Special Joint City Council / Financial Advisory Board Meeting September 27, 2022

0:00:03Okay, Mayor, we do have all of the Count expected Council members as well as all of the Fab members on the call. So we are ready to begin whenever you are

0:00:13now. Um. Good evening. The September twenty, seventh, Special Joint City Council Meeting Financial Advisory Board Meeting is call to order at six zero three. Will the city clerk please call?

0:00:28Thank you. I'll start with City Council, Mayor Kinto here, Mayor Pretend Mojayama, your councilmember, Abelson, will be absent tonight. Councilmember Fideli,

0:00:37Council Member Motiyama.

0:00:40Oh, my apologies! Council Number Red Nick,

0:00:43Councilmember Tessa Rudnick (she/her): is it?

0:00:44Thank you. And then I will go to our Fab chair farmont

0:00:49FAB Chair Farhad Farahmand: here, vice-president,

0:00:51FAB Vice-Chair Ktsanes (he/his): you here Member Casden here member White,

0:00:58he's.

0:01:03Thank you. Member Patterson and I do not see Member Patterson on the call. There he is

0:01:10just popped on, so we'll give him a moment to come up.

0:01:27Okay, we we can go ahead and and proceed while I work on getting him promoted. He is on the call, however.

0:01:32Very good. Uh, next is uh teleconference and public comment instructions. Member.

0:01:39Thank you, Mayor. This joint meeting is being held in person with an option to participate via zoom for those participating remotely. Please remember to keep your microphone on you whenever you are not speaking for those participating in person. If you are also logged on to the zoom call, please ensure that your audio, both in zoom and on your device, are muted to avoid any feedback

0:01:59closed captions are available by participating via zoom

0:02:03for members of the public who wish to provide oral testimony. The mayor will announce the time for public comment on each applicable item for each period of public comment. In-person requests will be her first followed by remote request to speak in-person. Requests are submitted to the city clerk with a speaker card. At any time it advance of this item being heard, and remote requests are submitted by selecting a hand icon, for when the period for public comment is announced,

0:02:28and remote requests by phone are submitted by Dialing Star. Nine instructions are also provided on page one of the agenda, and will be displayed with the speaker timer for each period of public comment. And as a reminder, this is a special meeting, and public comments will be limited to the items listed on the agenda. Only tonight in Mayor. That concludes my announcement.

0:02:46Okay,

0:02:46thank you. Next is a pledge of allegiance. Please. Stand.

0:02:53I plugged allegiance to the flag of the United States of America and the Republic, for which it stands.

0:03:00One nation under God, indivisible with liberty and justice, Scroll

0:03:09and good evening, everyone. We have a special presentation, and that is a Calpers unfunded, accrued liability. The U. Al. And I want to welcome our our Fab team, and I want to introduce Tony Cuny and senior pension, actuary and helpers, Terry

0:03:33Ah, working

0:03:35as well as supervising pension actuary with calpers and our finance director, Sandra Deleta. Let's go with this special presentation. Good evening.

0:03:50Tony Cuny (CalPERS): Good evening.

0:03:51My name is Tony Cooney from Calpers.

0:03:55I'm sorry, Tony give me half the second. My mic was off. This is Sandra. Hi, Tony! Hi, Carrie!

0:04:02Before we begin. I just wanted to give you just a brief introduction that the Calpers session is to provide the Council and bad members with information about our unfunded liability that's to help us and and help inform us as we move to the next session with Nh. A advisors to help us carve a path, role and responsibilities. So Calpers has currently served more than two million members in the retirement system.

0:04:32One point five million members and their families in the health program. They have been serving their members for more than nine decades. Tony, who knows who is our representative, who we interact with directly, has his bachelor's degree in math from the University of California. Davis.

0:04:51He's an associate of the society of actuaries, a member of the American Academy of Actuaries, and he's a senior in tension. Accurate actuary with Calpers Harry Morgan, also Fellow of the Society of Actuaries, Fellow Canadian Institute of Actuaries, and he's a supervisor with Calgary.

0:05:10Both of them have serve as our experts, and are here to describe our unfunded liability. And how it's calculated to help. Ah, inform us in the next session with that, Tony Carrie, it's all yours,

0:05:25Tony Cuny (CalPERS): Thank you, Sandra, as Sandra described, we are here to give an overview of the Cuppers unfunded liability status for the city of El Cerrito,

0:05:36and what we're intending to

0:05:39share with you is the changes in the most recent actuarial valuation,

0:05:45the required contributions that are set for your pitch and plans,

0:05:49the financial position of your pension plans from the most recent actuary evaluation and the path forward from the most recent actuary evaluation.

0:05:59So Calpers

0:06:03Tony Cuny (CalPERS): conducts what we call an actuarial valuation every year, and it sets the contribution rates for two years. In the future. The most recent actuarial evaluation was, as of June thirtieth, two thousand and twenty one,

0:06:16and this evaluation will set contribution rates for fiscal year, two thousand and twenty, three, two thousand and twenty four.

0:06:25There was a number of changes with this actuarial valuation that I wanted to cover.

0:06:31The biggest driver for change was a twenty one point, three percent investment return, which greatly exceeded our expectation in fiscal year two thousand and twenty two thousand and twenty-one.

0:06:45This triggered our risk mitigation policy.

0:06:48Through this policy we look to use the gains from large investment returns to help offset lowering our expected investment return in the future. This is intended to help lower the volatility of investment returns in the future.

0:07:04So through this large investment return our discount rate or our expected rate of return investment rate of return in the future was lowered from seven to six point eight percent.

0:07:17We'll take a look in the slides coming forward with how this will impact some of the contributions that your agency will be paying for the pension.

0:07:27In addition, we had a asset liability management cycle. So this happens every four years, and through this we look at all of the assumptions we use in our actuarial valuation. This covers both the discount rate that we talked about demographic

0:07:46assumptions like service, retirement rates and life expectancy, and also economic assumptions.

0:07:53On the economic assumption side. We increased our salary growth expectation from two point seven, five percent to two point eight percent.

0:08:04This is a long-term expectation for the agency's payroll as a whole. So the

0:08:11in the long run we would expect to see the payroll to grow at a two point eight percent rate.

0:08:17Um. Although this may differ in shorter periods of time

0:08:22we actually lowered our inflation rate from two and a half percent to two point, three percent.

0:08:28This tied with the capital market assumptions that we use to set the discount rate, so that two point three inflation. The lower inflation expectation, died back with the six point, eight percent discount rate that we adopted

0:08:42again. These are long-term rates of rates that we expect,

0:08:47and we look at them every four years. So in two thousand and twenty-five. When we do this again. If we see some of the short-term inflation persist, then we would adjust our expectations at that point with the two thousand and twenty-five actuary evaluation

0:09:03one other change that we made on the demographic side was adopting generational mortality. This is a more sophisticated way for us to be able to model life expectancy, and it allows us to vary life expectancy based upon the birth year of the participant,

0:09:21and generational mortality is now the standard for actuarial valuation systems. So We're having the most cutting edge reflected in our valuations. Now,

0:09:33before I move forward to talking about required contributions, I want to pause and see if there's any questions on that changes with the actuarial valuation we most recently conducted

0:09:44any questions. Counsel,

0:09:47Thank you, Mayor. I have a question. So because the return was so high our discount rate is pushed down, and that seems like a double penalty to me, because we're not getting the benefit of

0:10:07having that additional funding. Now, in order to make um, you know, to to increase the pot, to meet the future need, and then the discount rate is going down. So we have to actually put more in to support that

0:10:24amount of funding for pensions in the future. So

0:10:28why is that fair? How does this work, and why, you know, I can see that the inflation is going down by twenty basis points, as a discount rate has gone down twenty basis points, but it just seems like a ah a big penalty, just because you guys did well in the market.

0:10:47Tony Cuny (CalPERS): So I understand your perspective. And you're definitely not alone.

0:10:52The aim of this policy is to

0:10:55ah reduce future volatility of investment returns. So the thought behind it was any good years being able to use part of the gain from that to help ease the cost of lowering the future investment expectation.

0:11:12Just as your board has public comment, so does the Calpers board, and they are. Ah! So you could come and share your perspective there on the policy, and I can certainly relay this back to my office. Your viewpoints on it

0:11:26so that they're aware of it.

0:11:28Tony Cuny (CalPERS): All I can communicate is the intent of the policy. But I can definitely understand where you're coming from that It seems like it's a double impact of not getting the benefit of that investment return while having the costs increase from a lower investment expectation.

0:11:48Thank you.

0:11:50Tony Cuny (CalPERS): You're welcome.

0:11:54Any other questions. Counsel.

0:11:57Go ahead, Tony Mayor. Did you want to check and see if there was any questions by pad, Members, we'll go to the fab here, and I will

0:12:09FAB Chair Farhad Farahmand: have the chair uh for Odd to uh continue. Good evening, Mayor. Are there any questions or comments from five members?

0:12:24I've seen that right.

0:12:27Very good. Thank you. Go ahead, Tony. Thank you very much. So next up we're going to talk about required contributions.

0:12:36Tony Cuny (CalPERS): So in this section i'm going to go over the two sets of required contributions from the actuary evaluation. First, we're going to go for a definition of the required contribution, and then we'll look at the specific numbers associated with your plans.

0:12:52The two sets of required contributions in each valuation is, first, the payment on amortization bases, or what's often called the unfunded accrued liability payment,

0:13:04and we calculate the unpunded liability by taking the accrued liability which is essentially the value of the benefits that have been accrued up to that point, and subtracting the assets that the plan has

0:13:17This unfunded liability is amortized over time to ah create a payment schedule to get each plan back to one hundred percent funded, and these payment periods are over a long term. For example, with the twenty twenty-one valuation, any unfunded liability was amortized over twenty years.

0:13:38The second required contribution is normal cost, and this is the cost of earning a year of benefits by active employees.

0:13:48We provide this as a dollar amount and a level percent of pay.

0:13:52It's billed as a percentage of pay for the active employees.

0:13:56The normal cost can fluctuate due to assumption changes like we talked about previously with the lowering of the discount rate and some of the demographic assumptions, and it can also change, based upon the entry age of active members

0:14:10to look at the specific numbers associated with your plans

0:14:15in fiscal year twenty-two twenty-three. The overall unfunded liability payment for city of El Cerrito plans was six point, two million dollars

0:14:25in fiscal year. Twenty, three, twenty, four. It will go down a bit to six point One million dollars. This is primarily due to the large investment gain That was in fiscal year two thousand and twenty, two thousand and twenty-one.

0:14:38You can also see here that the majority of the unfunded liability is associated with the classic, miscellaneous and the classic safety plans

0:14:53for the normal cost.

0:14:56This is the employer normal cost rate. The employer. The normal cost is split between employees and employers.

0:15:03We see the rates increase from fiscal year, twenty, two, twenty, three to two thousand three hundred and twenty four. This is primarily due to the lowering of the discount rate, and changes to the demographic assumptions.

0:15:16You can see that the employer cost for a classic, miscellaneous, and classic safety increased more than the peppera plans.

0:15:25This is because classic employees contribution rates stay fixed while pepper employees have to pay at least fifty percent of the the total normal cost.

0:15:36So when the total normal cost increased, it was split between the pepper employees and the employer,

0:15:44and I guess I should define that the Pepper employees are new members that join after January the first two thousand and thirteen.

0:15:53Is there any questions on either? The definitions of the required contributions, or the numbers associated with the plans that I've shown you here.

0:16:02Any questions. Counsel.

0:16:07Uh, let's go to

0:16:08Yes, uh Council, member for Della.

0:16:11Yes, just going back to slide um

0:16:13slide five under the normal cost.

0:16:17Um! Why is it the cost of service earned in the coming year? Is that a projection?

0:16:24It's made?

0:16:26Yeah, it, it's the cost to. So with the what the cost of burning the the pension benefit for the year. So So,

0:16:38Tony Cuny (CalPERS): for example, in the valuation year, two thousand and twenty-one we're setting the contribution rate that normal cost rate for fiscal year, two thousand three hundred and twenty-four. So it's the cost of the active employee to earn the pension benefit for that year

0:16:56and it split between the employer and the employee,

0:17:01and and the the word normal is used. Because why?

0:17:06Um, Just to make a suppose that Don't

0:17:10ah I this is the regular contribution. So the when we look at the financial position. I'll show you that unfunded liability may come or go, but the normal cost will always be there.

0:17:23This is the basic centerpiece, and then required is,

0:17:28uh the Uel. That may happen or may not. Okay.

0:17:32Yes, sir, thank you. You're welcome.

0:17:35Okay. Any other questions from our Council.

0:17:40Let's turn this over to that chair for our

0:17:46FAB Chair Farhad Farahmand: Thank you. Any questions from that.

0:17:53I don't see any. Thank you very much.

0:17:56Uh, go ahead, Tony.

0:17:58Tony Cuny (CalPERS): Thank you.

0:17:59So Now we'll move forward to looking at the financial positions of your plans as of June thirtieth twenty, twenty, one, and just as we did with required contributions, we'll define some of the financial positions we'll look at, and then we'll look at the specific numbers corresponding to the plans.

0:18:17So the five key elements of

0:18:20Tony Cuny (CalPERS): the financial position we have here are, first, the present value of projected benefits, so this has the value of future benefits included. So it contains a projection for future service that could be earned by the employees.

0:18:38The second, that we've referred to before the accrued liability is the current value of all accrued benefits, so to give an example.

0:18:48If I had ten years of service, as at the valuation date, the accrued liability would just show the value of those ten years of service as my pension benefit, whereas the present value of projected benefits would have a projection of future service accruals and the costs associated with it.

0:19:09The third item is the market value of assets, which is the current value of plan assets,

0:19:15and the fourth item is what we've talked about before the unfunded liability which is the accrued liability just reflecting the service that's been accrued so far by the members less the market value of assets.

0:19:30And the fifth item is a measure of planned health that's used pretty commonly called the funded ratio, which is the market value of assets divided by the accrued liability.

0:19:42So this gives you basically a ratio or a percentage of the assets you have on hand to cover the value of the benefits that have been accrued so far.

0:19:53When we look at the city of El Cerrito plans, we can see that overall. The plans are about seventy-five percent funded, meaning that there's about seventy five percent of assets

0:20:07required to cover the benefits that have been earned as of that valuation date.

0:20:14The total on funded accrued liability is approximately fifty seven point eight million dollars.

0:20:22And again we see the larger shares of unfunded, accrued liability sitting with the classic, miscellaneous and safety plans.

0:20:30As of this valuation, all of the pepper plans were fully funded

0:20:36in terms of the unfunded viability.

0:20:42Is there any questions on the

0:20:45financial positions, either the definitions or the numbers associated with the plans that i'm showing here

0:20:52any questions.

0:20:54A Council member, Ruddak.

0:20:56Councilmember Tessa Rudnick (she/her): Thank you, Mayor. Can you explain a little bit more about how that unfunded the crude liability, as you mentioned with Petro that's fully funded. How is that represented here in these numbers,

0:21:08Tony Cuny (CalPERS): So we can look at the unfunded liability line four, and for each of them the unfunded viability is actually negative.

0:21:17So that's one concept, since it's the accrued liability minus the assets. You Still, you have more assets than you have accrued liabilities for those plans. So specifically we could look at the pepper miscellaneous plan as a negative, unfunded liability of almost seventy thousand dollars, and we could also look at the funded ratio, which is the plan plan assets divided by the accrued liability.

0:21:44And since that is over one hundred, it's one hundred and three point six. It means that you have more assets than you do by abilities at that measurement point.

0:21:56Thank you.

0:21:57Tony Cuny (CalPERS): You welcome.

0:21:59Okay? Ah,

0:22:00any other questions cancel.

0:22:02Okay, let's go to Fab chair for on for a month.

0:22:15FAB Member Dick Patterson: Yeah, I want to ask the um fifty-seven million dollar unfunded liability that's down from the seventy million um last one that we saw. That's about a twenty percent difference is that a Would you call it a typical variation uh in between the times the new value beyond the liability

0:22:36Tony Cuny (CalPERS): um,

0:22:38because of the large investment return that we received. I don't believe it's a typical reduction in the unfunded accrued liability, because we had that large investment return that helped to reduce the plans on funded liability.

0:22:54Part of that investment Return, as we said before, was used to help offset the cost of lowering the expected investment returns in the future. But some of it did flow through to the plan and helped to reduce the unfunded accrued liability more than we might expect in an average year.

0:23:11FAB Member Dick Patterson: Okay, thank you.

0:23:15FAB Chair Farhad Farahmand: Do you have any questions from the

0:23:20I have a question, if I may, for the present value of benefits. I'm trying to understand.

0:23:26Um. What is the the difference between the entry, age, approval, liability, and the present value benefits represents a future amount that will lead to save towards and pay back eventually. Um! And I see that some of your further slides do have a path for on this. But i'm wondering

0:23:46how are we going to interpret that because the value of benefits on this slide

0:23:52information that you're sharing here in the

0:23:54Is it just kind of for reference?

0:23:57Tony Cuny (CalPERS): I would say It's more for a reference I could get into some more technical parts of it. For instance, we also value the present value of future normal cost contributions, and when we add up what we would expect to come in the future from normal cost um to fund those benefits. Then, when we, when we combine that with the crude liability it's kind of actuarial formula that works out in this presentation it doesn't have as much significance as the

0:24:26um accrued liability, or the unfunded liability

0:24:30with it.

0:24:31FAB Chair Farhad Farahmand: Any other questions from five members

0:24:34missing and miracle is what?

0:24:37Thank you. Uh, let's go on. Uh, Tony.

0:24:42Tony Cuny (CalPERS): Thanks. So now we'll take a look at the path forward and to do this we're going to use ah screenshots from the Pension Outlook tool. It's a free tool that's offered by Calpers online that you can access and use to look at the path forward for your plan and model different scenarios.

0:25:03Here is a screenshot of the city of El Cerrito

0:25:07miscellaneous plans. So this is the classic and the pepper of miscellaneous plans put together.

0:25:14You're going to see a few different lines here. The blue lines correspond to the funded status, so you can see that they are trending upward from the current state, eventually towards one hundred percent funded, as the As the unfunded liability is paid off,

0:25:30the red lines should show the contribution rate the employer on total contribution rate. So here we are, adding together the normal cost and the unfunded liability payments in the future, and expressing it as a percentage of payroll.

0:25:47You can see the red lines trend downward

0:25:51as the unfunded viability gets paid off and they trend down to just the normal cost, and it's the normal cost of the pepper employees as the classic employees. Eventually transition out of the system.

0:26:05The darker lines are our baseline. So This is what was set in your two thousand and twenty one valuation.

0:26:13This shows a forty, two percent contribution rate between the unfunded liability and the employer normal cost

0:26:20and a seventy five percent funded status

0:26:25calfers came out earlier, I believe, in August or September with an estimated negative six point, one percent investment return for fiscal year twenty, one, twenty, two. So we had the big year in fiscal year, twenty, twenty, twenty, one and a down year in fiscal year, twenty, one, twenty, two.

0:26:47These lighter lines show the impact. The estimated impact of that investment loss.

0:26:53We can see it immediately recognized in the plant assets with the lighter blue funded status dropping with the two thousand and twenty-two valuation,

0:27:04and we can see a more ah phased in impact the contribution rates as they grow. So we for any of the investment gains or losses. That's what we call the unfunded liability associated with an investment return. It's phased in over it's ramped in over a five year period to start with, to help smooth the impact of the investment returns.

0:27:30So basically the darker lines show the path forward from the valuation which, after a

0:27:38higher than expected investment, return that is coming to, you know, fully funded status

0:27:47a bit earlier than after the expected investment loss, and then we can see the expected contribution increase from that down investment year.

0:28:00Similarly, on the safety plans, the

0:28:05again the blue lines correspond to the funded status, and the red lines correspond to contribution rates. The safety plans were all ah, all put together. Both the classic and the pepper are about seventy five percent funded, and we see an immediate drop in the funded status that we expect in the next valuation, and the contribution rates, which are about sixty two percent of payroll.

0:28:29This is common among safety plans, as the benefits that are offered to safety. Members are generally more generous than for miscellaneous members, and then we see a gradual increase with the contribution rates. But then, in the long run they trend downwards as the unfunded liability paid off

0:28:46is paid off.

0:28:47Is there any questions on the path forward? I know I'm. Probably sharing some

0:28:54not so popular news with the estimated investment loss. But I want to make sure that you're aware of that, as you're making decisions and charting your path forward. Here,

0:29:06let's check with the Council any questions, any comments

0:29:10possible. Thank you. What what would cause on the base employer rate the uptick around two thousand and forty? One demonstrated there. Why would that

0:29:24Tony Cuny (CalPERS): good question?

0:29:25Yeah, this is associated. So we had a big investment gain

0:29:32Tony Cuny (CalPERS): that's helping to bring down the unfunded liability. So that's spread out over twenty years, and then one year after we have an investment loss that's spread out over twenty years. So that big uptick is when basically the the gain, the relief from that investment gain comes off of your schedule, and then it pops up to that investment loss.

0:29:56In reality, we're going to have year after year, you know, Every year we do evaluation, and there'll be more experience that are. That's added every year. So when it comes, you know, for two thousand and forty one, This probably isn't exactly what your schedule will look like, but it's our best projection that we have at this point,

0:30:18and and we know that's going to happen then, based on

0:30:22reality of what you just said.

0:30:25Tony Cuny (CalPERS): Well, what this, what this valuation with what this would set is your twenty, twenty, four, twenty, twenty, five contribution. So the only thing that's set in stone. From this valuation from the next valuation that will come is your twenty, twenty, four, twenty, twenty, five contribution rate,

0:30:42and then each year as we get different investment experience, different things. This schedule would be adjusted going forward into the future, so

0:30:54that trend will happen there. But by the time you get there you're going to have a lot of other layers that are built up on top of what we're seeing right here. If that makes any sense.

0:31:04Thank you.

0:31:05It's very well company

0:31:07as much as anything.

0:31:09Any other questions uh mayor put on.

0:31:12Thank you, Mayor. So does so. I understand

0:31:17the the most painful year for us to be anticipating is roughly twenty, twenty, six is that and that's for the combined, and you know, looking at the safety plan. So is that because

0:31:31um after that point, because of actual actuarial reasons, um kind of

0:31:39who we're serving, or who those pension plans, I mean there, there's a reduction in the number of of classic members, or some specific thing. That kind of makes that peak occur in two thousand and twenty six.

0:31:52What What what causes that? That um you know,

0:31:58employer-based, you know, employer, model funded rate.

0:32:03Go up, then, that's you you would explain that there's a five-year ramp up from this reduction in the model funded status,

0:32:16your blue line, and so that is causing us to have to pay more. But that gets ramped up over five years, and then it peaks. So what is that peak? In

0:32:27what exactly causes that?

0:32:30Tony Cuny (CalPERS): So what is contributing to? That is just the way that your unfunded liabilities are amortized over time,

0:32:39so each plan has its own schedule.

0:32:44Um. So every valuation we do. We look at. You know what happened with your investments and other areas, and then we spread that out over time. So, depending upon each plan specific experience, you can have a different trend line in your unfunded liability. So to to answer it, I i'd have to look at this specific, unfunded liability schedule for your plan, and Calpers also does have another free tool called the managing employer contribution.

0:33:14It's a spreadsheet where you can look at specific plans and see the pattern of payments associated with the plans. So i'm happy to, You know, if you're interested in more information to be able to work with you to provide that.

0:33:29Okay, So

0:33:32basically, you're saying that things happened twenty years ago, for example, that would impact

0:33:39what we're paying now. So my understanding is in the ninetys. We opted not to put funding into the pension plan, and when you spread that out over twenty years it gets us to

0:33:53this, this higher payment level is that is that how this gets to be here.

0:33:59Tony Cuny (CalPERS): Um! Well, I think that

0:34:01you know, as you had mentioned before, the the spreading out over the investment loss that we're projecting right now. But then, you know, I would contribute to it, and I would have to look at the specific amortization schedule for the plan. I want to be sure that I give you accurate information, so i'd have to look at the specific amortization schedule for the plan to tell you where where that that's coming from. I don't know that it was something that your agency did

0:34:31like, not fund the plan that's causing this to happen.

0:34:36The other thing I would say about these projections, is, It's just a point in time estimation. So next year I could come back with different investment, experience, different demographic experience, and before you even get to twenty, twenty, six, or twenty, twenty, eight. It could look different than it does right now. But I can work to try to find specific information regarding these plans. Why, it is peaking in that given fiscal year. I just don't have it.

0:35:05Ah, with me at this point in time

0:35:07that would be really helpful to understand kind of the bigger picture. And then, if we use the tool, can we also look backwards and see kind of what it looked like after two thousand and eight, for example, in the recession that this looks different,

0:35:24and what we can expect if there is a downturn in the next couple of years.

0:35:30Is that possible to do? Does that inform anything here or not? Really, because we're coming off of a really good year? Clearly, because of the two thousand and twenty, two thousand and twenty one, and returns

0:35:43because of higher inflation because of other things that you know, i'm assuming that returns would be lower in two thousand and twenty to two thousand and twenty three.

0:35:52So

0:35:53for us to understand what that looks like. Is there a way to look at past impacts of past downturns and see? Or is this so specific and so variable that past doesn't really inform, and what we could expect to see in the future.

0:36:10Tony Cuny (CalPERS): Well, you can enter into these tools whatever investment return you want to for a future fiscal year, and it'll help to estimate the impact of that so you could put in an investment expectation. Ah, for example, in this pension outlook tool that's online for for free to use, you could put in whatever investment expectation you have for two thousand and twenty-two two thousand and twenty-three, and it would illustrate the impact of Ah!

0:36:39Of that.

0:36:43So there are ways that the tool doesn't necessarily look back to two thousand and eight and two thousand and nine. But there are ways for you to be able to. Ah moving forward to estimate the impact of future investment experience to your plans. Does that help to answer your question?

0:37:00Yes, thank you.

0:37:02Tony Cuny (CalPERS): You're welcome.

0:37:03Any other questions from our council.

0:37:09Okay, let's move to a fab chair far on

0:37:14FAB Chair Farhad Farahmand: in your Fab members any questions. Please raise your hand.

0:37:18You're so

0:37:22FAB Chair Farhad Farahmand: I have a question and forgive me if this is out of scope. Just let me know you.

0:37:28Could you share a little bit about the historical data? And when was potentially the last time the funded status was at one hundred percent

0:37:38Tony Cuny (CalPERS): up the top of my head. I don't know the last time the plans were one hundred percent funded. That's another item that I could look back and help to look back in time and help to answer that question for you, though.

0:37:51Yes, please, Thank you.

0:37:53Tony Cuny (CalPERS): You're welcome

0:37:55um, Tony. I just wanted to do a time check to make sure that everyone's aware that we have some essential charts that we need to get through, and we have about ten minutes left in this session.

0:38:09Tony Cuny (CalPERS): Thank you for the time check that is, bring me. That was the crux of the information that I wanted to get through today. I did have some slides in here where we could look at the specific plan information, but I have some questions on those that I can follow up and get back to you, and the slides that I had here would not address the question of the specific questions about the amortization schedule, but they're here for your reference. If you would like to take a look, and the last thing that I would point out

0:38:38is that I did have some slides here on accelerated funding.

0:38:45There are options for paying down your unfunded liabilities that you

0:38:50unfunded liability faster than the schedules that are presented if you have the funding to do that. So there are some things that you can look look through associated with those like I said before, is the free managing employer contribution spreadsheet, and if you have any questions about that, you can reach out to me, and i'll help you with additional information, and that addresses all of the information I was hoping to touch on this evening.

0:39:15They're good um First let's go back to the Council, and I wanted to find out if anyone has any questions or any comments.

0:39:26I'm looking at the screen here does not look like any, so I will move this over to our fab chair.

0:39:40FAB Chair Farhad Farahmand: Thank you. Note: Thank you, Mayor. I see you member can really White house or handwriting. Please go ahead.

0:39:48FAB Member Kimberly White (she/her): Thank you. Good afternoon, everyone. Good afternoon.

0:39:51Um, and thank you so much

0:39:56to our finance director and treasurer

0:40:01for putting this together for us. I found this to be quite, quite

0:40:07uh interesting. And so I really appreciate having this information provided to us. So thank you very much, Sandra,

0:40:18and thank you very much. Calpers Carrie and Tony for coming to put this together for us. I'm sure that there was a lot of work that went into it, and I appreciate your time and your consideration to help us understand what our

0:40:34unfunded liability looks like and what we need, and to give us an idea of what we need to do, moving forward. Thank you again, everyone.

0:40:42That's all I have. I have a question.

0:40:46FAB Chair Farhad Farahmand: Next we'll go to. Oh, I'm: Sorry for any other.

0:40:54Okay, thank you. Now is the time for members of the public who wish to provide public comments on this item in person. Request to speak can submit a speaker card to the city clerk, and remote speakers can use a raised hand feature for us to speak.

0:41:09Please remember to identify yourself and your city of residents at the beginning of your commons out of City Club.

0:41:16Thank you, Mayor. We did not receive any written comments for this item, and at this time I do not have any speaker cards, nor do I see any request to speak from those on the zoom call.

0:41:27Okay, Great. We'll bring this back to the Council, and I just want to double-check any final questions or comments.

0:41:39We are good. We'll bring this to the chair of the fab. Next. Go ahead.

0:41:47FAB Chair Farhad Farahmand: Any other last questions.

0:41:53I don't see any matter.

0:41:56I want to thank Tony. Ah, Cooney and Ah, Kerry Morgan. Ah! From Calpers, and you know I know you were closely with with a colleague of mine. Ah, the mayor of Ah Palm Springs, who's on the board of Calpers as well as the State treasurer. So ah! Thank you for explaining everything. I i'm coming, and ah, but never so. And thank you.

0:42:22This this presentation

0:42:24we'll go to a study session on the Thank you to the One hundred and Fifteen trust session,

0:42:37and this will be with Nh. A advisors regarding

0:42:42the options for funding a section one fifteen trust. And so I want to present and introduce Ah Craig Hill, managing Parker, Principal of Nh. A advisors Roy Kim, and associate with Nh. A. Matt. D. Phillips,

0:43:01and we have once again our treasurer and finance director of Sandra Deleta, the

0:43:10Hello Mayor and Council members and fab members, and I wanted to briefly introduce the Nh. A. Advisors. They are an independent, registered, municipal, advisory, headquartered in San Rafael. They currently serve over eighty five California cities and special districts.

0:43:27Craig Hill who has worked with Bells reader, for over eight years, is one of the founding members of Nha, and he has been serving California public agency since one thousand nine hundred and eighty nine.

0:43:38Roy Kim is an associate. He has been with Nh. A since two thousand and eighteen, and he has an extensive background with calpers. He provides Calpers education. He is an expert in unfunded liability, cost management strategies and restructuring of unfunded liabilities.

0:43:57At the Philippines. The analyst he joined Nha in two thousand and twenty one, and he provides a day-to-day support. So I work closely with all of them, and they have been a pleasure to work with. They are going to provide a general overview about your options and how to manage your unfunded liability

0:44:14section. One hundred and fifteen is one option to manage on front of liability, and they will step you through all of the options, so that it will help us inform as a work group, possible directions and the path we would like to take, and with that i'll turn it over to Nh: A. Thank you,

0:44:31Craig Hill, NHA Advisors: Thanks, Andrew, and Ah good to see you all tonight, at least virtually as Senator Minch and I'm. Craig Hill, with Nhs advisors, have enjoyed working with the city for

0:44:44quite a while now on a number of uh projects and cash flow issues. Certainly the pension is one of the bigger issues that that you're addressing along with a lot of your peer groups out there. Um! I will do a shout out to the Calpers team for a great job of taking a very complicated concept of an unfunded liability and making it uh understandable. We sit through a lot of these meetings where this this same discussion comes up, and

0:45:14oftentimes it just seems to get worse before anybody else gets a handle on it. So

0:45:21what we can do is have our short presentation pulled up. Matt. Do you need

0:45:30Matt DeFilippis (NHA Advisors): authority to do a screenshot. Yes, I believe I need host permission to share my screen.

0:45:37You should be able to screen share. Please let me know if you can, if you need. I can also screen share for you. But you should have the capability.

0:45:47Matt DeFilippis (NHA Advisors): See? When I'm clicking on it, it does. Say, host, disabled participants screen sharing.

0:45:57Okay, it looks like it's working. So bear with me one second. Well, I pull up presentation technology at its best.

0:46:09Craig Hill, NHA Advisors: Great thanks, Matt:

0:46:11So as Sandra mentioned what we're going to try to do in a

0:46:16fairly high level is talk about some of your pension. Liability cost management strategies with a particular focus on the implementation of a section one hundred and fifteen Trust so real quickly going through if you want to next slide, Matt,

0:46:36just to give you an idea of what's going on out there. There are certainly a number of of your

0:46:43fellow cities that are looking at this exact same issue, and how to address the ever rising uh budgetary impact of your contributions. We're working with a number of cities throughout the bay area and up and down the State on very similar issues as a reminder for anybody in the audience who may be wondering what the city's been doing. Our work with the city went back to two thousand and seventeen, where we were holding workshops with the city council

0:47:11and with some of your labor groups. We've done some ah pension reports that are ah what I would consider an executive summary of the calories reports that you get on an annualized basis, and we've done some extensive modeling to really do some rejection work, and what options the city may have going forward so. Ah, certainly, for the last, I guess. Going on six or seven years we have been talking to the city specifically about

0:47:40pension liability issue. Next slide.

0:47:45As Sandra mentioned, there are many different options that you have to try to tackle or attack

0:47:54the the unfinded liability. Um. Certainly you have the ability to prepay every year what is going to be due that year, and in exchange Calpers will give you a discount, and the city has implemented this in some years to take advantage of that benefit. One hundred and fifty.

0:48:09You certainly have the ability, and these are all mutually exclusive. So any any of these are all of these could be implemented. You have the ability to um negotiate with your labor groups for cost, Sharing one example that is out there that is provided by calipers is what they call their fresh start.

0:48:29Um, We don't usually see that as a

0:48:32viable solution, because it typically will require higher payments in the earlier years. It's a very short amortization, but it does level things out. It's. Think of it as going from a thirty year to a fifteen year mortgage. Um! We're going to focus on what you can do with available cash, whether that be one time dollars, or the allocation of reserve funds, and or any projected surplus that you may see in your budget in the in the immediate future.

0:49:02And Finally, the other option that was considered up until about six months ago, was possibly restructuring the pension liability through some form of a financing next slide, please.

0:49:16So just for starters when we, when we talk about this concept of a section one hundred and fifteen trust, what are we really talking about? And the idea is, consider it a super reserve. It's a lock box by which you would create a trust or create a new fund,

0:49:33and money that goes into that fund gets effectively locked for one specific purpose, and that is to make pension or opim Opec. Excuse me payments in the future. So you it isn't something that you can

0:49:48put money into, and then decide two years later that she made the money to buy police cars or to, you know, find other capital projects it it it. It's a one-way flow. It is typically also managed by a third party administrator, which is necessary in order to to meet all of the necessary guidelines.

0:50:10The other big benefit is that it allows you to have an investment strategy that is different than your typical treasury. So, as you're all very aware the city has invested

0:50:24surplus cash, and it's residual monthly receipts in things like life, and some of the other very secure investment strategies that have very low returns. Anything that is locked up long term can typically be invested in a at a higher rate, and we, through the trust you're able to effectively use a different set of permitted investments than you otherwise would under your Government code.

0:50:51Obviously, like any investment strategy putting the money into a section one hundred and fifteen Trust does expose it to market risk. So putting,

0:51:02however much into a trust, and then immediately deploying that into an investment strategy right Now, obviously as the markets are down, as we all know, from personal experience, we've got uh the same exposure for the city's funds. So, having them put money into a a one hundred and fifteen, deploy it through an investment portfolio. You have the same risks that anybody else would.

0:51:27I will mention. Sorry you just go back with that. The last note is that you

0:51:33this becomes an asset of your financial state. The section one hundred and Fifteen Trust is a is an account that will a growing value over time, and can be used for purposes of offsetting that ual liability, while your calpers statements will still show

0:51:52the Ual at you know, whatever the number is for each particular year, you should be able to at least look at it and identify. Well,

0:52:02yes, it's sixty million dollars, but we have ten million dollars in our section one hundred and fifteen trust. Therefore the net liability is really only fifty in my example, next slide

0:52:16so really quickly. You know one of the things other things that you can do with any discretionary cash is make contributions straight to calivers, so you can elect

0:52:29out of any particular budget here to put an additional amount of money to calpers, and that will be a direct impact to the Ual contribution or the Uae balance. And so it is a very effective way. We have a number of cities that we work with that have taken residual revenues that have showed up at the end of a budget here, and they have dedicated it to putting it straight to caliber, to just see an immediate impact on the

0:52:58balance of their of their unfunded liability.

0:53:02The offset is, instead of giving it to calipers to put it into a one section, one hundred and fifteen trust, which has a whole set of different strategies.

0:53:12Obviously, you're now managing an asset pool that you can decide how you want to invest it. What strategy you want to have to do this. We actually have cities who

0:53:23elected not to put any more in calpers, and they need to only because from a

0:53:30what i'll call a You know political perspective. They believe they can do a better job of managing the returns, and so, if they keep it inside of a trust, it will look, and potentially perform better than what they may see out of Sacramento. That's not a an opinion. It's just kind of a position that we have seen in in other communities around the State.

0:53:53There are, as you can see from this table a number of comparisons, for how is it managed. You know we're talking about. If under a one-fifty trust, having a third-party trust administrator engaged um, and there are fees associated with that if you give the money to calpers it. It basically is, um, you know, swallowed up into the system and is managed by calories. As you know, everything else is

0:54:18my next line.

0:54:21So what does a one hundred and fifteen trust potentially do for you? And we created this hypothetical example to try to quantify for you what it actually might mean.

0:54:33Pension liabilities, as I started this conversation with are very complicated, and it can be easy to get lost in the numbers and in the percentages and the contribution rates and the funding ratios. So in this example, what we are attempting to do is show

0:54:51in those blue bars what the the current projected payment will look like over the next twenty five years

0:55:01for twenty, three years. Excuse me,

0:55:02and the idea being that if you were theoretically to put something like five million dollars into a one hundred and fifteen trust,

0:55:12and then kind of commit to doing another four years of million dollar contributions out of the future fiscal year budgets.

0:55:22And And if you add the assumption of that, you could earn four percent on that portfolio uh, we would say that was a little aggressive six months ago, or a year ago uh, under current markets that we have on the fixed income side. Um! That that could be potentially a very viable earnings rate.

0:55:42You can see that from the orange line. What the impact of that growth is in the one hundred and fifteen, because what you're able to do then effectively is earn an amount that offsets those payments, and effectively can flatten them out in this example, or take one

0:56:02the pain of an ever-increasing contribution to Calpers down to something that could be theoretically sustainable.

0:56:11So that is the you know the idea. There behind the orange. There are also a strategies where you will let the one fifteen trust continue to accumulate over time to try to take out the back end of the Ul. So you just let the assets grow to a point where they equal the amount of the Ul, in which case you are. You know you're paying, and off You're taking everything out of the one hundred and fifteen at that point in time.

0:56:40Everything it to calpers.

0:56:42Craig Hill, NHA Advisors: So uh, you know, we can certainly come back to this slide if there's any other questions. But i'd like to just kind of finish. We've got a couple more slides to talk really about this concept. Um. With a section one hundred and fifteen trust there are. As we mentioned, they need to have a administrator.

0:57:00Those administrators are kind of put into two buckets. Calpers has recently created a one hundred and fifteen trust

0:57:11program that you are eligible to use. I just came out a few years ago. It's currently growing. They've got about seventeen cities that are involved.

0:57:21And then you have some of these private sector uh trust administrators, such as pars, which has been around the longest caden and Pfm. Asset management, and each of them we have seen working with some of our other clients. Uh we're agnostic as to which uh group you may want to work with across all four uh, they just have different strategies and a different approaches to what you might want to do from an investment perspective

0:57:49within the trust next slide,

0:57:53trying to compare the non-calpers piece as you can see from some high level as assumptions. The the big takeaway that we'd like to to bring to your attention. Is that for cars again? They've they've kind of been around the the longest. They have substantial amount of public agencies that they work with.

0:58:14Uh, they also have the largest amount of assets uh their strategy is to work with high mark, capital and us bank as the kind of the entire trust team to manage any of your portfolios, and as you could see, they have uh five portfolio options uh the big thing that we can certainly talk about if anybody is interested. Is this concept of active or passive management? Right? So what does that mean? Uh, It's like picking stocks versus putting your money into

0:58:44to certain kinds of funds uh strategy on passive strategy versus an individual selection strategy. You can also see there what the estimated fees are

0:58:55for there, too Obviously, an active strategy is busier. Because you're you're working and selecting individual investments. So there is a a higher fee involved in that

0:59:06on Keenan. As an example, they also have a couple of different options, but they have a much more controllable passive investment, strategy or management with giving you six different portfolio options. So it's a little bit more um

0:59:23easy to look at their options and pick within their six uh whereas you you really do have an um, an infinite number of options. You could go with with somebody like cars, and finally, you have pfm asset management,

0:59:39which is, uh,

0:59:42probably not a viable option for the city at this point uh their strategy is really to do a much more active management with larger public agencies around the State, and they're a national firm, so they they do a lot of work across the country as well.

1:00:01Next slide.

1:00:04We have had some pretty extensive conversations with Staff over the last few months about what the actual process would be should the Council.

1:00:15And if I decide this is something that they uh want to try to implement as a policy and as a strategy for managing the pension liability. As you can see from this graphic, it is, uh what we would consider a very compressed schedule. Uh, certainly, different public agencies have different processes, but these are the six steps that we need to occur, started with developing a working group of those that want to

1:00:45in the selection process that would need to be, you know, assuming that could happen over, let's say, the next week

1:00:52We would then go into evaluating the the trust providers. Um! As we showed on an earlier slide, there's ah less than a handful, and to we would advocate or so recommend that the working group

1:01:10identify what the objectives are that they're looking for prior to then just going out and trying to talk to all of the different groups we could expect to see

1:01:23materials come back from those groups in late October. In the meantime we would be very interested in getting the development of pension funding strategies or policies in place. This is something that we feel is a critical part of this it doesn't. Do you any good to set up a one hundred and fifteen, and unfortunately we have other public agencies out there who have created one of the teams, and then not done anything. They haven't been able to either fund them because they've found higher

1:01:51priorities for use of those dollars. They don't have a real strategy, for you know whether or not they're going to be investing systematically in the one hundred and fifteen, so we feel that that's a very important part or step in this process that should be considered. Why this working group by the Fab and run by city council.

1:02:14Ah, again, as I mentioned late October. You are actually at this point have identified which of the administrators you want to work with? There is a ah and a resolution in, and a formal process that city council would adopt in order to actually create the plan in early November. And then you would actually kind of implement it later that month, or towards the end of the year. So

1:02:41this is, in our opinion, a very compressed cycle to get you from the start to the end. But it is

1:02:50possible if there's an efficient um process for kind of getting those that are involved early in the game to the table, so that we can work collaboratively with them to um work through this implementation, I think, with that Matt is at the last slide.

1:03:09Matt DeFilippis (NHA Advisors): Yes, that is the last one

1:03:12Craig Hill, NHA Advisors: so happy to keep the the the screen share going. If there are particular slides that anybody wants to talk to, otherwise have to answer any questions.

1:03:20Thank you, Craig and Pat and Roy for being here before we get too far into discussions about the city manager.

1:03:31We'll go into the next two slides about the roles and responsibilities and the path forward. But before we turn it over to the city manager, i'd like to make sure that city council and I have had an opportunity to ask questions, and in the last bit of information for

1:03:48information Nha. Will work with the work group to facilitate,

1:03:54to provide examples of other policies, financing as well as resolutions for many of the other cities they work for to expedite the process. We're also working with sky as well to make sure that we are able to move forward with the in the contracting process with an administrator. So we will stay compliant with city policy, administrative policy as well from the procurement and contracting process. So I just wanted to make sure that

1:04:23everyone was aware that we checked those boxes as well, and with that question and answers, and then to the city manager.

1:04:29Okay, um. Let's see if our Council has any questions

1:04:34we would like to go first

1:04:36paper term.

1:04:37I I do have a bunch of questions, so I don't want to go out of order, but first is, I know we touched on it, but the additional discretionary payments the Adps. So it sounds like

1:04:52you are funneling us towards the section one hundred and fifteen decision making um, but it feels like I would like to have an understanding of what some of these Um, this alternative is, but also, you know, to just better understand. Um, if

1:05:11you know.

1:05:12Okay, what do can we Can we do an early um prepayment of the unfunded liability early in the fiscal year? Now that we have this pretty good fund reserve. Where does that get us if we plan for that for like for your four years, How far do we get? Um! I just want to understand all the different things that we could do and also understand. And I share this with city manager. But just to understand.

1:05:42Given where our ah the fund reserve balance is, and our five year projections. And where does that put us? Ah, in five years? So are we taking any other options out? Are there now, that we're kind of into two thousand and twenty-two, twenty-three, are we seeing anything that will cause us to say Well, our forecast is not as what we're it's not going to be as robust as we expect.

1:06:12Um, I also want to make sure that in thinking of the big picture of where we're going to park our money for our long term and not be able to use for any other use is to really think about um. You know I know that there's the unfunded liability. I know there's There's the emergency reserve, but also I want to make sure It's kind of a

1:06:36kind of mode of business that we

1:06:38make sure that we don't need to start going back to the trend. So

1:06:43that's sort of on the expense side of things. But I hope that you know we are. We have this magic

1:06:51money um

1:06:53in our fund reserve. Now, that allows us to have all these options. I just want to make sure that in choosing this particular vehicle that we are understanding the impact, not just today, and not just to the pension underfunded liabilities, but to the way that we will, shepherd and manage that reserve over the next five to ten years.

1:07:17So

1:07:18given kind of the presentation from the Calpers folks, and you know again, I don't know how they got us to the peak of the mountain in two thousand and twenty-six but that's a big ah watershed here for us financially, because that's when all of our redevelopment obligations go away. So we will have more money then, if that is our peak, and then we could potentially start paying additional to our unfunded liability. Do we still need this?

1:07:47I know that peak and kind of it's a hypothetical, and that's why i'm trying to understand this. Are we?

1:07:54Are we looking at the highest possible payment obligation coming forward to us in the next two years and the next five years in the next ten years. What exactly

1:08:06are we preparing for, and what is the best way to be ready for it? And I appreciate. I think you know, Section one hundred and fifteen makes a lot of sense. I just want to make sure that we, as counsel and fab, have the fullest amount of information to confirm that this is the right thing to do,

1:08:27Craig Hill, NHA Advisors: Senator Karen, you want me to answer some of those questions.

1:08:35Oh, yes, this is your Q A. Time.

1:08:38Craig Hill, NHA Advisors: And so so those are actually great points, and and it really, I think, offers up the opportunity to go back to the the big comparison between setting up a one hundred and fifteen trust and putting money in that trust versus giving the money to Calpers as a paydown uh the big you're You're absolutely right to be thinking about this in the capacity of what we're trying to really focus on the long term.

1:09:07You know how we're going to not get ourselves into cash flow crunches like we had in the past. So the the big difference

1:09:17that um, if I can explain this as simply as possible is when you give, let's just say theoretically, you have five dollars. If you give that to calpers as a one-time adp payment, it will absolutely, positively impact your U Al. Right. I mean It's It's going to

1:09:36buy down the Ul, and that will have, you know, future positive impacts by you'll have a lower contribution that you need going forward.

1:09:48The issue is that you've now spent the five million dollars, and ah! When calpers readjust your schedule, you know it's good until they have games or losses in future years, right where they're always adjusting things. What we see as a

1:10:06a value or a positive to doing it, as the one Fifteen Trust is. You're halfway there right? You're actually putting that same five million dollars towards pensions. But you're retaining it, and you're kind of temporarily putting it on the shelf

1:10:22with the idea that it is still going towards that U. Al. But should God forbid you get a a year or two out, and for whatever reason, the economy or your expenditures, or on the revenue side, there's some significant disruption. You can actually use that

1:10:42that

1:10:44trust

1:10:45to make the the payments that you otherwise would have made be made out of your budget. It's still going towards the bench. But it is So you're not getting away from that. But you you now the the rainy day call it a radio pension fund is the section one hundred and fifty. Trust. So it just provides you some financial security and flexibility.

1:11:08You need it in the future. Now, you know there are certainly the philosophy that not. We're going to

1:11:15manage our budgets. We're going to always be running in the black where we're maintaining some kind of a

1:11:24a positive cash flow. So we shouldn't ever get into that position. But you do need to make sure that you have this ability to have flexibility. Um, should you need it?

1:11:36And ah! You know we. We have plenty of public agencies that are doing buff right. They're They're either just chiseling away at it by making small contributions on it to the adp, and then they're systematically putting money into the section one hundred and fifteen trust.

1:11:53So there we don't see them as competing strategies as much as they're complementary, depending on really what your projection work on. Your budget looks like. A five or a ten year cash flow. Projection of the general fund is a critical piece,

1:12:11the funding strategy for either putting money into a one hundred and fifteen trust or making eighty eightyp pay.

1:12:22Thank you.

1:12:24Okay.

1:12:25Any other questions from the Council.

1:12:28It's

1:12:29Ah, let's get to councilmember, Tesla Rodnick.

1:12:32Councilmember Tessa Rudnick (she/her): Thank you. So if we were to establish a one hundred and fifteen trust based on this timeline of getting us to November with it. You want to scroll to this one?

1:12:45I'm. Assuming that we would have to have some sort of budget adjustment to reflect that we would be funding a one hundred and fifteen trust, since our current budget cycle does not

1:12:57those funds directed towards a one hundred and fifteen Trust, or

1:13:03because it's me more for management.

1:13:08Yes, yes, you would need a budget adjustment.

1:13:11Councilmember Tessa Rudnick (she/her): Okay? And when we are establishing this this policy group?

1:13:19Um. Would it be in that group potentially establishing how much we would contribute to this one hundred and fifteen trust?

1:13:28I think city manager will go of that, and what they that group work will be recommending to City council,

1:13:36Councilmember Tessa Rudnick (she/her): hey? Thank you.

1:13:40Next will go to Council Member for Delhi.

1:13:42Yes, thank you. A couple general questions. Um! You mentioned Ah, nh! A folks that one hundred and fifteen is viewed as an asset, so I can assume,

1:13:56then, that the State auditor use this as an asset when we make such reports,

1:14:03and this will assist in improving bond ratings. When they look at our city finances,

1:14:11Craig Hill, NHA Advisors: It's absolutely a a credit positive for third-party rating agencies to look at. They, you know. Obviously they are very focused on the looming liabilities that many public agencies have

1:14:29addressing them with a the formation of a one hundred and fifteen that actually begins to grow assets is certainly a credit positive.

1:14:40Thank you; and, as we all know elsewhere is a city coming

1:14:45back out of financial difficulty, and it's going to take some time. So I was hoping you might um give us a couple of sentences about using caution before we make our decision, because there are a few decisions to be made here,

1:15:03and I heard you just talk about one fifteen more with flexibility than I ever have. I've heard before. I keep hearing the one fifteen is locking it away, and you can't do anything with it. Can you talk about the differences between the flexibility you're talking about and us

1:15:20locking that money away

1:15:23for the purse payments?

1:15:27Craig Hill, NHA Advisors: Sure, when when we speak of flexibility. It's more a function of when you're actually using the trust balances to

1:15:38impact the calpers liability. So well, we did state that when you create a trust, and you put money into the section one hundred and fifteen. Trust it cannot be ah withdrawn for any other purpose other than to make ah pension payments that are required under the calipers obligation, or opens

1:16:03so that's in, you know, in one sentence it's a very narrow use. Right? You're locked up. You don't have any other choice.

1:16:12Craig Hill, NHA Advisors: The the flexibility aspect is that you may choose

1:16:17to apply it towards those payments next year;

1:16:22for in two years, or in three years. When you compare that to the same amount of money that you want to give to Calpers as an adp payment. That's one and done

1:16:34right. You don't get to um,

1:16:38change your mind and ask for the money back or use it. Ah, you know what I didn't really mean to use it in this fiscal year. I was hoping we could actually apply it next year, because we sort of needed to hold on to that cash for other reasons. So these are very high level

1:16:56reserve policy conversations that you know we we really appreciate, and is a very important piece of the equation. This goes beyond. I think, any strategy that you're talking about. Implementing needs to be paired with

1:17:13a strategy, you know, a reserve fund strategy, right? Not only just a pension policy, but a reserve fund strategy On what are we trying to build

1:17:24up to before we decide to put money into a one hundred and fifteen trust? Or do we make the one hundred and fifteen? The most important thing that we do with every extra dollar quad that we find There's not a right or wrong. Answer. We have a lot of scenarios where

1:17:42there's a splitting of, you know you systematically have a policy that says at the end of the year any unencumbered fund balances or applied twenty five percent to

1:17:54you know the one fifteen or the pension liability and twenty-five percent to deferred capital or whatever you you choose, but creating that policy and then implementing it year after year, is what's going to get You kind of out of the the financial hardship. That was um, you know, brought down on the city and in the prior years, and allows you to kind of grow yourself out without a whip sign through different strategies on an annual basis.

1:18:23So the flexibility is when we use it and decide to make the payment as part of a broader strategy going forward that needs to be continually updated.

1:18:36Craig Hill, NHA Advisors: Absolutely. Okay, that's that's a great way to say it.

1:18:38Okay, My, My last question is on the page with the three ah providers Um! The last bullet on cars that's bolded, says, only provided with Irs private letter ruling. What does that mean?

1:18:55Craig Hill, NHA Advisors: Uh great question? So pars was one of the first uh firms to create this concept of a section one hundred and Fifteen Trust because they were breaking ground. They actually had a legal team that went to the Irs

1:19:13and ask for the Irs. We call it a private letter ruling meeting. It's effectively. Ah! An opinion from the Irs that what they are doing that with the pro

1:19:24that they are doing is uh is legal and viable. Now they did it because they needed to. They were kind of setting case law, if you will. Right. They were creating something that had never been created before. With this concept of a section one hundred and fifteen trust.

1:19:42The The other providers have kind of relied on the fact that Pars has has effectively been able to

1:19:52operate and run the section one hundred and fifteen trust, hence the four hundred and eighty. You know clients that they have, or programs that they're offering for a number of clients. So if you talk to the other providers, they will take the position that they didn't need a private letter really, because this concept of a section one hundred and fifteen was already a You know, a market standard if you have

1:20:19okay, and not to ask you to judge for us. But you made it sound like. It was a simpler

1:20:25direction for us to proceed with.

1:20:27Craig Hill, NHA Advisors: Um

1:20:28great question. I think the the big discussion we have had with a number of city councils over the last five years has really been more about. What is it that you're trying to accomplish with the one hundred and fifteen? We have had

1:20:43uh Council members and councils as a whole, who have said, You know we're just tired of having these huge losses, you know, and then rips on up, and having these huge games, we would much rather have it. Or every year, you know, four or five percent. We have a much more conservative strategy. So when you think about, we're trying to back into what your philosophical approach is that will actually fall into a

1:21:11better category within

1:21:14any of these providers. They each have a different strategy, and we try to align the provider with the strategy or the philosophical approach that each of the public agencies has. So there there is not a right or wrong from any of these firms, including calcers as well.

1:21:34Between the four providers. They just have different approaches that you want to make sure that you're, For instance, if

1:21:41you were a council that were all private wealth, money managers, you might actually suggest that we want to go with cars, and we want to have an active management strategy, right? We want to talk about this. That would be very interested in on a monthly basis. Talking about the portfolio of where it goes.

1:22:00Most of our clients are the exact opposite Right? We We have many other fires we need to put out. We want to just put this money into a trust and let it,

1:22:11you know, be smart. We invested and have a much more passive approach.

1:22:18Well, thank you. That's one of the decisions we'll have to make. Thank you very much.

1:22:23I just want to double check with councilmember, Roddick, if you have any any

1:22:28uh questions, or any any more comments.

1:22:31Councilmember Tessa Rudnick (she/her): I know I learned a lot from my colleagues questions

1:22:35right? Um, You know as as mayor this year one of the things I wanted to make sure is to have this this year, and and to complement this. So i'm looking at the next steps and the timeline.

1:22:53I like what I see. I want to make sure. Ah! With our city manager, if ah! And just want to double check with her and with the Fab committee your take on Ah, the potential next steps.

1:23:14I I can't hear you, Karen.

1:23:19Your mic is not working

1:23:28Karen Pinkos, City Manager (she/her): now. Can you hear me? Yeah, I can hear you. Okay? Sorry about that. Thank you. Um. Before I go on to the slide with the next steps. Um, perhaps. Uh, if the bad members have any questions on the previous slides. Uh for any J. Before I share my screen. Perhaps we could do that.

1:23:50It's

1:23:52FAB Chair Farhad Farahmand: I remember, Cousin.

1:23:57FAB Member Ruth Cazden: Yes, thank you. I I wanted to actually address this to Mayo Quinto in looking at the slide. That shows the implementation progression.

1:24:10Um! I wanted to know why it's critical that we get this done before the end of the year. Is is it for? And maybe this should be addressed to somebody else

1:24:23there? Some financial reason why we have to rush this through before the end of the calendar year.

1:24:32Thank you. I, In my personal opinion, I don't think we're watching through this. We've been wanting to do this for

1:24:39a long time. I wanted to do this. Ah, you know, for the last few years, but we had to ah make sure that our house was in order before we even look at this. So it was a State treasurer, John Chung, who spoke. Ah! Before the League of California cities back in two thousand and sixteen and um, and you know we wanted to start it and look at this many years ago,

1:25:07but we just couldn't do it now with new leadership and city manager, Karen Baker, at the Home. We are now able to look at this and discuss this, so

1:25:18I mean full support of making sure that we look at this

1:25:24on time coming, and know that there are cities in our county that have been doing this now for what? At least ten years now. So we have some catching up to do, and and I want to make sure that we'll have every opportunity

1:25:39start prepaying these uh uh funded liabilities. Now, So, Um Karen, did you want to add anything else?

1:25:49Karen Pinkos, City Manager (she/her): Uh, no i'm, certainly uh back in July? Two thousand and twenty-one. The city council directed me to look at establishing a section one hundred and fifteen Trust, and we have again as the Mayor indicated. It's been a matter of, you know, making sure that we were in a good position to do so, and with bringing Sandra on, or this is one of her first tests was to make sure that we started this process, and she's been working with Nh. A.

1:26:15And count her in for a few months now trying to get this going. She's only worked here for six months, so she's kind of left on in that short amount of time. So um! So I I also agree that this is something that has wanted certainly directed Staff to be since over a year ago. But I think that certainly, with the with the uh, taking advantage of some of the high rates of returns that we see coming up, I think would also be that

1:26:45absolutely so. Let's go to a fab chair, and I know your fad members have some questions. Go ahead.

1:26:55FAB Chair Farhad Farahmand: Yes, thank you, Mayor. Yeah, I remember White. Your hand is just

1:27:00FAB Member Kimberly White (she/her): thank you. Um chairperson.

1:27:03I will allow the other five members who haven't had a chance to speak. Speak first, and i'll go. I'll go later.

1:27:11It's

1:27:12FAB Chair Farhad Farahmand: remember Patterson.

1:27:15FAB Member Dick Patterson: Yeah, Thank you. Um. I have a question on Slide six. I actually have a couple of questions. So first is on Slide Six. That's an illustration of the how the fund might work, and I realize that there are many variations of how this can.

1:27:31But in this particular illustration it shows that the fund is built up to It's like nine million dollars, and then it's used over a nine year period to use the principle of the fund and the interest earned during that period to pay a portion

1:27:48of the annual Ul payments.

1:27:52My my question is, this: assumes a four percent earnings rate. Can you just explain? Is that a is that like a guaranteed rate. In other words, once we get to two thousand and twenty-six or two thousand and twenty-seven, we put in the nine million dollars.

1:28:10Ah! Does this assume that there is a in essence a guaranteed four percent return each year? Ah! So that the fund is paid down to zero by the time we get to twenty, thirty-six. Is that the assumption that's made here?

1:28:27Craig Hill, NHA Advisors: Great question Short answer no there's no guarantee. This is just the like. Any other investment depending on your investment strategy with the trust administrator. This, the

1:28:43percent earnings rate was a hypothetical just to give you an impact analysis on what it might actually mean to your cash flow going forward So, under a scenario where you did

1:28:55consistently earned four, you would have a portfolio that could be used to bite off those peaks everything above the orange line such that you stabilize your contribution or your I should say your annual payments to Calibers right at about seven million, as opposed to letting it go all the way up to nine, as you see, in two thousand and thirty-one.

1:29:18FAB Member Dick Patterson: Right? Okay, So so obviously the the asset allocation would make a big difference. Um, and and May may not play out this way, depending on how investments turn out, Um, Okay, thank you. And then my second question was,

1:29:34Um. So this is one hundred and fifteen is is certainly one tool, the other tool. And I don't think you really said much about it was pent and obligation bonds. Is there

1:29:45a reason, or do cities have a preference for the one hundred and fifteen trust, or to give more weight to a one hundred and fifteen trust than say to a pension obligation bond.

1:29:57Craig Hill, NHA Advisors: Yeah. Great question. Um, right now. So the the short answer to the evaluation of whether it makes sense to borrow money to pay off a liability. Think about it, as you know, taking money off of one credit card to pay another credit card is the the simple uh

1:30:17Craig Hill, NHA Advisors: comment that we often hear that rates have risen substantially in the pension, obligation, bond world. We were doing transactions as low as three and a half, and right now we're up in the five and a half to six percent Keep in mind. You're borrowing money at that rate. Only then to give it to calpers for an assumed return of six point, eight percent.

1:30:44So if if calpers can't perform at six, eight, and let's just say It's only the average five percent over the next ten years. Pick a pick a term

1:30:55if you're. If you've borrowed money at

1:30:58five and a half or six, and yet they've only earned five percent on it while they're taking all those proceeds and investing it as part of your asset group.

1:31:09You know you'd actually do worse off. So we are not advocating or or recommending at this point in time that that is a viable option only because your cost of borrowing is at such a higher rate. And and for this reason most public agencies that we're considering it. Have sort of put it on a,

1:31:31you know, pending the market kind of coming back to something more normal.

1:31:37FAB Member Dick Patterson: Okay, thank you.

1:31:40FAB Chair Farhad Farahmand: Thank you. Remember. Get Sonnet, our vice chair. Katzannis.

1:31:45FAB Vice-Chair William Ktsanes (he/his): Can you hear me?

1:31:46Yes,

1:31:47FAB Vice-Chair William Ktsanes (he/his): battery's dying. I'm sorry I just want to express a concern. I'm hearing from two different

1:31:54change the thought and questions here, there. There are some people, for example, Councilmember Otiyama, who's you know, asking about the advantages and disadvantages? Some of the intricacies of why you might go the ones with team route

1:32:05and I'm, hearing other questions that seem to imply that we've already made this decision,

1:32:09and i'd like to just, you know, caution against it that we take time to really look at it. So my first take is that we're paying. We go the one hundred and fifteen route. We're paying additional fees

1:32:19more flexibility. That may not be in the best interest of the city. To have. And part of that flexibility is the flexibility to not make payments. But

1:32:27and I just want to make you know the same caution as to take caution, and to really evaluate what the advantages are for us,

1:32:36and this goes along also with risk. Question about the timeline. I don't see the urgency of getting started. I see the urgency to really figure out which is the optimal route and be able to focus on that first. That's all.

1:32:50FAB Chair Farhad Farahmand: Thank you. Vice Chair. Good science member. Why did you want to express a comment.

1:32:54FAB Member Kimberly White (she/her): Yes, I would. I have a question for our consultants. So El Cerrito, you know, has a pretty

1:33:02um interesting situation where we recently adopted our budget. But we did not allocate funding for this effort, so as with Councilmember, Motoyama. Um Ah, I do have

1:33:19concerns as with other fad members. I do ask of some concerns about the timeline. I also have some concerns about the

1:33:27whether or not this is even a good option.

1:33:30But my question for you is

1:33:34there? Are, you know, a couple of cities that are taking this one hundred and fifteen trust route

1:33:43of those cities.

1:33:45How much are they investing to make it worth their while? I mean approximately ballpark. What's the minimum amount that a city would invest to make it worth their while

1:33:56or So a city like El Cerrito.

1:34:00Craig Hill, NHA Advisors: Yeah, that that that's actually a a great, very subjective question. Um, I would say in our experience, Um, the effort of going through and starting a section one hundred and fifteen trust, while we do have

1:34:19cities that we work with who created them, and then didn't put any money into them. Yet, for

1:34:25unforeseen reasons, I think at that point in time we would feel like as a diligent process that this city would really want to not fund it with less than a million dollars. You would ideally

1:34:42it with a larger chunk, with a commitment to make, you know contributions consistently going forward. We understand that there's, you know, every year is a new

1:34:55war on everything right? So you, you don't know exactly what you're going to be able to afford in future years, but to to get off the ah, the starting block it! It would be something that we would say, don't do if it's anything less than a million dollars.

1:35:13FAB Member Kimberly White (she/her): Okay, Thank you very much, very much. I I do appreciate having that information. Thank you so.

1:35:21FAB Chair Farhad Farahmand: And thank you, Cab members. I'll turn it back to Mayor Kinto, and it's the manager. Pick us.

1:35:26Okay, Thank you. Chair. I appreciate that. Um. Next um. Let's go to public comment. Now is the time for members of the public who wish to provide public comments on this item In-person request to speak in support to the city clerk. Yeah, both speakers can use the

1:35:47Please remember to identify yourself and your city of residents at the beginning of your

1:35:52and a particular

1:35:53Thank you, Mayor. We also did not receive written public comment on this item. I have no members of the public in person, and I only see two members of the public on the call still, and I do not see any hands raised.

1:36:06Let's let's give them like a five to ten seconds to see if

1:36:13they would like to speak.

1:36:22Karen Pinkos, City Manager (she/her): I still do not have any hands. All right, this one Mixer. All right. So let's bring this back to the Council and let's go one by one,

1:36:36he, as soon as she's there,

1:36:37Karen Pinkos, City Manager (she/her): may I? May I wrap up with the next steps? Sure, right, Absolutely. Go ahead.

1:36:43You make up

1:36:45Karen Pinkos, City Manager (she/her): all right. These are the last slides that you all had in your packet.

1:36:51Can you all hear me still? Yeah. Yes, Okay. Good. Sorry. So what we are seeking. And as Craig talked about, and, in fact, as Mayor Potato, Moyama pointed out

1:37:05that the strategies behind this are as important as setting up the one fifty trust. And again, as the Council has, as I've previously indicated, in July two thousand and twenty-one the Council directed staff to establish a section one trust so That is why we are moving instruction. Um. This presentation was indeed to confirm that. And so um the working group that is established uh within between the Fab and the City council.

1:37:33Um! That would be uh again, a confirmation of the direction that the city council has already given us. So what we would propose. But and I work, and I want to give a shout out right now, especially to Sandra Deleta, who has done a bang up job of putting this all together in a in a short amount of time that she's worked here, but has also worked really well um with Craig. And again a big shout out to Frank: Thank you so much, and your team for being able to to help us as you have

1:38:02for uh, quite some time. Now, this is just a next step, and it it. It's nice for you to be able to help us when it comes to uh how we invest money as opposed to how we borrow money. So it's great to have this conversation.

1:38:15So what Staff would propose is that, uh, as as the fabs uh charge it has been, and is currently to to review policies and develop policies such as staff to recommend to the City Council. Um! What best financial practices will be your budget practices or financial policies. This is exactly one of those policies. So we would like to work with the fact to help develop first general fund surplus allocation

1:38:45policy, as Craig indicated. What we've seen in other cities is right. Now, again, the City Council also has established direction based on a fab recommendation for us to try to achieve a one million dollars surplus here at a minimum. That's our goal. Okay. So going further, perhaps this could be something that the fab recommends and the city council adopts is what happens with that surplus. Um, just as a reminder in two thousand and nineteen. The City Council did modify the comprehensive financial

1:39:15policies to create an emergency and disaster fund, a Edrf Fund

1:39:22Emergency Disaster relief Fund. Um that has not been funded yet, either. And again, as Mayor Gamma indicated, We have a lot of right now. We have, say, about a fifteen million dollars general fund reserve that we're looking at kind of how we allocate the surplus at the end of each year, and how we allocate that general and reserve is what needs to be discussed in conjunction with this trust. And so, first and foremost again, we want them to work with the bad developers.

1:39:50Ah, go a little bit deeper into that allocation policy for each annual surplus, and then another policy or a related policy would be that initial funding and ongoing contribution policy recommendations I just indicated.

1:40:06If we were to have the City Council allocate one million dollars. If the general fund reserved toward this one fifteen trust is a beginning or a larger amount. Again, I think that would, is what needs to be discussed at the Fab level and make a recommendation to the City Council.

1:40:24We're proposing, as also Craig indicated, on his timeline a section one hundred and fifteen work group. Um! It would. It consist of a member of city council, a member of the Fab and City staff to work together. What we would look at is again confirming this approach for the section. One Fifteen Trust Council has already made that direction, but it would be a confirmation. And then, looking at selecting the administrator to do so, and developing the um, the Rfp. Or whatever

1:40:52contractual procurement issues need to be dealt with, and then selecting the provider,

1:40:59so that would be one That would be one part of this for the next step. When it comes to fab

1:41:07when it comes to the Council

1:41:10next.

1:41:11Um same thing the City Council. We would um ask for a city Council member, and as a suggestion um to make it very simple and easy. Ah, this could be, say the mayor and the chair of the Fab um, or however, the city council wants to

1:41:30to put that together, but that's certainly a very kind of keeping it simple. If the chairs of all of the bodies would be willing to serve as uh as part of this group. Um, i'm told by Sandra and Frank. You can nod your head if this is true, it's we're looking at perhaps two meetings to be able to work through what the working group would need to talk about.

1:41:50Yes,

1:41:51he's not okay. So we're looking at about two meetings, so it's not going to be too much of a a burden or a a position on anybody's time. And then again, this would help us select it with the Administrator and the Board Trust, and then the City Council will need to have some very serious strategic discussions about the funding policy and considering uh the Bad's representations, and then what's not on here? But as uh that point indicated that this would need to be, and and the Council Member Redneck also brought this up

1:42:21that this would definitely need to be a specific fund balance allocation that is done separately. That has not been done in this budget. And so any allocation would need to be brought back to the city Council for their consideration, and then appropriation. So with that

1:42:38Oh, I already went there. Going backwards.

1:42:42There we go. Thank you. And I just want to thank everyone for their time, and especially Sandra and Nij and the fab um for for hanging in there with all of us, and of course thank you to the city Council for your leadership, and with that i'm going to stop sharing my screen. And now we can um

1:43:00any additional questions or comments. Thank you so much,

1:43:04and thank you for bringing this back to the Council. Any final thoughts here for Jennifer Jones. Thank you, Mayor. I think that sounds all good. I really will be focusing my attention on that general fund. Reserve allocation, policy recommendation.

1:43:24I think. What is, you know. I want to make sure that I get to see in considering that policy a ten year forecast. So we have our five year forecast in the Budget book, which I'm looking at right now, and kind of given what it was telling us at the time of the proposed two thousand and twenty, two, two thousand and twenty three budget.

1:43:47It looked like we would have um

1:43:50a ten million dollars. Ah! Eleven million dollars fund reserve At the end of this coming fiscal year. So we have roughly five million more than we were expecting conveniently. And so, in theory

1:44:06theory, we could put that five million dollars into the one hundred and fifteen trust, and still be able to trend as we have been forecasting for the five years in the future. So

1:44:21I would really like to see the ten years to get us past two thousand and twenty six

1:44:26again. That's an important year for us to see where we land if we were to do that, and also because we would have that tool to see where we land in. You know, if we have a downturn, so that sort of a worse case scenario. So we can see, you know, if we dip low enough that we would have needed some of this money to use for a trans or something like that. I would like to be able to see that as this policy is made, and to help us size, what

1:44:54amount of funding we would put be able to comfortably put into the one fifteen, so that it's really the long-term big picture understanding that's going to help us guide. You know what goes into the one hundred and fifteen, and how it's going to be

1:45:08administered and policy-wise. And just one final question, which it didn't occur to me until you know. Craig started talking about um, how this one fifteen could theoretically be used? It sounded like if we were to have a down year in the future

1:45:26we could use a one hundred and fifteen to use to pay the Ul

1:45:31instead of our general fonts. Is that correct.

1:45:38Craig Hill, NHA Advisors: Yes,

1:45:40okay. So that that, I think is a flexibility. It's flexibility is great. It just

1:45:46put a chill down my spine, and I thought, that is a really easy way for some, not us, not as responsible council members, but some future accounts will say, Hey, we can spend that money because we have this one hundred and fifteen, and we can cover that.

1:46:02So my hope to this policy group is,

1:46:07Show me how we're not going to do that through this policy. So thank you.

1:46:12Okay, Thank you.

1:46:13I

1:46:14anyone else. Um, Councilmember. Fidel.

1:46:17Yes, thank you. I thank you all. Thank you, Fab. Thank you. Folks that have come to talk to us as experts. I do believe this is a process and a journey that we have to take

1:46:29um after the last couple of years, what we've been dealing with, and what we've heard about the one fifteen. I'm hoping that any any um options, some unfunded liability options that come to us, based on fab deliberations, will be customized to Elsa, Rita

1:46:48and all the things that we've talked about tonight, the unique situation we're in, and how we can be more flexible, and we have flexible tools to go forward and get us back on back on tracks. But thank you very much.

1:47:02Councilmember Rodney.

1:47:06Councilmember Tessa Rudnick (she/her): Thank you, Mayor. I'm really appreciative of the partnership between Council and Fab

1:47:12as we move through this process. Because I really want, I think everyone here. We're all here because we care so much about the financial health of the city, and making sure that we're doing, measuring twice and cutting one. I also want to clarify that. My question about how the timeline isn't a commitment to rushing things I want to make sure that we're doing this correctly, and that we're really gaining insight from the Financial Advisory Board, so that as a council, as we are

1:47:40to, you know, moving through the process of adopting this,

1:47:43that we're really seeing this from lots of lenses and lots of angles, because we want to do this right. And I think that everyone here is committed to making sure that the city is not in the same financial position than it was before, and that we weren't gambling. I think we want to be a lot safer as we move through, so thank you for everyone tonight. It is really informative.

1:48:05Thank you. Council Member rodeo um, you know I I

1:48:09as folks said, and and and, as I stated before, this is something that we absolutely need to do. So, you know, I want to say thank you to Ah, Sandra for researching this very thoroughly working with our partners here with with

1:48:27Ah, nh! A. And Ah, you know especially our fabric, because we're going to need you more than ever, especially during these next steps. So ah! You know I am Um, I will as vayor this year i'd like to. Ah offer my services to be in this ah

1:48:47special. Ah, committee. Yeah. Ah! Hoping that Ah, I will have that chair. Ah! For had Ah accept my invitation. Ah, let's work together and work on this together for for what's best for the city of elsewhere,

1:49:09and i'll turn this over to the chair.

1:49:12FAB Chair Farhad Farahmand: Thank you so much, Mayor, for offering your services, and i'm sure we'd be very happy to to accept yourself or any member of the Council as experts on this topic. So thank you so much to city staff members. Is there anything that you want to

1:49:29to close comment with? I know our party is not finishing after this meeting we're going to keep going.

1:49:38There's going to be more time to discuss. But are there any other comments you have for council and staff to hear?

1:49:45Fantastic? They're good. So I I just want to double check with our our city clerk and our city attorney. Do we need to do a motion on this?

1:49:58I don't believe so. This is where there's no action to be taken, and that's the the direction. Regarding the One hundred and Fifteen trust has already been provided, and the city manager will be moving forward with the recommendations that were outlined on the presentation.

1:50:11Okay, just wanted to double check. Thank you very much. So I want to say thank you to everyone for being here and and taking the time to,

1:50:22you know, meet with us and and with the Fab team again. Ah, congratulations for all your good work, and we look forward to working with you on the next steps coming up

1:50:34during this joint City council, financial advisory body meeting. The time is now Ah, seven, Ah, fifty, three P. M. And this speeding is adjourned. Thank you very much.

1:50:49Thank you.