[00:00:06]
AND BOARD, UH, READY FOR THE START THE MEETING.
UM, THIS IS THE BOARD FINANCE COMMITTEE MEETING OF THE EAST BAY REGIONAL PARK DISTRICT FOR WEDNESDAY, FEBRUARY 28TH, 2024, BEGINNING AT 10:32 AM UM,
[Roll Call]
WILL THE RECORDING CLERK PLEASE TAKE THE ROLE? YES.PARK DISTRICT STAFF COORDINATORS IN THE MEETING INCLUDE DEBORAH SPALDING, HERE, A GM OF FINANCE AND MANAGEMENT SERVICES.
REN BATES, CHIEF OF DESIGN AND CONSTRUCTION.
UM, TODAY'S MEETING IS HELD PURSUANT TO THE BROWN ACT.
WE ARE PROVIDING LIVE AUDIO AND VIDEO STREAMING.
MEMBERS OF THE PUBLIC WISHING TO MAKE A PUBLIC COMMENT CAN DO SO.
ONE LIVE IN PERSON OR VIA ZOOM TWO BY SUBMITTING AN EMAIL OR THREE LEAVING A VOICEMAIL.
THIS INFORMATION IS NOTED ON THE AGENDA.
IF THERE ARE NO QUESTIONS ABOUT THE MEETING PROCEDURES, WE WILL BEGIN.
ALRIGHT, OUR NEXT, UH, THANK YOU.
[Approval of Minutes]
ITEM IS APPROVAL OF THE MINUTES.DO I HAVE A MOTION FOR APPROVAL OF THE MINUTES? SO MOVED.
[Public Comments on Items Not on the Agenda]
UH, PUBLIC COMMENTS? UH, FOR ITEMS NOT ON THE AGENDA.LOOKS LIKE WE HAVE A HAND RAISED IN THE, ON THE WEB.
LET ME, UH, PROMOTE TO PANELIST.
KELLY, CAN YOU HEAR ME? YOU ARE MUTED AT THIS POINT.
UM, I AM GLAD TO HEAR THAT OUR CHIEF OF DESIGN AND CONSTRUCTION IS HERE BECAUSE, UH, HE NEEDS TO HEAR THESE THINGS AND ALSO OUR FINANCE PEOPLE, BECAUSE EVERYTHING HAS TO DO WITH FINANCE.
UM, BAY NATURE YESTERDAY PUBLISHED A HAPPY NEWS PIECE ABOUT THE TRANSFORMATION OF COYOTE HILLS, MAKING IT MORE ACCESSIBLE.
THE NATURE MAGAZINE OVERLOOKS THE IMPACT OF FINANCES AND THE, UH, THE IMPACT OF PARKING FEES ON, UH, VISITORS.
THEY TALK ABOUT ACCESSIBILITY WITHOUT, WITHOUT TAKING ANY CONSIDERATE ANY NOTE OF THE, UM, PARKING FEES, UH, THAT WENT FROM BEING FREE UP TO BEING $5.
UM, THERE THAT WAS, UH, THE FREE PARKING WAS FENCED OFF IN LATE 2022, BASED ON THE AGGRESSIVE AND UNSUPPORTED ASSUMPTION THAT THE LEASE WAS.
THE, UH, FARMING LEASE WAS A SURE THING, AND, UH, FREE PARKING WAS GONNA BE NEEDED FOR THE PRODUCE STAND.
BUT, UM, SINCE, UM, UH, THE PLAN PRESENTED TO YOUR BOARD CALLED FOR ALAMEDA COUNTY AND DIG DEEP FARMS WITH A CONTRACT AND WITH, WITH A LEASE TO GROW EDIBLE GR CROPS, BEGINNING A YEAR OR TWO AGO.
THEY DIDN'T GROW A SINGLE CARROT OR ONION, OR POTATO, OR CABBAGE OR EAR OF CORN.
AND NOW THE COUNTY IS TAKING A STEP BACK TO REASSESS THEIR RELATIONSHIP WITH THE GROWERS AND REASSESS THEIR FUNDING FOR FOOD AS MEDICINE.
NOW, THE 45 ACRE FIELD, IN THE ARTICLE IN, IN BAY NATURE, IT SAYS IT WILL BE LEASED TO A FARMER, UH, FOR SUSTAINABLE AGRICULTURE.
AND THE OLD BARN COULD BE USED AS A PRODUCE STAND.
AND, UH, THAT, THAT'S ACCORDING TO CHRIS BARTON.
UM, OF COURSE, THEY, THEY, THEY GOT RID OF THAT FREE PARKING, UM, TWO YEAR, UH, A YEAR, TWO YEARS AGO, UH, OR, OR A YEAR AGO, UH, BASED ON THE, THE ASSUMPTION THAT THAT WAS GONNA HAPPEN.
NOW, IT'S NOT EVEN A SURE THING BECAUSE CHRIS SAYS, UH, BARTON, MR. BARTON SAYS THAT'S, UH, IF THEY CHOOSE TO DO SO, THERE'S NO LONGER A PRODUCE STAND IN, UH, IN THE, IN THE GUARANTEE.
NOW THERE'S 300 ACRES OF PARKLAND, UH, IN THIS ARTICLE SLATED TO OPEN IN SPRING OF 2024, AND THAT'S A YEAR LATE.
THE CONSTRUCTION THERE AS OF MID 22, WAS SCHEDULED TO OPEN IN SPRING OF 2023.
AND AS OF AUGUST 16TH, 2023 SCHEDULED OPEN IN SEPTEMBER, 2023, UH, WHICH WAS ABOUT A YEAR, YOU KNOW, UH, UH, SIX MONTHS AGO.
IT'S NOW SCHEDULED, IT'S NOW FULLY A YEAR LATE.
IT'S TAKING EXACTLY TWICE AS LONG AS SCHEDULED.
SO WHEN YOU SPEND, UH, HAVE SCHEDULES AND YOU HAVE PRO UH, SPENDING, UM, YOU KNOW, THE, THE, THE TIMELINE FOR COMPLETION OF PROJECT COMPLETION IS OF CRITICAL IMPORTANCE.
YOU KNOW, YOU KNOW YOUR SPENDING, BUT YOU DON'T KNOW YOUR TIMELINES FOR PROJECT COMPLETION.
AND IF YOU DO, THEY'VE BEEN, UH, INCREDIBLY AGGRESSIVE TWICE THE SPEED AND, UH, HALF THE HALF THE TIME.
AND THEY HAVE BEEN ENTIRELY UNREALISTIC AT COYOTE HILLS.
[00:05:01]
ALRIGHT, THANK YOU.[Action Items]
ON TO OUR ACTION ITEMS. UM, FOUR.UH, NUMBER FOUR A IS THE, UH, UPDATE ON SELECTION OF THE FIRM TO PROVIDE ASSESSMENT, DISTRICT ENGINEERING AND COMMUNITY FACILITIES.
DISTRICT ADMINISTRATIVE SERVICES.
I'M DEBORAH SPALDING, ASSISTANT GENERAL MANAGER OF FINANCE AND MANAGEMENT SERVICES.
GIMME A SECOND WHILE I PULL UP THE SCREEN HERE.
A UPDATE ON SELECTION OF FIRM TO PROVIDE IS ASSESSMENT DISTRICT ENGINEERING AND COMMUNITY FACILITIES, DISTRICT ADMINISTRATIVE SERVICES.
AND I'M START OUT BY GIVING YOU SOME BACKGROUND TALKING ABOUT WHAT DOES THE ASSESSMENT ENGINEER DO FOR THE PARK DISTRICT.
'CAUSE IT'S KIND OF A FUNNY TITLE, AN ASSESSMENT ENGINEER.
SO THE PARK DISTRICT HAS, UH, A NUMBER OF SPECIAL REVENUES THAT COME IN FROM DIFFERENT ASSESSMENT DISTRICTS, UH, LIGHTING AND LANDSCAPING ASSESSMENT DISTRICTS, OR LLDS AS WE CALL THEM.
UH, WE ALSO HAVE SIX ZONES OF BENEFITS OR ZBS AND FOUR COMMUNITY FACILITIES, DISTRICTS, OR CFDS.
UH, SO ALL OF THESE SPECIAL REVENUES ARE REQUIRED TO GO THROUGH CERTAIN PROCESSES FOR BOTH ESTABLISHING THE ANNUAL ASSESSMENT AND THEN REPORTING OUT ON IT EVERY YEAR.
SO THIS IS FROM PROP TWO 18 ONLY SPECIAL BENEFITS ARE ACCESSIBLE AND AGENCIES SHALL SEPARATE THE GENERAL BENEFITS FROM THE SPECIAL BENEFITS CONFERRED ON A PARCEL.
SO OUR ENGINEER HELPS US TO DO THIS, HELP US WITH THE REPORTING, MAKING SURE THAT WE ARE, UH, CORRECTLY ASSESSING THESE PARCELS.
SO HERE'S A LIST OF ALL OF OUR ASSESSMENT DISTRICTS AND OUR ZONES OF BENEFITS.
SO YOU CAN SEE THERE'S, THERE'S QUITE A FEW OF THEM.
UM, MOST RECENTLY WE'VE STARTED ADDING CFDS RATHER THAN ZONES OF BENEFITS.
AND ALL OF THESE, THE REVENUES ARE TRACKED IN SPECIAL REVENUE FUNDS, SO THAT WE'RE KEEPING TRACK OF THE MONEY COMING IN AND, AND GOING OUT AND HOW IT'S BEING SPENT, UH, CAREFULLY AND SEPARATELY FROM OTHER FUNDS.
SO NOW INTO THE RFP PROCESS AND HOW IT WENT.
SO WE, WE DISTRIBUTED OUR RFP DECEMBER 22ND.
UH, WE RECEIVED THREE PROPOSALS ON JANUARY 11TH, AND THEN WE CONDUCTED PANEL INTERVIEWS.
AND SO THERE WERE THREE OF US ON THE PANEL.
UH, IT WAS, UH, MICHELLE STRASS AND O'HARA, OUR INTERIM ASSISTANT FINANCE OFFICER, BRIAN HOLT, OUR CHIEF OF PLANNING.
AND THEN, UH, I ALSO SAT ON THE PANEL.
AND FROM THAT PROCESS WE SELECTED NBS.
UH, SOME OF YOU MAY BE FAMILIAR WITH THEM.
THEY HAVE BEEN THE PARK DISTRICT'S ASSESSMENT ENGINEER SINCE 2011.
UH, SO THEY HAVE NOT ONLY A LOT OF, UH, EXPERIENCE WITH THE PARK DISTRICT, BUT ALSO WITH MANY OTHER AGENCIES THROUGHOUT CALIFORNIA.
SO THEY'RE REALLY KNOWN AS BEING EXPERTS, UH, IN ASSESSMENT DISTRICTS AND IN CFD CREATION AS WELL.
UM, BY GOING THROUGH THE RFP PROCESS, WE WERE ABLE TO GET A MORE COMPETITIVE PRICE, UH, SLIGHTLY LOWER THAN, UH, PRICING IN THE PRIOR YEAR.
AND OF COURSE, WE ALWAYS LEARN THINGS WHEN WE GO THROUGH OUR RFP PROCESS ABOUT BEST PRACTICES OUT THERE.
SO, VERY HELPFUL FOR US TO GO THROUGH THIS.
UM, AND SO WE HAVE A REQUESTED ACTION TO RECOMMEND TO THE FULL BOARD, A THREE YEAR CONTRACT WITH MBS FOR A TOTAL OF $145,800.
AND I'D BE HAPPY TO TAKE ANY QUESTIONS, ANY QUESTIONS FROM THE COMMITTEE? IF THERE, IF THERE, WELL, LET ME JUST SAY, UM, THERE'S NO QUESTIONS BECAUSE YOU, YOU DESCRIBED IT ALL REALLY WELL IN THE REPORT.
OH, YOU HAVE A QUESTION? OKAY.
UM, IS THIS THE SAME FIRM THAT WE HAD WORKED WITH PREVIOUSLY OR WILL THIS BE A NEW, UH, PARTNERSHIP? YEAH, NBS IS THE FIRM WE'VE BEEN USING SINCE 2011.
SO EVERY FIVE YEARS, ROUGHLY, SOMETIMES WE'VE EXTENDED IT FOR AN ADDITIONAL TWO YEARS.
WE HAVE GONE OUT FOR AN RFP, UH, GOTTEN PROPOSALS AND WE'VE SELECTED NVS, I THINK THIS IS THE THIRD OR FOURTH TIME, UM, THAT WE'VE ENDED UP WITH NVS.
BUT YES, SO THEY HAVE A LONG HISTORY WITH THE PARK DISTRICT.
AND THEN, UM, IN TERMS OF WHERE THE, UM, I GUESS THE, THE PAYMENT TO WORK WITH THIS FIRM AND WHAT WE'RE APPROVING TODAY, THAT WILL COME FROM THE, UM, PARCEL TAX AND ASSESSMENT DISTRICT FUNDS? YES, THAT'S RIGHT.
SO EACH OF THE ASSESSMENT DISTRICTS AND ZONES OF BENEFITS IS PAYING A SMALL PORTION, UH, TOWARDS THE COST FOR MBSS SERVICES.
AND IS THAT DETERMINED BY, UM, THE AMOUNT IN EACH ONE OF THOSE DIFFERENT YES, EXACTLY.
SO THE, THE LARGER THE DISTRICT, THE MORE WORK
[00:10:01]
IT IS FOR NBS TO MANAGE IT.ANY OTHER QUESTIONS OR I'LL TAKE A MOTION? I'D BE HAPPY TO MAKE THE MOTION.
DO WE RESUME SHARING HERE? ARE YOU, ARE YOU STAYING UP FOR THE NEXT ONE TOO? YES.
UM, SO THE NEXT ITEM FOUR B IS, UM, THE QUARTERLY REPORT AND MARKET REVIEW FOR DECEMBER 31ST, 2023 AND 2024 INVESTMENT POLICY APPROVAL.
SO THERE'S TWO, TWO SORT OF TWO ITEMS THERE.
TRYING TO GET TO THE RIGHT SIDE HERE.
SO I'M GONNA START OUT, UM, TALKING ABOUT OUR INVESTMENT POLICY, UM, AND, UH, WALK YOU THROUGH THE INVESTMENT POLICY.
AND THEN I'M GOING TO TAKE THE QUARTERLY REPORT AND I'LL GIVE AN OVERVIEW OF THE QUARTERLY REPORT.
AND THEN WE HAVE JUSTIN UE, WHO'S HERE FROM PFM, AND, UM, OH, THANK YOU.
AND HE WILL, UH, UH, GIVE YOU SOME EVEN MORE DETAILS ABOUT THE PARK DISTRICT'S INVESTED PORTFOLIO.
SO STARTING OUT WITH THE INVESTMENT POLICY, AND LET'S SEE WHAT PAGE THIS IS IN YOUR PACKET.
UM, SO WHAT IS THE INVESTMENT POLICY? UM, THIS IS A STRUCTURE THAT WE HAVE IN PLACE TO HELP GUIDE US IN MANAGING OUR, WHAT WE CALL OUR IDLE CASH.
SO CASH THAT'S NOT CURRENTLY BEING USED, WAITING TO BE USED FOR SOMETHING OUR TREASURY AND, AND, UH, JUST MANAGING THE INVESTMENT FUNCTION OF THE PARK DISTRICT.
THERE ARE FIVE OBJECTIVES THAT WE HAVE LAID OUT IN OUR POLICY.
THREE OF THEM ARE PRIMARY, SO SAFETY, LIQUIDITY, AND YIELD, UH, ARE OUR PRIMARY OBJECTIVES.
SO SAFETY ALWAYS HAS TO BE PRIMARY.
WE WANNA MAKE SURE THAT WE AREN'T LOSING ANY OF OUR FUNDS THROUGH OUR INVESTMENTS.
LIQUIDITY MEANS THAT ALL OF OUR INVESTMENTS HAVE TO BE EASILY LIQUIDATED IN THE EVENT THAT WE NEED TO DRAW DOWN ON THOSE FUNDS.
AND THEN, UH, THE THIRD OF THOSE PRIMARY IS YIELD.
SO WE WOULD NEVER WANNA PUT INVESTMENT EARNINGS AHEAD OF SAFETY.
AND THEN THE NEXT TWO, SUSTAINABILITY AND PUBLIC TRUST ARE REALLY SPECIAL TO THE PARK DISTRICT.
SO YOU DO SEE SAFETY, LIQUIDITY YIELD IN ALMOST EVERY INVESTMENT POLICY ACROSS THE STATE.
BUT WE HAVE AN ADDITIONAL SUSTAINABILITY LENS AND THEN PUBLIC TRUST THAT WE, UM, HAVE ADDED INTO OUR POLICY.
UH, EACH YEAR PFM REVIEWS OUR INVESTMENT POLICY AND THEY GIVE US ADVICE ABOUT ANY STATE LAW CHANGES OR ANY BEST PRACTICES WE WANNA INCLUDE.
WE ACTUALLY HAVE, UH, MADE NO CHANGES TO LAST YEAR'S POLICY, ALTHOUGH WE'VE HAD SOME SUGGESTIONS THAT HAVE COME IN FROM THE BOARD MEMBER ABOUT LITTLE REFINEMENTS WE CAN MAKE.
BUT, UM, THERE'S NOTHING IN THE PACKET THAT'S DIFFERENT FROM LAST YEAR.
UH, SO WHAT ARE THE FINANCE COMMITTEE'S INVESTMENT DUTIES? UM, SO THE TREASURER IS RESPONSIBLE FOR OVERSEEING THE PARK DISTRICT'S INVESTMENT POLICIES AND IT'S PLURAL POLICIES.
UH, THIS ONE THAT WE'RE LOOKING AT TODAY IS FOR THE PARK DISTRICT'S POOLED CASH INVESTMENTS, SO ALL OF OUR DAILY OPERATIONS.
WE ALSO HAVE AN INVESTMENT POLICY FOR OUR E-B-R-P-D RETIREMENT FUND, WHICH IS THE FUND WE HAD PRIOR TO JOINING CALPERS.
UH, WE HAVE ONE FOR OUR PENSION TRUST.
AND WE, UH, AS OF A MONTH AGO NOW HAVE AN INVESTMENT POLICY FOR OUR DEFERRED COMPENSATION PLAN.
UM, EACH QUARTER, WELL ANNUALLY THE PARK, THE FINANCE COMMITTEE REVIEWS THE INVESTMENT POLICY, AND EACH QUARTER YOU RECEIVE QUARTERLY INVESTMENT REPORTS.
SO ALL PART OF MAINTAINING THAT INVESTMENT, UH, REVIEW THAT THE FINANCE COMMITTEE MUST, MUST DO, AND YOU'LL RECEIVE QUARTERLY UPDATES ALSO FROM OUR INVESTMENT ADVISOR.
UH, THE INVESTMENT POLICY ALSO STATES THAT THE BOARD OF DIRECTORS DELEGATES RESPONSIBILITY FOR INVESTMENTS TO THE CFO.
JUST A LITTLE BIT MORE DETAIL ON THE ESG PIECE OF OUR POLICY.
SO IN, UH, 2020, WE ADDED THIS ENVIRONMENTAL SOCIAL AND GOVERNANCE LAYER, UH, WHICH IS ALSO CALLED ESG, WHICH IS IN ADDITION TO ALL OF OUR OTHER, UH, PRIMARY OBJECTIVES.
AND THE IDEA IS THAT IF WE'RE PAYING ATTENTION TO THIS, WE'RE PUTTING THIS, UH, NEW LENS ONTO OUR INVESTMENTS, THEN WE WANT THE COMPANIES THAT WE'RE INVESTING IN TO ALSO PAY ATTENTION TO THIS.
SO WHAT GETS MEASURED GETS MANAGED.
UM, SO ACTUALLY HAVING A HIGH, A GOOD ESG SCORE HAS BEEN SHOWN TO ACTUALLY GIVE YOU BETTER INVESTMENT RETURNS, AND THOSE ARE, TEND TO BE SAFER, UH, INVESTMENTS AS WELL.
[00:15:01]
SO THE INTENT IS, UH, GIVES US A BETTER INVESTMENT PORTFOLIO AND ALSO ENCOURAGES COMPANIES THAT WE'RE INVESTING IN TO MAKE CHANGES TO IMPROVE THEIR ESG SCORES.SO, UH, WE COULD TAKE AN, UH, WE CAN TAKE ACTION NOW OR WE CAN HOLD IT TILL AFTER, UH, THE FULL INVESTMENT, UM, QUARTERLY REPORT.
SO IT'S UP TO YOU GUYS IF YOU WANNA TAKE DO QUESTIONS AND, AND DO THE ACTION NOW, OR WE CAN HOLD EVERYTHING TILL THE END AND DO IT THEN.
UM, WE CAN TAKE QUESTIONS NOW WHILE IT'S FRESH IN OUR MINDS, I GUESS.
UM, WE DO HAVE A QUESTION FROM ONE OF THE PUBLIC.
KELLY, YOU HAVE THREE MINUTES.
UM, YEAH, AS WAS JUST MENTIONED, THIS IS A FAMOUS PHRASE FROM, UM, UH, THE, UH, ONE OF THE GURUS OF, UH, OF, UH, OF, UH, STATISTICAL PROCESS CONTROL.
UM, OR NO, ONE OF THE GURUS OF MANAGEMENT WAS, UH, IT WAS, UM, UH, UH, BRUNER, WHATEVER HIS NAME WAS.
UM, WHAT GETS MEASURED GETS MANAGED, UH, VERY IMPORTANT PHRASE.
AND THE WAY THESE, THESE THINGS ARE BEING MEASURED VERY OFTEN, THE, UH, THE FUND, THE PENSION INVESTMENTS, THE INVESTMENT FUNDS, UM, THEY SHOW YOU WHAT THE, WHAT THE INVESTMENT RETURN HAS BEEN.
THEY MAY EVEN SUBTRACT OFF THEIR, UH, THEIR FEES AND EXPENSES AND STUFF, AND THEN SHOW YOU WHAT, UH, WHAT WHAT THE PERFORMANCE IS.
AND THAT'S A PRETTY, THAT SOUNDS LIKE A PRETTY FAIR WAY TO DO IT.
UM, HOWEVER, UH, IT TURNS OUT THERE'S ANOTHER LAYER BEFORE THE MONEY GETS TO YOUR, UH, PENSION RECIPIENTS AND YOUR EMPLOYEES AND, UH, AND, AND THE, THE FINAL, YOU KNOW, THE FINAL CONSUMER OR FINAL OWNER OF, OF THAT MONEY.
AND THAT NEXT LAYER IS WHAT DO, WHAT DO YOU PUT IN AS A, UH, INVESTMENT FUND, UH, KIND OF A MANAGEMENT STRUCTURE, UH, FOR, FOR WHEN WITH, THEY DON'T PUT THEIR MONEY IN THE FUNDS DIRECTLY.
THEY KIND OF HAVE IT IN THEIR, IN THEIR OWN IRA OR WHATEVER IT IS, RIGHT? AND, UH, FOR EXAMPLE, THERE MIGHT BE, UH, I'VE SEEN IN SOME COMPANIES OR, UH, IN SOME, UH, THEY, THEY'LL HAVE, UH, UH, TARGET, UH, 2040 FUND FOR, UH, OR FOR, UH, OR FOR A CERTAIN AGE OF INDIVIDUAL.
AND, UH, THAT FUND IS BEING, UH, MANAGED BY SOME, SOME, UH, SERVICE PROVIDER TO, UH, TO, TO GIVE WHATEVER, UM, UH, UH, RETURNS AND, AND, AND, UH, RISK AND WHATEVER AND INVESTMENTS OR A MIX OF INVESTMENTS TO, TO, TO, TO, UH, SATISFY THE, THE NEEDS OF THE CONSUMER.
AND THAT ONE HAS ANOTHER LAYER OF EXPENSES.
SO THIS, WHAT YOU'RE SEEING HERE IS NOT WHAT YOUR, UH, PENSION RECIPIENTS ARE GETTING BECAUSE THEY'RE NOT, UH, THEY MAY BE GETTING, UH, UH, THEY MAY BE HAVING SOMETHING ELSE SUBTRACTED, UH, RIGHT AT THE LAST MINUTE, DEPENDING ON HOW THEIR, THEIR FUNDS AND THEIR INVESTMENTS ARE STRUCTURED IN THEIR IRA OR IN THEIR PEN PENSION ACCOUNT OR WHATEVER IT IS.
UM, ANY QUESTIONS FROM THE COMMITTEE? YES, GO AHEAD.
UM, JUST, UH, ON THE, THE, UM, JUST A QUICK QUESTION AROUND REGARDING MEASURED AA PROJECT FUNDS, UM, IS THERE A TIMELINE FOR WHEN WE NEED TO USE THOSE? BECAUSE IT'S DOUBLE A CLOSED IN 2008 WITH WW WW? RIGHT.
SO THE REMAINING MEASURE AA BOND FUNDS, UM, WHEN, WHEN THOSE BONDS WERE ISSUED, THEY WERE DONE, UH, AS TAXABLE, WHICH IS TAXABLE BONDS, WHICH IS DIFFERENT FROM OUR TYPICAL GENERAL OBLIGATION BOND ISSUANCE YOU DO AS A NON-TAXABLE.
AND THE REASON THAT WAS DONE WAS BECAUSE WE RECOGNIZED IT WAS GONNA BE DIFFICULT TO SPEND DOWN THE, THOSE LAST POTS OF MONEY, UM, THAT SOME OF THE, LIKE, ACQUISITIONS THAT WERE NEEDED, WERE GONNA TAKE A LONGER TIME.
SO, SO THERE IS NO TIME RESTRICTION ON THE REMAINING AA FUNDS.
WE ARE DEFINITELY TRYING TO GET THROUGH THEM.
UM, AND, UM, THE OTHER, THE OTHER QUESTION PART OF THAT IS, UH, IS IT ACQUISITION ONLY OR CAN WE USE IT FOR CAPITAL PROJECTS? YEAH, THE MAJORITY OF THE REMAINING FUNDS THAT ARE UNAPPROPRIATED ARE IN ACQUISITION.
THERE'S A SMALL AMOUNT THAT'S IN DEVELOPMENT.
AND THEN REGARDING THE PENSION FUND, UM, ARE WE STARTING TO USE DRAW DOWN ON THAT? YEAH, SO THE PENSION TRUST WE HAVE BEEN DRAWING DOWN ON THIS IS THE THIRD YEAR WE'LL DRAW DOWN ON THE PENSION TRUST.
SO WE DREW DOWN IN 2022, $2 MILLION, 23, 2 MILLION, AND THEN THIS YEAR ANOTHER 2 MILLION.
[00:20:01]
PHASE THAT OUT BECAUSE OF THE STRUCTURE OF HOW OUR CALPERS, UH, COSTS ARE, WHERE THERE'S A BIG KIND OF LIKE A LUMP IN THE PYTHON YEAH.THAT WE'RE TRYING TO GET THROUGH THE CLIFF.
UM, SO THE INVESTMENT POLICY APPLIES TO THE FOUR, UM, IS IT THE FOUR FUNDS THAT YOU HAD MENTIONED DURING THE PRESENTATION? CORRECT.
SO EVEN THOUGH, I GUESS THE NEXT ITEM WE'RE GONNA LOOK AT IS THE POOLED CASH INVESTMENT.
THAT'S ONLY ONE OF THE FOUR THAT WE HAVE.
OH, SORRY, I I MUST NOT HAVE BEEN CLEAR.
SO THE, SO WE ACTUALLY HAVE FOUR INVESTMENT POLICIES.
AND THEN THE, THE INVESTMENT POLICY WE'RE LOOKING, LOOKING AT TODAY, THE SCOPE OF THAT IS, UM, IT'S ON PAGE 76, SO IT APPLIES TO OUR GENERAL FUND, SPECIAL REVENUE FUNDS, CAPITAL PROJECT DEBT SERVICE, INTERNAL SERVICE FUNDS AND PERMANENT FUNDS.
AND THEN IF WE EVER HAD ANY NEW FUNDS.
AND THEN WE HAVE OTHER POLICIES FOR OUR, UM, PENSION TRUST FOR OUR DEFERRED COMPENSATION AND FOR OUR OLD RETIREMENT PLAN CALLED THE E-B-R-P-D RETIREMENT PLAN.
SO THEY'RE ALL SEPARATE INVESTMENT POLICIES.
THIS IS THE ONLY ONE THAT YOU SEE ANNUALLY.
THE OTHER, IT'S THE ONLY ONE THAT NEEDS TO BE REVIEWED ANNUALLY.
IS THAT WHAT YOU YEAH, THIS ONE, UH, IT'S REQUIRED IN THE POLICY TO REVIEW IT ANNUALLY.
THE OTHER ONES, IT'S A BEST PRACTICE TO LOOK AT IT REGULARLY.
UM, SO WE HAVE DEFERRED COMP, YOU JUST, YOU JUST APPROVED LAST MONTH.
I THINK THE E-B-R-P-D INVESTMENT POLICY'S PROBABLY BEEN ABOUT FIVE YEARS.
AND THEN MY NEXT QUESTION, SO I, I KNOW THAT THERE'S A LITTLE BIT OF A DIFFERENCE AND WE'RE THINKING ABOUT WHERE THE ACTUAL INVESTMENTS ARE AND THEN WHERE THE GUIDANCE OF THE POLICY IS.
AND SO I'M SPECIFICALLY LOOKING AT, I THINK IT'S WHAT PAGES? UM, IT STARTS ON PAGE 82.
SO 81, I THINK WHERE WE START TO LOOK AT, UM, THE DISTRIBUTION.
SO IT SPECIFICALLY, I'M SE I'M SEEING LIKE 9.9 ON PAGE 82 WHERE WE TALK ABOUT MEDIUM TERM NOTES AS AN EXAMPLE.
YOU KNOW, WE DON'T WANT IT TO EX EXCEED 30% OF OUR TOTAL PORTFOLIO.
AND THAT'S IN REGARDS TO THESE, THE, THIS SPECIFIC INVESTMENT POLICY FOR THE, UH, POOL CASH RESERVES? THAT'S CORRECT, YES.
AND THEN DO WE HAVE LIKE A GENERAL PIE CHART TO SHOW THAT BREAKDOWN? UM, AND I KNOW IT COULD, UM, VARY SO IT SHALL NOT EXCEED 30%, SO IT COULD BE LESS THAN 30%, BUT IS THAT THAT, I DON'T THINK THAT'S THE PIE CHART THAT WE HAD IN OUR PACKET.
IS IT, I BELIEVE PFM THAT JUSTIN'S GONNA GO THROUGH THAT.
LET ME LOOK AND MAKE SURE SOMETIMES THEY CHANGE THEIR CHARTS.
UM, THIS 1 75 IS A SPECIFIC INVESTMENT.
SO THAT PIE CHART IS A DIFFERENT BREAKDOWN OF THE DIFFERENT, UM, IT'S CALLING OUT SOME OF THE DISTRICT FUNDS, BUT NOT ALL OF THEM.
BUT IT'S NOT GETTING INTO THE LEVEL OF DETAIL OF THIS MUCH IS TREASURIES, THIS MUCH IS, UM, ASSET BACKED SECURITIES.
UM, BUT I BELIEVE PFM HAS A, I SEE JUSTIN'S LOOKING AT HIS AND SO WE'RE GONNA DO HIS PRESENTATION NEXT AFTER I DO MINE.
YEAH, THAT'S, AND I BELIEVE HE HAS A PIE CHART THAT SHOWS THAT BREAKDOWN.
AND THEN, UM, I GUESS MY NEXT QUESTION, SO IT'S, IT'S SECTION NINE POINT 11, SO IT'S SORT OF THE SAME TOPIC THINKING ABOUT BONDS.
AND IT SAYS MUNICIPAL BONDS SHALL NOT EXCEED 30% OF OUR PORTFOLIO, BUT THIS INCLUDES OTHER BONDS.
WHEN I GO ONTO THE NEXT PAGE 83, YOU KNOW, WE TALK ABOUT SUPER NA NATIONALS AND, AND SO THERE, THERE'S A LOT OF DIFFERENT BONDS COMING OUTTA THE MARKET.
I, I GUESS MORE SPECIFICALLY TO MY QUESTION, AND I KNOW THERE'S A NEWER TYPE OF BOND, A CLIMATE BOND THAT'S SUPPOSED TO BE LOOKING AT DIFFERENT RISKS AND MAYBE NOT EVEN JUST CLIMATE BOND, BUT, UM, RISK BONDS.
SO IT COULD INCLUDE SOMETHING LIKE AN EARTHQUAKE.
AND IS THAT SOMETHING THAT WE'VE EXPLORED AND IS THAT PART OF OUR INVESTMENT POLICY RIGHT NOW? OR IS IT TOO NEW? AND MAYBE THIS MIGHT BE SOMETHING YOU CAN ANSWER.
IS THAT SOMETHING TOO NEW FOR US TO THINK ABOUT THIS YEAR, BUT MAYBE SOMETHING FOR NEXT YEAR? 'CAUSE I KNOW IT'S A LITTLE BIT OF A NEWER BOND ON THE MARKET.
YEAH, I'M GONNA, I'M GONNA LET JUSTIN SPEAK TO THAT IN MORE DETAIL.
UM, SO THAT, I BELIEVE FOR THE MOST PART, LIKE A CLIMATE BOND WOULD FALL INTO ONE OF THE EXISTING CATEGORIES THAT WE ALREADY HAVE HERE AS AN APPROVED TYPE OF BOND.
BUT, UH, I'LL LET JUSTIN ADDRESS THAT.
JUST, JUST, JUST TO FOLLOW UP ON, UH, DIRECTOR SAN WONG'S QUESTION.
UH, SOME OF OUR LOT OF OUR INVESTMENTS ARE ALSO, AREN'T THEY GOVERNED BY STATUTE OF WHAT, WHAT WE CAN AND CAN'T DO? YEAH.
SO STATE CODE, AND IT'S CALLED OUT IN HERE WHAT EXACTLY SECTIONS OF THE STATE CODE IT IS, UM, LIMITS.
IT'S, IT'S, UH, NUMBER NINE AUTHORIZED AND SUITABLE INVESTMENTS.
SO ALL INVESTMENTS AND DEPOSITS OF THE DISTRICT SHALL BE MADE IN ACCORDANCE WITH CALIFORNIA GOVERNMENT CODE SECTIONS
[00:25:01]
1, 6 4, 2 9, AND THEN IT LISTS THE WHOLE, UH, LIST OF OTHER ONES.SO THAT'S THE STATE SAYING, THIS IS WHAT YOU'RE LIMITED TO INVESTING IN.
AND THEN WE, ON TOP OF THAT, HAVE OUR INVESTMENT POLICY THAT GIVES EVEN MORE SPECIFIC GUIDANCE.
AND I DON'T HAVE ANY OTHER QUESTIONS.
I GUESS WE CAN CALL, UM, CALL UP OUR NEXT SPEAKER THEN, I GUESS.
I HAVE JUST A FEW OVERVIEW SLIDES THAT I'LL DO OKAY.
BEFORE I TURN IT OVER TO JUSTIN.
SO HANG ON WHILE I, AGAIN, REMEMBER HOW TO SHARE MY SCREEN.
SO, SO NOW WE'RE WALKING THROUGH THE FOURTH QUARTER INVESTMENT REPORT AND, UM, I'M LOOKING AT ALL THE DISTRICT'S INVESTED FUNDS.
UM, AND THEN JUSTIN, WHO'S HERE FROM PFM, IS GOING TO LOOK AT, UH, THE SPECIFIC PORTION THAT PFM MANAGES FOR US.
SO THIS IS THE TABLE ON PAGE EIGHT, AND I'M BREAKING IT DOWN INTO DIFFERENT CHUNKS.
UH, SO FIRST LOOKING AT THE, THE TOP PART OF THIS PAGE, UH, THE LIQUIDITY PORTFOLIO.
SO THESE ARE THE FUNDS THAT ARE EITHER CASH OR EASILY CONVERTIBLE TO CASH.
AND SO JUST TALKING THROUGH A FEW OF THE, UM, HIGHLIGHTS OF WHAT YOU'RE SEEING HERE.
SO WE HAVE APPROXIMATELY $10.5 MILLION MORE IN OUR LIQUIDITY PORTFOLIO, UH, AS OF DECEMBER 31ST, 2023, THAN WE DID AT DECEMBER 31ST, 2022.
UM, AND THEN THE OTHER THING YOU'LL NOTICE IS THAT OUR DECEMBER 31ST, 2023, UH, FUNDS ARE APPROXIMATELY 25 MILLION HIGHER THAN WHAT WE HAD AT SEPTEMBER 30TH.
AND THE REASON FOR THAT IS THAT WE ARE RECEIVING PROPERTY TAXES, UH, IN, AT THE VERY END OF DECEMBER.
UM, SO WE GET OUR PROPERTY TAXES IN TWO BIG CHUNKS AND THEN SOME SMALLER INCREMENTS THROUGH THE YEAR.
UM, BUT SO AT THE END OF DECEMBER, YOU SEE OUR INVESTMENT, OUR POOLED CASH BALANCES, UH, ENLARGE QUITE A BIT, AND THEN THAT GETS DRAWN DOWN IN THE COMING MONTHS UNTIL WE GET OUR NEXT BIG INFUSION IN APRIL, AND THEN WE DRAW DOWN ON THAT THROUGH THE REST OF THE YEAR.
THOSE ARE OUR BIG, UM, FUNDS COMING INTO THE PARK DISTRICT.
NOW, AND, UH, MOVING A LITTLE BIT FURTHER DOWN ON THAT PAGE EIGHT, LOOKING AT THE INVESTED SECURITIES.
SO PFM UH, MANAGES ALL THESE INVESTMENTS FOR US.
SO JUSTIN WILL GET INTO MORE DETAIL, BUT SOME OF THE HIGHLIGHTS ARE TREASURIES INVESTMENTS DECREASED IN QUARTER FOUR, UH, AND INVESTMENTS IN FEDERAL AGENCIES AND ASSET BACKED SECURITIES INCREASED.
AND THEN LASTLY, I'LL TOUCH ON THE FACT THAT, UH, SEVERAL YEARS AGO WE ESTABLISHED A, A LONGER INVESTMENT BENCHMARK, ONE TO FIVE YEARS PREVIOUSLY WE ARE ONE TO THREE YEARS.
AND SO THAT ENABLES US TO INVEST A LITTLE BIT LONGER DURATION.
AND AS SHORT TERM RATES START TO DROP, WE ARE, WE ARE SLOWLY MOVING OUR PORTFOLIO OUT TO BE A LITTLE BIT LONGER SO THAT WE CAN TAKE ADVANTAGE OF THOSE HIGHER YIELDS AND HOLD ONTO THEM EVEN WHEN SHORT TERM YIELDS DROP.
SO I THINK JUSTIN WILL SPEAK ABOUT THAT MORE, BUT WE'RE STILL SLOWLY INCREASING THE DURATION OF OUR PORTFOLIO.
AND THEN, UH, LASTLY, MOVING DOWN TO THE BOTTOM PART OF THIS PAGE, THESE ARE ALL THE FUNDS THAT WE HOLD IN TRUST.
SO THEY'RE NOT PART OF OUR, UM, FUNDS THAT WE CAN USE FOR DAILY OPERATION.
THEY'RE SPECIFIC FOR, UM, WELL, FOR EXAMPLE, OUR PENSION TRUST IS, CAN ONLY BE USED FOR OUR MISCELLANEOUS PENSION, UM, AND OUR PROJECT BOND FUNDS.
LET'S MEASURE AA, OUR PROMISSORY NOTES AND MEASURE WW.
SO THOSE FUNDS ARE JUST FOR DOING OUR PROJECTS.
AND, AND THEN DOWN AT THE BOTTOM WE HAVE OUR DEBT SERVICE FUNDS.
SO THOSE ARE THE TAXES THAT ARE BEING LEVIED TO PAY FOR THOSE BONDS.
AND SO THE BIG CHANGE YOU'LL NOTICE IN THE FOURTH QUARTER IS THE JUMP IN THE MEASURE WW DEBT SERVICE FUNDS.
AND THAT'S 'CAUSE WE'RE GETTING THAT REVENUE FROM THE COUNTIES AS PART OF OUR PROPERTY TAX PAYMENTS.
WE ALSO ARE TAKING IN THAT LEVY.
AND SO WE NEED THOSE FUNDS IN ORDER TO MAKE OUR MARCH 1ST DEBT SERVICE PAYMENT.
UH, SO I'LL TURN IT OVER TO JUSTIN NOW, AND THEN AT THE CONCLUSION OF HIS, UH, PRESENTATION, UM, WE WOULD LIKE OUR, UH, RECOMMENDATION TO BRING THIS TO THE FULL BOARD.
I'M NOT SURE IF IT IS ACTUALLY, LET'S SEE.
[00:30:45]
UH, GOOD MORNING EVERYONE.MY NAME IS JUSTIN UE AND I'M WITH PFM.
I KNOW THAT, UH, MONIQUE SPIKE HAS HISTORICALLY BEEN HERE.
AND UNFORTUNATELY TODAY SHE COULDN'T MAKE IT BECAUSE SHE'S, UH, PREPARING A PRESENTATION FOR THE C-M-T-A-C-S-M-F-O, UH, INVESTMENT TRAINING CONFERENCE IN LIVERMORE TODAY.
SO, UH, I, I'M PLEASED TO STEP IN SELFISHLY, UH, AND I'VE TOLD DEB THIS NUMEROUS TIMES.
I, I, I'M SUCH A BIG FAN OF EAST BAY PARKS.
UH, MY PARTNER AND I, WE LOVE GOING TO REINHARDT.
THAT'S PROBABLY ONE OF OUR MOST FAVORITE SPOTS IN THE BAY AREA.
AND, UH, WHEN IT RAINS, ACTUALLY, SO AFTER THE C CSM FO CONFERENCE IN ALBANY IN, UH, ANAHEIM, WE ENDED UP AT CHABOT.
SO IT'S, YOU KNOW, NICE AND PAVED AND, YOU KNOW, NO ONE'S GONNA SLIP AND FALL LIKE YOU
BUT OTHERWISE, YOU KNOW, WE'RE, I'M A BIG FAN.
I'M, I'M SO HAPPY TO BE WORKING WITH YOU ALL.
SO THANK YOU FOR YOUR TIME THIS MORNING.
SO I'LL TRY TO GO OVER, UM, SOME ECONOMIC DATA, FINANCIAL DATA, DIG INTO THE PORTFOLIO A BIT, AND THEN TALK ABOUT THE ESG GOALS THAT DEB MENTIONED EARLIER.
THE FIRST THING I'LL TALK TO HERE IS THE MARKET UPDATE.
SO, UH, I DON'T WANNA READ THROUGH EVERYTHING ON THIS SLIDE.
THE, THE BOTTOM LINE IS THROUGH Q4 THROUGH THE END OF THE YEAR, WE SAW THE CONSUMER REALLY HOLD UP A LOT OF THE ECONOMY.
THEY'RE JUST SPENDING LIKE GANGBUSTERS.
AND THAT'S REALLY WHAT'S DRIVING GDP GROWTH.
THE CONSUMER IS ALSO BENEFITING FROM REALLY REMARKABLE EMPLOYMENT AND LABOR MARKETS AND REALLY STRONG, UM, SALARIES THAT ARE NOW EXCEEDING THE, THE RATE OF INFLATION.
SO IN SUMMARY, THE ECON, THE ECONOMY REMAINS RESILIENT.
THE FED IS WORKING TOWARD WHAT THEY CALL A 2% TARGET.
I KNOW THERE ARE SOME QUESTIONS ABOUT WHAT'S THE DIFFERENCE BETWEEN PCE AND PCI, AND I'LL DIG INTO THAT IN A BIT.
UH, BUT EITHER WAY, THE FED IS GETTING THERE AND THEY'RE BEGINNING TO TELEGRAPH, AND THEY HAVE TELEGRAPH TO THE MARKETS THAT THEY EXPECT INTEREST RATES TO BEGIN FALLING.
AND THAT'S WHAT DEB SPOKE TO A MOMENT AGO WITH PARKING MONIES A LITTLE FURTHER OUT ON THE YIELD CURVE SO THAT THE DISTRICT CAN BENEFIT FROM LOCKING IN HIGHER COUPONS AS RATES BEGIN TO FALL.
THIS NEXT SLIDE HERE, THIS IS SHOWING, UH, FEDERAL RESERVE PROJECTING A SOFT LANDING.
THE DATA HERE ARE FROM THE FED'S SUMMARY OF ECONOMIC PROJECTIONS.
THEY RELEASE THESE EVERY FEW MONTHS.
EVERY OTHER MEETING, ACTUALLY, THE LIGHT BARS INDICATE THE SEPTEMBER PROJECTIONS, WHILE THE DARK BARS REPRESENT THE DECEMBER PROJECTIONS.
SO THE ECONOMY IS GROWING WITH REALLY NO SIGNS OF A RECESSION IN THE UPPER LEFT.
UH, REAL GDP GREW 4.9% IN THE THIRD QUARTER, AND 3.3% IN THE FOURTH QUARTER.
THIS MORNING, WE ACTUALLY HAD THE FULL YEAR GDP RELEASE.
SO THE, THE CHART IS SHOWING EXPECTED PROJECTION OF 2.6 FOR THE YEAR.
SO COMPARED TO 2022, WE WERE AT 1.9%.
GDP IS STILL PRETTY MUCH ON TRACK WITH WHAT THE FED HAS PROJECTED HERE JUST OFF BY, UM, 10 BASIS POINTS.
LABOR MARKETS, AS I MENTIONED IN, UH, EARLIER, ARE VERY STRONG.
AND YOU'LL SEE IN THE UPPER RIGHT THE LIGHT BLUE BARS SHOWING ON THE UNEMPLOYMENT RATE.
CURRENTLY, THERE ARE ABOUT 1.4 JOBS AVAILABLE FOR EACH PERSON SEEKING UNEMPLOYMENT.
SO THE LABOR MARKET IS STILL REALLY, UH, DOING QUITE WELL.
UNEMPLOYMENT CONTINUES TO BE AT HISTORIC LOWS.
UM, MOST RECENTLY THE JANUARY NUMBERS WERE SHOWING 3.7% UNEMPLOYMENT WITH 353,000 NEW JOBS ADDED.
FOR PERSPECTIVE, WE HIT 3.4%, AND THE LAST TIME WE WERE AT THAT RANGE WAS IN 1969.
SO UN SO THE LABOR MARKETS ARE INCREDIBLY STRONG.
UH, PCE INFLATION, THIS IS THE, THE ONE SORT OF AREA, WE'LL, WE'LL TALK ABOUT INFLATION.
I'LL, AND I'LL DIG IN A BIT DEEPER HERE.
SO, CPI, THAT'S THE NUMBER THAT YOU PROBABLY HEAR IN THE NEWS.
AND THAT NUMBER WAS 3.4% IN DECEMBER, AND THAT FELL ACTUALLY TO 3.1% IN JANUARY.
AND WE'LL EXPECT TO SEE FEBRUARY NUMBERS IN MID-MARCH.
[00:35:01]
UH, WITH RESPECT TO WHY WE ARE LOOKING AT PCE COMPARED TO PCI, THAT'S BECAUSE PCE IS ACTUALLY THE FED'S PREFERRED MEASURE.SO WHEN THE FED, WHEN JAY POWELL IS ON 60 MINUTES, AND HE'S TALKING ABOUT, WE WANT TO GET TO 2%, THAT'S SPECIFICALLY REFERRING TO PCE.
AND THE MAIN DIFFERENCES ARE THAT, UH, WHILE THEY MOVE IN TANDEM, PRETTY MUCH WITH EACH OTHER, PCE ACTUALLY USES, UH, ACTUALLY HAS SOME SMALLER SEASONAL ADJUSTMENTS AND SOME SMALL PRICE DIFFERENCES.
THE SPECIFIC THINGS I'VE WRITTEN DOWN HERE, I'M JUST READING FROM MY NOTES.
PCE USES, FOR EXAMPLE, PASSENGER REVENUES FOR MILES TRAVELED, WHEREAS PCI MIGHT USE WHAT IS THE AIRFARE, UH, MORE PRECISELY, PCE IS USING SOME, SOME OTHER MEASURES THAT WE ARE MORE INTERESTED AS WELL, WHICH IS HEALTHCARE COSTS.
SO PCI WILL CAPTURE CONSUMER SPENDING, FOR EXAMPLE, AT WALGREENS WHEN YOU BUY MEDICINE AND HEALTHCARE AND, AND WELLCARE ITEMS. WHEREAS PCE IS ALSO CAPTURING THOSE ITEMS ACTUALLY SPENT BY THE HOSPITAL AND INSURANCE COMPANIES.
AND ADDITIONALLY, PCE IS ACTUALLY COVERING, UM, HOW DO YOU CALL IT, MORE, MORE BROAD POPULATIONS.
SO PCI REALLY COVERS ONLY URBAN AREA POPULATIONS, WHEREAS PCE COVERS MUCH LARGER SWATHS OF THE POPULATION, CAPTURING MORE OF THE INFLATION DATA THAT THE FED IS MOST INTERESTED IN.
SO HERE, UH, WE'RE SHOWING PCE INFLATION.
AGAIN, THIS IS THE, THE FED'S TARGET IS 2%.
THEY'RE GETTING TO NEARLY 2% BY 2026, AT LEAST THAT'S WHAT THEIR PROJECTIONS ARE SHOWING.
SO WE'LL SEE WHERE DATA FALL TOMORROW IS THE NEXT RELEASE FOR PCE.
THE MARKET'S REALLY KIND OF ON EDGE WAITING TO SEE WHERE, WHERE INFLATION IS HEADED.
I THINK THE EXPECTATION IS THAT, UH, THE FED WILL BE GETTING CLOSER TO THAT 2% LEVEL.
AND LASTLY, IN THE LOWER RIGHT, THE FED FUNDS RATE, UH, THESE ARE EXPECTATIONS FOR WHERE THE FED IS FORECASTING OVERNIGHT RATES.
UH, IN DECEMBER IT WAS 5.4%, AND, UH, WE REALLY ONLY GOT TO ABOUT FIVE AND, UH, FIVE AND A THIRD, UH, REALLY AT THE END OF THE YEAR.
SO HERE, UH, ON THE NEXT SLIDE, WE'RE SHOWING THE TWO YEAR TREASURY YIELD CURVE.
THE MAIN REASON WE FOCUS ON THIS CHART IS BECAUSE THE DISTRICT IS IN THAT ONE TO FIVE YEAR BENCHMARK.
AND WE THINK THIS IS A NICE PROXY FOR WHERE THE DISTRICT'S, UH, UH, RATES LIE OR RETURNS LIE.
SO, UH, YOU'LL SEE OVER THE QUARTER RATES FELL PRECIPITOUSLY.
AND THAT'S REALLY PRIMARILY DUE TO ALL OF THE NEWS AND THE, AND THE INFORMATION THAT FED THAT.
THE FED HAS BEEN TELEGRAPHING TO THE MARKET.
SO IN THE BEGINNING OF NOVEMBER, THEY SLOWED THE RATE OF DEBT ISSUANCE IN MID-NOVEMBER CPI DATA CAME OUT IN THE END, AT THE END OF NOVEMBER, THERE WAS SOME FED SPEAK.
AND THEN FINALLY IN MID-DECEMBER, THERE WAS THE DOT PLOT.
AND ALL OF THESE CONTRIBUTED TO REALLY DRAMATIC DECLINES IN TREASURY YIELDS.
AND YOU'LL SEE THE TWO YEAR FELL FROM, YOU KNOW, NEARLY A LITTLE ABOVE 5% TO NEARLY FOUR AND A QUARTER.
YOU'LL SEE AT THE, AT THE END OF THE CHART, THERE RATES BEGIN TO CREEP BACK UP.
UH, AS OF, UH, TODAY, I BELIEVE IT'S AT ABOUT THE TWO YEARS, AT ABOUT 4 66.
SO, YOU KNOW, WITH POSITIVE UNEMPLOYMENT, WITH CONTINUED, UH, ELEVATED INFLATION, THOSE NUMBERS MAY DELAY THE FED'S ACTION, BUT THEY DO COMMUNICATE AND TELEGRAPH THAT THEY DO PLAN TO THAT THAT RATES WILL DECLINE.
SO HERE YOU'RE SEEING THE TREASURY YIELD CURVE.
SO THIS IS, UH, THE PAST 15 YEARS IN THE BRIGHT SHADE ACROSS THE WHOLE CHART.
THE SEPTEMBER DATA FOR YIELDS WERE THE, UH, THE DASHED LIGHT BLUE LINE AT THE TOP, AND THEN THE DECEMBER YIELD CURVE IS THE DARKER SOLID BLUE LINE.
AND YOU'LL SEE THE PRECIPITOUS DECLINE IN, IN YIELDS ACROSS, ACROSS THE MATURITY SPECTRUM.
THIS IS WHAT'S REALLY DRIVING GAINS IN THE PORTFOLIO.
AS RATES FALL, BOND PRICES RISE, AND, YOU KNOW, WHILE, WHILE WE'D LOVE TO TAKE CREDIT FOR ALL OF THE GAINS IN THE PORTFOLIO, WE, WE JUST CAN'T, UM, YOU KNOW, THE, WE'VE, I THINK THE INDICATIONS HERE ARE THAT WE'VE HIT THE, THE PEAK OF THE RATE HIKING CYCLE AND THAT RATES ARE GONNA DECLINE.
SO WITH THAT SAID, THE FINAL SLIDE I HAVE HERE ON THE MARKETS ARE REALLY JUST RETURNS FOR THE CERTAIN AREAS OF FIXED INCOME.
AND YOU'LL SEE, I, I THINK THE BIG 40,000 FOOT VIEW FOR THIS CHART FOR THESE TWO CHARTS IS THAT MOST OF THE FOURTH QUARTER DECLINES WERE REAL, OR MOST OF THE YEAR RETURNS WERE MADE UP ALL IN THE FOURTH QUARTER.
SO YOU'LL SEE US TREASURIES YIELDED, YOU KNOW, OR WERE GENERATING THREE 10 FOR THE FULL YEAR, THEY GENERATED FOUR 30, AND THEN IT, IT GOES ON AS YOU GO DOWN THE SORT OF, UM, SECTOR SPECTRUM AND, AND FROM AGENCIES DOWN TO
[00:40:01]
CORPORATES.SO, UM, AT THIS POINT, MAYBE I SHOULD PAUSE BEFORE I JUMP INTO THE PORTFOLIO ITSELF.
UH, I HOPE THIS OVERVIEW IS HELPFUL.
I THINK, UH, THE, THE MAIN THING IS THAT THE MARKET'S REALLY, UM, LOOKING TO THE CONSUMER AND LOOKING TO INFLATION.
AND WE'LL SEE WHERE THE FED, UH, KIND OF DRIVES THE CAR FROM HERE.
ANY, UH, QUESTIONS? UH, WHAT, OKAY, GO AHEAD.
UM, THIS IS KIND OF HYPOTHETICAL, BUT WHAT EFFECT DOES THE, UH, THE THREAT OF SHUTDOWNS HAVE ON THE MARKET? SO, UH, DIRECTOR ROSARIO, I REALLY APPRECIATE THAT QUESTION.
I, I STARTED MY CAREER AT MOODY'S AS A RATING AGENCY ANALYST.
AND I'LL NEVER FORGET WHEN WE HAD, WHEN THE RATING AGENCY HAD THE FIRST RATINGS DOWNGRADE ON THE US GOVERNMENT OR, OR INDICATED NEGATIVE WATCH, RIGHT? WITH ALL OF THE SORTS OF NOISE, SHALL WE CALL IT NOW IN, IN CONGRESS.
UM, NOW WITH THE, WITH, WITH RESPECT TO SHUTDOWN, I, I THINK HISTORICALLY WHAT WE'VE SEEN IS MARKETS HAVE REALLY JUST NOT RESPONDED.
YOU KNOW, INITIALLY THERE WAS A LOT OF SORT OF, YOU KNOW, UNEASE AS FOLKS WERE LIKE, WELL, YOU KNOW, IF IF WE'RE, IF THE US IS GONNA DEFAULT ON ITS TREASURIES, THAT'S A BIG DEAL.
UH, WE WE'RE ALL GONNA HAVE MUCH LARGER ISSUES THAN, THAN WHAT, WHAT WE'RE FACING AT THIS POINT.
BUT AS WE'VE SEEN AS CONGRESS HAS, YOU KNOW, HAD THESE SORTS OF, UH, LEVELS OF, UH, YOU KNOW, UH, STRIFE OR INACTION, HOWEVER YOU WANT TO CHARACTERIZE IT, THE MARKETS HAVE REALLY KIND OF JUST BEEN MUTED.
KEEP CALM, CARRY ON SORT OF ATTITUDE.
ANOTHER, ANOTHER HYPOTHETICAL.
I MEAN, UH, THERE'S A LOT OF PROJECTIONS SAYING THAT THERE'S GONNA BE A DEPRESSION IN THE NEXT COUPLE OF YEARS.
UH, WHAT ARE THEY LOOKING AT? I MEAN, I'M, I MEAN, I'M LOOKING AT THE, UH, THE YIELD CURVE.
AND IN THE PAST WHEN THE YIELD CURVE REVERSES INVERSES LIKE IT IS NOW, IT USUALLY PORTENDS.
BUT THE, THE YIELD CURVE'S BEEN SO STEADY, AND I DON'T IF YOU CAN ILLUMINATE ME, GREAT.
DIRECT DIRECTOR,
I, YOU KNOW, I, I CERTAINLY AGREE WITH YOU.
THE INVERTED YIELD CURVE HAS PORTENDED TYPICALLY A RECESSION.
BUT BASED ON THE DATA THAT WE'RE SEEING AND, AND THOSE, UH, FED PROJECTIONS AND OR SUMMARY OF ECONOMIC PROJECTIONS THAT I POINTED TO EARLIER, BASED ON THEIR GDP FORECAST, BASED ON WHAT WE'RE SEEING WITH RESPECT TO INFLATION AND EMPLOYMENT AND GDP GROWTH, IT REALLY DOESN'T SEEM LIKE WE'RE GONNA HIT ANY SORT OF RECESSION OR NEGATIVE GROWTH.
WE'RE, WE'RE NOT GONNA HIT THE LEVELS THAT JAPAN OR EUROPE HAVE HIT.
YOU KNOW, IF ANYTHING, THE FED IS PROJECTING MAYBE 1.4, 1.5% GDP GROWTH OUT TO 2026.
AND NO NEGATIVE GROWTH AT THIS POINT.
UM, I THINK WE'LL HAVE TO SEE WHAT INFLATION LOOKS LIKE TOMORROW AND IN THE COMING MONTHS AND HOW, HOW MUCH THE FED CAN REALLY STICK THAT SOFT LANDING.
RIGHT? I THINK THE CONCERN IS THE FED'S GONNA DRIVE RATES DOWN NOT ENOUGH OR TOO QUICKLY, YOU KNOW, BUT AT THE SAME TIME THEY'RE FACING THE ELECTION, THEY DON'T WANT TO SHOW ANY SORT OF INDICATION OF BIAS, YOU KNOW, SO, UM, SO I THINK WE'LL SEE, BUT AT THIS POINT, THE DATA JUST AREN'T REALLY POINTING TO, EVEN THOUGH THE, THE YIELD CURVE DOES REMAIN INVERTED, THAT THE DATA AREN'T POINTING TO, UM, A RECESSION.
THIS IS ALWAYS HELPFUL TO HAVE, UM, YOU KNOW, THIS TYPE OF MARKET UPDATE AND MARKET REVIEW.
I, I REALLY APPRECIATE HAVING YOU HERE WITH US TOO, AND BEING ABLE TO MEET YOU.
I DON'T THINK I'VE MET YOU BEFORE, SO THANK YOU FOR BEING HERE.
UM, I'VE ALWAYS BEEN A SOFT LANDING PERSON, SO IT'S INTERESTING TO SEE IT PLAY OUT.
AND WITH THAT, I ALWAYS THINK THAT SOME MORE OF OUR RISKS MIGHT BE THE GLOBAL RISKS, WHICH I THINK YOU JUST ALLUDED TO IN TERMS OF ANSWERING DIRECTOR ROSARIO'S QUESTION.
AND, UM, YOU KNOW, I WONDER IF THAT'S SOMETHING TO CONSIDER, INCLUDING IN HERE, WHERE SOME OF THOSE GLOBAL RISKS COULD COME FROM, OR JUST EVEN HAVING A NOTE THAT, UM, WHILE THE US ECONOMY LOOKS TO BE PERFORMING STRONG AND, YOU KNOW, THE FORECAST LOOKS STRONG, YOU KNOW, WE DO LIVE IN A GLOBAL ECONOMY AND SOMETIMES, YOU KNOW, THE, THE, THE RISK COULD COME FROM OUTSIDE, UM, THE US AND THEN ON THAT NOTE, YOU KNOW, I ALSO THINK ABOUT OUR LOCAL ECONOMY HERE IN THE BAY AREA.
I THINK THAT IN TERMS OF OUR INVESTMENT, SINCE THIS IS LOOKING AT, YOU KNOW, OUR INVESTMENT PERFORMANCE, IT TENDS TO TRACK MORE CLOSELY WITH WHAT'S HAPPENING ACROSS THE US.
BUT I GUESS WHAT'S HELPFUL FOR US HERE AT THE PARK DISTRICT IS TO ALSO THINK ABOUT THE LOCAL BAY AREA ECONOMY.
AND I THINK THAT WE, UM, IN GENERAL ARE VERY SIMILAR TO THE CALIFORNIA, UH, BOOM AND BUST TYPE OF CYCLE.
SO WHEN, YOU KNOW, THE OVERALL US ECONOMY IS DOING VERY WELL, IT SEEMS LIKE WE BOOM HERE IN CALIFORNIA AND THEN, YOU KNOW, WE HAVE MUCH MORE OF A BIGGER BUST, WHEREAS MAYBE SOME OTHER, UM, STATES LIKE, UH, YOU KNOW, I'M FAMILIAR WITH MASSACHUSETTS, LOCAL ECONOMY TENDS TO BE A LITTLE BIT MORE STEADY,
[00:45:01]
UH, WHEN, WHEN COMPARED TO CALIFORNIA'S BOOM AND BUST CYCLE.AND UM, YOU KNOW, I ALWAYS THINK ABOUT LIKE, YOU KNOW, HOW THAT CAN AFFECT US, YOU KNOW, LOCALLY AT THE PARK DISTRICT, BUT IN TERMS OF OUR INVESTMENTS, I DON'T THINK THAT THAT'S ALWAYS, UM, QUITE THE IMPACT IN TERMS OF THE INVESTMENT PORTFOLIO.
BUT SOMETHING FOR US TO THINK ABOUT HERE AT THE PARK DISTRICT.
I, I LIKED ONE OF YOUR, UM, COMMENTS ON THE SLIDE, THE, UM, SOFTER INFLATION AND PET FED PIVOT.
I, I THINK IT'S NUMBER, UM, THREE, SLIDE THREE.
YOU SAID SOMETHING, IT'S A GOOD PROXY FOR OUR, FOR THE DISTRICT'S RETURNS.
IS THAT WHAT YOU HAD SAID? I, I TRIED TO WRITE IT DOWN, BUT I THINK I MIGHT HAVE MISSED A LITTLE BIT.
IF YOU COULD MAYBE REPEAT WHAT YOU HAD SAID.
SO, UM, WE LIKE TO POINT TO THE TWO YEAR TREASURY YIELDS AS A NICE KIND OF PROXY WITH, WITH RESPECT TO THE PORTFOLIO ITSELF.
THERE ARE SOME OTHER NUMBERS THAT WE LIKE TO POINT TO FOR LIKE A BUDGET PROXY OR WHAT, WHAT, WHAT NUMBER YOU WOULD USE IF YOU WANNA JUST LIQUIDATE THE ENTIRE PORTFOLIO TODAY.
BUT I THINK FOR WITH RESPECT TO BENCHMARK THE ONE TO FIVE YEAR, THE TWO YEAR TREASURY IS A, A NICE SORT OF COMPARISON.
AND I, I THINK THE LAST THING I'D GO, I'D SAY GO BACK, GOING BACK TO GLOBAL RISKS, IT'S NOT JUST GEOPOLITICAL RISKS, BUT ALSO, AND I THINK THIS IS MY EARLIER QUESTION WITH SOME OF THE BONDS WITH THE CATASTROPHE BONDS OR DISASTER BONDS OR DIFFERENT CLIMATE BONDS, ESPECIALLY.
'CAUSE I KNOW WE FACE THIS AS A PARK DISTRICT OURSELVES.
UM, SO THAT, THAT'S ONE POINT I WOULD THINK OF IN REGARDS TO GLOBAL RISKS.
IT JUST SEEMS LIKE THESE, UM, YOU KNOW, MAJOR WEATHER CATASTROPHES OR MAJOR DISASTERS ARE ALSO KIND OF PICKING UP GLOBALLY.
UM, AND SO THAT, THAT'S SOMETHING ELSE THAT I THINK, YOU KNOW, SHOULD BE AT LEAST ON OUR RADAR SCREEN.
UM, AND THEN, YOU KNOW, MY FINAL POINT, AND I THINK THAT WAS A REALLY GOOD QUESTION ACTUALLY, UH, DIRECTOR ZARIO ABOUT, YOU KNOW, WHAT, WHAT ARE THE RISKS OF, UH, GOVERNMENT SHUTDOWN? BECAUSE I ALWAYS THINK ABOUT, YOU KNOW, LAST YEAR I WAS ON OUR LEGISLATIVE COMMITTEE AND UM, YOU KNOW, WE, WE, WE TALK ABOUT, YOU KNOW, SOME OF THESE DIFFERENT ECONOMIC THEMES IN A DIFFERENT WAY.
SO I'M NOT SURE IF SOME OF THESE SLIDES GET SHARED ACROSS THE PARK DISTRICT, BUT I THINK IT COULD BE HELPFUL TO START TO AGGREGATE SOME OF THESE, BECAUSE I KNOW WE KIND OF HAD SIMILAR SLIDES AT THE LAST FINANCE COMMITTEE MEETING WHEN WE WERE LOOKING AT THE EMPLOYEE RETIREMENT ACCOUNT.
SO BEING ABLE TO AGGREGATE THE DIFFERENT, YOU KNOW, MARKET SLIDES AND ALSO BE ABLE TO SHARE THAT, BECAUSE I THINK THAT COULD BE HELPFUL, YOU KNOW, IN, IN TERMS OF WORK THAT WE'RE DOING IN OTHER PLACES WITHIN THE PARK DISTRICT.
ALRIGHT, ARE THERE ANY, UH, ANYTHING FROM THE PUBLIC ON THIS? NO PUBLIC QUESTION? NO.
SO, UM, I GUESS IF THERE'S, UH, NO OTHER QUESTIONS THEN, IS THERE ANY ANYTHING? OH YEAH, THERE'S A BIT MORE, AND I'LL TRY TO GET THROUGH THIS MORE QUICKLY.
UM, SO THIS IS NOW THE PORTFOLIO REVIEW.
UH, WE PROVIDE A CERTIFICATE OF COMPLIANCE SO THAT YOU ALL KNOW AND ANYONE REVIEWING THE PORTFOLIO KNOWS THAT THE, THAT THE PORTFOLIO HAS BEEN IN COMPLIANCE WITH THE DISTRICT'S INVESTMENT POLICY STATEMENT DAY TO DAY.
UH, WE, WE MANAGE THIS VERY CAREFULLY.
COULD, COULD, YOU MAY MAYBE GET CLOSER TO THE MIC BECAUSE I'M HAVING A HARD TIME.
I DON'T WANNA MISS ANY OF YOUR WISE ADVICE HERE.
OH, THANK, THANK YOU, DIRECTOR MEIA.
SO WITH RESPECT TO THE PORTFOLIO ITSELF, IT NOW STANDS AT 1.49 OR $149 MILLION.
THIS IS UP FROM 1 44 0.8 AT THE END OF LAST QUARTER AND 1 42 0.4 MILLION AT THE END OF LAST YEAR.
THE DURATION WAS 2.46 VERSUS THE ONE TO FIVE YEAR BENCHMARK OF 2.53.
AND AS DEB INDICATED, WE'RE TRYING TO GET CLOSER TO THAT BENCHMARK LEVEL AND, AND MAYBE A BIT LONGER AS YIELDS ARE BEGINNING TO FALL, THE PORTFOLIO IS DIVERSE TO THE EXTENT PRACTIC PRACTICAL AS, AS YOU'LL SEE HERE ON THE SECTOR ALLOCATION PIE CHART IN THE UPPER RIGHT YIELD AT COST.
THIS IS ESSENTIALLY YOUR EARNINGS RATE LOOKING FORWARD.
AND THAT CAN BE KIND OF USED AS A BUDGET PROXY NUMBER THAT WAS 3.67 AND THEN YIELD AT MARKET.
THAT'S THE NUMBER, IF WE WERE TO LIQUIDATE THE ENTIRE PORTFOLIO AS OF THE END OF THE YEAR, THAT WOULD'VE BEEN 4.34%.
THE CREDIT QUALITY OF THE PORTFOLIO IS REMARKABLY HIGH.
IT'S 64% ALL AA RATED AND HIGHER.
SO THIS IS A VERY HIGH QUALITY PORTFOLIO.
THE NEXT SLIDE WE'RE SHOWING PORTFOLIO ACTIVITY.
SALES AND MATURITIES ARE IN GRAY, WHEREAS NEW PURCHASES ARE IN THE DARK BLUE BARS.
I'LL POINT OUT A FEW OF THE NEW PURCHASES FOR THE PORTFOLIO.
UH, IN TOTAL IT WAS 10.7 MILLION, PURCHASED, UH, MOSTLY TREASURY NOTES AS WELL AS SOME ASSET BACKED SECURITIES AND, UH, FEDERAL GOVERNMENT
[00:50:01]
PASS THROUGH SECURITIES.THIS IS THE PORTFOLIO PERFORMANCE SLIDE FOR THE QUARTER.
RETURNS WERE 3.10 OUTPERFORMING BENCHMARK BY 30 BASIS POINTS.
INTEREST WAS EARNED OF OVER 1.2 MILLION FOR THE DISTRICT WITH A CHANGE IN MARKET VALUE OF THE INVESTMENTS OF 3.7 MILLION AND A TOTAL DOLLAR RETURN OF 4.9 MILLION.
AND THAT EQUATES TO THE 3.40 RETURN OVER THE PAST 10 YEARS.
YOU'LL SEE WE OUTPERFORM BENCHMARK FOR THE DISTRICT BY 29 BASIS POINTS.
UH, THIS IS THE ACCRUAL BASIS EARNINGS, THIS IS EARNINGS WITHOUT MARKET VALUE CHANGES, AND THIS IS SHOWING A $978,000 GAIN FOR THE QUARTER AND 16.3 MILLION EARNED OVER THE PAST 10 YEARS.
SO WITH THAT SAID, UH, THAT WRAPS UP MY REMARKS FOR THE PORTFOLIO AND I CAN NOW DIVE INTO THE ESG TOPICS THAT YOU ALL MIGHT BE MORE INTERESTED IN.
SO THE TARGET IS TO BE MINDFUL OF THE ESG FACTORS WHEN WE'RE INVESTING THE CORPUS.
UH, THE CRITERIA IN 2020 WERE, UH, LESS THAN 30 RISK RA RATING FOR THE CERTAIN AREAS THAT ARE INVESTED OR THAT THAT CAN BE REVIEWED IN THE ESG POLICY.
AS OF TODAY, 69 OUT OF 75 OF THE ISSUERS ARE RATED BY OUR PORTFOLIO PART BY OUR ESG PARTNER SUSTAINA LINUX.
AND THAT REPRESENTS $94.2 MILLION OF THE PORTFOLIO.
UH, I LOOKED BACK ON THE 2020 REPORT WHEN THE ENDEAVOR WAS FIRST STARTED, AND AT THAT POINT, ONLY 55 OF THE 62, UH, ISSUERS WERE RATED, REPRESENTING ABOUT 62.5% OF THE PORTFOLIO.
AND AT THAT POINT THE RATING WAS 25, WHEREAS TODAY THE RATING IS 21.3.
SO OVER THE PAST FOUR, THREE PLUS YEARS, THE DISTRICT HAS DONE A GREAT JOB OF MEETING ITS ESG GOALS.
WITH RESPECT TO INDUSTRY DIVERSIFICATION.
UM, UH, YOU'LL SEE THE DIAMOND REPRESENTS, UH, UH, THE, THE LARGEST, UH, PORTFOLIO WAITING IN, IN YOUR HOLDINGS.
BY NO SURPRISE, FRANKLY, BANKS KIND OF DOMINATE THIS JUST BECAUSE THEY'RE VERY FREQUENT ISSUERS IN THE MARKET, SO WE'RE ABLE TO MOVE IN AND OUT OF THOSE ASSETS NICELY.
THE LOWEST RATED ENTITY WITH RESPECT TO THE ESG RATINGS IS YOUR CHEMICALS.
AND THERE'S ONE HOLDING THERE THAT, UM, THAT CONTRIBUTES TO HELP OUT THE SCORE.
HERE YOU CAN SEE THE SECTOR ANALYSIS AND THE RATINGS HERE WITH THE RANGES.
AND THEN LAST, OR, AND, AND ON THIS SLIDE WE HAVE THE S AND BS AND P RATING DISTRIBUTION.
YOU'LL SEE FEDERAL AGENCIES DOMINATE, UH, THE CREDIT RISK RATING.
SO AA AND AA, UH, REALLY KIND OF HELP THAT OUT.
IT'S VERY HIGH QUALITY AND THERE, THERE, UM, ISN'T MUCH ELSE I WOULD, UH, SHARE ON THIS PAGE.
LASTLY, THIS IS MAYBE WHERE WE WANT TO DIG IN JUST A LITTLE BIT.
THESE ARE THE ACTUAL INDIVIDUAL NAMES HELD WITHIN THE PORTFOLIO.
SO THE LOWER THE NUMBER FOR THE ESG RISK RATING, THE BETTER, THE HIGHER THE NUMBER, THE MORE WE GROW A LITTLE BIT CONCERNED.
YOU'LL SEE NOW AT THE TOP WE HAVE, UH, JP MORGAN CHASE AND JENNY MAY AND JP MORGAN CHASE IS REALLY RATED HIGH JUST BECAUSE OF ITS SORT OF, IT KNOW, UH, FINANCIAL ENVIRONMENTAL CONCERNS, UH, SURROUNDING POTENTIAL BRIBERY POTENTIAL, UH, ISSUES WITH, UM, UH, ENVIRONMENTAL SORT OF, UH, THREATS THAT THEY'RE MAKING AS THEY MANAGE A MULTINATIONAL GLOBAL COMPANY.
GINNY MAY IS ALSO LISTED HIGH HERE, BUT THAT, BUT THAT'S NOT, UH, THAT'S A GOVERNMENT RELATED SECURITY.
SO, UM, WE DON'T, WE DON'T, UH, EXPLICITLY REMOVE THIS FROM THE PORTFOLIO BECAUSE OF ITS ESG RATING.
WITH THAT SAID, THAT WRAPS UP MY REMARKS FOR THE ESG PORTFOLIO AND, AND THE PORTFOLIO IN TOTAL.
UM, I'LL INVITE QUESTIONS OR, OR DEB TO COME BACK UP.
ANY, UH, QUESTIONS OVER THIS PORTION? OKAY, SURE.
UM, AND THE INVESTMENTS, I NOTICED THAT, UM, SOME OF OUR, UH, SOME OF THE ROCK OR THE, UH, THE ROCK STARS OF THE FINANCE WORLD, UH, GOLDMAN SACHS AND CITIBANK, THEY'RE ALL NOW TRIPLE BS.
UH, IS THAT BECAUSE THEY HAVE BIGGER EXPOSURE OR, UH, THEY'RE NOT PERFORMING? NO.
AND YEAH, I, I APPRECIATE THE, THAT QUESTION HERE AND I, I JUST, I'M PULLING UP THE, THE
[00:55:01]
QIP SLIDE.SO WITH RESPECT TO GOLDMAN AND, UH, CITI AND, AND I THINK A FEW OF THE OTHER, UH, FINANCIAL INSTITUTIONS S AND P REVISED, ITS, UH, RATING CATEGORIES AND FOR SOME REASON THEY RATE THOSE ISSUERS MUCH LOWER THAN THEIR COUNTERPARTS.
FITCH AND MOODY'S, WHO I BELIEVE MAINTAINED SINGLE A RATINGS ON THESE BANKS.
UM, I I DON'T KNOW SPECIFICALLY, UH, WHY S AND P WENT THAT ROUTE, BUT IT CERTAINLY HAD A NEGATIVE IMPACT ON THE RATINGS.
UH, BUT WITH RESPECT TO THE INVESTMENT POLICY, UH, THESE CAN STILL BE HELD BECAUSE MOODY'S AND FITCH CONTINUE TO MAINTAIN HIGHER QUALITY RATINGS.
AND WE ALSO HAVE AN, UH, CREDIT ANALYST DESK THAT HELPS LOOK AT THESE TRANSACTIONS AND HOLDINGS FOR THE PORTFOLIO.
SO, UM, WE MAINTAIN INDEPENDENTLY AS WELL THAT, THAT THEY'RE STILL VERY HIGH QUALITY.
AND THEN MY LAST QUESTION IS REGARDING, I SAW WE HAVE A LITTLE BIT OF, UH, WALMART AND, UM, DID, DID THEIR ESG IMPROVE TO THE POINT WHERE WE WERE, UH, HAVEN'T DROPPED THEM OUT OR, YEAH.
OH, I, I WAS JUST GONNA SAY, SO LOOKING AT HERE AT THE WALMART ESG SCORE AT THE END OF THE YEAR, IT WAS 25.3, WHICH PUTS THEM IN THAT LOW RATING CATEGORY.
MM-HMM,
UH, SO, YOU KNOW, THEY, THEY FIT WITHIN THE POLICY, YOU KNOW, CERTAINLY THEY'RE IN THE NEWS A LOT AS ONE OF THE WORLD'S LARGEST RETAILERS AND, AND A LOT OF THE PROPERTIES AND, YOU KNOW, ALL THE SORTS OF ITEMS THAT THEY SHIP AROUND.
OH, AND I GUESS, UH, ONE, ONE OTHER THING DEB REMINDED ME TO ADDRESS FOR DIRECTOR SAN WONG WERE THE, UH, CLIMATE ISSUES THAT, THAT YOU WERE TALKING TO.
UM, SO THERE'S BEEN A LOT OF PUSH FOR ESG TYPE ISSUES WITH RESPECT TO WHAT THE MARKET TYPICALLY CALLS GREEN BONDS.
UH, AT THIS POINT, UH, THE MARKET IS REALLY WAITING FOR FORMAL SEC GUIDANCE WITH RESPECT TO THESE ISSUES AND HOW THEY SHOULD BE MEASURED WITHIN PORTFOLIOS.
THIS HAS BEEN AN OPEN COMMENT, I WANT TO SAY, SINCE 2018
AND WE JUST STILL HAVEN'T GOTTEN ANYTHING.
UM, BUT THERE ARE ISSUES AND, UH, I THINK ONE THING THAT I CAN DO WHEN I GET BACK TO, TO THE OFFICE IS TO ENCOURAGE OUR PORTFOLIO MANAGEMENT TEAM TO LOOK AT THOSE SORTS OF GREEN ISSUES, UM, FOR THE PORTFOLIO AS THEY BECOME AVAILABLE IN THE MARKET.
YEAH, I LOOK FORWARD TO SEEING THAT.
DEE, DID YOU HAVE OTHER QUESTIONS? NO.
SO THE, THESE ARE THE BOTTOM 25 ISSUES AND THE, THE PREVIOUS SLIDE WAS THE TOP 25 ISSUERS.
SO, UM, YOU BASICALLY TOOK ALL OF OUR HOLDINGS AND JUST WANTED TO SHOW US THE TOP 20.
THIS MIGHT BE SOMEWHAT REPETITIVE, BUT I WANNA MAKE SURE I UNDERSTAND WHAT I'M LOOKING AT.
UM, SO THE TOP 25 BUY THEIR ESG RATE RISK RATING, AND THEN THE NEXT ONE IS THE BOTTOM 25, BUT THEN THERE'S A WHOLE BUNCH IN THE MIDDLE, AND THAT'S WHAT'S ALL IN THE NEXT SET OF SLIDES, YOU KNOW, STARTING ON SLIDE 31.
YEAH, I, I THINK THAT MOST OF THE PORTFOLIO WAS COVERED HERE ON THESE TWO SLIDES.
BUT IF THERE ARE ANY SPECIFIC ISSUES THAT YOU WANT US TO DIG INTO ON THE DE ON THE PORTFOLIO DETAIL SLIDES, YOU KNOW, PLEASE DO REACH OUT.
I'M HAPPY TO, TO GET THAT INFORMATION.
AND THEN I GUESS THIS GOES BACK TO THE INVESTMENT POLICY.
ONE OF THE OTHER QUESTIONS I'VE ALWAYS HAD, UM, IS I DON'T THINK WE REALLY, UH, HAVE IN OUR INVESTMENT POLICY THIS IDEA OF, UH, COMPANIES THAT ARE HEADQUARTERED IN THE SAN FRANCISCO BAY AREA OR SPECIFICALLY WITHIN, YOU KNOW, OUR EAST BAY REGIONAL PARK DISTRICT.
AND I DON'T KNOW IF THAT'S SOMETHING THAT WE WOULD WANT TO CONSIDER IN THE FUTURE, BECAUSE WE DO HAVE, YOU KNOW, SOME COMPANIES HERE IN THE BAY AREA THAT I THINK MAY HAVE, UM, YOU KNOW, A DECENT ESG SCORE AND ALSO DECENT PERFORMANCE.
AND IT IS ALWAYS NICE TO SUPPORT OUR LOCAL COMPANIES, BUT ALSO BECAUSE, YOU KNOW, A LOT OF THOSE EMPLOYEES LIVE ACROSS OUR TWO COUNTIES USE OUR PARKS.
SO IT'S A WAY OF ALSO, YOU KNOW, SUPPORTING THOSE COMPANIES THAT ARE HERE.
SO THAT MIGHT BE SOMETHING, UM, TO CONSIDER.
I DO SEE A FEW ON THIS LIST, BUT THEN THERE'S A FEW THAT I DON'T SEE ON THIS LIST, UM, THAT, YOU KNOW, MAYBE THAT, THAT THAT'S A WAY THAT WE, YOU KNOW, HELP STRENGTHEN OUR LOCAL ECONOMY.
UM, I'LL TURN IT NOW OVER TO, UNLESS THERE ARE ANY OTHER QUESTIONS.
LET'S, KELLY, YOU HAVE THREE MINUTES.
[01:00:01]
YEAH.UM, A LOT OF UH, WHEN IT COMES TO, UH, EN ENVIRONMENTAL SUSTAINABILITY GOVERNANCE ISSUES, UM, YOU KNOW, THE CORPORATE AMERICA, UM, A LOT OF TIMES HAS A WAY OF GOING THROUGH FADS AND FASHIONS, AND SOMETIMES THERE'S A BACKLASH AGAINST WHATEVER THE CORPORATE FAD WAS.
YOU KNOW, THE, THE PARADIGM SHIFTS OF WHATEVER, OF, UH, CORPORATE FICKLE FASHIONS AND, UH, WALL STREET JOURNAL, JANUARY 9TH, 2024, THE VOICE OF CORPORATE AMERICA, THEY HAVE THIS STORY.
AND I'LL QUOTE FROM THE STORY.
MANY COMPANIES NO LONGER USE THESE THREE LETTERS, ESG FOLLOWING YEARS OF SIMMERING INVESTOR BACKLASH, POLITICAL PRESSURE AND LEGAL THREATS OVER ENVIRONMENTAL, SOCIAL GOVERN GOVERNANCE EFFORTS.
A NUMBER OF BUSINESS LEADERS ARE NOW MAKING A CONSCIOUS EFFORT TO AVOID THE ONCE WIDELY USED ACRONYM FOR SUCH INITIATIVES ON EARNINGS CALLS.
MANY CHIEF EXECUTIVES NOW EMPLOY NEW APPROACHES.
SOME COMPANIES, INCLUDING COCA-COLA, ARE REBRANDING CORPORATE REPORTS AND COMMITTEES, STRIPPING, ESG FROM TITLES.
ADVISORS ARE COACHING EXECUTIVES ON ALTERNATIVE WAYS TO DESCRIBE THEIR EFFORTS, PROPOSING NEW TERMS LIKE RESPONSIBLE BUSINESS ON WALL STREET.
MEANWHILE, UH, SOME FIRMS ARE CLOSING ONCE POPULAR ESG FUNDS AS INTEREST FADES.
SO, UM, YEAH, THERE'S SOMETHING TO, FOR YOU GUYS TO, UH, READ.
I'M SURE THE, THE BOARD OF DIRECTORS OF THE EAST BAY PARK DISTRICT HAS RECEIVED THIS STORY A COUPLE OF MONTHS AGO, AND I JUST SENT IT TO, UH, MS. SPALDING.
UH, JUST WANTED TO POINT OUT A FEW THINGS THAT, UM, WERE NOTED IN THE INVESTMENT POLICY WHEN THE BOARD WAS DOING THEIR REVIEW, THAT WE ARE GOING TO, UM, AMEND, I GUESS I'LL SAY, UM, WHEN WE BRING THIS TO THE FULL BOARD.
SO ONE ON PAGE 78 THERE FOR SOME REASON.
SO NUMBER 5.4, THERE'S SOMETHING STRANGE HAPPENED WITH THE ADOBE DOCUMENT AND THAT, UM, WORD THAT'S ALL GARBLED SHOULD BE THE WORD SUSTAINABILITY.
UM, AND THEN ON PAGE 80, THERE WAS A REQUEST TO DEFINE, UM, 9.1 SAYS UNITED STATES TREASURY BILLS, NOTES, BONDS, OR STRIPS.
AND SO WE'RE GOING TO PULL OUT THAT DEFINITION AND PUT IT IN THE GLOSSARY SO THAT IT'S MORE CLEAR WHAT THOSE ARE.
AND THEN, UH, I BELIEVE THE, UH, FINAL CHANGES ON NUMBER NINE POINT 10, WHICH IS PAGE 82.
UM, THERE'S AN ADDITIONAL, IT SAYS 500 WITH THE DOLLAR SIGN, AND THEN IT SAYS DOLLARS AFTER THAT.
SO IT'S CLEANING UP THAT DUPLICATION.
SO WE'LL MAKE THOSE CHANGES FOR THE, UM, VERSION THAT WE BRING TO THE FULL BOARD.
ANY, UH, ANY QUESTIONS ON THAT PARTICULAR, UH, DOCUMENT FOR EITHER.
SO, UM, NEED A MOTION? YEAH, WE'RE, IT'S TIME.
IT IS TIME FOR THE MOTION
SO THE MOTIONS TO APPROVE THE INVESTMENT POLICY AS WELL AS, UH, IS IT JUST TO RECEIVE THE MARKET REVIEW? THE MARKET REPORT? YEAH.
UM, BUT THE, THE FOURTH QUARTER, UH, IN INVESTMENT REPORT DOES GO TO THE FULL BOARD.
SO WE NEED A RECOMMENDATION TO, TO BRING THAT FOURTH QUARTER REPORT TO THE BOARD AS WELL.
SO YOU'RE ACTUALLY RECOMMENDING THAT THE FULL BOARD APPROVE IT, BUT YOU'RE GIVING IT A POSITIVE RECOMMENDATION, SO FOR BOTH OF THEM.
SO THEN THE MOTION IS TO RECOMMEND THAT BOTH THE INVESTMENT POLICY AS WELL AS THE FOURTH QUARTER MARKET REPORT GO TO THE FULL BOARD.
I'M HAPPY TO MAKE THAT MOTION, YEAH.
[Informational Items]
AND NOW WE MOVE ON TO, UH, NUMBER FIVE, UM, WHICH IS, UH, ABOUT THE JOB ORDER CONTRACT CONTRACTING PROGRAM BY A GOOD, GOOD AFTERNOON FINANCE COMMITTEE MEMBERS.UH, I AM RAN BATES, CHIEF OF DESIGN AND CONSTRUCTION, AND I'M HERE TO PROVIDE QUARTERLY REPORT ON OUR JOB ORDER CONTRACTING PROGRAM.
I AM PULLING UP MY PRESENTATION NOW, SO PLEASE BEAR WITH ME FOR A SEC.
UM, THIS IS A QUARTERLY REPORT.
IT'S PART OF OUR JOB ORDER CONTRACTING PROGRAM.
UM, WHAT I'M GONNA PROVIDE TODAY IS AN UPDATE ON OUR CURRENT
[01:05:01]
CONTRACTS.THIS IS PER OUR JOB ORDER CONTRACTING POLICY THAT THE BOARD ADOPTED.
UM, IT'S PROVIDED THAT WE PROVIDE TO THE FINANCE COMMITTEE THE COSTS OF JOB ORDERS THAT HAVE BEEN INITIATED AND COMPLETE AND OR COMPLETED, AND THE AMOUNT OF ADMINISTRATIVE FEES FOR OUR CONSULTANTS THAT ARE PART OF THOSE PROJECTS.
SO, UM, I WAS JUST AT THE BOARD ON THE 20TH OF THIS MONTH TO, UH, ASK AUTHORIZATION FOR TWO NEW CONTRACTS.
THIS IS ABOUT THE CONTRACTS THAT WE'VE HAD HAD INITIATED AS OF 2023 IN TERMS OF JANUARY 17TH.
SO I'M TALKING ABOUT THESE 1, 2, 3, 4, 5, 6, 7, 8 CONTRACTS THAT ARE IN FRONT OF YOU.
UM, AND AGAIN, THESE CONTRACTS ARE A ONE YEAR PERIOD WITH AN NTP ISSUED AT THE F OR OUR COMMENCEMENT OF THAT TERM WITH THE ISSUANCE OF OUR FIRST NTP.
AND THE MINIMUM CONTRACT VALUE IS THAT WE NEED TO OFFER TO THESE CONTRACTORS $50,000 OF WORK.
UM, IT'S NOT REQUIRED THAT WE ENTER INTO AN AGREEMENT IF WE CAN'T, BUT WE ARE, AND THE MAXIMUM CONTRACT VALUE IS $2 MILLION.
AND AS A REMINDER, I GUESS JUST TO BACK UP, WE DO HAVE, OF THESE EIGHT CONTRACTS, WE HAVE THREE THAT ARE GENERAL A LICENSES, WHICH IS UTILITY AND GENERAL ENGINEERING, THREE B LICENSES, WHICH ARE BUILDING ENGINEERS.
AND THESE ARE LICENSES THAT ARE ISSUED BY THE, UH, STATE IN TERMS OF CONTRACTOR'S LICENSE.
AND THEN THE LAST TWO ARE A, A CONTRACTORS, WHICH AGAIN, ARE GENERAL ENGINEERING, BUT THOSE TWO WE PROVIDE ARE JUST FOR BASICALLY PAVING.
AND THAT, THAT THOSE CONTRACTORS NEED TO SELF PERFORM THAT WORK AT A RATE OF 65%.
SO SOME OF OUR JOB ORDER CONTRACTING IS JUST AS A POINT OF REFERENCE, THEY ARE GENERALS AND THEY'LL SUB OUT A BIT OF WORK BECAUSE WE ASK THEM TO DO A BROAD RANGE OF WORK.
AND SO THEY MIGHT NOT NECESSARILY HAVE THE IN-HOUSE STAFF TO DO THAT.
AND SO THEY'LL, UH, SUBCONTRACT THAT OUT.
THAT SAID, WE DON'T WANT OUR CREATING OR OUR PAVING ENGINE CONTRACTORS TO DO THAT.
SO WE'VE PROVIDED A PROVISION THAT THEY DO 65% OF THEIR WORK SELF PERFORMING.
UM, HERE ARE THE PROJECTS THAT HAVE BEEN COMPLETED TO DATE SINCE WE INITIATED CON OR ENTERED INTO AGREEMENT WITH THESE CONTRACTORS.
UH, SO JUST AGAIN, AS A POINT OF REFERENCE, WE HAVE THREE AS AND THREE BS.
SO WE TRY TO DISPERSE THOSE AMONGST OUR CONTRACTORS EQUITABLY, DEPENDING ON HOW QUICKLY THEY RESPOND AND WHAT WE FIND AS A, AS A RESPONSE TO THAT.
SO THESE ARE PROJECTS THAT HAVE BEEN COMPLETED.
AGAIN, IT'S THE, ALL THESE GRAPHS SHOW THE PARK THE PROJECT NAME, WHICH OSTENSIBLY SHOWS YOU WHAT WE'VE KIND OF DONE THE APPROVED PROJECT COST IN THIS COLUMN, WHICH SHOWS, UM, WHAT WE PAID FOR THAT WORK.
AND THEN THE GORDIAN GROUP COST IS A 5% OF THIS.
AND SO THAT IS THE FEES THAT THEY GET AS, AS OUR CONSULTANTS.
AND THOSE ARE THE FEES THEY GET IN SUM TOTAL.
SO JUST AGAIN, AS A REMINDER, UM, WHEN WE ENTER INTO AGREEMENT WITH THE GORIAN, THEY DON'T REALLY GET PAID UNTIL WE ISSUE NTPS FOR PROJECTS.
SO THEN THEY INVOICE US FOR THAT 5% OF THAT.
SO BASICALLY WHAT THEY DO IN TERMS OF PREPARING OUR CONSTRUCTION TASK CATALOG AND EVERYTHING THAT GETS US UP TO ACTUALLY ENTERING INTO JOB ORDERS, THEY DO THAT, THOSE FEES ARE INCORPORATED INTO THIS COST.
SO WE'VE ACCEPTED THESE, THIS NEXT SLIDE THAT I'M FORWARDING TO ARE PROJECTS THAT HAVE BEEN EITHER WE'VE AGREED TO A PRICE AND ISSUED NTP, WHICH IS NOTICE TO PROCEED AND OR ARE IN CONSTRUCTION.
SO HERE'S THE LIST OF THOSE PROJECTS.
UM, AND THEN LASTLY, BECAUSE WE DO, WE ARE ABOUT MIDWAY THROUGH SOME OF THESE CONTRACTS, WE STILL HAVE PROJECTS THAT WE ARE PRICING, AND THESE ARE THE PROJECTS THAT WE ARE CURRENTLY PRICING.
UH, ITEM NUMBER SIX ON THIS LIST, UH, IF YOU REMEMBER, WE HAD AN ACTION AT THE LAST BOARD MEETING THAT COMBINED THIS WORK.
SO THAT NUMBER SIX IS ACTUALLY GONNA COME OFF THE LIST BECAUSE WE'RE GONNA INCORPORATE EVERYTHING THAT WE SAW OR RECEIVED FROM THE DEPARTMENTS OF STATE SAFETY OF THE DAM SAFETY OF DEPARTMENT OF THE STATE, UM, TO FIX LAKE ANZA DAM.
SO THAT WILL BE REMOVED AS A JOB ORDER CONTRACTING PROJECT, AND WE'RE GONNA DO FULL PLANS AND WE'LL PUT THAT ONE OUT TO BID 'CAUSE THE SCOPE HAS INCREASED.
SO, BUT THESE ARE THE OTHER ONES WE ARE CURRENTLY WORKING ON.
UM, THIS SHOWS AGAIN, THE BENEFIT OF A JOB ORDER OR CONTRACTING IN TERMS OF REPAIR AND RENOVATION WORK IS THAT IT PROVIDES US, UH, COST FOR DURING NORMAL HOURS AND OFF HOURS.
I, YOU'VE PROBABLY GETTING TIRED OF SEEING THIS HAYWARD MARSH COGSWELL MARSH REPAIR, BUT IT, IT HIGHLIGHTS IT SO WELL THAT WE.WORK.
AND SO IT, IT ALLOWS US TO GET PRICES FOR WHEN WE HAVE TO DO WORK, UH, IN NIGHT BECAUSE OF TIDES.
UM, IT, IT REALLY IS A GREAT WAY FOR US TO CONTRACT THAT.
UM, AND THEN LASTLY, I HAVE AN IMAGE OF, UH, THE BURRELL AT THE BURRELL PROPERTY.
WE REMOVED A STORAGE TANK, AND THIS JUST SHOWS SOME OF THAT, UH, THAT PROJECT'S BEEN CLEANED AND DONE.
[01:10:01]
WAS TO BASICALLY REMOVE A STORAGE TANK THAT IT WAS LEAKING ENOUGH CONCERN TO THE WATER BOARD.UM, THESE ARE JUST SOME REPRESENTATIVE PROJECTS THAT CONCLUDES MY PRESENTATION.
I DON'T HAVE IMAGES OF ALL THE PROJECTS AND I DON'T KNOW MUCH ABOUT THEM.
I'M HAPPY TO ANSWER QUESTIONS AS I, AS I'M ABLE, IF THERE ARE THINGS I CAN ANSWER, I WILL FIND OUT FROM THE PROJECT MANAGERS AND RELATE TO THAT.
UH, THAT CONCLUDES MY PRESENTATION.
I'M HAPPY TO FIELD QUESTIONS CURRENTLY.
ALRIGHT, AS LONG AS YOU SHOW US A FEW PICTURES, WE'LL LET YOU GO.
YEAH, AND I REALIZE THAT THIS IS A NEW FINANCE COMMITTEE, UM, SO I'M HAPPY TO ANSWER ANY QUESTIONS ABOUT THE QUARTERLY REPORT OR JOB ORDER CONTRACTING AT THAT, JUST AS A REFRESHER.
WE'LL GET MORE PHOTOS ON THE NEXT QUARTERLY REPORT.
I HEARD YOU THAT WE HAVE A COUPLE, BUT I WILL STRIVE TO HAVE A FEW MORE.
IT'S, IT'S, UH, YOU KNOW, A LITTLE, LITTLE SOMETHING TO TANGIBLE, YOU KNOW,
I PREFER CONSTRUCTION PHOTOS TO GRAPHS AND CHARTS AS WELL.
ANYWAY, UM, SO ANY, ANY QUESTIONS? UH, GO FIRST.
I LIKE HEARING THESE QUESTIONS.
UH, THE, THE LAFAYETTE MORGUE PROJECT, THAT 222,000, IS THAT JUST FOR THE TEMPORARY OR DOES THAT INCORPORATE THE, UH, PERMANENT FIX AS WELL? UM, THAT IS PERMANENT.
ARE, ARE YOU REFERRING TO THAT ONE AS THE PIN SHORES OR, OR THAT'S LAFAYETTE MORAGA TRAIL.
I THINK IT WAS NUMBER SIX ON YOUR SLIDE.
SO WE'RE IN CONSTRUCTION, THAT'S A PERMANENT REPAIR FOR THAT ONE.
YEAH, SO THAT, SORRY, I'M GETTING CONFUSED WITH THE POINT.
THEY YEAH, THAT ONE IS THE ONE WITH THE EAST ON THE EAST BAY MUD PROPERTY.
AND SO THAT WE ARE WAITING UNTIL IT DRIES UP.
SO WE CAN, THEY GIVE US THE, TO, TO, UH, MAKE SURE THAT WE'RE IN COMPLIANCE WITH OUR ENVIRONMENTAL PERMITS.
SO, SO THAT'S THE ONE TO GET THE TRAIL OPEN AGAIN, ALL THE WAY AT THE END.
UM, SO REAL QUICK, SO THE, THE, THIS IS THE REVIEW FROM THE JANUARY 17TH, 2023 AWARD.
AND WAS THAT A TWO YEAR JOB ORDER CONTRACTING OR IS THAT A NO, IT'S, SO IT'S, THEY'RE ALL ANNUAL.
THEY'RE ALL ONE YEAR TERMS. AND SO WHEN THE BOARD APPROVED IN JANUARY, IT TAKES US SOME TIME TO EXECUTE THOSE AGREEMENTS, AND THEN IT TAKES TIME TO SET UP AND THEN GET JOB ORDERS INITIATED.
SO IN PRACTICE THEY'RE CALLED ANNUAL TERMS, BUT YOU CAN THINK OF THAT IT USUALLY TAKES 18 MONTHS TO TWO YEARS FOR US TO CYCLE THROUGH A FULL ONE YEAR TERM OF JOB ORDER CONTRACTING CONTRACTS.
AND IT COULD BE JUST BECAUSE, JUST FOR CLARITY IS THAT, SO WE ENTERED IN, OR THE BOARD APPROVED ON JANUARY 7TH, I THINK IT TOOK US TWO TO THREE MONTHS TO FULLY EXECUTE ALL OF THOSE.
AND SO THAT CAN TAKE ANYWHERE FROM TWO WEEKS TO UP TO MAYBE SIX DEPENDING ON THE, UH, THAT PROJECT AND HOW MUCH WE HAVE TO GO BACK AND FORTH.
BUT ONCE WE THEN ISSUE THE NTP, THAT'S WHEN THE, THE, THE ANNUAL TERM STARTS.
SO WE'RE COMING UP ON SOME OF OURS TERMING OUT IN APRIL AND MAY OF THIS YEAR.
SO THAT'S HOW THAT WORKS IN TERMS OF, UM, THAT, IF THAT ANSWERS YOUR QUESTION.
AND, AND YOU KNOW, I'M TRYING TO KEEP THIS ORGANIZED IN, IN MY, MY BRAIN HERE.
UM, SO THESE ARE THE ONES THAT WERE APPROVED FROM THAT INITIAL JANUARY, 2023 JOC.
AND THEN WE JUST HAD ANOTHER ONE A FEW WEEKS AGO AT THE BOARD OF DIRECTORS.
SO I GUESS YOU COULD SAY JANUARY, 2024 OR FEBRUARY, 2024.
AND THAT WAS FOR TWO OF THE, A GENERAL ENGINEERING CONTRACTORS.
UM, AND I THINK BOTH OF THEM HAD BEEN ALSO PART OF THIS 2023 CYCLE, IS THAT CORRECT? SO NOW THAT'S CORRECT.
AND THE REASON WE DID THAT IS BECAUSE TYPICALLY WE, WE HAVE DONE THEM IN GROUPS AS PROGRAM PRO PROGRAMMATICALLY.
SO WE THAT WE HAVE THREE AS, THREE BS AND TWO PAVING.
AND WE'VE GROWN THAT AS THE PROGRAM HAS DEVELOPED.
'CAUSE WE STARTED WITH JUST A'S AND B'S AND TWO OF EACH.
UM, THE REASON THAT WE WENT, WE CAME EARLIER THIS MONTH TO AWARD TWO A CONTRACTS IS BECAUSE SOME OF THE ASS THAT WE CURRENTLY HAVE ARE CLOSE TO THEIR $2 MILLION CAPACITY FOR THE CONTRACT.
AND THAT'S BECAUSE OF ALL THE WORK THAT WE'VE DONE.
AND SO IN TERMS OF HAVING OVERLAP, IT WAS SUGGESTED AND WE ACCOMMODATED THAT TO GO OUT TO BID FOR TWO MORE IN CASE THERE WAS MORE STORM CLEANUP OR ANYTHING THAT NEEDS TO HAPPEN SO THAT WE WOULD HAVE SOME OVERLAP.
'CAUSE AS IT IS NOW, THE TWO, MOST OF OUR A'S WILL TURN OUT IN ABOUT MAY OF THIS YEAR.
SO IF WE DIDN'T HAVE THAT, WE WOULD HAVE TO THEN GO OUT TO BID AND WE WOULD BE, WE'D HAVE A LAG THERE.
SO WE HAD IT'S ATYPICAL, BUT WE DID DO THESE TWO FOR SOME OVERLAP.
AND WE WILL THEN PROBABLY BID SOME
[01:15:01]
MORE LATER ON THIS YEAR AS A FULL SUITE OF THE THREE ASS THREE BS IN TWO PAVING.AND I KNOW, UM, TWO OF US ACTUALLY ARE ALSO ON THE OPERATIONS COMMITTEE, AND WE RECEIVED A REPORT FROM OUR MASS TEAM, AND I BELIEVE APPROXIMATELY TWO THIRDS OF THE PROJECTS THAT WERE PRESENTED TO US WERE, UH, WERE COMPLETED THROUGH JOB ORDER CONTRACTING.
SO I THINK IF THAT'S THE CASE, IT'S NICE TO SEE THOSE CONNECTIONS KIND OF COME TOGETHER IN SOME OF THESE PRESENTATIONS.
SO I DON'T KNOW IF MAYBE THE NEXT TIME THERE'S AN UPDATE, IT WOULD BE HELPFUL TO MAYBE SEE THE A BC DISTINCTION ON SOME OF THESE PROJECTS HERE ON, WAS THIS NUMBER 96 IN OUR PACKET? I DON'T KNOW WHAT SLIDE NUMBER IT WAS WHEN IT WAS PRESENTED.
UM, AND THEN I GUESS, YEAH, I THINK YOU EXPLAINED IT VERY WELL JUST NOW.
SO I, I UNDERSTAND WHAT YOU SAID, BUT I DON'T KNOW IF THERE'S A WAY TO VISUALIZE THAT, HOW WE'RE GETTING CLOSE WITH SOME OF THE, UM, YOU KNOW, GENERAL ENGINEERING CONTRACTORS ON THAT 2 MILLION.
THAT'S WHY WE EXTENDED IT THE PREVIOUS BOARD MEETING, BUT JUST TO, TO TRY TO KEEP TRACK OF THE, UM, YOU KNOW, CONTRACTORS WE'RE WORKING WITH.
'CAUSE RIGHT NOW, THE, THE UPDATES MORE BASED ON, YOU KNOW, OUR PARK AND OUR PROJECTS, BUT I ALSO THINK THERE'S ANOTHER DIMENSION TO THIS, WHICH IS THE CONTRACTOR THEMSELVES AND THEN THAT A, B AND C DESIGNATION, UH, UNDERSTOOD.
THAT'S NOT NECESSARILY THE REPORTING THAT'S REQUIRED BY THE POLICY AND THAT'S OH, OKAY.
SO I THINK WE COULD LOOK AT THAT, BUT I, I'LL NEED TO I HEAR YOU.
I'LL LOOK INTO THAT AS TO WHAT ALL WE NEED TO REPORT TO YOU AS A REQUEST AND KIND OF WHAT WE FITS INTO OUR POLICY.
THAT WAS, UH, AN UPDATE AND, UM, WE ARE MOVING ON TO, UM, DIRECTOR.
WE HAVE A PUBLIC COMMENT FOR FA THANK DO, WELL, LET'S BRING IT ON.
UH, MY NAME IS MEADOW DARCY, AND I AM THE CHIEF STEWARD OF ASME LOCAL 2 4 2 8.
UM, I, I KNOW, UM, SOME OF YOU ARE, UH, NEWER TO THE FINANCE COMMITTEE THIS YEAR.
I KNOW DEE'S BEEN ON HERE FOR A WHILE.
UM, BUT I WANTED TO ASK THE STATUS OF THE PAVING REPORT THAT WE'VE BEEN ASKING FOR, FOR SEVERAL YEARS.
UM, EACH TIME I COME, IT'S ALMOST DONE.
UM, SO JUST WONDERING IF THERE'S AN UPDATE, UM, ON THE PAVING REPORT.
UM, WE'LL, WE'LL CHECK IT OUT.
AND SO NOW, UM, WE'LL MOVE ON TO, UM, AND THAT, THAT WAS THE ONLY, OKAY, FIVE B, OTHER POST-EMPLOYMENT BENEFITS TRUST FUND UPDATES, AND FUNDED STATUS THROUGH DECEMBER 31ST, 2023.
GOOD MORNING AGAIN, DEB SPALDING, ASSISTANT GENERAL MANAGER OF FINANCE AND MANAGEMENT SERVICES.
I'M GONNA GIVE A FEW BRIEF SLIDES HERE AND, AND THEN I'M GONNA TURN IT OVER TO OUR EXPERTS HERE FROM VIA ACTUARIAL.
AND THEY HAVE, UH, A MORE DETAILED PRESENTATION.
SO JUST VERY QUICKLY, WHAT IS OUR TRUST? SO BACK IN 20, UH, 2007, WE SET UP OUR TRUST, AND THIS IS SENDING ASIDE MONEY TO PAY FOR FUTURE RETIREE MEDICAL COSTS.
AND THE IDEA IS THAT YOU'RE PRE-FUNDING THE TRUST AND THE INVESTMENT EARNINGS THERE ARE GONNA GROW OVER TIME AND HELP US HELP TAKE CARE OF SOME OF THESE COSTS.
SO PRIOR TO THIS, WE WERE LIKE, PAY, PAY, GO, PAY AS YOU GO.
JUST, WE DID NOT HAVE A FUND SET UP.
AND, UM, IT'S WORKING AS YOU CAN SEE BY THE THIRD BULLET.
SO THIS YEAR WE PUT IN 2.4 MILLION AND, UM, CONTRIBUTIONS AND 3.2 MILLION IN, UH, BENEFITS WERE PAID OUT.
AND YET OUR FUNDED STATUS IS, UH, OVER A A HUNDRED.
SO, UM, SO IT'S BEEN WORKING FOR US.
UM, BACK IN 2012, WE CONTRACTED WITH SERT, WHICH IS A BRANCH OF, UH, CALPERS TO MANAGE OUR OPE TRUST INVESTMENTS.
AND WE'VE BEEN USING STRATEGY ONE, WHICH HAS THE HIGHEST EXPECTED RETURN FOR ITS INVESTMENTS, BUT ALSO MORE RISK.
UM, AND RIGHT NOW WE'RE AT 111% FUNDED STATUS, BUT TO THE POINT OF EXPECTED RISK, UM, WE HAD, WE WERE AT A NEGATIVE, UH, NOT NEGATIVE, BUT WE HAD SOME INVESTMENT LOSSES IN 2022.
AND THEN IN 2021 WE WERE ACTUALLY, AGAIN, ABOVE THE A HUNDRED PERCENT FUNDED STATUS.
SO IT'S REALLY, IT'S GONE UP AND DOWN, UM, OVER THE LAST FEW YEARS.
UM, SO OUR CONTRIBUTION RATES HAVE DROPPED DOWN, UM, FROM WHAT THEY USED TO BE BECAUSE WE ARE AT THAT HIGHER FUNDED STATUS.
SO THAT'S ALL I HAVE, AND THEN I'M GONNA TURN IT OVER TO MARK AND EMILY FROM VIA TO DO THEIR PRESENTATION.
[01:20:01]
OUR PRESENTATION.UH, MARK SCHULTE FROM V ACTUARIAL SOLUTIONS WITH ME IS MY COMM COLLEAGUE, EMILY ERICKSON.
AND WE'RE GONNA PROVIDE A BRIEF UPDATE ON OUR ANALYSIS OF YOUR OTHER POST-EMPLOYMENT BENEFIT PLAN.
AS DEB UH, MENTIONED, OPEP IS KIND OF A, A CATCHALL TERM FOR RETIREE HEALTHCARE.
THERE ARE ALSO SOME RETIREE DENTAL BENEFITS AND LIFE INSURANCE IN THERE, BUT PRIMARILY THE HEALTHCARE BENEFITS.
AND I'M JUST GONNA GIVE A LITTLE BIT OF BACKGROUND ON WHAT OPAB IS, SOME OF THE CONCEPTUAL, UH, ITEMS SINCE IT IS A A, A VERY COMPLEX TOPIC, WHAT'S GOING ON BEHIND THE SCENES.
AND JUST TO REFRESH PEOPLE'S MEMORY, UH, EMILY WILL TALK ABOUT SOME OF THE FINANCE UPDATES, AND THEN WE'LL TALK A LITTLE BIT MORE ABOUT FUNDING, BUT WE'LL, WE'LL TRY TO KEEP IT AS BRIEF, BUT AS INFORMATIVE AS POSSIBLE.
SO, BACKGROUND, UH, AS MENTIONED, THESE ARE, ARE PROMISES THAT HAVE BEEN MADE TO RETIREES AND ACTIVE EMPLOYEES AS THEY'RE WORKING, THAT WHEN THEY RETIRE, THEY'RE GONNA RECEIVE SOME FORM OF SUBSIDIZED HEALTHCARE BENEFITS, UH, WHETHER THEY PARTICIPATE ON THE DISTRICT'S GROUP HEALTH PLANS OR ANOTHER HEALTH PLANS.
THERE'S, UH, A LOT OF DIFFERENT STRUCTURE TO HOW YOUR RETIREE HEALTH PLAN PLAN IS ORGANIZED, UH, VARYING BY, UH, WHEN FOLKS WERE EMPLOYED, WHAT BARGAINING GROUP THEY'RE IN, WHETHER THEY'RE UNDER OR OVER AGE 65.
UH, THE, A LOT OF SMALL FEATURES, BUT WHAT WE DO IS WE LOOK AT THE OVERALL LIABILITY.
WHAT IS THE VALUE OF THE BENEFITS THAT HAVE BEEN PROMISED? AND GENERALLY THE, THE FUNDING STRUCTURE FOR OP E IS A LITTLE BIT DIFFERENT THAN, SAY, FOR A PENSION PLAN WHERE A CONTRIBUTION AMOUNT IS CALCULATED, THAT MONEY GOES INTO A TRUST, AND THEN THE TRUST THEN PAYS THE RETIREES THEIR MONTHLY BENEFITS FOR LIFE.
AND SO REALLY ALL THAT HAPPENS THERE IS THE DISTRICT OR WHATEVER AGENCY SPONSORING A PENSION PLAN, WE'RE, THEY'RE JUST RESPONSIBLE FOR FUNDING THE TRUST AND THEY TAKE CARE OF THE BENEFITS.
IT'S A LITTLE MORE COMPLICATED WITH OPEP IN THAT YOU ARE, I WON'T USE THE TERM SELF-ADMINISTERING, BUT YOU'RE REALLY SUPPLYING THOSE, THOSE SUBSIDIES DIRECTLY TO THE RETIREES IN A HEALTHCARE SETTING.
AND SO ON THE SIDE, YOU HAVE THIS TRUST FUND THAT YOU'RE ALSO FUNDING.
AND THEN IN ORDER TO MAKE THE WHOLE CYCLE WORK, YOU HAVE TO REQUEST REIMBURSEMENT FROM THE TRUST FOR THOSE COSTS YOU'VE PAID TO RETIREES.
AND WHAT WE OFTEN SEE FROM AGENCIES IS NOT DOING THE REIMBURSEMENT PART.
SO THEY'RE PAYING BENEFITS TO RETIREES.
THEY'RE ALSO PUTTING MONEY IN THE TRUST FUND, WHICH ARE BOTH PRETTY SUBSTANTIAL EXPENDITURES.
BUT WHAT HAPPENS IS ALL THAT MONEY SITS IN THE TRUST FUND FOR YEARS AND JUST KEEPS GROWING WITH INVESTMENT RETURNS AND THAT WE CALL IT HYPER FUNDING.
AND THAT, THAT'S REALLY WHAT HAPPENED AT, AT THE DISTRICT FOR A WHILE, IS THAT YOU HAD THIS POT OF MONEY GROWING AND IT REALLY HELPED CONTRIBUTE TO THE, UH, GROWTH OF THE OPEP TRUST FUND AND WHERE YOU'RE AT NOW, WHICH IS A LITTLE BIT MORE BALANCED APPROACH, WHERE THESE REIMBURSEMENTS ARE NOW COMING IN AND OFFSETTING THE PAYMENTS YOU'RE MAKING TO RETIREES.
SO UNDERSTANDING THAT, THAT CASH FLOW, IT CAN BE KIND OF HARD TO, TO WATCH WHERE THE DOLLARS GO IN OPEP, 'CAUSE THERE'S A LITTLE BIT MORE TO IT THAN SAY ON, ON THE PENSION SIDE.
BUT IN, IN THE END, WHAT YOU WANNA DO IS PUT MONEY ASIDE NOW, GET THAT INVESTMENT RETURN TO HELP YOU PAY FOR THOSE BENEFITS THAT HAVE BEEN PROMISED IN THE FUTURE.
SO AS ACTUARIES, WHAT WE DO IS WE BUILD THESE MODELS BASED ON ALL THE, THE CENSUS DATA FOR FOLKS WHO ARE IN YOUR, UH, RETIREE HEALTHCARE PLAN, BOTH ACTIVE MEMBERS WHO ARE ACCRUING BENEFITS AND RETIREES WHO ARE RECEIVING PAYMENTS.
AND WE USE OUR MODELS TO PROJECT OUT WHAT ARE YOUR OUT-OF-POCKET COSTS FOR RETIREE HEALTHCARE BENEFITS GONNA BE IN THE FUTURE.
AND THEY GENERALLY FOLLOW A CURVE AS SHOWN IN THIS CHART.
AND AS DEB MENTIONED, IT'S ABOUT THREE AND A HALF MILLION OR SO IN EXPENDITURES THIS PAST YEAR.
AS YOU CAN SEE, THOSE ARE EXPECTED TO RAMP UP OVER THE NEXT COUPLE DECADES.
AND THIS IS JUST BASED ON THE POPULATION NOW.
SO ASSUMING YOU HAVE MORE PEOPLE BEING HIRED IN A CONSTANT WORKFORCE, REALLY IT JUST KIND OF KEEPS GOING OUT.
BUT TO SEE HOW THERE'S THIS GROWTH IN PAYMENTS.
AND OFTENTIMES WHAT WE FIND WITH AGENCIES IS THAT, ESPECIALLY EARLY IN THE STAGES OF AN OPEP PLAN, THE THE PAY AS YOU GO, AS DEB MENTIONED, PAYING OUT OF POCKET, IT, IT'S A MANAGEABLE EXPENSE, BUT WHEN YOU'RE LOOKING AT THREE AND A HALF MILLION VERSUS A PROJECTION HERE OF OVER $7 MILLION OUT A FEW DECADES, THAT'S WHAT REALLY GETS,
[01:25:01]
UH, AGENCIES TO PRE-FUND OPEP JUST TO HELP MANAGE THOSE, THOSE COSTS.ANY QUESTIONS SO FAR ON, ON SOME OF THE TECHNICAL STUFF? WELL, THIS IS GREAT.
UM, UH, A LITTLE BIT MORE BACKGROUND INFORMATION ON YOUR PLAN.
JUST A, AN IDEA IN THE LOWER LEFT THERE ABOUT THE NUMBER OF ACTIVE EMPLOYEES AND ALSO RETIRED MEMBERS WHO ARE RECEIVING BENEFITS.
SO THIS IS A, IS A HEALTHY SIZED PLAN, UH, THAT IS REALLY PROVIDING A VALUABLE BENEFIT TO RETIREES, A BREAKDOWN OF THE, THE LIABILITIES.
AND YOU'LL SEE THE, THE LIABILITY AMOUNT IS CALCULATED IS ABOUT $70 MILLION OR SO, AND APPROXIMATELY TWO THIRDS OF THAT IS FOR RETIREES.
AND THEN THE OTHER THIRD IS RETIRE OR ACTIVE EMPLOYEES, UH, A LIABILITY FOR THEIR FUTURE BENEFIT PROMISES.
AND THEN THE LAST TOPIC I I, I WON'T GET INTO TOO MUCH, BUT THERE'S, THERE'S TWO COMPONENTS TO MEASURING OPE LIABILITIES.
ONE WE CALL THE EXPLICIT SUBSIDY, WHICH IS REALLY WHAT IS THE AMOUNT THAT WE'RE PROVIDING TO RETIREES, WHAT'S BEEN PROMISED TO THEM.
AND THEN OUR ACTUARIAL STANDARDS AND ALSO GOVERNMENT ACCOUNT ACCOUNTING STANDARDS REQUIRE MEASUREMENT OF WHAT'S KNOWN AS AN IMPLICIT SUBSIDY LIABILITY.
AND, AND THIS ONE'S A A LOT HARDER TO PIN DOWN.
IT'S, IT'S ESSENTIALLY THE ADDITIONAL COST TO THE HEALTH PLAN BY ALLOWING RETIREES TO REMAIN ON THE PLAN, MIXED IN WITH YOUR ACTIVE MEMBERS, BECAUSE THE RETIREES GENERALLY HAVE A HIGHER COST LEVEL, WHICH DRIVES UP THE OVERALL PREMIUM COST.
SO I, I ALWAYS LIKE TO THINK ABOUT IT WHEN, WHEN I ASK BY FINANCE FOLKS, WELL, HOW, HOW DO WE ACTUALLY SEE THIS COST? I SAY, WELL, WHAT IF YOU TOOK ALL THE RETIREES OUTTA YOUR PLAN? WHAT WOULD HAPPEN TO THE HEALTH PREMIUMS? GENERALLY, THEY WOULD GO DOWN, SO YOUR COST FOR YOUR ACTIVE EMPLOYEES WOULD GO DOWN AS WELL.
SO IT, IT'S KIND OF THIS HIDDEN SUBSIDY THAT'S IN THERE.
UH, IT, IT'S REALLY HARD TO FOLLOW THE DOLLARS, BUT IT MUST BE MEASURED, UH, FOR FINANCIAL REPORTING PURPOSES.
FORTUNATELY FOR THE DISTRICT, IT'S RELATIVELY SMALL PIECE OF IT.
UM, THERE'S NOT NECESSARILY AN ADVANTAGE TO FUNDING IT OTHER THAN IT, IT MAKES YOUR FUNDED STATUS LOOK BETTER IN THE PLAN.
UH, BUT WE DO ENCOURAGE, UH, AGENCIES THAT IF YOU ARE PUTTING CONTRIBUTIONS IN THE TRUST THAT ARE BASED ON THIS IMPLICIT, YOU BETTER ASK FOR THE REIMBURSEMENTS ALSO.
AND, AND SOMETIMES THAT DOES NOT HAPPEN.
WITH THAT, I'M GONNA TURN OVER MY COLLEAGUE EMILY, TO TALK ABOUT THE FINANCE UPDATES.
UH, SO NEXT I'M GONNA TALK ABOUT SOME OF THE ACCOUNTING THAT WENT INTO THE RECENT REPORT THAT WE COMPLETED FOR FISCAL YEAR AND 2023.
SO THIS CHART MIGHT LOOK A LITTLE FAMILIAR.
UH, IT'S VERY SIMILAR TO WHAT WE SAW A COUPLE SLIDES AGO, BUT IT SHOWS THAT BREAKDOWN BETWEEN THE EXPLICIT AND THE IMPLICIT THAT MARK JUST TOUCHED ON.
AND, YOU KNOW, HE MENTIONED THAT IT CAN BE A LITTLE HARD TO MEASURE THE LIABILITY FOR OPEP BECAUSE HEALTHCARE COSTS TEND TO BE A LITTLE BIT UNPREDICTABLE AND VOLATILE.
UH, SO WE HAVE THE, WE HAVE THE FUN JOB OF BEING ABLE TO, UH, PROJECT THOSE COSTS.
BUT, UM, THERE WAS A COUPLE THINGS THAT ARE UNIQUE TO THE DISTRICT THAT DOES HELP WITH THE PROJECTIONS.
AND ONE IS THAT, UH, THEY HAVE THEIR HEALTH PLANS THROUGH CALPERS MEDICAL, AND CALPERS HAS MADE A LOT OF CHANGES TO TRY TO HELP STABILIZE PRE PREMIUMS GOING FORWARD.
AND SO THAT IS HELPING TO STABILIZE THE OPE LIABILITIES.
AND ALSO THE PLAN IS CLOSED TO, UM, BACK IN 20 20 12, WHILE EMPLOYEES ARE ABLE TO STAY ON THE PLAN, UH, THEY'RE NOT PROMISED AS LARGE OF A BENEFIT AS FOLKS WHO WERE, UM, EMPLOYED PRIOR TO 20 20 12.
SO THAT IS HELPING TO, UM, ABLE TO PROJECT THOSE COSTS IN THE FUTURE.
AND HERE WE ARE MOVING ON TO THE INVESTMENT RETURNS FOR THE OPE TRUST.
UM, AS DEB MENTIONED EARLIER, THE DISTRICT IS INVESTED IN SERT AND THEY'RE INVESTED IN THE STRATEGY ONE, WHICH IS VERY, UH, HEAVILY EQUITY BASED.
AND SO OUR LIABILITIES ASSUME A ANNUAL 6.25% INVESTMENT RETURN, AND YOU'LL NOTICE IN THIS CHART THAT THERE'S A HORIZONTAL LINE RUNNING THROUGH IT.
UM, AND THAT'S WHERE IT SHOWS THE, YOU KNOW, EXPECTED RETURN, THAT DOTTED LINE.
AND THEN YOU CAN SEE THE GREEN BARS ARE THE RETURNS THAT ARE IN RELATION TO THE EXPECTED RETURN.
UM, THERE HAS BEEN A LOT OF MARK, THERE WAS A LOT OF MARKET VOLATILITY IN 2021 AND 2022, UH, BUT YOU CAN SEE THAT ON A SMOOTH BASIS OVER FIVE YEARS, UH, IT HAS BEEN PRETTY CLOSE TO EXPECTED.
UM, AND SHOULD BE NOTED THAT FOR FUNDING PURPOSES, UH, WE USE A SMOOTH VALUE OVER A FIVE YEAR BASIS.
SO WHEN WE, UM, LOOK AT THE ASSETS, WE SMOOTH INVESTMENT GAINS AND LOSSES OVER FIVE
[01:30:01]
YEARS TO HELP WITH THAT INHERENT VOLATILITY THAT HAPPENS ANNUALLY, UM, SO THAT WE'RE NOT, UM, OVERREACTING TO CHANGES IN THE MARKET IN YOUR CONTRIBUTION RATES.AND HERE YOU CAN SEE A PICTURE THAT SHOWS THE PROGRESSION OF THE DISTRICT'S FUNDED STATUS, UH, GOING BACK TO ABOUT 10 YEARS AGO IN 2013, YOU CAN SEE THAT THE DISTRICT WAS AROUND, UM, 50% FUNDED.
AND, UM, AS DEB MENTIONED, NO, THEY'RE NOW IN A SURPLUS SITUATION.
AND THE, THERE'S A FEW THINGS THAT HAVE ATTRIBUTED TO THAT.
UM, YOU'LL NOTICE THAT THE LIABILITY LINE HAS REALLY FLATTENED OUT, UH, STARTING SOMEWHERE AROUND 2018 AND 2019.
AND A LOT OF THAT WAS DUE TO THE DISTRICT'S, UH, MOVING THEIR CAL THEIR MEDICAL PLANS TO HELPERS THAT REALLY HELPED STABILIZE THE COSTS.
UM, AS YOU CAN SEE, PRIOR TO THAT, THEY WERE KIND OF STEADILY INCREASING AND, UM, THE DISTRICT MADE THAT DECISION, UH, TO HELP STABILIZE THEIR LIABILITIES.
AND THEN ALSO, UM, THE CONTINUED FUNDING THAT THE DISTRICT HAS DONE, YOU'VE MADE A REALLY GOOD, UM, JOB OF CONTINUING THOSE CONTRIBUTIONS ANNUALLY.
UM, AND THAT COUPLED WITH SOME GOOD INVESTMENT RETURNS HAS REALLY HELPED, UH, GROW THE FUNDED STATUS.
UM, MOVING ON, I'M GONNA JUST TOUCH BRIEFLY ON A COUPLE FUNDING UPDATES UNLESS ANYBODY HAS ANY QUESTIONS ON THE ACCOUNTING STUFF THAT WE JUST DISCUSSED.
I'M NOT FAMILIAR WITH WHEN WE, UM, WHEN THE PARK DISTRICT CHANGED TO CALPERS, WHAT, WHAT DID WE HAVE, WHEN DID, WAS THAT CHANGE? AND WHEN DID, WHAT WOULD, WHEN WAS THAT CHANGE TO CALPERS AND WHAT DID WE HAVE BEFORE? I AM GONNA HAVE TO GET SOME SPECIFICS FOR YOU, BUT I BELIEVE IT HAPPENED IN 2012.
IT WAS PART OF THE NEGOTIATIONS, UH, THAT WERE GOING ON AT THAT TIME.
DIRECTOR ROSARIO IS NODDING HIS HEAD AND, UM, YEAH, BUT I DON'T KNOW THE SPECIFICS OF WHAT, OF WHAT THE PLAN WAS PR PREVIOUSLY.
BUT THAT CHANGE DOES MAKE A DIFFERENCE.
AND THEN I GUESS A BIGGER QUESTION, YOU KNOW, WHEN YOU'RE LOOKING AT, I THINK THE PREVIOUS CHART THAT WAS JUST UP THERE, THIS ONE, SO AS IT'S STARTING TO SMOOTH OUT, YOU KNOW, IF WE, SO WITH THIS CHART COMPARED TO THE OTHER ONE WHERE YOU SHOWED 2044 WHERE WE'LL, WE'RE GONNA KIND OF BE AT THAT PEAK MM-HMM.
SO WHILE THAT'S PRETTY FAR INTO THE FUTURE, UM, DO WE THINK THEN WITH THIS TRUST, IT MAY NOT BE THE TYPE OF SITUATION WHERE WE'RE GONNA HAVE TO BE CONTRIBUTING.
I, I THINK I SEE 2023 WE CONTRIBUTED, THE PARK DISTRICT CONTRIBUTED 2.4 MILLION, WILL THAT START TO POTENTIALLY LOWER, UM, YOU KNOW, AS WE MOVE FORWARD IN TIME BECAUSE OF SOME OF THE CHANGES THAT WE'VE MADE MORE RECENTLY WITH THE MOVE TO CALPERS, FOR EXAMPLE? YEAH, GOOD QUESTIONS.
THIS CHART DOES TOUCH ON ALL THE FUTURE PROJECTED BENEFIT PAYMENTS, UH, THAT WE'RE, UH, LOOKING AT FOR THE DISTRICT.
AND THEN WHEN YOU LOOK AT THIS, UM, THE CHART HERE WHERE IT SHOWS THE TOTAL LIABILITY, WHICH MARK MENTIONED WAS AROUND 70 MILLION, THAT'S THE PRESENT VALUE OF ALL THOSE FUTURE BENEFITS.
SO THOSE ARE, THOSE ARE, THOSE ARE CONNECTED.
UM, AND, AND SO IT WILL, UM, DECREASE OVER TIME.
AND HE ALSO MENTIONED THAT IT'S, YOU KNOW, A CLOSED GROUP THAT CHARTS SO AS, EVEN THOUGH THE PLAN IS CLOSED TO 2012 HIRES, THE, UM, THERE IS STILL A SMALL PROMISED LIABILITY TO THEM.
UM, AND SO AS THE PLAN KEEPS HAVING, UH, FUTURE ACTIVE EMPLOYEES, THERE WILL STILL BE SOME FUTURE LIABILITIES THAT WILL BE ADDED.
UM, THAT, THAT CHART THAT SHOWS THE DROP IS FOR THE CLOSED PLAN RIGHT NOW.
UM, AND THEN TO TOUCH ON YOUR QUESTION ABOUT THE, UM, FUNDING, WHICH WE'RE GONNA DISCUSS NEXT, YES, THE, UH, DISTRICT'S CONTRIBUTIONS ARE DECREASING BECAUSE OF THE SURPLUS STATUS.
UH, THE DISTRICT UPDATES THEIR FUNDING EVERY TWO YEARS.
AND SO SOMETIMES THERE CAN BE A LITTLE BIT OF A DELAY, UH, IN THE CONTRIBUTIONS, UH, OF WHAT, WHAT HAPPENS BASED ON WHEN THE LIABILITIES CHANGE.
AND SO WE'LL SEE THAT ON THE NEXT COUPLE SLIDES.
SO, UH, THIS CHART KIND OF ANSWERS YOUR QUESTION A LITTLE BIT.
UM, SO YOU CAN SEE THAT THE, UH, DIRECT RELATE RELATED TO HOW THE FUNDED STATUS HAS BEEN INCREASING.
YOU CAN SEE THAT THE CONTRIBUTIONS HAVE SUBSTANTIALLY DECREASED AS WELL.
UH, THE BARS SHOW THE DOLLAR CONTRIBUTION AMOUNTS THAT THE DISTRICT HAS BEEN, UH, THIS IS WHAT WE RECOMMENDED THE CONTRIBUTIONS.
THEY'RE NOT THE EXACT DOLLAR AMOUNTS BECAUSE THE DISTRICT DOES EVERYTHING ON A PERCENTAGE OF PAYROLL.
SO THINGS DO VARY A LITTLE BIT.
BUT THESE ARE THE CONTRIBUTIONS THAT HAVE BEEN RECOMMENDED
[01:35:01]
OVER THE YEARS.AND YOU CAN SEE THERE WAS A HUGE DROP IN 2023 BASED ON THE, UH, SURPLUS STATUS THAT THE, THE DISTRICT IS NOW IN.
AND, UH, WE HAVEN'T RELEASED THE FUNDING REPORT FOR THE NEXT COUPLE YEARS, BUT WE'VE DONE SOME PRELIMINARY ANALYSIS AND WE'RE EXPECTING ANOTHER DROP IN 2025 AND 2026, SOMEWHERE AROUND THE 700 TO $800,000 RANGE, UM, ON A PERCENT OF PAYROLL.
I, AND THEN, UM, IF THERE'S NO OTHER QUESTIONS ON THIS, I'M GONNA TURN IT BACK OVER TO MARK.
I'M JUST GONNA ADD ONE OTHER COMMENT ON, ON THIS CHART THAT, YOU KNOW, REALLY COMMEND THE DISTRICT AND THEN ALSO ON THE CHART, A COUPLE, UH, SLIDES BACK WITH THE, THE CHANGE IN FUNDED STATUS TO REALLY SEE THAT THAT CLOSURE OF THE GAP FROM GOING FOR UNDER 50% FUNDED NOW 10 YEARS AGO TO HAVE BEEN A SURPLUS POSITION, THAT THAT REALLY, YOU KNOW, SHOWS THE DEDICATION AND THE CONSISTENCY WHEN WE TALK WITH PUBLIC AGENCIES ABOUT THE KEY TO, TO FUNDING PENSION AND OPEP IT, IT'S ALL ABOUT CONSISTENCY.
YOU HAVE TO PUT IN THOSE ACTUARIAL CONTRIBUTIONS.
SO REALLY WANT TO COMMEND THE DISTRICT FOR DOING THAT OVER THE PAST DECADE PLUS, UH, TO REALLY PUT YOURSELF IN THIS GOOD FINANCIAL POSITION FOR YOUR OPEP PLAN.
AND NOW IT'S MANIFESTED IN LOWER CONTRIBUTION RATES.
YOU KNOW, IT, I REALIZE IT CAN BE DIFFICULT TO PUT A MILLIONS OF DOLLARS INTO THESE PLANS, UH, BUT REALLY THE SOONER YOU GET IT IN, THE MORE YOU CAN HARNESS THE INVESTMENT RETURN.
SO THAT LONG TERM, YOUR CONTRIBUTION RATES CAN BE LOWER.
I MEAN, THAT, THAT'S THE WHOLE GOAL OF PENSION AND OPE FUNDING IS TO, TO FULLY FUND THAT OLD LIABILITY.
SO YOU'RE JUST FUNDING THE NEW STUFF AS IT GROWS, WHICH IS GENERALLY THE MUCH LOWER LEVEL.
SO THE, THE LAST SLIDE REALLY IS JUST, UH, ON THE FUNDING SIDE.
I THINK ONE IMPROVEMENT WE, WE'VE TALKED WITH FINANCE STAFF ABOUT IS, UH, ADOPTING A FORMAL OPE POLICY.
NOW, THE, WE DO THESE REPORTS EVERY COUPLE YEARS, AND THEY'RE BASED ON, I WOULD CALL INFORMAL POLICIES OVER THE YEARS OF, YOU KNOW, HOW ARE WE GONNA, UH, AMORTIZE OR PAY DOWN UNFUNDED LIABILITIES, THINGS LIKE THAT.
UM, WE'VE ALSO SPOKEN WITH STAFF ABOUT, YOU KNOW, MAKING SURE TO GET REIMBURSEMENTS FROM THE TRUST, UH, FOR THE ANNUAL BENEFIT PAYMENTS.
UH, BUT IT IS A BEST PRACTICE TO HAVE A FUNDING POLICY DOCUMENT.
SO, UH, WE'VE HAD SOME DISCUSSIONS ABOUT STARTING THAT PROCESS.
UH, IT'S, IT'S FAIRLY STRAIGHTFORWARD JUST TO DRAFT A DOCUMENT THAT THEN WOULD ENCAPSULATE ALL THESE ITEMS, YOU KNOW, WHAT ARE, WHAT ARE OBJECTIVES, FULLY FUND THE LIABILITIES AS THEY ACCRUE, THINGS LIKE THAT.
UH, IDENTIFYING IF THERE EVER IS AN UNFUNDED LIABILITY, HOW LONG ARE WE GONNA TARGET FOR PAYING DOWN THOSE COSTS? IS IT GONNA BE 10 YEARS, 20 YEARS, WHATEVER IT MIGHT BE.
UH, IF THERE'S A SURPLUS POSITION, HOW DOES THAT AFFECT OUR CONTRIBUTIONS? IF WE GET TO A CERTAIN POINT IN TIME, IT MIGHT BE CERTAINLY REASONABLE IF YOU'RE 125% FUNDED TO SAY, WE'RE GONNA TURN OFF CONTRIBUTIONS FOR A WHILE, BUT THEN IF IT EVER DROPS BELOW A CERTAIN THRESHOLD, WE WANNA MAKE SURE WE AT LEAST KEEP PUTTING A NOMINAL AMOUNT IN THE TRUST AND THEN, UH, DOCUMENTING THE REIMBURSEMENT POLICY SO THAT THERE'S A, A CLEAR, UH, STRUCTURE FOR STAFF TO FOLLOW IN THE FUTURE.
YOU KNOW, WHETHER THERE'S JUST CHANGE IN STAFF OR JUST TO HAVE A CONTINUITY OF WHAT OUR POLICIES FOR, UH, FUNDING THE OPEP PLAN.
WITH THAT, THAT'S, THAT'S THE END OF OUR PRESENTATION AND PREPARED REMARKS, BUT GLAD TO ANSWER ANY OTHER QUESTIONS, UH, ABOUT THE OPEP? YEAH.
ANY, ANY QUESTIONS FROM THE, UH, I MIGHT HAVE JUST ONE, BUT IT DOESN'T HAVE TO DO WITH THE, UM, INVESTMENT, BUT I JUST HAD A QUESTION ABOUT P AND A.
UM, DO WE HAVE A PROCESS WHERE, UM, WE RE REVIEW HOW THEY'RE DOING? UH, ARE WE TRACKING COMPLAINTS VERSUS, YOU KNOW, RESOLUTIONS? UM, IS THERE, IS THERE, DO WE HAVE ANY KIND OF REVIEW OF THEM OR DO WE WAIT TILL THEY, TILL THEY END THEIR CONTRACT? YEAH, SO P AND A GROUP IS THE, UH, FIRM THAT WE'RE CONTRACTING WITH TO MANAGE THE PAYMENTS TO THE RETIREES THAT ARE RELATED TO OP, THAT ARE FOR OPEP.
UM, THAT CONTRACT IS MANAGED BY HR, SO I AM NOT AN EXPERT ON IT.
UM, BUT I CAN CHECK INTO IT AND, AND FIND OUT FOR YOU.
IT'S JUST, UM, UH, THANK YOU VERY MUCH.
YOU'VE, YOU'RE TAKING, YOU, YOU'RE TAKING VERY GOOD CARE OF, OF FUNDS THAT WE, THAT WE'RE ALLOTTING, SO THANK YOU.
YEAH, IT'S ALWAYS NICE TO BE ABLE TO COME TO THESE MEETINGS WHEN, UH, THE OPEP PLAN'S IN A GREAT FINANCIAL POSITION.
SO THANK YOU AGAIN TO THE DISTRICT FOR, FOR REALLY BEING DEDICATED ABOUT, ABOUT FUNDING THESE BENEFITS.
YEAH, I THINK THE TERM FISCAL DISCIPLINE COMES TO MIND HERE WHEN WE GET A REPORT LIKE THIS.
[01:40:01]
QUESTION? I, I GUESS, YEAH, ONE QUESTION, BUT JUST A COMMENT.I THINK THIS REPORT WAS GREAT, SO THANK YOU SO MUCH FOR JOINING US TODAY AND SHARING THIS.
I THINK IT WAS REALLY WELL, UM, ORGANIZED.
I GUESS MY QUESTION IS, UH, THE LAST SLIDE HERE ABOUT CONSIDERING THE ADOPTION, SO THIS WOULD BE A FUTURE AGENDA ITEM, IT SOUNDS LIKE, 'CAUSE TODAY THIS WAS JUST AN INFORMATIONAL PRESENTATION.
SO DO, ARE YOU LOOKING FOR SOME DIRECTION, IF THIS IS SOMETHING THAT WE'RE INTERESTED IN PURSUING, BECAUSE I, I WOULD SAY, YEAH, I THINK THIS WOULD BE SOMETHING GOOD TO BRING, UH, FORWARD IN A FU AT A FUTURE MEETING.
YOU WANNA JUST STAY LATE AND WE'LL DO IT RIGHT NOW.
UM, YEAH, WE HAVE BEEN TALKING ABOUT DOING AN OPEP FUNDING POLICY, AND IF YOU WANNA GIVE US THAT FORMAL DIRECTION, THAT WOULD BE, THAT WOULD BE GREAT.
KELLY, YOU HAVE THREE MINUTES? YEAH.
OEP FUNDING, UH, PERCENTAGE WHERE THE, UM, PEOPLE JUST PUT OUT A NUMBER AND SAY, OH, WE NEED TO BE AT WHATEVER NUMBER, A HUNDRED PERCENT WHATEVER, TO, UH, TO, TO MEET OUR, OUR TO MEET STANDARDS.
UM, AS, AS YOU KIND OF HEARD FROM THE CONSULTANTS, THE, UH, THE PARK DISTRICT HAS, UH, VASTLY EXCEEDED, UM, THE TYPICAL INDUSTRY STANDARD AMONG GOVERNMENT AGENCIES FOR OPE FUNDING PERCENTAGE.
UM, BECAUSE MAINLY BECAUSE THE PARK DISTRICT DOESN'T LOOK, DOESN'T BENCHMARK ITSELF AGAINST OTHER GOVERNMENT, GOVERNMENT AGENCIES.
SO, UM, LET ME GIVE YOU A LITTLE HINT.
IF YOU DID INDUSTRY, UH, SURVEYS AND REPORTS, UM, IF YOU LOOKED AT LIKE THE NATIONAL CONFERENCE ON PUBLIC EMPLOYEE RETIREMENT SYSTEMS AND C PS AND THE GOVERNMENT FINANCE OFFICERS ASSOCIATION, GFOA, UM, TO LOOK AT OTHER, UH, AGENCIES, OPED PRACTICES, PRACTICES, UH, YOU MIGHT FIND AVERAGES OR MEDIANS FOR, UH, FUNDING PERCENTAGES OR, YOU KNOW, VARIOUS TYPES OF AGENCIES AND REGIONS, UM, THAT YOU, THAT YOU'D BE ABLE TO USE NOW.
UH, I'LL JUST THROW OUT A NUMBER HERE.
UM, I'VE HEARD A NUMBER OF AROUND, UM, UH, AMONG HUNDREDS OF GOVERNMENT AGENCIES OF AROUND, UH, 75%.
SO THEY'RE FUNDING LIKE 75%, UM, YOU KNOW, OF THE LEVEL THAT THEY SHOULD, THAT THEY'RE SUPPOSED TO BE FUNDING.
AND THAT'S A TYPICAL UNDERPERFORMANCE AMONG YOUR GOVERNMENT AGENCIES.
SO TO BE AT 111%, OR AT A HUNDRED PERCENT IS REALLY TREMENDOUSLY, UH, OUTSTRIPPING THE, UH, THE INDUSTRY STANDARDS OR GOVERNMENT AGENTS STANDARD FOR GOVERNMENT AGENCIES.
AND, YOU KNOW, THIS IS, UH, THIS IS EXTRAORDINARY PERFORMANCE.
AND YOU SHOULDN'T BE JUST SAYING, OH YEAH, WE'RE JUST DOING, DOING WHAT WE SHOULD BE DOING 'CAUSE NOBODY ELSE DOES WHAT THEY'RE, WHAT THEY SHOULD BE DOING THIS, UH, GO, THIS, UH, AGENCY IS, UM, IS REALLY EXEMPLARY IN THE OPEP BUSINESS.
UM, SO I THINK THAT'S, UH, THAT CONCLUDES THAT ITEM OR SO, SO YEAH, THAT, THOSE, THOSE WERE, THOSE WERE BOTH, UH, FIVE A AND B.
WERE BOTH INFORMATIONAL, SO NO VOTE REQUIRED FOR THAT.
[Announcements]
UM, DO WE HAVE ANY ANNOUNCEMENTS? NO.YES, I DID WANNA MAKE AN ANNOUNCEMENT.
WE HAVE A NEW STAFF PERSON HERE TODAY.
UH, KATIE DIGNAN, SHE'S STANDING UP IN THE BACK.
FOR THOSE OF YOU WHO ARE HERE IN PERSON, UH, SHE'S OUR NEW ASSISTANT FINANCE OFFICER.
UM, YEAH, SO KATIE'S, KATIE'S BEEN JUMPING RIGHT IN.
WE'RE VERY EXCITED TO HAVE HER.
IF YOU WANNA SAY A FEW WORDS, INTRODUCTION, THAT'D BE AWESOME.
HI, UH, GOOD AFTERNOON DIRECTORS.
UM, EXCITED TO JOIN AND, UM, PICKING UP AS QUICKLY AS I CAN, LIKE, UH, AND DEB'S FIRST DAY WAS ALSO ON MONDAY IN HER NEW ROLE, SO FIGURING EVERYTHING OUT AS WE GO ALONG, BUT LOOK FORWARD TO WORKING WITH YOU ALL.
WHERE DO YOU COME FROM? UM, SO, UH, GOVERNMENT EXPERIENCE IS CITY OF OAKLAND.
I WAS THE ASSISTANT DIRECTOR FOR PLANNING AND BUILDING, AND THEN I SPENT, UM, SEVEN AND A HALF YEARS IN NEW ORLEANS HELPING WITH THE HURRICANE KATRINA, UH, RECOVERY AND RESILIENCE PROGRAM.
SO TRYING TO BRING SOME OF THAT KNOWLEDGE OVER HERE TO HELP WITH OUR FEMA, UH, PROGRAMS AND OUR GRANTS AND, UM, AND THINGS LIKE THAT.
AND YOU CAN'T HAVE TOO MUCH FEMA HELP
SO OUR, UM, OUR LAST AGENDA ITEM IS
[01:45:01]
ADJOURNMENT.I WAS GONNA ASK, UM, IF WE COULD ADJOURN IN HONOR OF, UM, IN MEMORY OF, UH, BEVERLY LANE'S SON PASSED.
WELL THEN WE, WE SHALL, UM, ADJOURN THIS MEETING IN, UM, MEMORY OF, UH, MEMBER EMERITA, BEVERLY LANE'S SON DOUGLAS, THANK YOU.