Jan 08, 2025 Finance Committee Meeting

[00:00:05]

OKAY. WE'RE GOOD.

ALL RIGHT. THANK YOU VERY MUCH.

GOOD MORNING, ONE AND ALL.

WELCOME TO THE FINANCE COMMITTEE MEETING OF THE EAST BAY REGIONAL PARK DISTRICT ON WEDNESDAY, JANUARY 8TH.

WE'RE BEGINNING A LITTLE LATE, AND I APOLOGIZE FOR THAT.

I WOULD REQUEST AT THIS POINT THAT OUR RECORDING CLERK, DEBORAH FULLER, CALLED THE ROLL CALL FOR THE COMMITTEE.

[Roll Call]

STAFF IS PROVIDING LIVE AUDIO AND VIDEO STREAMING.

MEMBERS OF THE PUBLIC WISHING TO MAKE PUBLIC COMMENT MAY DO SO BY SUBMITTING AN EMAIL, LEAVING A VOICEMAIL, OR JOINING LIVE VIA ZOOM WITH THE LINK PROVIDED ON THE AGENDA LOCATED ON THE PARK DISTRICT WEBSITE.

IF THERE ARE NO QUESTIONS ABOUT THE MEETING PROCEDURES, WE WILL BEGIN.

THANK YOU DEBORAH. WE WILL THEN MOVE TO ITEM TWO APPROVAL OF MINUTES.

[Approval of Minutes]

IS THERE A MOTION TO APPROVE? MOVE. APPROVAL. SECOND.

THE MOTION WAS MOVED AND SECONDED.

ALL IN FAVOR, SAY AYE.

AYE. NEXT ITEM B, APPROVAL OF THE BOARD.

FINANCE COMMITTEE MINUTES OF OCTOBER 23RD, 2024 AND THERE'S A SLIGHT REVISION TO THE MINUTES IN WHICH MEADOW D'ARCY IS BEING ACKNOWLEDGED AS A MEMBER OF OUR AUDIENCE FOR THAT MEETING, RATHER THAN STAFF.

EASY TO EASY MISTAKE TO MAKE.

AND WITH THAT ADJUSTMENT TO THE MINUTES, IS THERE A MOTION TO APPROVE THE MINUTES FOR OCTOBER 23RD, 2024? MOVE. APPROVAL. SECOND.

IT'S BEEN MOVED AND SECONDED.

ALL IN FAVOR, SAY AYE.

AYE AND THOSE MINUTES HAVE BEEN APPROVED.

[Public Comments on Items Not on the Agenda]

NOT ON OUR AGENDA THIS MORNING.

ARE THERE ANY REQUESTS? THERE ARE NO PUBLIC COMMENTS.

OH. HOLD ON. WE DO.

IN OUR ZOOM ROOM? IN OUR ZOOM ROOM.

ALL RIGHT, WELL, LET'S PROCEED.

MISS SELF. IF YOU COULD PLEASE ACCEPT.

PANELIST. UNMUTE AND SHOW.

EXCUSE ME, YOU HAVE THREE MINUTES.

GOOD MORNING. THANKS SO MUCH.

HELLO, BOARD MEMBERS.

MY NAME IS DEB SELF.

I'M AN OAKLAND RESIDENT AND A FREQUENT USER OF MANY OF THE EAST BAY REGIONAL PARK DISTRICTS.

I ALSO AS LONGTIME EXECUTIVE DIRECTOR OF SAN FRANCISCO BAYKEEPER PARTNERED EXTENSIVELY WITH PARKS STAFF ON RESPONSE TO THE COSCO BUSAN AND OTHER OIL SPILLS.

SO I HAVE A FAMILIARITY WITH EMERGENCY PLANNING AND PREPAREDNESS AND RESPONSE.

AND I'M I WANTED TO JOIN AND ISSUE A PUBLIC COMMENT AND A QUESTION HERE TO THE FINANCE COMMITTEE ABOUT THE IMPACTS OF ANY POSSIBLE IMPACTS OF THE CITY OF OAKLAND'S CLOSURE OF FIRE STATIONS NUMBER 25 AND NUMBER 28, WHICH ARE THE INTERFACE BETWEEN THE WILDLANDS OF EAST BAY REGIONAL PARK, REINHART REGIONAL AND CHABOT BETWEEN THE PARKS AND OAKLAND.

AND I QUICKLY PERUSED THE 2025 PROPOSED BUDGET.

I'M NOT SURE IF THAT'S THE ONE THAT WAS APPROVED AND ADOPTED YET BY THE EAST BAY REGIONAL PARK DISTRICT, BUT I NOTED THAT THERE IS A PROPOSED AN INCREASE OF, I BELIEVE, FIVE FTES AND AN INCREASE OF $600,000 ANTICIPATED FROM PUBLIC AGENCIES. I DON'T KNOW WHETHER THAT WAS FROM OAKLAND, BUT GIVEN THE FINANCE SITUATION AND A PLANNED REDUCTION OF 30% OF FIRE DEPARTMENT CAPACITY, I WONDERED WHAT IMPACT THAT COULD HAVE EAST BAY REGIONAL PARK BUDGET AND ITS OPERATIONS NOT PREVENTION AS MUCH AS IN RESPONSE TIMES.

THANKS VERY MUCH FOR WHAT YOU DO.

[00:05:02]

THANK YOU. ALL RIGHT.

THANK YOU. DEB, I'M FAIRLY CONFIDENT WE WOULDN'T HAVE A REALLY GOOD ANSWER FOR YOU OFF THE TOP OF OUR HEADS, BUT IF SOMEONE CAN NOTE THAT DEB HAS THAT QUESTION AND SOMEONE CAN GET BACK TO YOU.

THANK YOU.

IS THAT OKAY, DEBORAH? THAT'S FINE. THANKS VERY MUCH.

THANK YOU. WE WILL MOVE TO ACTION ITEMS AND THE FIRST IS THE RECOMMENDATION TO THE BOARD OF DIRECTORS

[Action Items]

DEBORAH. ALL RIGHT.

GOOD MORNING, I'M DEBORAH SPAULDING, AGM.

OF FINANCE AND MANAGEMENT SERVICES AND I WANT TO THANK OUR FINANCE COMMITTEE MEMBERS FOR JOINING THIS COMMITTEE.

I KNOW WE GIVE YOU A LOT OF MATERIAL AND IT'S VERY TECHNICAL.

SO I APPRECIATE THAT YOU GUYS ARE TACKLING THIS AND SO NOW I'LL JUMP INTO THE REPORT.

SO AS USUAL I START OUT BY GIVING A REVIEW OF THE PARK DISTRICT'S ENTIRE INVESTMENT PORTFOLIO.

AND THEN I WILL TURN IT OVER TO SOMEONE FROM PFM.

TODAY WE HAVE JUSTIN ROSELLO, WHO'S JOINING US VIRTUALLY, AND HE'S GOING TO DIVE INTO PFM INVESTMENTS AND GIVE YOU SOME MORE MARKET COMMENTARY FROM SEPTEMBER 30TH, AS WELL AS A LITTLE BIT ABOUT THE CURRENT MARKET ENVIRONMENT.

SO I'M GOING TO START OUT BY SHARING MY PRESENTATION.

GIVE ME A SECOND HERE.

YEAH. BACK TO THE BEGINNING.

ALRIGHT AND SO I'M WALKING YOU THROUGH THE TABLE THAT'S ON PAGE 14 OF YOUR PACKET AND SO THIS IS LOOKING AT ALL OF THE PARK DISTRICT INVESTMENTS.

THE MAJORITY OF OUR INVESTMENTS ARE MANAGED BY PFM BUT NOT ALL OF THEM.

SO THIS IS A WAY TO LOOK AT EVERYTHING.

SO STARTING AT THE TOP OF THAT PAGE WE HAVE ALL OF OUR LIQUID INVESTMENTS.

SO THOSE ARE INVESTMENTS THAT ARE EITHER ALREADY CASH OR EASILY CONVERTIBLE TO CASH AND JUST A COUPLE OF THINGS TO BRING TO YOUR ATTENTION HERE.

ONE IS AS YOU KNOW, WE RECEIVE THE MAJORITY OF OUR REVENUES FROM PROPERTY TAXES.

AND THOSE ARE RECEIVED IN APRIL IN DECEMBER.

SO DURING QUARTER THREE, WE'RE DRAWING DOWN ON OUR CASH BALANCES.

SO YOU CAN SEE THAT CHANGE.

THE LIQUIDITY PORTFOLIO IS DROPPING BY 18.7 MILLION BETWEEN JUNE 30TH AND SEPTEMBER 30TH.

AND WE DID RECEIVE OUR NEXT PROPERTY TAX INSTALLMENT IN DECEMBER.

SO THOSE CASH BALANCES HAVE NOW GONE UP AGAIN.

MOVING A LITTLE BIT FURTHER DOWN ON THE PAGE.

WE'RE NOW LOOKING AT INVESTED SECURITIES.

SO THESE ARE SHORT MID AND LONG TERM SECURITIES WHERE WHERE PFM IS MAKING OUR INVESTMENT DECISIONS ON OUR BEHALF.

AND SO JUSTIN IS GOING TO BE TALKING ABOUT THIS IN MORE DETAIL.

BUT JUST A FEW HIGH LEVEL OBSERVATIONS HERE.

YOU CAN SEE THAT WE DECREASED OUR HOLDINGS IN TREASURY BONDS AND INCREASED INVESTMENTS IN FEDERAL AGENCIES AND IN CORPORATE BONDS AND NOTES AND JUSTIN WILL TALK MORE ABOUT HOW THOSE DECISIONS WERE MADE.

AND THEN LASTLY, MOVING TO THE BOTTOM OF THAT SAME PAGE WHERE WE TALK ABOUT OUR FUNDS THAT ARE HELD IN TRUST.

SO THESE ARE OUR PROJECT FUNDS AND OUR BOND DEBT SERVICE FUNDS THAT ARE HELD BY TRUSTEES.

AND SO YOU CAN SEE A BIG CHANGE THAT WE RECEIVED ARE THE PROCEEDS FROM OUR PROMISSORY NOTE SALE, WHICH WAS IN THE THIRD QUARTER LAST YEAR AND SO THAT'S A NEW 39.1 MILLION.

THAT SHOWS UP UNDER SEPTEMBER 30TH AND THOSE FUNDS ARE BEING USED TO CONSTRUCT A PERALTA OAKS NORTH ACROSS THE STREET AND THEN A COUPLE OTHER CHANGES YOU'LL NOTICE.

ONE IS THAT WE ARE CONTINUING ON ALL OF OUR MEASURE WW PROJECTS.

SO WE'RE DRAWING DOWN AS WE DO THOSE PROJECTS, WE USE DISTRICT FUNDS TO PAY FOR THEM AND THEN WE REQUEST REIMBURSEMENT FROM OUR TRUSTEES.

SO YOU CAN SEE THE TRUSTEE FUNDS BEING DRAWN DOWN SLIGHTLY THERE AND THEN YOU CAN ALSO SEE A BIG CHANGE IN OUR MEASURE, WW DEBT SERVICE FUNDS.

SO WE HAD OUR BIG DEBT SERVICE PAYMENT IN SEPTEMBER AND SO THAT'S A BIG DROP FROM 42 MILLION DOWN TO 10.3 MILLION. SO THAT'S IT FOR MY PART OF THE PRESENTATION.

I'M AND I TURN IT OVER TO JUSTIN AND THEN WHEN HE'S DONE, WE DO WANT A RECOMMENDATION FROM THE FINANCE COMMITTEE TO THE FULL BOARD.

SO I'LL STOP SHARING AND WE'LL TURN IT OVER TO JUSTIN.

GREAT. THANKS SO MUCH, DEB.

GOOD MORNING EVERYONE. THANK YOU FOR ACCOMMODATING ME VIRTUALLY.

AS MANY OF THE COMMITTEE MEMBERS HAVE KNOW.

AND DEB SPAULDING, ALSO, I'M A FREQUENT USER OF THE EAST BAY REGIONAL PARKS, AND MY PARTNER AND I LOVE GOING TO REINHART,

[00:10:10]

AND ANYWAY, THAT SAID, I'M JUST SO EXCITED ALWAYS TO BE WITH YOU ALL, AND I APOLOGIZE THAT I CAN'T BE IN PERSON AS I'M STILL SORT OF GETTING OVER THE FLU HERE.

SO I, YOU KNOW, THANK YOU AGAIN FOR ACCOMMODATING ME VIRTUALLY.

I'LL NOW SHARE MY SCREEN TO SHOW THE PFM REPORT FOR THE INVESTMENT PERFORMANCE REVIEW FOR THE QUARTER ENDING SEPTEMBER 30TH, WHICH YOU SHOULD NOW SEE ON YOUR SCREEN, AND I'LL INVITE ANY QUESTIONS DURING THE PRESENTATION IF YOU'D LIKE, OR YOU'RE WELCOME TO RESERVE THOSE TOWARD THE END OF THE PRESENTATION. SO HERE ON THE FIRST SLIDE, YOU'LL SEE CURRENT MARKET THEMES AND THIS IS A FAMILIAR SLIDE THAT WE PRESENT AT THE BEGINNING OF EACH QUARTERLY PRESENTATION TO FRAME OUR BROAD PERSPECTIVES ON THE ECONOMY AND THE MARKETS THAT IMPACT THE DISTRICT'S PORTFOLIO.

THE US ECONOMY IS GENERALLY SUPPORTING A SOFT LANDING SCENARIO, AND WE'RE FINDING THAT DATA SHOW INFLATION COMING CLOSER TO THE FED'S VOCALIZED 2% TARGET.

IN WITH RESPECT TO LABOR MARKETS, WE SAW SOME VOLATILITY DURING THE SUMMER AND THE THIRD QUARTER, BUT NONETHELESS, WE SEE SIGNS THAT THE CONSUMER REMAINS RESILIENT WITH CONTINUED SPENDING THAT DRIVES US GROSS DOMESTIC PRODUCT GROWTH.

THAT SAID, DURING THE THIRD QUARTER, THE FED BEGAN ITS RATE EASING CYCLE WITH A 50 BASIS POINT CUT IN SEPTEMBER.

I THINK THE BIG ELEPHANT IN THE ROOM, ASIDE FROM ALL THE SORT OF MONETARY POLICY THAT I'LL BE GOING THROUGH TODAY, IS REALLY THE INCOMING PRESIDENTIAL ADMINISTRATIONS CONSIDERATIONS AND A LOT OF THOSE HAVE TO DO WITH FISCAL POLICY.

SO THOSE FOUR KEY CONSIDERATIONS ARE TAXES, TARIFFS, IMMIGRATION AND REGULATION.

FROM A HIGH LEVEL VIEW, OUR BASE CASE IS THAT THE 2020, WE EXPECT THE 2025 GDP TO SHOW STRONGER GROWTH DESPITE HIGHER INFLATION AND FEWER FED RATE CUTS.

AND WE HAVE NO EXPECTATION FOR ANY SORT OF RECESSION AT THIS TIME.

WITH RESPECT TO THE TREASURY YIELDS AND THE WAY THIS IS SHAPED OUT FOR THE PORTFOLIO, YIELDS ON MATURITIES BETWEEN THREE MONTHS AND TEN YEARS DID FALL. BUT THAT SAID, WE'RE SEEING NORMALIZATION IN THE YIELD CURVE AND JUST INVERSIONS IN THE THIRD QUARTER, AS SPREADS BETWEEN THE TWO AND TEN YEAR NOTES HAVE REACHED POSITIVE SLOPE FOR THE FIRST TIME IN SEVERAL YEARS.

DESPITE THAT, YIELD SPREADS CONTINUE TO BE TIGHT, AND AS DEB NOTED, PURCHASES WERE SOMEWHAT LIMITED TO MANY TREASURY SECURITIES THAT WE MADE FOR THE PORTFOLIO.

BUT WE ALSO FOUND SOME GOOD VALUES IN OTHER SECTORS OF FIXED INCOME THAT I'LL SPEAK TO IN A MOMENT.

SO THIS NEXT SLIDE, WE WANT TO TRY TO FRAME OUR DISCUSSION AROUND WHERE WE'VE BEEN AND WHERE WE THINK WE'RE HEADED.

SO THE FED, AS I MENTIONED IN THE THIRD QUARTER, BEGAN ITS RATE CUT EASING CYCLE WITH 50 BASIS POINTS.

SO THINK BACK TO, YOU KNOW, THINGS YOU'VE HEARD IN THE NEWS WHERE WE'VE TALKED ABOUT HOW INFLATION HAS BEEN QUITE HIGH WHEN GAS LINES WERE LONG AT COSTCO. RIGHT.

THINK BACK TO BACK TO THOSE TIMES, AND A LOT OF THAT REALLY DROVE WHAT HAS CAUSED THE FED TO INCREASE ITS RATES OVER, YOU KNOW, SEVERAL MONTHS HERE, BEGINNING IN 2021, LATE 21, ALL THE WAY UP THROUGH 2023.

SO NOW WITH THIS FIRST RATE CUT THAT WE SAW IN SEPTEMBER, YOU KNOW, WE'RE BEGINNING TO SEE YOU KNOW, A LOT OF THAT DRIVEN BY THE FED'S CONFIDENCE THAT INFLATION IS COMING CLOSER AND IN LINE WITH ITS 2% TARGET.

NOW JUST TO KIND OF BACK UP A BIT MORE BECAUSE I KNOW THAT, YOU KNOW, FOLKS ARE WONDERING WHY WE'RE SO FOCUSED ON THE FED FUNDS RATE.

NOW THIS IS REALLY THE KEY MONETARY POLICY DRIVER FOR THE FED, WHOSE MANDATE IS TO ONE, MAINTAIN GOODS PRICE AFFORDABILITY AND TWO, MAINTAIN MAXIMUM EMPLOYMENT.

SO THOSE ARE THE TWO MAIN FACTORS THE FED IS MOST CONCERNED WITH AND THE MAIN WAY THAT THEY MIGHT DRIVE THAT IS THROUGH THIS KEY FED FUNDS RATE.

SO ON THE RIGHT SIDE OF THIS CHART, AS I MENTIONED, RATES WERE CUT AND WE'RE NOW TRYING TO PROJECT WHAT MAY HAPPEN.

NOW WE HAVE, YOU KNOW, QUITE A BIT OF DATA HERE.

THE DASHED LINE SHOWS THE MARKET IMPLIED FED FUNDS RATE.

THAT IS WHAT FOLKS AND MARKET PARTICIPANTS THINK FOR RATES WE SEE MEDIAN FOMC PROJECTIONS.

THAT'S THE FEDERAL OPEN MARKET COMMITTEE AND THE FED'S PROJECTIONS WITH ITS DOT PLOT AS TO WHERE IT THINKS RATES MAY GO AND THEN WE ALSO TOOK

[00:15:08]

IN SUMMARY, I SHOULD SAY THERE'S REALLY NO GREAT CRYSTAL BALL.

BUT WHAT WE DO BELIEVE IS THAT IT'S VERY CLEAR WE'RE IN A RATE EASING CYCLE.

THEY BEGAN WITH 50 BASIS POINTS IN SEPTEMBER.

THEY HAD ANOTHER 25 BASIS POINTS IN NOVEMBER AND THEN ANOTHER 25 BASIS POINTS IN DECEMBER AND WHEN I SPEAK WITH YOU AGAIN IN THE COMING MONTHS, WE'LL BE TALKING THROUGH WHAT HAPPENED ALSO IN THE FOURTH QUARTER.

SO NOW TURNING TO THE DUAL MANDATE FOR THE FED.

THE FIRST PIECE I'LL SPEAK TO IS LABOR, RIGHT.

YOU'LL SEE HERE THAT EMPLOYMENT UNEMPLOYMENT HAS BEEN HISTORICALLY LOW AT LESS THAN 4% FOR OVER 28 CONSECUTIVE MONTHS AND RECENTLY IT CREPT UP TO ABOUT 4.1% BEGINNING IN SEPTEMBER AND IT'S CONTINUED TO REMAIN A BIT ELEVATED SINCE THEN.

AT THE SAME TIME, NONFARM PAYROLLS ON THE LEFT SIDE OF THIS PAGE HAVE GENERALLY DECLINED.

THOSE NEW ADS HAVE GENERALLY DECLINED DURING THE FED'S RATE HIKING CYCLE.

SO THAT'S ONE OF THE REASONS THE FED HAS NOW BEGINNING IS NOW BEGINNING TO THINK, WELL, WE SHOULD AS THE FED SEES CALMING AND INFLATION, THEY'RE BEGINNING TO SEE LABOR MARKETS SHOWING SOME PRESSURE THOUGH IT HAS COOLED AND THAT'S ONE OF THE REASONS THE FED WE BELIEVE HAS BEGUN CUTTING RATES. ONE OTHER AREA OF THE LABOR MARKET THAT WE WANTED TO POINT TO SHOW SOME MORE EVIDENCE FOR THE FED'S DUAL MANDATE, WAS HIRING PLANS.

SO THINKING BACK TO THE TO HISTORICAL DATA, YOU KNOW, AMERICAN WORKERS GENERALLY DON'T SEEM TO BE IN A BAD PLACE, DESPITE WHAT WE SEE IN THE NEWS.

THE LEFT SIDE OF THE CHART SHOWS BUSINESS HIRING PLANS, WHEREAS THE RIGHT SIDE SHOWS THE OPPOSITE.

THAT IS, BUSINESSES PLANNED AND EXECUTED LAYOFF PLANS.

SO FROM THE HIGH, FROM A HIGH LEVEL VIEW, BUSINESSES HAVE REALLY COME DOWN FROM STRONG HIRING LEVELS THAT WE SAW DURING THE PANDEMIC, BUT THEY HAVEN'T PULLED TO POTENTIALLY WORSENING OR CONTRACTING LEVELS.

THEY'RE REALLY STILL ABOVE THE LONG RUN AVERAGE FOR WHAT MIGHT BE CONSIDERED NORMAL.

NOW PIVOTING TO THE OTHER SIDE OF THE EQUATION, RIGHT.

WITH RESPECT TO THE FED'S DUAL MANDATE, WE'RE NOW HERE LOOKING AT INFLATION AND THIS IS BEING SHOWN ON THIS PAGE BY THE CONSUMER PRICE INDEX AND THIS IS THE HEADLINE NUMBER THAT YOU GENERALLY SEE IN THE NEWS.

SO HEADLINE CPI INFLATION HIT 2.6% IN OCTOBER AND IN FACT ROSE TO 2.7% IN NOVEMBER. BUT THAT WAS IN LINE WITH MARKET EXPECTATIONS.

DECEMBER NUMBERS AREN'T EXPECTED UNTIL NEXT WEEK, BUT CURRENT ECONOMY ECONOMISTS FORECASTS EXPECT AROUND ONE THING THAT YOU THAT WILL POINT TO HERE IS REALLY THE STUBBORN NATURE OF SHELTER INFLATION, AND THAT'S REPRESENTED BY THE BLUE BARS ON THE PAGE THAT CONTINUES TO REPRESENT A LARGE PROPORTION OF INFLATION AS WE CONSIDER IT AND YOU KNOW, WE'LL CONTINUE TO WATCH THAT CLOSELY AS WE CONSIDER THIS FACTOR WITH RESPECT TO THE FED'S MONETARY POLICY DECISION MAKING.

THIS NEXT SLIDE TRIES TO SHOW THE DUAL MANDATE IN SORT OF AGGREGATE AND THIS IS A NEW SLIDE FOR US.

WHILE IT SOUNDS YOU KNOW, SOMEWHAT HUMOROUS, THIS MISERY INDEX ACTUALLY IS AN ECONOMIC MEASURE THAT ECONOMISTS DO USE AND IT'S REALLY SIMPLISTIC IN ITS CALCULATION.

IT IS THE SUM OF THE CONSUMER PRICE INDEX.

THAT'S A MEASURE OF INFLATION PLUS THE UNEMPLOYMENT RATE, WHICH IS A MEASURE OF POTENTIAL, YOU KNOW, LABOR MARKETS AND HOW THEY'RE FARING.

AND AS YOU CAN SEE, A LOT OF THIS AND THE FLUCTUATIONS THAT WE'RE POINTING TO HERE ARE DRIVEN BY LABOR.

SO YOU'LL SEE IN THE 2020 TEN UNEMPLOYMENT CREEPING UP, UNEMPLOYMENT REACHING A HIGH, AND THEN AGAIN IN OCTOBER 2019, HISTORICALLY LOW UNEMPLOYMENT AND INFLATION AND AGAIN, HIGHER LEVELS OF UNEMPLOYMENT.

WITH THE PANDEMIC AND INFLATION SKYROCKETING WHEN GAS LINES WERE LONG AT PLACES LIKE COSTCO.

THAT SAID, IF WE'RE LOOKING TO THE MOST RECENT SORT OF SUM HERE THAT WE'RE SHOWING ON THIS CHART, SEPTEMBER 2024 MISERY INDEX LEVELS OF

[00:20:10]

IT'S ACTUALLY QUITE LOW AND AS WE LOOK TO A LATER CHART WHERE I'LL SHOW A LOT OF THE KEY DATA POINTS THE FED LOOKS TO, THIS IS THE SLIDE TITLED SUMMARY OF ECONOMIC PROJECTIONS.

YOU'LL SEE THAT THE LONG TERM SORT OF NORMAL RATE FOR THIS SHOULD BE AROUND 6 TO 7%.

SO WE'RE SQUARELY IN THAT RANGE AT THIS POINT.

SO WHAT DOES THIS ALL SORT OF DRIVE RIGHT.

THE REAL CONCERN IS US GROSS DOMESTIC PRODUCT AND ECONOMIC GROWTH AND THIS SLIDE SHOWS THAT CONSUMER ACTIVITY CONTINUES TO BE QUITE STRONG.

YOU KNOW IF YOU REWIND THE CLOCK CALL IT A YEAR RIGHT.

PEOPLE WERE TALKING ABOUT RECESSION.

AND THAT'S JUST REALLY NOT IN THE CARDS WITH RESPECT TO A LOT OF THE DATA THAT WE'VE SEEN, A LOT OF THE SORT OF INFORMATION THAT WE'RE PRESENTING HERE ON THE LEFT, YOU CAN SEE GDP, AND ON THE RIGHT YOU CAN SEE CONSUMER EXPENDITURE.

JUST TO UPDATE THIS CHART ON THE LEFT.

THIRD QUARTER 24 SHOWING 2.0% FORECAST.

IT ACTUALLY CAME IN INITIALLY AT 2.8% AND WAS FURTHER REVISED UPWARD TO 3.1% A FEW WEEKS AGO.

AND FOR THE FOURTH QUARTER, THE ORIGINAL FORECAST WAS 1.4%, BUT INITIAL GDP READINGS ARE SHOWING 3.3% GROWTH IN THE US ECONOMY. SO AGAIN, THOSE SORT OF DISCUSSIONS AND THE SORT OF RUMBLINGS ABOUT POTENTIAL CONTRACTION OR RECESSION IN THE US ECONOMY JUST REALLY HAVEN'T SHOWN ANY EVIDENCE AT THIS POINT.

ON THE RIGHT SIDE, PERSONAL CONSUMPTION EXPENDITURES, THIS IS A SORT OF LEVEL OF CONSUMER SPENDING IN THE IN THE ECONOMY THAT CONTINUES TO BE QUITE POSITIVE, DESPITE CONCERNS ABOUT LABOR AND UNEMPLOYMENT DURING THE SUMMER, IT CONTINUES TO BE QUITE STRONG AND NOW SHOWING, IN FACT, INCREASED SPENDING ABOVE PRE-PANDEMIC LEVELS.

SO WHAT DOES THIS ALL MEAN FOR, YOU KNOW, WHERE THE MARKETS HAVE SORT OF, YOU KNOW, GONE FOR FOR YIELDS? WE'RE SHOWING ON THIS CHART THE TWO YEAR US TREASURY YIELD.

AND WE USE THIS MEASURE PRIMARILY BECAUSE THE DISTRICT'S PORTFOLIO IS INVESTED IN A 1 TO 5 YEAR TREASURY BENCHMARK STRATEGY. AND ITS WEIGHTED AVERAGE LIFE IS AROUND TWO YEARS.

SO THIS IS A NICE SORT OF, YOU KNOW, PROXY MEASURE FOR THE DISTRICT'S INVESTMENT PORTFOLIO.

YOU'LL SEE THAT DURING THE QUARTER, TWO YEAR RATES FELL BY OVER ONE PERCENTAGE POINT.

THAT'S 112 BASIS POINTS.

AT THE END OF JULY, WE SAW WEAK PAYROLL NUMBERS AND MANUFACTURING NUMBERS, AND THAT CONTINUED WITH ADDITIONAL FED SPEAK SAYING THAT, YOU KNOW, THINGS WERE COMING INTO BETTER BALANCE. BUT, YOU KNOW, ULTIMATELY THAT SUPPORTED, AS I MENTIONED, THE 50 BASIS POINT RATE CUT THAT THE FED SPOKE TO.

AND NOW THE FED CONTINUES TO ACCOUNT FOR DEVELOPMENTS IN THE ECONOMY.

AND, YOU KNOW, THE SORT OF PACE OF CUTS.

OUR VIEW AT THIS POINT IS THAT TREASURY YIELDS ON THE SHORT END, THAT IS THIS TWO YEAR AND EVEN, YOU KNOW, CLOSER TO THREE MONTH LEVELS ARE REALLY LOWER WHERE THEY COULD HAVE BEEN AND TREASURIES WERE OVERBOUGHT.

BUT THAT SAID, THE DISTRICT PORTFOLIO HAS REALLY PERFORMED QUITE WELL DURING THE QUARTER.

SO THIS IS ANOTHER DATA POINT THAT WE LOOK TO SEE WHERE YIELDS MAY HEAD AND THIS IS WHAT'S CALLED THE FED'S DOT PLOT.

SO THE FEDERAL OPEN MARKET COMMITTEE HAS MANY MEMBERS AND ITS GOVERNORS VOTE WITH RESPECT TO WHERE THEY THINK RATES WILL BE IN THE COMING PERIODS AND HERE YOU CAN SEE THOSE PERIODS ARE 2024 ALL THE WAY OUT THROUGH 2027 AND LONGER TERM AND EACH DOT REPRESENTS A VOTE OF A GOVERNOR. THE SOLID OR PARDON ME, THE LIGHT BLUE LINE SHOWS THE MEDIAN DOT PLOT VOTE FOR JUNE, WHEREAS THE DARKER LINE AND DARKER DOTS SHOW WHAT TRANSPIRED IN THE MOST RECENT DOT PLOT.

WE'RE SHOWING HERE FOR SEPTEMBER.

THAT SAID, THIS IS A BIT OUT OF DATE AND THERE IS NOW A DECEMBER DOT PLOT THAT I'LL GO OVER IN OUR NEXT PRESENTATION.

[00:25:04]

FOR 2025 AT SEPTEMBER, THE FED WAS ANTICIPATING FOR CUTS AS OF THE DECEMBER DOT PLOT.

THEY'RE NOW EXPECTING AROUND TWO CUTS.

SO THAT SAID, THE LONGER TERM NOMINAL RATE.

FOR THIS SEPTEMBER DOT PLOT WAS EXPECTING AROUND 2.9%.

AND THAT HAS ELEVATED A BIT TO AROUND JUST AROUND 3% FOR DECEMBER.

SO AS THE DISTRICT THINKS ABOUT ITS SORT OF LONG TERM BORROWING PLANS AND ITS YOU KNOW, VERY DELIBERATE USE OF SHORT TERM CASH.

YOU KNOW, THIS IS JUST SOMETHING TO KEEP IN MIND.

AS TO WHAT THE FED IS THINKING AND WHERE LONG TERM RATES MAY HEAD.

THIS IS THE SUMMARY OF ECONOMIC PROJECTIONS AND THESE ARE, AGAIN, THE SORT OF DATA POINTS THAT I SPEAK TO THAT THE FED THINKS ABOUT AS IT DETERMINES ITS MONETARY POLICY ACTIONS AND HERE YOU CAN SEE IN THE UPPER LEFT CHANGE IN REAL GDP, WITH DARKER BARS SHOWING THE SEPTEMBER PROJECTIONS PROVIDED BY THE FED EACH QUARTER AND THE LIGHTER BARS SHOWING THE JUNE PROJECTIONS, THE PRIOR QUARTERS PROJECTIONS.

IN THE UPPER RIGHT YOU SEE UNEMPLOYMENT.

AND THAT IS A BIT ELEVATED PCE INFLATION.

THAT'S PERSONAL CONSUMPTION EXPENDITURES INFLATION.

AND THAT'S ACTUALLY THE FED'S PREFERRED MEASURE FOR INFLATION.

THAT'S ON THE LOWER LEFT SIDE OF THE CHART.

AND THAT HAS COME A BIT LOWER COMPARED TO THE PRIOR QUARTER.

AND THEN ON THE LOWER RIGHT SIDE YOU SEE THE LONG TERM MONETARY RATE THE FED FUNDS RATE SHOWING 2.8% LONG RUN.

AND AS I SPOKE TO YOU EARLIER, WITH RESPECT TO THE MISERY INDEX, IF YOU SUM THE UNEMPLOYMENT RATE 4.2% LONG RUN PLUS PCE INFLATION OF 2.0%, YOU GET AROUND 6.2%.

RIGHT. SO, YOU KNOW, IN OUR OPINION, WE FEEL THAT MISERY IN GENERAL, THE SUM OF INFLATION AND UNEMPLOYMENT SEEMS TO BE IN LINE WITH WHAT THE FED EXPECTS TO SEE LONG TERM.

THIS NEXT SLIDE IS SHOWING THE RATE CURVE RIGHT.

SO THIS IS THE X AXIS SHOWS VARIOUS PERIODS OF MATURITIES.

SO THAT'S THREE MONTH TWO YEAR FIVE YEAR, SEVEN YEAR, TEN YEAR, ALL THE WAY OUT TO 30 YEAR LIKE OR LIKE A 30 YEAR TYPE MORTGAGE.

AND WHAT THE INTEREST RATES ARE FOR EACH OF THOSE TREASURY YIELD PRODUCTS.

THE DASHED LINE IS THE JUNE QUARTER, WHEREAS THE SOLID LINE IS THE SEPTEMBER QUARTER, AND THE SHADING REPRESENTS THE ONE YEAR RANGE OF THE RATES SINCE SEPTEMBER 30TH, 2023 THROUGH SEPTEMBER 30TH, 2024.

AND WHAT I'LL EMPHASIZE HERE IS, IT'S VERY CLEAR TO US THAT THE FED BEGAN ITS SORT OF RATE EASING CYCLE, AND RATES DID FALL QUITE A BIT. AS YOU CAN SEE, THE SOLID LINE IS REALLY AT THAT BOTTOM EDGE OF THE ONE YEAR RANGE.

YOU KNOW, THAT SAID YOU KNOW, WITH A LOT OF THE SORT OF FISCAL POLICY SORT OF POTENTIAL DECISIONING THAT WE MAY SEE FROM THE PRESIDENT, THE INCOMING PRESIDENTIAL ADMINISTRATION.

YOU KNOW, THERE IS CONCERN THAT RATES MAY BE A BIT HIGHER FOR LONGER.

SO AND YOU'LL SEE AGAIN AND I'LL SPEAK TO IT IN OUR NEXT MEETING IN DECEMBER, THE DOT PLOT IS SHOWING, INSTEAD OF FOUR RATE CUTS FOR 25 NOW TWO RATE CUTS.

SO WE'LL CONTINUE TO MONITOR THIS CLOSELY.

YOU KNOW, I THINK THE POSITIVE SIGN HERE IS THAT AS I MENTIONED IN MY OPENING REMARKS, THE TWO YEAR RATE OF 3.60 IS NOW BELOW THE TEN YEAR RATE OF 3.76 AND FOR MANY FOLKS, THIS INVERSION OR NORMALIZATION A STEEPENING OF THE YIELD CURVE IS, YOU KNOW, IS GOOD FOR THE ECONOMY.

RIGHT. THAT REPRESENTS APPROPRIATE AMOUNT OF RISK.

ONE WOULD EXPECT THAT A LONGER TERM LOAN SHOULD PAY OR SHOULD EXPECT A HIGHER RATE OF INTEREST.

SO WE'RE BEGINNING TO SEE SIGNS OF NORMALIZATION IN THE YIELD CURVE.

NOW WITH RESPECT TO SPECIFIC INVESTMENTS IN THE SECTORS WE INVEST ON BEHALF OF THE DISTRICT.

HERE YOU CAN SEE SECTOR YIELD SPREADS FOR DIFFERENT ASSET CLASSES AND FIXED INCOME.

SO ON THE UPPER LEFT YOU SEE AGENCIES.

THAT'S FEDERAL AGENCY PAPER.

[00:30:02]

ON THE BOTTOM LEFT YOU SEE MORTGAGE BACKED SECURITIES AND ON THE BOTTOM RIGHT YOU SEE ASSET BACKED SECURITIES AND THIS IS FOR THE YEAR AND WHAT SPREAD MEANS IS THIS IS THE EXPECTED SORT OF YIELD OR PREMIUM ONE SHOULD EXPECT TO RECEIVE IN INVESTING IN THESE SECURITIES VERSUS, FOR EXAMPLE, A US TREASURY SECURITY, THE RISK FREE ASSET.

ZOOMING IN FOR THE QUARTER, YOU'LL SEE THE ONE YEAR AVERAGE REPRESENTED BY THE DASHED BLACK LINE ACROSS EACH ASSET CLASS AND WHAT WE'LL SAY, WHAT I'LL EMPHASIZE HERE IS THAT CREDIT SPREADS CONTINUE TO REMAIN QUITE TIGHT.

RIGHT. YOU CAN SEE THEY'RE HUGGING, YOU KNOW, NEARLY THE BOTTOM EDGE, OF THE CHARTS HERE.

SO IN THAT REGARD THAT REPRESENTS THAT THE ECONOMY IS REALLY HEALTHY.

RIGHT. FOLKS THINK THE ECONOMY IS HEALTHY.

SO REALLY WITH RESPECT TO TAKING ADDITIONAL RISK IN OTHER ASSET CLASSES, WHY SHOULD ONE, RIGHT.

IF YOU THINK ABOUT THE US ECONOMY, IF IT'S PERFORMING QUITE STRONG, ONE WOULD WANT TO CONTINUE INVESTING IN THE US ECONOMY.

SPECIFICALLY WITH TREASURIES.

THAT SAID, WE HAVE BEEN QUITE OPPORTUNISTIC IN THE NEW ISSUE MARKET FOR ALL OF THESE ASSET CLASSES, AND WE'VE MADE PURCHASES FOR THE PORTFOLIO WHEN WE SEE GOOD RELATIVE VALUE PURCHASING OPPORTUNITIES.

SO I'M GOING TO MAYBE YOU CAN SEE MY CURSOR HERE.

FOR EXAMPLE. YOU'LL SEE CORPORATE NOTES.

THIS YELLOW LINE. THIS CONTINUES TO REPRESENT ACTUALLY SOME PRETTY GOOD VALUE SHOWING AROUND HALF A PERCENTAGE POINT RELATIVE SPREAD TO US TREASURIES. AND SIMILARLY YOU'LL SEE THIS LIGHT BLUE LINE FOR CCMES.

THIS IS SHOWING AGAIN MORE RELATIVE VALUE ADDITIONAL SPREAD RELATIVE TO TREASURIES FOR THESE TYPES OF SECURITIES THAT ARE HIGHLY RATED, HIGHLY SECURE AND WE DO CONDUCT QUITE A BIT OF CREDIT WORK TO DETERMINE THAT THESE ARE APPROPRIATE FOR THE DISTRICT TO HOLD.

SIMILARLY, WE HAVE SOME ASSET BACKED SECURITIES IN THE PORTFOLIO.

THIS IS THE SORT OF COPPER LINE.

AND YOU CAN SEE THAT'S NEAR THE ONE YEAR RANGE OF ABOUT CALL IT 6/10 OF 1% SPREAD TO US TREASURIES.

SO WITH RESPECT TO HOW FIXED INCOME MARKETS PERFORMED IN THE THIRD QUARTER, THEY WERE REALLY QUITE STRONG.

AS THE FED LOWERED RATES, WE SAW MANY MARKET VALUES FOR FIXED INCOME ASSETS RISE.

THERE'S AN INVERSE RELATIONSHIP BETWEEN HOW INTEREST RATES AND BOND PRICES ARE SORT OF YOU KNOW, MIRROR EACH OTHER.

SO AS INTEREST RATES FALL, BOND PRICES RISE.

AND CONVERSELY, AS BOND PRICES RISE, INTEREST RATES FALL.

AND THAT SORT OF COMPENSATES HOLDERS OF FIXED INCOME INSTRUMENTS LIKE THE DISTRICT.

SO HERE YOU CAN SEE US TREASURIES FOR THE QUARTER YIELDED AROUND 3.39%, WHEREAS CORPORATE TRIPLE A'S AROUND 3.70 AND OTHER SECURITY ASSET CLASSES THAT WE PURCHASED FOR THE DISTRICT, INCLUDING AGENCIES AND ABS, SHOW OVER 2% RETURNS FOR THE QUARTER.

NOW FOR THE YEAR, IN FACT, YOU KNOW, YOU'LL SEE THAT FIXED INCOME HAS ALSO DONE QUITE WELL.

AND THE ONE THING I WOULD EMPHASIZE FROM THIS CHART IS REALLY THAT THE DISTRICT IS REALLY IN A GREAT POSITION WITH RESPECT TO ITS INVESTMENTS, AND YOU'LL SEE THAT IN THE PERFORMANCE PAGES AS I GO THROUGH THE SPECIFIC PORTFOLIO FOR THE DISTRICT IN THE NEXT COMING SLIDES.

HERE WE HAVE SOME WRITTEN COMMENTARY FOR EACH OF THE DIFFERENT ASSET CLASSES THAT WE PURCHASE ON BEHALF OF THE DISTRICT, AS WELL AS SOME FACTORS TO CONSIDER.

SO HERE I'LL POINT TO A COUPLE THINGS.

THE CHANGE IN MONETARY POLICY, YOU'LL SEE, IS NOW SLIGHTLY POSITIVE FROM NEUTRAL, AS WE SAW THE FED BEGIN ITS RATE EASING CYCLE.

AT THE SAME TIME, LABOR MARKETS WITH RESPECT TO, YOU KNOW, SOME COOLING.

UNEMPLOYMENT DOES SHOW, YOU KNOW, A BIT OF PRESSURE HERE.

JOB GROWTH SHOWS A LITTLE BIT OF PRESSURE.

SO WE MOVE THAT FROM SLIGHTLY POSITIVE TO NEUTRAL.

ONE THING THAT IS NOT ON THIS SLIDE ARE AGAIN THOSE SORT OF CONSIDERATIONS OF FISCAL POLICY THAT THE INCOMING PRESIDENTIAL ADMINISTRATION HAS SORT OF VOCALIZED.

THAT SAID, AS I MENTIONED IN MY OPENING REMARKS, THERE'S STILL NO EXPECTATION FOR RECESSION, BUT TO DIVE INTO THE FOUR AREAS WE'RE THINKING ABOUT TAXES, TARIFFS, IMMIGRATION AND REGULATION, TAXES.

WE VIEW IF IF THOSE ARE LOWERED, ONE MIGHT EXPECT THAT SHOULD BE POSITIVE FOR GROWTH IN GROWTH IN THE US ECONOMY, BUT NEGATIVE FOR THE US LONG TERM DEFICIT WITH RESPECT TO TARIFFS.

THERE HAVE BEEN YOU KNOW, VOCALIZED 10% TARIFFS TO CHINA, TO GOODS OUT OF CHINA AND 25% TARIFFS

[00:35:09]

IN OUR VIEW, AT THIS POINT, WE THINK THIS MIGHT PROBABLY BE A NEGOTIATION TACTIC FOR POTENTIAL BORDER AND IMMIGRATION POLICIES.

THAT SAID, THE FED MAY LOOK THROUGH THE IMPACT ON TARIFFS AND NOT REALLY.

AND PERHAPS TARIFF RELATED INFLATION MAY OR MAY NOT OCCUR AT THIS TIME WITH RESPECT TO IMMIGRATION.

BORDER SECURITY DOES SEEM TO BE A VOCALIZED PRIORITY FOR THE INCOMING PRESIDENTIAL ADMINISTRATION.

THAT SAID, IT'S NOT VERY CLEAR AS TO HOW ANY SORT OF DEPORTATION PROGRAM OR WHAT SCALE OF THIS PROGRAM MIGHT BE IMPLEMENTED.

THAT SAID, IT MAY CAUSE, IN OUR VIEW, SOME PRESSURE TO WAGES AND SOME CHANGES IN WHAT THE LABOR FORCE COMPOSITION MAY LOOK LIKE GOING FORWARD AND LASTLY, WITH RESPECT TO REGULATION, YOU KNOW, FROM A BUSINESS PERSPECTIVE, WE WOULD ANTICIPATE THAT REGULATION EASING MIGHT BE GOOD FOR POTENTIAL GROWTH IN PROFITS OF THESE PRIVATE INDUSTRIES.

BUT WE WOULD EXPECT THAT SOME OF THIS MIGHT BE EMPHASIZED ON FINANCIAL INSTITUTIONS AND ENERGY, WITH A POTENTIAL BUMP IN MERGERS AND ACQUISITIONS IN THE COMING ADMINISTRATION.

THAT SAID, AS I MENTIONED, OUR BASE CASE IS TO EXPECT STRONGER GROWTH.

THAT IS US GDP GROWTH IN 2025 DESPITE HIGHER INFLATION AND FEWER FED RATE CUTS.

IT'S AND YOU KNOW, AGAIN, WE'LL HAVE MORE INFORMATION AND WE'LL CONTINUE TO MONITOR THIS VERY CLOSELY.

IN YOU KNOW, AS TIME GOES ON, I KNOW THAT, YOU KNOW, THE INAUGURATION IS COMING UP AND CERTAINLY WE'LL SEE MUCH MORE INFORMATION FROM THE ADMINISTRATION ONCE IT BEGINS IN OFFICE.

SO BEFORE I PROCEED FURTHER, ARE THERE ANY QUESTIONS ABOUT, YOU KNOW, ALL THE SORT OF ECONOMIC DATA? I KNOW THAT THIS IS QUITE A BIT TO TAKE IN, BUT I WANT TO TRY TO BE HELPFUL AND PAUSE HERE FOR QUESTIONS BEFORE I JUMP INTO THE DISTRICT'S PORTFOLIO.

ANY QUESTIONS FROM THE COMMITTEE AT THIS STAGE OF THE PRESENTATION? I ALREADY HAD MY QUESTIONS ANSWERED.

NO, I HAVE NO QUESTIONS.

GO AHEAD AND PROCEED.

OKAY, GREAT. THANK YOU.

SO I'M NOW TURNING TO THE PORTFOLIO REVIEW.

AND THIS BEGINS ON PAGE 20 OF THE REPORT THAT WE'VE SHARED.

SO THIS IS THE CERTIFICATE OF COMPLIANCE THAT LETS YOU AND ANYONE ELSE VIEWING THIS REPORT KNOW THAT THE DISTRICT'S INVESTMENT PORTFOLIO WAS IN COMPLIANCE WITH THIS INVESTMENT POLICY.

EACH DAY DURING THE QUARTER, THIS PORTFOLIO SNAPSHOT PAGE SHOWS INFORMATION AS OF SEPTEMBER 30TH, 2020 FOR THE TOTAL DISTRICT INVESTMENT PROGRAM GREW BY OVER $5.6 MILLION TO 167.1 MILLION FROM 161.5 MILLION LAST QUARTER.

DURATION WAS 2.55 YEARS, AND THAT'S SLIGHTLY LONGER THAN LAST QUARTER, WHEN IT WAS 2.53 YEARS AND IS NEAR THE 1 TO 5 YEAR BENCHMARK OF 2.53 YEARS.

THE LOWER RIGHT SIDE OF THE CHART SHOWS THE DURATION DISTRIBUTION, AND SEVERAL OF THOSE HAVE FLUCTUATED FROM THE PRIOR QUARTER, BUT ARE GENERALLY IN LINE WITH THE BENCHMARK YIELD AT COST.

THIS APPROXIMATES THE FORWARD EARNINGS RATE AT THE END OF THE QUARTER.

AND THIS IS THESE ARE THE NUMBERS HERE.

SO HERE YOU CAN SEE YIELD AT COST IMPROVED TO 4.13 AND THAT'S UP FROM 4.11 AT JUNE 30TH.

YIELD AT MARKET.

THIS REPRESENTS THE YIELD IF THE PORTFOLIO WERE SOLD ENTIRELY AT THE END OF THE QUARTER THAT FELL TO 3.92%.

AND THAT'S DOWN FROM 4.77%.

AND ONE WOULD EXPECT RIGHT AS YIELDS AS TREASURY RATES BEGIN TO FALL.

YIELD AT MARKET WILL BEGIN TO FALL.

AND EVENTUALLY THESE NUMBERS WILL CROSS AND YOU'LL SEE, YIELD AT COST.

WELL, ACTUALLY THEY ALREADY DID CROSS, SO YIELD AT COST WILL CONTINUE TO RISE WHILE YIELD AT MARKET WILL CONTINUE TO FALL.

CREDIT QUALITY REMAINS QUITE HIGH AND YOU'LL SEE THAT OVERALL RATINGS ARE IN THE DOUBLE A CATEGORY.

AND THERE'S MORE DETAIL HERE.

[00:40:02]

HERE YOU CAN SEE A SORT OF PIE CHART FOR SECTOR ALLOCATIONS THAT I'LL JUMP INTO IN THE COMING SLIDE.

BUT THAT SAID, THERE WERE SOME INCREASES SLIGHTLY TO 15% FOR AGENCY CMBS, AND THAT'S UP ONE PERCENTAGE POINT FROM LAST QUARTER.

US TREASURIES DECLINED SLIGHTLY BY ABOUT TWO PERCENTAGE POINTS TO 34%, AND CORPORATES INCREASED SLIGHTLY TO 30% FROM 27% LAST QUARTER. THIS NEXT SLIDE SHOWS PORTFOLIO ACTIVITY.

YOU KNOW THIS PORTFOLIO IS ACTIVELY MANAGED EACH DAY AND YOU'LL SEE NEW PURCHASES REFLECTED IN THE BLUE BARS HERE.

WHILE SALES AND MATURITIES ARE REFLECTED BY THE GRAY BARS.

AND A LOT OF THE DATA THAT I'M GOING TO SPEAK TO NOW ACTUALLY SUMMARIZE, THERE ARE SOME DETAIL PAGES FURTHER ON IN THE PRESENTATION HERE SHOWING QUARTERLY PORTFOLIO TRANSACTIONS.

SO SALES TOTALED 15.4 MILLION INCLUDING TREASURIES, CORPORATES AND ASSET BACKED SECURITIES, WHILE NEW PURCHASES TOTALED $18.7 MILLION.

THIS QUARTER, WE PURCHASED TREASURIES TOTALING 8.5 MILLION WITH COUPONS RANGING 1.25 TO 4.5%.

WE PURCHASED CORPORATE BONDS TOTALING $6 MILLION, INCLUDING MANY FAMILIAR NAMES NOVARTIS, MASTERCARD, ELI, LILLY, ROCHE, UNILEVER, CATERPILLAR, TOYOTA, BLACKROCK, HONEYWELL AND NATIONAL RURAL UTILITY CO-OP.

AND THOSE YIELDS WERE BETWEEN 3.80% TO 5.15%.

AGENCY CMS. THOSE PURCHASES TOTALED 2.4 MILLION, INCLUDING FEDERAL HOME LOAN MORTGAGES, WITH COUPONS RANGING FROM 4.54 TO 4.72.

AND LASTLY, THERE WERE SOME ASSET BACKED HOLDINGS THAT WE PURCHASED ON BEHALF OF THE DISTRICT, TOTALING 1.5 MILLION, REPRESENTING CAPITAL ONE AUTO LOANS WITH A COUPON OF 3.92%.

HERE IS THE PORTFOLIO PERFORMANCE AS OF SEPTEMBER 30TH AS I SPOKE TO YOU.

THIS WAS A GREAT QUARTER FOR THE DISTRICT, AND YOU'LL SEE THAT INTEREST WAS EARNED OF OVER $1.5 MILLION, AND THAT'S INCREASED CONTINUALLY OVER THE PAST TWO QUARTERS, 1.3 MILLION IN MARCH, 1.4 MILLION IN JUNE, AND NOW 1.5 MILLION AS OF SEPTEMBER.

WE SAW SIZABLE POSITIVE GAIN IN MARKET VALUE FOR THE DISTRICT'S PORTFOLIO HOLDINGS.

IT WAS FOUR POINT NEARLY 4.1 MILLION FOR THE QUARTER, AND TOTAL DOLLARS WERE RETURNED OF 5.6 MILLION DURING THE QUARTER, AND THAT REPRESENTS 3.45% RETURN TO THE DISTRICT DURING THE QUARTER AND PERFORMANCE THAT IS SIX BASIS POINTS ABOVE THE 1 TO 5 YEAR TREASURY BENCHMARK.

USUALLY WE REPRESENT ALSO THE NET OF FEE PERFORMANCE.

THE DISTRICT PAYS AROUND 2% BASIS POINT TWO BASIS POINTS FOR MANAGEMENT OF ITS PORTFOLIO.

SO ONE WOULD EXPECT THAT THE NET PERFORMANCE WAS APPROXIMATELY 3.43% DURING THE QUARTER ON AN ACCRUAL BASIS.

YOU CAN SEE PERIODIC RETURNS YOU KNOW, ON THE TABLE BELOW.

AND YOU'LL SEE THE SAME INTEREST EARNED FROM THE PRIOR SLIDES REPRESENTED HERE WITH ADJUSTMENTS TO REALIZE GAINS OF AROUND 16,000 AND CHANGE IN AMORTIZED COST OF 197,000 FOR THE QUARTER OVER THE PAST ONE YEAR, THREE YEAR, FIVE YEAR, AND TEN YEAR. WE CONTINUE TO SEE VERY SOLID GROWTH.

AND THE ONE THING THAT I'LL NOTE HERE IS THAT FOR THE FIRST TIME SINCE WE BEGAN MANAGING THE PORTFOLIO IN JUNE 30TH OF 2009 THE TEN YEAR TOTAL EARNINGS HAVE NOW CROSSED 20 MILLION FOR THE DISTRICT.

SO THIS IS A REMARKABLE YOU KNOW, MILESTONE FOR THE DISTRICT.

AND I THINK IT REALLY SPEAKS TO THE CONTINUED, YOU KNOW, FORESIGHT AND DELIBERATE USE OF THE INVESTMENTS BY THE DISTRICT STAFF IN CONJUNCTION WITH US.

SO WE'RE VERY PROUD OF WHAT WE'VE BEEN ABLE TO ACHIEVE FOR THE DISTRICT.

SO BEFORE I JUMP INTO ESG, ENVIRONMENTAL, SOCIAL AND GOVERNMENTAL CONSIDERATIONS OF THE PORTFOLIO, ARE THERE ANY QUESTIONS

[00:45:04]

ALL RIGHT. MEMBERS OF THE COMMITTEE.

I DON'T SEE ANY QUESTIONS.

JUSTIN. OKAY.

THANK YOU. SO ONE OF THE OTHER ADDITIONAL MANDATES THAT THE DISTRICT HAS ASKED US TO HELP IMPLEMENT FOR ITS INVESTMENT PORTFOLIO IS A FOCUS ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE FACTORS.

WHEN WE INVEST, WHEN WE INVEST ON BEHALF OF THE DISTRICT AND ONE THING WE'LL SHARE HERE.

SO THERE WERE A COUPLE SLIDES THAT JUST KIND OF SPEAK TO SUSTAINABILITY AND ESG NEWS THAT I'LL INVITE YOU ALL TO LOOK TO.

BUT I WANT TO DIVE SPECIFICALLY INTO THE DISTRICT'S PORTFOLIO AND THE WAY WE EVALUATE THIS AND THE RISK RATING FOR THE PORTFOLIO AND YOU'LL SEE HERE IT'S 19.6 THIS QUARTER.

THIS MEASURES THE ECONOMIC VALUE AT RISK BASED ON ENVIRONMENTAL, SOCIAL AND GOVERNMENTAL FACTORS.

LOWER SCORES REPRESENT LESS UNMANAGED RISK OF THE DISTRICT'S INVESTMENT PORTFOLIO.

THE ONE THING THAT I WILL SHARE, OR ACTUALLY THE FEW THINGS I'LL SHARE, IS THAT THIS QUARTER, YOU'LL SEE 65% OF THE DISTRICT'S PORTFOLIO IS NOW RATED AND THEN EVALUATED BY OUR ESG RISK RATING MANDATE AND THAT'S IMPROVED FROM 62% LAST QUARTER, NOW REPRESENTING $108 MILLION OF THE DISTRICT'S PORTFOLIO, UP FROM A SHADE OVER 99 MILLION LAST QUARTER.

THE ESG RISK RATING THAT REMAINS STABLE AT 19.6 THIS QUARTER.

SAME AS LAST QUARTER AND IT IS ACTUALLY DOWN AND BETTER.

SO AS YOU SEE HERE RIGHT.

LOWER RATINGS MEAN LOWER MANAGED RISK.

AND THAT HAS IMPROVED FROM 20.5% IN MARCH AND 20.3 OR 21.3 POINTS IN DECEMBER. MOST OF THE COMPANIES HELD IN THE CITY'S PORTFOLIO FALL WITHIN TO THE FALL WITHIN THE LOW TO MEDIUM RISK RANGES.

AND THE ONE THING I SHOULD ALSO EMPHASIZE HERE IS GIVEN THE VERY SHORT DURATION OF THE DISTRICT'S PORTFOLIO, WHICH IS AROUND TWO YEARS.

PLEASE DON'T BE SURPRISED IF WE SEE CONTINUED POTENTIAL SWINGS IN THE OVERALL ESG RISK RATING.

QUARTER TO QUARTER IF, FOR EXAMPLE, THE RISK RATING WERE TO MOVE BACK INTO THE MEDIUM CATEGORY.

HERE WE SEE INDUSTRY DIVERSIFICATION OF THE PORTFOLIO AND YOU KNOW THIS REALLY KIND OF SPEAKS TO, YOU KNOW, AGAIN, ANOTHER SORT OF STRATEGY OF THE DISTRICT TO DIVERSIFY ITS INVESTMENT PORTFOLIO ACROSS INDUSTRIES TO MITIGATE ANY SORT OF CONCENTRATION RISK AMONG ANY SPECIFIC SORT OF BUSINESS FUNCTION AND YOU CAN SEE 18 DIFFERENT INDUSTRIES HERE.

A PORTFOLIO WEIGHT IS SHOWN BY THE BLACK DIAMONDS, WHEREAS BLUE BARS REPRESENT THE ESG RISK RATING AND THE LOWER NUMBERS REPRESENT LOWER ESG RISK RATING, WHICH AGAIN IS BETTER FOR THE PORTFOLIO.

THE DISTRICT'S GREATEST PORTFOLIO EXPOSURE IS BANKS.

THOSE BANKS THAT HOLD THAT ARE HELD IN THE PORTFOLIO ACCOUNT FOR AROUND 50% OF THE DISTRICT'S PORTFOLIO.

SORT OF. HOW DO YOU SAY IT? PORTFOLIO EXPOSURE UNDER 50%, I SHOULD SAY AND THAT SHOULD BE UNSURPRISING BECAUSE BANKS REALLY ARE FREQUENT ISSUERS TO THE FIXED INCOME MARKETS IN WHICH WE ARE ABLE TO INVEST. THE BANK INDUSTRY'S RISK RATING IS 18.1.

AND THAT'S TOWARD THE LOWER END OF THE ESG RISK RANGE.

THAT SAID, THE HIGHEST RISK RANGE FOR THE DISTRICT'S PORTFOLIO IS AEROSPACE AND DEFENSE AT 28.1 AND YOU CAN SEE THAT ON THE FAR LEFT SIDE OF THE CHART. BUT IT ACCOUNTS FOR, AS YOU CAN SEE, A VERY MINIMAL AMOUNT OF THE PORTFOLIOS WEIGHTING THE BLACK DIAMOND NEAR ZERO WITH A SINGLE HOLDING. LOCKHEED MARTIN SECTOR ANALYSIS HERE YOU CAN SEE SECTOR DISTRIBUTIONS AND AS I SPOKE TO YOU EARLIER, WE WERE ABLE TO FIND A LOT OF ATTRACTIVE RELATIVE VALUE PURCHASING OPPORTUNITIES FOR THE QUARTER WITHIN CORPORATE NOTES AND MANY OF THE ISSUERS IN THIS SECTOR HAD SCORES RANGING FROM LOW RISK AROUND 12.9 POINTS TO MEDIUM RISK AROUND 29.1, BUT THE AVERAGE WAS 20.8 WITH THE PURCHASE OF GINNIE MAE SECURITY.

WE ALSO SAW FEDERAL AND AGENCY MBS RANGE THAT SORT OF ROSE IN THE QUARTER, AND YOU CAN SEE THAT AT THE BOTTOM BAR ON THIS CHART, THE RATING IS 16.4 RELATIVE TO CREDIT RISK.

[00:50:07]

WHICH IS REALLY GREAT RELATIVE TO THE OVERALL PORTFOLIO SIZE.

AND AROUND 37 MILLION OF THOSE ARE RATED DOUBLE-A AND TRIPLE-A, WHICH AGAIN REPRESENTS, YOU KNOW, GOOD RISK RATING FOR AGAIN VERY HIGH CREDIT QUALITY OF THE PORTFOLIO.

AND ON THE LOWER CHART HERE, YOU CAN SEE THE LOWEST ESG RISK IS 16.7 POINTS AND THE MAJORITY OF THOSE ARE RATED DOUBLE-A.

THESE NEXT TWO SLIDES SHOW THE RANKING OF THE HOLDINGS RATED LOWEST TO HIGHEST.

AND YOU CAN SEE THE BOTTOM ON THIS CHART AND THE TOP ON THIS CHART.

I'LL SPEAK TO TWO SPECIFIC ISSUERS THIS QUARTER AND HERE YOU CAN SEE THAT ACTUALLY I SHOULD START WITH THE WITH THIS SLIDE HERE.

LET'S SEE TORONTO DOMINION BANK, THAT'S TD BANK IS AMONG THE SORT OF LOWER RATED RISK ISSUERS THAT ARE HELD IN THE PORTFOLIO AND THAT HAD THE GREATEST RISK INCREASE BY AROUND 2.5 POINTS.

IT ISN'T SHOWING ON THIS CHART, BUT IT IS RATED 21.1 AND WE'RE FOLLOWING IT CLOSELY BECAUSE OF A NEGATIVE OUTLOOK RELATED TO SOME BUSINESS ETHICS. IN OCTOBER AND JUNE OF 2024, THERE WERE TWO SHAREHOLDER CLASS ACTION LAWSUITS FILED AGAINST TD BANK AND SOME OF ITS EXECUTIVES OVER MISREPRESENTATIONS OF ITS ANTI-MONEY LAUNDERING CONTROLS, AND THAT HAS NEGATIVELY IMPACTED TD BANK'S OPERATIONS AND SHARE PRICE.

SO WE'LL CONTINUE TO MONITOR THAT AND PROVIDE ANY SORT OF PERTINENT UPDATES.

BUT WE WANTED TO INFORM YOU THAT WAS THE GREATEST RISK DECLINE, ESG RISK DECLINE THIS QUARTER.

AND THEN ON A POSITIVE NOTE, THE GREATEST DECREASE IN ESG RISK WAS WITH JOHNSON AND JOHNSON ALSO NOT SHOWN ON THIS CHART, BUT MOVING TOWARD THE TOP ISSUERS.

IT IS NOW RATED 20.1 POINTS AND IMPROVED BY 1.2 POINTS THIS QUARTER.

AND THAT IMPROVED DUE TO IMPROVEMENTS IN QUALITY AND SAFETY LINKED INCIDENTS.

SO THERE WERE SOME RECURRING PRODUCT QUALITY AND SAFETY ISSUES SINCE AROUND 2009, PARTICULARLY WITH RESPECT TO LAWSUITS ALLEGING ASBESTOS CONTAMINATION IN ITS TALC BASED PRODUCTS LINKED TO MESOTHELIOMA AND OVARIAN CANCER.

SO THOSE HAVE BEEN YOU KNOW, ARE CONTINUING TO BE MONITORED.

BUT IN SEPTEMBER 2024, JNJ ACTUALLY INCREASED A SETTLEMENT RELATED TO THESE OF AROUND $8 BILLION, WHICH WOULD BE RESOLVED THROUGH ONE OF THEIR SUBSIDIARIES.

CHAPTER 11 BANKRUPTCIES AGAIN REPRESENTING ANOTHER ATTEMPT TO RESOLVE THIS.

THAT SAID, THE BANKRUPTCY IS PENDING AND WE'LL CONTINUE TO MONITOR THIS SITUATION AS THEY TRY TO RESOLVE AND IMPROVE THEIR QUALITY AND SAFETY FOR MANY OF THE CONSUMERS THEY SERVE.

SO WITH THAT SAID, THAT REPRESENTS, YOU KNOW, MY PREPARED REMARKS FOR THE ECONOMIC MARKET DATA, THE DISTRICT INVESTMENT PORTFOLIO, AND THE ESG RISK RATING OF THE PORTFOLIO.

I'LL INVITE ANY OTHER QUESTIONS THAT THE COMMITTEE MAY HAVE AT THIS AT THIS POINT.

THANK YOU. JUSTIN. COMMITTEE MEMBERS.

AT THIS POINT, ARE WE TAKING QUESTIONS JUST DIRECTED TOWARD JUSTIN'S PRESENTATION OR THE ENTIRETY OF YOUR PRESENTATION? DO YOU HAVE MORE TO COME? I HAVE NOTHING ELSE TO ADD.

SO, YEAH, WE CAN DO QUESTIONS ON THE WHOLE ENCHILADA.

SO DIRECTED TOWARD YOURSELF OR JUSTIN AT THIS POINT.

THANK YOU. WITH THAT IN MIND, WE'RE OPEN TO QUESTIONS.

YOU'RE GOOD. DIRECTOR.

YEAH. THANK YOU. THIS IS GREAT PRESENTATION.

YEAH. I GUESS ONE THING.

DO WE HAVE THE DISTRICT'S ESG POLICY AND HOW WE INVEST AND WHY WE INVEST AND THAT.

[00:55:04]

I SORT OF UNDERSTAND IT PERIPHERALLY, BUT IT'S ACTUALLY IN THE NEXT ITEM, WE'RE GOING TO TALK ABOUT THE INVESTMENT POLICY AND THERE'S A SECTION IN THERE THAT TALKS ABOUT OUR ESG STRATEGY. SO WE CAN TALK ABOUT IT.

YEAH. SO IT'S IN THERE AND THEN WE CAN DISCUSS IT A LITTLE BIT IF YOU LIKE.

OKAY. LET ME SEE WHAT PAGE THAT IS.

I HAVE A QUESTION FOR JUSTIN.

JUST VERY BROAD GENERAL AND GIVEN MY OWN EXPERIENCE WITH INVESTMENT REPORTS OVER THE LAST 7 OR 8 YEARS I WAS A MEMBER OF THE COMMITTEE FOR SEVERAL YEARS, AND THEN I'VE BEEN OFF FOR SEVERAL YEARS, AND NOW I'M BACK.

AND ONE OF THE THINGS THAT I THINK THE THING THAT STOOD OUT THE MOST FOR ME IN THIS REPORT WAS THE APPROXIMATE PARITY BETWEEN OUR HOLDINGS IN TREASURY AND CORPORATE ASSETS, AND I HAD NEVER SEEN THAT BEFORE.

WE'VE BEEN HISTORICALLY HEAVILY WEIGHTED AS MOST PUBLIC AGENCIES TOWARDS HOLDINGS IN TREASURIES AND RATHER MINIMAL CORPORATE HOLDINGS.

SO IS THIS A PHENOMENON THAT IS.

IN OTHER WORDS, EAST BAY PARKS, OUR INVESTMENT PORTFOLIO IS I DON'T HAVE THE FIGURES IN FRONT OF ME.

IT WAS CLOSE, SOMEWHERE IN THE REALM OF 30% CORPORATE BONDS, 30% TREASURIES AS OF THE END OF THE THIRD QUARTER.

IS THAT A PHENOMENA FOR US? IS IT A REFLECTION OF THE UNIQUE POST-COVID INFLATIONARY PERIOD? AND ARE THINGS LIKELY TO GO BACK TO A MORE HISTORICALLY THE HISTORICAL PRECEDENT OF BEING HEAVILY INTO TREASURIES AND SIMILAR ASSETS AS OPPOSED TO CORPORATE.

I'M JUST THROWING THAT OUT THERE IN A VERY GENERAL SENSE, BECAUSE IT STOOD OUT FOR ME AND IT MIGHT BE SIMPLY BECAUSE I HAVEN'T BEEN FOCUSED ON THAT FOR A COUPLE OF YEARS.

WELL, THANK YOU FOR THE QUESTION.

YOU KNOW, I WOULDN'T SAY THAT THERE IS YOU KNOW, A SORT OF PARITY BETWEEN CORPORATE AND TREASURY SORT OF WEIGHTINGS IN THE DISTRICT'S PORTFOLIO OR ANY PORTFOLIOS FOR OUR CUSTOMERS. WHAT I WILL SAY IS THAT A LOT OF THIS IS DRIVEN BY WHAT WE SEE WITH RESPECT TO SPREADS AND RELATIVE VALUE AND AT THIS POINT IN TIME, IN THIS CYCLE OF THE ECONOMY, WE'RE SEEING A LOT OF VALUE WITH RESPECT TO POTENTIAL RISK TAKING IN CORPORATE SECURITIES RELATIVE TO TREASURY SECURITIES AND IN THAT REGARD, WE'VE SEEN QUITE A QUITE A NUMBER OF PORTFOLIOS INCREASE THE SORT OF RATIO OF CORPORATE HOLDINGS RELATIVE TO OTHER HOLDINGS IN THE PORTFOLIO AND I THINK, TO BE FRANK, A LOT OF IT IS REALLY DUE TO JUST THE RELATIVE VALUE, THE SPREAD THAT WE'RE SEEING IN THESE CORPORATE HOLDINGS. THE ONE THING THAT I SHOULD ALSO BACK UP AND SAY IS THAT WE HAVE A VERY DELIBERATE AND CAREFUL SORT OF APPROVED LIST FOR WHAT CORPORATE HOLDINGS WE MAY PURCHASE ON BEHALF OF ANY CUSTOMER.

AND WE WORK IN CONJUNCTION WITH US, BANK CORP ASSET MANAGEMENT AND THEIR CREDIT TEAM TO CAREFULLY VET THOSE QUARTER TO QUARTER, MONTH TO MONTH, AS EARNINGS ARE OUT AND AS ISSUERS COME TO MARKET.

SO IT'S NOT YOU KNOW, IT'S NOT OFTEN THAT YOU'LL SEE NEW NAMES ADDED OR NEW NAMES OR OLD NAMES REMOVED FROM THE PORTFOLIO AND THAT, YOU KNOW, THERE IS A VERY DELIBERATE AND CAREFUL SORT OF, YOU KNOW, FUNDAMENTAL CREDIT ANALYSIS THAT GOES INTO EACH OF THESE CORPORATE NAMES THAT ARE THAT ARE PERMITTED TO BE HELD FOR THE PORTFOLIO.

SO, YOU KNOW, ASIDE FROM CREDIT RISK ANALYSIS REALLY, AT THE END OF THE DAY, I WOULD SAY THAT THE IT'S REALLY THE SPREAD RELATIVE TO TREASURIES THAT'S DRIVING THE INCREASE IN CORPORATE HOLDINGS RELATIVE TO TREASURIES.

OKAY. FROM WHAT YOU'RE DESCRIBING, IT ISN'T NECESSARILY A UNIQUE MOMENT IN TIME THAT FINDS US MORE, MORE INVESTED IN CORPORATE BONDS THAN WE HAVE BEEN IN THE PAST.

IS JUST A REFLECTION OF INTEREST RATE CYCLES IN TREASURY CYCLES.

IS THAT. YEAH.

I WOULD SAY THAT'S FAIR AND AGAIN, IT'S IN ADDITION TO THAT, THE SPREAD OF CORPORATE HOLDINGS RELATIVE TO, FOR EXAMPLE, TREASURIES.

WE'RE JUST FINDING A LOT OF VALUE IN THAT SPACE AT THIS POINT IN TIME.

OKAY. AND ARE WE, COMFORTABLE STILL WITH USING THE TREASURY INDEXES AS OUR BENCHMARK?

[01:00:09]

SOMETIMES IT MAY RANGE BETWEEN 0 TO 3 YEARS OR AS LONG AS 1 TO 5.

AND IN THIS CASE, THE DISTRICT HAS CHOSEN A 1 TO 5 TREASURY INDEX.

AND YOU KNOW, WE'LL CONTINUE TO SUPPORT THAT.

IT'S IN LINE WITH CALIFORNIA STATE CODE AND IF THE DISTRICT CHOOSES TO REVISIT THAT, YOU KNOW, WE'LL CERTAINLY WORK WITH YOU IN CONSULTATION TO FIGURE OUT THE BEST BENCHMARK FOR THE DISTRICT PORTFOLIO.

YEAH, I ALWAYS FOUND IT VERY IMPORTANT THAT WE ARE COMFORTABLE WITH THAT BENCHMARK.

IN ORDER TO REALLY JUDGE PERFORMANCE AND AGAIN, I FIND MYSELF NEWLY BACK ON THE COMMITTEE AND, MY MEMORY IS THAT WAS AN ISSUE FOR US SOME YEARS AGO IN TERMS OF THE MIX THAT MADE UP OUR BENCHMARK AND IT WOULD SEEM REASONABLE TO HAVE A US TREASURIES INDEX BENCHMARK.

THE LAST QUESTION I HAVE IS FOR YOU, DEBORAH.

AND THAT IS AGAIN, BY ABSENCE FROM THE MEETINGS I'VE TRIED TO WATCH THEM, BUT THE PENSION TRUST HAS BEEN NOW USED FROM OUR ORIGINAL $10 MILLION FUNDING.

AND I'M WONDERING WHAT THE FUTURE OF THAT PENSION TRUST IS AND WHETHER IT IS SOMETHING THAT ISN'T REALLY A CONTINUING TOOL WE'RE GOING TO USE FOR POTENTIAL SOFTENING OF THE IMPACT OF UNUSUAL CALPERS ASSESSMENTS, OR THE NEED FOR HIGHER THAN ANTICIPATED CALPERS INVESTMENTS FOR OUR PENSION FUNDS.

SO MAYBE THAT HAS BEEN DISCUSSED AT LENGTH BY THE COMMITTEE.

AND I JUST MISSED IT.

YEAH. GREAT QUESTIONS.

I'M GOING TO JUMP BACK TO YOUR OTHER QUESTIONS AND THEN I'LL TALK ABOUT THE PENSIONS.

I DO, YOU KNOW, HAVING BEEN HERE FOR FOUR YEARS AND JUST THIS IS PRETTY NEW TO OUR PORTFOLIO.

I DO THINK YOU'RE RIGHT THAT OUR CORPORATE EXPOSURE HAS, CHANGED MAYBE OVER MAYBE 5 OR 10 YEARS THAT WE HAVE INCREASED AND SO I'M KIND OF INTERESTED IN THAT MYSELF NOW AND SO I WILL GO BACK AND JUST SEE IF THAT PERCENTAGE HAS CHANGED.

YEAH. I DON'T HAVE ANY DATA IN FRONT OF ME, BUT I'M INTERESTED.

AND THEN THE OTHER QUESTION YOU HAD ASKED, WHAT WAS THE OTHER ONE I WAS GOING TO ANSWER? [INAUDIBLE]. WELL, NO, NO, NOT THE PENSION TRUST, BUT THE OTHER ONE YOU HAD ASKED JUSTIN ABOUT.

THE BENCHMARK.

I WAS CURIOUS ABOUT OUR EVOLUTION IN.

OKAY, SO WE HAD A I THINK WE HAD A 1 TO 3 YEAR BENCHMARK AND THEN WHEN YOU WERE ON THE COMMITTEE SEVERAL YEARS AGO, WE CHANGED TO THE 1 TO 5 YEAR BENCHMARK.

OKAY. SO WE EXTENDED THE DURATION OF THE PORTFOLIO.

WE, WE AND WE'LL TALK ABOUT THAT IN THE NEXT PRESENTATION THAT WE MADE IT POSSIBLE TO INVEST LONGER THAN FIVE YEARS.

AND SO WE EXTENDED THE BENCHMARK.

SO YEAH, I DO THINK IT'S WORTH TAKING A LOOK AT.

I COULD TALK TO JUSTIN AND SEE, IS THIS STILL THE BEST MATCH FOR OUR PORTFOLIO? IS THERE ANYTHING WE WANT TO DO DIFFERENTLY? AND THEN LASTLY, THE PENSION TRUST.

SO YES, IN THE LAST BOARD MEETING OF THE YEAR, WE APPROVED USING THE ALMOST THE ENTIRE PENSION TRUST TO PAY DOWN SOME OF OUR LONG TERM LIABILITIES WITH CALPERS AND ALSO TO DO A FRESH START.

AND SO WE'LL BE GETTING A NEW ACTUARIAL REPORT, AND I'LL BE BRINGING THAT TO THE FINANCE COMMITTEE.

I WAS GOING TO LOOK AT THE WORK PLAN FOR THE YEAR, BUT WE'LL GET TO THAT AT OUR LAST AGENDA ITEM.

BUT THAT IS COMING LATER IN THE YEAR WHERE WE'LL TALK ABOUT OUR CALPERS LONG TERM LIABILITIES.

IT SHOULD HAVE DECREASED SIGNIFICANTLY SINCE WE MADE THAT CHANGE AND WE THE REASON WE WERE ABLE TO DO THIS AND THAT, WE DECIDED THAT WE DIDN'T NEED TO HOLD ON TO THE PENSION TRUST, IS THAT OVER THE LONG TERM, OUR RATES ARE ACTUALLY DECREASING.

SO WE HAD THIS.

IT'S HARD TO TALK ABOUT IT WITHOUT HAVING A GRAPH IN FRONT OF YOU, BUT WE ACTUALLY HAD A SPIKE IN OUR IN OUR REQUIRED PAYMENTS.

AND SO WE WERE SETTING ASIDE FUNDS IN ADVANCE TO TAKE CARE OF THAT SPIKE.

AND WE'RE NOW PAST THAT BIG BUBBLE.

AND WE'RE NOW ON THE DOWNHILL SIDE OF THAT.

[01:05:03]

AND IT SHOULD BRING US LONG TERM STABLE RATES IN THE FUTURE.

SO ONCE WE HAVE THAT NEW REPORT, WE'LL BRING IT TO YOU.

ALL OF WHICH IS A GOOD THING.

THANK YOU. YEAH.

OKAY. SO MORE TO COME ON THAT.

IT WAS AS I JUST HAVE BEEN A STRONG SUPPORTER IN THAT PENSION TRUST CONCEPTUALLY BECAUSE AS LONG AS IT WAS ANTICIPATED THAT WE WOULD NEED PERHAPS EXTRAORDINARY FUNDING IT MADE SENSE TO CREATE THAT RESERVE FOR MAKING THOSE PAYMENTS IN THE FUTURE, BECAUSE THAT RESERVE WAS ABLE TO OBTAIN HIGHER RETURNS THAN OUR ORDINARY INVESTMENT VEHICLES. SO.

EXCUSE ME. IT SERVED US REALLY WELL DURING THAT TIME PERIOD AND I THINK ITS USEFULNESS IS NOW PAST.

RIGHT AND SO WE SHOULD BE HAVING LOWER CALPERS RATES IN THE FUTURE.

GREAT. THANK YOU.

GLAD I ASKED. ALL RIGHT.

SO ARE THERE PUBLIC COMMENTS OR ANY FURTHER DISCUSSION FROM STAFF? NO PUBLIC COMMENTS. COMMITTEE? ALL RIGHT. SO WE HAVE A RECOMMENDATION TO RECOMMEND ACCEPTANCE OF THE INVESTMENT PORTFOLIO REPORT.

AND IS THERE A MOTION? SO MOVED. SECOND.

THE MOTION TO ACCEPT THE RECOMMENDATION TO OR TO MAKE THE RECOMMENDATION TO THE BOARD OF DIRECTORS TO ACCEPT THE INVESTMENT REPORT AND MARKET REVIEW.

WE HAVE A MOTION AND A SECOND.

ALL THOSE IN FAVOR SAY AYE.

AYE. AND THE RECOMMENDATION PASSES.

THANK YO. THANK YOU, JUSTIN.

YES, JUSTIN, THANK YOU VERY MUCH.

YEAH. THANK YOU EVERYONE, AND WE'LL LOOK FORWARD TO BEING WITH YOU NEXT QUARTER.

BUT I'LL STAY ON DURING THE INVESTMENT POLICY DISCUSSION IN CASE THERE'S ANY QUESTIONS.

THANK YOU. APPRECIATE THE PRESENTATION.

IT WAS VERY WELL PRESENTED JUSTIN.

THANK YOU. OKAY.

SO WE WILL MOVE TO THE NEXT AGENDA ITEM 4B RECOMMENDATION TO THE BOARD OF DIRECTORS BY THIS COMMITTEE TO ACCEPT THE 2025 INVESTMENT POLICY.

ALL RIGHT.

SO DEBORAH SPAULDING AGM OF FINANCE AND MANAGEMENT SERVICES AND CFO.

AND SO THIS IS OUR ANNUAL PRESENTATION OF OUR INVESTMENT POLICY.

WE BRING THIS TO THE FINANCE COMMITTEE AND THEN TO THE BOARD EVERY YEAR AS IS REQUIRED BY OUR POLICY, AND IT'S ALSO A BEST PRACTICE.

SO THE POLICY ITSELF STARTS ON PAGE 102 AND THEN DIRECTOR WAESPI YOU WERE ASKING ABOUT ESG AND THAT'S IN SECTION TEN.

HOLD ON. SO IT STARTS ON PAGE 109.

ALL RIGHT. IF YOU WANT TO READ THROUGH THAT WHILE I'M TALKING OR AT SOME OTHER POINT.

I'M NOT. THERE WE GO.

SO I'LL FIRST PROVIDE SOME CONTEXT ABOUT OUR INVESTMENT POLICY AND WHY WE HAVE IT.

SO THE STATE CODE.

CALIFORNIA GOVERNMENT CODE ACTUALLY SETS OUT MANY DETAILED REQUIREMENTS OF HOW LOCAL GOVERNMENTS MAY AND MAY NOT INVEST THEIR SURPLUS FUNDS.

SO IN ADDITION TO FOLLOWING WHAT THE STATE CODE REQUIRES, WE HAVE AN INVESTMENT POLICY.

IT'S A BEST PRACTICE, BUT IT IS NOT.

IT'S NOT ACTUALLY REQUIRED BY STATE CODE AND IT ALLOWS US TO NOT JUST, YOU KNOW, ITERATE WHAT'S IN THE STATE CODE, BUT ALSO ADD OUR OWN SPECIAL FLAVOR, ANY REQUIREMENTS THAT WE WOULD LIKE TO HAVE.

SO IT PROVIDES SOME STRUCTURE TO GUIDE US IN MANAGING OUR CASH AND INVESTMENT MANAGEMENT FUNCTION.

IT HIGHLIGHTS THE MAIN OBJECTIVES WHICH ARE.

THE PRIMARY IS SAFETY OF OUR INVESTMENT.

SO WE WANT TO MAKE SURE THAT WE AREN'T EVER AT RISK OF LOSING OUR PRINCIPAL THAT WE'RE INVESTING.

THE SECOND IMPORTANT OBJECTIVE IS LIQUIDITY.

SO WE WANT TO MAKE SURE THAT EVERYTHING THAT WE INVEST IN IS EASY TO SELL.

WE NEVER WANT TO GET CAUGHT HOLDING ON TO SOMETHING THAT'S HARD TO SELL AND THEN THE THIRD LEAST IMPORTANT IS YIELD.

SO AS YOU NOTICE, MAYBE IN YOUR OWN RETIREMENT PORTFOLIOS, THE YIELD YOU GET WHEN YOU'RE INVESTING IN STOCKS, FOR EXAMPLE, CAN BE HIGHER THAN WHAT THE PARK DISTRICT IS ABLE TO ABLE TO INVEST IN.

SO WE'RE LIMITED BY THAT STATE CODE.

SO WE DON'T EARN A VERY HIGH YIELD, BUT WE HAVE VERY SAFE AND LIQUID INVESTMENTS AND THAT'S A GOOD THING.

WE ALSO ADD INTO OUR POLICY A COUPLE OF THINGS THAT ARE NOT PART OF STATE CODE SUSTAINABILITY AND THAT'S IN THE FORM OF THAT ESG SECTION OF THE POLICY AND THEN PUBLIC

[01:10:01]

SO WE USE PFM, OUR INVESTMENT ADVISORS, TO LOOK AT OUR POLICY EACH YEAR AND GIVE US ANY SUGGESTED CHANGES.

SOMETIMES THERE ARE CHANGES TO STATE CODES, OR SOMETIMES THERE ARE JUST SOME IDEAS THAT HAVE COME OUT THAT ARE BEST PRACTICES AND THEN I'LL ALSO GIVE SOME CONTEXT ABOUT THE FINANCE COMMITTEE'S RESPONSIBILITIES.

SO THE TREASURER IS RESPONSIBLE FOR OVERSEEING PARK DISTRICT INVESTMENT POLICIES AND SO WE ACTUALLY NOW HAVE FOUR POLICIES.

THE ONE THAT WE'RE TALKING ABOUT TODAY IS GUIDING OUR POOLED CASH FOR THE PARK DISTRICT.

BUT WE ALSO HAVE AN INVESTMENT POLICY FOR OUR EBRPD RETIREMENT FUND.

WE HAD ONE FOR OUR PENSION TRUST AND WE HAVE ONE FOR OUR DEFERRED COMPENSATION PLAN INVESTMENTS.

SO AGAIN, THE FINANCE COMMITTEE REVIEWS THE INVESTMENT POLICY.

YOU ALSO REVIEW THESE QUARTERLY INVESTMENT REPORTS, WHICH WE JUST SAW AND THEN YOU RECOMMEND THEM TO THE FULL BOARD AND YOU GET THESE UPDATES FROM OUR INVESTMENT ADVISORS AS YOU JUST DID AND THE INVESTMENT POLICY ALSO REQUIRES THE BOARD TO DELEGATE RESPONSIBILITY FOR INVESTMENTS TO THE CFO.

SO THAT'S PART OF THE PART OF THE POLICY AND PART OF WHAT YOU'LL VOTE ON WHEN IT COMES TO THE BOARD AND NOW AT LAST, I WILL GET INTO THE CHANGES THAT ARE BEING RECOMMENDED AND SO THIS BEGINS ON PAGE 106.

YOU CAN SEE THE TRACK CHANGES THAT ARE.

SO THE POLICY BEGINS ON PAGE 102.

BUT ON PAGE 106 ARE MOST OF THE CHANGES.

SO FIRST WE ARE CLARIFYING THE MATURITY DATE FOR TREASURIES AND FOR FEDERAL AGENCIES TO BE NO LONGER THAN FIVE YEARS FROM THE DATE OF THE TRADE SETTLEMENT AND THEN I HAVE AN ASTERISK THERE THAT WE ACTUALLY HAVE SECTION 13 OF OUR POLICY THAT ALLOWS US TO INVEST LONGER TERM THAN THAT. SO THAT WAS APPROVED BY THE BOARD BACK IN 2018 AND WE HAVE THAT AUTHORITY UNTIL THE BOARD DECIDES OTHERWISE.

SO YOU COULD SAY, NO, I DON'T FEEL LIKE THAT'S SAFE AND YOU COULD BRING US BACK TO A SHORTER MATURITY.

BUT WE WANTED TO HAVE THAT FLEXIBILITY.

WE DO HAVE SOME FUNDS, FOR EXAMPLE, OUR PERMANENT FUNDS, WHERE WE WERE HOLDING ON TO THESE INVESTMENTS FOREVER AND SO WE WANTED TO HAVE THAT FLEXIBILITY.

IF AN INVESTMENT CAME UP THAT WAS HAD A REALLY GREAT RATE OF RETURN, THAT WE'D BE ABLE TO INVEST LONG, REALLY LONG TERM.

ANOTHER CLARIFICATION BEING ADDED IS THAT THERE'S NO RATING REQUIREMENT FOR TREASURIES AND FOR FEDERAL AGENCIES.

AND ADDITIONALLY, WE ARE ADDING A LIMITATION THAT FOR BANKER'S ACCEPTANCES, WE CAN HOLD NO MORE THAN 30% IN ANY SINGLE COMMERCIAL BANK AND THEN LASTLY, A FEW PAGES LATER ON IN SECTION 9.13, UPDATING THE LANGUAGE TO ADD MORTGAGE PASS THROUGH INVESTMENTS AND THEN AT THE VERY END OF THE POLICY, WE'RE UPDATING THE NAME OF OUR PFM, OUR INVESTMENT ADVISOR, AS WELL AS THE NAME OF THE CUSTODY BANK THAT WE USE.

THEIR NAME CHANGED IN THE LAST YEAR, SO WE'RE JUST UPDATING THAT TO REFLECT IT.

I'LL TALK BRIEFLY ABOUT THE ESG SECTION OF OUR POLICIES.

THAT'S SECTION TEN.

SO THIS WAS ADDED BACK IN 2020.

IT'S A SCREENING CRITERIA AND YOU SAW JUSTIN JUST WALK THROUGH HOW THAT WORKS.

SO NOT EVERY INVESTMENT THAT WE HAVE HAS AN ESG SCORE.

A LOT OF OUR PORTFOLIO NOW DOES.

IT'S A GREATER PERCENTAGE EACH YEAR.

THAT DOES PROVIDE AN ESG SCORE AND SO WE'RE ABLE TO LOOK AT THAT SCORE AND THE IDEA IS NOT JUST THAT WE WANT TO MOVE TOWARDS MORE ENVIRONMENTALLY FRIENDLY, SOCIALLY FRIENDLY AND GOVERNMENT GOVERNANCE.

HIGH QUALITY GOVERNANCE INVESTMENTS.

BUT WE ALSO WANT TO BY SHOWING THAT WE VALUE THIS SCORE, WE'RE WE'RE HOPING THAT COMPANIES ARE ENCOURAGED NOT JUST TO PROVIDE US WITH THE SCORE, BUT TO IMPROVE THEIR OWN SCORE.

AND SINCE 2020, WE HAVE SEEN OUR ESG SCORE IMPROVE AND WE'RE NOW IN THAT LOW RISK CATEGORY.

I DID HEAR JUSTIN SAY THAT IT CAN CHANGE.

AND OBVIOUSLY IT'S NOT WHAT WE WANT.

THE IDEA IS FOR US TO TO EVENTUALLY IT MOVED TO A LOWER AND LOWER RISK RATING.

SO THAT'S ALL I HAVE FOR MY PRESENTATION.

I'M HAPPY TO TAKE ANY QUESTIONS AND I WILL DROP THE PRESENTATION.

OKAY. THANK YOU DEBORAH.

SO THE UPDATES THAT WE'RE CONTEMPLATING ARE BASICALLY MANDATED BY LAW BECAUSE THE GOVERNMENT CODE IS OR ACCOMMODATING CHANGES TO STATE LAW UNDER THE GOVERNMENT CODE.

[01:15:02]

THEY'RE CLARIFYING THINGS SO THAT THEY'RE MORE IN ALIGNMENT WITH STATE CODE AND SOME OF THEM ARE BECAUSE THE STATE CODE CHANGED.

GOT IT. MEMBERS.

SO THANK YOU FOR THAT AND I HAVE TO, YOU KNOW, SAY I APPRECIATE YOU AND OUR CONSULTANTS BEING ON THE BALL ENOUGH TO, YOU KNOW, STAY UP ON THE WAY.

THINGS NEED TO CHANGE AS THE STANDARDS CHANGE.

SO THANK YOU FOR KEEPING US ON THAT.

I'M ABSOLUTELY SURE THAT THERE'S AGENCIES OUT THERE THAT JUST THEY JUST MISS IT, YOU KNOW.

AND I DON'T KNOW WHAT HAPPENS AFTER THAT.

BUT WE DON'T HAVE TO WORRY ABOUT THAT BECAUSE WE HAVE COMPETENT FOLKS TAKING CARE OF US AND I JUST ALSO WANTED TO SAY THAT THE ESG, THE WHOLE ESG THAT'S BEEN AROUND FOR GOING ON FIVE YEARS NOW, AND I BELIEVE THAT TO BE A VERY DESIRABLE TOOL FOR US TO JUST SEE HOW WE FIT IN WITH THE WHOLE, THE WHOLE GREATER SOCIAL WORLD BEYOND WHAT WE DO WITH PARKS, TRAILS AND OPEN SPACE HERE.

SO I REALLY LIKE THAT A LOT, AND I IT'S NOT IT LOOKS LIKE BASED ON THE RATINGS, THE AGGREGATE RATING THAT WE HAVE, THAT IT'S NOT JUST SOMETHING THAT WE THROW OUT THERE AND SAY, ISN'T THIS NICE, BUT WE'RE ACTUALLY FOLLOWING IT AND IT SEEMS TO BE GRADUALLY IMPROVING. BECAUSE GENERALLY SPEAKING, THE WORLD IS IMPROVED.

THE COUNTRY IS IMPROVING.

WE'LL SEE HOW THAT GOES. BUT IT'S GREAT THAT WE HAVE THAT OUT THERE AND WE'RE TRANSPARENT ABOUT IT.

WE LET FOLKS KNOW AND IT CONTINUES.

SO AGAIN, THANK YOU FOR WHAT YOU'VE BEEN DOING.

GOOD. YEAH. ALL RIGHT.

DIRECTOR WAESPI. NO QUESTION.

JUST THANK YOU FOR THE REPORT AND THANK YOU FOR POINTING OUT THE ESG GUIDELINES.

I GOT HIM ON PAGE 115.

ALRIGHT. GREAT.

I APPRECIATE DIRECTOR MERCURIO COMMENTS ABOUT THE BENEFITS OF THE ESG COMPONENT TO OUR INVESTMENT POLICY AND THE ABILITY TO LOOK AT OUR PORTFOLIO AND ACTUALLY LOOK AT HOW WE'RE DOING ON THE ESG PERFORMANCE INDEXES I GUESS WE WOULD REFER THEM TO.

I REMEMBER BEING BEFORE WE DID THAT, I REMEMBER HAVING THIS VERY AWKWARD VIEW TOWARD OUR PORTFOLIO BECAUSE AS AN INDIVIDUAL, THE SOCIAL JUSTICE WARRIOR IN ME WOULD LOOK AT SOME OF OUR HOLDINGS AND SAY, WE SHOULDN'T HOLD THAT COMPANY. YOU KNOW, ONE OF THEM'S STILL HERE.

WALMART. YOU KNOW, I FROM THE FIRST YEAR ON THE BOARD, IN THIS COMMITTEE, I WOULD RAIL AGAINST US HOLDING WALMART BECAUSE OF ITS HISTORIC REALLY, BAD LABOR POLICIES, AND OVER TIME THAT BECOMES INCREASINGLY AWKWARD BECAUSE YOU JUST LEARN OF MORE COMPANIES OUT THERE THAT BEHAVE BADLY AT TIMES OR GENERALLY AND ONE BOARD MEMBER REALLY CAN'T START LOOKING AT OUR STAFF AND OUR INVESTMENT MANAGERS AND SAYING, DAMN IT, DON'T OWN WALMART.

WE SHOULDN'T HAVE WALMART IN OUR PORTFOLIO.

AND I STILL FEEL THAT WAY.

BUT THE DIFFERENCE IS WITH THE ESG PERFORMANCE INDEXES AND THE ABILITY TO LOOK AT OUR OVERALL PORTFOLIO AND HOW WE MEASURE AGAINST THOSE INDICES AND THE DESIRED GOALS ASSOCIATED WITH ESG.

I CAN LOOK AT THE ENTIRE PORTFOLIO AND SAY, YOU KNOW, WE'RE DOING PRETTY WELL.

AND THE SOCIAL JUSTICE WARRIOR IN ME SAYS, YOU KNOW, WE'RE DOING BETTER THAN MOST CERTAINLY IN THE PRIVATE SECTOR AND IN THE PUBLIC SECTOR.

SO I APPRECIATE HAVING THAT WHOLE VEHICLE AVAILABLE FOR MY OWN ANALYSIS OF OUR PORTFOLIO.

SO I JUST DON'T FEEL AS BAD ABOUT ANY ONE COMPANY WHOSE BONDS WE OWN AND WHO'S DOING SOMETHING BAD OUT THERE AND WE ALL KNOW THAT PUBLIC AGENCY INVESTMENTS ARE A THING IN TERMS OF POLITICAL ISSUES IN THE WORLD THESE DAYS.

SO I REALLY APPRECIATE HAVING THAT.

I'M GLAD WE PUT THAT TIME AND EFFORT INTO IT AND APPRECIATE OUR INVESTMENT MANAGERS ADHERENCE TO THE BOARD'S

[01:20:10]

THAT'S JUST MY GENERAL COMMENTARY AND IT'S JUST SOMETHING WAS GOING THROUGH MY MIND AS I WAS REVIEWING THIS AND COMPARING IT ONCE AGAIN AND I'LL ONLY DO IT AT THIS MEETING WHERE I WAS SEVERAL YEARS AGO.

SO THANK YOU. AND THANK YOU FOR THE PRESENTATION.

WE DO HAVE A RECOMMENDATION COMING TO MAKE TO THE FULL BOARD.

ARE THERE PUBLIC COMMENTS ON THIS TOPIC? NO PUBLIC COMMENTS. ALL RIGHT.

SO WITH THAT, WE HAVE A RECOMMENDATION TO THE BOARD TO ACCEPT THE 2025 INVESTMENT POLICY. IS THERE A MOTION? SO MOVED. MOVED BY DIRECTOR WAESPI.

SECONDED BY. SECONDED.

DIRECTOR MERCURIO.

WE HAVE A MOTION AND A SECOND.

ALL IN FAVOR, SAY AYE.

MOTION PASSES.

THANK YOU, DEBORAH.

ALL RIGHT. THANK YOU. ITEM FIVE IS INFORMATION.

[Informational Items]

AS ALWAYS. THAT IS REN.

THANK YOU REN.

GLAD TO BE HERE. GOOD AFTERNOON.

NOW THAT IT IS AFTERNOON.

COMMITTEE MEMBERS. I AM HERE TO PROVIDE AN UPDATE.

IF YOU'LL BEAR WITH ME. I'M JUST GETTING MY PRESENTATION UP HERE.

OOPS. THANKS.

[INAUDIBLE].

HERE WE GO.

JOB ORDER CONTRACTING.

SO I'M HERE. LET ME BEGIN AGAIN.

REN BATES DIVISION LEAD OF DESIGN AND CONSTRUCTION.

I'M HERE, AS STATED BY DIRECTOR COFFEY TO PROVIDE AN UPDATE ON OUR JOB ORDER CONTRACTING PROGRAM.

THIS IS A QUARTERLY UPDATE.

THIS IS AN UPDATE AS REQUIRED BY OUR ADOPTED JOB ORDER CONTRACTING POLICY THAT THE BOARD ADOPTED.

SO JUST A BRIEF OVERVIEW.

I KNOW YOU ALL HEARD THIS BEFORE, BUT IT'S MY OPPORTUNITY TO REFRESH ON JOB ORDER CONTRACTING.

THIS IS A FIXED COST CONTRACT THAT ALLOWS US TO ENGAGE WITH CONTRACTORS TO BID ON A CATALOG OF CONSTRUCTION COSTS THAT IS PROVIDED TO US BY OUR CONSULTANTS, THE GORDIAN GROUP AND THAT PROVIDES PREVAILING WAGE AND MATERIAL COSTS FOR COSTS FOR LOCAL MATERIALS AND WAGES TO DO CONSTRUCTION WORK.

THIS CONSTRUCTION WORK IS FOR RENOVATION AND REPLACEMENT.

IT'S NOT FOR NEW CONSTRUCTION, BUT REPLACEMENT AND FIXING OF THINGS.

SO THESE ARE ANNUAL CONTRACTS AND PER THIS SLIDE, IT SAYS ON JANUARY 17TH, 2023, THE BOARD AUTHORIZED THESE CONTRACTS.

SO YOU'RE SAYING NOW IT'S 2025, WHAT'S UP WITH THE ONE YEAR CONTRACT.

SO WE HAVE A ONE YEAR CONTRACT THAT IS BASED ON WHEN WE ISSUE THE FIRST NP FOR A JOB ORDER.

SO WE'LL COME TO THE BOARD.

WE'LL GET THE APPROVAL OF THESE CONTRACTS.

WE WILL THEN EXECUTE THE CONTRACTS WHICH TAKE SOME TIME BECAUSE WE HAVE TO GO THROUGH ALL OF OUR ADMINISTRATIVE PROCESSES AND THEN WHAT WE DO IS WE THEN ENGAGE WITH THE CONTRACTORS AND START THE PRICING OF THE JOB ORDERS AND THEN ONCE WE ISSUE THE FIRST NTP THAT TRIGGERS THE ANNUAL CONTRACT.

SO IN OTHER WORDS, WE'RE NOT EATING UP THEIR CONTRACT WITH ADMINISTRATIVE TIME AND PRICING.

THAT GIVES US A FULL YEAR TO UTILIZE THEM UNDER THE CONTRACT.

SO WHAT THAT MEANS PRACTICALLY IS THAT OUR ROUND OF CONTRACTS TAKE ANYWHERE FROM 18 MONTHS TO TWO YEARS, AND THAT'S WHERE WE ARE NOW.

SO THESE CONTRACTS ARE MOST OF THEM HAVE TURNED OUT, ACTUALLY, WE ARE LAST DOWN TO OUR LAST TWO AND I'M GOING TO PROVIDE YOU AN UPDATE.

SO THAT'S WHERE WE ARE. WE'RE LOOKING TO.

CURRENTLY WE'RE PREPARING BID DOCUMENTS TO GO OUT TO BID HOPEFULLY AT THE END OF THIS MONTH TO ENTER INTO OUR NEXT ROUND OF EIGHT CONTRACTS, WHICH WE AGAIN WILL HOPEFULLY CONTINUE WITH THE SAME VALUES OF A MINIMUM CONTRACT OF $50,000 AND A MAXIMUM CONTRACT OF 2 MILLION.

SO AGAIN, WE'RE NOT ENCUMBERING ALL THAT 2 MILLION AT THIS POINT IN TIME.

THAT 2 MILLION IS JUST A BLANKET PO.

AND SO THE MONEY THAT'S UTILIZED FOR THESE IS NECESSARILY HAS TO COME FROM THE PROJECT ITSELF OR ANYTHING ALONG THOSE LINES.

AND SO THIS DOESN'T ENCUMBER ANY FUNDING.

[01:25:01]

AND AS A REMINDER, THE JOB ORDER CONTRACTING POLICY STIPULATES THAT WE CAN USE IT FOR PROJECTS THAT ARE OVER 50,000 WHICH WOULD NORMALLY HAVE TO GO OUT TO BID ANYWAYS.

SO THIS LIST, WHICH IS SMALL IN FRONT OF YOU, BUT IT'S ALSO IN YOUR PACKET, SHOWS ALL THE PROJECTS WE'VE COMPLETED WITH THIS LAST ROUND OF CONTRACTS.

SO CURRENTLY WE'VE COMPLETED 25 NOT PROJECTS BUT JOB ORDERS, EXCUSE ME, THAT HAVE TOTALED $8.8 MILLION IN WORK AND SO THIS IS ACTUALLY THE LARGE THIS ROUND OF CONTRACTS.

WE'VE COMPLETED THE MOST DOLLAR VALUE THAT WE HAVE IN THE SIX OR 5 OR 6 ROUNDS THAT WE'VE DONE.

I THINK THIS IS OUR FIFTH ROUND.

SO THAT SAID, LIKE I MENTIONED EARLIER, A LOT OF THESE CONTRACTS HAVE TERMED OUT, BUT WE'VE GOTTEN QUITE A BIT OF WORK DONE.

WE STILL HAVE A FEW PROJECTS THAT ARE IN CONSTRUCTION OR WE'VE ISSUED A NOTICE TO PROCEED FOR, AND THAT ADDS ANOTHER $1.3 MILLION OF WORK AT THIS POINT.

THESE PROJECTS MAY INCREASE, AS WE MIGHT HAVE SOME SUPPLEMENTAL WORK THAT NEEDS TO HAPPEN.

BUT AT THIS POINT, WE'VE WITH THIS ROUND OF CONTRACTS WE'VE COMPLETED, WE WILL HAVE COMPLETED $10 MILLION WORTH OF WORK FOR THE DISTRICT, WHICH IS PRETTY SIGNIFICANT AND IS, IN MY OPINION, A GOOD VALUE BECAUSE WE'VE GOTTEN A LOT OF WORK DONE THAT WOULD TAKE A BIT MORE TIME.

SO WITH THAT SAID, NOW I HAVE.

WELL, I CAN ANSWER ANY QUESTIONS IF YOU HAVE ABOUT THE PROGRAM AT THIS POINT BECAUSE I HAVE FURTHER ARE JUST SOME PHOTOS OF THE PROJECTS THAT HAVE BEEN COMPLETED.

SO I THINK IT'S NOW APPROPRIATE IF THERE ARE QUESTIONS I CAN I'M HAPPY TO FIELD THOSE JUST ABOUT THE PROGRAM OR HOW IT WORKS.

AS A REFRESHER. DIRECTOR WAESPI.

SURE. THANKS, RANDY.

YOU KNOW, I'VE BEEN IN FAVOR OF THIS PROGRAM SINCE ITS INCEPTION.

I THINK LOTS OF PROJECTS GET DONE.

I THINK IT'S EVERYTHING YOU DESCRIBED.

IT'S MUCH EASIER.

YOU GET SOME CONTRACTORS THAT ARE REALLY INTO DOING WORK FOR THE PARK DISTRICT, AND THEY SEEM TO BE DOING A GOOD JOB.

I GUESS MY ONLY QUESTION IS IF I'M DOING MY MATH CORRECTLY IN THIS 23, 2023 CONTRACT, ARE WE ALLOWED 2 MILLION FOR 8 CONTRACTS? CORRECT. SO IF MY MATH IS CORRECT, THAT'S 16 MILLION.

CORRECT AND IF I'M LOOKING AT THE PROJECTS THAT HAVE COMPLETED SO FAR, THAT'S ABOUT 10 MILLION.

SO THE DISCREPANCY MIGHT AND I KNOW YOU WHAT YOU'RE THINKING.

IT'S I JUST THINK IT'S SUCH A GREAT OPPORTUNITY.

WHAT ARE THE CONTRACTORS TOO BUSY TO DO THE OTHER 6 MILLION? BECAUSE I KNOW WE'VE GOT LOTS AND LOTS OF PROJECTS.

YEAH, [INAUDIBLE].

DON'T SEEM LIKE THEY'D BE THAT TECHNICALLY DIFFICULT TO GET THEM GOING.

I MEAN, I GUESS MY QUESTION IS, CAN WE IS THERE A POSSIBILITY? WHAT'S THE TIE UP OF NOT SPENDING ALL OF IT? SO IT'S A COUPLE OF THINGS.

IT'S A GREAT QUESTION. AND I THINK THERE ARE A COUPLE OF FACTORS THAT CONTRIBUTE TO THE FACT THAT WE AREN'T USING THE FULL CAPACITY.

ONE BEING, THE AS YOU MENTIONED, IT'S NOT A, IT'S A, IT'S TIMELINE AND IT'S CONTRACTORS. SO IT BOILS DOWN TO IS SOMETIMES AND IT'S COST.

SO EVENTUALLY WE HAVE WE BID NUMEROUS CONTRACTS BECAUSE SOMETIMES WE HAVE CONTRACTORS THAT ARE MORE WILLING TO WORK WITH US IN TERMS OF LIKE LOOKING AT WHERE WE ARE AND SOME CONTRACTORS THAT ARE LESS RESPONSIVE AND SO WHAT OUR PROGRAM HAS DONE IS WE BID THREE A'S, THREE B'S AND TWO PAVINGS SO THAT WE HAVE THAT FLEXIBILITY IN TERMS OF USING THAT WHERE WE SOME OF THE PROBLEM OR SOME NOT THE PROBLEM.

EXCUSE ME, THE SOME OF THE DISCREPANCY WHERE WE DON'T UTILIZE THE CAPACITY IS BASED ON INTERACTING WITH THAT CONTRACTOR AND SOMETIMES WE'VE JUST IN THE PAST WE'VE HAD CONTRACTORS THAT HAVE DEFAULTED AND NOT IN THIS ROUND.

BUT SO WE'VE TRIED TO AS WE'VE DEVELOPED THESE MOVE FORWARD WITH HAVING OUR IN OUR MANDATORY PRE-BID MEETINGS, STATING TO OUR CONTRACTORS, LOOK, DON'T COME LOW BID THIS BECAUSE IT IS WE HAVE WE AWARD ON LOW BID.

SO IN THE PAST WE'VE HAD CONTRACTORS BID LESS THAN ONE.

SO IN OTHER WORDS THEY'RE BIDDING LOWER THAN COST AND SO BECAUSE WE HAD TO TAKE LOW BID WE THAT DOESN'T WORK AND SO THAT EATS UP CAPACITY BECAUSE THEN THEY'RE TRYING TO MAKE UP. ANYWAY THIS IS A LONG ANSWER TO YOUR QUESTION, BUT IT'S VERY NUANCED BECAUSE IT'S NOT ONE THING THAT ALLOWS US TO USE THAT CAPACITY.

IT'S A CONTINGENT UPON THE CONTRACTOR.

IT'S CONTINGENT UPON TIME.

SOMETIMES WE ALSO HAVE OUR JOB ORDERS HAVE PERMIT WINDOWS BECAUSE OF OUR THE SITES THAT WE'RE AT AND WHERE WE'RE WORKING AND SO THAT PERMIT WINDOW DOESN'T ALIGN WITH WHERE WE ARE AND WE SOMETIMES WE WILL THEN ASK THE CONTRACTOR TO WAIT A YEAR AND THAT DOESN'T WORK AND SO WE HAVE TO PUSH THAT THAT JOB ORDER TO THE NEXT ROUND BECAUSE IT DOESN'T FIT IN JUST BECAUSE OF THE ENVIRONMENTAL CONSTRAINTS THAT AREN'T RELATED TO THAT.

SO. I UNDERSTAND THAT COMPLETELY.

I'M WONDERING STRATEGY WISE WITH THE NEW DO YOU THINK THAT MAYBE WE SHOULD HAVE GOTTEN 3 OR 4 PAYMENT CONTRACTORS SO THAT WE CAN?

[01:30:05]

AND I'M NOT TRYING TO PUT YOU ON THE SPOT.

I'M JUST SAYING. UNDERSTOOD.

I KEEP GETTING CONSTITUENT COMMENTS THAT LISA AND I HAVE BEEN TALKING ABOUT.

WHEN ARE WE GOING TO FIX THIS TRAIL? WHEN ARE WE GOING TO DO THIS RETAINING WALL SO THAT I CAN HAVE ACCESS TO THE PARKS? AND IT'S BECOMING, YOU KNOW, IT KEEPS BUILDING AND BUILDING AND BUILDING AND THE MORE PROJECTS I THINK THAT WE CAN KNOCK OUT AND GET DONE AND THE MORE PAVEMENT WE CAN GET PUT IN SO THAT OUR PAVEMENT INDEX DOESN'T KEEP DECLINING.

I JUST THINK THAT WOULD BE A TREMENDOUS VALUE.

AND THAT IS A GREAT QUESTION.

AND IT IS ON THE STAFF IS DISCUSSING THAT AS WE MOVE FORWARD.

I THINK WE CAN LOOK AT THAT.

AND MAYBE AS WE BID IT, WE CAN BID ANOTHER ADDITIONAL PAVING, I THINK.

SO YEAH, WE HAVE TALKED ABOUT THAT.

SO IT WILL BE ULTIMATELY UP TO THE BOARD.

I THINK IF THEY WANT TO AWARD THAT MANY AND INCREASE THE CAPACITY FOR ANOTHER 2 MILLION.

BUT TO YOUR POINT, THAT'S SOMETHING WE CAN DISCUSS.

AND WE WILL DISCUSS STAFF LEVEL WISE MOVING FORWARD WITH THIS NEXT ROUND, IF WE WANT TO ADD ANOTHER PAVING OR TWO.

I KNOW I HAVE HEARD FROM STAFF THAT ANYWAY, THERE'S INTEREST.

YOU'RE NOT ALONE IN THAT SUGGESTION.

THANK YOU. SO IS THERE ANYTHING THAT WE CAN DO AS THE BOARD TO RECOMMEND CHANGES BE MADE, SUCH AS? I DON'T KNOW IF THE ONE OF THE LIMITING FACTORS IS STAFF ON OUR END.

IF WE HAD ANOTHER PERSON WORKING ON THESE THINGS, I MEAN, WOULD THAT BE A LITTLE MAYBE PART OF THE THING THAT WOULD HELP ANSWER, ANSWER DIRECTOR WAESPI CONCERN.

AND BY THE WAY, HE'S GOT THE SAME EXACT CONCERN THAT I DO.

I'D LIKE TO SEE MORE AND YOU SPECIFICALLY CALLED OUT PAVING.

THAT'S WHERE WE'RE KIND OF EXPOSED AND VISIBLE TO THE PUBLIC, MORE THAN A ROOF ON A MAINTENANCE BUILDING IN THE BACK OF A CORPORATION YARD, YOU KNOW WHAT I MEAN? SO I'M ESPECIALLY CONCERNED ABOUT THOSE SORTS OF THINGS.

UNDERSTOOD. AGAIN, THAT'S A DIFFICULT QUESTION TO ANSWER WITH.

JUST CAN YOU ADD ONE MORE PERSON AND GET A LOT MORE WORK DONE? IT GETS TO OUR CAPITAL PROJECT PLANNING, OUR CIP, SORT OF HOW MUCH WORK WE HAVE AND HOW MUCH MONEY WE HAVE.

BECAUSE AGAIN, THIS DOESN'T FUND THESE PROJECTS.

THE BOARD ISN'T APPROVING THE FUND.

I MEAN, THE BOARD APPROVES THAT EVENTUALLY THROUGH THE BUDGET CYCLE.

BUT THIS DOESN'T. WHEN WE AWARD THESE CONTRACTS, IT DOESN'T PROVIDE THE MONEY TO DO ALL THE WORK.

THE WORK THE MONEY HAS TO BE THERE.

SO THAT TIES INTO OUR BUDGET CYCLE AND MAKING SURE THAT THERE ARE MONIES FOR THESE PROJECTS SUCH THAT WE CAN DO THAT AND SO YOUR QUESTION OF IF WE ADD ONE MORE, CAN WE GET MORE PAVING DONE IS A VERY DIFFICULT QUESTION FOR ME TO ANSWER.

ALL RIGHT. THANK YOU.

BUT ON THE CONTRACTORS END, I THINK I DON'T KNOW IF THERE'S ANY PRESSURE THAT YOU CAN EXERT.

I THINK WE'VE BEEN HERE LONG ENOUGH AND I SEE SOME OF THESE CONTRACTORS HAVE STAYED.

SOME OF THEM HAVE LEFT.

SOME OF THEM MUST HAVE FIGURED IT OUT THAT THIS IS A GOOD GIG.

I CAN GET $2 MILLION FROM THE PARK DISTRICT, WHICH IS A GREAT PARTNER.

YOU'RE DOING GREAT WORK, AND THEY BUY INTO THAT PROGRAM AND THEY DO IT, I WOULD ASSUME.

OTHERS HAVE DROPPED AWAY, FIGURING IT'S NOT GOING TO WORK FOR US.

OR MAYBE WE LOBBIED IT, LIKE YOU SAID.

BUT IF WE CAN ENCOURAGE THAT TYPE OF BEHAVIOR AND IF WE ADD NEW PEOPLE, IS THERE ANY LANGUAGE WE CAN WRITE TO SAY YOU NEED TO BE RESPONSIVE, WHETHER OR NOT YOU LOBBIED IT OR NOT? YOU IT'S A CONTRACT WE HAVE WITH YOU.

SO IF YOU'RE MAYBE REQUIRED TO PERFORM AT LEAST 50,000 A YEAR, THAT'S CORRECT.

UP THAT TO 250.

I MEAN TO SAY, HEY, WE WANT THESE PROJECTS DONE.

WE'VE HIRED YOU TO DO THE PROJECTS.

SO I, THINK THAT COULD BE A POTENTIAL, BUT I'D LIKE TO CLARIFY THAT THE 50,000 IS NOT A REQUIREMENT THAT WE GIVE THAT WORK, IT'S THAT WE OFFER THAT MINIMUM DOLLAR AMOUNT. SO THAT'S WHAT WE HAVE TO DO IS OFFER THEM THAT MINIMUM DOLLAR AMOUNT AND IF WE FIND THAT THEY ARE NON RESPONSIVE, THAT DOESN'T REQUIRE US TO THEN WORK WITH THAT CONTRACTOR. SO I THINK THAT'S ACTUALLY A PROVISION FOR NON-RESPONSIVE CONTRACTORS AS OPPOSED TO FORCING THEM TO DO MORE WORK.

BECAUSE, AGAIN, WHAT WE FOUND IN PRACTICE IS THAT SOME CONTRACTORS WILL BID IT, BUT WHEN IT GETS INTO PRICING AND THEN LOOKING AT THE QUANTITIES AND BASED ON WHAT THEIR ADJUSTMENT FACTOR IS, THEN THEY'LL PAD QUANTITIES AND THEN WE'RE IN THIS BACK AND FORTH OF WHY ARE YOU PADDING THESE QUANTITIES.

BECAUSE WE DON'T THAT'S NOT THE RIGHT AMOUNT AND IT'S LIKE, WELL, I GOT TO MAKE MY MONEY ON THIS.

MY SUB HAD THAT AND SO I THINK WHAT YOU'RE SUGGESTING, AND I DON'T MEAN TO GET INTO THE WEEDS OF THIS, BUT TO RESPOND TO YOUR QUESTION, I THINK JUST PUTTING IN A DOLLAR AMOUNT AND FORCING THAT DOESN'T WOULDN'T REALLY SOLVE THE PROBLEM FROM A STAFF LEVEL AND DELIVERY POINT OF VIEW.

OKAY, IF THAT MAKES SENSE.

OH YEAH. IT'S COMPLICATED.

OH YEAH.

OKAY. WHY DON'T I RUN THROUGH A COUPLE OF SLIDES? WE FINISHED OF PROJECT JOB ORDERS WE'VE DONE, AND THEN WE CAN CONTINUE ON WITH SOME OF THE CRITIQUES.

AND OH, THAT'S A VERY GOOD IDEA BECAUSE I WAS JUST GOING TO KEEP GOING.

OKAY. WELL, SO I'LL SHARE THIS.

SO WHEN WE COMPLETED THIS YEAR WAS THE PINOLE SHORES TRAIL REPAIR.

AS YOU CAN SEE, THIS WAS DAMAGED IN THE 2022-23 STORMS I GUESS.

[01:35:05]

SO TO TO ALL OF THE COMMITTEE MEMBERS, CONCERNS ABOUT PAVING THIS ONE WAS COMPLETE AND OPENED UP AND WE ACTUALLY GOT THIS DONE VERY QUICKLY, SURPRISINGLY, BECAUSE IT IS WITHIN TWO RAIL LINES AND SO IT WAS IT'S A GREAT ONE.

WE FINISHED ANOTHER ONE WAS THE WILDCAT CREEK TRAIL REPAIR REPAVEMENT IN POINT PINOLE.

THIS REPAVED A LONG STRETCH OF TRAIL THERE.

THE LAFAYETTE RIDGE STAGING AREA AND BRIONES IS NOW FULLY COMPLETE.

FOR A LITTLE WHILE, WE HAD SOME UTILITY ISSUES WHICH DIDN'T ALLOW US TO OPEN THE RESTROOM, BUT NOW THIS IS FULLY OPERATIONAL AND SO THIS REMOVED A CHEMICAL TOILET, BUT IN THE FLUSH TOILET, BROUGHT UTILITIES IN AND REPAVED THE ENTIRE PARKING LOT.

SO THAT'S RIGHT THERE IN LAFAYETTE.

AND THEN THE BIG BREAK SHADE STRUCTURE REPLACEMENT.

THIS WAS THE FIRST PHASE OF REPLACING SOME OF THE SHADE SAILS THAT ARE OUT THERE WITH MORE WIND RESISTANT AND STURDY STRUCTURES.

SO THOSE ARE JUST REPRESENTATIVE PROJECTS.

LIKE I SAID, AND LIKE THE LIST SHOWS, WE'VE DONE QUITE A BIT OF WORK, SO THAT'S ENCOURAGING.

I'M HEARING THE QUESTIONS AND HEARING THAT WE WANT TO DO MORE.

SO NOW I'LL ALLOW MORE QUESTIONS ALONG THOSE LINES AND DO MY BEST TO ANSWER.

THANK YOU SO MUCH. SO THE WAY I WAS GOING TO COMPLICATE THE PAVING ISSUE, YOU LAUGH.

JUST NOT A GOOD WAY TO INTRODUCE [INAUDIBLE].

NO, I'M SORRY. PAVING, AND MY COLLEAGUES WONDERING ABOUT THE EFFICACY OF THE CONTRACTING THAT WE'RE DOING AND I AGREE, IT'S A GREAT PROGRAM AND IT'S PERFECT FOR THE KIND OF WORK THAT YOU AND YOUR OVERSIGHT OF THE PROGRAM HAVE BEEN UTILIZING IT.

SO IT'S A REALLY GOOD PROGRAM.

I AGREE WITH DIRECTOR WAESPI THAT IT'S BEEN VERY SUCCESSFUL, AND WE APPRECIAT THE MANAGEMENT WORK THAT'S BEEN PUT INTO THAT PROGRAM. ON THE FURTHER INTO THE PAVING PROJECT ISSUE I AM REMINDED THAT SOME YEARS AGO, I'VE BEEN SAYING THAT SEVERAL TIMES TODAY BECAUSE THIS DOES TRIGGER PAST ISSUES THAT I'VE BEEN ENGAGED IN JUST BEING HERE TODAY AT THE BEGINNING OF THE YEAR.

THE. EITHER THIS COMMITTEE, I THINK IT WAS THIS COMMITTEE AND OR THE FULL BOARD SUGGESTED THAT THERE BE A STUDY OF THE COST AND BENEFIT OF OUTSOURCING THE PAVING PROJECT WORK TO THESE CONTRACTORS VERSUS EXPANDING OUR OWN MAST WORKFORCE ABILITY TO UNDERTAKE PAVING AND WE KNOW THEY DO PAVING.

WE, DO INTERNALLY THROUGH MASS.

A LOT OF PAVING WORK AND THEN WE OUTSOURCE A LOT OF THAT WORK.

AND IT JUST STRUCK US AS A QUESTION OF WHETHER MANAGEMENT HAD REALLY DELVED WHERE MIGHT IT BE MORE COST EFFECTIVE TO EXPAND OUR OWN WORKFORCE, TO HANDLE WHAT APPEARED TO BE UNENDING PAVING PROJECTS AND VERSUS THE COST OF OUTSOURCING THEM? AND SO JUST TOSSING THAT OUT THERE.

I WANT TO SUGGEST THAT THERE WAS WORK DONE ON THAT ISSUE, AND I DON'T RECALL EVER SEEING THE OUTCOME OF IT AND I HAVE MEMORIES OF DEPUTY GENERAL MANAGER O'CONNOR SUGGESTING THAT WORK HAD BEEN DONE AND WAS AT SOME STAGE OF BEING FINALIZED FOR REVIEW BY THE BOARD OF DIRECTORS AND I'M JUST AT A LOSS TO REMEMBER WHETHER THAT WAS DONE OR NOT.

SO I'M GOING TO I'M LEANING TOWARD THAT.

IT WAS NEVER DONE OR IT NEVER ACTUALLY GOT BACK TO US.

IT'S POSSIBLE IT DID.

SO YOU DON'T HAVE TO ANSWER TODAY.

BUT I WANT TO SUBMIT THAT I CONTINUE TO BE VERY INTERESTED IN THAT ISSUE.

GIVEN THAT WE ARE ALWAYS SEEING THE VAST NEED FOR PAVING PROJECTS THAT THIS DISTRICT HAS.

[01:40:04]

SO THAT'S JUST AN ISSUE OUT THERE, AND I'M JUST GOING TO RENEW IT.

UNDERSTOOD. I'LL ACKNOWLEDGE THAT.

AND I WILL PURSUE TO SEE WHERE THAT REPORT IS AND HOW THE STATE OF THAT AND PROVIDE AN UPDATE AT THE NEXT QUARTERLY UPDATE.

TERRIFIC. THANK YOU SO MUCH.

[INAUDIBLE] LISA WANTS TO TALK AND THEN I'LL ASK FOR PUBLIC.

I LOVE THE STOOL. MY NAME IS LISA GOORJIAN, THE ASSISTANT GENERAL MANAGER OF OPERATIONS.

SO I DID WANT TO JUST CLARIFY THAT IN OPERATIONS, THERE WAS DEVELOPMENT OF PAVING ANALYSIS, AND IT'S IN DRAFT FORM, SO IT HASN'T BEEN FINALIZED YET.

SO THERE'S NO FINAL REPORT.

I THINK IT'S ONE OF THESE THINGS WHERE WE'RE WORKING ON IT, BUT IT JUST IT HADN'T BEEN FINALIZED BECAUSE, YOU KNOW, MORE QUESTIONS COME UP.

SO WE'RE STILL WORKING ON IT.

WELL, THAT'S VERY GOOD NEWS BECAUSE IT CONFIRMS THAT MY MEMORY ISN'T REALLY BAD.

SO I'M GOOD MEMORY.

SO I APPRECIATE THAT FEEDBACK A LOT.

AND ALSO APPRECIATE THAT IT'S A WORK IN PROGRESS.

THAT REMAINS TO BE FINALIZED.

THANK YOU VERY MUCH FOR THAT INFORMATION.

ARE THERE MEMBERS OF THE PUBLIC WITH COMMENTS OR QUESTIONS ON THIS AGENDA TOPIC? NO PUBLIC COMMENTS. ALL RIGHT.

JUST INFORMATIONAL. SO UNLESS YOU HAVE FURTHER COMMENTS, I WILL BE BACK.

BUT LOOK FORWARD TO BRINGING THE FUTURE ROUND OF CONTRACTS TO THE BOARD IN THE NEXT MONTH OR SO BEFORE THE NEXT UPDATE.

SO THANK YOU MUCH AGAIN.

VERY GOOD REPORT. AS USUAL, IF I MAY, MY ONLY COMMENT WOULD BE GREAT REPORT.

I LOVE THIS THESE PROJECTS AND THE MORE YOU SHOW PHOTOS OF WHAT GETS DONE, I THINK IS INCREDIBLY IMPORTANT FOR THE YOU KNOW, I THINK WE'LL ALWAYS CONTINUE THIS PROGRAM, BUT I THINK IT SHOWS THE VALUE.

AND I THINK SOME OF THESE PROJECTS SHOWING THE PUBLIC WHAT WE'RE DOING, BECAUSE I LITERALLY GET IT'S REALLY PILED ON ME OVER THE HOLIDAYS OF, HEY, I CAN'T ACCESS THIS TRAIL, I CAN'T GET HERE BECAUSE OF THIS AND PEOPLE SAY, I CAN ONLY SAY, WELL, THERE WERE STORMS IN 2017 AND STORMS IN 2022.

WE'RE WORKING ON IT. BUT THIS KIND OF SHOWS THAT THERE IS AN ORDER OF HOW WE PROGRESS IN THESE, AND WE DO HAVE PRIORITIES AND IT'S LEGITIMATE AND LOGICAL.

BUT WHEN YOU PRESENT IT IN LIKE THIS, IT'S HELPFUL.

NOTED. WELL, MAKE MORE OF AN EFFORT TO GET MORE JOB ORDER PHOTOS.

THANK YOU. THANKS AND THE MORE PHOTOS OF BRAND NEW RESTROOMS, THE BETTER.

THANK YOU.

MAKES MY DAY.

THANK YOU. THE NEXT INFORMATION ITEM IS 5B FINANCE COMMITTEE, 25 WORK PLAN AND 24 ACCOMPLISHMENTS.

DEBORAH. ALL RIGHT.

GOOD AFTERNOON.

DEB SPAULDING, GM OF FINANCE AND MANAGEMENT SERVICES.

THE LAST AGENDA ITEM TODAY I'M TRYING TO PULL UP HERE.

SO WE'LL JUST WALK YOU THROUGH OUR 2024 ACCOMPLISHMENTS AND THEN TALK A LITTLE BIT ABOUT WHAT WE PLANNED FOR 2025.

SO LAST YEAR WE WENT THROUGH ALL OF OUR REGULAR QUARTERLY REPORTS AND ALL OF OUR ANNUAL PROCESSES, OUR BUDGET AND OUR AQUIFER.

AND I FORGOT TO LIST HERE, BUT WE ALSO REVIEWED A NUMBER OF POLICIES.

LAST YEAR WE REVIEWED OUR GENERAL FUND RESERVE POLICY, WE UPDATED OUR MERGER POLICY, AND WE CREATED A NEW OPEB POLICY LAST YEAR.

AND THEN WE HAD A BUNCH OF SPECIAL PROJECTS, WHICH I AM VERY GRATEFUL TO STAFF WHO WORKED ON THIS ON THESE.

SO WE HAD ISSUANCE OF OUR 2024 PROMISSORY NOTES LAST YEAR, A BUNCH OF RFPS WE WERE ABLE TO COMPLETE FOR ENGINEERING SERVICES, ACTUARIAL SERVICES, AUDIT SERVICES.

WE WERE ABLE TO AMEND OUR 457 (B) DEFERRED COMP PLAN TO ADD QUALIFIED DISASTER RECOVERY DISTRIBUTIONS.

WE DID AN RFP AND AWARDED A CONTRACT TO SDI PRESENCE TO HELP US WITH OUR ERP SYSTEM ASSESSMENT, WHICH IS GOING TO ROLL INTO A PROJECT WE'RE DOING THIS YEAR, WHICH WILL MOST LIKELY BE AN RFP FOR A NEW ENTERPRISE RESOURCE PLANNING SYSTEM.

WE WERE WE BROUGHT TO THE BOARD A REQUEST TO CONSOLIDATE OUR MEASURE AA PROJECT ALLOCATIONS.

THEY WERE IN INDIVIDUAL PARKS AND THEN WE CONSOLIDATED CONSOLIDATED THEM INTO METRO AREAS TO MAKE IT EASIER TO SPEND THOSE FUNDS DOWN.

[01:45:05]

AND THEN LASTLY, WE HAD A FUNDING AGREEMENT WITH THE CITY OF PITTSBURGH TO COMPLETE CERTAIN TRAIL PROJECTS AND SO WE HAVE ALL OF OUR USUAL ANNUAL AND QUARTERLY REPORTS THAT WE'RE GOING TO BRING TO YOU AND THEN JUST A FEW SPECIAL PROJECTS LISTED.

I'M SURE THERE WILL BE MORE THAN THIS, BUT THIS IS JUST WHAT WE KNOW IS COMING FORWARD FOR SURE.

AN RFP AND CONTRACT AWARD FOR DISASTER RECOVERY ADMINISTRATIVE SUPPORT SERVICES.

WE ARE BEGINNING WORK TO CREATE A NEW COMMUNITY FACILITIES DISTRICT, OR CFD, FOR THE RURAL AGRICULTURAL PARK.

AND THEN LASTLY, MOVING FORWARD WITH AN RFP TO BRING ON A NEW ENTERPRISE RESOURCE PLANNING SYSTEM AND WILL LIKELY ALSO HIRE AN IMPLEMENTATION IMPLEMENTATION PARTNER TO HELP US WITH THAT SINCE IT IS A PRETTY MASSIVE UNDERTAKING.

SO THOSE ARE THE SPECIAL PROJECTS THAT WE HAVE PLANNED.

I'M SURE OTHER STUFF WILL COME UP.

I'M HAPPY TO TAKE ANY QUESTIONS THAT YOU HAVE.

AND THIS IS JUST AN INFORMATIONAL ITEM.

ALL RIGHT. SO YOU HAVE PRESENTED A PROJECTION OF MONTHLY TOPICS FOR THE COMMITTEE.

YES, IT'S ON PAGE 126 OF YOUR PACKET.

I WAS GOING TO MENTION THE. SO THE CALPERS RETIREMENT PLAN IT'S COMING PROJECTED TO BRING IT FORWARD APRIL 9TH.

OKAY. SO THAT'S JUST FOR US TO REVIEW.

YOU DON'T ANTICIPATE GOING THROUGH IT YOURSELF? FOR US, I WASN'T GOING TO.

OKAY. YEAH, I JUST WANTED I DIDN'T WANT TO JUMP ON THAT TOPIC IF YOU WERE GOING TO DISCUSS IT FURTHER.

ALL RIGHT. MEMBERS OF THE COMMITTEE.

DIRECTOR MERCURIO.

YEAH. I WAS JUST WONDERING LOOKING AT LOOKING AHEAD.

ALMOST A YEAR TO NOVEMBER 12TH MEETING AND SEEING THOSE FIVE ITEMS ON THERE, AND ONE OF WHICH IS A GIGANTIC ITEM KNOWN AS OUR BUDGET.

IF THERE WOULD BE THE, YOU KNOW, IF WE MIGHT CONSIDER MOVING 1 OR 2 OF THOSE ITEMS TO THE DECEMBER MEETING. I KNOW THERE MIGHT BE AN EFFORT TO TRY TO AVOID DOING A DECEMBER MEETING, BUT AND THAT'S OKAY.

EXCEPT THAT THEN WE END UP WITH A FIVE HOUR MEETING, AND WE'RE OUR CAPACITY FOR MAKING RATIONAL DECISIONS DIMINISHES TREMENDOUSLY AT THE END OF THAT MEETING.

SO I'D RATHER BE A LITTLE FRESH AND BE ABLE TO CONSIDER BECAUSE PROBABLY SOMETHING ELSE WILL EVEN COME ALONG THAT WE MIGHT WANT TO ADD INTO DECEMBER AS WELL.

SO ANYWAY, THAT WAS JUST MY DECISION TO SEE IF THE COMMITTEE WAS INTERESTED IN THAT OR.

NO, I THINK THAT'S A GOOD SUGGESTION.

DIRECTOR WAESPI. I WOULD TEND TO AGREE WITH DIRECTOR MERCURIO AND YOU KNOW, ANY I KNOW IT'S PROBABLY AN IMPOSSIBILITY, BUT ANY GETTING THE PROPOSED OPERATING AND PROJECT PROGRAM BUDGET A LITTLE BIT EARLIER.

EVEN AT TWO WEEKS WOULD BE GREAT.

ONE WEEK WOULD BE GREAT.

I KNOW THAT'S A DIFFICULTY THAT'S HARD TO GET.

SO GETTING IT TO THE COMMITTEE TO REVIEW EARLIER, NOT THAT WE WOULD HAVE IT ON AN EARLIER MEETING.

IS THAT WHAT YOU WERE ASKING? WELL, I MEAN, I DON'T KNOW THAT YOU COULD DO THAT, BUT I MEAN, IF WE'RE GOING TO, YOU KNOW, I'M TALKING ABOUT LIKE ONE EXTRA WEEK TO REVIEW IF OUR.

WHEN IS OUR NOVEMBER MEETING? I DON'T KNOW WHEN THAT IS.

NOVEMBER 2ND. IT'S WRITTEN RIGHT HERE.

YEAH. IF IT COULD BE NOVEMBER YOU KNOW, FIFTH A WEEK EARLIER OR SOMETHING LIKE THAT.

I KNOW WE DON'T LIKE TO MOVE MEETINGS AROUND, BUT, BOY, IT SURE FEELS LIKE IT'S COMPRESSED.

YEAH, I KNOW YOU GUYS FEEL WORSE HAVING TO PRODUCE THE DOCUMENT, BUT TO US TO SUPPOSEDLY ANALYZE IT IN A SHORT PERIOD OF TIME LIKE THAT IS FOR ME IS MORE DIFFICULT.

AND IF I WILL, DEFINITELY TRY.

THANKS. I HAVE ONE THOUGHT AS TO A POTENTIAL TOPIC FOR THIS COMMITTEE. IF IT'S OKAY TO THROW IT OUT AT THIS POINT.

MY COLLEAGUE, WHO WAS IMMEDIATE PAST CHAIR OF THE COMMITTEE, SAID IT WOULD BE OKAY, SO I DIDN'T WANT TO STEP ON TOES.

IF THE COMMITTEE HAS JUST PUT A LOT OF EFFORT ALREADY INTO TOPICS.

THE TOPIC THAT I HAVE ALWAYS BEEN FAIRLY UNCOMFORTABLE WITH MY OWN GRASP OF

[01:50:06]

SO THAT IS NONETHELESS A MAJOR RESERVE FUND THAT WE KEEP.

WE ALSO HAVE SEVERAL OTHER LAYERS OF RESERVE FUNDS, OF WHICH I INCLUDE THE FUNDS WE SET ASIDE FROM OUR OPERATING BUDGET INTO CAPITAL AND MAINTENANCE.

AND THERE ARE.

OTHER LAYERS OF RESERVE FUNDS AND MY COMFORT LEVEL IS THAT IF SOMEONE ASKS ME FROM OUR MANY STAKEHOLDERS ABOUT THE STATUS OF OUR VARIOUS RESERVE FUNDS, I CAN LOOK THEM UP AND SEE THE NUMBERS AND SUCH.

BUT I'VE JUST GENERALLY THOUGHT THAT IT IS AN AREA OF GREAT CONCERN TO THE PUBLIC.

WE HAVE A LOCAL NEWSPAPER THAT REGULARLY LOOKS AT PUBLIC AGENCY RESERVE FUNDS AND PENSION RESERVE FUNDS AND ASSESSES IN FACT, DIRECTLY ASSESSES THE KNOWLEDGE BASE OF ITS GOVERNING BOARDS AND WE'VE SEEN THAT OVER THE YEARS.

I THINK I'M TALKING ABOUT DAN BORNSTEIN'S WORK, OBVIOUSLY.

I MEAN, YEAH.

YOU KNOW, AND I THINK THAT IS A, PUBLIC SERVICE THAT THEY PROVIDE.

IT'S A VERY DRY TOPIC THAT BECAUSE OF HIS WORK I THINK IT'S SIGNIFICANT ATTENTION AND I'VE ALWAYS WANTED THEREFORE JUST TO BE ON TOP OF IT MORE.

SO THAT'S A LONG WINDED WAY TO SAY, I'M ALMOST THINKING THAT'S AN AGENDA TOPIC OF ITSELF.

IS THIS DISTRICT'S RESERVE POLICIES.

OUR RESERVE. OUR ACTUAL RESERVES AND MANAGEMENT'S ASSESSMENT OF HOW WE ACCOUNT FOR RESERVES AND HOW WE MANAGE THEM AND IT WOULD BETTER PREPARE ME TO ANSWER THE QUESTION THAT I GET, ESPECIALLY FROM OTHER OFFICEHOLDERS.

YOU KNOW, WHY DO YOU FOLKS MAINTAIN X, Y, AND Z IN RESERVES? AND WE GET THAT FROM OUR COLLEAGUES AT THE TWO COUNTIES, FOR INSTANCE.

SO IF THAT IS REASONABLE AND THERE IS SOME POINT WHERE IT WOULD NATURALLY FIT IN OR, YOU KNOW, I'M NOT TRYING TO JUST PLUG SOMETHING IN HERE.

IF IT DOESN'T WORK THIS YEAR, JUST KEEP IT IN MIND AS SOMETHING THAT MAYBE THE BOARD COULD BENEFIT FROM HAVING A FOCUSED LOOK AT THAT TOPIC EITHER AT THE COMMITTEE LEVEL OR THE BOARD LEVEL OR WHEREVER YOU THINK APPROPRIATE.

THAT'S MY COMMENT.

I THINK WE COULD DO THAT.

ONCE OUR SO IN THE JUNE 11TH MEETING, WE'LL HAVE OUR AUDIT COMPLETED FOR 2024.

SO WE'LL ACTUALLY KNOW CONCRETELY OUR FUND BALANCES FOR ALL OF OUR DIFFERENT FUNDS FOR THE PRIOR YEAR AT THAT POINT.

SO THAT MIGHT BE THE APPROPRIATE TIME TO BRING IT FORWARD.

OKAY. I THINK WHAT YOU'RE TALKING ABOUT IS WE'VE GOT YOU'VE GOT FUND BALANCES.

WE HAVE RESERVE FUNDS.

AND SO WE HAVE SOME TABLES IN OUR AQUIFER THAT WE CAN WALK THROUGH AND THEN WE CAN ALSO LOOK AT ALL THE FUNDS IN DETAIL.

DOES THAT SOUND LIKE WHAT YOU'D BE INTERESTED.

THAT SOUNDS PERFECT. IT'S JUST SOMETHING I WANT TO MAKE SURE THAT I HAVE A GOOD GRASP ON AS A MEMBER, BOTH OF THIS COMMITTEE AND THE BOARD OF DIRECTORS. GREAT.

GOOD. THANK YOU.

ANYTHING FURTHER FROM DIRECTOR MERCURIO? ONE MORE. YOU KNOW, I CAN.

I CAN SEE THE BENEFIT OF NOT HAVING, YOU KNOW, WE HAVE A BLANK MEETING IN OCTOBER, AND I CAN SEE THE BENEFIT TO YOUR FUNCTION BECAUSE YOU'RE IN THE FINAL THROES OF GETTING THE BUDGET BEAT INTO SHAPE.

SO IT'D BE NICE IF YOU DIDN'T HAVE TO DEAL WITH US, YOU KNOW?

[01:55:01]

I'M A BIG PROPONENT OF THAT.

YOU NEED SOME RESERVE TIME.

SO JUST ANOTHER REASON TO MAYBE NOT HOLD THE LINE SO MUCH IN NOVEMBER AND LET SOMETHING PUSH OVER INTO DECEMBER.

YEAH, NO, WE SHOULD DO THAT.

OKAY. I THINK WE'RE GOOD.

ANY PUBLIC COMMENT? NO PUBLIC COMMENT. OKAY.

THANK YOU. DEB.

THANK YOU. OKAY, SO WE'VE REACHED THAT POINT

[Announcements]

OKAY. FROM THE CLERK.

ALL RIGHT. MEMBERS OF THE COMMITTEE.

ANNOUNCEMENTS. WELL, THANK YOU ANYWAY.

MY ONLY COMMENT IS I'M VERY HAPPY TO BE BACK AND BE ABLE TO WORK WITH YOU, DEB.

APPRECIATE IT AND LOOK FORWARD TO THE YEAR AND THE EXTENSIVE LIST OF TOPICS THAT YOU'VE COME UP WITH FOR THE COMMITTEE.

AND I AM HAPPY THAT FOR THE MOST PART, IF NOT ENTIRETY, IT'S THE FINANCES OF THIS ORGANIZATION ARE DOING WELL, YOU KNOW, SO WE HAVE, A LIST OF TOPICS THAT ARE THE VAST MAJORITY OF WHICH ARE GOOD NEWS TOPICS.

AND THAT'S A VERY HAPPY THING TO LOOK FORWARD TO, ESPECIALLY WHEN IT COMES TO FINANCE AND THE STATE OF THIS ORGANIZATION'S FINANCES.

SO I APPRECIATE IT AND ALWAYS APPRECIATE THE VERY WELL MANAGED STATE OF OUR FINANCES.

JUST ONE MORE QUICK THING THAT JUST OCCURRED TO ME A FEW MINUTES AGO.

SO WE DO.

I HOPE YOU REALIZE THAT WE REALLY APPRECIATE WHAT YOU'RE DOING THERE.

THE THING THE THING OF IT IS, THOUGH, IT'S REALLY IN THE BACKGROUND TO A RIDICULOUS DEGREE.

I MEAN, IT'S SO IMPORTANT.

WE CAN GO IN THE LOBBY OUT THERE AND WE CAN PICK OUT A BROCHURE ON FISHING.

WE CAN PICK OUT A BROCHURE ON TILDEN PARK AND ANY AND EVEN SOME OBSCURE.

WE DO HAVE OBSCURE PARKS, BUT THERE'S NO BROCHURE THERE THAT SAYS ACCOUNTING PRINCIPLE PRACTICES OF THE EAST BAY REGIONAL PARK DISTRICT, BECAUSE IT'S JUST SO BACKGROUND, YOU KNOW. BUT I HOPE WE'RE HERE TO ENCOURAGE YOU AND TO WHOEVER'S WATCHING THAT GREAT WORK IS BEING DONE AND IT'S ESSENTIAL.

AND WE CAN'T, IT'S, YOU KNOW, THE UNSUNG FUNCTION THAT HAPPENS THERE.

SO THAT'S, YOU KNOW, WE DO OUR BEST TO ENCOURAGE EVERYBODY ON YOUR TEAM.

YEAH. YEAH.

ABSOLUTELY. THAT'S A VERY GOOD POINT.

THAT BROCHURE WOULD NOT BE NEARLY AS POPULAR AS DOGS IN THE EAST BAY REGIONAL PARK SYSTEM BROCHURE.

THAT ONE EVERYONE REALLY APPRECIATES.

SO WITH THAT, WE WILL STAND ADJOURNED.

THANK YOU VERY MUCH. AND THANK YOU FOR ALL THE WORK THAT GOES INTO THE COMMITTEE'S WORK.

* This transcript was compiled from uncorrected Closed Captioning.