[0:00] Okay, let's call.
[0:14] Uh,
[0:16] >> member
[0:18] » member
[0:18] is passing.
[0:20] Uh, vice chairman
[0:23] >> here.
[0:24] » here.
[0:24] >> Fairville
[0:25] » Fairville
[0:25] >> here.
[0:26] » here.
[0:26] >> Member Jane
[0:27] » Member Jane
[0:27] >> here. Member Bridley
[0:29] » here. Member Bridley
[0:29] >> here
[0:30] » here
[0:30] >> and then Mayor Owen
[0:37] and uh Vice Mayor look
[0:42] around.
[0:45] » Uh are there any public comments? Anyone
[0:48] online?
[0:51] >> No, no one online.
[0:54] » No, no one online.
[0:54] >> Let's go to the regular agenda item.
[0:56] » Let's go to the regular agenda item.
[0:56] First is review include the draft
[0:59] minutes.
[1:11] » Any corrections?
[1:14] I mean there was a typo in section two
[1:17] of the public property tax.
[1:34] Do I have a motion to approve the
[1:35] minutes with the one change?
[1:37] >> I motion to approve the minutes. No
[1:39] » I motion to approve the minutes. No
[1:39] changes.
[1:54] Then you can sit next to Andrew. Sorry.
[2:04] So,
[2:05] >> so next item is uh review of the bars
[2:09] » so next item is uh review of the bars
[2:09] that have crossed the border ending
[2:12] September 3rd.
[2:14] >> Can we do a motion motion? I'm sorry.
[2:17] » Can we do a motion motion? I'm sorry.
[2:17] Motion.
[2:18] >> Yes.
[2:28] » Yes.
[2:29] >> Yes.
[2:38] Yes. Uh so before us we have um
[2:42] presentation just real quick on on this
[2:45] item. Item three is a review and discuss
[2:47] of PAR's OPEC OPEC trust program and a
[2:50] snapshot of the quarter ending September
[2:52] 30th 25 review presentation by
[2:55] administration in our um asset
[2:59] management group investment funds. We'll
[3:02] discuss
[3:04] George and then oh thank you
[3:08] funding and to the trust and we'll
[3:11] discuss the expense and investment
[3:13] discussion. So um with this item real
[3:15] quick I just want to give a background
[3:17] um in the staff report at that our
[3:19] September 9th um finance committee
[3:21] meeting the committee reviewed our roll
[3:23] forward oped valuation and liabilities
[3:25] and assets as of June 3025
[3:28] uh which provided the latest output
[3:30] actuality report and the balance of the
[3:32] par trust as of 63035
[3:35] and the staff report which showed a
[3:37] decrease in the oped liability of
[3:40] 171,000 and um uh 7.9 million against an
[3:46] increase in the town fiduciary fiduciary
[3:48] net position of 9,57,000.
[3:51] Uh this is an increase of 388,745
[3:54] and net position. They revealed our net
[3:57] opet balance of 1,70.
[4:00] So today's meeting we're providing an
[4:01] update to the annual program for the PAR
[4:03] trust as of November 30th 25 and then
[4:05] we're going to do an overview of the
[4:07] investment performance for the first
[4:08] quarter um ending uh September 30th 25.
[4:13] So in the staff report on page two, I
[4:15] had listed the um the roll forward that
[4:18] we reviewed at September 9th as our
[4:20] September meeting and then the 63025
[4:23] trust position updated as of 11:30.
[4:26] So um there was a the trust balance went
[4:30] up to 9.25 25 million to the OPED
[4:33] liability is 7.98 million and net OAP
[4:36] asset introduced about
[4:40] 7,000 to 1 million268.
[4:44] So um there's still a favorable asset
[4:47] experience um that contributes to
[4:49] decreasing our net liability. And again
[4:52] we have um our presentation here we have
[4:53] director Andrew Brown of PFM asset
[4:56] management to present today. I'm sorry
[4:58] we have
[5:00] administrative director uh Jennifer Mesa
[5:03] with PARS to discuss the outlook of the
[5:05] pre-unding trust program and I see that
[5:07] you just what was just handed to you was
[5:09] the actual hard copy of the presentation
[5:11] that was included in your graphic. Uh,
[5:15] so without further ado, I would like to
[5:16] turn it over to Jennifer Mensah of ours
[5:19] and Andrew Brown of management and I
[5:23] will pull up the presentation online so
[5:26] you'll be able to see it as well
[5:30] as they talk through it. So without
[5:32] further ado,
[5:33] >> All right. Perfect. Thank you so much.
[5:35] » All right. Perfect. Thank you so much.
[5:35] Um, and good evening or good afternoon
[5:36] everyone. Thank you for having us here
[5:38] today. I went ahead and put uh together
[5:40] a presentation here for you. We won't
[5:42] cover every single page, but we want to
[5:44] provide you as much information as we
[5:45] can in case you have additional
[5:47] questions that we can work to. Um, if we
[5:50] go to slide number two, just our contact
[5:52] information at any point in time, feel
[5:54] free to reach out to us if you have
[5:55] questions. If you don't have any today,
[5:57] but maybe in a couple days or after this
[5:59] meeting, something comes up. We're
[6:00] always available to assist you. Slide
[6:03] number three, just a little bit of a
[6:05] reminder of the trust team myself
[6:08] public agency retirement services. We do
[6:11] the administration of this account. So
[6:13] the record keeping, the audits, the
[6:15] reporting, all of that is done by force.
[6:17] US Bank holds the over $9 million that
[6:20] you currently have and safeguards those
[6:22] assets and overseas PFM where Andrew is
[6:26] from making sure that everything that
[6:28] the town has requested for the
[6:30] investments is being properly done and
[6:32] managed through PFM. So those are the
[6:34] different parties within the group. Um,
[6:36] if you have any additional questions, I
[6:38] can answer them.
[6:41] Slide number four, we go through the uh
[6:44] program. You have what's called a
[6:46] combination trust that allows you to put
[6:48] money aside for retiring healthcare
[6:50] obligations. Um and you also could
[6:53] technically put money aside for pension.
[6:55] That's something that we talked about
[6:56] maybe a little bit over five years ago.
[6:58] Now, that uh part of the bucket has not
[7:00] or that part of the program has not been
[7:02] utilized, but you have uh flexibility.
[7:05] Currently, you're only using the OPM
[7:07] side. As I mentioned, you have over $9
[7:09] million in that. Yeah. You select when
[7:12] to put money in and you have flexibility
[7:14] of taking that money out. You can take
[7:16] that money out to pay uh for any retiree
[7:19] uh related expense, whether you
[7:21] reimburse the town back for those
[7:23] expenses. If you have some kind of
[7:25] stipen that you provide them, we can pay
[7:26] them directly. We can pay a third-party
[7:29] provider that may be offering some of
[7:31] those benefits out of the trust. And for
[7:33] any actual evaluations, you can pay it
[7:36] out of the trust as well. So, a lot of
[7:38] different ways that you can utilize the
[7:39] asset. Um, when
[7:44] slide number five,
[7:47] top portion just shows you this program
[7:49] started back in May 16th of 2012. Uh,
[7:52] town manager, city manager is currently
[7:54] the plan administrator. So, on behalf of
[7:56] uh your city council and this committee,
[7:59] any changes would be done uh there by
[8:01] Jordan. The investment strategy is
[8:04] called the moderate index strategy which
[8:06] Andrew is going to go out and talk about
[8:08] in just a couple of slides. That is not
[8:10] something that is locked in. The city
[8:12] can or the town can make changes at any
[8:14] point in time to that investment
[8:16] strategy. And that's why we try to meet
[8:18] on a regular basis in case things happen
[8:20] or you know something else changes with
[8:22] the town and you want to make changes to
[8:24] the investment. So that can be done at
[8:25] any time of the year at any time uh that
[8:28] we needed.
[8:30] bottom portion are your assets. As of
[8:33] November 30th, you've contributed a
[8:35] total of $9.4 million into the account.
[8:39] That includes the initial June 2013
[8:42] contribution of 1.2 million plus the
[8:44] additional $8 million in there. You have
[8:47] taken money out. You've been taking
[8:49] money out almost every fiscal year. A
[8:51] total of over $5 million taken out of
[8:54] the truck. Your net investment earnings
[8:56] from KFF have been of over $4.8 8
[8:59] million on there and the account balance
[9:02] as I mentioned November 30th is $9.2
[9:05] million in the account.
[9:08] Line number six shows you this
[9:10] information uh based on the historical
[9:13] information on every fiscal year that we
[9:16] program. So you can see when the money
[9:17] came in, you can see your total assets
[9:20] there and then of course those
[9:21] reimbursements taken out of there in the
[9:23] center uh column for you. And you can
[9:26] see since 2024, we have not had any
[9:29] additional contributions into the
[9:30] program. As you'll see in the next page,
[9:33] the plan is very uh well established in
[9:36] a very healthy place. The town has done
[9:38] a great job of establishing the program,
[9:41] putting money aside, and really
[9:42] addressing those liabilities on the
[9:44] account. So all we are seeing in the
[9:46] last couple of years is reimbursements
[9:48] to pay down those retirey healthcare
[9:50] obligations.
[9:53] By number seven, this is the liability
[9:56] for this specific program. These reports
[9:58] are not done by PARs. Uh you currently
[10:00] use a company called Position Actuaries
[10:02] that does that for you. And what we went
[10:05] ahead and did is compared the 2024
[10:07] versus the latest 2025 on there. The
[10:10] discount rate or the long-term expected
[10:12] rate of return for this type of plan
[10:15] under this portfolio is about 6.5%. So
[10:19] that's what the actuary is quoting on
[10:20] there. That gives you a total OPED
[10:23] liability or what currently is due for
[10:25] this type of liability with your town of
[10:28] about 7.9 million. Now, the actual money
[10:32] that you have in the trust is over that
[10:34] at $9 million. So, as you can see,
[10:36] currently if you, you know, you had to
[10:38] pay the bill today, you currently have
[10:39] assets to meet all of those obligations.
[10:42] Now, again, that's a running number. It
[10:44] can change. That's why you do ask for
[10:46] evaluations at a minimum every two years
[10:48] because things can change, premiums and
[10:50] so forth, costs can change. So that is a
[10:53] floating number that we'll see from time
[10:55] to time. At this time, you're in a very
[10:57] healthy funded status. Uh you're funded
[10:59] at 113%.
[11:02] Uh but less than uh 5% of our agencies
[11:05] in California are that well funded. So
[11:07] good job to you to the town and staff
[11:10] for actually establishing this, funding
[11:12] it, and having it in such a healthy
[11:14] condition.
[11:15] And then the last number that I want to
[11:17] take a look at there is the annual
[11:18] benefit payments. The about half a
[11:21] million dollars that you currently um
[11:23] you know pay out for these type of
[11:24] liabilities. You can always take that
[11:26] out if you're currently doing to um
[11:28] other
[11:37] » sign number eight. Um I'll have Andrew
[11:40] touch base more as I mentioned on the
[11:41] investments. This is just historically
[11:43] what you have uh returned with the
[11:45] inception to date of 6.47. In the
[11:48] previous slide I had mentioned your
[11:50] discount rate is 6.5. So you're right
[11:52] there u meeting that discount rate from
[11:54] the actuary as well. That's that's what
[11:57] I'll point out there and then I'll have
[11:58] Andrew come back if he needs to to that
[12:00] slide.
[12:02] So that is the administrative portion of
[12:04] this program. Details on your assets and
[12:07] so forth and your liability. I'm going
[12:09] to turn it over to Andrew to discuss the
[12:11] investments. But are there any questions
[12:12] on the slides that I've touched on
[12:14] already?
[12:17] >> Okay,
[12:17] » Okay,
[12:17] >> Robert, I think there were some
[12:19] » Robert, I think there were some
[12:19] premeating questions. Uh, one of which I
[12:21] think was fairly much in the
[12:24] interpersonal role. Do we want to do all
[12:27] questions at the end or if you want to
[12:30] >> I think one of them was the
[12:31] » I think one of them was the
[12:31] reimbursement.
[12:32] >> You mean the funds?
[12:33] » You mean the funds?
[12:34] >> Um, yeah, we can handle that right now.
[12:36] » Um, yeah, we can handle that right now.
[12:36] Um uh report
[12:40] discussed it. Um correct. So uh PARS
[12:43] administers the retirey health benefits
[12:45] for us. So every month um through our
[12:49] retirees have to participate with
[12:50] CalPERS help. And so, um, because we
[12:54] have this, uh, trust with ARS, um, we
[12:58] get the bill every month from from, um,
[13:01] Kalpers, and then we verify based off of
[13:04] the individual retiree, whatever, um,
[13:08] plan reimbursement they get, we we we
[13:10] take that, we reconcile it against what
[13:12] their premium is, and then we reimburse
[13:15] them their um, retirey health. Um
[13:19] because Kalpers, what CalPKERS does is
[13:21] they deduct their retirey health out of
[13:23] their pension. So that comes out from
[13:27] Kalpers. They take out the retirey
[13:29] medical from the retiree, the annuity.
[13:32] Um and what we do through PARs is we
[13:35] reimburse the retirees their medical.
[13:38] And so every month we send that to PAR
[13:40] say a list of all the individuals. Um
[13:42] they already have their address, they
[13:45] have their bank information. and we set
[13:46] it up and we send every month um prior
[13:49] to the end of the month um before the
[13:52] annuitant's uh healthcare is taken out
[13:55] we send that list to um PARS and then
[13:58] PARS reimburse each individual annuitant
[14:01] their reimbursement amount health
[14:03] reimbursement amount and so on that
[14:05] slide that um previous slide on page six
[14:09] we saw the dispersements
[14:11] uh so the dispersements
[14:15] amount you can see are all in that
[14:18] column under the dispersement. So u as
[14:20] of June 26th and again this is on a
[14:23] calendar year as of June 26 we
[14:26] contributed 347,000
[14:29] and that's what was contributed in total
[14:31] to reimburse the annuitance their health
[14:34] um retirey health uh care. Uh so PARS we
[14:38] work in tandem with PARS on this uh and
[14:41] you could see it as of fiscal year 24 we
[14:45] stopped doing contributions because what
[14:47] we were doing prior the town would every
[14:50] month the town would contribute whatever
[14:53] um that retirey help for the month was.
[14:55] So if it was 35,000 we were contributing
[14:57] 35,000 to PARS and PARS was taking that
[15:00] amount and dispersing it to the
[15:02] individual retirees. So that's how the
[15:05] flow of funds work and that's how we use
[15:06] the retirement trust. We use the trust
[15:09] because it's um in doing so the retiree
[15:13] is not um taxed on that benefit because
[15:17] we're we're reimbursing through the
[15:18] trust. So um
[15:22] with the Jennifer mentioned that we do
[15:24] the OPEC act report that's precision
[15:27] actual does their actual report we work
[15:30] in tandem we send that to to PARs and
[15:32] that way we can kind of gauge and see
[15:35] where we're at based off of our assets
[15:38] and our liabilities. And so PARS helps
[15:40] us with that administering that
[15:42] reviewing it. And then Andrew is on the
[15:44] investment side making sure that we meet
[15:46] the investments for it. Um and and and
[15:50] also the uh the cost the expenses for
[15:55] the uh administrator and the investment
[15:58] also comes out of the cars trust and and
[16:01] I'll uh touch work on that after we talk
[16:05] talk about the investments. Um but
[16:08] that's that's all I have. Is there any
[16:11] questions? Um I just wanted that's how
[16:13] the process works with cars. Um, and
[16:16] then they they managed the they
[16:18] administered the plan for us.
[16:23] Any questions?
[16:27] So then I'll turn it over to Andrew.
[16:29] >> Let me let me have you go, Robert, if I
[16:31] » Let me let me have you go, Robert, if I
[16:31] could to 2.8 page uh number in the
[16:34] bottom right hand corner.
[16:40] » There you go. Yep.
[16:43] >> So it's good to be back here. Thank you
[16:45] » So it's good to be back here. Thank you
[16:45] for the invitation. Uh, as the finance
[16:47] director Baron highlighted in the staff
[16:49] report, I'm going to touch on
[16:51] performance. We'll take a look at the
[16:54] economic snapshot of PF and asset
[16:57] management, highlight positioning for
[16:59] the portfolio, and then I think there's
[17:02] also some supplementary questions uh
[17:05] submitted related to fees and expenses
[17:06] and investment policy statement. Uh so
[17:09] those are going to be the five topics
[17:10] but um any other topic that uh you want
[17:13] to uh discuss just feel free. Uh so this
[17:18] is my first investment uh presentation
[17:20] for calendar year 2026. Uh and so the
[17:24] the slide that we're looking at here the
[17:25] the quarterly uh market summary the
[17:28] factors to consider over the next six to
[17:30] 12 months. This is something we call our
[17:31] heat map. And what we do is we take nine
[17:33] economic and market variables and we
[17:35] apply some type of color-coded rating
[17:38] system to our outlook on these nine
[17:40] dynamics. Uh and it's designed to cover
[17:43] a 6 to 12 month horizon. Uh the color
[17:46] coding uh corresponds to red and yellow
[17:50] uh some type of negative view. Gray
[17:52] there in the middle would be a neutral
[17:54] outlook and then light green, dark green
[17:56] is some type of positive view towards
[17:59] one of these dynamics. uh upper right
[18:01] hand corner you'll see it's uh ending uh
[18:04] September 30th 2025. So we have not
[18:06] updated it officially
[18:09] um uh for for dissemination for the 1231
[18:13] period of time uh but but but I have
[18:15] people who who have uh shared our our
[18:18] views and um they haven't changed. So,
[18:21] so where you see the black dots on these
[18:23] nine dynamics are exactly where we are
[18:26] today and and certainly we can debate um
[18:29] you know maybe we should have moved
[18:31] something here and there you know when I
[18:33] think about the six to 12 month horizon
[18:35] you know predicting the future is
[18:36] difficult at any time I think we have a
[18:39] better handle on a six-month horizon
[18:41] versus a 12-month horizon and and if we
[18:43] were thinking about the next six months
[18:45] I think we're pretty constructive pretty
[18:47] positive I think growth in the in the
[18:49] United States is going to be pretty
[18:50] solid. Um and and a lot of uh that
[18:53] positive feeling really comes from, you
[18:56] know, where we have many of these black
[18:57] dots in the green regions, upper leftand
[18:59] corner. First off, monetary policy. Um
[19:02] we're still working through the positive
[19:04] impact of 2024 rate cuts. We got some
[19:07] rate cuts in the fourth quarter of 2025
[19:11] and and our best guess is we get one or
[19:13] two more here in 2026. So, so that was
[19:17] maybe some of the uh catalyst to uh
[19:19] putting that uh rating as as a positive
[19:22] outlook for monetary policy. Interest
[19:23] rates in our view are likely uh to t
[19:26] continue to trend downward. Uh financial
[19:29] conditions look excellent. Much of that
[19:31] really stems from the one big beautiful
[19:33] bill that was signed into law there on
[19:36] July 4th that has some tremendous
[19:38] provisions for corporations to expense
[19:41] R&D and capex as well as uh it is widely
[19:45] anticipated uh that that tax refund
[19:48] season uh in the upcoming quarter the
[19:51] later this quarter second quarter this
[19:53] year is going to see some uh pretty
[19:55] significant tax refunds for individual
[19:58] tax filers. Uh, and typically when you
[20:00] get a windfall of cash coming in,
[20:02] Americans typically spend it. So, so we
[20:04] think financial conditions are poised.
[20:06] And really, I mean, if if it was just a
[20:08] six-month horizon there at 12:00, we'd
[20:10] probably move economic growth uh to one
[20:13] of the shades of green there. Uh, and we
[20:16] also probably would move consumer
[20:17] spending to one of the shades of green
[20:19] there, right in the middle. Uh, with
[20:20] respect to inflation, the upper right
[20:22] hand corner, we do have it rated as a
[20:24] yellow. We did get CPI today. CPI
[20:27] headline was 2.7, core was 2.6.
[20:31] Still kind of closer to the 3% level
[20:34] versus the 2% level that the Fed is
[20:36] looking to target. Um, many economists
[20:39] out there, point to 2%. Kind of maybe a
[20:42] little bit hesitant to put my initials
[20:44] next to that. Uh, you know, I might stay
[20:46] at the mid 2% level. uh but but may
[20:50] maybe not so ownorous uh from a from a
[20:54] policy standpoint for monetary policy
[20:56] halting the Fed from cutting rates going
[20:58] forward. Uh labor markets we do have it
[21:00] rated as a yellow there at 3:00 and um
[21:03] yeah uh last five six months we've seen
[21:06] a slowdown in job creation. uh it's been
[21:09] sort of what's been termed in the media
[21:11] and and I hate reusing well you you know
[21:15] beat them into the ground phrases but I
[21:17] I will today low higher low fire um you
[21:20] know there's not a lot of terminations
[21:22] out there but there's not a lot of new
[21:24] job creation either um some economists
[21:28] point to well with the uh the slowdown
[21:30] in immigration maybe we only need
[21:33] something around along the lines of 50
[21:35] to 60,000 new jobs the Dallas Fed put
[21:38] out a report in the fourth quarter uh
[21:41] putting forth that that that uh
[21:42] potential data point that maybe 50 to
[21:44] 60,000 new jobs might be that that that
[21:47] that neutral rate of growth. Um maybe
[21:50] maybe not. Uh but but but certainly with
[21:53] the low number of new jobs that have
[21:55] been posted in the economy, we feel
[21:56] pretty comfortable still keeping it at
[21:58] yellow in terms of our rating. And then
[22:00] just two other quickly uh items that
[22:02] I'll touch on. um valuations,
[22:07] you know, some some argument, some push
[22:09] back there. At uh six o'clock, we have
[22:11] it at slightly negative. Sometimes uh
[22:14] clients would say, "Well, why should you
[22:16] put it at red?"
[22:17] >> And and maybe because of the textbooks
[22:18] » And and maybe because of the textbooks
[22:18] that I at least studied uh growing up,
[22:21] um yeah, it kind of feels a little bit
[22:24] expensive or or very expensive there at
[22:26] 23 times price to earnings ratio for
[22:29] large cap stocks in the United States,
[22:31] the S&P 500. Uh so so my inclination is
[22:35] to be a little more conservative. Um my
[22:38] other colleagues feel that yellow is
[22:40] maybe the the one that deserves the
[22:42] merit. Uh but but yeah, it the market's
[22:45] a bit overvalued to say the least. And
[22:48] that's worrisome because if we don't get
[22:49] the economic growth and the corporate
[22:51] earnings that that we anticipate in
[22:53] 2026, uh we're probably poised for a
[22:56] market selloff. And then we get to the
[22:58] fun part of the presentation where we
[22:59] talk about policy and political risks.
[23:02] Uh that always seems to be a hot topic
[23:04] with uh committees and whatnot. Um you
[23:08] know, three months ago, well, I guess I
[23:10] didn't totally lay out the the
[23:12] presentation format. When you see a
[23:13] white dot, a white dot is where we were
[23:16] maybe three months ago. So if this is
[23:18] for the 9:30 ending period, uh for that
[23:21] June uh June 30th to to uh end of
[23:25] September period, uh we had it at
[23:27] excessive risks. We moved it to yellow.
[23:30] Um and and I know what my colleagues
[23:32] were thinking about when they moved it
[23:34] from red uh highly negative to slightly
[23:37] negative. It was sort of the notion and
[23:39] it wasn't a debate of whether or not the
[23:41] the Trump policies were were disruptive.
[23:44] Yeah, they are disruptive. Um but but it
[23:48] was maybe the recognition that the
[23:49] market really wasn't caring too much
[23:50] about disruptions and and and maybe also
[23:53] uh not all disruptions yield negative
[23:56] outcomes and and so when when we think
[23:58] about some of the policies that have
[24:00] been uh enacted uh over over President
[24:03] Trump's first uh 12 13 months in office.
[24:06] You know there's been some highly
[24:07] disruptive policies but but with okay
[24:09] outcomes. one uh would certainly be the
[24:13] one big beautiful bill that's um going
[24:15] to be a huge catalyst for for the
[24:16] economy and it's always already been a
[24:18] very nice catalyst in some industries.
[24:21] Uh Operation Midnight Hammer that that
[24:23] that was certainly a positive. Um and
[24:26] then also some benefits coming from the
[24:28] initial deregulation uh policies
[24:31] enacted. So, so, so yeah, there have
[24:33] been some positives, but then you just
[24:36] kind of go through the first 11 12 days
[24:37] of 2026 and and it's one to make my head
[24:41] spin and um
[24:44] I just kind of jotted a few down.
[24:46] Venezuela, abduction of Maduro and his
[24:48] wife, cajoling, Trump, cajoling oil
[24:51] executives to invest hundred billion
[24:52] dollars in Venezuela, a country where
[24:55] many of them got kicked out several
[24:57] years ago. So, you know, how, you know,
[24:59] eager are are people to, you know, once
[25:01] burn, twice shy sort of thing. Strong
[25:03] overtures to invade Greenland. Directing
[25:06] Fanny May and Freddy Mack to purchase
[25:08] 200 billion in agency mortgage back
[25:09] bonds. Uh, truth social posting calling
[25:12] for prohibition of institutional
[25:13] investors to buy residential homes,
[25:15] preventing defense companies from buying
[25:18] back stock and issuing dividends. Um,
[25:21] and then just yesterday trying to cap
[25:23] swipe fees for credit card issuers at
[25:26] 10%. I mean, it's it's it's a lot. It's
[25:30] a lot for one administration in one
[25:31] year, not to mention 12 13 days. So, so
[25:34] I don't know if you want to push back in
[25:36] terms of, hey, why don't you guys put it
[25:38] back to red? I certainly wouldn't uh I
[25:40] wouldn't fight you. Um, but yeah, I
[25:44] don't know if hopefully it's nothing
[25:46] more than a debate about, you know, just
[25:48] the merits of, you know, where do you
[25:49] guys put it, red or or yellow, rather
[25:51] than, hey, you know, you highlighted
[25:54] some of the good benefits of of
[25:55] disruptive policies. You know, hopefully
[25:58] these current policies don't yield
[26:00] negative results um for for the
[26:03] remaining three years of of his
[26:05] presidential term. So, yeah, that wasn't
[26:08] much of an overview. It was maybe a
[26:10] little bit longer than I anticipated,
[26:12] but this is my first time in 2026, so
[26:14] I'll get better. Um, any any questions
[26:18] or or feedback on any of that?
[26:24] » Okay.
[26:26] All right. Uh, Robert, maybe page 2.9,
[26:29] which I think is in the next one. And
[26:31] and just a quick stop on this page. This
[26:34] covers our our asset allocation
[26:35] positioning and and and the the the one
[26:39] sort of u scarlet letter for us in 2025
[26:42] calendar year 2025 was we moved a slight
[26:45] underway position to equities there uh
[26:48] called maybe the third week in April. uh
[26:51] we got a little bit nervous about the
[26:52] the potential negative input of uh or
[26:55] impact of tariffs uh from from uh t
[26:58] liberation day there on April 2nd or 3rd
[27:02] and we moved from a 50% equity
[27:04] allocation to a 48% allocation in this
[27:07] portfolio. So it was a slight
[27:08] underweight. It wasn't a big move. Uh
[27:11] and and like I said the market didn't
[27:13] really seem to care. it kept on going up
[27:15] and and so maybe the third week in July,
[27:18] we moved back to a neutral allocation
[27:20] going back from 48% to 50% in equities.
[27:23] Uh and we've maintained that position
[27:25] across all of the asset allocation
[27:27] decisions within the plan. So when you
[27:30] look at this and you look at all the the
[27:32] black dots and the neutral uh section
[27:34] there in the middle of the page, uh US
[27:36] equities u international equities
[27:39] combining that together that's going to
[27:40] be 50% of the portfolio. fixed income is
[27:43] going to be 48% and your cash is going
[27:45] to be at a 2% allocation and that's
[27:47] where we've been since the third week in
[27:49] July and and that's where we maintain
[27:51] our current position today.
[27:54] Robert maybe page 3.1
[27:58] and and so this is going to be and um I
[28:03] think Robert you put the first quarter
[28:05] it is the first quarter of the fiscal
[28:07] year correct
[28:08] >> third quarter at least we're we're
[28:11] » third quarter at least we're we're
[28:11] mapping it on here
[28:12] >> correct
[28:12] » correct
[28:12] >> um
[28:13] » um
[28:13] >> and and so you know uh maybe
[28:17] » and and so you know uh maybe
[28:18] >> maybe the most relevant column to look
[28:21] » maybe the most relevant column to look
[28:21] at and I'll I'll be happy to look at any
[28:22] column here uh would be maybe the
[28:24] one-year column there. Third or fourth
[28:26] one over from the left. Uh and for the
[28:29] first line item, total portfolio. This
[28:31] represents the total portfolio uh for
[28:34] the pool that we're invested in. Uh you
[28:36] saw a page that Jennifer presented her
[28:39] her her last page in her presentation
[28:41] that actually um took a look at the cash
[28:43] flows for the town's uh uh portfolio and
[28:48] that actually would be maybe a more
[28:50] relevant period or re relevant uh
[28:53] exhibit to look at and maybe we can kind
[28:54] of finish off on that if if you want to.
[28:57] Um, so in terms of a 12-month period of
[28:59] time, the actuary says make 6.5%.
[29:02] And and we generated a a 9
[29:08] » 92.
[29:10] Does it show 9.65 up there?
[29:16] » Yeah. 9
[29:19] >> It says 9.65, but the
[29:21] » It says 9.65, but the
[29:21] >> the book shows 9.92.
[29:25] » the book shows 9.92.
[29:25] >> Oh, yeah. the basin.
[29:28] » Oh, yeah. the basin.
[29:28] >> No, of course.
[29:30] » No, of course.
[29:30] >> Yeah. Well, we're gonna go with 9.92
[29:32] » Yeah. Well, we're gonna go with 9.92
[29:32] because that's the book.
[29:33] >> The one in the book in the packet is
[29:35] » The one in the book in the packet is
[29:35] 9.92.
[29:37] >> Yeah,
[29:37] » Yeah,
[29:37] >> that's correct.
[29:38] » that's correct.
[29:38] >> We're going to go with 9.92. Apologies.
[29:40] » We're going to go with 9.92. Apologies.
[29:40] Apologies there. Uh, and so, yeah, way
[29:43] ahead of 6.5% for a 12-month period of
[29:46] time. Uh, how did we get there? Well, we
[29:48] certainly got there in the back of of
[29:50] the equity market. Uh, the domestic
[29:52] equity line item there, 17.2%.
[29:55] uh the international equity line item
[29:57] 17.3%.
[29:59] Uh when we do our capital market
[30:00] assumptions, we expect domestic equities
[30:02] to get about 7% and international get
[30:04] about 7.4. So, you know, heck, that's
[30:07] almost two and a halfx of of what we
[30:10] would expect to generate over a 12-month
[30:12] period of time. So, that's certainly
[30:13] indicative of a really good 12 months.
[30:15] Uh other growth is a category where we
[30:18] lumping together some diversifying
[30:19] assets, real estate as well as
[30:22] infrastructure. Uh thumbs up on the
[30:24] infrastructure investment um at 16.2%
[30:28] that was one of our best performing
[30:30] asset classes over the last 12 that
[30:32] 12-month period of time. Um real estate
[30:34] struggled real estate struggled over
[30:36] this period of time. I think investors
[30:38] were were kind of hoping they get a
[30:39] little bit more in the way of interest
[30:41] rate cuts uh to maybe spur that that
[30:44] real estate market. it it was actually
[30:46] the only category that that has a a
[30:48] minus sign in front of it over this
[30:49] 12-month period of time at 2.3%.
[30:53] Uh fixed income fixed income was at
[30:55] 3.3%.
[30:57] It's a better story when you look at um
[31:00] the 9-month period of time uh for for
[31:03] for this portfolio at 6.2% 2% and then
[31:07] when you throw on about a percent there
[31:09] in the fourth quarter uh we got about 7%
[31:12] from our real estate investments which
[31:15] it's important because in a 50/50
[31:18] portfolio half of it does come from real
[31:20] estate and and and real estate has been
[31:23] one of maybe the more disappointing
[31:24] areas uh for the portfolio for the plan
[31:27] and it's not really any of our doing
[31:29] because we're invested in in an index
[31:31] fund if you will for for fixed income.
[31:34] uh it's it's the more so the market and
[31:37] the low interest rate environment and
[31:38] also 2022 when the Fed increased
[31:41] interest rates up uh at a very high clip
[31:44] but over that 12-month period of time a
[31:46] 3.3%
[31:47] return and then finally rounding it out
[31:49] cash
[31:50] while the Fed is cutting rates and that
[31:52] is impacting some of our money market
[31:54] yields we were able to still generate
[31:56] about a four and a half% return on our
[31:57] cash we don't have a lot in cash as I
[31:59] said it's about a 2% allocation um but
[32:02] but it it wasn't
[32:04] detracting over that period of time. So,
[32:06] putting it all together just to shade
[32:08] under 10%. Very happy to uh very happy
[32:10] to show that to you. Um
[32:14] I I will give you the estimate based on
[32:16] um we don't have our our final numbers
[32:18] uh solidified just yet. Um but um it
[32:21] looks like we had about a 1.8 1.9%
[32:25] uh we'll call it the second quarter of
[32:28] the fiscal year, fourth quarter of the
[32:30] calendar year. Uh so maybe just a shade
[32:32] under 2%. So, not about three months to
[32:35] uh end the calendar year.
[32:39] Uh I said I was going to talk about
[32:40] positioning and maybe that that slide
[32:42] that we looked at previously does
[32:44] capture that at a 50/50 allocation. Uh
[32:47] that that is currently where we are at.
[32:50] Um Dr.
[32:52] >> Yes sir. Just to go back to what you
[32:54] » Yes sir. Just to go back to what you
[32:54] said at the beginning, the the total
[32:58] portfolio and then these other things
[33:01] you said isn't necessarily a portfolio.
[33:07] >> This would be the investment portfolio
[33:09] » This would be the investment portfolio
[33:09] that the town of Athetherton and I'll
[33:12] make up a number six to seven seven
[33:14] other agencies are invested in. Okay.
[33:17] >> So your your portfolio assets, your plan
[33:19] » So your your portfolio assets, your plan
[33:19] assets are in this portfolio. Um but but
[33:22] but it's not totally isolated to to the
[33:25] town.
[33:27] >> But why would So the town's returns
[33:29] » But why would So the town's returns
[33:29] would be exactly the same. Then
[33:32] >> it would be maybe a little bit more or
[33:34] » it would be maybe a little bit more or
[33:34] maybe a little bit less um than than
[33:38] what the other plan or whether the
[33:41] portfolio participants are are
[33:42] experiencing. The drivers of that would
[33:44] be cash flows going in and out. Uh the
[33:47] drivers also would be fees and expenses
[33:49] which we're going to touch on probably
[33:50] about 90 seconds. Um I think you're
[33:53] maybe maybe one of the more larger
[33:55] participants and so it's a gradiated fee
[33:58] schedule. So more the more assets you
[34:00] have the lower fees and expense that
[34:02] that you uh that you incur.
[34:05] >> The assets are segmented. So the buckets
[34:07] » The assets are segmented. So the buckets
[34:07] the pools are each each town, right? So
[34:11] their inflows and outflows are going to
[34:12] affect something. So when you're
[34:14] invested in bucket A, you're going to
[34:16] put more more in the equity. You're
[34:18] going to reallocate in that portfolio.
[34:20] Maybe bucket B doesn't have the cash
[34:22] available to do it. Or is it's just
[34:24] timing issues on all this stuff.
[34:25] >> It it's not
[34:26] » It it's not
[34:26] >> it's all of us having have same amount
[34:28] » it's all of us having have same amount
[34:28] of money, but one person needs a little
[34:30] bit more and one person is getting a
[34:32] little more.
[34:33] >> It's not segregated. So that's that's
[34:34] » It's not segregated. So that's that's
[34:34] the key point.
[34:35] >> It's not it's it's a pool.
[34:37] » It's not it's it's a pool.
[34:37] >> It it's a pool. So, so let's say for
[34:39] » It it's a pool. So, so let's say for
[34:39] example, uh, um,
[34:42] Selenus,
[34:44] I'm making this up. Selenus says,
[34:46] >> uh, Selenus needs a $7 million
[34:49] » uh, Selenus needs a $7 million
[34:49] distribution to play plan, paid plan
[34:51] participants.
[34:52] >> Yeah,
[34:53] » Yeah,
[34:53] >> they it will say, uh, portfolio manager,
[34:56] » they it will say, uh, portfolio manager,
[34:56] make sure that we have enough liquidity.
[34:58] Portfolio manager checks, yes, we have
[35:00] $12 million in liquidity. uh US bank as
[35:04] plan administrator would pull these
[35:07] seven million
[35:08] >> 12 is is if we're all each of town
[35:10] » 12 is is if we're all each of town
[35:10] that's all of our our that's our that's
[35:12] everybody's one and a half or so
[35:14] >> some but but but then but then upon um
[35:19] » some but but but then but then upon um
[35:19] at at a certain point in time the
[35:21] investment manager says oh well geez uh
[35:23] we are low on cash or we we've moved
[35:26] from our target asset allocation
[35:28] position yeah uh and then we have a
[35:30] decision to to potentially rebound
[35:32] balance that portfolio.
[35:34] >> Sure. So if it's pulled then then and
[35:36] » Sure. So if it's pulled then then and
[35:36] the why would
[35:39] I imagine these returns are really
[35:41] close. But why would it matter per city
[35:43] then? If we all have a big thing all
[35:45] together then we're all getting the same
[35:46] return. If you want $7 million it's
[35:48] coming out of that big pool.
[35:50] >> I I would offer well if you consistently
[35:52] » I I would offer well if you consistently
[35:52] put more money in well let's say you
[35:54] were the only agency
[35:56] >> right
[35:56] » right
[35:56] >> that that that was putting money.
[35:59] » that that that was putting money.
[35:59] I don't believe that that you're if you
[36:03] were putting money into an individual
[36:05] account, I don't think that that the
[36:08] cash flows would um the performance
[36:11] based on the cash flows would exactly
[36:14] foot to the performance based on
[36:16] >> maybe the thing that we care about is
[36:17] » maybe the thing that we care about is
[36:17] that we don't suffer as a result of
[36:19] other people's cash needs.
[36:22] >> Certainly appreciate. I don't think that
[36:24] » Certainly appreciate. I don't think that
[36:24] you do, but but but but there is a
[36:27] dynamic there,
[36:28] >> especially when we're overfunded. So,
[36:30] » especially when we're overfunded. So,
[36:30] we're overfunded, we could sit back and
[36:33] use and have Robert's cash needs met
[36:36] without too much trouble. So,
[36:40] >> it's maybe
[36:41] » it's maybe
[36:41] >> Robert's cash needs a question for next
[36:44] » Robert's cash needs a question for next
[36:44] time for you for for if if we want to
[36:47] get into the weeds. Um I don't want to
[36:49] get too far into the weeds because I
[36:50] think you missed things. But um maybe
[36:53] that's to are are we are
[36:57] is the mechanism and is the way that you
[36:59] operate and the policy the way that you
[37:00] operate it such that
[37:02] that towns that are overfunded so to
[37:06] speak are actually um
[37:09] um
[37:10] not benefiting from the overfunding. So
[37:12] to their we're we're we're helping the
[37:15] underfunded. We're actually the biggest
[37:18] draw you start
[37:20] definitely two different two different
[37:22] dynamics going on here. I mean, so so
[37:26] your your funding policy uh to to me I I
[37:29] began to think, okay, well, if you're
[37:31] 113% funded, which I think the marked
[37:33] market through November, uh then then we
[37:37] begin to think about, well, do we need
[37:38] to take 6.5 the risk commenserate with a
[37:41] 6.5% discount rate, which
[37:44] >> in in our in our recommendation is a 50%
[37:47] » in in our in our recommendation is a 50%
[37:47] equity, 50% portfolio.
[37:48] >> Yeah.
[37:49] » Yeah.
[37:49] >> So that's completely germanine to the
[37:51] » So that's completely germanine to the
[37:51] town. it doesn't really impact or or or
[37:53] or consider other agencies within this
[37:56] pool. Um the and our answer would be
[38:00] yes, we would still maintain we would
[38:01] recommend maintaining the course with a
[38:03] 50/50 portfolio
[38:05] because of the the cash requirements. I
[38:08] mean because right now what did you what
[38:10] did you disperse last year or where the
[38:13] town disperse
[38:14] >> um
[38:15] » um
[38:16] >> 4.5ish
[38:18] » 4.5ish
[38:18] almost 5%. So if you think about the
[38:21] dynamics here, uh you're assuming 6.5%
[38:24] but you're also kind of distributing
[38:27] four and a half um couple nickels for
[38:31] our fees and expenses. You have a little
[38:34] bit left in a perfect world, right? And
[38:35] this isn't even factoring in those years
[38:37] where we have down.
[38:38] >> Um
[38:38] » Um
[38:38] >> yeah,
[38:39] » yeah,
[38:39] >> you have a little bit left over for
[38:40] » you have a little bit left over for
[38:40] compound growth, but we're really not in
[38:42] growth mode. But I mean, we're we're
[38:43] using the assets for for what they're
[38:47] intended for to to support the the
[38:50] liability.
[38:51] >> As maybe even more, I'm just trying to
[38:53] » As maybe even more, I'm just trying to
[38:53] get the basic question as I can.
[38:55] >> Yeah.
[38:55] » Yeah.
[38:56] >> How are we affected by other towns? We
[38:58] » How are we affected by other towns? We
[38:58] could isolate our assets and stick them
[39:00] right here in our corner and have
[39:02] everybody else stay over there. Do we do
[39:04] better or do we do worse or we just do
[39:07] do the same? Is the pooling
[39:10] does the pooling allow you to do the
[39:12] administration that you need and pull
[39:13] this whole thing thing off at le less of
[39:15] a cost? That's why we pool or you
[39:18] >> Well, there are three questions there. I
[39:19] » Well, there are three questions there. I
[39:19] had I had the no, they had the yes and
[39:21] the um one one thing that that that we
[39:24] typically do is is in and this is well
[39:27] the Wii is the royal we but it's really
[39:29] the trustee. uh the trustee establishes
[39:33] a limit usually at $10 million uh to to
[39:36] have an individual account and and the
[39:38] town since day one has been under that
[39:40] that that limit
[39:42] >> 92 93 I mean potentially we could talk
[39:45] » 92 93 I mean potentially we could talk
[39:45] to the trustee um since my paycheck has
[39:49] the same name that the trustees has. I
[39:51] mean we could potentially look at an
[39:53] individual account. Key point though, we
[39:56] would not do anything different than
[39:57] what you see on the asset. You see the
[40:01] percent sign with the the allocation
[40:02] there. We would allocate it the same way
[40:04] we'd manage the same.
[40:06] >> But you wouldn't be potentially
[40:08] » But you wouldn't be potentially
[40:08] positively or negative. You wouldn't be
[40:10] impacted by other agencies cash flows in
[40:12] or cash flows out
[40:15] >> because it got effect.
[40:16] » because it got effect.
[40:16] >> Yeah.
[40:16] » Yeah.
[40:16] >> A smidge, but but it could be to the
[40:18] » A smidge, but but it could be to the
[40:18] positive. Uh
[40:19] >> it could be
[40:20] » it could be
[40:20] >> but but
[40:21] » but but
[40:21] >> the point is we don't know. So if you
[40:22] » the point is we don't know. So if you
[40:22] just sit there,
[40:23] >> I'll answer it in a maybe a slightly
[40:24] » I'll answer it in a maybe a slightly
[40:24] different way. When we put together our
[40:26] um portfolio composits, our investment
[40:28] composits, so when we when we show the
[40:31] world, you know, quote unquote, how much
[40:33] better we are than than the Calurge,
[40:35] right? We're going to an RFP and we put
[40:37] together our composits for the 50/50
[40:39] portfolio. Uh the the the variance in
[40:42] terms of our returns for our 5050
[40:44] portfolios, it's not too wide. So when I
[40:48] see that, it's not too varied. So when I
[40:50] see that, I say, well,
[40:53] the the whatever the cash flows in and
[40:55] out of those 10, 12, 15 accounts that
[40:58] make up our 50/50 portfolio, it's not
[41:00] really walloping one or pool. And it's
[41:05] pretty tight. But if as a homework
[41:09] assignment you want us to look into
[41:10] maybe doing a separate account
[41:14] >> we can look at
[41:14] » we can look at
[41:14] >> if you would just confirm why there
[41:16] » if you would just confirm why there
[41:16] would be if you would like I look into
[41:18] why there's a difference. It's cash
[41:20] flows, but I'll give it I'll write out
[41:22] to me would be the thing that would make
[41:24] sense would be
[41:27] that
[41:29] each each per each pool participant
[41:33] uh their return depends on their the
[41:36] timing of their inflows and outflows.
[41:39] At the portfolio level, it's like an
[41:41] average of that. But
[41:44] but we shouldn't be impacted by what
[41:46] anyone else is doing.
[41:48] I
[41:50] >> shouldn't be from a philosophical
[41:51] » shouldn't be from a philosophical
[41:51] standpoint or shouldn't be from a
[41:53] investment.
[41:54] >> Well, both.
[41:55] » Well, both.
[41:55] >> Well, I mean, you you should have a
[41:57] » Well, I mean, you you should have a
[41:57] system that doesn't impact us depending
[42:01] on what other people are doing.
[42:04] >> Well, so so then I would encourage you
[42:06] » Well, so so then I would encourage you
[42:06] to
[42:07] >> see if you can isolate it, right? That's
[42:08] » see if you can isolate it, right? That's
[42:08] I mean that's what I would do.
[42:09] >> I would encourage you then to discuss it
[42:11] » I would encourage you then to discuss it
[42:11] if if you do want to pursue individual
[42:13] account. Well, the first thing would be
[42:15] if you could maybe get back to Robert
[42:18] and explain exactly how differences can
[42:22] arise.
[42:26] » Sure. I'll give an official one pager.
[42:30] >> I got to think it's going to be really
[42:31] » I got to think it's going to be really
[42:31] hard to isolate that.
[42:33] >> Well, when you say isolate, I I can't do
[42:35] » Well, when you say isolate, I I can't do
[42:35] the the accounting.
[42:37] >> What if that's
[42:39] » What if that's
[42:39] >> Yeah. No, that I'm going to give it a
[42:41] » Yeah. No, that I'm going to give it a
[42:41] philosophical. These are the three
[42:43] reasons why you would anticipate a
[42:45] different return uh between an
[42:48] individual account where it's just your
[42:51] $450,000 coming in and whatever
[42:53] contribution you're putting in uh versus
[42:56] the experience of
[42:59] a coming pool that that has you know a
[43:03] very I mean the main thing Thomas is is
[43:07] okay well we ended the we ended the
[43:08] quarter there at 2.6% 6% cash.
[43:11] >> Um, other pools might have ended the
[43:13] » Um, other pools might have ended the
[43:14] quarter at 1 point something percent
[43:15] cash or maybe 5%. Maybe somebody got a a
[43:18] 10% contribution to cash that we were
[43:20] gradually dollar cost averaging in and
[43:23] we dollar cost
[43:26] on great days which slightly increased.
[43:29] You know, we bought low and then it went
[43:31] up after we we put that large
[43:33] contribution in and it gradually showed
[43:35] a little bit of upside in that pool
[43:38] experience.
[43:39] I mean, and like I said, I'll give you
[43:41] the memo, but but that's the main thing.
[43:44] >> I take a look at isolating it. It's it's
[43:46] » I take a look at isolating it. It's it's
[43:46] as if as if Tom and I got together and
[43:48] said, "Hey, let's combine our retirement
[43:49] accounts together and we'll have an
[43:51] accountant to kind of figure things out.
[43:52] We'll allocate it out. You might need
[43:54] some money and then I might need some
[43:55] money after
[43:58] I wanted to have my retirement account."
[43:59] He doesn't want mine either.
[44:01] >> Yeah.
[44:01] » Yeah.
[44:01] >> So, is it that you think it's similar
[44:04] » So, is it that you think it's similar
[44:04] expense ratio for for operating on a
[44:07] separate account versus a pool? We don't
[44:09] charge anything more for an individual
[44:10] account. So that's the you're charged
[44:13] based on your assets under management.
[44:14] Since that's one of our check boxes,
[44:17] let's let's knock that out right now. Uh
[44:19] at at let's see.
[44:23] >> So if we wanted it separate, it wouldn't
[44:24] » So if we wanted it separate, it wouldn't
[44:24] cost us anything. Is that correct?
[44:29] >> It doesn't cost any more. Yeah. uh the
[44:33] » It doesn't cost any more. Yeah. uh the
[44:33] blended um
[44:35] the expenses for the index funds the the
[44:37] the weighted average for the index funds
[44:40] is going to be 4.8 basis points.
[44:42] >> Uh and then I think I I calculated the
[44:45] » Uh and then I think I I calculated the
[44:45] uh expense for 9.2 million at 30.7
[44:50] or so. So I think we were just a shade
[44:52] under 36 basis points all in all in for
[44:55] investment management. So that's uh the
[44:58] embedded expenses for the index funds
[45:00] and what PFM asset management US bank uh
[45:04] charges.
[45:05] >> What what's the review process for that?
[45:07] » What what's the review process for that?
[45:07] One of the things I mentioned last time
[45:08] was Fidelity's got a 0% total market
[45:11] index. I think does
[45:14] a process in house to substitute lesser
[45:17] cost. Can we go from a third from 3 to
[45:20] 0.25? Is that something that's looked
[45:22] at? I respect your diligence in terms of
[45:25] trying to get below this cost. I think
[45:28] one of the things that we do think about
[45:30] I mean obviously we think especially
[45:31] with index ones we think about fees and
[45:33] expenses expenses
[45:34] >> because it's easy because you guys can
[45:36] » because it's easy because you guys can
[45:36] keep your management keep the fees
[45:37] related to it and run it to where you're
[45:39] running and drive the cost of the
[45:41] portfolio down. We need liquidity. Uh,
[45:44] and we also need need a provider that
[45:47] that won't tag you for a because
[45:49] sometimes if you if you if you pull
[45:51] money out within a 30-day window of
[45:53] time, they'll assess a a modest penalty.
[45:57] >> Yeah.
[46:00] » Yeah. I'm I'm not wondering about I'm
[46:03] wondering about what the process is for
[46:06] for not just us but for for the others
[46:09] where you look down your when was the
[46:11] last time you had a fund change. Do
[46:12] what's the process for looking down
[46:14] there and going I have Fidelity total
[46:16] market index. There's other total market
[46:18] indexes that are out there and they may
[46:20] be they may track the index similarly
[46:23] the same and they may be at less cost.
[46:25] Do you have a process where you go, you
[46:27] know, it's January, it's time for us to
[46:30] take a look at that?
[46:31] >> Well, it actually kind of follows that
[46:33] » Well, it actually kind of follows that
[46:33] that sort of rubric for index funds. I
[46:37] mean, it's it's probably going to be a
[46:39] once a year dynamic. I mean, it's not
[46:41] going to be a
[46:42] >> still I mean, we're just that's how you
[46:43] » still I mean, we're just that's how you
[46:43] got to.
[46:44] >> So, a manager research group would look
[46:46] » So, a manager research group would look
[46:46] at index funds pretty much on a on an
[46:48] annual basis. Uh determine liquidity,
[46:51] determine if there's any fund provisions
[46:52] that that change. uh index funds they
[46:55] don't raise their fees. So
[46:56] >> what about substitution? Does that
[46:58] » what about substitution? Does that
[46:58] happen often? Because there's fidelity
[46:59] >> doesn't happen often and when it does
[47:02] » doesn't happen often and when it does
[47:02] happen for index funds it's you know
[47:06] attracting the underlying venture. Why
[47:08] is
[47:09] >> well this international fund doesn't
[47:10] » well this international fund doesn't
[47:10] have exposure to Canada.
[47:12] >> Well who cares? It's only 6%. Well wait
[47:15] » Well who cares? It's only 6%. Well wait
[47:15] a minute we care because we're not
[47:16] tracking. So, so that's usually more of
[47:18] a catalyst um to to make us think about
[47:21] a replacement for for an index fund.
[47:24] >> Yeah.
[47:24] » Yeah.
[47:24] >> Uh yeah. Well, um
[47:26] » Uh yeah. Well, um
[47:26] >> I mean our plan here is to have I just
[47:28] » I mean our plan here is to have I just
[47:28] got the statements is to is to have all
[47:31] these funds, show what they are, look at
[47:34] what their tracking record is, look at
[47:36] what their expenses are, and see if
[47:37] there's a substitute for it. And then
[47:40] just ask, go, hey, there's a substitute
[47:42] for fidelity of whatever. Are you guys
[47:45] considering that? If we have our own
[47:47] pool, does it make any different or is
[47:49] this a policy decision that you make for
[47:51] everybody? Everybody's going to get the
[47:52] Fidelity B.
[47:53] >> It's a policy decision that everybody
[47:55] » It's a policy decision that everybody
[47:55] gets. Yeah. So, so
[47:57] >> that's a good one though. I think if you
[47:58] » that's a good one though. I think if you
[47:58] track the same you have less expenses,
[48:00] why not do it?
[48:02] >> Well, sure. I mean, all things being
[48:04] » Well, sure. I mean, all things being
[48:04] equal, but all things aren't always
[48:05] equal. And you do have the tracking with
[48:07] the underlying index. Um, and and
[48:09] liquidity is a big deal, too. Totally
[48:10] agree. And there's also some providers
[48:12] that that that will uh you know nickel
[48:14] and dime you in terms and remember I
[48:16] mean we have a lot of inflows and
[48:17] outflows.
[48:18] >> I get it.
[48:19] » I get it.
[48:19] >> The fund provider thinks that we're
[48:21] » The fund provider thinks that we're
[48:21] buying and selling and flipping things
[48:22] around and we're not.
[48:24] >> Um but yet they still want to give you a
[48:26] » Um but yet they still want to give you a
[48:26] little bit of a penalty and that's the
[48:30] >> fair. That's fair.
[48:34] » Yes. So just to piggyback on that on the
[48:37] the the investment uh cost. So the costs
[48:41] are about um as I mentioned about point
[48:45] 30 basis point um so it's about 26,000
[48:50] and then with the administration it's
[48:53] about 24. So the total
[48:55] >> expenses about 49,000 on
[48:58] » expenses about 49,000 on
[48:58] >> the 8.8 million
[49:01] » the 8.8 million
[49:01] >> is is the cost between the administrator
[49:03] » is is the cost between the administrator
[49:04] and the investment. Um so about you're
[49:06] looking at 48,000 um cost per year. um
[49:10] about 8.8 millions in assets.
[49:15] » This part of this discussion going to be
[49:16] on again on on shorts allocation um on
[49:19] our equity versus bond or is that
[49:24] >> yeah we we'll we'll bring that back um
[49:26] » yeah we we'll we'll bring that back um
[49:26] when we do our our end of the year we'll
[49:29] review we'll say um this is you know our
[49:32] investment strategies is the modern
[49:34] index um asset.
[49:36] >> Do we want to change it? We want to um
[49:38] » Do we want to change it? We want to um
[49:38] be more conservative.
[49:39] >> That was the last one we just did.
[49:40] » That was the last one we just did.
[49:40] >> Yes, that was the one in in June,
[49:42] » Yes, that was the one in in June,
[49:42] correct? And and and the committee
[49:44] recommended we just stay where we're at
[49:46] um because that one meets the uh at the
[49:49] time it was 6% um our our investment
[49:53] return, but through the actuarian
[49:55] mentioned that now it's 6.5%.
[49:58] So um in and see the plan is is the
[50:01] investment plan is making is
[50:03] >> next step up is is is the next step up
[50:06] » next step up is is is the next step up
[50:06] from ours is
[50:07] >> balanced balanced is something we we run
[50:10] » balanced balanced is something we we run
[50:10] uh the target allocation can be 60 40
[50:13] 60% equities 40% bonds
[50:16] >> the range is 50 to 70% equity so it can
[50:19] » the range is 50 to 70% equity so it can
[50:19] go as low as 50
[50:21] >> uh if you think that that's low I mean
[50:22] » uh if you think that that's low I mean
[50:22] that's our target and then as high as 70
[50:26] >> um I Yeah, I didn't come, you know, when
[50:30] » um I Yeah, I didn't come, you know, when
[50:30] I did my own internal pregame prep. I
[50:32] didn't come here thinking, uh, I'm gonna
[50:34] talk I'm gonna talk overunded plan to
[50:36] take more equity risk.
[50:38] >> Um,
[50:40] » Um,
[50:40] >> it's coming too.
[50:44] » Yeah, we we'll definitely bring that
[50:46] back. We always review um the investment
[50:49] strategy to see where we where we ended
[50:51] up by the
[50:52] >> at the end of the year,
[50:54] » at the end of the year,
[50:54] >> but we're bringing this because we
[50:56] » but we're bringing this because we
[50:56] wanted to start reviewing it as a
[50:58] quarterly um snapshot
[51:00] >> rather than the yearly that we doing.
[51:02] » rather than the yearly that we doing.
[51:02] So, this is just the the quarter review.
[51:05] So, we're we're about 200,000 more in
[51:09] the net position than we were in June of
[51:14] 25. So we made 200 something thousand
[51:18] even though we've been distributing um
[51:20] money out of it. So you know the first
[51:22] quarter is a positive 200. So if we do
[51:25] four more times it's positive 800 and
[51:28] we've expended 450,000. So we spent
[51:31] eight we earn 800 spent 450,000 we had a
[51:35] positive balance.
[51:36] >> Nice return.
[51:38] » Nice return.
[51:38] >> Yeah I like it
[51:39] » Yeah I like it
[51:39] >> when it works.
[51:40] » when it works.
[51:40] >> That's a good lubricate.
[51:42] » That's a good lubricate.
[51:42] >> So um yeah. So this is, you know, for
[51:45] » So um yeah. So this is, you know, for
[51:45] the first quarter, we're we're we're
[51:47] looking good. Um, but again, yeah, we
[51:50] we'll we'll do the snapshot reviews and
[51:53] then
[51:54] >> fabulous jobs for
[51:56] » fabulous jobs for
[51:56] great team. Great team,
[51:59] >> mayor.
[51:59] » mayor.
[52:00] >> How many like humans are participating
[52:02] » How many like humans are participating
[52:02] like retirees are participating in this
[52:04] plan? Is there any like oversight as
[52:07] we're not adding new people to it? We're
[52:10] adding more money like the interest is
[52:12] doing more than we're paying. Like at a
[52:14] certain point, we won't have enough
[52:16] people.
[52:18] We'll have a lot less people in this
[52:20] plan. Like is someone watching?
[52:22] >> Yes.
[52:23] » Yes.
[52:23] >> Number of humans.
[52:24] » Number of humans.
[52:24] >> Yes, we do that. Um when we do the
[52:26] » Yes, we do that. Um when we do the
[52:26] actar, we do the census um data on that
[52:30] and that's what you know every two years
[52:32] we do a census of who's on the plan or
[52:35] the in the future retirees. There's
[52:37] still a handful of current employees
[52:40] that do get some retiring help and
[52:42] majority get still get retirey help but
[52:46] they get that minimum amount right and
[52:49] that gets calculated in
[53:02] We're on 3.1. I don't know if there's
[53:04] any.
[53:05] >> There's no other exhibit um that I was
[53:08] » There's no other exhibit um that I was
[53:08] going to utilize in the presentation.
[53:13] » I think Yeah, we got to the end. All it
[53:15] was was the at the end was um the trust
[53:19] programs. Uh I'm just going to go
[53:21] through it real quick. Here's the
[53:26] uh strategies
[53:28] that was at the end the index
[53:30] at the end of the report. This is the
[53:33] there are different strategies there.
[53:35] We're in the moderate
[53:38] um
[53:39] be that 11.3% this month.
[53:42] >> That's true.
[53:44] » That's true.
[53:44] >> Yeah.
[53:47] » Yeah.
[53:47] >> Yeah. So this this is in your packet. Um
[53:51] » Yeah. So this this is in your packet. Um
[53:51] these are the different strategies that
[53:53] we have and then and you know how much
[53:56] uh percentage the strategic range.
[53:59] So the moderate 40 60 is 46 m to 20 and
[54:08] she's very in that 50%.
[54:14] And then here's here's where we in early
[54:17] in the report the one year the index
[54:21] we're at 9.65.
[54:23] So here it is these are the other five
[54:27] um strategies and we're in that middle
[54:30] moderate
[54:32] index.
[54:34] And then how Andrea mentioned the next
[54:36] one up would be the balance and then the
[54:39] highest more risky risk of risky one
[54:42] would be the capital appreciation
[54:45] strategy.
[54:47] Andrew,
[54:48] in measuring your own performance, if
[54:51] you went if you went to 55% equity, 35
[54:56] fixed income,
[54:58] would the benchmark go 5535 or would you
[55:02] stay at 5050?
[55:04] >> Oh. So, so if we're talking the moderate
[55:08] » Oh. So, so if we're talking the moderate
[55:08] strategy,
[55:08] >> Yeah.
[55:09] » Yeah.
[55:09] >> and we move to 55, the benchmark would
[55:11] » and we move to 55, the benchmark would
[55:11] still stay at 5050.
[55:13] >> Good. And so then the way to and we're
[55:17] » Good. And so then the way to and we're
[55:17] really interested in a bunch of index
[55:18] funds. So the way that we would either
[55:20] add value or detract value, you know,
[55:22] nine times out of 10 is is the asset
[55:24] allocation. It's not like we come up
[55:26] with a better index fund better than the
[55:28] index,
[55:36] » you know. So this is all included in the
[55:39] your packet. Um yeah, we wanted to bring
[55:43] the team out again just to kind of start
[55:44] on the quarter review and and you can
[55:48] see you know the September 385
[55:53] positive
[55:56] quarter and we'll continue to review
[55:59] that in the quarter ended the second
[56:01] quarter which ended 1239.
[56:04] We'll do an update in a couple months
[56:06] time on
[56:11] bring see where we're at and answer the
[56:14] question some of the questions about the
[56:15] investment expense the flow of funds how
[56:18] it's working
[56:21] we have great partners with PARs as the
[56:23] administrator overseeing and then Andrew
[56:25] and his team uh the investment
[56:30] and then we'll we'll Andrew and I will
[56:33] touch based on some of these questions
[56:34] and then we'll bring it back up answer
[56:38] when we see the second quarter.
[56:40] Hopefully it's another positive 200,000.
[56:43] >> You give me a martial art.
[56:46] » You give me a martial art.
[56:46] >> Is it possible to have too much money in
[56:48] » Is it possible to have too much money in
[56:48] this? I mean like you know no such thing
[56:50] as too much money but like
[56:53] >> but we can't really move it anywhere
[56:55] » but we can't really move it anywhere
[56:55] else, right? It has to stay in here.
[56:58] >> Yeah. And eventually
[56:59] » Yeah. And eventually
[56:59] >> substitute money, right?
[57:02] » substitute money, right?
[57:02] Yeah,
[57:03] >> I was gonna say eventually one of your
[57:05] » I was gonna say eventually one of your
[57:05] questions was, you know, you're starting
[57:06] to have less active employees. If if at
[57:08] the end of the the life of your plan,
[57:11] your your retired healthcare plan,
[57:13] you're done. There's no more employees,
[57:15] nothing left in there, any residual, any
[57:18] additional money in the trust goes back
[57:19] to your account, goes general fund. We
[57:22] don't have to like
[57:23] >> I'm just like, it's awesome that we're
[57:25] » I'm just like, it's awesome that we're
[57:25] getting so much more interest than our
[57:27] >> what we're paying. So, it's good that
[57:29] » what we're paying. So, it's good that
[57:29] we're building, but like at some point
[57:31] it might get too big.
[57:32] >> So, maybe 35 40 years or so, it might
[57:36] » So, maybe 35 40 years or so, it might
[57:36] get to that point. But if the town is
[57:38] still a town and pursive
[57:42] employees that get
[57:44] >> um the PMPA minimum and if the fund is
[57:47] » um the PMPA minimum and if the fund is
[57:47] way overfunded at that point, how does
[57:49] that work? So, the fund's got two
[57:51] million fund still has 8 million in
[57:53] there, but we only have PMPA minimum
[57:55] staffed moving forward. How do we
[57:58] address that?
[57:59] >> Well, and that's why you're not
[58:00] » Well, and that's why you're not
[58:00] contributing to the program any to try
[58:02] to stabilize that. Um, and then also you
[58:04] have to think the investments. The
[58:05] investments while I want to guarantee
[58:07] double digits or extra and won't let me,
[58:09] we will have um some down years.
[58:12] >> There's downturns. Yeah.
[58:13] » There's downturns. Yeah.
[58:13] >> And then if there's changes in the
[58:15] » And then if there's changes in the
[58:16] health care costs, right, I have those
[58:17] costs have been keep going up. So
[58:20] there's going to be compression whether
[58:22] the investments do well or they don't do
[58:24] well and then your costs keep going up.
[58:27] So right now in the last several years
[58:30] we've been fine but on the liability
[58:32] side the cost trends can go higher and
[58:35] on your census right in the healthcare
[58:38] plans um you know have been going up you
[58:41] know 10% 13% a year so when that happens
[58:44] and your investments
[58:47] I mean right now we're actuarial
[58:49] >> right it is in the actuarial and and
[58:51] » right it is in the actuarial and and
[58:51] they review it and then they kind of put
[58:53] in the the demographic assumptions on
[58:56] the healthcare care the the cost the CPI
[58:59] they also do mortality rates and all of
[59:01] that. So um the one thing is you know
[59:05] mortality rates improve uh then your
[59:08] your health care cost your retired
[59:10] health care cost continues. So um
[59:13] there's that part of it.
[59:14] >> At present there's nothing that the town
[59:16] » At present there's nothing that the town
[59:16] is paying that the fund can't pay. Is
[59:20] there any leakage of maybe wrong choice
[59:22] of words? Uh, no. We're we're also re
[59:26] getting reimbursed from the the amount
[59:28] that we the minimum pen that we pay the
[59:31] FAR to Calers. We're getting reimburse
[59:33] that as well through the the trust.
[59:36] >> There's no there's nothing there's no
[59:38] » There's no there's nothing there's no
[59:38] other switch, no other volume to have
[59:40] the bond pay more and the town pay less
[59:47] » other than Yeah. just the retirey help
[59:49] um that those components. Yeah.
[59:52] >> Agree. Correct. Yeah. I mean, you could
[59:54] » Agree. Correct. Yeah. I mean, you could
[59:54] have those actual evaluations, but
[59:56] that's just like a small fraction of
[1:00:00] >> Yeah. I mean, that's something easy. I'm
[1:00:02] » Yeah. I mean, that's something easy. I'm
[1:00:02] just thinking something.
[1:00:04] >> Would the change to a charter town
[1:00:07] » Would the change to a charter town
[1:00:07] affect any? Okay. So, that's
[1:00:12] » got to ask
[1:00:14] >> exiting from Calerts.
[1:00:17] » exiting from Calerts.
[1:00:17] >> Exiting from Calbert
[1:00:18] » Exiting from Calbert
[1:00:18] >> change things, but that is an
[1:00:19] » change things, but that is an
[1:00:19] astronomical con.
[1:00:22] Yeah.
[1:00:25] >> Got it.
[1:00:25] » Got it.
[1:00:26] >> The cost will go opposite. Yeah. We need
[1:00:28] » The cost will go opposite. Yeah. We need
[1:00:28] more money.
[1:00:30] >> Yeah.
[1:00:31] » Yeah.
[1:00:31] >> I know what last year you put in $3
[1:00:33] » I know what last year you put in $3
[1:00:33] million as a discretionary payment
[1:00:35] occurs.
[1:00:36] >> ADP.
[1:00:36] » ADP.
[1:00:36] >> ADP. I
[1:00:37] » ADP. I
[1:00:37] >> mean, have you considered doing the the
[1:00:40] » mean, have you considered doing the the
[1:00:40] PARs 115 trust instead of something like
[1:00:43] that?
[1:00:43] >> I said some Yeah. Um, we we we have
[1:00:46] » I said some Yeah. Um, we we we have
[1:00:46] discussed that and it's still
[1:00:49] >> established the trust, right?
[1:00:51] » established the trust, right?
[1:00:51] >> Correct. But it's not um as far as we
[1:00:55] » Correct. But it's not um as far as we
[1:00:55] presented those options of putting it in
[1:00:56] the trust and let it build up or
[1:01:00] making the contribution here and then
[1:01:02] and we've done that just making it
[1:01:04] directly to Calers and and let's see
[1:01:08] what it does instead of
[1:01:11] >> right just putting money aside into the
[1:01:13] » right just putting money aside into the
[1:01:13] trust for over time. So I think that
[1:01:16] could be the next
[1:01:19] proposition is okay, we've done the the
[1:01:22] ADPs, instead of doing that, let's set
[1:01:24] aside a savings, right?
[1:01:27] >> Yeah.
[1:01:27] » Yeah.
[1:01:27] >> 200,000 a year, 500,000 a year for the
[1:01:31] » 200,000 a year, 500,000 a year for the
[1:01:31] future for for council decision.
[1:01:36] >> It might depend on how the new
[1:01:38] » It might depend on how the new
[1:01:38] investment manager calers,
[1:01:41] >> right? Yeah. They just diversify your
[1:01:44] » right? Yeah. They just diversify your
[1:01:44] bets
[1:01:44] >> manager and uh uh yeah and the plan is
[1:01:48] » manager and uh uh yeah and the plan is
[1:01:48] has done well. Um they're staying at
[1:01:51] 7.8%.
[1:01:54] >> Uh they had that new portfolio approach
[1:01:57] » Uh they had that new portfolio approach
[1:01:57] that they were adding. So yeah, I mean
[1:02:00] there was only that one year where there
[1:02:03] was that negative
[1:02:05] >> but I mean yeah that's but that is an
[1:02:08] » but I mean yeah that's but that is an
[1:02:08] option is instead of doing ADP and we
[1:02:11] bring that up but I think what it was
[1:02:13] just to give the money to helpers let's
[1:02:15] reduce our cost now uh and see what what
[1:02:19] that
[1:02:21] and it has it's reduced our UIO
[1:02:22] component payments it's reduced our um
[1:02:26] normal cost uh rates
[1:02:28] 115 wouldn't do either of those two,
[1:02:30] would it?
[1:02:32] >> No, the 115 would just it's just
[1:02:34] » No, the 115 would just it's just
[1:02:34] building our what we've done with this
[1:02:36] trust with the OPE just putting money
[1:02:37] aside for the future. I mean, we're in
[1:02:41] essence what it is is we're taking
[1:02:44] 500,000 whatever we put in there and
[1:02:46] we're letting um Andrew's team go and
[1:02:49] say, "Okay, let's let's earn whatever we
[1:02:52] can on this interest." So this 500,000
[1:02:56] could be 5 million 10 years and then or
[1:03:01] or longer, right? Or
[1:03:03] >> and then take that money and then here
[1:03:05] » and then take that money and then here
[1:03:05] you go. Instead of it being an
[1:03:07] operations expense one year, it's like
[1:03:09] oh now we have 6 million in here.
[1:03:11] >> Uh and like this OPE trust, you know, it
[1:03:14] » Uh and like this OPE trust, you know, it
[1:03:14] started in 2012 2011. We didn't
[1:03:18] >> at that time. I mean it we contributed
[1:03:22] » at that time. I mean it we contributed
[1:03:22] to it. we did significantly 5 million to
[1:03:25] it. So we almost doubled our investment,
[1:03:27] right? What's in the truck.
[1:03:29] >> So we put in 5 million and now it's 9.2
[1:03:32] » So we put in 5 million and now it's 9.2
[1:03:32] million um you know in a matter of of
[1:03:35] what 14 years and and
[1:03:39] the you know with the liabilities have
[1:03:42] gone down on the OPE so that's helped um
[1:03:46] create that um positive net balance. Um
[1:03:50] but yeah I mean that can be an you know
[1:03:53] an option is
[1:03:54] >> your knowledge of this and you is
[1:03:57] » your knowledge of this and you is
[1:03:57] amazing and the comfort it brings to me
[1:04:00] is
[1:04:02] >> chs.
[1:04:03] » chs.
[1:04:03] >> Thank you. That's not to me it's
[1:04:05] » Thank you. That's not to me it's
[1:04:05] >> historical knowledge and your ability to
[1:04:07] » historical knowledge and your ability to
[1:04:08] fluidly move around in these numbers is
[1:04:10] pretty impressive.
[1:04:11] >> Thank you. Well just you see it a lot
[1:04:14] » Thank you. Well just you see it a lot
[1:04:14] right and and
[1:04:15] >> yeah don't discount yourself.
[1:04:17] » yeah don't discount yourself.
[1:04:17] >> Thank you. I appreciate it. appreciate
[1:04:19] » Thank you. I appreciate it. appreciate
[1:04:19] it. But I have a great team, you know,
[1:04:21] we're great great um counterparts and
[1:04:24] stuff. So that that assists us in in
[1:04:26] just staying on top of it and uh you
[1:04:29] know, making sure that we're we're doing
[1:04:31] what we can and you know, the council's
[1:04:33] director with let's pay down our
[1:04:34] liabilities and that's what we've been
[1:04:35] doing through the the retirey health and
[1:04:38] and through pensions.
[1:04:42] Thank you. Appreciate it.
[1:04:45] >> Any further questions?
[1:04:48] » Any further questions?
[1:04:48] Thanks Jennifer and Andrew.
[1:04:51] >> Thank you for coming personally.
[1:04:53] » Thank you for coming personally.
[1:04:53] >> We really appreciate it. We do
[1:04:58] our
[1:05:00] counterpart here and
[1:05:03] you know it adds more value. I know we
[1:05:06] do the Zooms and stuff.
[1:05:10] Jennifer came up from LA. Andrew came
[1:05:14] down from San Francisco. So
[1:05:16] >> she might meet me home. like anyone.
[1:05:19] » she might meet me home. like anyone.
[1:05:19] >> Oh, sorry. That used Yeah. But we we
[1:05:22] » Oh, sorry. That used Yeah. But we we
[1:05:22] really really do appreciate
[1:05:25] >> all you do for us, the partnerships.
[1:05:29] » all you do for us, the partnerships.
[1:05:29] >> We'll continue presenting this every
[1:05:31] » We'll continue presenting this every
[1:05:32] quarter and um continue to work, you
[1:05:34] know, refine what we can.
[1:05:38] >> Thank you.
[1:05:39] » Thank you.
[1:05:39] >> Thank you.
[1:05:39] » Thank you.
[1:05:39] >> Thanks. Thank you so much
[1:05:44] » and happy new year.
[1:05:46] 12 days into it like you said 13 days
[1:05:48] and going on.
[1:05:51] >> Take care. Byebye.
[1:05:59] » Okay.
[1:06:01] And last topic is
[1:06:05] Robert's going to go over the asset
[1:06:06] liability management
[1:06:10] process at Kalpers.
[1:06:12] >> Oh yeah. But before that, there's item
[1:06:15] » Oh yeah. But before that, there's item
[1:06:15] number three.
[1:06:16] >> I apologize. I was just I saw it as
[1:06:19] » I apologize. I was just I saw it as
[1:06:19] well.
[1:06:20] >> Uh item three was the um brief review
[1:06:23] » Uh item three was the um brief review
[1:06:23] and update on
[1:06:25] >> I'm sorry.
[1:06:25] » I'm sorry.
[1:06:25] >> No, you're you're you're fine.
[1:06:27] » No, you're you're you're fine.
[1:06:27] >> Um brief review and update on the AI
[1:06:30] » Um brief review and update on the AI
[1:06:30] applications in the town financial
[1:06:32] software reporting um and transparency
[1:06:34] metrics. Review and discuss AI
[1:06:36] applications tailored for municipal
[1:06:38] governments and financial reporting,
[1:06:40] dashboards and automations. Um this this
[1:06:43] came up as you know at our November
[1:06:45] meeting committee there was a question
[1:06:47] raised by uh uh members of the committee
[1:06:49] about uh the town considering the use of
[1:06:51] AI software or there's an existing
[1:06:54] software vendor to develop financial
[1:06:55] metrics dashboards um for the town
[1:06:58] finances um as the case with emerging AI
[1:07:02] there there are existing and developing
[1:07:04] um AI applications for for some of our
[1:07:06] software tool tools that are being
[1:07:08] custom made uh for our local government
[1:07:12] and not just local government at the
[1:07:14] state level and at the federal level. Um
[1:07:16] so uh again there's focus on helping
[1:07:19] financial reporting metric dashboards
[1:07:22] and some more transparency and automatic
[1:07:24] automated processing um that are being
[1:07:27] developed but developed for all our
[1:07:30] enterprise resource planning um software
[1:07:33] uh in the stock report I mentioned it
[1:07:34] it's ERP so that a lot of these that's
[1:07:36] what they call our financial softwares
[1:07:39] and that we use so um other than chat
[1:07:43] GPT is starting to become
[1:07:46] used within the AI applications. Uh
[1:07:49] there's uh also Excel, Chat, DPC, all
[1:07:52] these things that are being um kind of
[1:07:55] co- um created uh with uh open AI and
[1:08:00] also all these various software
[1:08:02] programs. So just you know in the stock
[1:08:05] report want to bring bring out what the
[1:08:07] town is doing. Um there's uh chatbot
[1:08:11] applications that are are are occurring
[1:08:14] uh taking place. There's some websites.
[1:08:16] There's also chatbot applications that
[1:08:18] are going to start be implemented in our
[1:08:19] software. So I just wanted to let you
[1:08:22] know and let the committee know that the
[1:08:25] our current software springbook software
[1:08:28] uh it has it's our handle financial
[1:08:30] management our payroll our general edge
[1:08:34] uh you know budgeting uh our accounts
[1:08:37] payable it's all in one module all in
[1:08:39] one software the modules are integrated
[1:08:42] so uh we've been with springbook
[1:08:44] software for 16 years there is over the
[1:08:47] years they've innovated just like every
[1:08:48] all these softwares
[1:08:50] um around uh they specialize in local
[1:08:53] small local governments and and they
[1:08:54] have over uh 500 or so um agencies,
[1:08:59] local agencies and then additional they
[1:09:01] have some uh county agencies but um over
[1:09:04] the years they've uh innovated and so
[1:09:07] now there is a cloudbased uh portion of
[1:09:10] that and so we're anticipating to u uh
[1:09:14] upgrade to that and migrate to their
[1:09:16] cloud-based. Right now we're not
[1:09:18] cloud-based, we are um site based
[1:09:21] application. So it's sitting in our
[1:09:22] servers.
[1:09:23] >> Uh but this cloud-based application is
[1:09:25] » Uh but this cloud-based application is
[1:09:25] more um integrated with uh Microsoft,
[1:09:30] integrated with other software um
[1:09:32] components that uh it's allowing us to
[1:09:35] have that opportunity for um AI
[1:09:40] interaction. Uh one of the things I
[1:09:42] mentioned the stack report is within
[1:09:45] this new uh um cloud-based they have an
[1:09:50] upgraded portion on the expenditure
[1:09:52] where there's an AI component docu AI
[1:09:56] reader document
[1:09:57] >> reader where invoices can be imported
[1:10:00] » reader where invoices can be imported
[1:10:00] they're read they're populated in your
[1:10:02] system you can verify the amount you can
[1:10:06] actually and it's more uh right now it's
[1:10:09] manual intensive And with this AI
[1:10:11] reading, it's going to be less. It's
[1:10:13] more it'll make the document processing
[1:10:16] easier, easier to identify invoices
[1:10:19] being paid or not being paid on time or
[1:10:22] just making sure the account numbers are
[1:10:24] done. And then you can interact with um
[1:10:28] your vendors as well through the
[1:10:29] software like you can uh import uh an
[1:10:34] invoice or you can take that and you can
[1:10:37] uh export you know a report from there
[1:10:41] uh to to the vendor. So it's very
[1:10:43] interactive. So um we're excited about
[1:10:45] that. That's one of the AI components
[1:10:47] that is um being developed not just in
[1:10:50] our software but other softwares to um
[1:10:54] to to uh reduce the labor intensity on
[1:10:57] the job.
[1:10:57] >> So does it automatically match?
[1:11:00] » So does it automatically match?
[1:11:00] >> Yeah, automatically matches and pays uh
[1:11:02] » Yeah, automatically matches and pays uh
[1:11:02] you can update uh
[1:11:04] >> without verification.
[1:11:05] » without verification.
[1:11:05] >> Right. Right. So it doesn't take away
[1:11:08] » Right. Right. So it doesn't take away
[1:11:08] it's not like you just throw it in there
[1:11:09] and it just Right. You have to approve
[1:11:11] it. You have to do the signing. I think
[1:11:13] that that um that those processes will
[1:11:16] still stay the same, but I think the um
[1:11:18] you're able to also interact with
[1:11:21] different departments, right? They can
[1:11:23] they can send uh invoices through the
[1:11:26] the software and they can it's more like
[1:11:28] of an approval workflow, right? The
[1:11:30] workflow here's this invoice we
[1:11:31] received. Uh do you approve it? Is this
[1:11:33] the right code? Put the code on there
[1:11:35] and the document reads code numbers and
[1:11:37] it assigns it. And it's again, you just
[1:11:39] George mentioned you verify that
[1:11:41] everything's in there. So it takes the
[1:11:44] uh the actual manual step of taking the
[1:11:47] invoice, reading it, reviewing it,
[1:11:49] coding it more automated. So that'll
[1:11:52] help us um um and just like they add,
[1:11:56] right? It's supposed to minimize
[1:11:58] transform
[1:11:59] uh productivity, right? In a sense where
[1:12:02] it makes everything more um the labor
[1:12:05] intensive stuff, it gets shortened where
[1:12:06] you can focus on other stuff, the
[1:12:08] analysis part and all of that stuff. The
[1:12:10] idea is to stay with who you have
[1:12:11] because it's got all this historical
[1:12:12] information and they've got a history,
[1:12:15] you know, updating themselves and so
[1:12:17] maybe there's another piece of software
[1:12:18] that's just a little bit better, but the
[1:12:20] conversion is just going to be crazy.
[1:12:22] So, we're just going to stick with who
[1:12:23] we have.
[1:12:23] >> Yes.
[1:12:24] » Yes.
[1:12:24] >> Because I mean, this is all very
[1:12:25] » Because I mean, this is all very
[1:12:25] familiar stuff.
[1:12:27] >> The area where I would encourage you,
[1:12:30] » The area where I would encourage you,
[1:12:30] you mentioned chat as an example. We're
[1:12:32] all watching out for privacy issues
[1:12:34] because when you let stuff out
[1:12:36] >> into chat then the rest of the world
[1:12:38] » into chat then the rest of the world
[1:12:38] learns from the town of Alton and also
[1:12:40] theoretically
[1:12:42] >> right
[1:12:42] » right
[1:12:42] >> the area where I think it could be
[1:12:44] » the area where I think it could be
[1:12:44] really interesting for you as a
[1:12:45] controller is if you take this document
[1:12:48] and the other hundred that you've done
[1:12:49] over the last however whatever period
[1:12:51] you have and feed it into the engine,
[1:12:54] >> right? that you could go back into it
[1:12:56] » right? that you could go back into it
[1:12:56] and all these questions that are coming
[1:12:57] up can be digested and and answered for
[1:13:00] you through an inquiry,
[1:13:02] >> right?
[1:13:02] » right?
[1:13:02] >> And it'll be unique to the task
[1:13:04] » And it'll be unique to the task
[1:13:04] information,
[1:13:05] >> right?
[1:13:06] » right?
[1:13:06] >> So when you ask, hey, how many people
[1:13:07] » So when you ask, hey, how many people
[1:13:07] are involved in there? You how many
[1:13:09] people are involved? You do this while
[1:13:11] you're, you know, watching Netflix, how
[1:13:13] many people are involved in and then out
[1:13:15] comes the answer. So I think I think
[1:13:18] it's beyond the accounting. No,
[1:13:21] >> it's going to be it's going to be a a
[1:13:24] » it's going to be it's going to be a a
[1:13:24] data lake of whatever you could p with
[1:13:28] with privacy introduced to that system
[1:13:31] and go I want you to learn from all this
[1:13:34] but we're just so it's just it's still
[1:13:35] far it's still far away. It's actually
[1:13:38] not. There's a hat that uh the mayors
[1:13:41] got that says, you know, I read the
[1:13:43] packet. It was provided by prophecy.com,
[1:13:47] which was at the last three managers
[1:13:49] conference. Prophecy.com does exactly
[1:13:51] what you're talking about. It mines the
[1:13:54] Africanonly website for every single
[1:13:57] document that's on there
[1:13:59] >> and then creates it for staff to be able
[1:14:01] » and then creates it for staff to be able
[1:14:01] to write staff reports, replicate
[1:14:03] information, and answer questions. Boy,
[1:14:05] you gotta watch privacy,
[1:14:07] >> right?
[1:14:08] » right?
[1:14:08] >> That stuff's got to be rock solid.
[1:14:11] » That stuff's got to be rock solid.
[1:14:11] >> Yeah. And
[1:14:12] » Yeah. And
[1:14:12] >> introduce documents to it. That
[1:14:15] » introduce documents to it. That
[1:14:15] >> and I think that's the the thing is and
[1:14:18] » and I think that's the the thing is and
[1:14:18] some of these some of these softwares
[1:14:20] are working in with open AI, right? And
[1:14:24] as you mentioned, right, you can get
[1:14:27] they're showing open AI what they do
[1:14:29] with their processes, right? They're
[1:14:31] reading it. said what what what can
[1:14:33] happen from that like whether
[1:14:35] information gets
[1:14:37] they get information on processes or or
[1:14:40] what is it what's the word I'm looking
[1:14:42] for um
[1:14:43] >> example we have now is we'll take
[1:14:44] » example we have now is we'll take
[1:14:44] information we'll put it in the one
[1:14:46] called claude claude then could actually
[1:14:49] h have
[1:14:51] a particular software can actually have
[1:14:52] your name and your salary and your
[1:14:54] whatever right a snapshot in time it
[1:14:57] then it then this is theoretic removes
[1:15:00] all that information right? Puts it out
[1:15:03] to
[1:15:04] the general like chat GPT to get his
[1:15:07] question answered, pulls it back in and
[1:15:08] then adds your name back on it again. I
[1:15:11] still don't have confidence that that's
[1:15:12] what's occurring, right?
[1:15:13] >> That that
[1:15:15] » That that
[1:15:15] >> that can achieve.
[1:15:17] » that can achieve.
[1:15:17] >> No, some of the stuff that you want.
[1:15:19] » No, some of the stuff that you want.
[1:15:19] >> Yes. And and and
[1:15:20] » Yes. And and and
[1:15:20] >> it's coming.
[1:15:21] » it's coming.
[1:15:21] >> It it's coming and and there is there's
[1:15:23] » It it's coming and and there is there's
[1:15:23] some um like some of the transparency
[1:15:26] stuff like Open Gov is is is creating
[1:15:29] that. They have AI tools within there
[1:15:31] where you can create a a procurement
[1:15:34] where you can um take a document and and
[1:15:38] and and throw it in the AI component and
[1:15:41] then it creates a whole procurement.
[1:15:43] >> Yeah, it's going to affect your staffing
[1:15:45] » Yeah, it's going to affect your staffing
[1:15:45] too.
[1:15:45] >> Yeah.
[1:15:46] » Yeah.
[1:15:46] >> So the the difference between open
[1:15:49] » So the the difference between open
[1:15:49] government open gov and spring box
[1:15:53] cirrus
[1:15:54] >> they're two different
[1:15:55] » they're two different
[1:15:55] >> they they're two different things.
[1:15:56] » they they're two different things.
[1:15:56] OpenGV is uh the transparency tool that
[1:15:59] that um we use to kind of we can show
[1:16:02] our actual reunion date and our budget.
[1:16:04] Um Springbook is our actual financial um
[1:16:08] software that where we keep all our
[1:16:10] financial data, our financial
[1:16:11] management. Um the the good thing with
[1:16:15] open gov is open gov reads springbrook
[1:16:18] and it takes our information every night
[1:16:21] and it it feeds it into open gov where
[1:16:23] you can do the transparency portal where
[1:16:25] you can create um graphs and charts and
[1:16:28] stuff. So that we use it in tando
[1:16:31] >> the transparency portal. Is that just
[1:16:32] » the transparency portal. Is that just
[1:16:32] the town's website?
[1:16:34] >> That's it's open gov but it's it's on
[1:16:37] » That's it's open gov but it's it's on
[1:16:37] the town's notified.
[1:16:38] >> Correct. Um but a lot of these agencies
[1:16:42] » Correct. Um but a lot of these agencies
[1:16:42] are working with each other like like
[1:16:43] open gov's working with open AI right
[1:16:46] and all they're they're creating all
[1:16:47] these things but um it it's it's like
[1:16:52] where's the control of someone some
[1:16:55] company can decide oh this is how they
[1:16:57] do it and we'll we can do it do it on
[1:17:00] our own right and they create a product
[1:17:02] that they beat the other person out on
[1:17:04] the product right because they created
[1:17:06] it
[1:17:06] >> it's overlap for sure
[1:17:07] » it's overlap for sure
[1:17:07] >> right overlap and and And and case in
[1:17:09] » right overlap and and And and case in
[1:17:09] point,
[1:17:09] >> it's a race to market.
[1:17:10] » it's a race to market.
[1:17:10] >> Open gov at the time was just a
[1:17:12] » Open gov at the time was just a
[1:17:12] transparency portal.
[1:17:14] >> Yeah.
[1:17:15] » Yeah.
[1:17:15] >> Where we would take and upload our data
[1:17:16] » Where we would take and upload our data
[1:17:16] in there and it would spit out the
[1:17:18] information. Well, in its infancy,
[1:17:21] OpenGV was partnered with Springbrook on
[1:17:26] reading the data and all that and so it
[1:17:29] worked. Well, what does open gov have
[1:17:31] now today? They have a financial
[1:17:33] software tool that does spring book
[1:17:36] does. So all this partnering and Eric
[1:17:40] it's great
[1:17:41] >> but at what cost right and so um as this
[1:17:45] » but at what cost right and so um as this
[1:17:45] AI component um kind of develops a lot
[1:17:50] of it is because the chat GPT they've
[1:17:53] been working with these softwares and
[1:17:54] and this is George just brought it up.
[1:17:56] So this stuff pulls in from our
[1:17:58] financial software. It read it's a read
[1:18:00] only to our financial software. It
[1:18:02] doesn't it all it does is take the
[1:18:04] information and then and and and we map
[1:18:07] it. But OpenGV
[1:18:12] has now not just this but it's a
[1:18:14] financial software. They have permitting
[1:18:17] and licensing
[1:18:18] uh all these things where they worked
[1:18:21] with other software developers like how
[1:18:24] does this work? How does this and and
[1:18:26] now they're they're competition for
[1:18:27] them. Um but uh with Spring Brook,
[1:18:30] Spring Brook also has I mentioned it,
[1:18:32] there's a Tableau which is similar to
[1:18:35] this
[1:18:36] >> but it's great from Springbrook.
[1:18:39] » but it's great from Springbrook.
[1:18:39] >> So um and yeah, so there's Open AI stuff
[1:18:42] » So um and yeah, so there's Open AI stuff
[1:18:42] where see these filters and these views,
[1:18:45] you can create them, right? Well, now
[1:18:46] OpenAI can can say go in there and say,
[1:18:49] "Okay, I want to know the property taxes
[1:18:51] for the town for the last 10 years." And
[1:18:53] it'll right. So the innovation's there
[1:18:56] and it's happening quick, but at the
[1:18:58] same time it's like we're um where
[1:19:02] governments are still having to create
[1:19:05] policies about the use of open AI
[1:19:08] >> um because it's just exploding uh so
[1:19:11] » um because it's just exploding uh so
[1:19:12] fast and and another thing they were
[1:19:14] talking about is open AI and these chat
[1:19:17] GPT applications create hallucinations,
[1:19:19] right? Where
[1:19:21] >> makes it seem like this is real but it's
[1:19:23] » makes it seem like this is real but it's
[1:19:23] not. you know, because you're reading
[1:19:25] it's taking data and it's just the
[1:19:26] supercomputer
[1:19:28] um and it could create um
[1:19:30] hallucinations. So that's where the the
[1:19:32] human element comes in. Oh,
[1:19:34] >> it's good that you're open to the idea
[1:19:35] » it's good that you're open to the idea
[1:19:35] and it's good that good that you're
[1:19:36] trying to control the idea because the
[1:19:38] two got to coexist.
[1:19:40] >> So So you're planning on converting to
[1:19:42] » So So you're planning on converting to
[1:19:42] the cloud based?
[1:19:43] >> Yes.
[1:19:44] » Yes.
[1:19:44] >> And is that with the $75,000
[1:19:48] » And is that with the $75,000
[1:19:48] >> and then what's the $10,000? Oh, so the
[1:19:51] » and then what's the $10,000? Oh, so the
[1:19:51] 10,000 is is we we reallocate that
[1:19:54] amount every year from the finance
[1:19:56] department to our equipment replacement
[1:19:58] fund. So we we've done that the last
[1:20:00] several years. So the amount that we've
[1:20:02] contributed
[1:20:03] >> that's just an annual,
[1:20:04] » that's just an annual,
[1:20:04] >> right? An annual allocation. So what
[1:20:06] » right? An annual allocation. So what
[1:20:06] we've contributed over the years pays
[1:20:08] for that 75,000 migration. So we
[1:20:11] >> So you don't spend that 10,000 every
[1:20:12] » So you don't spend that 10,000 every
[1:20:12] year.
[1:20:13] >> We all No, we don't. We just allocate
[1:20:15] » We all No, we don't. We just allocate
[1:20:15] for Correct. We've been building it. And
[1:20:18] so so there's $75,000 tagged. And then
[1:20:22] does that include the training also?
[1:20:24] >> Uh yes, this includes the training. Um
[1:20:27] » Uh yes, this includes the training. Um
[1:20:27] it could be it could be plus or minus,
[1:20:29] but it includes having the on-site
[1:20:31] training. And that's what I'm requiring
[1:20:33] is not to I've been through some um
[1:20:37] migrations into new software. Then the
[1:20:39] training is like three days and then all
[1:20:41] of a sudden you're on your own. So this
[1:20:43] is going to be walk us through
[1:20:44] everything. Um, and I meant I'm glad
[1:20:47] that you mentioned this, Steve, because
[1:20:48] changing from software, one software to
[1:20:50] another is it's a nightmare. Um, but
[1:20:53] Spring Brook is
[1:20:53] >> she'll lose your historical data no
[1:20:55] » she'll lose your historical data no
[1:20:55] matter what to tell you. Correct.
[1:20:56] >> Not if you But you can also do it to
[1:20:58] » Not if you But you can also do it to
[1:20:58] keep the historical.
[1:20:59] >> Oh, good luck.
[1:21:01] » Oh, good luck.
[1:21:01] >> Well, I've done it. Um,
[1:21:02] » Well, I've done it. Um,
[1:21:02] >> yeah, I know. It's all these buckets and
[1:21:04] » yeah, I know. It's all these buckets and
[1:21:04] multiple
[1:21:06] categories,
[1:21:07] >> but but are is there going to be much of
[1:21:10] » but but are is there going to be much of
[1:21:10] a conversion when you go to the
[1:21:11] cloud-based application? Um there there
[1:21:14] will be conversion as far as the
[1:21:16] interface um the way it looks like um
[1:21:20] where you go uh and h in processing
[1:21:24] things. Um right now it's more of a
[1:21:26] >> is it using the same database?
[1:21:28] » is it using the same database?
[1:21:28] >> Yes, it's using the same we're not
[1:21:30] » Yes, it's using the same we're not
[1:21:30] cloud-based now.
[1:21:31] >> No.
[1:21:32] » No.
[1:21:32] >> Uh
[1:21:33] » Uh
[1:21:33] >> no
[1:21:33] » no
[1:21:33] >> no. So there is going to have to be a
[1:21:35] » no. So there is going to have to be a
[1:21:35] conversion to the
[1:21:36] >> but within the same software provider.
[1:21:39] » but within the same software provider.
[1:21:39] >> Yes. Yeah. Within
[1:21:41] » Yes. Yeah. Within
[1:21:41] >> that's okay. Yeah. And and and what the
[1:21:44] » that's okay. Yeah. And and and what the
[1:21:44] what the good thing about this the the
[1:21:46] cloud cloud-based like any upgrades or
[1:21:49] any like
[1:21:51] >> it's automatic,
[1:21:52] » it's automatic,
[1:21:52] >> right? They'll do it and stuff but
[1:21:55] » right? They'll do it and stuff but
[1:21:55] >> and it's more it's more secure, right?
[1:21:57] » and it's more it's more secure, right?
[1:21:57] Um
[1:21:58] >> and so it it's just a it's a different
[1:22:01] » and so it it's just a it's a different
[1:22:01] look on the interface and what's good is
[1:22:03] they understand that. So you can when
[1:22:06] you you can toggle between what you're
[1:22:08] existing working for working in and the
[1:22:11] new interface. So I have staff that
[1:22:13] enjoy that is used to doing it this way
[1:22:16] and and I can find here in this module.
[1:22:18] >> So you can go back and forth. You're not
[1:22:20] » So you can go back and forth. You're not
[1:22:20] like it's not like okay once you're in
[1:22:22] this new one you're just working in this
[1:22:24] new one. So you can you can pivot
[1:22:26] >> and so which is I think is is is
[1:22:29] » and so which is I think is is is
[1:22:29] beneficial.
[1:22:30] >> One the information is already there. Uh
[1:22:33] » One the information is already there. Uh
[1:22:33] too, it also helps with the integration.
[1:22:36] Another thing too we want to do, there's
[1:22:38] um express bill pay uh so uh people can
[1:22:41] pay online through credit cards.
[1:22:43] >> Is that included in the budget? So
[1:22:45] » Is that included in the budget? So
[1:22:46] >> yes,
[1:22:46] » yes,
[1:22:46] >> and the AI portions of it
[1:22:48] » and the AI portions of it
[1:22:48] >> and the AI portion, right? Yeah. So
[1:22:50] » and the AI portion, right? Yeah. So
[1:22:50] that's another added benefit is it um
[1:22:54] everything is integrated. So on the
[1:22:56] payments right taking payments it'll be
[1:22:59] um through the express bill pay is is
[1:23:01] the payment
[1:23:03] >> uh application for springbook. So it it
[1:23:05] » uh application for springbook. So it it
[1:23:05] it it
[1:23:07] >> you pay and it it talks to your GL, it
[1:23:10] » you pay and it it talks to your GL, it
[1:23:10] talks to your cash receipts and and
[1:23:11] everything's integrated. Right now when
[1:23:14] we take credit card payments, we we take
[1:23:16] it but it's manual entry,
[1:23:18] >> right? This is seamless, right? So that
[1:23:21] » right? This is seamless, right? So that
[1:23:22] and it's it's a it's much needed and we
[1:23:25] need to move more to that direction
[1:23:28] >> and stuff. So
[1:23:29] » and stuff. So
[1:23:29] >> the budget also includes the AI modules.
[1:23:33] » the budget also includes the AI modules.
[1:23:33] for any other
[1:23:34] >> or anything that for now. Yeah. Unless
[1:23:36] » or anything that for now. Yeah. Unless
[1:23:36] and then if I think if there's anything
[1:23:38] that that gets created, there may be
[1:23:40] like that's not already in there, they
[1:23:42] may say, okay, um
[1:23:45] >> like Yeah, correct. An add-on. So, when
[1:23:47] » like Yeah, correct. An add-on. So, when
[1:23:47] we do this, we'll verify, okay, what is
[1:23:50] what is the future of this version of
[1:23:53] the cloud? Is there anything that's
[1:23:55] additional? Um
[1:23:58] yes, if it is, okay, what are the
[1:23:59] add-ons? And then going forward it's
[1:24:02] just up upgrades right whatever refresh
[1:24:04] upgrades were um you know if they find a
[1:24:08] bug on something right it automatically
[1:24:10] will update um the other thing is uh
[1:24:14] what was the other mention on the
[1:24:19] not the upgrades but um
[1:24:21] >> does it change the licensing fees
[1:24:24] » does it change the licensing fees
[1:24:24] >> the the license fee should be it's about
[1:24:27] » the the license fee should be it's about
[1:24:27] should be about half of that a year
[1:24:29] which means the license fee so it will
[1:24:31] go down.
[1:24:31] >> Yeah. The license fee fee would be about
[1:24:33] » Yeah. The license fee fee would be about
[1:24:33] 34,000 which includes um customer
[1:24:36] service, customer support. Um
[1:24:39] >> so that's
[1:24:41] » so that's
[1:24:41] >> and we already pay that right now. We
[1:24:43] » and we already pay that right now. We
[1:24:43] pay that.
[1:24:43] >> So the so in the budget
[1:24:46] » So the so in the budget
[1:24:46] >> our cost will go down.
[1:24:48] » our cost will go down.
[1:24:48] >> No no um this is the onetime cost,
[1:24:51] » No no um this is the onetime cost,
[1:24:51] >> right? That's
[1:24:52] » right? That's
[1:24:52] >> And then and then our maintenance cost
[1:24:53] » And then and then our maintenance cost
[1:24:53] is is already in the budget which is our
[1:24:56] our customer support which is for all
[1:24:58] the modules is sort of about 34,000 a
[1:25:01] year the same stay the same
[1:25:03] >> but the licensing you said so the
[1:25:05] » but the licensing you said so the
[1:25:05] licensing
[1:25:05] >> that is the licensing 34,000
[1:25:07] » that is the licensing 34,000
[1:25:07] >> because at first I thought I heard you
[1:25:08] » because at first I thought I heard you
[1:25:08] say it would go down but it'll stay the
[1:25:10] same.
[1:25:11] >> Yes it'll stay the same.
[1:25:13] » Yes it'll stay the same.
[1:25:13] >> Yeah. This I meant the one time would go
[1:25:16] » Yeah. This I meant the one time would go
[1:25:16] down.
[1:25:16] >> 75,000 one time
[1:25:18] » 75,000 one time
[1:25:18] >> and then the open gov work.
[1:25:22] » and then the open gov work.
[1:25:22] Does how much does that cost or is that
[1:25:25] >> that's about 30
[1:25:28] » that's about 30
[1:25:28] 32,000 or
[1:25:29] >> that's not included in the 75.
[1:25:31] » that's not included in the 75.
[1:25:31] >> Correct. And we're that's already
[1:25:33] » Correct. And we're that's already
[1:25:33] budgeted in our on our um annual budget
[1:25:37] that part through open gov. Um the same
[1:25:40] thing for the spring book maintenance
[1:25:41] that's already budgeted in our in our
[1:25:43] operation budget. And another thing with
[1:25:45] with um our spring broke is we have
[1:25:48] customizations in there that are
[1:25:50] specific to our agency um specifically
[1:25:55] customizations for
[1:25:58] this state our pension right. It's
[1:26:00] customcreated portion in our software
[1:26:03] that we can create reports run reports
[1:26:06] um because we have to download every two
[1:26:10] weeks we send the the pension uh data to
[1:26:14] calc and so that's a customization like
[1:26:16] there's a customization for the state of
[1:26:18] warrior right they have to customize
[1:26:19] their software for what what is required
[1:26:22] there so we have some customizations too
[1:26:25] in our software and that's what they're
[1:26:26] aware of it so that I think staying with
[1:26:29] them upgrading with them. Um it it it
[1:26:34] the best thing and then the
[1:26:35] customizations also are pretty
[1:26:40] » do you know like initial uses like do
[1:26:43] you have a list of initial uses of AI
[1:26:46] >> other than right now uh it's the the um
[1:26:51] » other than right now uh it's the the um
[1:26:51] >> the bills the bills I think there's
[1:26:53] » the bills the bills I think there's
[1:26:53] going to be an AI component on the
[1:26:55] reporting on the Tableau where you can
[1:26:58] say tell me the last Mhm.
[1:27:00] >> for property taxes and you enter the
[1:27:03] » for property taxes and you enter the
[1:27:03] account code and it should bring
[1:27:05] everything up. Um but right now I think
[1:27:08] the the biggest ones for us is the
[1:27:10] expense the AP component accounts
[1:27:12] payable and then the express bill pay to
[1:27:16] take on um pay online um pay via credit
[1:27:20] cards. When do you want to do it
[1:27:22] >> this? I'm I'm I'm working with Spring
[1:27:24] » this? I'm I'm I'm working with Spring
[1:27:24] Brook and hopefully
[1:27:27] not in the next two months or so.
[1:27:29] Probably towards the end it's
[1:27:30] summertime. Um right because my hiccup
[1:27:33] is don't want to do it when you're in
[1:27:36] the middle of budgeting.
[1:27:37] >> Right.
[1:27:38] » Right.
[1:27:38] >> Yeah.
[1:27:41] » Yeah.
[1:27:41] >> Middle closing the fiscal year. So yeah.
[1:27:43] » Middle closing the fiscal year. So yeah.
[1:27:43] So and it's just also making sure that
[1:27:46] it aligns with their time timeline with
[1:27:48] their consultants, right? because
[1:27:50] they're going to have to send them here
[1:27:52] um the time for them to uh to do this
[1:27:56] conversion switch over to the uh
[1:28:01] cloud and then thank you the cloud and
[1:28:03] then also the to organize the training
[1:28:06] right and the training will be I'm
[1:28:08] assuming two weeks but each module will
[1:28:10] be two days two and a half days
[1:28:12] >> do they also have to reintegrate it with
[1:28:14] » do they also have to reintegrate it with
[1:28:14] open gov
[1:28:15] >> uh I don't I don't think so I think Um
[1:28:19] » uh I don't I don't think so I think Um
[1:28:20] I think it'll just be because open of is
[1:28:22] an SQL reader I think or something like
[1:28:24] that that it just reads. is just making
[1:28:26] sure I I'll update making sure I'll
[1:28:29] verify um on the on the reader, but uh
[1:28:32] we had we didn't um only with Springbook
[1:28:35] when we worked with Open Gov, we just
[1:28:36] had to contact Springbook to have them
[1:28:40] the ability to to tag and read it. But
[1:28:43] other than that, it's shouldn't be so
[1:28:45] much
[1:28:46] >> if the database isn't changing.
[1:28:48] » if the database isn't changing.
[1:28:48] >> Correct. If the database isn't changing
[1:28:49] » Correct. If the database isn't changing
[1:28:50] shouldn't it shouldn't um be a big
[1:28:52] change. But thank you. Those are one of
[1:28:54] the things more asked.
[1:28:55] >> Things are never as easy to
[1:28:56] » Things are never as easy to
[1:28:56] >> No. Yeah, I I hear you. Yeah, you're
[1:28:59] » No. Yeah, I I hear you. Yeah, you're
[1:28:59] right.
[1:28:59] >> Does it increase your prospect pool for
[1:29:01] » Does it increase your prospect pool for
[1:29:01] employees because now you could have
[1:29:02] more work at home or is that something
[1:29:04] we don't do?
[1:29:05] >> Um the work from home is something we
[1:29:07] » Um the work from home is something we
[1:29:07] don't do. Um
[1:29:09] I think
[1:29:10] >> because of a management be here do work
[1:29:13] » because of a management be here do work
[1:29:13] kind of
[1:29:15] >> not so much that I think more we're
[1:29:17] » not so much that I think more we're
[1:29:17] we're a public servant. So how can we
[1:29:20] serve the public? We're at home. um more
[1:29:23] of that that approach but we we do I
[1:29:25] mean some of the directors work from
[1:29:27] home um but I think on the the the
[1:29:31] >> so that software in particular won't
[1:29:33] » so that software in particular won't
[1:29:33] contribute to that you couldn't have an
[1:29:34] AP person that's going to wants to work
[1:29:36] Friday from home and
[1:29:38] >> you can I mean
[1:29:40] » you can I mean
[1:29:40] >> where they go
[1:29:41] » where they go
[1:29:41] >> I mean the software will be available to
[1:29:44] » I mean the software will be available to
[1:29:44] log in right you can you can access it
[1:29:47] anywhere like a
[1:29:49] >> um a portal VPN
[1:29:50] » um a portal VPN
[1:29:50] >> yeah VPN portal Yeah,
[1:29:53] » yeah VPN portal Yeah,
[1:29:53] >> but I think it it just it'll help help I
[1:29:56] » but I think it it just it'll help help I
[1:29:56] guess streamline not just the workflow
[1:29:58] flow but also um the analysis to
[1:30:03] reporting um the cash module the bank
[1:30:07] record module um a lot of it will be um
[1:30:10] more
[1:30:12] I think streamlined and easier all
[1:30:15] windows based already but I think more
[1:30:17] now with these applications for data
[1:30:19] >> modern idea Yes. Yeah, they will. Yeah,
[1:30:23] » modern idea Yes. Yeah, they will. Yeah,
[1:30:23] I gave them a log. Here you go. Log in.
[1:30:24] You can pull it up yourself. Pull up the
[1:30:26] information. But yeah, but that that was
[1:30:30] my update on that
[1:30:32] just to let you know where we're at. And
[1:30:34] and then the AI component. We're still
[1:30:36] I'm still like evaluating it like with
[1:30:38] the open gov. They they working with
[1:30:40] chat gd. I'm creating the the components
[1:30:44] within their software. So, um, and in
[1:30:47] trying to see what other agencies are
[1:30:49] are dealing with and making sure that
[1:30:51] policies are set up, too, so it's not,
[1:30:53] um, you know, we run them up, right?
[1:30:58] But, um, that was for three. Any other
[1:31:00] questions on that one?
[1:31:03] >> Thank you.
[1:31:05] » Thank you.
[1:31:05] >> Yeah. And then on the ALM, I just want
[1:31:07] » Yeah. And then on the ALM, I just want
[1:31:07] to kind of highlight real quick just I I
[1:31:09] I attended the webinar back in early
[1:31:12] December and just and I I included in
[1:31:15] your packet um the ALM review and again
[1:31:19] this is a review that's every four years
[1:31:21] that Calpers is doing. Uh at page nine
[1:31:24] of the um packet is the kind of or the
[1:31:30] main the main meat of it is the the
[1:31:34] board adopted the total portfolio
[1:31:36] approach. Um and this was um I kind of
[1:31:40] briefly discussed about it this um at
[1:31:42] our last meeting. It's the they're doing
[1:31:45] the 7525
[1:31:47] uh equity bonds reference portfolio and
[1:31:49] then they're at they're allowing that
[1:31:51] active risk limit of 400 basis points.
[1:31:54] So 4% for within that portfolio risk um
[1:31:59] adjustment and I think that's um Tom as
[1:32:02] you mentioned hopefully the new
[1:32:03] investment person has that edge so it's
[1:32:06] extra tool so the the plans can move
[1:32:09] within that 400 basis point for the risk
[1:32:12] limit on the um the the actual portfolio
[1:32:17] and then there's no change to the
[1:32:18] current discount rate 6.8 A is going to
[1:32:21] be the same. Uh and the just you know on
[1:32:24] the adopting the portfolio approach
[1:32:27] there's no no changes to the board's
[1:32:29] authority. The ALM process is a four
[1:32:31] year cycle midpoint on review uh you
[1:32:34] know to verify that the the
[1:32:37] capital market assumptions are being
[1:32:39] met. If there's any if the expected
[1:32:41] returns are being met if there's any
[1:32:42] changes that need to be made. Um again
[1:32:44] they review the whole actuarials uh on
[1:32:47] the assumptions. Again, they just
[1:32:49] there's a reference portfolio, there's
[1:32:51] the active risk limit. Um, and this
[1:32:54] replaces that adopted target strategic
[1:32:57] asset allocation and ranges that they
[1:32:59] were um they were using before. And
[1:33:04] again, the the board will continue to
[1:33:05] review this uh total portfolio fund
[1:33:07] risk. Uh, and then that that's pretty
[1:33:10] much it. Just kind of it evolves into um
[1:33:14] you know, better outcomes. There's a
[1:33:17] they kind of put like a matrix a metrics
[1:33:20] of um improved internal governance
[1:33:23] reference portfolios on page 11
[1:33:26] simplicity better transparency greater
[1:33:28] accountability investment decisions for
[1:33:30] the whole and then um it kind of the
[1:33:34] rest of the report it kind of goes
[1:33:35] through uh what the process will be
[1:33:41] but um age
[1:33:47] 19 and 20. Uh 18 through 20 kind of
[1:33:51] discuss the actual assumptions. Uh you
[1:33:54] know the economic assumptions obviously
[1:33:56] the long-term investment return that
[1:33:57] they're looking at. The discount rate is
[1:33:59] is staying unchanged at 6.8. They're
[1:34:02] verifying inflation. Inflation has gone
[1:34:03] up the last um previous years. So they
[1:34:06] they're factoring that in there. uh
[1:34:08] other non-economic assumptions they're
[1:34:10] factoring in on the uh going forward is
[1:34:14] increase pay increases longevity
[1:34:16] retirement termination disability all
[1:34:18] these are getting factored in um in
[1:34:21] these new uh assumptions for uh the ALM
[1:34:24] process
[1:34:26] and then demographic assumptions uh
[1:34:30] shows on page 20 starts on page 20 on
[1:34:33] what's changing
[1:34:35] um retirement rates are staying the same
[1:34:38] but Some are increasing by some while
[1:34:40] some will also decrease. Uh mortality
[1:34:43] rates is something that they looked at.
[1:34:45] Uh there's a slight reduction in
[1:34:47] mortality rates. Uh projected mality
[1:34:50] rates slight reduction.
[1:34:53] There is a minimum changes. There's
[1:34:56] termination rates, minimum changes have
[1:34:58] been adopted.
[1:35:00] Um I think the biggest one is the
[1:35:02] discount rate because if the discount
[1:35:04] rate changed from 6.8 the whole asset
[1:35:06] allocation would change, your um
[1:35:10] investment opportunity um would change.
[1:35:13] So, uh they're keeping it the same. I
[1:35:15] don't think it's going to change um
[1:35:17] until another four years. We still have
[1:35:19] the funding risk mitigation policy that
[1:35:22] takes effect, but last year of April of
[1:35:25] 24, it's no longer automatic. It was
[1:35:29] automatic. Now if it gets triggered and
[1:35:32] this is if the investment rate of
[1:35:34] returns is 2% higher than the actual um
[1:35:37] discount rate then that it creates a a
[1:35:40] funding risk mitigation policy where it
[1:35:42] reduces the rate of return by 05%.
[1:35:46] That's not automatic. If it happens they
[1:35:48] bring it to the board. Again that
[1:35:50] happened this year. We had a positive
[1:35:52] what 11% increase in
[1:35:55] investment return. Um and so it it
[1:35:58] created an investment risk risk
[1:36:00] manuvation policy. The board uh
[1:36:03] presented the board not to recommend a
[1:36:05] reduction. So again discount rate be at
[1:36:08] 6.8%.
[1:36:09] I think eventually over time it could go
[1:36:12] from 6.8 to 6.5.
[1:36:16] Most investment portfolios are at that
[1:36:19] 6.5%. Question.
[1:36:22] >> Who's on the board? Are you on the
[1:36:23] » Who's on the board? Are you on the
[1:36:23] board?
[1:36:24] >> Helpers board.
[1:36:24] » Helpers board.
[1:36:24] >> Yeah. Who are these people? I wish they
[1:36:28] » Yeah. Who are these people? I wish they
[1:36:28] state appointed. Yeah,
[1:36:30] >> they're they're appointed by the state.
[1:36:31] » they're they're appointed by the state.
[1:36:32] >> They elected or I hope would hope not.
[1:36:35] » They elected or I hope would hope not.
[1:36:35] >> No,
[1:36:36] » No,
[1:36:36] >> there's um I think two
[1:36:41] » there's um I think two
[1:36:41] elected members, but that they're
[1:36:43] elected by retirees or by by members
[1:36:48] elect I think one or two members on the
[1:36:50] board, but majority of them are fable.
[1:36:53] Very smart.
[1:36:55] >> Yes. Yes.
[1:36:55] » Yes. Yes.
[1:36:55] >> Very smart.
[1:36:57] » Very smart.
[1:36:57] >> These are the There you go.
[1:36:59] » These are the There you go.
[1:36:59] >> I know there there's at least one union
[1:37:02] » I know there there's at least one union
[1:37:02] representative.
[1:37:03] >> Correct.
[1:37:03] » Correct.
[1:37:04] >> Yes. Union representatives. Um
[1:37:08] they look intelligent, right?
[1:37:11] >> Yeah. I I've I've watched a thing where,
[1:37:13] » Yeah. I I've I've watched a thing where,
[1:37:13] you know, they were in attendance and
[1:37:15] they were asking questions and they all
[1:37:16] seemed to be on top of things
[1:37:21] >> and seem to be confident.
[1:37:23] » and seem to be confident.
[1:37:23] >> Yeah,
[1:37:23] » Yeah,
[1:37:23] >> Robert, I don't think that was the
[1:37:25] » Robert, I don't think that was the
[1:37:25] biggest change for me. The biggest
[1:37:26] change was the postretirement mortality
[1:37:29] for men, the slight reduction in the
[1:37:31] projected mortality rate. I think that's
[1:37:33] correct.
[1:37:35] >> Is that assuming everyone's going to
[1:37:36] » Is that assuming everyone's going to
[1:37:36] live longer? So a reduction of a
[1:37:38] mortality rate is a longer life.
[1:37:42] >> Yeah.
[1:37:43] » Yeah.
[1:37:43] >> Plan accordingly.
[1:37:44] » Plan accordingly.
[1:37:44] >> Yeah. Exactly. Oh, and then I just want
[1:37:46] » Yeah. Exactly. Oh, and then I just want
[1:37:46] to point out
[1:37:47] >> Yeah. Live longer.
[1:37:57] » Thanks for bringing it up. I was I was
[1:37:59] but page 25 of the report, it kind of
[1:38:02] shows the the the funded ratio. So last
[1:38:05] year of 24 that you can see the funding
[1:38:08] ratio was um 74.4%
[1:38:11] and um current assumptions are in blue
[1:38:14] proposed assumptions are in green. So in
[1:38:16] 25 the funding ratio increased to 79% on
[1:38:20] the current assumption and then proposal
[1:38:22] assumptions it reduced by.
[1:38:25] >> So this is a key thing to me that 63025
[1:38:31] » So this is a key thing to me that 63025
[1:38:31] hasn't happened in terms of the
[1:38:33] allocations to U that's so when they say
[1:38:37] it's going to go down four.4% 4%. I
[1:38:42] think for sure what they're saying is
[1:38:44] there's going to be a UL layer added for
[1:38:48] assumption changes.
[1:38:50] And I think on the next page they they
[1:38:54] imply at least that depending on your
[1:38:57] plan things could be different. But if
[1:38:59] if that was just the average if we were
[1:39:01] at the average
[1:39:03] >> I've calculated it's going to be a added
[1:39:07] » I've calculated it's going to be a added
[1:39:07] layer of 300 to 350,000
[1:39:10] for all plans total bathroom plans
[1:39:14] >> on the UAO.
[1:39:15] » on the UAO.
[1:39:15] >> Yeah. It's going to add to that. It's
[1:39:17] » Yeah. It's going to add to that. It's
[1:39:17] going to be
[1:39:18] >> have to advertise advertised. Yeah.
[1:39:21] » have to advertise advertised. Yeah.
[1:39:21] >> Yeah.
[1:39:21] » Yeah.
[1:39:21] >> Right.
[1:39:22] » Right.
[1:39:22] >> Yeah. But also we know for 63025
[1:39:26] » Yeah. But also we know for 63025
[1:39:26] there's a huge investment gain that's
[1:39:28] going to go the other way. So
[1:39:31] >> uh in net I would think
[1:39:34] » uh in net I would think
[1:39:34] >> we're we're going to end up better than
[1:39:36] » we're we're going to end up better than
[1:39:36] we are right now.
[1:39:38] >> Correct. And then you got to factor into
[1:39:40] » Correct. And then you got to factor into
[1:39:40] the we we just made the 3 million ADP.
[1:39:43] >> Yeah.
[1:39:43] » Yeah.
[1:39:43] >> Oh and I didn't calculate that in what I
[1:39:46] » Oh and I didn't calculate that in what I
[1:39:46] came up with is 300,000.
[1:39:48] >> Yeah. So that that's going to be
[1:39:50] » Yeah. So that that's going to be
[1:39:50] benefit. Yeah. um we made it after the
[1:39:52] April deadline, so it didn't um it was
[1:39:57] it's not factored into the actual report
[1:40:00] we received, but it'll be in the next
[1:40:02] one at the end of of of 25. And then
[1:40:05] yeah, it just mentions that you know the
[1:40:08] there's new assumptions that'll be used
[1:40:10] for the June 30 to 25 actual
[1:40:12] evaluations. These um the changes will
[1:40:15] update our public agencies. they will
[1:40:17] affect our contribution rates in fiscal
[1:40:19] year 2728. So um two fiscal years from
[1:40:23] now um these changes in the ALM will
[1:40:26] take effect and then it'll be uh the ALM
[1:40:30] will be effective July 1st 2012
[1:40:38] » I mean 26 sorry
[1:40:41] that they they're they're voting right
[1:40:42] now and then in July 1. Thank you. I'm
[1:40:45] still in 25
[1:40:48] only 13 days in the new year. Okay. But
[1:40:51] yeah, so July 1st of 26, um these new
[1:40:54] ALM rates and assumption changes will
[1:40:56] take place. And that's why the it won't
[1:40:58] affect our our rates until the 27 28
[1:41:02] year.
[1:41:06] » That's all I should talk about agendas
[1:41:09] coming up.
[1:41:11] Uh
[1:41:12] >> sure. Um
[1:41:12] » sure. Um
[1:41:12] >> I have one question and that is uh
[1:41:17] » I have one question and that is uh
[1:41:17] the audited financials.
[1:41:20] >> Yeah, I'm working on those.
[1:41:21] » Yeah, I'm working on those.
[1:41:21] >> We have that for next.
[1:41:22] » We have that for next.
[1:41:22] >> Yes, we will have it next meeting in
[1:41:24] » Yes, we will have it next meeting in
[1:41:24] March. And then um the the other one I
[1:41:26] wanted to bring out was the uh Victoria
[1:41:29] talking about Kalpers is working on
[1:41:32] bringing um Julian and um the investment
[1:41:36] team out and they they couldn't come out
[1:41:38] this month um but u I'm hoping that
[1:41:41] maybe they come out in March
[1:41:43] >> as well.
[1:41:45] » as well.
[1:41:45] Anybody else have agenda items?
[1:41:52] So, are we ready to adjourn?
[1:41:55] Let's do it.
[1:41:56] >> Yeah. Will we adjourn?
[1:41:59] » Yeah. Will we adjourn?
[1:41:59] >> Okay.