 4th that has some tremendous
provisions for corporations to expense
R&D and capex as well as uh it is widely
anticipated uh that that tax refund
season uh in the upcoming quarter the
later this quarter second quarter this
year is going to see some uh pretty
significant tax refunds for individual
tax filers. Uh, and typically when you
get a windfall of cash coming in,
Americans typically spend it. So, so we
think financial conditions are poised.
And really, I mean, if if it was just a
six-month horizon there at 12:00, we'd
probably move economic growth uh to one
of the shades of green there. Uh, and we
also probably would move consumer
spending to one of the shades of green
there, right in the middle. Uh, with
respect to inflation, the upper right
hand corner, we do have it rated as a
yellow. We did get CPI today. CPI
headline was 2.7, core was 2.6.
Still kind of closer to the 3% level
versus the 2% level that the Fed is
looking to target. Um, many economists
out there, point to 2%. Kind of maybe a
little bit hesitant to put my initials
next to that. Uh, you know, I might stay
at the mid 2% level. uh but but may
maybe not so ownorous uh from a from a
policy standpoint for monetary policy
halting the Fed from cutting rates going
forward. Uh labor markets we do have it
rated as a yellow there at 3:00 and um
yeah uh last five six months we've seen
a slowdown in job creation. uh it's been
sort of what's been termed in the media
and and I hate reusing well you you know
beat them into the ground phrases but I
I will today low higher low fire um you
know there's not a lot of terminations
out there but there's not a lot of new
job creation either um some economists
point to well with the uh the slowdown
in immigration maybe we only need
something around along the lines of 50
to 60,000 new jobs the Dallas Fed put
out a report in the fourth quarter uh
putting forth that that that uh
potential data point that maybe 50 to
60,000 new jobs might be that that that
that neutral rate of growth. Um maybe
maybe not. Uh but but but certainly with
the low number of new jobs that have
been posted in the economy, we feel
pretty comfortable still keeping it at
yellow in terms of our rating. And then
just two other quickly uh items that
I'll touch on. um valuations,
you know, some some argument, some push
back there. At uh six o'clock, we have
it at slightly negative. Sometimes uh
clients would say, "Well, why should you
put it at red?"
>> And and maybe because of the textbooks
» And and maybe because of the textbooks
that I at least studied uh growing up,
um yeah, it kind of feels a little bit
expensive or or very expensive there at
23 times price to earnings ratio for
large cap stocks in the United States,
the S&P 500. Uh so so my inclination is
to be a little more conservative. Um my
other colleagues feel that yellow is
maybe the the one that deserves the
merit. Uh but but yeah, it the market's
a bit overvalued to say the least. And
that's worrisome because if we don't get
the economic growth and the corporate
earnings that that we anticipate in
2026, uh we're probably poised for a
market selloff. And then we get to the
fun part of the presentation where we
talk about policy and political risks.
Uh that always seems to be a hot topic
with uh committees and whatnot. Um you
know, three months ago, well, I guess I
didn't totally lay out the the
presentation format. When you see a
white dot, a white dot is where we were
maybe three months ago. So if this is
for the 9:30 ending period, uh for that
June uh June 30th to to uh end of
September period, uh we had it at
excessive risks. We moved it to yellow.
Um and and I know what my colleagues
were thinking about when they moved it
from red uh highly negative to slightly
negative. It was sort of the notion and
it wasn't a debate of whether or not the
the Trump policies were were disruptive.
Yeah, they are disruptive. Um but but it
was maybe the recognition that the
market really wasn't caring too much
about disruptions and and and maybe also
uh not all disruptions yield negative
outcomes and and so when when we think
about some of the policies that have
been uh enacted uh over over President
Trump's first uh 12 13 months in office.
You know there's been some highly
disruptive policies but but with okay
outcomes. one uh would certainly be the
one big beautiful bill that's um going
to be a huge catalyst for for the
economy and it's always already been a
very nice catalyst in some industries.
Uh Operation Midnight Hammer that that
that was certainly a positive. Um and
then also some benefits coming from the
initial deregulation uh policies
enacted. So, so, so yeah, there have
been some positives, but then you just
kind of go through the first 11 12 days
of 2026 and and it's one to make my head
spin and um
I just kind of jotted a few down.
Venezuela, abduction of Maduro and his
wife, cajoling, Trump, cajoling oil
executives to invest hundred billion
dollars in Venezuela, a country where
many of them got kicked out several
years ago. So, you know, how, you know,
eager are are people to, you know, once
burn, twice shy sort of thing. Strong
overtures to invade Greenland. Directing
Fanny May and Freddy Mack to purchase
200 billion in agency mortgage back
bonds. Uh, truth social posting calling
for prohibition of institutional
investors to buy residential homes,
preventing defense companies from buying
back stock and issuing dividends. Um,
and then just yesterday trying to cap
swipe fees for credit card issuers at
10%. I mean, it's it's it's a lot. It's
a lot for one administration in one
year, not to mention 12 13 days. So, so
I don't know if you want to push back in
terms of, hey, why don't you guys put it
back to red? I certainly wouldn't uh I
wouldn't fight you. Um, but yeah, I
don't know if hopefully it's nothing
more than a debate about, you know, just
the merits of, you know, where do you
guys put it, red or or yellow, rather
than, hey, you know, you highlighted
some of the good benefits of of
disruptive policies. You know, hopefully
these current policies don't yield
negative results um for for the
remaining three years of of his
presidential term. So, yeah, that wasn't
much of an overview. It was maybe a
little bit longer than I anticipated,
but this is my first time in 2026, so
I'll get better. Um, any any questions
or or feedback on any of that?
» Okay.
All right. Uh, Robert, maybe page 2.9,
which I think is in the next one. And
and just a quick stop on this page. This
covers our our asset allocation
positioning and and and the the the one
sort of u scarlet letter for us in 2025
calendar year 2025 was we moved a slight
underway position to equities there uh
called maybe the third week in April. uh
we got a little bit nervous about the
the potential negative input of uh or
impact of tariffs uh from from uh t
liberation day there on April 2nd or 3rd
and we moved from a 50% equity
allocation to a 48% allocation in this
portfolio. So it was a slight
underweight. It wasn't a big move. Uh
and and like I said the market didn't
really seem to care. it kept on going up
and and so maybe the third week in July,
we moved back to a neutral allocation
going back from 48% to 50% in equities.
Uh and we've maintained that position
across all of the asset allocation
decisions within the plan. So when you
look at this and you look at all the the
black dots and the neutral uh section
there in the middle of the page, uh US
equities u international equities
combining that together that's going to
be 50% of the portfolio. fixed income is
going to be 48% and your cash is going
to be at a 2% allocation and that's
where we've been since the third week in
July and and that's where we maintain
our current position today.
Robert maybe page 3.1
and and so this is going to be and um I
think Robert you put the first quarter
it is the first quarter of the fiscal
year correct
>> third quarter at least we're we're
» third quarter at least we're we're
mapping it on here
>> correct
» correct
>> um
» um
>> and and so you know uh maybe
» and and so you know uh maybe
>> maybe the most relevant column to look
» maybe the most relevant column to look
at and I'll I'll be happy to look at any
column here uh would be maybe the
one-year column there. Third or fourth
one over from the left. Uh and for the
first line item, total portfolio. This
represents the total portfolio uh for
the pool that we're invested in. Uh you
saw a page that Jennifer presented her
her her last page in her presentation
that actually um took a look at the cash
flows for the town's uh uh portfolio and
that actually would be maybe a more
relevant period or re relevant uh
exhibit to look at and maybe we can kind
of finish off on that if if you want to.
Um, so in terms of a 12-month period of
time, the actuary says make 6.5%.
And and we generated a a 9
» 92.
Does it show 9.65 up there?
» Yeah. 9
>> It says 9.65, but the
» It says 9.65, but the
>> the book shows 9.92.
» the book shows 9.92.
>> Oh, yeah. the basin.
» Oh, yeah. the basin.
>> No, of course.
» No, of course.
>> Yeah. Well, we're gonna go with 9.92
» Yeah. Well, we're gonna go with 9.92
because that's the book.
>> The one in the book in the packet is
» The one in the book in the packet is
9.92.
>> Yeah,
» Yeah,
>> that's correct.
» that's correct.
>> We're going to go with 9.92. Apologies.
» We're going to go with 9.92. Apologies.
Apologies there. Uh, and so, yeah, way
ahead of 6.5% for a 12-month period of
time. Uh, how did we get there? Well, we
certainly got there in the back of of
the equity market. Uh, the domestic
equity line item there, 17.2%.
uh the international equity line item
17.3%.
Uh when we do our capital market
assumptions, we expect domestic equities
to get about 7% and international get
about 7.4. So, you know, heck, that's
almost two and a halfx of of what we
would expect to generate over a 12-month
period of time. So, that's certainly
indicative of a really good 12 months.
Uh other growth is a category where we
lumping together some diversifying
assets, real estate as well as
infrastructure. Uh thumbs up on the
infrastructure investment um at 16.2%
that was one of our best performing
asset classes over the last 12 that
12-month period of time. Um real estate
struggled real estate struggled over
this period of time. I think investors
were were kind of hoping they get a
little bit more in the way of interest
rate cuts uh to maybe spur that that
real estate market. it it was actually
the only category that that has a a
minus sign in front of it over this
12-month period of time at 2.3%.
Uh fixed income fixed income was at
3.3%.
It's a better story when you look at um
the 9-month period of time uh for for
for this portfolio at 6.2% 2% and then
when you throw on about a percent there
in the fourth quarter uh we got about 7%
from our real estate investments which
it's important because in a 50/50
portfolio half of it does come from real
estate and and and real estate has been
one of maybe the more disappointing
areas uh for the portfolio for the plan
and it's not really any of our doing
because we're invested in in an index
fund if you will for for fixed income.
uh it's it's the more so the market and
the low interest rate environment and
also 2022 when the Fed increased
interest rates up uh at a very high clip
but over that 12-month period of time a
3.3%
return and then finally rounding it out
cash
while the Fed is cutting rates and that
is impacting some of our money market
yields we were able to still generate
about a four and a half% return on our
cash we don't have a lot in cash as I
said it's about a 2% allocation um but
but it it wasn't
detracting over that period of time. So,
putting it all together just to shade
under 10%. Very happy to uh very happy
to show that to you. Um
I I will give you the estimate based on
um we don't have our our final numbers
uh solidified just yet. Um but um it
looks like we had about a 1.8 1.9%
uh we'll call it the second quarter of
the fiscal year, fourth quarter of the
calendar year. Uh so maybe just a shade
under 2%. So, not about three months to
uh end the calendar year.
Uh I said I was going to talk about
positioning and maybe that that slide
that we looked at previously does
capture that at a 50/50 allocation. Uh
that that is currently where we are at.
Um Dr.
>> Yes sir. Just to go back to what you
» Yes sir. Just to go back to what you
said at the beginning, the the total
portfolio and then these other things
you said isn't necessarily a portfolio.
>> This would be the investment portfolio
» This would be the investment portfolio
that the town of Athetherton and I'll
make up a number six to seven seven
other agencies are invested in. Okay.
>> So your your portfolio assets, your plan
» So your your portfolio assets, your plan
assets are in this portfolio. Um but but
but it's not totally isolated to to the
town.
>> But why would So the town's returns
» But why would So the town's returns
would be exactly the same. Then
>> it would be maybe a little bit more or
» it would be maybe a little bit more or
maybe a little bit less um than than
what the other plan or whether the
portfolio participants are are
experiencing. The drivers of that would
be cash flows going in and out. Uh the
drivers also would be fees and expenses
which we're going to touch on probably
about 90 seconds. Um I think you're
maybe maybe one of the more larger
participants and so it's a gradiated fee
schedule. So more the more assets you
have the lower fees and expense that
that you uh that you incur.
>> The assets are segmented. So the buckets
» The assets are segmented. So the buckets
the pools are each each town, right? So
their inflows and outflows are going to
affect something. So when you're
invested in bucket A, you're going to
put more more in the equity. You're
going to reallocate in that portfolio.
Maybe bucket B doesn't have the cash
available to do it. Or is it's just
timing issues on all this stuff.
>> It it's not
» It it's not
>> it's all of us having have same amount
» it's all of us having have same amount
of money, but one person needs a little
bit more and one person is getting a
little more.
>> It's not segregated. So that's that's
» It's not segregated. So that's that's
the key point.
>> It's not it's it's a pool.
» It's not it's it's a pool.
>> It it's a pool. So, so let's say for
» It it's a pool. So, so let's say for
example, uh, um,
Selenus,
I'm making this up. Selenus says,
>> uh, Selenus needs a $7 million
» uh, Selenus needs a $7 million
distribution to play plan, paid plan
participants.
>> Yeah,
» Yeah,
>> they it will say, uh, portfolio manager,
» they it will say, uh, portfolio manager,
make sure that we have enough liquidity.
Portfolio manager checks, yes, we have
$12 million in liquidity. uh US bank as
plan administrator would pull these
seven million
>> 12 is is if we're all each of town
» 12 is is if we're all each of town
that's all of our our that's our that's
everybody's one and a half or so
>> some but but but then but then upon um
» some but but but then but then upon um
at at a certain point in time the
investment manager says oh well geez uh
we are low on cash or we we've moved
from our target asset allocation
position yeah uh and then we have a
decision to to potentially rebound
balance that portfolio.
>> Sure. So if it's pulled then then and
» Sure. So if it's pulled then then and
the why would
I imagine these returns are really
close. But why would it matter per city
then? If we all have a big thing all
together then we're all getting the same
return. If you want $7 million it's
coming out of that big pool.
>> I I would offer well if you consistently
» I I would offer well if you consistently
put more money in well let's say you
were the only agency
>> right
» right
>> that that that was putting money.
» that that that was putting money.
I don't believe that that you're if you
were putting money into an individual
account, I don't think that that the
cash flows would um the performance
based on the cash flows would exactly
foot to the performance based on
>> maybe the thing that we care about is
» maybe the thing that we care about is
that we don't suffer as a result of
other people's cash needs.
>> Certainly appreciate. I don't think that
» Certainly appreciate. I don't think that
you do, but but but but there is a
dynamic there,
>> especially when we're overfunded. So,
» especially when we're overfunded. So,
we're overfunded, we could sit back and
use and have Robert's cash needs met
without too much trouble. So,
>> it's maybe
» it's maybe
>> Robert's cash needs a question for next
» Robert's cash needs a question for next
time for you for for if if we want to
get into the weeds. Um I don't want to
get too far into the weeds because I
think you missed things. But um maybe
that's to are are we are
is the mechanism and is the way that you
operate and the policy the way that you
operate it such that
that towns that are overfunded so to
speak are actually um
um
not benefiting from the overfunding. So
to their we're we're we're helping the
underfunded. We're actually the biggest
draw you start
definitely two different two different
dynamics going on here. I mean, so so
your your funding policy uh to to me I I
began to think, okay, well, if you're
113% funded, which I think the marked
market through November, uh then then we
begin to think about, well, do we need
to take 6.5 the risk commenserate with a
6.5% discount rate, which
>> in in our in our recommendation is a 50%
» in in our in our recommendation is a 50%
equity, 50% portfolio.
>> Yeah.
» Yeah.
>> So that's completely germanine to the
» So that's completely germanine to the
town. it doesn't really impact or or or
or consider other agencies within this
pool. Um the and our answer would be
yes, we would still maintain we would
recommend maintaining the course with a
50/50 portfolio
because of the the cash requirements. I
mean because right now what did you what
did you disperse last year or where the
town disperse
>> um
» um
>> 4.5ish
» 4.5ish
almost 5%. So if you think about the
dynamics here, uh you're assuming 6.5%
but you're also kind of distributing
four and a half um couple nickels for
our fees and expenses. You have a little
bit left in a perfect world, right? And
this isn't even factoring in those years
where we have down.
>> Um
» Um
>> yeah,
» yeah,
>> you have a little bit left over for
» you have a little bit left over for
compound growth, but we're really not in
growth mode. But I mean, we're we're
using the assets for for what they're
intended for to to support the the
liability.
>> As maybe even more, I'm just trying to
» As maybe even more, I'm just trying to
get the basic question as I can.
>> Yeah.
» Yeah.
>> How are we affected by other towns? We
» How are we affected by other towns? We
could isolate our assets and stick them
right here in our corner and have
everybody else stay over there. Do we do
better or do we do worse or we just do
do the same? Is the pooling
does the pooling allow you to do the
administration that you need and pull
this whole thing thing off at le less of
a cost? That's why we pool or you
>> Well, there are three questions there. I
» Well, there are three questions there. I
had I had the no, they had the yes and
the um one one thing that that that we
typically do is is in and this is well
the Wii is the royal we but it's really
the trustee. uh the trustee establishes
a limit usually at $10 million uh to to
have an individual account and and the
town since day one has been under that
that that limit
>> 92 93 I mean potentially we could talk
» 92 93 I mean potentially we could talk
to the trustee um since my paycheck has
the same name that the trustees has. I
mean we could potentially look at an
individual account. Key point though, we
would not do anything different than
what you see on the asset. You see the
percent sign with the the allocation
there. We would allocate it the same way
we'd manage the same.
>> But you wouldn't be potentially
» But you wouldn't be potentially
positively or negative. You wouldn't be
impacted by other agencies cash flows in
or cash flows out
>> because it got effect.
» because it got effect.
>> Yeah.
» Yeah.
>> A smidge, but but it could be to the
» A smidge, but but it could be to the
positive. Uh
>> it could be
» it could be
>> but but
» but but
>> the point is we don't know. So if you
» the point is we don't know. So if you
just sit there,
>> I'll answer it in a maybe a slightly
» I'll answer it in a maybe a slightly
different way. When we put together our
um portfolio composits, our investment
composits, so when we when we show the
world, you know, quote unquote, how much
better we are than than the Calurge,
right? We're going to an RFP and we put
together our composits for the 50/50
portfolio. Uh the the the variance in
terms of our returns for our 5050
portfolios, it's not too wide. So when I
see that, it's not too varied. So when I
see that, I say, well,
the the whatever the cash flows in and
out of those 10, 12, 15 accounts that
make up our 50/50 portfolio, it's not
really walloping one or pool. And it's
pretty tight. But if as a homework
assignment you want us to look into
maybe doing a separate account
>> we can look at
» we can look at
>> if you would just confirm why there
» if you would just confirm why there
would be if you would like I look into
why there's a difference. It's cash
flows, but I'll give it I'll write out
to me would be the thing that would make
sense would be
that
each each per each pool participant
uh their return depends on their the
timing of their inflows and outflows.
At the portfolio level, it's like an
average of that. But
but we shouldn't be impacted by what
anyone else is doing.
I
>> shouldn't be from a philosophical
» shouldn't be from a philosophical
standpoint or shouldn't be from a
investment.
>> Well, both.
» Well, both.
>> Well, I mean, you you should have a
» Well, I mean, you you should have a
system that doesn't impact us depending
on what other people are doing.
>> Well, so so then I would encourage you
» Well, so so then I would encourage you
to
>> see if you can isolate it, right? That's
» see if you can isolate it, right? That's
I mean that's what I would do.
>> I would encourage you then to discuss it
» I would encourage you then to discuss it
if if you do want to pursue individual
account. Well, the first thing would be
if you could maybe get back to Robert
and explain exactly how differences can
arise.
» Sure. I'll give an official one pager.
>> I got to think it's going to be really
» I got to think it's going to be really
hard to isolate that.
>> Well, when you say isolate, I I can't do
» Well, when you say isolate, I I can't do
the the accounting.
>> What if that's
» What if that's
>> Yeah. No, that I'm going to give it a
» Yeah. No, that I'm going to give it a
philosophical. These are the three
reasons why you would anticipate a
different return uh between an
individual account where it's just your
$450,000 coming in and whatever
contribution you're putting in uh versus
the experience of
a coming pool that that has you know a
very I mean the main thing Thomas is is
okay well we ended the we ended the
quarter there at 2.6% 6% cash.
>> Um, other pools might have ended the
» Um, other pools might have ended the
quarter at 1 point something percent
cash or maybe 5%. Maybe somebody got a a
10% contribution to cash that we were
gradually dollar cost averaging in and
we dollar cost
on great days which slightly increased.
You know, we bought low and then it went
up after we we put that large
contribution in and it gradually showed
a little bit of upside in that pool
experience.
I mean, and like I said, I'll give you
the memo, but but that's the main thing.
>> I take a look at isolating it. It's it's
» I take a look at isolating it. It's it's
as if as if Tom and I got together and
said, "Hey, let's combine our retirement
accounts together and we'll have an
accountant to kind of figure things out.
We'll allocate it out. You might need
some money and then I might need some
money after
I wanted to have my retirement account."
He doesn't want mine either.
>> Yeah.
» Yeah.
>> So, is it that you think it's similar
» So, is it that you think it's similar
expense ratio for for operating on a
separate account versus a pool? We don't
charge anything more for an individual
account. So that's the you're charged
based on your assets under management.
Since that's one of our check boxes,
let's let's knock that out right now. Uh
at at let's see.
>> So if we wanted it separate, it wouldn't
» So if we wanted it separate, it wouldn't
cost us anything. Is that correct?
>> It doesn't cost any more. Yeah. uh the
» It doesn't cost any more. Yeah. uh the
blended um
the expenses for the index funds the the
the weighted average for the index funds
is going to be 4.8 basis points.
>> Uh and then I think I I calculated the
» Uh and then I think I I calculated the
uh expense for 9.2 million at 30.7
or so. So I think we were just a shade
under 36 basis points all in all in for
investment management. So that's uh the
embedded expenses for the index funds
and what PFM asset management US bank uh
charges.
>> What what's the review process for that?
» What what's the review process for that?
One of the things I mentioned last time
was Fidelity's got a 0% total market
index. I think does
a process in house to substitute lesser
cost. Can we go from a third from 3 to
0.25? Is that something that's looked
at? I respect your diligence in terms of
trying to get below this cost. I think
one of the things that we do think about
I mean obviously we think especially
with index ones we think about fees and
expenses expenses
>> because it's easy because you guys can
» because it's easy because you guys can
keep your management keep the fees
related to it and run it to where you're
running and drive the cost of the
portfolio down. We need liquidity. Uh,
and we also need need a provider that
that won't tag you for a because
sometimes if you if you if you pull
money out within a 30-day window of
time, they'll assess a a modest penalty.
>> Yeah.
» Yeah. I'm I'm not wondering about I'm
wondering about what the process is for
for not just us but for for the others
where you look down your when was the
last time you had a fund change. Do
what's the process for looking down
there and going I have Fidelity total
market index. There's other total market
indexes that are out there and they may
be they may track the index similarly
the same and they may be at less cost.
Do you have a process where you go, you
know, it's January, it's time for us to
take a look at that?
>> Well, it actually kind of follows that
» Well, it actually kind of follows that
that sort of rubric for index funds. I
mean, it's it's probably going to be a
once a year dynamic. I mean, it's not
going to be a
>> still I mean, we're just that's how you
» still I mean, we're just that's how you
got to.
>> So, a manager research group would look
» So, a manager research group would look
at index funds pretty much on a on an
annual basis. Uh determine liquidity,
determine if there's any fund provisions
that that change. uh index funds they
don't raise their fees. So
>> what about substitution? Does that
» what about substitution? Does that
happen often? Because there's fidelity
>> doesn't happen often and when it does
» doesn't happen often and when it does
happen for index funds it's you know
attracting the underlying venture. Why
is
>> well this international fund doesn't
» well this international fund doesn't
have exposure to Canada.
>> Well who cares? It's only 6%. Well wait
» Well who cares? It's only 6%. Well wait
a minute we care because we're not
tracking. So, so that's usually more of
a catalyst um to to make us think about
a replacement for for an index fund.
>> Yeah.
» Yeah.
>> Uh yeah. Well, um
» Uh yeah. Well, um
>> I mean our plan here is to have I just
» I mean our plan here is to have I just
got the statements is to is to have all
these funds, show what they are, look at
what their tracking record is, look at
what their expenses are, and see if
there's a substitute for it. And then
just ask, go, hey, there's a substitute
for fidelity of whatever. Are you guys
considering that? If we have our own
pool, does it make any different or is
this a policy decision that you make for
everybody? Everybody's going to get the
Fidelity B.
>> It's a policy decision that everybody
» It's a policy decision that everybody
gets. Yeah. So, so
>> that's a good one though. I think if you
» that's a good one though. I think if you
track the same you have less expenses,
why not do it?
>> Well, sure. I mean, all things being
» Well, sure. I mean, all things being
equal, but all things aren't always
equal. And you do have the tracking with
the underlying index. Um, and and
liquidity is a big deal, too. Totally
agree. And there's also some providers
that that that will uh you know nickel
and dime you in terms and remember I
mean we have a lot of inflows and
outflows.
>> I get it.
» I get it.
>> The fund provider thinks that we're
» The fund provider thinks that we're
buying and selling and flipping things
around and we're not.
>> Um but yet they still want to give you a
» Um but yet they still want to give you a
little bit of a penalty and that's the
>> fair. That's fair.
» Yes. So just to piggyback on that on the
the the investment uh cost. So the costs
are about um as I mentioned about point
30 basis point um so it's about 26,000
and then with the administration it's
about 24. So the total
>> expenses about 49,000 on
» expenses about 49,000 on
>> the 8.8 million
» the 8.8 million
>> is is the cost between the administrator
» is is the cost between the administrator
and the investment. Um so about you're
looking at 48,000 um cost per year. um
about 8.8 millions in assets.
» This part of this discussion going to be
on again on on shorts allocation um on
our equity versus bond or is that
>> yeah we we'll we'll bring that back um
» yeah we we'll we'll bring that back um
when we do our our end of the year we'll
review we'll say um this is you know our
investment strategies is the modern
index um asset.
>> Do we want to change it? We want to um
» Do we want to change it? We want to um
be more conservative.
>> That was the last one we just did.
» That was the last one we just did.
>> Yes, that was the one in in June,
» Yes, that was the one in in June,
correct? And and and the committee
recommended we just stay where we're at
um because that one meets the uh at the
time it was 6% um our our investment
return, but through the actuarian
mentioned that now it's 6.5%.
So um in and see the plan is is the
investment plan is making is
>> next step up is is is the next step up
» next step up is is is the next step up
from ours is
>> balanced balanced is something we we run
» balanced balanced is something we we run
uh the target allocation can be 60 40
60% equities 40% bonds
>> the range is 50 to 70% equity so it can
» the range is 50 to 70% equity so it can
go as low as 50
>> uh if you think that that's low I mean
» uh if you think that that's low I mean
that's our target and then as high as 70
>> um I Yeah, I didn't come, you know, when
» um I Yeah, I didn't come, you know, when
I did my own internal pregame prep. I
didn't come here thinking, uh, I'm gonna
talk I'm gonna talk overunded plan to
take more equity risk.
>> Um,
» Um,
>> it's coming too.
» Yeah, we we'll definitely bring that
back. We always review um the investment
strategy to see where we where we ended
up by the
>> at the end of the year,
» at the end of the year,
>> but we're bringing this because we
» but we're bringing this because we
wanted to start reviewing it as a
quarterly um snapshot
>> rather than the yearly that we doing.
» rather than the yearly that we doing.
So, this is just the the quarter review.
So, we're we're about 200,000 more in
the net position than we were in June of
25. So we made 200 something thousand
even though we've been distributing um
money out of it. So you know the first
quarter is a positive 200. So if we do
four more times it's positive 800 and
we've expended 450,000. So we spent
eight we earn 800 spent 450,000 we had a
positive balance.
>> Nice return.
» Nice return.
>> Yeah I like it
» Yeah I like it
>> when it works.
» when it works.
>> That's a good lubricate.
» That's a good lubricate.
>> So um yeah. So this is, you know, for
» So um yeah. So this is, you know, for
the first quarter, we're we're we're
looking good. Um, but again, yeah, we
we'll we'll do the snapshot reviews and
then
>> fabulous jobs for
» fabulous jobs for
great team. Great team,
>> mayor.
» mayor.
>> How many like humans are participating
» How many like humans are participating
like retirees are participating in this
plan? Is there any like oversight as
we're not adding new people to it? We're
adding more money like the interest is
doing more than we're paying. Like at a
certain point, we won't have enough
people.
We'll have a lot less people in this
plan. Like is someone watching?
>> Yes.
» Yes.
>> Number of humans.
» Number of humans.
>> Yes, we do that. Um when we do the
» Yes, we do that. Um when we do the
actar, we do the census um data on that
and that's what you know every two years
we do a census of who's on the plan or
the in the future retirees. There's
still a handful of current employees
that do get some retiring help and
majority get still get retirey help but
they get that minimum amount right and
that gets calculated in
We're on 3.1. I don't know if there's
any.
>> There's no other exhibit um that I was
» There's no other exhibit um that I was
going to utilize in the presentation.
» I think Yeah, we got to the end. All it
was was the at the end was um the trust
programs. Uh I'm just going to go
through it real quick. Here's the
uh strategies
that was at the end the index
at the end of the report. This is the
there are different strategies there.
We're in the moderate
um
be that 11.3% this month.
>> That's true.
» That's true.
>> Yeah.
» Yeah.
>> Yeah. So this this is in your packet. Um
» Yeah. So this this is in your packet. Um
these are the different strategies that
we have and then and you know how much
uh percentage the strategic range.
So the moderate 40 60 is 46 m to 20 and
she's very in that 50%.
And then here's here's where we in early
in the report the one year the index
we're at 9.65.
So here it is these are the other five
um strategies and we're in that middle
moderate
index.
And then how Andrea mentioned the next
one up would be the balance and then the
highest more risky risk of risky one
would be the capital appreciation
strategy.
Andrew,
in measuring your own performance, if
you went if you went to 55% equity, 35
fixed income,
would the benchmark go 5535 or would you
stay at 5050?
>> Oh. So, so if we're talking the moderate
» Oh. So, so if we're talking the moderate
strategy,
>> Yeah.
» Yeah.
>> and we move to 55, the benchmark would
» and we move to 55, the benchmark would
still stay at 5050.
>> Good. And so then the way to and we're
» Good. And so then the way to and we're
really interested in a bunch of index
funds. So the way that we would either
add value or detract value, you know,
nine times out of 10 is is the asset
allocation. It's not like we come up
with a better index fund better than the
index,
» you know. So this is all included in the
your packet. Um yeah, we wanted to bring
the team out again just to kind of start
on the quarter review and and you can
see you know the September 385
positive
quarter and we'll continue to review
that in the quarter ended the second
quarter which ended 1239.
We'll do an update in a couple months
time on
bring see where we're at and answer the
question some of the questions about the
investment expense the flow of funds how
it's working
we have great partners with PARs as the
administrator overseeing and then Andrew
and his team uh the investment
and then we'll we'll Andrew and I will
touch based on some of these questions
and then we'll bring it back up answer
when we see the second quarter.
Hopefully it's another positive 200,000.
>> You give me a martial art.
» You give me a martial art.
>> Is it possible to have too much money in
» Is it possible to have too much money in
this? I mean like you know no such thing
as too much money but like
>> but we can't really move it anywhere
» but we can't really move it anywhere
else, right? It has to stay in here.
>> Yeah. And eventually
» Yeah. And eventually
>> substitute money, right?
» substitute money, right?
Yeah,
>> I was gonna say eventually one of your
» I was gonna say eventually one of your
questions was, you know, you're starting
to have less active employees. If if at
the end of the the life of your plan,
your your retired healthcare plan,
you're done. There's no more employees,
nothing left in there, any residual, any
additional money in the trust goes back
to your account, goes general fund. We
don't have to like
>> I'm just like, it's awesome that we're
» I'm just like, it's awesome that we're
getting so much more interest than our
>> what we're paying. So, it's good that
» what we're paying. So, it's good that
we're building, but like at some point
it might get too big.
>> So, maybe 35 40 years or so, it might
» So, maybe 35 40 years or so, it might
get to that point. But if the town is
still a town and pursive
employees that get
>> um the PMPA minimum and if the fund is
» um the PMPA minimum and if the fund is
way overfunded at that point, how does
that work? So, the fund's got two
million fund still has 8 million in
there, but we only have PMPA minimum
staffed moving forward. How do we
address that?
>> Well, and that's why you're not
» Well, and that's why you're not
contributing to the program any to try
to stabilize that. Um, and then also you
have to think the investments. The
investments while I want to guarantee
double digits or extra and won't let me,
we will have um some down years.
>> There's downturns. Yeah.
» There's downturns. Yeah.
>> And then if there's changes in the
» And then if there's changes in the
health care costs, right, I have those
costs have been keep going up. So
there's going to be compression whether
the investments do well or they don't do
well and then your costs keep going up.
So right now in the last several years
we've been fine but on the liability
side the cost trends can go higher and
on your census right in the healthcare
plans um you know have been going up you
know 10% 13% a year so when that happens
and your investments
I mean right now we're actuarial
>> right it is in the actuarial and and
» right it is in the actuarial and and
they review it and then they kind of put
in the the demographic assumptions on
the healthcare care the the cost the CPI
they also do mortality rates and all of
that. So um the one thing is you know
mortality rates improve uh then your
your health care cost your retired
health care cost continues. So um
there's that part of it.
>> At present there's nothing that the town
» At present there's nothing that the town
is paying that the fund can't pay. Is
there any leakage of maybe wrong choice
of words? Uh, no. We're we're also re
getting reimbursed from the the amount
that we the minimum pen that we pay the
FAR to Calers. We're getting reimburse
that as well through the the trust.
>> There's no there's nothing there's no
» There's no there's nothing there's no
other switch, no other volume to have
the bond pay more and the town pay less
» other than Yeah. just the retirey help
um that those components. Yeah.
>> Agree. Correct. Yeah. I mean, you could
» Agree. Correct. Yeah. I mean, you could
have those actual evaluations, but
that's just like a small fraction of
>> Yeah. I mean, that's something easy. I'm
» Yeah. I mean, that's something easy. I'm
just thinking something.
>> Would the change to a charter town
» Would the change to a charter town
affect any? Okay. So, that's
» got to ask
>> exiting from Calerts.
» exiting from Calerts.
>> Exiting from Calbert
» Exiting from Calbert
>> change things, but that is an
» change things, but that is an
astronomical con.
Yeah.
>> Got it.
» Got it.
>> The cost will go opposite. Yeah. We need
» The cost will go opposite. Yeah. We need
more money.
>> Yeah.
» Yeah.
>> I know what last year you put in $3
» I know what last year you put in $3
million as a discretionary payment
occurs.
>> ADP.
» ADP.
>> ADP. I
» ADP. I
>> mean, have you considered doing the the
» mean, have you considered doing the the
PARs 115 trust instead of something like
that?
>> I said some Yeah. Um, we we we have
» I said some Yeah. Um, we we we have
discussed that and it's still
>> established the trust, right?
» established the trust, right?
>> Correct. But it's not um as far as we
» Correct. But it's not um as far as we
presented those options of putting it in
the trust and let it build up or
making the contribution here and then
and we've done that just making it
directly to Calers and and let's see
what it does instead of
>> right just putting money aside into the
» right just putting money aside into the
trust for over time. So I think that
could be the next
proposition is okay, we've done the the
ADPs, instead of doing that, let's set
aside a savings, right?
>> Yeah.
» Yeah.
>> 200,000 a year, 500,000 a year for the
» 200,000 a year, 500,000 a year for the
future for for council decision.
>> It might depend on how the new
» It might depend on how the new
investment manager calers,
>> right? Yeah. They just diversify your
» right? Yeah. They just diversify your
bets
>> manager and uh uh yeah and the plan is
» manager and uh uh yeah and the plan is
has done well. Um they're staying at
7.8%.
>> Uh they had that new portfolio approach
» Uh they had that new portfolio approach
that they were adding. So yeah, I mean
there was only that one year where there
was that negative
>> but I mean yeah that's but that is an
» but I mean yeah that's but that is an
option is instead of doing ADP and we
bring that up but I think what it was
just to give the money to helpers let's
reduce our cost now uh and see what what
that
and it has it's reduced our UIO
component payments it's reduced our um
normal cost uh rates
115 wouldn't do either of those two,
would it?
>> No, the 115 would just it's just
» No, the 115 would just it's just
building our what we've done with this
trust with the OPE just putting money
aside for the future. I mean, we're in
essence what it is is we're taking
500,000 whatever we put in there and
we're letting um Andrew's team go and
say, "Okay, let's let's earn whatever we
can on this interest." So this 500,000
could be 5 million 10 years and then or
or longer, right? Or
>> and then take that money and then here
» and then take that money and then here
you go. Instead of it being an
operations expense one year, it's like
oh now we have 6 million in here.
>> Uh and like this OPE trust, you know, it
» Uh and like this OPE trust, you know, it
started in 2012 2011. We didn't
>> at that time. I mean it we contributed
» at that time. I mean it we contributed
to it. we did significantly 5 million to
it. So we almost doubled our investment,
right? What's in the truck.
>> So we put in 5 million and now it's 9.2
» So we put in 5 million and now it's 9.2
million um you know in a matter of of
what 14 years and and
the you know with the liabilities have
gone down on the OPE so that's helped um
create that um positive net balance. Um
but yeah I mean that can be an you know
an option is
>> your knowledge of this and you is
» your knowledge of this and you is
amazing and the comfort it brings to me
is
>> chs.
» chs.
>> Thank you. That's not to me it's
» Thank you. That's not to me it's
>> historical knowledge and your ability to
» historical knowledge and your ability to
fluidly move around in these numbers is
pretty impressive.
>> Thank you. Well just you see it a lot
» Thank you. Well just you see it a lot
right and and
>> yeah don't discount yourself.
» yeah don't discount yourself.
>> Thank you. I appreciate it. appreciate
» Thank you. I appreciate it. appreciate
it. But I have a great team, you know,
we're great great um counterparts and
stuff. So that that assists us in in
just staying on top of it and uh you
know, making sure that we're we're doing
what we can and you know, the council's
director with let's pay down our
liabilities and that's what we've been
doing through the the retirey health and
and through pensions.
Thank you. Appreciate it.
>> Any further questions?
» Any further questions?
Thanks Jennifer and Andrew.
>> Thank you for coming personally.
» Thank you for coming personally.
>> We really appreciate it. We do
our
counterpart here and
you know it adds more value. I know we
do the Zooms and stuff.
Jennifer came up from LA. Andrew came
down from San Francisco. So
>> she might meet me home. like anyone.
» she might meet me home. like anyone.
>> Oh, sorry. That used Yeah. But we we
» Oh, sorry. That used Yeah. But we we
really really do appreciate
>> all you do for us, the partnerships.
» all you do for us, the partnerships.
>> We'll continue presenting this every
» We'll continue presenting this every
quarter and um continue to work, you
know, refine what we can.
>> Thank you.
» Thank you.
>> Thank you.
» Thank you.
>> Thanks. Thank you so much
» and happy new year.
12 days into it like you said 13 days
and going on.
>> Take care. Byebye.
» Okay.
And last topic is
Robert's going to go over the asset
liability management
process at Kalpers.
>> Oh yeah. But before that, there's item
» Oh yeah. But before that, there's item
number three.
>> I apologize. I was just I saw it as
» I apologize. I was just I saw it as
well.
>> Uh item three was the um brief review
» Uh item three was the um brief review
and update on
>> I'm sorry.
» I'm sorry.
>> No, you're you're you're fine.
» No, you're you're you're fine.
>> Um brief review and update on the AI
» Um brief review and update on the AI
applications in the town financial
software reporting um and transparency
metrics. Review and discuss AI
applications tailored for municipal
governments and financial reporting,
dashboards and automations. Um this this
came up as you know at our November
meeting committee there was a question
raised by uh uh members of the committee
about uh the town considering the use of
AI software or there's an existing
software vendor to develop financial
metrics dashboards um for the town
finances um as the case with emerging AI
there there are existing and developing
um AI applications for for some of our
software tool tools that are being
custom made uh for our local government
and not just local government at the
state level and at the federal level. Um
so uh again there's focus on helping
financial reporting metric dashboards
and some more transparency and automatic
automated processing um that are being
developed but developed for all our
enterprise resource planning um software
uh in the stock report I mentioned it
it's ERP so that a lot of these that's
what they call our financial softwares
and that we use so um other than chat
GPT is starting to become
used within the AI applications. Uh
there's uh also Excel, Chat, DPC, all
these things that are being um kind of
co- um created uh with uh open AI and
also all these various software
programs. So just you know in the stock
report want to bring bring out what the
town is doing. Um there's uh chatbot
applications that are are are occurring
uh taking place. There's some websites.
There's also chatbot applications that
are going to start be implemented in our
software. So I just wanted to let you
know and let the committee know that the
our current software springbook software
uh it has it's our handle financial
management our payroll our general edge
uh you know budgeting uh our accounts
payable it's all in one module all in
one software the modules are integrated
so uh we've been with springbook
software for 16 years there is over the
years they've innovated just like every
all these softwares
um around uh they specialize in local
small local governments and and they
have over uh 500 or so um agencies,
local agencies and then additional they
have some uh county agencies but um over
the years they've uh innovated and so
now there is a cloudbased uh portion of
that and so we're anticipating to u uh
upgrade to that and migrate to their
cloud-based. Right now we're not
cloud-based, we are um site based
application. So it's sitting in our
servers.
>> Uh but this cloud-based application is
» Uh but this cloud-based application is
more um integrated with uh Microsoft,
integrated with other software um
components that uh it's allowing us to
have that opportunity for um AI
interaction. Uh one of the things I
mentioned the stack report is within
this new uh um cloud-based they have an
upgraded portion on the expenditure
where there's an AI component docu AI
reader document
>> reader where invoices can be imported
» reader where invoices can be imported
they're read they're populated in your
system you can verify the amount you can
actually and it's more uh right now it's
manual intensive And with this AI
reading, it's going to be less. It's
more it'll make the document processing
easier, easier to identify invoices
being paid or not being paid on time or
just making sure the account numbers are
done. And then you can interact with um
your vendors as well through the
software like you can uh import uh an
invoice or you can take that and you can
uh export you know a report from there
uh to to the vendor. So it's very
interactive. So um we're excited about
that. That's one of the AI components
that is um being developed not just in
our software but other softwares to um
to to uh reduce the labor intensity on
the job.
>> So does it automatically match?
» So does it automatically match?
>> Yeah, automatically matches and pays uh
» Yeah, automatically matches and pays uh
you can update uh
>> without verification.
» without verification.
>> Right. Right. So it doesn't take away
» Right. Right. So it doesn't take away
it's not like you just throw it in there
and it just Right. You have to approve
it. You have to do the signing. I think
that that um that those processes will
still stay the same, but I think the um
you're able to also interact with
different departments, right? They can
they can send uh invoices through the
the software and they can it's more like
of an approval workflow, right? The
workflow here's this invoice we
received. Uh do you approve it? Is this
the right code? Put the code on there
and the document reads code numbers and
it assigns it. And it's again, you just
George mentioned you verify that
everything's in there. So it takes the
uh the actual manual step of taking the
invoice, reading it, reviewing it,
coding it more automated. So that'll
help us um um and just like they add,
right? It's supposed to minimize
transform
uh productivity, right? In a sense where
it makes everything more um the labor
intensive stuff, it gets shortened where
you can focus on other stuff, the
analysis part and all of that stuff. The
idea is to stay with who you have
because it's got all this historical
information and they've got a history,
you know, updating themselves and so
maybe there's another piece of software
that's just a little bit better, but the
conversion is just going to be crazy.
So, we're just going to stick with who
we have.
>> Yes.
» Yes.
>> Because I mean, this is all very
» Because I mean, this is all very
familiar stuff.
>> The area where I would encourage you,
» The area where I would encourage you,
you mentioned chat as an example. We're
all watching out for privacy issues
because when you let stuff out
>> into chat then the rest of the world
» into chat then the rest of the world
learns from the town of Alton and also
theoretically
>> right
» right
>> the area where I think it could be
» the area where I think it could be
really interesting for you as a
controller is if you take this document
and the other hundred that you've done
over the last however whatever period
you have and feed it into the engine,
>> right? that you could go back into it
» right? that you could go back into it
and all these questions that are coming
up can be digested and and answered for
you through an inquiry,
>> right?
» right?
>> And it'll be unique to the task
» And it'll be unique to the task
information,
>> right?
» right?
>> So when you ask, hey, how many people
» So when you ask, hey, how many people
are involved in there? You how many
people are involved? You do this while
you're, you know, watching Netflix, how
many people are involved in and then out
comes the answer. So I think I think
it's beyond the accounting. No,
>> it's going to be it's going to be a a
» it's going to be it's going to be a a
data lake of whatever you could p with
with privacy introduced to that system
and go I want you to learn from all this
but we're just so it's just it's still
far it's still far away. It's actually
not. There's a hat that uh the mayors
got that says, you know, I read the
packet. It was provided by prophecy.com,
which was at the last three managers
conference. Prophecy.com does exactly
what you're talking about. It mines the
Africanonly website for every single
document that's on there
>> and then creates it for staff to be able
» and then creates it for staff to be able
to write staff reports, replicate
information, and answer questions. Boy,
you gotta watch privacy,
>> right?
» right?
>> That stuff's got to be rock solid.
» That stuff's got to be rock solid.
>> Yeah. And
» Yeah. And
>> introduce documents to it. That
» introduce documents to it. That
>> and I think that's the the thing is and
» and I think that's the the thing is and
some of these some of these softwares
are working in with open AI, right? And
as you mentioned, right, you can get
they're showing open AI what they do
with their processes, right? They're
reading it. said what what what can
happen from that like whether
information gets
they get information on processes or or
what is it what's the word I'm looking
for um
>> example we have now is we'll take
» example we have now is we'll take
information we'll put it in the one
called claude claude then could actually
h have
a particular software can actually have
your name and your salary and your
whatever right a snapshot in time it
then it then this is theoretic removes
all that information right? Puts it out
to
the general like chat GPT to get his
question answered, pulls it back in and
then adds your name back on it again. I
still don't have confidence that that's
what's occurring, right?
>> That that
» That that
>> that can achieve.
» that can achieve.
>> No, some of the stuff that you want.
» No, some of the stuff that you want.
>> Yes. And and and
» Yes. And and and
>> it's coming.
» it's coming.
>> It it's coming and and there is there's
» It it's coming and and there is there's
some um like some of the transparency
stuff like Open Gov is is is creating
that. They have AI tools within there
where you can create a a procurement
where you can um take a document and and
and and throw it in the AI component and
then it creates a whole procurement.
>> Yeah, it's going to affect your staffing
» Yeah, it's going to affect your staffing
too.
>> Yeah.
» Yeah.
>> So the the difference between open
» So the the difference between open
government open gov and spring box
cirrus
>> they're two different
» they're two different
>> they they're two different things.
» they they're two different things.
OpenGV is uh the transparency tool that
that um we use to kind of we can show
our actual reunion date and our budget.
Um Springbook is our actual financial um
software that where we keep all our
financial data, our financial
management. Um the the good thing with
open gov is open gov reads springbrook
and it takes our information every night
and it it feeds it into open gov where
you can do the transparency portal where
you can create um graphs and charts and
stuff. So that we use it in tando
>> the transparency portal. Is that just
» the transparency portal. Is that just
the town's website?
>> That's it's open gov but it's it's on
» That's it's open gov but it's it's on
the town's notified.
>> Correct. Um but a lot of these agencies
» Correct. Um but a lot of these agencies
are working with each other like like
open gov's working with open AI right
and all they're they're creating all
these things but um it it's it's like
where's the control of someone some
company can decide oh this is how they
do it and we'll we can do it do it on
our own right and they create a product
that they beat the other person out on
the product right because they created
it
>> it's overlap for sure
» it's overlap for sure
>> right overlap and and And and case in
» right overlap and and And and case in
point,
>> it's a race to market.
» it's a race to market.
>> Open gov at the time was just a
» Open gov at the time was just a
transparency portal.
>> Yeah.
» Yeah.
>> Where we would take and upload our data
» Where we would take and upload our data
in there and it would spit out the
information. Well, in its infancy,
OpenGV was partnered with Springbrook on
reading the data and all that and so it
worked. Well, what does open gov have
now today? They have a financial
software tool that does spring book
does. So all this partnering and Eric
it's great
>> but at what cost right and so um as this
» but at what cost right and so um as this
AI component um kind of develops a lot
of it is because the chat GPT they've
been working with these softwares and
and this is George just brought it up.
So this stuff pulls in from our
financial software. It read it's a read
only to our financial software. It
doesn't it all it does is take the
information and then and and and we map
it. But OpenGV
has now not just this but it's a
financial software. They have permitting
and licensing
uh all these things where they worked
with other software developers like how
does this work? How does this and and
now they're they're competition for
them. Um but uh with Spring Brook,
Spring Brook also has I mentioned it,
there's a Tableau which is similar to
this
>> but it's great from Springbrook.
» but it's great from Springbrook.
>> So um and yeah, so there's Open AI stuff
» So um and yeah, so there's Open AI stuff
where see these filters and these views,
you can create them, right? Well, now
OpenAI can can say go in there and say,
"Okay, I want to know the property taxes
for the town for the last 10 years." And
it'll right. So the innovation's there
and it's happening quick, but at the
same time it's like we're um where
governments are still having to create
policies about the use of open AI
>> um because it's just exploding uh so
» um because it's just exploding uh so
fast and and another thing they were
talking about is open AI and these chat
GPT applications create hallucinations,
right? Where
>> makes it seem like this is real but it's
» makes it seem like this is real but it's
not. you know, because you're reading
it's taking data and it's just the
supercomputer
um and it could create um
hallucinations. So that's where the the
human element comes in. Oh,
>> it's good that you're open to the idea
» it's good that you're open to the idea
and it's good that good that you're
trying to control the idea because the
two got to coexist.
>> So So you're planning on converting to
» So So you're planning on converting to
the cloud based?
>> Yes.
» Yes.
>> And is that with the $75,000
» And is that with the $75,000
>> and then what's the $10,000? Oh, so the
» and then what's the $10,000? Oh, so the
10,000 is is we we reallocate that
amount every year from the finance
department to our equipment replacement
fund. So we we've done that the last
several years. So the amount that we've
contributed
>> that's just an annual,
» that's just an annual,
>> right? An annual allocation. So what
» right? An annual allocation. So what
we've contributed over the years pays
for that 75,000 migration. So we
>> So you don't spend that 10,000 every
» So you don't spend that 10,000 every
year.
>> We all No, we don't. We just allocate
» We all No, we don't. We just allocate
for Correct. We've been building it. And
so so there's $75,000 tagged. And then
does that include the training also?
>> Uh yes, this includes the training. Um
» Uh yes, this includes the training. Um
it could be it could be plus or minus,
but it includes having the on-site
training. And that's what I'm requiring
is not to I've been through some um
migrations into new software. Then the
training is like three days and then all
of a sudden you're on your own. So this
is going to be walk us through
everything. Um, and I meant I'm glad
that you mentioned this, Steve, because
changing from software, one software to
another is it's a nightmare. Um, but
Spring Brook is
>> she'll lose your historical data no
» she'll lose your historical data no
matter what to tell you. Correct.
>> Not if you But you can also do it to
» Not if you But you can also do it to
keep the historical.
>> Oh, good luck.
» Oh, good luck.
>> Well, I've done it. Um,
» Well, I've done it. Um,
>> yeah, I know. It's all these buckets and
» yeah, I know. It's all these buckets and
multiple
categories,
>> but but are is there going to be much of
» but but are is there going to be much of
a conversion when you go to the
cloud-based application? Um there there
will be conversion as far as the
interface um the way it looks like um
where you go uh and h in processing
things. Um right now it's more of a
>> is it using the same database?
» is it using the same database?
>> Yes, it's using the same we're not
» Yes, it's using the same we're not
cloud-based now.
>> No.
» No.
>> Uh
» Uh
>> no
» no
>> no. So there is going to have to be a
» no. So there is going to have to be a
conversion to the
>> but within the same software provider.
» but within the same software provider.
>> Yes. Yeah. Within
» Yes. Yeah. Within
>> that's okay. Yeah. And and and what the
» that's okay. Yeah. And and and what the
what the good thing about this the the
cloud cloud-based like any upgrades or
any like
>> it's automatic,
» it's automatic,
>> right? They'll do it and stuff but
» right? They'll do it and stuff but
>> and it's more it's more secure, right?
» and it's more it's more secure, right?
Um
>> and so it it's just a it's a different
» and so it it's just a it's a different
look on the interface and what's good is
they understand that. So you can when
you you can toggle between what you're
existing working for working in and the
new interface. So I have staff that
enjoy that is used to doing it this way
and and I can find here in this module.
>> So you can go back and forth. You're not
» So you can go back and forth. You're not
like it's not like okay once you're in
this new one you're just working in this
new one. So you can you can pivot
>> and so which is I think is is is
» and so which is I think is is is
beneficial.
>> One the information is already there. Uh
» One the information is already there. Uh
too, it also helps with the integration.
Another thing too we want to do, there's
um express bill pay uh so uh people can
pay online through credit cards.
>> Is that included in the budget? So
» Is that included in the budget? So
>> yes,
» yes,
>> and the AI portions of it
» and the AI portions of it
>> and the AI portion, right? Yeah. So
» and the AI portion, right? Yeah. So
that's another added benefit is it um
everything is integrated. So on the
payments right taking payments it'll be
um through the express bill pay is is
the payment
>> uh application for springbook. So it it
» uh application for springbook. So it it
it it
>> you pay and it it talks to your GL, it
» you pay and it it talks to your GL, it
talks to your cash receipts and and
everything's integrated. Right now when
we take credit card payments, we we take
it but it's manual entry,
>> right? This is seamless, right? So that
» right? This is seamless, right? So that
and it's it's a it's much needed and we
need to move more to that direction
>> and stuff. So
» and stuff. So
>> the budget also includes the AI modules.
» the budget also includes the AI modules.
for any other
>> or anything that for now. Yeah. Unless
» or anything that for now. Yeah. Unless
and then if I think if there's anything
that that gets created, there may be
like that's not already in there, they
may say, okay, um
>> like Yeah, correct. An add-on. So, when
» like Yeah, correct. An add-on. So, when
we do this, we'll verify, okay, what is
what is the future of this version of
the cloud? Is there anything that's
additional? Um
yes, if it is, okay, what are the
add-ons? And then going forward it's
just up upgrades right whatever refresh
upgrades were um you know if they find a
bug on something right it automatically
will update um the other thing is uh
what was the other mention on the
not the upgrades but um
>> does it change the licensing fees
» does it change the licensing fees
>> the the license fee should be it's about
» the the license fee should be it's about
should be about half of that a year
which means the license fee so it will
go down.
>> Yeah. The license fee fee would be about
» Yeah. The license fee fee would be about
34,000 which includes um customer
service, customer support. Um
>> so that's
» so that's
>> and we already pay that right now. We
» and we already pay that right now. We
pay that.
>> So the so in the budget
» So the so in the budget
>> our cost will go down.
» our cost will go down.
>> No no um this is the onetime cost,
» No no um this is the onetime cost,
>> right? That's
» right? That's
>> And then and then our maintenance cost
» And then and then our maintenance cost
is is already in the budget which is our
our customer support which is for all
the modules is sort of about 34,000 a
year the same stay the same
>> but the licensing you said so the
» but the licensing you said so the
licensing
>> that is the licensing 34,000
» that is the licensing 34,000
>> because at first I thought I heard you
» because at first I thought I heard you
say it would go down but it'll stay the
same.
>> Yes it'll stay the same.
» Yes it'll stay the same.
>> Yeah. This I meant the one time would go
» Yeah. This I meant the one time would go
down.
>> 75,000 one time
» 75,000 one time
>> and then the open gov work.
» and then the open gov work.
Does how much does that cost or is that
>> that's about 30
» that's about 30
32,000 or
>> that's not included in the 75.
» that's not included in the 75.
>> Correct. And we're that's already
» Correct. And we're that's already
budgeted in our on our um annual budget
that part through open gov. Um the same
thing for the spring book maintenance
that's already budgeted in our in our
operation budget. And another thing with
with um our spring broke is we have
customizations in there that are
specific to our agency um specifically
customizations for
this state our pension right. It's
customcreated portion in our software
that we can create reports run reports
um because we have to download every two
weeks we send the the pension uh data to
calc and so that's a customization like
there's a customization for the state of
warrior right they have to customize
their software for what what is required
there so we have some customizations too
in our software and that's what they're
aware of it so that I think staying with
them upgrading with them. Um it it it
the best thing and then the
customizations also are pretty
» do you know like initial uses like do
you have a list of initial uses of AI
>> other than right now uh it's the the um
» other than right now uh it's the the um
>> the bills the bills I think there's
» the bills the bills I think there's
going to be an AI component on the
reporting on the Tableau where you can
say tell me the last Mhm.
>> for property taxes and you enter the
» for property taxes and you enter the
account code and it should bring
everything up. Um but right now I think
the the biggest ones for us is the
expense the AP component accounts
payable and then the express bill pay to
take on um pay online um pay via credit
cards. When do you want to do it
>> this? I'm I'm I'm working with Spring
» this? I'm I'm I'm working with Spring
Brook and hopefully
not in the next two months or so.
Probably towards the end it's
summertime. Um right because my hiccup
is don't want to do it when you're in
the middle of budgeting.
>> Right.
» Right.
>> Yeah.
» Yeah.
>> Middle closing the fiscal year. So yeah.
» Middle closing the fiscal year. So yeah.
So and it's just also making sure that
it aligns with their time timeline with
their consultants, right? because
they're going to have to send them here
um the time for them to uh to do this
conversion switch over to the uh
cloud and then thank you the cloud and
then also the to organize the training
right and the training will be I'm
assuming two weeks but each module will
be two days two and a half days
>> do they also have to reintegrate it with
» do they also have to reintegrate it with
open gov
>> uh I don't I don't think so I think Um
» uh I don't I don't think so I think Um
I think it'll just be because open of is
an SQL reader I think or something like
that that it just reads. is just making
sure I I'll update making sure I'll
verify um on the on the reader, but uh
we had we didn't um only with Springbook
when we worked with Open Gov, we just
had to contact Springbook to have them
the ability to to tag and read it. But
other than that, it's shouldn't be so
much
>> if the database isn't changing.
» if the database isn't changing.
>> Correct. If the database isn't changing
» Correct. If the database isn't changing
shouldn't it shouldn't um be a big
change. But thank you. Those are one of
the things more asked.
>> Things are never as easy to
» Things are never as easy to
>> No. Yeah, I I hear you. Yeah, you're
» No. Yeah, I I hear you. Yeah, you're
right.
>> Does it increase your prospect pool for
» Does it increase your prospect pool for
employees because now you could have
more work at home or is that something
we don't do?
>> Um the work from home is something we
» Um the work from home is something we
don't do. Um
I think
>> because of a management be here do work
» because of a management be here do work
kind of
>> not so much that I think more we're
» not so much that I think more we're
we're a public servant. So how can we
serve the public? We're at home. um more
of that that approach but we we do I
mean some of the directors work from
home um but I think on the the the
>> so that software in particular won't
» so that software in particular won't
contribute to that you couldn't have an
AP person that's going to wants to work
Friday from home and
>> you can I mean
» you can I mean
>> where they go
» where they go
>> I mean the software will be available to
» I mean the software will be available to
log in right you can you can access it
anywhere like a
>> um a portal VPN
» um a portal VPN
>> yeah VPN portal Yeah,
» yeah VPN portal Yeah,
>> but I think it it just it'll help help I
» but I think it it just it'll help help I
guess streamline not just the workflow
flow but also um the analysis to
reporting um the cash module the bank
record module um a lot of it will be um
more
I think streamlined and easier all
windows based already but I think more
now with these applications for data
>> modern idea Yes. Yeah, they will. Yeah,
» modern idea Yes. Yeah, they will. Yeah,
I gave them a log. Here you go. Log in.
You can pull it up yourself. Pull up the
information. But yeah, but that that was
my update on that
just to let you know where we're at. And
and then the AI component. We're still
I'm still like evaluating it like with
the open gov. They they working with
chat gd. I'm creating the the components
within their software. So, um, and in
trying to see what other agencies are
are dealing with and making sure that
policies are set up, too, so it's not,
um, you know, we run them up, right?
But, um, that was for three. Any other
questions on that one?
>> Thank you.
» Thank you.
>> Yeah. And then on the ALM, I just want
» Yeah. And then on the ALM, I just want
to kind of highlight real quick just I I
I attended the webinar back in early
December and just and I I included in
your packet um the ALM review and again
this is a review that's every four years
that Calpers is doing. Uh at page nine
of the um packet is the kind of or the
main the main meat of it is the the
board adopted the total portfolio
approach. Um and this was um I kind of
briefly discussed about it this um at
our last meeting. It's the they're doing
the 7525
uh equity bonds reference portfolio and
then they're at they're allowing that
active risk limit of 400 basis points.
So 4% for within that portfolio risk um
adjustment and I think that's um Tom as
you mentioned hopefully the new
investment person has that edge so it's
extra tool so the the plans can move
within that 400 basis point for the risk
limit on the um the the actual portfolio
and then there's no change to the
current discount rate 6.8 A is going to
be the same. Uh and the just you know on
the adopting the portfolio approach
there's no no changes to the board's
authority. The ALM process is a four
year cycle midpoint on review uh you
know to verify that the the
capital market assumptions are being
met. If there's any if the expected
returns are being met if there's any
changes that need to be made. Um again
they review the whole actuarials uh on
the assumptions. Again, they just
there's a reference portfolio, there's
the active risk limit. Um, and this
replaces that adopted target strategic
asset allocation and ranges that they
were um they were using before. And
again, the the board will continue to
review this uh total portfolio fund
risk. Uh, and then that that's pretty
much it. Just kind of it evolves into um
you know, better outcomes. There's a
they kind of put like a matrix a metrics
of um improved internal governance
reference portfolios on page 11
simplicity better transparency greater
accountability investment decisions for
the whole and then um it kind of the
rest of the report it kind of goes
through uh what the process will be
but um age
19 and 20. Uh 18 through 20 kind of
discuss the actual assumptions. Uh you
know the economic assumptions obviously
the long-term investment return that
they're looking at. The discount rate is
is staying unchanged at 6.8. They're
verifying inflation. Inflation has gone
up the last um previous years. So they
they're factoring that in there. uh
other non-economic assumptions they're
factoring in on the uh going forward is
increase pay increases longevity
retirement termination disability all
these are getting factored in um in
these new uh assumptions for uh the ALM
process
and then demographic assumptions uh
shows on page 20 starts on page 20 on
what's changing
um retirement rates are staying the same
but Some are increasing by some while
some will also decrease. Uh mortality
rates is something that they looked at.
Uh there's a slight reduction in
mortality rates. Uh projected mality
rates slight reduction.
There is a minimum changes. There's
termination rates, minimum changes have
been adopted.
Um I think the biggest one is the
discount rate because if the discount
rate changed from 6.8 the whole asset
allocation would change, your um
investment opportunity um would change.
So, uh they're keeping it the same. I
don't think it's going to change um
until another four years. We still have
the funding risk mitigation policy that
takes effect, but last year of April of
24, it's no longer automatic. It was
automatic. Now if it gets triggered and
this is if the investment rate of
returns is 2% higher than the actual um
discount rate then that it creates a a
funding risk mitigation policy where it
reduces the rate of return by 05%.
That's not automatic. If it happens they
bring it to the board. Again that
happened this year. We had a positive
what 11% increase in
investment return. Um and so it it
created an investment risk risk
manuvation policy. The board uh
presented the board not to recommend a
reduction. So again discount rate be at
6.8%.
I think eventually over time it could go
from 6.8 to 6.5.
Most investment portfolios are at that
6.5%. Question.
>> Who's on the board? Are you on the
» Who's on the board? Are you on the
board?
>> Helpers board.
» Helpers board.
>> Yeah. Who are these people? I wish they
» Yeah. Who are these people? I wish they
state appointed. Yeah,
>> they're they're appointed by the state.
» they're they're appointed by the state.
>> They elected or I hope would hope not.
» They elected or I hope would hope not.
>> No,
» No,
>> there's um I think two
» there's um I think two
elected members, but that they're
elected by retirees or by by members
elect I think one or two members on the
board, but majority of them are fable.
Very smart.
>> Yes. Yes.
» Yes. Yes.
>> Very smart.
» Very smart.
>> These are the There you go.
» These are the There you go.
>> I know there there's at least one union
» I know there there's at least one union
representative.
>> Correct.
» Correct.
>> Yes. Union representatives. Um
they look intelligent, right?
>> Yeah. I I've I've watched a thing where,
» Yeah. I I've I've watched a thing where,
you know, they were in attendance and
they were asking questions and they all
seemed to be on top of things
>> and seem to be confident.
» and seem to be confident.
>> Yeah,
» Yeah,
>> Robert, I don't think that was the
» Robert, I don't think that was the
biggest change for me. The biggest
change was the postretirement mortality
for men, the slight reduction in the
projected mortality rate. I think that's
correct.
>> Is that assuming everyone's going to
» Is that assuming everyone's going to
live longer? So a reduction of a
mortality rate is a longer life.
>> Yeah.
» Yeah.
>> Plan accordingly.
» Plan accordingly.
>> Yeah. Exactly. Oh, and then I just want
» Yeah. Exactly. Oh, and then I just want
to point out
>> Yeah. Live longer.
» Thanks for bringing it up. I was I was
but page 25 of the report, it kind of
shows the the the funded ratio. So last
year of 24 that you can see the funding
ratio was um 74.4%
and um current assumptions are in blue
proposed assumptions are in green. So in
25 the funding ratio increased to 79% on
the current assumption and then proposal
assumptions it reduced by.
>> So this is a key thing to me that 63025
» So this is a key thing to me that 63025
hasn't happened in terms of the
allocations to U that's so when they say
it's going to go down four.4% 4%. I
think for sure what they're saying is
there's going to be a UL layer added for
assumption changes.
And I think on the next page they they
imply at least that depending on your
plan things could be different. But if
if that was just the average if we were
at the average
>> I've calculated it's going to be a added
» I've calculated it's going to be a added
layer of 300 to 350,000
for all plans total bathroom plans
>> on the UAO.
» on the UAO.
>> Yeah. It's going to add to that. It's
» Yeah. It's going to add to that. It's
going to be
>> have to advertise advertised. Yeah.
» have to advertise advertised. Yeah.
>> Yeah.
» Yeah.
>> Right.
» Right.
>> Yeah. But also we know for 63025
» Yeah. But also we know for 63025
there's a huge investment gain that's
going to go the other way. So
>> uh in net I would think
» uh in net I would think
>> we're we're going to end up better than
» we're we're going to end up better than
we are right now.
>> Correct. And then you got to factor into
» Correct. And then you got to factor into
the we we just made the 3 million ADP.
>> Yeah.
» Yeah.
>> Oh and I didn't calculate that in what I
» Oh and I didn't calculate that in what I
came up with is 300,000.
>> Yeah. So that that's going to be
» Yeah. So that that's going to be
benefit. Yeah. um we made it after the
April deadline, so it didn't um it was
it's not factored into the actual report
we received, but it'll be in the next
one at the end of of of 25. And then
yeah, it just mentions that you know the
there's new assumptions that'll be used
for the June 30 to 25 actual
evaluations. These um the changes will
update our public agencies. they will
affect our contribution rates in fiscal
year 2728. So um two fiscal years from
now um these changes in the ALM will
take effect and then it'll be uh the ALM
will be effective July 1st 2012
» I mean 26 sorry
that they they're they're voting right
now and then in July 1. Thank you. I'm
still in 25
only 13 days in the new year. Okay. But
yeah, so July 1st of 26, um these new
ALM rates and assumption changes will
take place. And that's why the it won't
affect our our rates until the 27 28
year.
» That's all I should talk about agendas
coming up.
Uh
>> sure. Um
» sure. Um
>> I have one question and that is uh
» I have one question and that is uh
the audited financials.
>> Yeah, I'm working on those.
» Yeah, I'm working on those.
>> We have that for next.
» We have that for next.
>> Yes, we will have it next meeting in
» Yes, we will have it next meeting in
March. And then um the the other one I
wanted to bring out was the uh Victoria
talking about Kalpers is working on
bringing um Julian and um the investment
team out and they they couldn't come out
this month um but u I'm hoping that
maybe they come out in March
>> as well.
» as well.
Anybody else have agenda items?
So, are we ready to adjourn?
Let's do it.
>> Yeah. Will we adjourn?
» Yeah. Will we adjourn?
>> Okay.