May 14, 2025 Board Finance Committee

ALL RIGHT. YOU CAN BE SEEN. YOU CAN BE HEARD.

[00:00:03]

FINANCE COMMITTEE MEETING. A COMMITTEE OF THE EAST BAY REGIONAL PARK DISTRICT BOARD OF DIRECTORS.

WE ARE MEETING ON WEDNESDAY, MAY 14TH, AND WE'RE BEGINNING AT 11:05 A.M..

THE COMMITTEE IS SHORT ONE PERSON, BUT DIRECTOR WAESPI, I'M TOLD, IS ON HIS WAY AND ASKED US TO GET STARTED, AND WITH THAT, I WILL ASK OUR RECORDING CLERK TO TAKE THE ROLL.

[Roll Call]

TODAY'S MEETING IS BEING HELD PURSUANT TO THE BROWN ACT.

STAFF IS PROVIDING LIVE AUDIO AND VIDEO STREAMING.

MEMBERS OF THE PUBLIC WISHING TO MAKE A PUBLIC COMMENT MAY DO SO BY PROVIDING A COMMENT IN PERSON, JOINING LIVE VIA ZOOM WITH THE LINK PROVIDED ON THE AGENDA LOCATED ON THE DISTRICT WEBSITE.

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

ALL RIGHT. BEFORE WE MOVE TO APPROVAL OF THE MINUTES, I UNDERSTAND THAT THERE IS A REQUEST FOR A SLIGHT CHANGE TO OUR AGENDA.

YES. THANK YOU, DIRECTOR COFFEY. KATIE DIGNAN, ASSISTANT FINANCE OFFICER WITH FINANCE AND MANAGEMENT SERVICES.

I'M REQUESTING WE MOVE THE INFORMATIONAL ITEM FIVE A CAPITAL FINANCE UPDATE ON MEASURE CC AND MEASURE FF BEFORE ACTION ITEM E RECOMMENDATION TO THE BOARD OF DIRECTORS TO APPROPRIATE 1,883,261 OF MEASURE FF FUNDING.

THE REASON I'M REQUESTING IS TO GIVE YOU AN UPDATE ON WHERE THE FUNDING CURRENTLY STATUS IS, BEFORE I MAKE THE REQUEST FOR THE ADDITIONAL FUNDING.

ALL RIGHT. SO WHEN WE GET TO ACTION ITEMS UNDER FOUR A, B, C, D AND E, WE WILL MOVE FIVE A RIGHT BEFORE FOUR E, CORRECT? YES. THANK YOU. ANY OBJECTION. ALL RIGHT.

SO THAT WILL BE THE NEW ORDER OF THE AGENDA. WITH THAT WE WILL MOVE TO APPROVAL OF MINUTES.

[Approval of Minutes]

I HARBOR NO SUCH DESIRE EITHER, DO I? SO HAVING LOOKED AT THEM, THEY LOOK FINE.

SO WE WILL TAKE, ITEMS TWO A THROUGH D APPROVAL OF THE MINUTES FOR THOSE MONTHS AS ONE ITEM.

ALL IN FAVOR SAY AYE. AYE. ALL OPPOSED? ANY ABSTENTIONS? SO IT CARRIES FOR THE FOUR. DIRECTOR WAESPI VOTES I AS WELL.

I SURELY DO. WE JUST APPROVED THE MINUTES. EXCELLENT.

THAT BRINGS US TO ITEM THREE, AND DIRECTOR WAESPI HAS ARRIVED.

ITEM THREE IS PUBLIC COMMENTS ON ITEMS, NOT ON THE AGENDA.

WHICH REMINDS ME, I DIDN'T ASK FOR PUBLIC COMMENTS ON THE MINUTES, SO I HAVE TO JUST RECALL TO DO THAT ON EACH OF OUR AGENDA ITEMS. ANY REQUESTS TO SPEAK ON ITEMS? NOT ON THE AGENDA? NO, THERE ARE NONE. OKAY. THERE ARE NONE. SO WE WILL MOVE TO ITEM ITEMS UNDER ACTION ITEMS FOR A FIRST QUARTER

[Action Items]

FINANCIAL REPORTS. DEBORAH SPAULDING. ALL RIGHT.

GOOD MORNING. I'M DEB SPAULDING AGM OF FINANCE AND MANAGEMENT SERVICES.

GIVE ME A SECOND HERE WHILE I PULL UP OUR PRESENTATION.

AS YOU MENTIONED, THIS IS OUR FIRST QUARTER FINANCIALS, AND AS USUAL, AS USUAL, I'LL START OUT BY GIVING YOU THE HIGH LEVEL ROLL UP OF OUR REVENUES AND EXPENDITURES AS OF THE END OF THE FIRST QUARTER.

SO IF YOU LOOK AT OUR REVENUES THROUGH MARCH 31ST, WE BROUGHT IN 19.6 MILLION AGAINST OUR $225.6 MILLION BUDGET.

THAT'S 8.7% OF TOTAL REVENUES FOR THE YEAR, AND ON THE EXPENDITURES, WE BROUGHT IN $62.5 MILLION OF OUR $240 MILLION BUDGET.

THAT'S 26.1% OF OUR BUDGET FOR THE YEAR, AND THIS IS NORMAL, AND SO I'LL TALK ABOUT THIS MORE IN THE IN THE NEXT SLIDE. SO IN THE FIRST QUARTER WE RECEIVED VERY LITTLE PROPERTY TAX REVENUE, AND AS YOU KNOW PROPERTY TAX REVENUES ARE THE MAJOR REVENUE SOURCE FOR THE DISTRICT.

[00:05:08]

SO YOU CAN SEE FIRST QUARTER ACTUALS ARE COMING IN SLIGHTLY BELOW WHAT WE HAD BUDGETED TO RECEIVE IN THE FIRST QUARTER.

WE'RE EXPECTING IN QUARTER TWO, THREE AND FOUR TO RECEIVE SLIGHTLY HIGHER THAN BUDGET, BUT YOU CAN SEE THAT WE GET IN QUARTER 2ND APRIL AND IN QUARTER FOUR IN DECEMBER IS WHEN WE RECEIVE OUR BIG CHUNK OF PROPERTY TAXES.

SO IT'S NORMAL FOR US TO BE DRAWING DOWN ON REVENUE IN THE FIRST QUARTER.

THIS IS A EXCERPT FROM A PAGE IN YOUR PACKET WHERE WE PROVIDE INFORMATION ABOUT THE GENERAL FUND REVENUE AND EXPENDITURES.

FIRST, WE SHOW YOU AT A HIGH LEVEL ROLL UP. SO JUST BY TYPE OF REVENUE AND BY TYPE OF EXPENDITURE.

SO PROPERTY TAXES, AS I MENTIONED, WE'VE RECEIVED ONLY 6.6% OF OUR TOTAL BUDGETED REVENUE TO DATE, BUT THIS IS AS EXPECTED, AND IF YOU LOOK AT THE FINAL COLUMN HERE, YOU CAN SEE MARCH 31ST OF 2024.

SIMILARLY, WE HAD BROUGHT IN ONLY 7% OF WHAT WAS BUDGETED.

CHARGES FOR SERVICES ARE ON TRACK. ALL OF OUR OTHER REVENUES ARE ON TRACK WITH WHAT WE WOULD EXPECT.

WE ARE RECEIVING INTEREST EARNINGS. SO WE NO LONGER BUDGET FOR INTEREST EARNINGS, BUT YOU CAN SEE THAT 'S COMING IN VERY STRONGLY AS IT DID IN THE PRIOR YEAR AS WELL, AND YOU'LL BE HEARING MORE ABOUT INTEREST EARNINGS IN THE IN THE NEXT PRESENTATION.

ON THE EXPENDITURE SIDE THE AT THIS ON THIS SLIDE, IT LOOKS AS THOUGH WE'RE ON TRACK, WITH THE EXCEPTION OF SUPPLY SERVICES AND CAPITAL OUTLAY. THESE APPEAR TO BE BELOW BUDGET, BUT IF YOU LOOK AT OUR PURCHASE ORDERS, OUR ENCUMBRANCES, WHICH IS WHERE WE'RE PREPARING TO MAKE A PURCHASE, BUT WE HAVEN'T QUITE GOTTEN THROUGH ALL THE STEPS. IF YOU LOOK AT THOSE AND WE ARE ON TRACK FOR THE YEAR. NOW DRILLING DOWN INTO EXPENDITURES BY DIVISION.

SO LOOKING AT THAT EXPENDITURE, NOT BY TYPE, BY WHO'S SPENDING THE MONEY, AND THE BIG STANDOUT HERE IS IN THE BOARD OF DIRECTORS WHERE IT LOOKS LIKE YOU ARE WAY OVER BUDGET. THIS IS ACTUALLY A FUNCTION OF THE FOURTH.

IN THE LAST YEAR WHEN WE DID OUR ELECTION, WE RECEIVED AN INVOICE FROM ALAMEDA COUNTY, BUT WE DIDN'T RECEIVE IT IN UNTIL THE FIRST QUARTER.

SO IT NEEDS TO GET ACCRUED BACK TO LAST YEAR'S EXPENDITURES, BUT AS OF MARCH 31ST, THE ACCRUAL HADN'T YET HAPPENED.

SO IT'S STILL SITTING HERE. SO IT'S A TIMING ISSUE.

WHEN WE SHOW YOU THIS REPORT AT THE END OF THE SECOND QUARTER, THAT WILL BE GONE AND YOU GUYS WILL BE ON TRACK AGAIN AND IT'LL BE REFLECTED IN THE 2024 EXPENDITURES. OKAY. SO LET IT BE REFLECTED THAT THIS IS THE FAULT OF OUR TWO NEW BOARD MEMBERS.

RIGHT. YEAH. SO JUST A TIMING ISSUE, AND THIS WILL BE TAKEN CARE OF IN QUARTER TWO.

ALL OTHER EXPENDITURES ARE REALLY AS EXPECTED FOR THIS TIME OF YEAR.

YOU KNOW, YOU CAN SEE THAT WE'RE A LITTLE BIT SLOW TO GET GOING.

ALWAYS IN THE FIRST QUARTER, AS WE'RE, LIKE, ENCUMBERING FUNDS AND PREPARING TO DO THE MAJORITY OF THE WORK THAT HAPPENS IN THE SUMMER SEASON AND INTO THE FALL. NOW WE HAVE A COUPLE CHARTS, JUST GIVING YOU A BROADER PERSPECTIVE OF LOOKING AT REVENUES AND EXPENDITURES OVER A MULTI-YEAR PERIOD. SO GOING BACK FIVE YEARS SO THIS MIGHT LOOK A LITTLE BIT SCARY THAT OUR REVENUE, THE DASHED LINE IS SHOWING WHAT OUR PROJECTION IS FOR 2025.

SO THIS IS OUR BUDGET FOR 2025. AS I MENTIONED EARLIER, WE DON'T BUDGET FOR INVESTMENT EARNINGS, AND SO IN 2024 WE'RE REFLECTING THE ACTUAL REVENUES, AND SO AT THIS POINT, IT APPEARS THAT OUR BUDGETED REVENUES FOR INVESTMENT EARNINGS ARE ON TRACK TO DO AS WELL AS IN 2024 OR SIMILAR.

SO HOPEFULLY THIS WILL THIS UPWARD TREND WILL CONTINUE FOR 2025.

I ALSO WANTED TO POINT OUT ON PROPERTY TAXES.

YOU CAN SEE THAT THE LINE IS FLATTENING OUT. SO IN 2021 TO 2023 WE HAD A STEEPER INCREASE IN OUR PROPERTY TAX REVENUES.

THAT'S STARTING TO THE SLOPE IS IS FLATTENING, AND WE'VE HEARD PRELIMINARILY THAT IN 2526 IT WILL SIMILARLY BE FLATTENING OUT. SO OUR PROPERTY TAXES ARE STILL INCREASING BUT NOT AS AS QUICKLY AS THEY WERE IN PRIOR YEARS.

NOW LOOKING AT THE EXPENDITURES OVER THE PAST FIVE YEARS YOU CAN SEE SO AT 2024, WE'RE REFLECTING THE ACTUAL EXPENDITURES, AND WE HAD SOME REALLY SIGNIFICANT EXPENDITURES IN 2024 THAT ARE NOT BUDGETED TO HAPPEN IN 2025.

FOR EXAMPLE, WE TRANSFERRED 22 MILLION FROM THE GENERAL FUND TO CONSTRUCT THE PERALTA OAKS NORTH BUILDING, AND WE ALSO DID THAT MAJOR PAYMENT TO CALPERS TO PAY OFF OUR UNFUNDED LIABILITY.

SO THOSE TWO ARE REFLECTED IN THE EXPENDITURES IN 2024 BUT WON'T BE HAPPENING IN 2025.

[00:10:05]

SO THAT WAS ALL IN THE GENERAL FUND. NOW DIVING INTO OUR OTHER FUNDS.

SO WE HAVE OUR SPECIAL REVENUE FUNDS WHICH INCLUDES MEASURE FF, LIGHTING AND LANDSCAPING ASSESSMENT, DISTRICT ZONES OF BENEFITS, AND MEASURE WW LOCAL GRANTS.

THIS IS ALL A PAGE IN YOUR PACKET. THESE EXPENDITURES AND REVENUES ARE ALL ON TRACK FOR THE YEAR.

YOU CAN LOOK AT OUR PROJECT FUNDS. THE VARIANCES YOU SEE THERE ARE RELATED TO THE FACT THAT PROJECTS HAPPENING OVER MULTIPLE YEARS.

SO SOMETIMES WE'RE BUDGETING FUNDS IN ONE YEAR, BUT THE EXPENDITURES DON'T HAPPEN UNTIL LATER, AND CONVERSELY, SOMETIMES WE HAVE MAJOR EXPENDITURES IN ONE YEAR RELATED TO A PROJECT THAT WAS BUDGETED IN A PRIOR YEAR.

DEBT SERVICE FUNDS, THOSE ARE REVENUES AND EXPENDITURES RELATED TO OUR MEASURE WW BONDS AND OUR PROMISSORY NOTES, AND THEN WE HAVE INTERNAL SERVICE FUNDS, WHICH INCLUDE WORKERS COMPENSATION, GENERAL LIABILITY, EMPLOYEE BENEFITS, THE MAJOR INFRASTRUCTURE RENOVATION AND REPLACEMENT FUND, AND OUR EQUIPMENT FUND.

SO THESE ARE ALL ON TRACK FOR THE YEAR. SO I'M HAPPY TO TAKE ANY QUESTIONS, BUT WE WOULD LIKE A RECOMMENDATION TO SUBMIT THIS TO THE BOARD OF DIRECTORS FOR FAVORABLE CONSIDERATION. THANK YOU, DEB. ARE THERE QUESTIONS FOR DEB FROM MEMBERS OF THE COMMITTEE? JOHN. I DIDN'T HAVE ANY FOR THIS ONE. JUST YEAH PUZZLING.

I MEAN, 26 OR $2.638 MILLION FOR TWO ELECTIONS IN ALAMEDA COUNTY.

YEAH. SO THE ACTUAL INVOICE RECEIPT. SO THIS IS GOING TO GET INTO SOME ACCOUNTING JARGON.

SO FORGIVE ME. WE ACCRUED THE FULL $2.2 MILLION WHICH IS THE MOST THAT WE THOUGHT IT COULD BE OR 2.5 MILLION.

EXCUSE ME. WHICH WAS THE MOST WE THOUGHT IT COULD BE? WE GOT A PRELIMINARY ESTIMATE FROM ALAMEDA COUNTY OF IT COULD RANGE FROM THIS AMOUNT TO THIS AMOUNT.

SO WE ACCRUED THE HIGHEST AMOUNT JUST TO COVER THE, YOU KNOW, HAVE THE SAFE ESTIMATE.

IT CAME IN ONLY 1.9 MILLION, STILL QUITE HIGH, BUT IT WASN'T 2.5.

SO THE ACCRUAL IS NOW REFLECTED CORRECTLY IN THE 2024 ACTUALS, BUT WHAT YOU'RE SEEING IN 2025 IS THE HIGHER ESTIMATE THAT WE HAD GOTTEN. OKAY. SO SO 1.9 MILLION IS ACTUALLY WHAT THE BILL WAS.

DOES THAT HELP? YES. IT'S STILL VERY HIGH. IT'S NOT HELPFUL AT ALL, AND IT'S BASED ON YOU HAVE NOTHING TO DO WITH IT.

YEAH. IT'S A DOLLAR COST PER VOTER. INTERESTINGLY ENOUGH.

WOW. YEAH. SO SOME OF THAT'S CONTRA COSTA FOR WARD TWO, CORRECT? CONTRA COSTA IS SO MUCH LOWER. YEAH, AND IT'S NOT THAT THERE ARE FEWER VOTERS.

THERE ARE FEWER VOTERS, BUT IT'S REALLY THE PRICE OF VOTING IN THE COUNTY IS LOWER.

UNDERSTOOD. OKAY. I DON'T HAVE ANY QUESTIONS.

GOOD REPORT. IS THERE ANY REQUEST FOR PUBLIC COMMENT? PUBLIC COMMENT? NO PUBLIC COMMENT. SHALL WE MOVE ON TO ITEM FOUR B INVESTMENT REPORT AND MARKET REVIEW FOR MARCH 31ST, 2025. IS THAT AN ACTION ITEM? SO THAT IS AN ACTION ITEM.

YOU'LL NEED TO VOTE ON THAT. FIRST QUARTER. NOW ARE WE APPROVING A REFERRAL OR JUST A REPORT? YOU'RE APPROVING THE REQUEST TO MOVE IT TO THE FULL BOARD FOR FOR THEIR REVIEW.

OKAY. SO WE'RE APPROVING A REFERRAL TO THE FULL BOARD FOR APPROVAL.

YES. IS THERE A MOTION I WOULD MOVE TO REFER IT SECOND? IT HAS BEEN MOVED AND SECONDED. ALL IN FAVOR, SAY AYE.

AYE. UNANIMOUSLY APPROVED. NOW TO ITEM B, INVESTMENT REPORT AND MARKET REVIEW.

DIRECTOR COFFEY, MAY I INTERJECT? COULD WE QUICKLY, JUST FOR HOUSEKEEPING PURPOSES, TAKE A VOTE ON THE AGENDA CHANGE? OKAY. IF YOU INSIST. I'LL DO THAT WHEN WE GET THERE.

LAWYERS. OKAY. ALL RIGHT. SO AGENDA ITEM FOUR B IS THE QUARTERLY MARKET REPORT AND INVESTMENT REVIEW FOR MARCH 31ST, 2025. SO AS USUAL, I'LL GIVE YOU A BRIEF OVERVIEW, AND THEN I'M GOING TO TURN IT OVER TO MONIQUE SPIKE WHO IS HERE FROM PFMAM, AND SHE'S GOING TO GIVE YOU MUCH MORE DETAIL ABOUT THE CURRENT INVESTMENT ENVIRONMENT AND DETAILS ABOUT THE INVESTMENTS THAT PFM IS MAKING ON THE DISTRICT'S BEHALF.

[00:15:10]

SO AT THE TOP OF THIS TABLE, WHICH I BELIEVE IS ON PAGE NINE, BUT I DON'T LET ME SEE IF I CAN FIND IT.

AT THE TOP OF THIS TABLE, WE'RE TALKING ABOUT THE.

YES. PAGE NINE. WE'RE TALKING ABOUT THE DISTRICT'S LIQUIDITY PORTFOLIO.

SO THESE ARE INVESTMENTS THAT ARE EITHER CASH OR EASILY CONVERTIBLE TO CASH.

THE MAIN THING TO POINT OUT HERE IS WHAT YOU HEARD IN THE LAST PRESENTATION, THAT IN THE FIRST QUARTER, WE HAVE NOT YET RECEIVED OUR FIRST LARGE PROPERTY TAX INSTALLMENT.

SO YOU CAN SEE THAT FROM DECEMBER 31ST, BACK TO MARCH 31ST OR MOVING TOWARDS MARCH 31ST, WE'RE DRAWING DOWN ON THAT CASH, AND SO IT WAS 219.2 MILLION DECEMBER 31ST, AND NOW WE'RE DOWN TO 193.6 MILLION.

IN OUR IN OUR CASH AS WE'RE AS WE'RE SPENDING BUT NOT BRINGING IN NEW REVENUE.

MOVING DOWN A LITTLE FURTHER ON THE PAGE TALKING ABOUT INVESTED SECURITIES.

SO THESE ARE OUR SHORT AND MID AND LONG TERM SECURITIES THAT PFM ACQUIRES ON OUR BEHALF.

SO A DECREASE IN TREASURY INVESTMENTS IN THIS QUARTER AND AN INCREASE IN ASSET BACKED SECURITIES AND CORPORATE BONDS AND NOTES, AND MONIQUE WILL SPEAK MORE ON THAT IN HER PRESENTATION, AND NOW DOWN AT THE BOTTOM OF THE PAGE, THIS IS OUR FUNDS THAT ARE HELD IN TRUST. EITHER OUR BOND FUNDS OR DEBT SERVICE FUNDS, AND JUST A COUPLE THINGS TO POINT OUT HERE.

IF YOU LOOK AT THE TWO PROMISSORY NOTE LINES, YOU CAN SEE THAT WE'RE DRAWING DOWN ON THOSE FUNDS.

IF YOU COMPARE WHERE WE WERE WITH AT DECEMBER 31ST, WITH WHERE WE ARE AT MARCH 31ST, AND THAT'S BECAUSE WE'RE CONSTRUCTING THAT BUILDING ACROSS THE STREET, AND SO AS WE GET THOSE INVOICES IN, WE'RE DRAWING DOWN ON THOSE FUNDS, AND THEN THE OTHER THING TO POINT OUT HERE IS THAT WE SET UP A NEW ACCOUNT FOR OUR ARBITRAGE PAYMENT THAT IS DUE FOR OUR MEASURE WW BONDS.

THIS IS THE FIRST TIME WE'VE HAD AN ARBITRAGE PAYMENT IN A LONG TIME, AND IT'S BASICALLY WHEN YOU SELL BONDS AND YOU ARE WHEN YOUR INVESTMENT EARNINGS ARE DOING WELL ENOUGH. THE IRS SAYS YOU DON'T GET TO KEEP THAT.

YOU HAVE TO SEND IT TO THE IRS AS A PAYMENT, AND SO THAT'S DUE IN 2026, BUT OUR PRELIMINARY ESTIMATE IS THAT IT'S SO FAR WE OWE 2.125 MILLION, AND THERE'LL BE AN ADDITIONAL PAYMENT THAT WILL BE OWED ONCE THEY DO THAT NEXT CALCULATION.

SO WE SET THAT OFF INTO A SEPARATE ACCOUNT SO THAT WE'RE SURE NOT TO SPEND IT.

SO THOSE ARE THE TWO ITEMS I WANTED TO BRING TO YOUR ATTENTION HERE.

SO THIS IS ANOTHER ITEM WHERE WE WOULD LIKE TO BRING THIS TO THE FULL BOARD, BUT BEFORE WE TAKE THAT ACTION, I WILL TURN IT OVER TO MONIQUE, AND SHE'S GOING TO PRESENT THE PFM REPORT.

THANK YOU. JUST HERE SOMEWHERE.

WHICH ONE IS IT? I DON'T THINK IT'S. I DON'T THINK IT'S LOADED ON THE.

LET ME TURN OFF.

ONE SECOND WHILE WE GET THIS LOADED.

[00:21:38]

THANK YOU FOR YOUR TIME THIS MORNING. I AM GOING TO SPEND SOME TIME SPEAKING ABOUT THE MARKET ENVIRONMENT AND CONDITIONS THAT PERSISTED DURING THE FIRST CALENDAR QUARTER OF THE YEAR, AND DURING MY COMMENTARY, I'LL MAKE SOME COMMENTS ON HOW WE APPROACH THE MARKET WITH REGARD TO THE DISTRICT'S PORTFOLIO, AND THEN I'LL END TALKING ABOUT THE CHARACTERISTICS OF THE DISTRICT'S PORTFOLIO AND OUR GENERAL STRATEGY.

FIRST AND FOREMOST ONE THING I DO WANT TO SHARE, IT LOOKS LIKE WE'RE MISSING.

ALL RIGHT. PARDON ME. THAT WAS NOT THE SLIDE I EXPECTED.

I'LL START WITH SOME GENERAL COMMENTS ABOUT THE MARKET AND THEN JUMP INTO THE DISTRICT'S PORTFOLIO.

ONE THING THAT'S NOTABLE ABOUT THE TIMES WE'RE LIVING IN WITH REGARD TO THE MARKET IS THAT THINGS ARE REALLY CHANGING DAY BY DAY AND MOMENT BY MOMENT.

AS WE STARTED THE YEAR WITH THE NEW PRESIDENTIAL ADMINISTRATION, THE TRUMP ADMINISTRATION, THE MARKET HAS REALLY BEEN ADJUSTING TO SOME VOLATILE POLICIES WITH REGARD TO TARIFFS, AND A LOT OF THAT UNCERTAINTY HAS REALLY ROCKED THE INVESTMENT MARKETS.

SO SOME THINGS THAT I'LL POINT OUT ONE, THE FED HAS A CHALLENGING ENVIRONMENT TO NAVIGATE THROUGH.

AS WE STARTED THE CALENDAR YEAR, THERE WAS AN EXPECTATION THAT THE FED WOULD START LOWERING INTEREST RATES IN RESPONSE TO YOU KNOW, BETTER INFLATIONARY CONDITIONS ACROSS THE BOARD.

HOWEVER, WITH THE TARIFFS THAT HAVE BEEN PUT IN PLACE OR ANNOUNCED ANYWAY.

THE FED HAS HAD TO HOLD OFF ON THAT POLICY FOR A COUPLE REASONS.

ONE, WITH THE EXPECTATIONS OF TARIFFS HITTING THE MARKET, WE SAW A LOT OF TRADE ACTIVITY WITH FOLKS IMPORTING ASSETS AND PRODUCTS SOONER THAN ANTICIPATED TO GET IN FRONT OF POTENTIAL PRICE INCREASES WITH TARIFFS.

YOU SAW CONSUMER CONFIDENCE TAKE A HIT AS CONSUMERS AS A WHOLE EXPECTED HIGHER PRICES AND FELT VERY UNSURE ABOUT THE AMOUNT OF ANNOUNCEMENTS, POLICY CHANGES, TARIFF ANNOUNCEMENTS COMING FROM THE TRUMP ADMINISTRATION AND ALSO SOME IMPACTS ON UNEMPLOYMENT AS A WHOLE. SO WHAT WHAT HAS THAT RESULTED IN? ONE GDP GROWTH SLOWED DOWN DURING THE QUARTER.

FOR THE QUARTER, IT WAS DOWN 0.3%. I'M SORRY.

YEAH, IT WAS DOWN 0.3% COMPARED TO A FORECAST THAT INITIALLY SHOWED IT UP.

INFLATION, WHILE YOU KNOW, COMING IN LINE, THE SOFT DATA SUGGESTS THAT INFLATION COULD HAVE SOME CHALLENGES.

ALL RIGHT. OKAY. ALL RIGHT. THANK YOU. GIVE US JUST A MOMENT.

ALL RIGHT. WE'RE IN BUSINESS. THANK YOU. SO I WAS GENERALLY JUST WALKING THROUGH SOME OF THESE COMMENTS,

[00:25:04]

I WILL SAY THAT, YOU KNOW, AS A RESULT OF SOME OF THAT UNCERTAINTY, I TALKED ABOUT CONSUMER CONFIDENCE.

I TALKED ABOUT GROWTH EXPECTATIONS. WE'VE ALSO SEEN EXTREMELY VOLATILE ACTIVITY IN TERMS OF INTEREST RATES DURING THE QUARTER.

YIELDS ON MATURITIES BETWEEN 2 AND 5, TWO AND TEN YEARS FELL DRAMATICALLY, 35 AND 43 BASIS POINTS DURING THE QUARTER.

SINCE THE END OF THIS CALENDAR QUARTER, WE'VE ACTUALLY SEEN YIELDS JUMP BACK UP AGAIN AS A RESULT OF SHIFTING EXPECTATIONS WITH REGARD TO TARIFF POLICY.

ONE OF THE THINGS I'LL SHOW YOU AS WE GO ALONG HERE IS JUST WHAT SOME OF THIS UNCERTAINTY HAS REALLY LOOKED LIKE IN REAL TIME.

ON THIS CHART, WE SHOW THE NUMBER OF EXECUTIVE ORDERS SIGNED BY VARIOUS PRESIDENTS THROUGHOUT THEIR TERMS IN THE FIRST COUPLE OF DAYS OF THEIR ADMINISTRATION, AND YOU CAN SEE PRESIDENT TRUMP, YOU KNOW, REALLY WINS THIS RACE WITH THE MOST AMOUNT OF EXECUTIVE ORDERS SIGNED, AND THAT'S IMPORTANT IS BECAUSE, AGAIN, IT CONTRIBUTES TO THIS SENSE OF UNCERTAINTY IN THE MARKETS AS BOTH CONSUMERS AND BUSINESSES TRY TO KEEP PACE WITH WHAT'S EXPECTED OF THEM. THE CONSUMER CONFIDENCE INDEX AS OF PRINT WAS THE LOWEST IT HAD BEEN SINCE NOVEMBER OF 2022, AND SINCE THEN, IT'S FALLEN EVEN LOWER STILL.

ONE OF THE THINGS THAT'S REALLY NOTABLE ABOUT THIS TIME IN THE MARKETS IS THAT AS CONSUMERS ARE FACING HIGHER PRICES, THEY GENERALLY HAVE LESS SAVINGS AND LESS CERTAINTY THAN THEY DID PRIOR DURING THE PANDEMIC AND SO FOLKS ARE ENTERING THIS PHASE WITH LESS OF A FINANCIAL SAFETY NET THAN THEY DID A COUPLE OF YEARS AGO.

THE EXPECTATION FOR PRICES TO INCREASE IS SIGNIFICANT AS WELL.

DIRECTOR MERCURIO . I JUST WHILE WE'RE ON THE EXECUTIVE ORDERS THING, I MEAN, YOU KNOW I DON'T KNOW WHAT THAT NUMBER IS.

IT'S HUGE. WELL, THAT'S SOMETHING I'M SURE THAT REALLY CONCERNS THE MARKET IS THAT THERE'S SO MUCH OF THAT, BUT WHAT ABOUT THE ASPECT OF WHEN THE NEXT ADMINISTRATION COMES IN? THEY MAY REVERSE THOSE. YOU KNOW, BECAUSE THAT HAS BEEN GOING ON IN RECENT ADMINISTRATIONS.

DOES THE MARKET THINK DO YOU KNOW THAT FACTOR INTO ANY OF THE UNCERTAINTY? IN OTHER WORDS, THERE COULD BE FOUR YEARS OUT UNCERTAINTY.

YEAH, I THINK THAT'S ACTUALLY RIGHT ON TARGET.

I MEAN, FRANKLY, WHAT WE'RE SEEING IS THAT FOLKS AREN'T ABLE TO RELY ON TRADE DEALS THAT HAVE ALREADY BEEN INKED AND SIGNED.

IT SEEMS LIKE NOTHING IS SET IN STONE. PRESIDENT TRUMP, EVEN IN HIS OWN EXECUTIVE ORDERS, IN HIS OWN CORRESPONDENCE TO THE MARKET AT LARGE, IS CHANGING HIS MIND DAY BY DAY, MOMENT BY MOMENT, AND SO THAT SENSE OF UNCERTAINTY, WHEN YOU THINK ABOUT INVESTMENT FOLKS BEING ABLE TO MAKE LONG TERM PLANS TO BE ABLE TO ORDER PRODUCT RELY ON A PRICE POINT THAT DOESN'T REALLY EXIST RIGHT NOW AND THERE'S SO MUCH UNCERTAINTY FLOATING THERE IN THE MARKET.

JUST ANECDOTALLY, I CAN TELL YOU, I SAT IN FRONT OF AN INVESTMENT COMMITTEE LAST WEEK BEFORE THE WEEKEND, AND , YOU KNOW, I TOLD THEM, HEY, YOU KNOW, PRESIDENT TRUMP IS IN THE ADMINISTRATION IS GOING TO BE TALKING TO CHINA.

THERE'S NO SENSE WHAT WILL COME OUT OF THOSE TALKS.

RIGHT NOW IT'S ANTICIPATED THAT THEY'RE NOT GOING TO HAVE A TARIFF DEAL COMING OUT OF THAT, AND THEN BY THE WEEKEND, THAT HAD COMPLETELY SHIFTED AND THE MARKET'S EXPECTATIONS HAD COMPLETELY SHIFTED.

SO, YOU KNOW, WE'RE ALL JUST TRYING TO KEEP UP, QUITE FRANKLY, AND THAT'S CAUSING A LOT OF UNCERTAINTY, BUT WHEN YOU THINK ABOUT BUSINESS OWNERS AND PRODUCERS, YOU KNOW, THEY'RE MAKING FINANCIAL DECISIONS, AND , YOU KNOW, THE RISK MITIGATING MOVE FOR SOME OF THOSE BUSINESS OWNERS IS TO PERHAPS RAISE PRICES IN ADVANCE TO COVER THEM, AND THAT'S WHY CONSUMERS ARE EXPECTING TO SEE HIGHER PRICES IN THE FUTURE.

YEAH. OKAY. GREAT. THANK YOU. SO I'M NOT GOING TO SPEND TOO MUCH TIME TALKING ABOUT THE BROADER ECONOMIC IMPLICATIONS OF TARIFFS, BECAUSE I'M CERTAIN YOU HAVE HEARD ABOUT IT AD NAUSEAM.

WHAT I WILL SAY IS THAT, YOU KNOW, THE EFFECTIVE TARIFFS RATE ACROSS THE BOARD HAS RISEN SIGNIFICANTLY.

YOU KNOW, WE STARTED THE YEAR WITH THE EFFECTIVE TARIFF RATE BEING APPROXIMATELY 3% ACROSS THE BOARD, AND YOU CAN SEE HOW MUCH IT JUMPED AT THE END OF MARCH AND WE KNOW THAT THE TRUMP ADMINISTRATION IS EXPECTING, ON AVERAGE, TO HAVE A FLOOR TARIFF EFFECTIVE RATE OF ABOUT 10%.

SO WHICHEVER WAY YOU SLICE IT, WE DO EXPECT PRODUCERS TO PAY HIGHER, ON AVERAGE TAXES FOR IMPORTING GOODS.

[00:30:01]

AGAIN EXPECTING CONSUMERS TO PERHAPS PULL BACK SAVINGS.

FOLKS ON AVERAGE HAVE LESS OF A FINANCIAL SAFETY NET THAN THEY DID DURING THE PANDEMIC, AND THERE'S NO EXPECTATION THAT WE'RE GOING TO SEE SUPPORT FROM THE FEDERAL GOVERNMENT IN THE WAY THAT WE DID YEARS AGO. AS A MATTER OF FACT, I THINK IT'S BEEN CLEAR THAT THE ADMINISTRATION IS PULLING BACK ON SUPPORT PROGRAMS IN GENERAL. OTHER THINGS TO REALLY POINT OUT IS THE FED'S MANDATE HAS GOTTEN MORE COMPLICATED IN THIS ENVIRONMENT.

THE TWO THINGS THAT THE FED IS RESPONSIBLE FOR IS INFLATION'S IN TERMS OF KEEPING PRICE PRESSURE UNDER CONTROL AND THE UNEMPLOYMENT RATE, AND RIGHT NOW THE EXPECTATIONS FOR THE ECONOMY AT LARGE ARE CONFLICTING, AND I'M GOING TO USE THE WORD STAGFLATION, BECAUSE THAT'S REALLY WHAT WE'RE TALKING ABOUT. THE IDEA THAT PERHAPS THIS FISCAL POLICY COULD RESULT IN LOWER GROWTH FOR THE UNITED STATES, BUT ALSO HIGHER PRICES BECAUSE OF TARIFFS. NOTABLY, THE FED, WHEN THEY MET LAST WEEK, CHAIR POWELL MADE A COUPLE OF COMMENTS ABOUT HOLDING ON LOWERING THE FED FUNDS TARGET RATE, AND HE ESSENTIALLY SAID THAT WHILE WE ALL ANTICIPATE INFLATION TO INCREASE, AND WHILE WE ALL ANTICIPATE THE UNEMPLOYMENT RATE TO INCREASE, AND I'M PARAPHRASING A BIT THERE, THE REALITY IS THOSE THINGS HAVE NOT YET SHOWN UP IN THE NUMBERS.

RIGHT. WE HAVEN'T SEEN HIGHER INFLATIONARY DATA YET.

WE HAVEN'T SEEN THE EMPLOYMENT RATE RISE SUBSTANTIALLY YET, AND SO THE FED IS ESSENTIALLY SAYING RIGHT NOW WE DON'T WANT TO BE PREEMPTIVE.

WE DON'T WANT TO GUESS AT WHAT'S GOING TO HAPPEN EVEN THOUGH WE SUSPECT WE'RE GOING TO WAIT FOR IT TO ACTUALLY SHOW UP IN THE NUMBERS.

SO UNTIL WE ACTUALLY SEE HIGHER INFLATIONARY NUMBERS, OR WE SEE THE UNEMPLOYMENT RATE GETTING OUT OF CONTROL, WE CAN EXPECT THE FED TO STAY ESSENTIALLY STEADY IN TERMS OF NOT LOWERING THAT FED FUNDS TARGET RATE, BUT THE MARKET DOES EXPECT AND THE FED HAS SUGGESTED, THAT WE MAY SEE TWO RATE CUTS BY THE END OF THE CALENDAR YEAR.

SO THE CHANGE IN ECONOMIC PROJECTIONS ESSENTIALLY MATCHES WHAT I'VE BEEN SHARING, AND I'LL DIRECT YOUR ATTENTION TO THE TWO CHARTS ON THE LEFT HAND OF THE SCREEN, WHICH IS THE CHANGE IN GDP. THIS IS THE FED'S PROJECTION FOR DECEMBER AND MARCH.

DECEMBER IN THE LIGHT BLUE MARCH IN THE DARKER BLUE AND YOU CAN SEE THEIR EXPECTATIONS FOR GROWTH HAVE DECLINED, AS HAS EVERYONE ELSE'S EXPECTATIONS FOR GROWTH, AND THEIR EXPECTATIONS FOR INFLATION HAVE RISEN.

NOW I'LL NOTE THAT THIS WAS AS OF MARCH 31ST.

I'LL BE REAL INTERESTED IN HOW THE FED DOES THESE PROJECTIONS IN JUNE, AFTER THEY'VE HAD A COUPLE OF MONTHS TO DIGEST THE CURRENT POLICY AND THE IMPLICATIONS ASSOCIATED WITH IT. THIS IS THE FED'S DOT PLOT, WHICH I HAVE SHOWN TO YOU ALL BEFORE, AND I THINK WHAT'S INTERESTING ABOUT THIS DOT PLOT IS THAT THE MAJORITY OF THE DOTS, YOU KNOW, COMPARED TO THE LAST DOT PLOT, GENERALLY SHOW A REDUCED EXPECTATION OF LOWER RATES FOR THE MOST PART, AND SO THAT COINCIDES WITH WHAT I SAID WITH THE FED PERHAPS BEING ON HOLD FOR LONGER THAN ANTICIPATED, BUT STILL SHOWING TWO RATE CUTS IN 2025. NOW, THE IMPLICATION FOR THE DISTRICT IS THAT WE HAVE SEEN AGAIN, I MENTIONED YIELDS JUMPING AROUND, I THINK, AS TARIFF NEWS AS MARKET EXPECTATIONS SHIFT.

YIELDS ARE HIGHER AND LOWER ON AVERAGE, BUT GENERALLY WHAT WE'RE SEEING IS YOU'VE BENEFITED FROM HIGHER RATES ON THE SHORT END OF THE CURVE.

GENERAL MANAGER SPAULDING TALKED ABOUT YOUR LIQUID PORTFOLIO THAT'S BEEN BENEFITING FROM HIGHER RATES FOR SHORT TERM AND OVERNIGHT RATES, AND THEN THE LONGER END OF THE CURVE, WE HAVE BEEN ABLE TO TAKE ADVANTAGE OF SOME GOOD YIELDING SECURITIES IN THE TWO YEAR AND OTHER RANGE.

SO I'LL TALK ABOUT THAT IN A COUPLE SLIDES. SO THIS IS THE YIELD CURVE.

I'M FASCINATED BY THE ONE YEAR RANGE, WHICH IS SHOWN IN THE SORT OF SHADED BLUE AREA CHART, AND THIS JUST SHOWS YOU THE RANGE OF INTEREST RATES FOR THE PERIOD BETWEEN MARCH 31ST, 2024 AND MARCH 31ST, 2025, AND YOU CAN JUST SEE HOW MUCH YIELDS HAVE SHIFTED OVER THAT PERIOD AND EVEN QUARTER TO QUARTER DECEMBER BEING THE DOTTED LINE AND MARCH BEING THE SOLID BLUE LINE, HOW MUCH YIELDS HAD FALLEN DURING THAT PERIOD?

[00:35:03]

SO AGAIN, DRASTIC DROPS, DRASTIC INCREASES AS WE GO ALONG, AND THIS IS ALL IN RESPONSE TO THE MARKET REALLY TRYING TO TEALEAF WHAT THE FED IS ANTICIPATED OR EXPECTED TO DO. SECTOR YIELD SPREADS.

GENERALLY, WE'VE SEEN SECTOR YIELD SPREADS STAY IN A RANGE.

WE'RE REALLY, YOU KNOW, ON THE AVERAGE, AND I THINK THAT THIS REALLY SHOWS, ESPECIALLY IF YOU LOOK AT CORPORATE YIELD SPREADS IN THE TOP RIGHT, AND THESE ARE THE YIELDS AVAILABLE ON CORPORATE SECURITIES WITH MATURITIES BETWEEN 1 AND 5 YEARS.

THEY'RE REALLY SORT OF FLOATING AROUND THE AVERAGE OVER THE QUARTER, AND I THINK THAT'S AN INDICATION THAT WHILE THERE'S A LOT OF PRESSURE IN THE MARKETS, CORPORATE BALANCE SHEETS AS A WHOLE ARE STILL FAIRLY HEALTHY.

WE, FOR OUR PART, CONTINUE TO DO EXTENSIVE CREDIT RESEARCH ON ALL THE CORPORATE ISSUERS IN THE DISTRICT'S PORTFOLIO.

WE'RE THINKING ABOUT THAT IN LINE WITH CURRENT POLICY, AND WE REMAIN VERY COMFORTABLE WITH ALL THE CORPORATES WE HOLD AND SO I THINK THAT YOU'RE STILL GETTING GOOD VALUE FOR INVESTING IN THESE TYPES OF SECURITIES.

RETURNS FOR THE FIRST QUARTER WERE POSITIVE ACROSS THE BOARD, AND WE'RE STILL GETTING HEALTHY RETURNS ON AN ANNUALIZED BASIS FOR INVESTMENTS THAT THE DISTRICT IS GENERALLY ALLOWED TO INVEST IN, AND THE NEXT COUPLE SLIDES ARE JUST OUR FIXED INCOME COMMENTARY.

SO I'LL MOVE FORWARD TO THE PORTFOLIO REVIEW.

SO THIS IS THE SECURITIES PORTFOLIO, THE PORTION OF THE DISTRICT'S PORTFOLIO THAT ARE INVESTED IN LONGER TERM SECURITIES ON AVERAGE, AND ONE OF THE THINGS I WANT TO POINT OUT HERE IS YOUR DONUT CHART TO THE RIGHT.

YOU'LL NOTICE THE GRAY THAT'S US TREASURIES IN THE PORTFOLIO.

THIS IS WHAT WE CALL SORT OF OUR LIQUID PORTION OF THE PORTFOLIO.

WE ALWAYS KEEP A HEALTHY ALLOCATION TO TREASURIES.

THAT ALLOWS US LIQUIDITY. IN THE EVENT YOU EVER NEED TO TAP INTO THE SECURITY PORTFOLIO FOR CASH FLOW NEEDS, WHICH YOU GENERALLY HAVE NOT, BUT IN THIS ENVIRONMENT, IT'S GREAT TO CONSIDER SAFETY AND LIQUIDITY AS A METRIC.

THE PORTFOLIO'S DURATION IS ABOUT TWO AND A HALF YEARS, AND YOU'LL NOTICE THAT MATCHES THE BENCHMARK'S DURATION.

OUR STRATEGY IN THIS UNCERTAIN ENVIRONMENT IS TO BE NEUTRAL, AND WE WANT TO BE NEUTRAL BECAUSE RATES ARE UP, RATES ARE DOWN, MARKET VALUES ARE FALLING. MARKET VALUES ARE RISING.

BEING NEUTRAL ALLOWS US TO SORT OF INSULATE THE DISTRICT FROM THAT RISK.

WE'RE ESSENTIALLY SORT OF STAYING ON THE LINE WITH THE BENCHMARK.

THAT ALSO HAS ALLOWED US TO CONTINUE TO INVEST IN SECURITIES IN THE TWO YEAR RANGE.

WE'VE BEEN ABLE TO PICK UP SOME VERY ATTRACTIVE SECURITIES OVER THE PAST QUARTER, WHICH I'LL COMMENT ON IN A COUPLE OF SLIDES, AND AGAIN, OUR GOAL IS TO ENSURE THAT THE DISTRICT'S PORTFOLIO IS W ELL INSULATED FROM RISK IN THAT WAY.

OUR NET ACTIVITY FOR THE QUARTER, WE DID TAKE ADVANTAGE OF SOME ASSET BACKED SECURITIES AND SOME CORPORATE NOTES.

JUST A COUPLE OF HIGHLIGHTS. WE'VE PURCHASED SOME BMW SECURITIES AT A YIELD EXCEEDING 5%.

HERSHEY CHOCOLATE. ALSO SOME JOHNSON AND JOHNSON SECURITIES AS WELL.

FOR THE ASSET BACKED SECURITIES. WE'VE BEEN LOOKING AT COLLATERAL, INCLUDING MERCEDES, BMW AND IRONICALLY, VERIZON IPHONE LEASES, WHICH JUST STOOD OUT TO ME.

IN TERMS OF PORTFOLIO PERFORMANCE WE HAVE A PORTFOLIO PERFORMANCE OF 1.94% FOR THE QUARTER.

JUST A LITTLE BIT BELOW THE BENCHMARK PERFORMANCE.

THAT'S A BIT OF A TIMING ISSUE. WE'VE RECOVERED SOME OF THAT RETURN IN THE FIRST QUARTER, BUT ONE OF THE THINGS I REALLY WANT TO HIGHLIGHT IS THE INTEREST EARNED FOR THE PORTFOLIO AT 1.5 MILLION. IN GENERAL, INTEREST CONTINUES TO OUTPACE PRIOR PERIODS, SO WE ARE EXPECTING THE DISTRICT TO EARN MORE THIS YEAR THAN THEY HAVE LAST YEAR, WHICH IS REFLECTIVE OF THE GENERALLY HIGHER INTEREST RATE ENVIRONMENT WE HAVE FOUND OURSELVES IN OVER THE PAST YEAR.

SO OVERALL, WE'RE HAPPY WITH THE PORTFOLIO PERFORMANCE AND THE INCOME TRAJECTORY.

I'LL MOVE ON TO THE ESG OVERVIEW. THERE'S A LOT OF INFORMATION ON THIS PAGE, SO I'LL GO TO THE GRAPHICS.

THE DISTRICT'S ESG MANDATES ARE MEANT TO HELP THE PORTFOLIO, AND US AS YOUR PORTFOLIO MANAGER, FOCUS ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE FACTORS WHEN WE INVEST ON BEHALF OF THE DISTRICT.

THIS DISTRICT, THE AMOUNT OF SECURITIES IN THE PORTFOLIO THAT ARE ESG RATED ROSE TO 62%.

[00:40:01]

THIS IS THE SLIDE I WANT YOU TO TAKE A LOOK AT.

THE RISK RATING FOR THE PORTFOLIO IS 19.9, AND THAT'S STILL RELATIVELY LOW.

YOU'RE IN THE LOW CATEGORY. YOU CAN'T REALLY SEE THAT LINE THERE, BUT YOU'RE IN LOW, AND THAT MEANS THAT THE PORTFOLIO IS PERFORMING VERY WELL. THE DISTRICT'S PORTFOLIO IS DIVERSIFIED ACROSS 18 DIFFERENT INDUSTRIES.

THE BLACK DIAMONDS ON THIS CHART REPRESENT WHERE THE PORTFOLIO RATES ARE, THE BLUE BARS REPRESENT THE ESG RISK RATING, AND , YOU KNOW, THE LOWER THE NUMBER IS, THE BETTER THOSE INDUSTRIES ARE MANAGING ESG RISK.

THE HIGHEST RISK RATED INDUSTRY IN THE PORTFOLIO IS AEROSPACE AND DEFENSE, BUT IT ACCOUNTS FOR A FAIRLY LIMITED PORTION OF THE PORTFOLIO.

A SINGLE HOLDING IN THAT CATEGORY, LOCKHEED MARTIN, SPECIFICALLY HAS THE HIGHEST RATING OF THE PORTFOLIOS THAT ARE RATED FOR THE DISTRICT. YOU CAN SEE THAT THE CORPORATE NOTES ARE THE MAJORITY, WHICH YOU WOULD GENERALLY ANTICIPATED ANTICIPATE.

AEBS SECURITIES ARE SLIGHTLY ELEVATED IN TERMS OF THE ENVIRONMENTAL, SOCIAL AND GOVERNANCE RISK, MAINLY BECAUSE A LOT OF THOSE ARE RELATED TO THE AUTOMOBILE INDUSTRY.

AS I MENTIONED, MERCEDES, I MENTIONED BMW AUTOS TEND TO HAVE HIGHER ESG RATED RISK, AND THEN LASTLY, I SHOW S&P AND YOU KNOW, WHAT WE LIKE ABOUT THIS SLIDE IS WE GENERALLY SHOW THAT IN GENERAL HIGHER RATED CREDITS TEND TO HAVE LOWER RATED ESG ON AVERAGE.

WE HAVE, YOU KNOW, ONE TRIPLE, THE TRIPLE A RATED PORTION OF THE PORTFOLIO IS HIGHER THAN THE AA, BUT THAT'S BECAUSE THE MAJORITY OF THE INVESTMENTS ARE RATED IN THE AA CATEGORY.

REMAINING, WE SIMPLY SHOW THE ISSUERS AND THEIR ESG RISK RATING.

THAT CONCLUDES MY FORMAL PRESENTATION. I'LL HOLD HERE FOR QUESTIONS.

OKAY. THANK YOU. MEMBERS OF THE COMMITTEE. DENNIS.

ANY QUESTIONS? NO, JUST DOUBLE CHECKING HERE TO SEE IF I HAD ANYTHING.

I DON'T THINK I DID. NO, NO QUESTIONS. I HAD A QUESTION MAYBE DEB COULD ANSWER, AND THAT IS THE STATUS OF OUR GENERAL OBLIGATION BOND ISSUANCES, AND WHETHER WE'RE ANTICIPATING ANY ADDITIONAL BOND ISSUANCES IN THE FORESEEABLE FUTURE UNDER WW.

GREAT QUESTION. I COULD PULL UP MY PRESENTATION, BUT THAT MIGHT TAKE A MINUTE.

I'LL JUST TELL YOU. WE ARE STARTING TO THINK ABOUT OUR NEXT WW ISSUANCE.

IT PROBABLY WON'T HAPPEN THIS YEAR. MAYBE AT THE END OF THIS YEAR, MAYBE EARLY 2026, BUT WE'RE STILL MAKING SLOW PROGRESS ON DRAWING DOWN SPENDING OUR WW FUNDS. IF WE WERE TO HAVE A MAJOR ACQUISITION, THAT COULD CHANGE QUICKLY, AND THEN WE WOULD NEED TO ISSUE BONDS MORE QUICKLY BUT WE'RE NOT AT THAT THRESHOLD YET WHERE WE'RE READY. THE REASON I'M ASKING IS BECAUSE OF THE VOLATILITY IN TREASURIES.

I'M JUST STARTING TO THINK ABOUT WHAT DEBT FINANCING BASED ON BOND DEBT FINANCING IS GOING TO LOOK LIKE IN THE NEXT YEAR OR TWO. OBVIOUSLY NOT THIS YEAR, BUT NEXT YEAR.

SO IT'S JUST SOMETHING THAT OCCURRED TO ME THAT WE NEED TO THINK ABOUT.

RIGHT? YEAH, IT'S A GREAT POINT, AND ALSO SOMETHING WE HAVE VERY LITTLE CONTROL OVER, BUT YEAH, WE CAN'T TIME IT TOO MUCH, BUT WE CAN CERTAINLY TRY TO, AND RATES WERE PRETTY LOW AND FAVORABLE TO US AS AN ISSUER.

YEAH. WE'VE BEEN SO LUCKY FOR THE LAST TEN YEARS.

YEAH. WE'LL SEE HOW IT PLAYS OUT. THE FLIP SIDE OF THAT IS OUR FIXED RETURN INVESTMENTS ARE ALSO LOW IN TERMS OF INVESTMENT RATE RETURN. ANYWAY THAT WAS THE ONLY THING THAT OCCURRED TO ME FROM THIS PRESENTATION.

THANK YOU. SO ANY ANYTHING FURTHER ON THE INVESTMENT UPDATE? NOPE, THAT'S IT. WE JUST NEED A RECOMMENDATION.

OKAY. SO WE WILL MOVE TO THAT VOTE, BUT I WANT TO ASK FOR.

PUBLIC COMMENT. NO PUBLIC COMMENT. NO PUBLIC COMMENT.

DON'T SEE ANY IN THE ROOM. SO IS THERE A MOTION TO APPROVE THE INVESTMENT REPORT AND REFER IT TO THE FULL BOARD?

[00:45:05]

ALL IN FAVOR, SAY AYE. AYE. ANY OPPOSED? ANY ABSTENTIONS? IT'S UNANIMOUSLY APPROVED AND REFERRED TO THE FULL BOARD.

CAN WE THEN MOVE TO ITEM FOUR C, WHICH IS AUTHORIZATION TO RENEW THE EAST BAY REGIONAL PARK DISTRICT'S INSURANCE PROGRAM.

THANK YOU.

THANK YOU. HI. GOOD AFTERNOON. ALMA BALMES, RISK MANAGER WITH THE EAST BAY REGIONAL PARK DISTRICT.

I AM HERE TODAY TO PRESENT ON OUR ANNUAL INSURANCE PROGRAM RENEWAL.

THIS IS AN ANNUAL STANDARD ITEM WHERE I PRESENT JUST THE CHANGES IN GENERAL IN THE INSURANCE MARKET AND HOW IT'S IMPACTING OUR INSURANCES THAT WE HOLD AT THE DISTRICT. SO AS A PUBLIC AGENCY, WE DO HOLD MANY OR MOST OF OUR MAJOR POLICIES WITH PRISM .

PRISM IS A RISK SHARING POOL. I THINK STRONG MAJORITY I THINK MINUS MAYBE THREE COUNTIES PARTICIPATE IN PRISM AS THEIR EXCESS INSURANCE AUTHORITY, AS WELL AS OTHER CITIES AND OTHER SPECIAL DISTRICTS.

SCHOOL DISTRICTS. WE HAVE GENERAL LIABILITY PROPERTY, CYBER WATERCRAFT, EXCESS WORKERS' COMP, AIRCRAFT, AND DRONE ENDORSEMENT WITH PRISM , AND THEN WE HAVE SOME OTHER COVERAGES THAT ARE BROKERED THROUGH ALLIANT.

OUR CRIME POLICY IS WITH ALLIANT, AND WE HAVE A SMALL BOND WITH WESTERN SURETY.

SO JUST FOR A GENERAL OVERVIEW OF OUR INSURANCE PROGRAM, WE HAVE BEEN ABLE TO MAINTAIN A VERY FAVORABLE CLAIMS HISTORY, AND IT REALLY HELPS US WITH OUR INSURANCE PREMIUMS BECAUSE WE'RE NOT ONE OF THE AGENCIES THAT HAVE THE CATASTROPHIC LOSSES YEAR AFTER YEAR.

WE DO WELL WITH MAINTAINING THAT WITHIN OUR SELF-INSURED RETENTION LIMITS AND WITHIN OUR DEDUCTIBLES.

THE CALIFORNIA MARKET, HOWEVER, CONTINUES TO BE VERY CHALLENGING, ESPECIALLY AS, YOU KNOW, OUR LA FIRES IN JANUARY IN 2025, WHICH IS KIND OF RIPPLED ACROSS THE STATE, AND IT IMPACTS EVEN THOUGH WE DON'T PARTICIPATE IN THE PRIVATE MARKET, IT DOES IMPACT OUR POOL IN DIFFERENT WAYS. WHERE WE SEE LIABILITY TRENDING IS THAT THERE ARE INCREASED SETTLEMENT VALUES THAT THE EXCESS INSURANCE CARRIERS ARE HAVING TO PAY FOR IN TERMS OF OTHER PUBLIC AGENCIES THAT CAN'T WITHSTAND THOSE TYPES OF LOSSES, AND THAT'S THEN RIPPLING INTO HIGHER COSTS. WE SEE OUR CARRIERS WANTING TO HAVE HIGHER RESERVES FOR THEMSELVES.

A SNAPSHOT OF OUR 2020 FOR PROPERTY AND CASUALTY OVERVIEW.

THIS IS JUST FOR CALIFORNIA, NOT SPECIFICALLY FOR THE PARK DISTRICT IN 2024, CALIFORNIA IS THE TOP OF THE NATION FOR DIRECT PREMIUMS. SO THERE'S 94 BILLION IN WHAT EARNINGS THERE ARE THROUGH INSURANCES, AND THOSE CARRIERS ARE RETAINING THOSE COSTS TO BE ABLE TO WITHSTAND CLAIMS. WHEN THERE ARE CLAIMS THAT REPRESENTS 12% OF THE ENTIRE US PROPERTY INSURANCE MARKET.

THERE WERE SOME REFORM DISCUSSIONS IN DECEMBER AND THEN IN JANUARY WE HAD THE HUGE LA FIRES, THE FIRE PALISADES, AND IT'S CONSIDERED THE MOST CATASTROPHIC WILDFIRE EVENT IN US HISTORY IN TERMS OF DOLLARS.

SO WE'RE LOOKING AT $7.6 BILLION IN CLAIMS RELATED TO THE LA WILDFIRES, OVER 16,000 DESTROYED STRUCTURES.

BECAUSE OF THAT, AND WE ALWAYS WE SAW THIS BEFORE THE LA FIRES.

SEVERAL MAJOR INSURERS ARE NOW LEAVING THE INSURANCE MARKET IN TERMS OF PROPERTY.

THEY'RE NOT WANTING TO INSURE PROPERTIES THAT ARE IN HIGH RISK AREAS WHERE IT'S PRONE TO WILDFIRE.

WE SAW THIS KIND OF MANIFEST IN STATE FARM AS A HOMEOWNER'S PROPERTY INSURANCE AGENCY AND RENTERS AND RENTAL DWELLINGS, WHERE AFTER THE FIRES IN FEBRUARY, THEY PROPOSED AN EMERGENCY RATE INCREASE THAT WAS 22%, AND SO THAT WENT THROUGH A SERIES OF HEARINGS.

THE MAIN REASON WHY THEY WANTED TO INCREASE IT IS BECAUSE THEY KNEW THAT LOTS OF LOSSES WERE GOING TO COME THROUGH, THAT WAS GOING TO BE ON THEIR DIME, AND SO IT WAS AN UNPRECEDENTED ACT BY STATE FARM TO BE ABLE TO DO THIS TO THE STATE INSURANCE COMMISSIONERS OFFICE.

THIS PAST MONDAY, THEY HAD THAT HEARING, AND YESTERDAY, COMMISSIONER LARA ADOPTED THE 17% RATE HIKE FOR HOMEOWNERS THAT

[00:50:06]

IT DOES RIPPLE INTO THE OVERALL INSURANCE MARKET AND WHERE WE ARE TODAY.

SO FOR PROPERTY, WE HAVE A 25,000 SELF-INSURED RETENTION LIMIT OR THAT'S OUR DEDUCTIBLE.

WE'VE HAD A NUMBER OF PRIOR LOSSES. AGAIN, IT'S REALLY NOT AS MANY, BUT WE DO HAVE THE OCCASIONAL SEVERE EVENT THAT MIGHT OCCUR. I THINK OUR MOST RECENT ONE IS PROBABLY THE 2023 WINTER STORMS THAT HAPPENED IN JANUARY.

WE'VE RESOLVED SOME OF THOSE PROPERTY LOSSES THROUGH THE CLAIM WITH EXCESS, BUT WE'RE STILL WORKING THROUGH LOTS OF PROJECTS THAT TO GET US BACK TO PRE-DISASTER STATE, ADDED TO OUR 2025-2026 PROPERTY POLICY.

WE ADDED OUR DUMBARTON QUARRY SERVICE BUILDING AND YARD, AND THEN WE ALSO TOOK OVER SOME PROPERTY AT CAMP ARROYO THAT WAS ALREADY THERE AND DONATED TO US, AND SO THAT HAS BECOME PART OF OUR PROPERTY PROGRAM.

OUR ESTIMATED PREMIUM INCREASE FOR PROPERTY IS ROUGHLY 18%.

SO QUESTION. YES. IS THE RETENTION LIMIT IS THAT WHAT WE WOULD NORMALLY THINK OF IN OUR HOME INSURANCE AS THE DEDUCTIBLE? YES, AND THIS IS KIND OF MORE SO A SELF-INSURED RETENTION LIMIT WOULD BE AS IF THIS IS WHAT WE'RE RESPONSIBLE FOR AS AN AGENCY BEFORE EXCESS WOULD EVEN GET INVOLVED.

WHEREAS A DEDUCTIBLE WE WOULD HAVE TO PAY AFTER NOT NECESSARILY PAY UPFRONT, BUT YEAH, IT'S KIND OF LIKE THAT.

YEAH OKAY. YEAH. THANK YOU. SURE. PARDON ME. YES I'M LOOKING AT THE PRIOR LOSSES OF THE 2023-2024 HEAVY EQUIPMENT AND VEHICLE LOSSES.

WAS THAT A BIG YEAR FOR DID WE LOSE EQUIPMENT OR WAS IT? IT WAS A NUMBER OF DIFFERENT THINGS. ONE OF THEM WAS A STOLEN SKID STEER.

THAT WASN'T RECOVERED. WE TRIED TO RECOVER IT.

THERE WAS A TRACKING DEVICE ON IT, BUT THE CAT COULD NOT LOCATE AND IDENTIFY IT.

SO WE SUBMITTED A CLAIM TO RECOVER FOR THAT AND WORKED WITH FLEET, AND THEN WE HAD SOME VEHICLE LOSSES RELATED TO TOTAL VEHICLES.

ONE WAS A THIRD PARTY VEHICLE ACCIDENT THAT WE WERE NOT RESPONSIBLE FOR.

ACTUALLY A COUPLE OF THEM WE WEREN'T RESPONSIBLE FOR, BUT IT ENDED UP IN TOTAL VEHICLES.

OKAY. OUR GENERAL LIABILITY PROGRAM, AND THIS FIRST BULLET IS NOT SPECIFIC TO THE PARK DISTRICT, BUT THE POOL IN GENERAL UNDER PRISM IS SEEING A HIGHER FREQUENCY OF VERY LARGE LOSSES, WHICH IS JUST EXACERBATING THE HARD MARKET CONDITIONS.

SO WE'RE SEEING LOTS OF THAT IN JURY VERDICTS, NOT NECESSARILY HERE, BUT FOR COUNTIES AND CITIES THAT PARTICIPATE IN THE POOL.

SO AGAIN, YOU SEE THE RISING CLAIM COSTS AND INSURANCE CARRIERS ARE COMPENSATING THAT BY INCREASING THEIR RESERVES TO BE ABLE TO KIND OF CYCLICALLY WITHSTAND THE NEXT BIG LOSS. TO GIVE YOU A SENSE OF THE POOL IN GENERAL, PRISM'S GENERAL LIABILITY CLAIMS IN THE LAST TEN YEARS, ON AVERAGE, THERE ARE ROUGHLY 126 CLAIMS IN A YEAR THAT EXCEEDED THEIR SELF-INSURED RETENTION LIMIT BY A TOTAL OF 188 MILLION COLLECTIVELY BETWEEN THE MEMBERS. SO THIS MEANS THAT WITHIN EVERY PUBLIC AGENCY'S OR EVERY MEMBER OF THE POOL THAT HAS THEIR OWN SEPARATE SELF-INSURED RETENTION LIMIT THAT THEY'RE ABLE TO SET, THEY'RE HAVING TO CALL ON THE CARRIER TO TAKE CARE OF THE REST OF THE CLAIM, TO BE ABLE TO PAY FOR WHATEVER LIABILITY THEY'RE RESPONSIBLE FOR.

SO WHAT WE'RE SEEING NOW IN CARRIERS, IN PRISM , AND ALSO JUST REINSURERS IN GENERAL, IS THEY'RE REDUCING CAPACITY.

THEY'RE ASSESSING HOW MUCH RISK THEY WANT TO ASSUME, AND CAPPING IT AT A LOWER LIMIT IF AT ALL POSSIBLE.

IF THERE'S AN AGGREGATE LIMIT WHERE, SAY, THERE'S MULTIPLE LOSSES IN A SINGLE YEAR, THEY'RE CAPPING THE NUMBER OF CLAIMS IN ANY GIVEN POLICY PERIOD AND SAYING WE'RE NOT RESPONSIBLE FOR THE REST OF IT SHOULD IT OCCUR, AND THEN WE'RE SEEING, OF COURSE, DRAMATIC INCREASE IN RATES FOR INSURANCE, AND THEN ALSO UNDERWRITING IS TAKING A VERY CLOSE EYE IN TERMS OF WHAT THE POLICY INCLUDES IN THE MEMORANDUM OF COVERAGE AND WRITING SPECIFIC EXCLUSIONS OR EXCEPTIONS, WHERE THEY'LL COVER GENERALLY A SPECIFIC TYPE OF LIABILITY, BUT THEY MIGHT EXCLUDE CERTAIN THINGS, AND ESTIMATED PREMIUM INCREASE FROM PRIOR FOR GL IS ABOUT 34%.

SO THIS IS OUR INSURANCE PREMIUMS INCREASE, AND I WANTED TO POINT OUT A COUPLE OF THINGS, IS THAT OUR 2025 2026 ESTIMATES FOR OUR INSURANCE PREMIUMS ARE REALLY JUST ESTIMATES AT THIS POINT, BECAUSE PRISM DOESN'T FINALIZE THEIR NUMBERS TILL END OF JUNE,

[00:55:08]

SO USUALLY EVEN THOUGH THE CHANGE AMOUNT HERE, YOU'RE SEEING A 1.3 MILLION INCREASE TO BE ABLE TO KEEP OUR INSURANCES.

WE USUALLY COME IN ON THE LOWER END OF THE ESTIMATE OR MIDDLE.

WE'RE NEVER USUALLY AT THE HIGH END, BUT WE ALWAYS WANT TO MAKE SURE WE HAVE ENOUGH AUTHORITY IN CASE IT ENDS UP LANDING ON THE HIGH END.

SO OVERALL, WE HAVE ABOUT A 27% TOTAL INCREASE IN THE INSURANCE PROGRAM OVER THE PRIOR YEAR, AND IT'S RELATIVELY FLAT. IF WE'RE LOOKING AT LAST YEAR, OUR OVERALL INCREASE WAS ABOUT 26%.

THERE IS A VERY STRANGE PERCENT HERE, 349% FOR THE WORKERS' COMP SELF-INSURED ASSESSMENT, AND THIS IS BASICALLY THE ASSESSMENT WE GET ANNUALLY FROM THE STATE OFFICE OF SELF-INSURED PLANS THAT REQUIRES US TO PAY INTO THIS TO BE ABLE TO KEEP OUR SELF-INSURED STATUS.

LAST YEAR, WE WERE CHARGED 61,000 BECAUSE OF OUR ACTUARIAL REPORT AND OUR GOOD STANDING FINANCIALLY, BUT IT CAN BE HIGH AND LOW, AND SO WE'RE KEEPING THE BUDGET FLAT AT 275,000, NOT RECOMMENDING TO MOVE THAT AMOUNT, BUT JUST BASICALLY MAINTAIN WHAT'S ALREADY ADOPTED IN THE BUDGET, AND SO THAT'S WHY YOU SEE THAT HUGE VARIANCE OF A 213,000, WHICH LOOKS LIKE 350% INCREASE, BUT IT'S NOT. SO LOOKING FORWARD AGAIN, I SAY THIS YEAR AFTER YEAR, STATE OF THE INSURANCE MARKET.

BACK THEN WE WERE LOOKING AT HOW FREQUENTLY SOMETHING HAPPENED OR HOW SEVERE SOMETHING HAPPENED.

NOW WE'RE LOOKING AT HOW FREQUENT THE SEVERITY IS, WHICH IS TENDS TO BE A LOT FOR PUBLIC AGENCIES BECAUSE OF THE STATE OF THE MARKET WHERE WE'RE LOOKING TO GO IS, AGAIN, JUST MAINTAIN STABILITY.

WE HAVE EXPLORED OTHER MODELS AND OTHER RISK SHARING POOLS AND JPAS, BUT WHERE WE FEEL MOST COMFORTABLE AND RECOMMEND KEEPING WITHIN PRISM IS THAT WE ARE A MEDIUM-SIZED FISH IN A VERY LARGE POOL WITH BIGGER FISH, AS OPPOSED TO BEING A LARGER PUBLIC SECTOR THAT TAKES ON THE BRUNT OF INSURANCE PREMIUMS AMONGST THE POOL THAT MIGHT HAVE SMALLER PUBLIC AGENCIES.

WHERE WE'RE LOOKING TO CONTINUE TO KIND OF GET IN FRONT OF OUR LOSSES IN GENERAL IS FOCUSING ON PUBLIC AND EMPLOYEE SAFETY, SECURING OUR ASSETS AND ALL OF OUR VEGETATION MANAGEMENT, AND WITH THAT, OUR RECOMMENDATION TO THE FINANCE COMMITTEE IS TO REVIEW THE INSURANCE PROGRAM AND RECOMMEND THAT THE FULL BOARD OF DIRECTOR RENEW OUR INSURANCE PREMIUMS AND POLICIES FOR THE 2025 2026 PERIOD AND AUTHORIZE THE SELF-INSURED ASSESSMENT PAYMENT TO THE CALIFORNIA DEPARTMENT OF INDUSTRIAL RELATIONS IN AN AMOUNT NOT TO EXCEED 275,000.

WITH THAT, I AM HAPPY TO TAKE ANY QUESTIONS. THANK YOU, ALMA.

SURE. QUESTIONS FROM THE COMMITTEE? OKAY. WELL, THIS IS NOT ONE OF THOSE QUESTIONS I LIKE TO ASK, BUT SO DO WE GET ANY CREDIT ANYWHERE FOR ALL OF OUR FUELS MANAGEMENT WORK THAT WE'VE BEEN DOING.

I MEAN, WE COULD PROVE IT BY MILLIONS UPON MILLIONS OF DOLLARS.

I REMEMBER WHEN I WAS ON THIS BOARD, IT WAS 2 MILLION A YEAR WE WERE DOING FOR FIRE PREVENTION PRE-FIRE MITIGATION.

NOW IT'S IN 13 MILLION. I THINK THIS YEAR, IF I'M NOT MISTAKEN, I MY NUMBERS COULD BE WRONG, BUT WE'RE MAKING THIS INCREDIBLE EFFORT. WE'VE HAD LESS FIRES.

WELL, WE DON'T HAVE A REAL BIG HISTORY OF BURNING HOUSES DOWN, COMMUNITY HOUSES DOWN BUT THE POINT IS, WE'RE DOING THIS PRE-FIRE MITIGATION. DOES THAT GET ANY CREDIT FOR THAT? ALONG THE LINE, WE SORT OF DO. I THINK IT IT KIND OF SHOWS ITSELF IN DIFFERENT WAYS.

ONE BEING WE'RE NOT SEEING HUGE INCREASES THAT OTHER JURISDICTIONS OR OTHER ENTITIES MIGHT SEE IN TERMS OF HIKES IN THEIR INSURANCE PREMIUMS. IT'S A HUGE ASK IN TERMS OF THE INCREASE IN OUR INSURANCE PREMIUMS, BUT COMPARED TO OTHER COUNTIES OR CITIES THAT MIGHT HAVE THOSE LOSSES BECAUSE THEY MIGHT NOT HAVE THE MITIGATION STRATEGIES THAT WE HAVE IN PLACE.

THEY'RE SEEING THAT IN HIGHER INSURANCE PREMIUMS. WE ALSO DO WE ALSO DO RECEIVE SMALL CREDITS WHEN WE PERFORM WELL, AND THEY KIND OF SPREAD THAT OUT ACROSS THE POOL FOR PUBLIC AGENCIES THAT ARE PERFORMING WELL. SO THERE ISN'T AN OUTRIGHT CREDIT FOR THAT SPECIFICALLY, BUT WE DO SEE IT MANIFEST IN DIFFERENT WAYS.

THANK YOU. I CAN SAY SOMETHING THAT'S NOT DIRECTLY RELATED TO INSURANCE, BUT THE WORK WE DO ON FUELS MANAGEMENT DEFINITELY BENEFITS OUR BOND RATING.

WHEN WE DO GO SELL OUR MEASURE WW BONDS, THE RATING AGENCIES ASK ABOUT THIS.

[01:00:01]

THAT'S GOOD TO KNOW. THANK YOU. OKAY. I HAVE ISSUE NOT REALLY A QUESTION, BUT IT STEMS FROM THE OBSERVATION THAT MISSING FROM THIS PROGRAM IN COMPARISON TO MANY OTHER LOCAL AGENCIES, IS DIRECTORS AND OFFICERS COVERAGE. DURING MY SEVERAL DECADE CAREER IN SPECIAL DISTRICT LAW AND REPRESENTATION THE VAST MAJORITY OF MY CLIENTS MAINTAINED DIRECTORS AND OFFICERS LIABILITY COVERAGE AND FOR MY COLLEAGUES BENEFIT, OF COURSE, THAT IS THE SPECIFIC COVERAGE THAT IS TRIGGERED WHEN A MEMBER OF THE BOARD OF DIRECTORS IN THEIR GOVERNANCE CAPACITY OR AN OFFICER OF THE AGENCY IN TERMS OF MANAGEMENT OFFICERS HIGHER LEVEL OF MANAGEMENT ARE CONSIDERED OFFICERS.

WE ARE OFFICERS. WHEN DIRECTORS OR OFFICERS ARE SUED IN THEIR CAPACITY OF AS OFFICERS OR DIRECTORS OF THE AGENCY, THAT COVERAGE KICKS IN.

IT PROVIDES A LEGAL DEFENSE AND LEGAL COVERAGE OF COSTS AND ULTIMATELY COVERS LIABILITY.

NOW, HISTORICALLY, THIS PARK DISTRICT HAS NOT ACQUIRED DNA COVERAGE, AND THE RESPONSE HAS BEEN IN THE PAST THAT, WELL, WE ALL HAVE EXTENSIVE IMMUNITIES TO LIABILITY UNDER CALIFORNIA STATE LAW. IN OTHER WORDS, IT'S VERY HARD, DIFFICULT TO ATTACH PERSONAL LIABILITY TO PEOPLE WHO ARE ELECTED TO PUBLIC OFFICE AND THE OFFICERS OF PUBLIC AGENCIES. THIS IS TO ASSURE THAT THOSE OF US WHO RUN FOR OFFICE OR SERVE AS OFFICERS OF PUBLIC AGENCIES DON'T LIVE IN FEAR OF BEING SUED ALL THE TIME, AND THEREFORE, MOST LAWSUITS BROUGHT ARE DISMISSED SIMPLY BECAUSE THERE ISN'T INDIVIDUAL LIABILITY TO OFFICERS AND DIRECTORS WHERE THE AGENCY ITSELF MAY INDEED FACE SOME LIABILITY AND LOSS AS A RESULT OF DAMAGES TO OTHERS. THAT USUALLY DOESN'T EXTEND BECAUSE OF THESE EXTENSIVE IMMUNITIES.

THE OTHER IS THAT THE PARK DISTRICT, BY LAW, IS REQUIRED TO INDEMNIFY ITS OFFICERS AND ITS DIRECTORS IF THEY ARE IN FACT SUED, AND IF THEY ARE FOUND LIABLE FOR DAMAGES IN THEIR CAPACITY AS OFFICERS AND DIRECTORS.

SO WE GET TO RELY ALSO ON THE PARK DISTRICT ITSELF AS A POTENTIAL SOURCE OF INDEMNITY.

NOW, HAVING SAID THAT AS THE HISTORIC REASON WE HAVEN'T PROVIDED OFFICERS AND DIRECTORS THAT COVERAGE I HAVE BECOME INCREASINGLY, INCREASINGLY UNCOMFORTABLE WITH THAT, AND THE REASON I GUESS THE BEST WAY TO ARTICULATE IN A KIND OF A NEUTRAL FASHION IS WE HAD THE CHIEF JUSTICE OF THE SUPREME COURT, I THINK JUST A DAY OR TWO AGO, TALK ABOUT HOW THE COUNTRY IS FACING INCREASINGLY RISKS THE INCREASING RISK THAT THE RULE OF LAW IS BEING UNDERMINED AT THE HIGHEST LEVELS OF GOVERNMENT, AND I DON'T HAVE THAT FEAR TODAY AT THIS AGENCY, BUT I HAVE BEEN A WITNESS TO DURING MY OWN CAREER TO A PUBLIC AGENCY IN WHICH OFFICERS, DIRECTORS, ELECTEDS JUST MANAGERS WERE SO POLARIZED POLITICALLY THAT WHEN AN INDIVIDUAL DIRECTOR WAS SUED, THE AGENCY SIMPLY REFUSED TO APPLY THE INDEMNITY OBLIGATION, TAKING THE POSITION THAT THE DAMAGES THAT EXISTED IN THAT CIRCUMSTANCE DIDN'T ARISE OUT OF ANY COURSE AND SCOPE OF THE OFFICER'S DUTIES. THAT WAS A VERY SUBJECTIVE DETERMINATION BY THAT AGENCY AND IN MY JUDGMENT, IT WAS VERY POLITICAL. THE BOTTOM LINE IS WITHOUT GOING TOO FAR INTO IT, BECAUSE IT'S

[01:05:05]

I'M SURE THEY PROVIDE IT. IF THEY'RE LIKE OTHER JPA INSURANCE, PUBLIC AGENCY INSURANCE POOLS THAT IN FACT, I'VE WORKED FOR I WORKED FOR ONE THAT INSURED HEALTH CARE DISTRICTS CALLED PROGRAM BETA BASED IN SAN RAMON.

THEY WOULD, AS PART OF THEIR COURSE OF DOING BUSINESS, PROVIDE COVERAGE TO THEIR MEMBERS USUALLY ON FAVORABLE TERMS TO COMPARED TO THE PRIVATE MARKET, BUT IN ANY EVENT.

SO IF THIS COULD BE ON THE FUTURE AGENDA OR I'M HAPPY TO RESPOND TO THAT.

AS FAR AS WE'RE CONCERNED AND FROM MY UNDERSTANDING, WE DO CARRY PUBLIC OFFICIALS.

ERRORS AND OMISSIONS COVERAGE WAS WHICH IS THE EQUIVALENT FOR THE PUBLIC SECTOR FOR DIRECTORS AND OFFICERS, WHICH IS WHAT IS THE SAME POLICY BUT FOR PRIVATE SECTOR OR EXECUTIVES WITHIN A BUSINESS.

SO WE DO CARRY PUBLIC OFFICIALS E&O, WHICH IS WRAPPED UP IN OUR GENERAL LIABILITY POLICY, AND IT WOULD COVER OVERSIGHT OF THE BOARD EMPLOYEES, OTHER APPOINTED OFFICIALS THAT WORK IN THE CAPACITY OR ON BEHALF OF THE PARK DISTRICT, AND SO I'M UNSURE, MAYBE BECAUSE IT'S BURIED WITHIN THE GENERAL LIABILITY.

IT IS PART OF THAT COVERAGE THAT WE ALREADY HOLD, AND SO IF THERE'S ANYTHING SPECIFIC THAT MAYBE YOU'RE.

OKAY, SO WHAT I WOULD LIKE TO HAVE IS THE SPECIFICS AND THE DETAILS OF THAT COVERAGE.

WE CAN GET BACK TO YOU WITH MORE INFORMATION.

YEAH, AND I'VE BEEN EXPRESSLY TOLD BY LEGAL COUNSEL AT THE PARK DISTRICT THAT WE DIDN'T HAVE COVERAGE FOR THE REASONS I STATED, UNDERSTOOD, AND I THINK MAYBE WE'RE THE CLARIFICATION IS THAT WE ARE PUBLIC OFFICIALS E&O.

IT ISN'T CALLED THE E&O, BUT IT'S THE EQUIVALENT OF THAT FOR THE PUBLIC SECTOR.

YEAH, I'M AWARE OF THAT, AND I WAS TOLD WE DID NOT HAVE E&O COVERAGE THAT EXTENDED TO THE BOARD OF DIRECTORS, FOR INSTANCE. SO LET'S CHECK INTO THAT AND SEE WHAT THE COVERAGE IS FOR A FUTURE AGENDA.

WE CAN L OOK INTO THAT, AND I REALLY APPRECIATE THAT FEEDBACK.

THANK YOU. ANY OTHER QUESTIONS. SO WE NEED A MOTION.

PUBLIC COMMENTS. OH NO PUBLIC COMMENTS OKAY. SO MOTION TO APPROVE THE RENEWAL OF THE PROGRAM AND THE SELF-INSURANCE. SO MOVED.

RECOMMENDATION. SECOND, IT'S BEEN MOVED AND SECONDED AS PRESENTED.

ALL IN FAVOR, SAY AYE. AYE AYE. ANY OPPOSED? MOTION CARRIES UNANIMOUSLY.

NOW. THAT BRINGS US TO 4D PARK DISTRICT RETIREMENT PLAN.

INVESTMENT POLICY STATEMENT UPDATE.

ALL RIGHT. GOOD AFTERNOON, DEB SPAULDING AGM OF FINANCE AND MANAGEMENT SERVICES.

I AM PLEASED TO HAVE WITH ME TODAY, ANDREW BROWN WHO'S HERE FROM PFMAM, PREVIOUSLY HIGHMARK CAPITAL MANAGEMENT AND THEN JOINING US VIRTUALLY WE HAVE DENNIS YU FROM PARS, AND THEY ARE GOING TO WALK THROUGH FOR YOU A REVIEW OF THE PARK DISTRICT'S THE EAST BAY REGIONAL PARK DISTRICT RETIREMENT PLAN INVESTMENTS, AND FOLLOWING THAT, WE'RE GOING TO TALK ABOUT THE CHANGES TO THE INVESTMENT POLICY STATEMENT.

SO I'LL TURN IT OVER TO ANDREW AND DENNIS AND REMIND US WHICH EACH OF OUR PRESENTERS FIRMS DO FOR US.

ALL RIGHT. I'LL LET ANDREW AND DENNIS SPEAK ABOUT THAT, AND THEY CAN GIVE YOU DETAILS.

THAT WOULD BE GREAT. THANK YOU. YEAH, I'LL GO FIRST.

[01:10:02]

DENNIS. ALL RIGHT. ALL RIGHT. GOOD AFTERNOON, MR. CHAIRMAN. MEMBERS OF THE COMMITTEE. MY NAME IS DENNIS YU, EXECUTIVE VICE PRESIDENT WITH PARS, AND I'M PLEASED TO PRESENT AN UPDATE ON THE DISTRICT'S RETIREMENT PLAN FOR YOUR GENERAL AND SWORN EMPLOYEES, AND IF, ANDREW, IF YOU DON'T MIND FLIPPING TO PAGE FOUR OF THIS PRESENTATION.

THIS WILL GIVE A GENERAL OVERVIEW OF THE PARS TRUST TEAM, WHICH IS THE ORGANIZATION THAT PROVIDES THE RETIREMENT PLAN SERVICES FOR, AGAIN, BOTH THE GENERAL AND SWORN EMPLOYEES. THE FIRM THAT I REPRESENT, PARS, WE ARE RESPONSIBLE FOR PROVIDING THE OVERALL ADMINISTRATION OF THE RETIREMENT PLANS.

BASICALLY, WE'RE THE MAIN POINT OF CONTACT FOR ALL DISTRICT EMPLOYEES, PARTICIPANTS AND RETIREES IN WITH REGARDS TO THEIR BENEFIT SERVICING NEEDS.

THE OTHER COMPANY THAT'S ALSO INVOLVED IS US BANK.

THEY SERVE AS TRUSTEE OF THE PLAN. SO ALL THE ASSETS ARE ACTUALLY HELD IN TRUST BY US BANK, AND THEY ARE RESPONSIBLE FOR THE SAFEGUARDING OF THOSE ASSETS, AS WELL AS DISTRIBUTING THE BENEFITS TO THE RETIREES IN THE FORM OF THOSE MONTHLY BENEFIT PAYMENTS, AND THEN THE FIRM ON THE FAR RIGHT HAND SIDE IS THE COMPANY THAT ANDREW BROWN REPRESENTS, PFM ASSET MANAGEMENT. THEY SERVE AS THE INVESTMENT MANAGER OF THIS PROGRAM.

THE DISTRICT PROVIDES THE RISK TOLERANCE GUIDANCE FOR THIS PLAN.

SO THE DISTRICT HAS CHOSEN A VERY CONSERVATIVE INVESTMENT STRATEGY, AND IT'S UP TO PFM ASSET MANAGEMENT TO DESIGN THE PORTFOLIO ACCORDINGLY. OKAY, AND SO WE DO HAVE A QUICK PRESENTATION.

I'M GOING TO SKIP SOME OF THE SLIDES IN THIS PRESENTATION, BUT WE DID WANT TO PROVIDE A, YOU KNOW, A GOOD MIXTURE. THE COMMITTEE HAS A GOOD OVERVIEW OF THIS PROGRAM AND THE STRUCTURE, ANDREW , IF YOU DON'T MIND FLIPPING TO THE NEXT PAGE, PAGE FIVE.

SO PAGE FIVE PROVIDES A QUICK OVERVIEW OF THE HISTORY OF THE RETIREMENT PLANS THAT WE'RE HERE TO DISCUSS TODAY.

SO THESE ARE BOTH PLANS FOR THE GENERAL AND SWORN EMPLOYEES WERE DESIGNED BACK IN THE 1960S.

IN THE YEAR 2000 THE BOARD DECIDED TO CONTRACT WITH CALPERS TO PROVIDE RETIREMENT BENEFITS FOR YOUR LOCAL AND SAFETY EMPLOYEES GOING FORWARD. AS OF THAT DATE, HOWEVER, THERE WERE A GROUP OF EMPLOYEES AND RETIREES THAT WERE NOT TRANSITIONED TO THE CALPERS PLAN, AND SO THAT'S THE PLAN THAT WE'RE HERE TO TALK ABOUT TODAY.

SO PRIOR TO JANUARY 1ST OF 2022, THOSE PLANS WERE ADMINISTERED BY A COMPANY CALLED TRANSAMERICA, AND THEN THE BOARD DECIDED TO TRANSITION THOSE PLANS TO ADMINISTRATION UNDER THE PARS TRUST BACK IN 2022.

OKAY. NEXT SLIDE. SO THERE ARE TWO SEPARATE PLANS ON PAGE SEVEN PROVIDES AN OVERVIEW OF THE GENERAL EMPLOYEE PLAN.

I'M NOT GOING TO COVER THAT, BUT JUST WANTED TO GIVE YOU THE BACKGROUND ON THE OVERALL DESIGN OF THAT PLAN.

IF YOU WANT TO FLIP TO THE NEXT PAGE THIS PROVIDES A DEMOGRAPHIC SUMMARY OF THE REMAINING PARTICIPANTS IN THIS PARTICULAR PROGRAM.

SO AS OF JANUARY 1ST OF 2023, THERE WAS ONE ACTIVE PLANNED PARTICIPANT.

THERE WERE FIVE TERMINATED VESTED EMPLOYEES. SO THAT SIMPLY MEANS THE EMPLOYEES THAT HAVE LEFT THE SERVICE OF THE DISTRICT BUT ONE DAY ARE ELIGIBLE TO RETIRE AND THEN DRAW A BENEFIT UNDER THIS PROGRAM, AND THEN THERE WERE 144 RETIRED PLAN PARTICIPANTS AND BENEFICIARIES WHO WERE CURRENTLY IN THE PROCESS OF COLLECTING THEIR BENEFITS. SO WHEN YOU ADD UP THESE THREE ROWS THAT GIVES YOU A UNIVERSE OF 150 PLAN PARTICIPANTS THAT ARE ELIGIBLE FOR THIS GENERAL EMPLOYEE PLAN, AND SO THAT THIS PLAN IS WHAT'S CONSIDERED A CLOSED PROGRAM.

SO THOSE NUMBERS WILL NEVER GO ABOVE 150 AND WILL ONLY CONTINUE TO DIMINISH OVER THE YEARS DUE TO MORTALITY OCCURRENCE.

OKAY. IF YOU WANT TO FLIP TO THE NEXT SLIDE, ANDREW THE NEXT SLIDE GIVES YOU AN OVERVIEW OF THE CURRENT PLAN FUNDED STATUS FOR THE GENERAL EMPLOYEE PLAN. SO YOU CAN SEE THAT THIS PLAN IS TRENDING IN A POSITIVE DIRECTION.

SO BACK IN 2021, THE PLAN WAS 89% FUNDED. AS OF 2023, YOU CAN SEE HOW THE FUNDED RATIO HAS IMPROVED TO 101%, WHERE THE VALUE OF THE ASSETS IN THE PLAN ACTUALLY EXCEEDS THE PROJECTED LIABILITIES OF THE PROGRAM.

SO THIS PLAN 100% FUNDED IS IN VERY GOOD SHAPE.

THE ONE THING TO NOTE IS THAT THE PLAN FUNDED STATUS IS SIMPLY JUST A SNAPSHOT POINT IN TIME,

[01:15:04]

THAT DOESN'T MEAN THAT THE PLAN HAS. THE DISTRICT IS HAS ELIMINATED ALL OF ITS LIABILITIES, YOU KNOW, GOING FORWARD. IT'S ONLY AS OF THAT DATE, AND THEN THE PLAN FUNDING RATIO CAN CHANGE, AND OVER TIME. SO AGAIN, THE NEXT EVALUATION WILL BE PERFORMED AS OF JANUARY 1ST OF 2025, AND THEN WE'LL SEE HOW WHAT THE PLAN FUNDED STATUS IS AS OF THAT DATE, BUT AGAIN THE PLAN IS CURRENTLY IN IN VERY GOOD STANDING.

ALL RIGHT. IF YOU CAN FLIP TO THE NEXT PAGE. AS A RESULT OF THE PLAN'S FUNDED STATUS, YOU CAN SEE THAT THE CONTRIBUTION REQUIRED BY THE DISTRICT TO BE FUNDED INTO THIS PROGRAM HAS DECLINED OVER TIME. SO BACK IN 2023, THE DISTRICT WAS SUPPOSED TO PUT IN ABOUT $1.8 MILLION A YEAR, BUT YOU CAN SEE HOW THAT'S DROPPED. AS OF THIS CALENDAR YEAR, THAT AMOUNT HAS DROPPED DOWN TO $6,000, AND AGAIN, THAT'S A FUNCTION OF THE IMPROVEMENT IN THE PLAN'S FUNDED STATUS.

ALL RIGHT. YOU CAN FLIP TO THE NEXT PAGE. THIS JUST SIMPLY SHOWS THE PLAN ACTIVITY SINCE PARS TOOK OVER THE ADMINISTRATION OF THIS PROGRAM.

SO CURRENTLY AS OF FEBRUARY 28TH OF 2025, THE PLAN HAS APPROXIMATELY $43 MILLION IN PLAN ASSETS.

RIGHT. NEXT SLIDE. THE NEXT SECTION DEALS WITH THE SAFETY PLAN, YOUR SWORN SAFETY PLAN, WHICH IS A SMALLER PROGRAM, LESS ELIGIBLE EMPLOYEES IF YOU WANT TO FLIP A PAGE 13 ALSO PROVIDES THE OVERVIEW OF THE PLAN DESIGN.

IF YOU CAN FLIP TO PAGE 14, ANDREW , YOU SEE THAT THERE'S CURRENTLY NO ACTIVE PARTICIPANTS.

ONE TERMINATED VESTED EMPLOYEE WHO AGAIN ONE DAY WILL BECOME ELIGIBLE TO DRAW BENEFITS UNDER THIS PROGRAM, AND 28 RETIRED PARTICIPANTS. SO AGAIN, THE TOTAL UNIVERSE IN THIS PARTICULAR PROGRAM IS ONLY 29 PARTICIPANTS WHO WILL ARE ELIGIBLE FOR BENEFITS UNDER THIS PROGRAM.

ON THE NEXT SLIDE, YOU'LL SEE THE PLAN FUNDED STATUS.

SO THE PLAN FUNDED STATUS IS SLIGHTLY DIFFERENT THAN THAT OF THE GENERAL EMPLOYEE PLAN, BUT STILL TRENDING IN THE RIGHT DIRECTION AS OF 2021.

THIS PLAN WAS 81% FUNDED, AND THEN AS OF 2023, THIS PLAN WAS 91% FUNDED.

SO AGAIN, A VERY HEALTHY FUNDED STATUS FOR THIS PROGRAM.

IF YOU SUBTRACT OUT THE LIABILITY FROM THE AMOUNT OF ASSETS, THIS PLAN IS APPROXIMATELY UNDERFUNDED BY A LITTLE BIT MORE THAN $400,000.

OKAY. SO IF YOU WANT TO FLIP TO THE NEXT PAGE, THE NEXT PAGE SHOWS YOU THE COST OF THIS PROGRAM.

SO BECAUSE OF THE IMPROVED FUNDING STATUS OF THIS PLAN, YOU CAN SEE THAT THE ANNUAL COST OF THIS PROGRAM IS DECLINING.

SO AS OF 2023, THE ANNUAL COST WAS 240,000, AND THEN AS OF 2025, THIS PLAN IS $56,000.

SO THOSE CONTRIBUTIONS THAT YOU'RE MAKING, THE $56,000, IS EXACTLY WHAT'S BEING CONTRIBUTED TO TRY TO BRING DOWN THAT FUNDING, THAT UNFUNDED LIABILITY OF AROUND 400,000 SO THAT HOPEFULLY IN THE NEAR FUTURE, YOU'RE 91% FUNDED STATUS WILL EVENTUALLY OBTAIN 100% FUNDED STATUS.

ALL RIGHT, AND IF YOU CAN THE NEXT PAGE JUST SIMPLY SHOWS THE SIMILAR PLAN STATISTICS, $5.1 MILLION OF PLAN ASSETS AS OF FEBRUARY 28TH OF 2025. RIGHT, AND THEN THE FINAL SLIDE BEFORE I TURN IT OVER TO ANDREW.

SO THE PLAN ACTUALLY USES A VERY CONSERVATIVE DISCOUNT RATE OF 4.25%.

SO AGAIN, THAT ALLOWS THE DISTRICT TO BE VERY CONSERVATIVE WITH RESPECT TO ITS INVESTMENT EARNINGS.

JUST A POINT OF COMPARISON WITH YOUR CURRENT PLAN WITH CALPERS, THAT PLAN USES A 6.8% DISCOUNT RATE, WHICH THEN REQUIRES A MUCH MORE AGGRESSIVE INVESTMENT PORTFOLIO TO ACTUALLY ACHIEVE TO HIT THAT 6.8% ON AN ANNUAL BASIS, BUT AGAIN, A 4.25% IS A VERY CONSERVATIVE RATE THAT YOU'RE ACTUALLY HAS SELECTED.

OKAY, AND WITH THAT, I'LL GO AHEAD AND TURN IT OVER TO ANDREW.

OKAY. BEING A COLLEAGUE, I THOUGHT I WAS GOING TO GET OFF SCOT FREE AND JUST LET HER DO THE ENTIRE ECONOMIC UPDATE.

SHE IN HER TOWARDS THE LATTER PART OF HER PRESENTATION.

SHE HAD THIS SLIDE, BUT SHE WHIZZED RIGHT THROUGH IT, SO I'LL SPEND NO MORE THAN MAYBE THREE MINUTES IN TERMS OF JUST MAYBE PIGGYBACKING ON SOME OF HER COMMENTS IF FOR ONLY THE REASON THAT IN THE PORTFOLIO THAT I MANAGE, YOU KNOW, WE HAVE 15 TO 20% IN EQUITIES, OBVIOUSLY SHE HAS NO ALLOCATION TO EQUITY. SO, YOU KNOW, MAYBE WE INTERPRET SOME OF THE DYNAMICS OUT THERE A LITTLE BIT DIFFERENTLY.

YOU KNOW. THIS IS OUR HEAT MAP, AND IT'S SIMILAR TO THE ONE THAT MONIQUE PROVIDED IN YOUR PACKET.

THE COLOR CODED RATING SYSTEM CORRESPONDS TO.

[01:20:01]

GREEN WOULD BE A POSITIVE VIEW TOWARDS SOME DYNAMIC OUT THERE, AND THEN RED AND ORANGE WOULD BE SOME VIEW A NEGATIVE VIEW TOWARDS SOME ASPECT.

THE FIRST TWO ROWS YOU CAN SEE ACROSS THE BOARD WERE NEUTRAL, AND , AND IT MAY NOT FEEL LIKE THINGS ARE NEUTRAL, RIGHT. IN TERMS OF LABOR MARKETS AND CONSUMER SPENDING AND ECONOMIC GROWTH AND WHAT THE FED MIGHT DO.

I THINK THE NEUTRALITY IS MORE SO JUST THE UNPREDICTABLE NATURE OF HOW POLICY CAN TRANSFORM GOING FORWARD OR WHAT MIGHT TAKE PLACE AND I THINK MONIQUE, ONE OF HER SLIDES, SHE SHOWED THE EXECUTIVE ORDERS THAT HAVE BEEN ENACTED SINCE PRESIDENT TRUMP TOOK OVER, AND BY FAR AND AWAY, IT WAS MORE THAN ANY OTHER PRESIDENT, AND HE'S LIKE IN THE EARLY INNINGS OF HIS AT LEAST THE TRUMP 47 PRESIDENCY.

SO YOU KNOW MORE TO COME, AND SO YOU LOOK AT THE BOTTOM RIGHT HAND CORNER POLITICAL RISKS.

IT'S THE ONLY DYNAMIC THAT WE HAVE RATED AS A RED, AND YEAH FOR MAYBE OBVIOUS REASONS IT DOESN'T NECESSARILY MEAN THAT THE WHOLE STORY MIGHT BE NEGATIVE, RIGHT. YOU KNOW, YOU THINK ABOUT DEREGULATION AND YOU THINK ABOUT TAXES, POTENTIALLY THE STRONG POTENTIAL FOR TAXES TO COME DOWN A LITTLE BIT, AND I THINK THAT 'S REALLY ONE OF THE REASONS IN THE BOTTOM LEFT HAND CORNER, WHY WE SEE CORPORATE FUNDAMENTALS AS STILL POTENTIALLY POSITIVE, POTENTIALLY POSITIVE. BECAUSE, YOU KNOW, I DON'T THINK ANYBODY KNOWS WHAT THE NATURE OF TARIFFS ARE ULTIMATELY GOING TO BE, AND I DON'T THINK TARIFFS ARE GOING TO BE NECESSARILY A PLUS FOR FOR CORPORATE FUNDAMENTALS OR FOR MANY OF THESE PANELS ON THIS PAGE. YOU KNOW, WHEN WE THINK ABOUT HOW THIS TRANSLATES TO ACTUAL INVESTMENTS SIMILAR COLOR CODED RATING SYSTEM FOR OUR PORTFOLIO POSITIONING ON THIS PAGE, AND YOU CAN SEE AS YOU GO FROM THE TOP PANEL, WHICH IS ALLOCATED TO DOMESTIC EQUITIES, YOU CAN SEE THAT WE ARE NEUTRAL FOR DOMESTIC EQUITIES.

THE SECTION BELOW THAT INTERNATIONAL EQUITIES NEUTRAL AS WELL, AND SO NEUTRAL ONCE AGAIN IS A REMINDER FOR THIS PLAN.

IT'S 15% 15% OF THE PORTFOLIO ALLOCATED TO EQUITIES.

THAT WOULD BE A NEUTRAL POSITION, AND THIS WAS OUR POSITIONING AS OF 331.

I WILL SHARE WITH YOU AT THE END OF MAY OUR INVESTMENT COMMITTEE, OF WHICH I AM A MEMBER OF VOTED TO GO SLIGHTLY UNDERWEIGHT EQUITIES.

SO IF WE WERE TO UPDATE THIS SLIDE INTRA-QUARTER WE WOULD MOVE SOME OF THE DOTS IN THE UPPER PART AND THE MIDDLE PART A LITTLE BIT TO THE LEFT, ONLY SLIGHTLY TO THE LEFT BECAUSE UNDERWEIGHT FOR EQUITIES FOR THE EAST BAY REGIONAL PARK DISTRICT PENSION PLAN IS 14%.

SO 15% TO 14%, YOU KNOW, SMALL BABY STEPS IF YOU WILL.

GOING BACK TO DENNIS' COMMENTS, THIS IS A CONSERVATIVE PORTFOLIO, AND THE DYNAMIC BEHIND CONSERVATIVE CONSERVANCY IS THE EQUITY ALLOCATION IS GOING TO BE MANAGED AT A VERY LOW LEVEL. WE ARE BASICALLY FULLY FUNDED ON THE GENERAL SIDE, SWORN SAFETY, VERY CLOSE TO FULLY FUNDED. WE DON'T HAVE TO TAKE A LOT OF RISKS, SO WE DON'T TAKE A LOT OF RISKS.

IN TERMS OF PERFORMANCE, I'LL JUST DO A QUICK OVERVIEW IN TERMS OF PERFORMANCE, AND I'M SORT OF FOCUSED ON THAT FIFTH COLUMN OVER FROM THE LEFT, GOING FROM LEFT TO RIGHT, THE ONE YEAR RETURN AND THE TOP ROW SHOWS THE PERFORMANCE FOR THE TRAILING 12 MONTH PERIOD, 5.55%, A LITTLE BIT FAVORABLE TO THE BENCHMARK, WHICH WAS 5.31% AND AS YOU LOOK AT CONTRIBUTION AND THE CONTRIBUTION IS GOING TO BE REPRESENTED BY THE DARK BLUE ROWS, AND IF YOU KIND OF GO FROM THE TOP TO THE BOTTOM, DOMESTIC EQUITY 5.7% FOR THE TRAILING 12 MONTH PERIOD OF TIME. INTERNATIONAL EQUITY MAYBE TOWARDS THE BOTTOM THIRD OF THIS EXHIBIT 5.7% RATE OF RETURN.

ON THE NEXT PAGE, WE SHOW OTHER GROWTH, AND THIS WOULD BE A PERFECT SEGUE INTO THE INVESTMENT POLICY STATEMENT DISCUSSION, BUT WE'VE GOT TO KIND OF TABLE IT, BUT OTHER GROWTH IS MAYBE A NEW CATEGORY THAT PFM LABELS, WHICH REPRESENTS REAL ESTATE AS WELL AS GLOBAL INFRASTRUCTURE.

YOU CAN SEE THE TRAILING 12 MONTH PERIOD OF TIME, A VERY STRONG CONTRIBUTION FOR OTHER GROWTH 10.08% AND THEN FIXED INCOME.

YOU KNOW, MAYBE ONE OF THE FRUSTRATING THINGS THAT MAYBE YOU'VE THOUGHT PRIVATELY TO YOURSELVES IN TERMS OF A CONSERVATIVE PORTFOLIO, AT LEAST OVER THE LAST 3 OR 4 YEARS THAT WE'VE WORKED TOGETHER ON THIS PLAN IS THAT, WELL, IT'S A CONSERVATIVE PORTFOLIO, BUT, GOSH, BONDS REALLY HAVEN'T BEEN ABLE TO DO MUCH OF ANYTHING.

I'M PLEASED TO REPORT THAT AT LEAST OVER THE LAST 12 MONTHS, BONDS HAVE DONE A LITTLE BIT MORE OF WHAT WE WOULD EXPECT BONDS TO DO. 5.43% RATE OF RETURN FOR THE TRAILING 12 MONTH PERIOD OF TIME. SO YOU KIND OF LOOK AT ALL THE MAJOR COMPONENTS OF THIS PORTFOLIO SOMEWHERE AROUND THE MID 5% LEVEL, RATE OF RETURN AND EVEN CASH AT THE BOTTOM OF THE PAGE, KNOCKING ON THE DOORSTEP OF A 5% RETURN OVER THE TRAILING 12 MONTH PERIOD OF TIME AT 4.9%.

[01:25:07]

SOMETHING LIKE THIS TO DELIVER. I HAVE SOME OTHER SLIDES IN HERE.

YOU KNOW, THIS WAS THE GENERAL PLAN. I DON'T WANT TO LET ME MAKE A QUICK COMMENT ON PAGE NUMBER 30 HERE, AND THIS DOES A CASH FLOW RECONCILIATION OF THE PLAN, AND I WOULD JUST POINT OUT THAT THE NET FLOWS, WE DO SEE SOME HEAVY FLOWS, CONSISTENT OUTFLOWS, FLOWS FOR FOR BENEFIT PAYMENTS ON A MONTHLY BASIS, A LITTLE BIT OVER 300,000. ON A MONTHLY BASIS.

SO SO WE DO HAVE TO MAKE SURE THAT THERE'S PLENTY OF LIQUIDITY.

AT THE FUND LEVEL, AND SO OVER THE FIRST THREE MONTHS OF THIS YEAR, A LITTLE BIT OVER $1 MILLION IN OUTFLOWS FROM THE PLAN AND SWORN SAFETY, SIMILAR PERFORMANCE RETURN, I THINK THE OTHER ONE WAS 5.55.

THIS IS 5.56. IT'LL NEVER BE EXACTLY THE SAME BECAUSE THERE IS A LITTLE BIT OF A DIFFERENCE IN TERMS OF CASH FLOWS, BUT THE UNDERLYING INVESTMENT ALLOCATION WILL BE EXACTLY THE SAME TARGETS.

SO THAT IS THE SWORN SAFETY UPDATE, AND NOW THIS WILL BE MY HOPEFULLY PERFECT SEGUE INTO THE NEXT ITEM WHERE WE TALK ABOUT THE INVESTMENT POLICY STATEMENT. I SHARED WITH YOU AT THE UPFRONT THAT WE WERE A LITTLE BIT AHEAD OF THE BLENDED BENCHMARK TARGET FOR BOTH THE GENERAL AND THE SWORN SAFETY PLANS. THE BENCHMARK IS A FUNCTION OF A SMALL FUNCTION, BUT AN IMPORTANT ONE OF THE INVESTMENT POLICY STATEMENT, AND WE'LL BE TALKING ABOUT THAT RIGHT NOW.

ALL RIGHT. DEB SPAULDING, AGAIN, LET ME PULL UP YET ANOTHER PRESENTATION.

ONE SECOND. ALL RIGHT.

SO I MENTIONED EARLIER THAT ANDREW USED TO WORK FOR HIGHMARK AND THEY MERGED WITH PFMAM.

SO NOW HE AND MONIQUE, WHO WAS HERE PREVIOUSLY, ARE WORKING IN THE SAME FIRM, AND WITH THAT CHANGE, THAT WAS A GOOD OPPORTUNITY FOR US TO REVISIT THE INVESTMENT POLICY STATEMENT FOR THE RETIREMENT PLAN.

SO WE'RE SOME THINGS THAT WE NEEDED TO UPDATE, JUST LIKE THE NAME, BUT ALSO A GOOD CHANCE TO TAKE A LOOK AT.

DO WE WANT TO CHANGE ANYTHING? BEFORE I DIG INTO THIS, YOU HEARD ALREADY THAT WE HAVE A VERY CONSERVATIVE INVESTMENT STRATEGY FOR THE TWO PLANS BECAUSE THEY'RE CLOSED PLANS, AND SO WE DON'T NEED TO BE AGGRESSIVE IN OUR EARNINGS.

SO NOTHING HAS CHANGED ABOUT THE INVESTMENT STRATEGY.

IT'S REALLY JUST A LOT OF CHANGES TO BENCHMARK AND CHANGES TO HOW THINGS ARE NAMED BY PFM VERSUS HOW THEY WERE NAMED BY HIGHMARK.

SO WALKING THROUGH THE PLAN, IF YOU WANT TO PLAY ALONG, IT STARTS ON PAGE 137.

YOU CAN SEE THE RED LINE OF THE CHANGES THAT ARE BEING MADE, AND THEN WE HAVE A CLEAN COPY IN THE PACKET AS WELL.

SO ON THE FIRST PAGE WE HAVE SOME CHANGES TO THE EXECUTIVE SUMMARY.

CHANGING THE NAMES CHANGING THE ACCOUNT NUMBERS.

THERE'S SOMETHING THAT WE DID NOT UPDATE ON THIS PAGE THAT WE NEED TO, WHICH IS IF YOU SEE THE TARGET RATE OF RETURN, IT'S LIKE TWO THIRDS OF THE WAY DOWN ON THE PAGE. WE DID ACTUALLY LOWER THE TARGET RATE OF RETURN IN OUR LAST ACTUARIAL UPDATE TO 4.25%, AND THIS STILL HAS THE OLD 4.45%. SO PLEASE MAKE THAT CHANGE.

IF YOU HAVE YOUR PACKET OPEN AND FEEL MOVED TO DO THAT, AND WE WILL MAKE SURE THAT IT GETS UPDATED FOR THE BOARD OF DIRECTORS WHEN IT GOES TO THE FULL BOARD FOR APPROVAL. SO SO THAT'S THE CHANGES TO THE EXECUTIVE SUMMARY.

NEXT, IF YOU GO TO NUMBER EIGHT, WHICH IS ON.

BEGINS ON PAGE 140 OF YOUR PACKET, BUT ALL THE CHANGES ARE ON PAGE 141.

YOU CAN SEE A LOT OF CHANGES TO THE BENCHMARKS THAT ARE BEING USED, AND AGAIN, IT'S CHANGES BETWEEN WHAT HIGHMARK USED AND WHAT PFM DOES. WE ALSO ADDED A DOMESTIC EQUITY ASSET CLASS OR SORRY OTHER GROWTH EQUITY ASSET CLASS UNDER NINE ASSET ALLOCATION, AND THEN MOVING TO SECTION 9.3. THIS IS CLARIFYING THAT THERE ARE CERTAIN INVESTMENTS THAT ARE ALLOWED PER RULE.

144 SO WE PREVIOUSLY DID NOT HAVE THAT CALLED OUT HERE.

[01:30:06]

SO I HAVE ANDREW HERE TO ANSWER ANY SPECIFIC QUESTIONS YOU MAY HAVE ABOUT THOSE CHANGES, AND THAT WAS A HIGH LEVEL OVERVIEW, AND I GUESS I'LL JUST EXPRESS AGAIN THESE ARE REALLY REFINEMENTS TO THE POLICY VERSUS LARGE CHANGES.

WE'RE MAINTAINING THE CONSERVATIVE INVESTMENT STRATEGY THAT WE'VE HAD.

SO WE'RE REQUESTING A RECOMMENDATION TO THE FULL BOARD TO UPDATE THE RETIREMENT PLAN INVESTMENT POLICY STATEMENT.

ALL RIGHT. FIRST, ANY QUESTIONS OR COMMENTS FROM COMMITTEE MEMBERS? JOHN? DENNIS? JUST THE CHANGE THAT SUGGESTED NO MORE THAN 30% OF THE PORTFOLIO MAY BE INVESTED IN SECURITIES. I'M JUST READING TO THERE.

I DON'T KNOW WHAT RULE 144 MEANS, BUT DOES THAT MEAN, YOU KNOW, THE RECOMMENDATION THAT THE STRATEGIC ASSET ALLOCATION RANGES OF EQUITY FROM 5 TO 20, AND NOW WE'RE RAISING THIS TO 30. OR IS THIS SOME SPECIFIC 144.

YES. DIRECTOR WAESPI. THAT'S GOING TO BE REFERRING TO THE FIXED INCOME PORTFOLIO ONLY.

SO WITHIN THE 60 TO 95% ALLOCATED TO FIXED INCOME, AND THE PORTION THAT WE, THAT WE INVEST USING INDIVIDUAL SECURITIES, THERE'S A FAIR PORTION OF THE PORTFOLIO THAT WE INVEST IN INDIVIDUAL BONDS.

SO WITHIN THAT COMPONENT WE WOULD SAY, OKAY, THE 30% LEVEL WOULD APPLY TO RULE 144A SECURITIES.

AND JUST QUICKLY WHAT THAT REFERS TO IS THAT IT'S A DESIGNATION WHERE AN ISSUER CAN COME TO MARKET WITHOUT NECESSARILY REGISTERING IN ADVANCE.

THEY CAN JUST GO TO MARKET, RECEIVE THOSE BOND PROCEEDS FROM THEIR PERSPECTIVE, BOND PROCEEDS AND IT MAKES IT A MORE EFFICIENT TRANSACTION FOR THEM AND FOR INVESTORS WHO ARE AT A CERTAIN LEVEL OF QIB LEVEL, WHICH IS $100 MILLION OR MORE OF INVESTABLE ASSETS, WHICH CERTAINLY THE DISTRICT IS THERE. IT ALLOWS US TO INVEST IN THAT TYPE OF INVESTMENT VEHICLE, AND THE REASON WHY WE WOULD REQUEST THAT IS THAT SO MANY MORE, SO MANY CORPORATE ISSUERS TODAY ARE GOING THIS ROUTE.

SO IF WE DON'T HAVE THE ABILITY TO DO THAT AND WE CAN STILL MANAGE YOUR PORTFOLIO, BUT, BUT WE'RE SORT OF REMOVED FROM A CERTAIN IMPORTANT TRANCHE OF THE BOND MARKET, THE CORPORATE BOND MARKET.

THANK YOU. I'M INTERESTED IN WHETHER YOU CAN DESCRIBE THE CHANGE IN THE PERFORMANCE BENCHMARK STANDARDS.

FOR US I HAVE TO ADMIT, I REALLY DON'T KNOW WHAT IT MEANS TO ELIMINATE THE S&P.

I KNOW WHAT THE S&P IS, RIGHT? BUT I HAVE NO IDEA WHAT THE BLOOMBERG US AGGREGATE BOND INDEX IS OR MEANS.

SO BY ELIMINATING SOME OF THESE BENCHMARKS TO CREATE A DIFFERENT BLEND OF BENCHMARKS, WHAT IS ACTUALLY GOING ON HERE? YEAH. CHAIR COFFEY, REMEMBER I WAS WITH HIGHMARK FOR 25 YEARS.

RIGHT. SO IT'S TAKEN ME A LITTLE BIT OF TIME TO GET COMFORTABLE WITH MAYBE A PFM WORLDVIEW.

SO SO HIGHMARK WOULD GO TO MARKET AND I'LL QUICKLY BREAK OUT THE ASSET ALLOCATION, ASSET ALLOCATION DECISIONS THAT SORT OF BUBBLED UP INTO YOUR HISTORICAL PORTFOLIO. ON DOMESTIC EQUITY. WE WOULD MAKE A CALL, IF YOU WILL, ON LARGE CAP, MID CAP, SMALL CAP. SO LET'S SAY LARGE CAP S&P 500.

WE WOULD SAY OKAY WELL NORMALLY WE'RE GOING TO BE INVESTING IN THAT MARKET BY 4% MID CAP 1.5% SMALL CAP MAYBE 2.5% SOMETHING LIKE THAT.

OKAY. SO WE WOULD SAY OKAY, WELL IF WE REALLY LIKE LARGE CAPS WE'RE GOING TO BE HIGHER THAN FOUR.

IF WE REALLY DON'T LIKE SMALL CAPS WILL BE LOWER THAN 2.5.

SO WE'RE MAKING THREE ALLOCATION DECISIONS IF YOU WILL, AND SO YOU KNOW A QUARTER COMES YEAR COMES,

[01:35:01]

PFM SIMPLIFIES THAT. PFM SAYS WELL, DON'T NECESSARILY THINK ABOUT SMALL CAP, MID-CAP LARGE CAP.

INVEST IN THE RUSSELL 3000 BECAUSE IN THE RUSSELL 3000, IF YOU SORT OF LIFT UP THE HOOD, YOU'LL SEE THAT THE RUSSELL 3000 IS IS 5% SMALL CAP, 12% MID CAP AND 83% LARGE CAP. SO IT CONTAINS THOSE COMPONENTS, BUT IN JUST SORT OF ONE INDEX.

SO THE PFMAM WORLD WOULD BE MUCH MORE SIMPLIFIED, SIMILAR INTERNATIONAL EQUITIES.

HI. MARK WOULD SAY OKAY, WELL 2% EMERGING MARKET EQUITIES, 4% DEVELOPED INTERNATIONAL EQUITIES.

PFM SAYS, WELL, OKAY WE'LL DO THAT, BUT WE'LL DO IT WITH ONE BENCHMARK, THE MSCI ACWI EX-US WHICH HAS BOTH EMERGING MARKET AND DEVELOPED MARKET AND SO INSTEAD OF, YOU KNOW, IN A HIGH MARK WORLD WHERE WE WOULD HAVE HAD FIVE DECISIONS TO MAKE, WE HAVE TWO DECISIONS TO MAKE. YOU STILL GET THE UNDERLYING EXPOSURE WITH THOSE TWO BENCHMARKS, BUT BUT IT'S BUT IT'S DIFFERENT. IT'S A DIFFERENT DECISION COMPONENT, AND IT'S A BIT SIMPLIFIED IN MY OPINION.

SIMILAR, YOU MENTIONED ABOUT THE BLOOMBERG AGGREGATE.

THAT WAS ACTUALLY ONE BENCHMARK THAT WAS IN THE LEGACY HIGHMARK WORLD THAT DID CARRY OVER.

SO SO THAT WOULD BE A FIXED INCOME BENCHMARK.

SO WHAT IS THE IMPACT OF THESE CHANGES. ARE WE GOING TO LOOK AT BENCHMARK OUR PERFORMANCE VERSUS BENCHMARK AS BEING.

BETTER. IS IT GOING TO BE MORE DIFFICULT TO ACHIEVE.

SO IN TERMS OF DEGREE OF MEETING THE BENCHMARK HOW DOES THAT CHANGE? I'M TRYING TO DO THE MATH OF 137, 138, AND I HAVE A DIFFERENT I DON'T THINK IT'LL BE SIGNIFICANTLY DIFFERENT AT ALL IN TERMS OF TRYING TO ACHIEVE 4.25%, AND I SAY THAT BECAUSE THE ONE COMMONALITY, THE ONE MAIN CARRYOVER THAT I WOULD HAVE THE FINANCE BOARD THINK ABOUT IS THAT WE ARE STILL GOING TO BE 80% OR 85% FIXED INCOME IN CASH, IN 15% EQUITIES, AND SO THAT IS GOING TO BE THE BIG DRIVER. THE ASSET ALLOCATION DECISIONS, WHETHER OR NOT WE MEET AND/OR EXCEED OR EXCEED BY HOW MUCH.

4.25%. THE BENCHMARKS. IT'S AN IMPORTANT DYNAMIC FOR US IN TERMS OF HOW WE THINK WE BUILD THAT PORTFOLIO BUT THE UNDERLYING NATURE OF WHAT'S GOING TO, YOU KNOW, ACHIEVE THAT 4.25% OR NORTH OF THAT.

IT'S NOT THE BENCHMARKS. IT'S GOING TO BE OUR UNDERLYING INVESTMENTS, AND THOSE REALLY WON'T BE CHANGING TO ANY GREAT DEGREE.

I GUESS WHAT'S MOST IMPORTANT IS THAT DEB AND HER FOLKS UNDERSTAND THE BENCHMARKS AND HOW WE'RE DOING AND HOW OUR MANAGERS ARE DOING VERSUS THOSE BENCHMARKS.

ONE OF THE THINGS THAT'S BEEN FRUSTRATING FOR ME OVER TIME, AND I THINK DEB'S HEARD THIS BEFORE, IS WHY THERE AREN'T BENCHMARKS THAT ARE ACTUALLY REAL LIFE BENCHMARKS THAT COMPARE OUR RETURNS TO SIMILARLY SITUATED AGENCIES RETURNS AS OPPOSED TO, YOU KNOW, JUST FINANCIAL STATISTICS, YOU KNOW, HOW T-BILLS ARE DOING AND STUFF LIKE THAT.

SO WE HAVE COMPARABLE AGENCIES THAT WE USE OUT THERE TO COMPARE OURSELVES TO FOR PURPOSES OF OUR WORKFORCE COMPENSATION, FOR INSTANCE, AND, AND OTHER COMPARISONS THAT WE CAN DO TO OTHER SIMILAR AGENCIES, BUT WE'RE NOT ABLE TO DO THAT IN THE FINANCIAL SENSE OF OUR PERFORMANCE, AND YOU DON'T HAVE TO ANSWER THAT.

IT'S JUST AN ONGOING FRUSTRATION. OTHER THAN IS IT EVER POSSIBLE FOR YOUR FIRM OR OTHERS TO LOOK AT STATISTICS? I MEAN, THESE ARE ALL PUBLIC STATISTICS, RIGHT, BUT WHAT OUR RETURNS ARE ON OUR INVESTMENT FUNDS ARE VERY PUBLIC, AND I'M WONDERING IF ANYBODY OUT THERE GATHERS THAT INFORMATION.

THERE ARE FIRMS THAT DO GATHER PEER UNIVERSE EXAMPLES, COMPARISONS ON THE UNIVERSE.

RIGHT. YEAH, BUT HERE'S THE CHALLENGE, AND THIS WILL BE GOOD PRACTICE FOR ME NEXT TUESDAY, BECAUSE I'LL BE GOING IN FRONT OF A CORPORATE PENSION BOARD TRYING TO EXPLAIN THE SAME CHALLENGE AND MAYBE AT SOME LEVEL, FRUSTRATION, AND THEY INITIALLY CAME AT IT FROM THE STANDPOINT OF, WELL, WHAT ARE OUR FEES? WHAT ARE OUR EXPENSES? YOU KNOW, HOW DO THOSE BENCHMARK AGAINST OTHER PROVIDERS OUT THERE?

[01:40:04]

THAT'S ALSO SOME OF THE ANSWER TO YOUR QUESTION, BECAUSE COMPARING 15% EQUITY TO 85% FIXED INCOME CASH PORTFOLIO ALLOCATION IS VERY PEDESTRIAN, AND IN AN UPWARD MOVING EQUITY MARKET, I'M GOING TO LOOK LIKE THE WORLD'S WORST MANAGER, RIGHT, BECAUSE WE ONLY HAD 15% IN STOCKS. SO, YOU KNOW, EAST BAY REGIONAL PARK DISTRICT IS DOWN HERE, BUT BUT IN MAYBE 2022, LOOK HOW BRILLIANT THAT ANDREW BROWN GUY IS.

HE REALLY MARSHALED A GREAT EFFORT FOR THE DISTRICT THERE.

WELL, NO, IT WAS 15% EQUITIES, 85% FIXED INCOME.

RIGHT. SO IT'S REALLY THE ASSET ALLOCATION THAT MAKES IT SO HARD, CHAIR COFFEY, TO DO AN APPLES TO APPLES COMPARISON ACROSS THE BOARD.

YOU CAN KIND OF BOOTSTRAP AND SAY, WELL WE'RE KIND OF IN THAT QUADRANT.

YOU CAN DO SOME THINGS LIKE THAT. PERFORMANCE WISE AND EVEN EVEN FEE AND EXPENSE WISE, IT'S HARD TO GET APPLES TO APPLES.

A GOOD THING IS THAT PEOPLE LIKE DENNIS ARE ABLE TO TELL US HOW WE'RE DOING IN TERMS OF FUNDING OUR RETIREMENT PLANS COMPARED TO OTHER AGENCIES, WHICH ALWAYS MAKES THIS BOARD FEEL REALLY GOOD, BECAUSE THAT'S ALWAYS BEEN IN THE EIGHT YEARS I'VE BEEN AROUND HERE.

GOOD NEWS THAT WE'RE VERY WE'RE PERFORMING VERY WELL IN TERMS OF FUNDING OUR PLANS, OUR RETIREMENT PLANS VIS A VIS SIMILAR AGENCIES. IT'S BEEN A PARTNERSHIP OF HIGHMARK GOING BACK TO 94 AND PFM SINCE JANUARY 1ST OF 2024, AND , YOU KNOW, WE'VE HAD A LOT OF SUCCESS. OKAY.

THANK YOU. YOU BET. THANK YOU. APPRECIATE IT.

ANYTHING ELSE? NO PUBLIC COMMENT. NO PUBLIC COMMENT.

NO PUBLIC COMMENTS. OKAY. THANK YOU. NOW, WHAT IS OUR ACTION ON THIS ITEM TO APPROVE THE UPDATE AND REFER IT TO THE FULL BOARD.

IS THERE A MOTION TO DO THE SAME? SO MOVED. MOVED AND SECONDED.

ALL IN FAVOR SAY AYE. AYE. ANY OPPOSITION OR ABSTENTIONS? IT PASSES UNANIMOUSLY. THANK YOU. WHICH I THINK THIS IS BRINGING US TO OUR CHANGE IN THE AGENDA.

[Informational Items]

ALL IN FAVOR, SAY AYE. AYE. ANY OPPOSED? SO THE AGENDA CHANGE IS APPROVED.

LET THE MINUTES REFLECT. SO CAPITAL FINANCE UPDATE ON MEASURE CC AND MEASURE FF. GREAT. GOOD AFTERNOON. BOARD. FINANCE COMMITTEE.

KATIE DIGNAN, ASSISTANT FINANCE OFFICER. TODAY I'LL BE PROVIDING AN UPDATE ON OUR MEASURE CC AND MEASURE FF SPECIAL TAX DISTRICT. SO FIRST OFF, THE COMMUNITY FACILITIES DISTRICT FOR MEASURE CC AND MEASURE F INCLUDES BOTH ALAMEDA AND CONTRA COSTA COUNTY AND THE COMMUNITIES OF OAKLAND, BERKELEY, RICHMOND, SAN PABLO, EL CERRITO, ALBANY, EMERYVILLE, PIEDMONT, EL SOBRATO, AND KINGSTON.

SO GOING INTO MEASURE CC, THE MEASURE CC PARCEL TAX WAS APPROVED BY VOTERS IN 2004, AND AFTER 15 YEARS.

THE TAX SUNSET IN 2020. IN NOVEMBER OF 2018, THE VOTERS APPROVED THE EXTENSION OF THIS FUNDING SOURCE AS MEASURE FF.

AS OF APRIL OF THIS YEAR, THE PARK DISTRICT HAS RECEIVED 47.9 MILLION OF REVENUE FROM MEASURE CC, AND WE CONTINUE TO RECEIVE MINIMAL REVENUES FROM DELINQUENT PROPERTY TAX COLLECTIONS.

OF THE 47.9 MILLION ALLOCATED FOR MEASURE CC, WE HAVE SPENT 45.86 MILLION AND ARE REMAINING WITH 2.12 MILLION OF FUNDS. 72 OF THE 84 PROJECTS HAVE BEEN COMPLETED AND MAJOR REMAINING PROJECTS INCLUDES FUEL MANAGEMENT, TIDEWATER DAY USE AREA, MLK, SHORELINE IMPROVEMENTS AT MILLER KNOX FOR THE KELLER BEACH PROJECT POINT MELODY TRAIL EXTENSION,

[01:45:03]

SO MOVING ON TO MEASURE FF IN NOVEMBER OF 2018, OVER 85% OF VOTERS IN THE COMMUNITY FACILITIES DISTRICT APPROVED THE CONTINUATION OF MEASURE CC AS MEASURE FF. THE TAX LEVY, AS I SAID, BEGAN IN 2020 AND IS ESTIMATED TO GENERATE ABOUT 3.3 MILLION PER YEAR UNTIL 2040. FUNDING IS COMMITTED TO WILDFIRE PROTECTION AND HEALTHY FORESTS, ENVIRONMENTAL CONSERVATION AND STEWARDSHIP, FACILITIES IMPROVEMENTS, ENVIRONMENTAL EDUCATION, GREEN TRANSPORTATION AND REGIONAL TRAILS, AND 11.59 FULL TIME EQUIVALENT STAFF THAT SUPPORT PARKS AND MEASURE F PROGRAMS THROUGHOUT THE COMMUNITY.

FACILITIES. DISTRICT. THE PROJECTED TOTAL ALLOCATION OF FUNDS IS 65.73 MILLION.

OF THAT, 6.6 MILLION IS RESERVED FOR CONTINGENCY.

AS OF APRIL OF THIS YEAR, WE'VE APPROPRIATED $14.9 MILLION OF FUNDING AND HAVE EXPENDED 6.3 MILLION.

DETAILS ON ALL PROJECT ALLOCATIONS, EXPENSES AND THE CONTINGENCY CAN BE FOUND IN YOUR PACKET AS EXHIBIT B.

WE'VE GOT A NUMBER OF PROJECTS AS THIS IS A NEW FUNDING SOURCE STILL IN PROGRESS AND TO HIGHLIGHT JUST A FEW.

MCKAY AVENUE RENOVATION AT CROWN BEACH. WE'RE GETTING READY TO MOVE FORWARD WITH THE POINT MOLATE BAY TRAIL EXTENSION.

WE HAVE LAKE CHABOT REPAIR AND UPGRADE MARINAS.

THE POINT ISABEL RESTORATION PROJECT. ANNUALLY, WE CONTRIBUTE 100,000 TO OAKLAND ZOO FOR ENHANCING CONSERVATION AND STEWARDSHIP EFFORTS.

ONGOING FUELS MANAGEMENT AND BLUE-GREEN ALGAE MANAGEMENT.

SO FAR, WE'VE COMPLETED PROJECTS INCLUDE WATER BOTTLE REFILL STATIONS AT MLK, CROWN BEACH AND POINT PINOLE, AND RESTORATION OF MCCOSKER CREEK. THE MEASURE FOR FUNDING IS ALLOCATED TO SUPPORTING 11.59 FTE POSITIONS AND 2025. NEARLY NINE FTE POSITIONS WERE FUNDED, UP FROM SIX LAST YEAR IN 2024 .

THE POSITIONS THAT WERE NOT FUNDED WAS EITHER DUE TO THE PARK SITE, NOT YET IN OPERATIONS OR SAVINGS CARRIED FORWARD FOR PREVIOUS YEARS.

DEPARTMENTS WILL DETERMINE WHAT ADDITIONAL POSITIONS ARE NEEDED AS PART OF THE 2026 BUDGET PROCESS.

SO TO HIGHLIGHT SOME OF THE PROJECTS THAT ARE THAT HAVE BEEN AND ARE CURRENTLY FUNDED BY MEASURE AND MEASURE CC, WE'VE GOT OUR ANNUAL FUELS MANAGEMENT GRAZING PROJECT.

WE HAVE TIDEWATER PUBLIC ACCESS AND IMPROVEMENTS.

KELLER BEACH RENOVATION AT MILLER KNOX. THE POINT MOLATE BAY TRAIL AND FUELS MANAGEMENT WORK.

SO WITH THAT, THAT'S THE UPDATE ON WHERE OUR MEASURE AND MEASURE CC FUNDING CURRENTLY STANDS TO DATE, AND I OPEN THAT UP TO QUESTIONS. NO QUESTIONS.

NO, JUST THAT I'M SURELY GLAD WE DID THIS MEASURE CC AND I THINK THAT WAS LONG BEFORE WE ANTICIPATED WHAT WE'D BE PAYING FOR FIRE MITIGATION, AND I DON'T KNOW WHERE WE WOULD HAVE GOT IT, BUT I'M SURE GLAD THAT FOLKS EMBRACED THIS AND WE'RE PRODUCING A GOOD PRODUCT FOR THE PUBLIC, AND GRAZING WAS A SPECIFIC EXPENDITURE ANTICIPATED UNDER FF? YES, IT'S PART OF OUR SAFE HEALTHY FOREST INITIATIVES.

SO THAT'S WHERE WE'RE GETTING SOME OF THE MONEY FOR THESE EXPENSIVE GOATS WE HIRED.

THAT'S CORRECT. INTERESTING. I DIDN'T KNOW THAT.

JUST A COMMENT. KIND OF GOING OFF OF DIRECTOR WAESPI COMMENT AND IT OCCURS TO ME WHEN LOOKING AT THAT LIST, IT'S BEEN A WHILE SINCE I LOOKED AT THAT LIST.

IT'S PRETTY EXTENSIVE, AND THERE'S SOME PRETTY SIGNIFICANT INITIATIVES THAT WERE ABLE TO BE PURSUED AS A RESULT OF THIS, AND IT JUST BRINGS TO MIND A RELATIVELY SMALL TAX INCREMENT WHEN POOLED IN A PRETTY BIG AREA CAN ACCOMPLISH THESE THINGS, AND SO EVERYBODY NEEDS TO KEEP THIS IN MIND. I DON'T THINK THE BOARD NEEDS TO KEEP IT IN MIND, BUT I MEAN THE GENERAL PUBLIC JUST TO SHOW WHEN YOU WHEN YOU JUST, YOU KNOW, CRANK IT UP A LITTLE TINY BIT, NOT PAINFUL OR ANYTHING AND ALL THESE THINGS CAN DO, AND MANY OF THEM ADDRESS SAFETY ISSUES TOO.

SO JUST A COMMENT. GREAT. THANK YOU. I'M GLAD WE DID IT, TOO; YOU DID IT, YOU GUYS.

[01:50:05]

YES, AND KEEP ALL OF THAT IN MIND AS WE GO INTO THE SECOND CENTURY PLAN, AND WHAT ELSE WE MAY ACHIEVE THROUGH SIMILAR MEASURES. YEAH.

THIS IS INFORMATION ONLY. ANY PUBLIC COMMENT? NO PUBLIC COMMENT. OKAY. SO ARE WE READY TO MOVE TO THE CAPITAL FINANCE? I'M SORRY. THE FUELS MANAGEMENT ALLOCATION. YES.

THANK YOU. LET'S GO AHEAD TO THAT FOR OUR CHANGE.

WE'RE NOW ON FOUR E RECOMMENDATION TO THE BOARD TO APPROPRIATE 1.8 MILLION OF MEASURE

[e. Recommendation to the Board of Directors to Appropriate $1,883,261 of Measure FF Funding for Fuels Management Projects to Meet Grant Match Requirements]

THANK YOU AGAIN. KATIE DEGNAN, ASSISTANT FINANCE OFFICER TO PRESENT ON AGENDA ITEM FOUR E RECOMMENDATION TO APPROPRIATE 1,883, 261 OF MEASURE F FUNDING FOR FUELS MANAGEMENT PROJECTS TO MEET GRANT MATCH REQUIREMENTS.

SO AT LAST WEEK'S BOARD MEETING, ACTING FIRE CHIEF HELAE INFORMED THE BOARD OF THE RECENT 8.2 MILLION OF GRANT AWARDS FOR FUEL MANAGEMENT EFFORTS.

EACH OF THESE GRANTS HAVE MATCH FUNDING REQUIREMENTS, AND WE'RE HERE TODAY TO REQUEST FUNDING TO MEET OUR GRANT OBLIGATIONS.

IN OCTOBER OF 2020, THE PARK DISTRICT HAD IDENTIFIED OVER 1500 ACRES OF DECLINING FOREST HEALTH, TREE MORTALITY AND DIEBACK IN MULTIPLE PARKLANDS.

A MULTI DIVISIONAL SPECIAL TASK FORCE WAS CONVENED TO IDENTIFY POTENTIAL FUNDING SOURCES TO DEAL WITH THIS ISSUE.

SINCE 2021, THE PARK DISTRICT HAS BEEN SUCCESSFUL IN EXECUTING OVER 17.2 MILLION IN GRANT FUNDED FUELS MANAGEMENT RELATED PROJECTS, AND IN THE LAST SIX MONTHS, WE'VE OBTAINED NEW FUNDING FROM FEMA, STATE COASTAL CONSERVANCY AND CALIFORNIA FIRE SAFE COUNCIL COOPERATIVE FIRE PROGRAM OF THE US FOREST SERVICE. NOW, I'M GOING TO GO INTO A BIT OF DETAIL ON EACH OF THESE GRANT AWARDS ON THE NEXT SLIDES, AND I'M JOINED TODAY BY ACTING FIRE CHIEF HELAE, IN CASE YOU HAVE ANY SPECIFIC QUESTIONS ON THE PROJECTS.

SO FIRST PROJECT TO HIGHLIGHT IS OUR FEMA PRE-DISASTER MITIGATION 2023 GRANT.

IN MARCH OF 2022, THE PARK DISTRICT APPLIED FOR THE FEMA PRE-DISASTER MITIGATION FUNDING TO COMPLETE HAZARDOUS REDUCTION OF APPROXIMATELY 85 ACRES IN ANTHONY CHABOT.

THIS WAS A CONGRESSIONALLY DIRECTED SPENDING REQUEST THROUGH SENATOR PADILLA'S OFFICE.

THE FUNDS WERE AWARDED AND WERE NOT AWARDED UNTIL NOVEMBER 2024, AND THE FINAL AGREEMENT EXECUTED IN JANUARY OF THIS YEAR.

THE TOTAL PROJECT AMOUNT IS $2,000,016, WITH A 25% MATCH OF 2016.

THE MEASURE FF FUNDS WERE APPROPRIATED IN MARCH OF 2023 TO MEET THIS REQUIRED MATCH FUNDING.

THE NEXT GRANT THAT WE WERE RECENTLY AWARDED WAS THE FEMA PRE-DISASTER MITIGATION 2024.

SO IN MARCH OF 2023, THE PARK DISTRICT APPLIED FOR THIS FUNDING TO COMPLETE HAZARDOUS FUELS REDUCTION EFFORTS ON 64 ACRES IN ANTHONY CHABOT.

AGAIN, THIS WAS A CONGRESSIONALLY DIRECTED SPENDING REQUEST THAT CAME THROUGH SENATOR SWALWELL'S OFFICE.

THE FUNDS WERE AWARDED IN NOVEMBER OF 2024 AND THE FINAL GRANT AGREEMENT EXECUTED IN JANUARY.

THE TOTAL PROJECT ACCOUNT IS 1,844,092, WITH A REQUIRED MATCH OF FOUR, 65 AND $20 OF FUNDING.

MATCH. THE NEXT PROJECT IS WAS OUR HAZARD MITIGATION GRANT PROGRAM FROM 2019.

IN SEPTEMBER OF 2018, THE PARK DISTRICT APPLIED FOR THIS HAZARD MITIGATION GRANT PROGRAM FUNDING FROM FOR HAZARDOUS FUELS REDUCTION WORK, AND 13 RECOMMENDED TREATMENT AREAS WITHIN TILDEN AND NINE RTAS WITHIN CLERMONT COUNTY.

THESE FUNDS WERE AWARDED IN FEBRUARY. THE TOTAL PROJECT AMOUNT ON THIS SLIDE HAS BEEN UPDATED TO 4,286,761 TO REFLECT THE ADDITIONAL 15,000 ALLOCATED FOR GRANT MANAGEMENT COSTS. THE REQUIRED MATCH IS 1,067,941.

THE NEXT PROJECT IS THE STATE COASTAL CONSERVANCY FOR TILDEN NATURE AREA IN TEN HILLS FUELS TREATMENT.

IN JANUARY OF 2023, THE PARK DISTRICT APPLIED FOR FUNDING FROM COASTAL CONSERVANCY FOR VEGETATION TREATMENTS TO REDUCE FUELS ACROSS 130 ACRES IN TILDEN, ANTHONY CHABOT AND CARQUINEZ STRAIT. WE ALSO HAVE A 34 ACRE SHADED FUEL BREAK ALONG SOUTHERN ALONG THE SOUTHERN BORDER OF LAKE CHABOT AND VEGETATION MANAGEMENT EQUIPMENT.

THE FINAL GRANT AGREEMENT WAS RECEIVED IN FEBRUARY OF 2025 , AND THE PROJECT AMOUNT IS 2,575,000.

[01:55:04]

THE LAST PROJECT THAT WAS CURRENTLY THAT WE RECEIVED IN THE LAST SIX MONTHS IS FROM THE STATE FIRE COUNCIL, AND WE APPLIED FOR THAT FUNDING IN MARCH OF 2024 FOR FUELS REDUCTION WORK OF OVER 58 ACRES IN WILDCAT CANYON.

THE GRANT AGREEMENT WAS RECEIVED IN OCTOBER OF 2024, AND THE PROJECT AMOUNT IS $200,300, WITH A MATCH OF $100,300. WE ALSO HAVE TWO PENDING HAZARD MITIGATION GRANT PROGRAM PROJECTS THAT WILL ADDRESS AREAS IN PENDING AWARD NOTIFICATIONS FOR ADDRESSING 173 ACRES IN TILDEN AND SIBLEY AND 114 ACRES ACROSS SIBLEY, HUCKLEBERRY, REINHARDT, REDWOOD, AND WILDCAT CANYON. THE TOTAL OF BOTH PROJECTS AMOUNTS TO OVER 6.1 MILLION, AND THEY HAVE MATCHING REQUIREMENTS OF 01,541,633. FOR RIGHT NOW, SINCE THESE PROJECTS HAVEN'T BEEN AWARDED, WE'RE NOT REQUESTING ANY FUNDS BE APPROPRIATED, BUT IF WE ARE AWARDED THESE FUNDS, WE WILL COME BACK TO THE BOARD AND REQUEST THE APPROPRIATION OF THE MATCHING FUNDS.

SO I JUST WENT THROUGH MEASURE FF, BUT JUST TO SUMMARIZE, TO GIVE YOU THE RECAP WE ORIGINALLY ALLOCATED 59,130,000 FOR PUBLIC SAFETY AND WILDFIRE PROTECTION AND OTHER COMMITMENTS THAT THE DISTRICT HAD IDENTIFIED.

OF THAT AMOUNT. WE ALSO HAVE 6.6 OF ESTIMATED PROCEEDS ALLOCATED AS CONTINGENCY.

TO DATE, WE HAVEN'T ALLOCATED ANY OF THOSE CONTINGENCY FUNDS, AND SO THEY STILL EXIST AND ARE REFLECTED IN THE REPORTS THAT I PROVIDED TODAY.

AS OF THE END OF 2024, $15 MILLION IN FF, PARCEL TAX REVENUE HAS BEEN COLLECTED AND 12.95 MILLION HAS BEEN ALLOCATED, LEAVING US WITH A FUNDING BALANCE OF OVER 2.1 MILLION.

SO THE FEMA, THE FIRST PROJECT I HIGHLIGHTED, FEMA PDM 2023, IS THE ONLY PROJECT THAT HAS BEEN THAT WE HAVE ALLOCATED MATCHING FUNDING FOR, AND THAT WAS MEASURE FF FUNDING. THE FOLLOWING PROJECTS THAT ARE LISTED ON THE CHART REQUIRE A MATCH.

FUNDING TOTAL OF 1,883,261. WHEN MEASURE FF WAS PROPOSED TO VOTERS IN NOVEMBER OF 2018.

WILDFIRE PROTECTION SAFE HEALTHY FOREST WAS ONE OF THE HIGHLIGHTED COMMITMENTS AND MAJOR FOCUSES OF THIS PROJECT AND PROGRAM.

MEASURE FF ALLOWS FOR THE BOARD TO ADJUST APPROPRIATIONS REFLECTING OPPORTUNITIES THAT ARRIVE OVER THE LIFE OF THE EXPENDITURE PLAN.

AS I SAID, THERE'S 6. 6 MILLION OF MEASURE FF CONTINGENCY FUNDING THAT HAS YET TO BE APPROPRIATED, AND WE'RE REQUESTING THAT 1,883,261 OF THE CONTINGENCY FUNDS BE ALLOCATED TO MEET THESE GRANTS, MATCHING FUND OBLIGATIONS, AND THAT CONCLUDES MY MY PRESENTATION AND OPENING IT UP FOR QUESTIONS. OKAY. QUESTION. QUESTIONS FROM THE COMMITTEE OR COMMENTS.

JOHN? NO . I THINK IT'S MONEY WELL SPENT. IS IT OKAY THAT A VERY SMALL PIECE OF THIS ALLOCATION IS FOR WORK UP IN CARQUINEZ STRAIT? SO WHAT WE'RE GOING TO DO, BECAUSE THE CARQUINEZ STRAIT IS NOT ASSOCIATED WITH THE MEASURE FF FUNDING.

SO WE'RE GOING TO MAKE SURE THAT NONE OF THIS MEASURE F FUNDING GOES TOWARDS THE TASK THAT'S ALLOCATED FOR CARQUINEZ STRAIT.

SO ON THE BACKEND ON THE FINANCE SIDE, WE HAVE THE BUDGET BROKEN OUT BY THE DIFFERENT TASKS AND PROJECTS.

SO WE CAN ADEQUATELY ACCOUNT FOR IT TO COVER THAT LITTLE PIECE FROM SOME OTHER FUNDS.

THAT'S CORRECT FOR THAT. THAT'S JUST CURIOUS.

OF COURSE, I'M GLAD TO SEE THE CARQUINEZ STRAIT FACET OF THIS, OF THESE PROJECTS.

ANYTHING ELSE FROM THE COMMITTEE? ANY PUBLIC COMMENT? NO PUBLIC COMMENT. OKAY. THIS IS AN ACTION ITEM.

SO WE NEED A MOTION FOR RECOMMENDING TO THE FULL BOARD TO APPROPRIATE THE 1.883261 OF MEASURE FF FUNDING FOR FUELS MANAGEMENT PROJECTS TO MEET THE GRANT MATCH REQUIREMENTS AS JUST PRESENTED TO US.

MOVE TO RECOMMEND IT TO THE FULL BOARD. SECOND.

IT'S BEEN MOVED AND SECONDED. ALL THOSE IN FAVOR SAY AYE.

AYE . ANY OPPOSED? PASSES UNANIMOUSLY. GREAT.

[02:00:03]

SO THAT BRINGS US TO THE END OF THE AGENDA. OTHER THAN ANNOUNCEMENTS.

ANY ANNOUNCEMENTS FROM STAFF? NO ANNOUNCEMENTS.

NO ANNOUNCEMENTS. MEMBERS OF THE COMMITTEE? NO.

ALL RIGHT, SO WE STAND ADJOURNED. THANK YOU VERY MUCH. WE APPRECIATE ALL THE EFFORT.

IT'S A TREMENDOUS EFFORT TO PUT ALL THESE MATERIALS TOGETHER AND TO PRODUCE THIS MEETING, AND ALL THAT EFFORT IS MUCH APPRECIATED.

THANK YOU.

* This transcript was compiled from uncorrected Closed Captioning.