I have to order our

嗎,

night.

and welcome to the November 21st, 2024 administration, investment and fiscal management board meeting.

The meeting is now called to order.

Will the clerk please call a roll to establish a court?

Thank you, Chair. Members, please unmute.

Member Coletto?

Year.

Vice Chair Colville?

Year.

Members, Emma Newton?

Present.

Member O'Toole?

Present.

And Chair Bader?

Year.

Thank you. We have, Corm.

Okay.

I'd like to remind the members of the public if you would like to speak on an agenda item.

Please turn in a speaker slip when the item begins.

You'll have two minutes to speak once you're called on.

After the first speaker, we will no longer accept speaker slips.

We will now proceed to today's agenda.

Please rise for the opening acknowledgement and honor of Sacramento's Indigenous Peoples and tribal lands.

To the original people of the land, the Nisanan people, the southern Maidu,

Valiant planes, Nihuac, Putwin, Wenton peoples and people of the Wilton Ranch area,

Sacramento's only federally recognized tribe.

We acknowledge and honor the native people who came before us and still walk beside us today

on these ancestral lands by choosing to gather together today in the active practice and

acknowledgement and appreciation of Sacramento's Indigenous Peoples' history, contributions

and lives.

Thank you.

Please remain standing to the pledge.

I pledge allegiance to the flag of the United States of America and to the Republic

for which it stands, ordination, undergrad, indivisible, the liberty and justice for all.

Okay.

Our first order of business today is the approval of the consent calendar.

Clerk, are there any members of the public who wish to speak on the consent calendar?

Thank you, Chair.

We have no speakers for the consent.

Okay.

Are there any members who wish to speak on the consent calendar?

No, but I'll move consent.

Moved by a member of a tool.

Zero presentation by staff or no?

For the consent calendar?

Yeah.

No.

Okay.

Okay.

Moved by a member of a Coledos.

Second by a member of Yusuf.

Okay.

Can we get a vote?

Yes.

Members, please unmute.

Member Coledo?

Aye.

Vice Chair Colville?

Yes.

Members, Edmundudin?

Aye.

Member O'Toole?

Aye.

Chair Bader?

Yes.

Thank you, the motion passes.

Okay.

We'll now proceed to the discussion calendar.

The first item is number eight.

These scurs quarterly investment report for June 2024.

Good afternoon.

We are going to start in a little different order.

Usually Segal goes before us, but today we're going to do it in the reverse.

So we're going to go through the June reports first, and then we'll go through the September

report since we skipped our September meeting.

The June data we're going to start with is going to be a little bit stale dated, but

we will go through it.

So in the report, I've pulled up slide number six, and I just wanted to point out here

that as you can see the difference between March and June, we started the new allocation

program that we voted on that came into effect on July 1st.

So over the quarter, you can see the fixed fund is increasing during that time period

to get us to where close to our asset allocation when July 1st came into effect.

So for the fiscal year to date, the fund had a 12.7% return, and longer term, the returns

have increased, obviously due to the strong year.

And when Jeff goes through the Segal reports, you'll see the 3.5, I believe 3.5, 7 and 10

year returns.

So he's going to go through the longer term returns of the fund.

And then I know sometimes we get the questions about competitors here in the Sacramento area.

So just for reference, CalPERS this year came in at 9.3%, and CalSTRS came in at 8.4%.

And they're both sitting around 75% funded status.

After this afternoon, foster and foster is going to present our actual oil report, and

they'll talk about our current fund as status of our plan.

Okay.

And then the other thing I wanted to point out on the June report was large cap growth

for the year was dragged down by the option program, about 100 basis points overall.

And that is to be expected when you have an equity market that is just pretty much going straight up.

The other thing I wanted to note is the benchmark is the S&P 500, and currently the S&P 500 is very heavily

weighted to a handful of tech companies.

So we're really not being benched against a diversified fund of 500 companies anymore.

So when those very heavily weighted equities outperform, we're going to always underperform

because our portfolio is a little more conservative than that.

So vice versa, when those tech heavy names go down, our fund will always outperform.

So that's just some of the reason for the outperformance in the, excuse me,

outperformance in the fiscal year.

So I will take any questions on our report before Jeff goes over the same time period for his report.

Yeah, there are any members who would speak on this item?

Okay.

So can we get a motion for this item?

Okay, first by Member Colville.

Second by Member O'Toole.

Please get a vote.

Thank you Chair.

Members, please unmute.

Member Coletto.

Aye.

Vice Chair Colville.

Yes.

Member O'Toole.

Aye.

And Chair Bader.

Yes.

Thank you, the motion passes.

Okay.

Next item on the agenda is the Seagull Marco Advisory's Quarterly Investment Performance Report

for June 2024.

Okay.

Thank you.

Good afternoon.

As Stacy said, this is pretty old news by now.

So just let me do a quick recap of what went on during the second quarter.

I almost forget, but April was a really ugly month.

And what you were hearing at the time was there was some concerns about inflation picking

up again.

It was almost perverse that the economy was doing too well.

And you started hearing people talk about, oh, not only is the Fed going to be delayed

in cutting rates, they might have to raise them again.

That lasted about one month in April.

May was a complete reversal.

And some other reports more favorable came out.

And the stock market especially took off.

So even with that little blip in April, you can see if you look at the U.S. equity column

second from the left, up 3% for the quarter and 23% for the year.

So for your fiscal year in June 30th, U.S. equities up 23.

International equities were basically flat during the quarter.

And as Stacy was saying, it was a very concentrated U.S. equity market with the big tech companies

really leading the way.

Fixed income if you look over towards the middle of the page.

Again, basically flat during the quarter had seen some rates rising during April, but

that turned around again.

So you ended up about where you started.

And calendar year to date through June, the broad market bond index was down over 1%.

I think.

So rates were kind of hanging in there with the Fed still not having done anything.

Let me skip ahead a few pages and just look at the performance.

Again, we'll have some more updated figures in a minute.

Okay, here we go.

So the second from the left columns, that's the fiscal year.

So 12.7, as Stacy said, for the turn.

So more than twice as much as the actuarial assumption.

And nicely ahead of the benchmark, about 1.5% ahead over that full fiscal year period.

You can see during the quarter, having the equity income piece, so that's a value-oriented

portfolio, not going to have the big tech company exposure at all in there.

So that was kind of a drag on overall equity performance.

But still squeezed out a positive return in equities for the quarter.

Bonds down at the bottom of the page, again pretty flat for the quarter.

Stacy also mentioned the longer term results.

So if you look across the top, you see three, five, seven, ten year numbers.

Three years were still impacted by 2022, which was a historically bad year for stocks

and especially bonds, both were down double digits that year.

So the last two calendar years have been much better.

So we've got a positive 3.5% return over the last three years.

But if you get out to five, seven, and ten, you can see everything is well over 7%.

Now, even the 10 year, up 7.4.

And obviously all of those longer term numbers are well ahead of the actuarial assumption.

So that was really all I was going to say about the second quarter.

We'll talk about third quarter in a minute.

Any questions?

Any questions from any members?

No, any public comment?

No speakers for this item.

Okay.

Jason, I'll make a motion to pass that.

Okay, first by member Colville.

I'll second.

Second by member Coletto.

Thank you.

Members, please unmute.

Member Coletto.

Aye.

Vice Chair Colville.

Yes.

Members, Emma Newton.

Aye.

Member O'Toole.

Aye.

And Chair Beaters.

Yes.

A motion passes.

Okay.

Item number 10 is the Scurres Quarterly Investment Report for September 2024.

So this report obviously is going to be still dated as well, but not nearly as much as our fiscal year one was.

So I will bring up to date through how the portfolio looked through the end of September.

So for the first quarter of the fiscal year, you can see the move from June to September that the fixed fund now is at full funding after the asset allocation that was voted on in the spring.

And the assets in that bucket are now over $100 million.

The 6% performance for the portfolio over the quarter represented strong gains and pretty much every asset class listed there.

They did have a reversal in October and just going to touch on what happened in the markets in October.

The International Fund, which is now our smallest allocation, really suffered in October.

And although it looks very strong on this first quarter, that did not hold up.

And some of the enthusiasm that we saw in the beginning in November post-election has started to wane.

So we'll have to see what the next five weeks hold to see how we end quarter two for the fund.

To touch on the option program, since I mentioned it for the previous report, the risk reward for having options ongoing into the election was not positive.

So we opted to just stay on the sidelines for that.

When we have the pretty significant run-up post-election for a few days, we did write some positions on that.

So we currently have positions on and they are all in the green as of today.

In just report, you'll see that for the first quarter, the option program is up 10 basis points for the quarter.

And then the next page that I wanted to point out.

Stacy, what's the magnitude of the options program now?

Right now we have 17 million noesional on.

So it's about 90,000 in premium that we wrote on.

And since we skipped November, they're actually December options because we didn't get involved in the election options.

Okay, so on this page, I wanted to talk more about fix since it seems to be the focus of a lot of what we've been doing in the portfolio the last couple years.

Just from a housekeeping perspective, we have about $6 million worth of bonds that are going to mature in the calendar year 2025.

And the average coupon on those is about 4%.

So I don't anticipate any issues replacing that income.

We haven't seen the significant fall off of interest rates that everyone was projecting a year to a year and a half ago.

And as the asset allocation has become complete, I've been trying to focus on filling in the buckets across the maturity curve that matches the benchmark a little more closely.

And the fixed fund is now generating over $4 million a year.

And just from perspective, in 2122, the fixed fund was generating over $2.5 million a year.

So you can see the continued small allocations to the fund have really picked up the income that the fund is generating.

And then the last thing I wanted to point out on the fixed fund is that although it feels like we keep adding to it and it's getting to be bigger and bigger in the overall fund, the fixed fund was 50% of the portfolio between 2008 and 2012.

And more risk was added to the portfolio starting in 2012 through 2022.

As interest rates were not as interesting to put money to work and we needed a little more outperformance because our funded status had dropped.

So now we've kind of come full circle to where our funded status has gone up and interest rates are more profitable.

So we've slowly been rotating funds into that and I would anticipate that the continued transition towards more fixed income will probably continue.

So I have some questions.

Well that context of that when it started at about 4, we had a 7030 fixed income equity.

Is that right? Well, we've inverted.

Yeah.

Any questions or comments from commissioners? Any public comment?

No speakers. Chair.

Okay. Get a motion on this item.

Okay. Member O'Toole for first.

Well second.

Second by Member Ysif. Get a vote please.

Thank you chair. Members please unmute. Member Coleno.

Aye.

Vice Chair Colville. Yes.

Members Aminudin. Aye.

Member O'Toole. Aye.

And Chair Bader. Aye.

Thank you the motion passed.

Okay. Item number 11 is the Seagal Marcos Advisors Quarterly Investment Performance Report for September 2024.

Okay. Thank you.

So I'm going to start on what's page two of our report.

It's page five I think in this PDF.

So as Stacey said it was another really good quarter.

In this case for both stocks and bonds and we'll look at bonds in a minute.

But this was this was a different type of quarter because the S&P 500 was not the star performer and big tech companies were not the star performer.

So here you can see S&P 500 was still up almost 6% in the quarter but international stocks both developed and emerging were up even more.

And on the next page is a little more detail about the US market.

So if you look Russell 1000 growth Russell 1000 value look at those quarterly returns value was up over 9% growth up three.

The big tech companies are in the growth benchmark.

So this was a very different market that the value stocks and smaller stocks which you don't really have but Russell 2000 the small cap index up 9%.

And I think this is particularly interesting way down in the bottom right corner and some of it's covered up but utilities were up 19% in the quarter and real estate or reets were up 17%.

Those were the best performing sectors of the equity market.

And I think there's a couple reasons for that.

One is as interest rates are coming down which they did in the third quarter and we'll see a picture of that in a minute.

These high yielding sectors high dividend paying sectors become more attractive and utilities and real estate or reets are the prime examples of that.

The other thing is a little bit of a knock on effect especially for utilities this whole artificial intelligence boom that's going on.

Well you've probably heard that they're going to reopen the three mile island nuclear plant to power AI for Microsoft.

So the utility that has that plant is benefiting in a sort of indirect sense from the demand for for AI.

This stuff takes a lot of power.

And so that's been a big part of what's driving the return in utilities.

You don't usually see that's a very defensive sector typically you don't usually see that dominate as as it did in that quarter anyway.

I'm going to skip ahead a couple pages.

Here are the yield curves I talked about bonds and interest rates.

So look there in the upper right so the green line that's the yield curve at the end of September.

The yellow line is where it was at the end of June so not a lot of movement from March to June.

A little bit of higher rates at the longer end from March to June but pretty significant drops especially at the short and middle part of the curve during the third quarter.

Obviously the Fed in September at long last did their first rate cut.

Everybody knew it was coming it was just a question of how much they were going to do.

They've since recently just done it so that was a 50 basis point cut they did a 25 basis point cut just recently.

We'll see what they do going forward but as markets do markets were already projecting okay rates are going to come down.

A minute ago I talked about April and the sort of concerning economic reports that came out that were almost too good.

Well in July it was actually it was August 1st the flip happened some sort of weak reports came out and you started hearing people say oh maybe the Fed has waited too long.

They should have already started cutting and for about four days the stock market took it pretty hard.

That quickly passed and recovered so you had another strong quarter of stock performance but bonds with rates dropping this much when rates go down bond prices go up and sure enough aggregate index the broad market index up over 5% in one quarter for bonds.

That's a pretty remarkable return for bonds so that brought I previously mentioned that was negative year to date through June up 4.5% through September.

Now that has since changed.

I'd say roughly three of that 5% has been given back so far this quarter.

So rates have gone back up.

I think a lot of that is due to fears in the market I'll call it that inflation might take off again.

Even before the election there was this view that kind of both candidates weren't that focused on the deficit so that means the treasurer is going to have to be issuing bonds and in order to do that they've got a price and attractively make them yield higher.

So you're seeing that and once the election was decided that that got exacerbated even more.

So you've seen a pretty sharp jump back up in bond yields so far this quarter which means bond prices have come down.

The flip side though is the US equity market.

Ten years to power on you saw October was not great down a little bit kind of flat down a little bit.

So I think that's a sharp jump after the election.

I call that the certainty effect that okay we know what it is.

We don't have to have this kind of cloud hanging over us of uncertainty so market just took off.

Again it's sort of cooled a little bit although today was apparently pretty good too.

So there are national stocks which are very tiny part of this portfolio down part of that because the dollar has gotten stronger as interest rates have come up.

But it's been interesting since the end of the quarter and probably will continue to be for a while.

Let me skip ahead a few to the performance.

Stacey already talked about the asset allocation so everything is pretty much in line.

Show here everything's within basically 1% if you look at the September bars on the on the left of of its targets.

Total portfolio value of almost 265 million at the end of September.

And here's performance so Stacey already said 6.1 for the quarter so basically you've made your assumed return all in one quarter.

A little bit behind behind the benchmark but if you look at the domestic equity composite line that sort of second gray line you see your domestic equity portfolio was up seven versus the index and the index here is the Russell 3000 so the broad market index.

And that's the boost of having this value oriented equity income portfolio that you have.

You can see it was up almost 9% during the quarter whereas the more kind of traditional S&P 500 type portfolio up up you know 5, 5 and a half.

So for the first time in a while having this equity income piece actually helped in terms of the equity the domestic equity exposure.

And longer term results again still good the three year number you may remember when I showed the as of June it was 3.5 now it's 5.8 so we're starting to work off some of that 2022.

And then you can see that the UGliness and get that get that return built up and longer term 10 years now up to 8% so very very strong across the board there.

One one other thing Stacey mentioned the option program so we show here just the impact you can see that what's called the large cap growth portfolio with and without options so in this case having the options added.

So 0.1% to the return during the quarter.

Any questions on that.

Any questions from members.

I think the projections for the rate cuts I think a few pages up was 200 basis points by the end of 2026 is that still the case.

I think generally it's still the case I think what you're hearing now is is maybe it won't be as front loaded.

Okay they're going to meet it again next month what are they are they going to cut again or they're going to wait a lot of it will depend on what the data looks like between now and then.

I mean they they their message has the fence message has been clear that they expect to continue to cut but they're not going to just do it willy nilly they're going to pay attention to what's going on.

So yes but timing is always timing in a mouth is the question.

Do we have any stays to do I don't know who the question will be for but do we have any sort of projections for 2025 as far as equity returns or what we're projecting at least.

No so traditionally what happens is the the street economists and the brokers on the street and then Jeff's group will come out with a capital assumptions forecast and once we get those that's how we start building our asset allocation for the following fiscal year so we get those usually in about February March and so we'll start getting those numbers then so and that that'll help us build the looking forward into the next fiscal year.

So we just point out our our assumptions are 10 and 20 year assumptions they're not one year assumptions.

If unless something dramatic happens between now in the end of the year we're going to have two consecutive years of domestic equity returns over 20% last year and this year.

I think that's only the third time that's ever happened.

I would say another 20% year next year probably won't happen but who knows but you just you know reality has to set in at some point and valuations are what they are and that sort of thing but if you if you can get this broadening out of the market that's not just seven big tech companies leading the way that's probably healthy to get a more broad based market.

I'll say we don't tend to look at the short like what you're asking about the one year only because the plans overall trajectory is 40 to 50 years so we try not to get bogged down and trying to match with the you know what they're predicting for the next 12 months so that's why all the reports we run are 10 and 20 years out and then we make our asset allocation decisions from there.

I guess what I was trying to kind of circle back to is the options program.

Yeah to see if what equity projections look like to see if the option program still makes sense because I think the one year I'm seeing is down 1.2%.

Yeah so the options program works best in a market that either goes down stays the same or goes up just a little bit so what you're saying is if we're going to have another 20% up year perhaps the option program shouldn't be being run as much and we agree and the option program is probably running it.

I find it guess maybe 10% of where it used to be run for how much is being written on the portfolio.

John I mean does that sound about right. I mean it used to be very large. Yeah so yeah so we.

What's that? I know this was a new program so I know no.

So probably around the time when you joined the board we were the program lost coverage so the program didn't run for a year because the brokers that serviced it with with COVID there was just a lot of turnover and nobody could take on the program again so maybe that's why but it's been running for probably 15 years I would guess.

In years what's that make 2009.

Now it's before that before that yeah yeah yeah.

So it has over the years become a smaller and smaller portion of the portfolio which is fine and as we are moving assets away from the more equity you know based buckets then obviously there's fewer names to write on and fewer opportunities so I would anticipate if the fixed fund continues to grow the option program is just going to naturally go down as well.

Thank you.

Any members of the public let's speak on the side of the.

Thank you chair we have no speakers. Okay can we get a motion in a second.

I'll move the item. Move by member Coletto. Seconded by member coville.

Thank you members please unmute. Member Coletto. I.

Mister Colville. Yes. Members eminuted. I.

Member O tool and chair beta. Thank you the motion passes. Okay item number 12 is the foster and foster scurs gas be 67 and 68 report for fiscal year 2024.

Good afternoon everybody.

So I'm actually going to start with item 13 if that's right then come back to 12. It just makes more sense to flow that way.

So my name is Drew Ballard on the actuary with foster foster home we are the actuary for the retirement system so while the focus on today's discussion has obviously been on the assets right however assets performed since last year three five.

Ten years so our role as the actuary is kind of to develop the liability side of things for the retirement system and when I say liabilities you know this plan was closed several years ago so it's really pretty much retirees only members that are collecting a pension from the plan so liabilities really what's today's value of the expected benefits that are expected to be paid in the future to those members collecting benefits and you know based on those liabilities and the

difference between our asset values we come up with a recommended contribution for the city to make to the pension fund to make sure that it's on track to basically have sufficient assets to continue to pay those benefit payments.

So essentially what we do each year as of June 30th is we run a snapshot valuation of the retirement system so we collect new data on those members that are still receiving benefits or who have you know deceased in the last year who's become retired at this point they're still only one year.

So we have a one active remaining member so it's you know really in active only plan so we collect updated information based on those you know the census each year develop the liabilities based on that group what's changed over the years and compared to the assets so you know what I'm going to do is kind of go through our funding valuation report which was item 13 and then that is the basis for the gas be accounting report that will go in the city's financial reports so I'm just going to kind of go and

go through what I think are the highlights the most important things to know compared to what we discussed a year ago when I was here one thing to keep in mind as we go through it is when we're developing liabilities you know we're really there's only that one remaining active member so we're not projecting out when do we think how much turnover we think there's going to be in this group when will folks retire really projecting out what are the assets going to earn each year.

How long are people going to live to continue to collect these benefits and what's inflation going to be because there's a cola tide the benefit increases with inflation each year so on page one of our report here you kind of look at we do a comparison of last year's valuation compared to this year's valuation so you can see that the participant counts how they have changed since the last snapshot June 33 to 24 so we still got one remaining active member as I mentioned a few times so we can see how much we can do that.

And then we basically have a little over 700 members collecting benefits in this plan so down a little bit from last year which is kind of what you would expect you know when you ever retire only population you know it's really going to be a decreasing membership each year as those members you know unfortunately pass away so really the remaining this reflects the remaining group as a June 30, 2024 June 30, 2023 at about 261.8 million dollars in actual area live.

So that's the value of all those benefits we expect to be paid for the covered group in the future discounted back at our soon investment return which is really 6% okay the long term expectation is 6% on the current asset allocation that you know we've been discussing here this afternoon.

What we saw was inflation I think was 3.7% this year some members received a 3% cola we assume on average it's going to be 2.5% each year so there was a little bit of an actuarial loss because members got higher benefits than we expected but there were actually some more life expectancy was a little shorter than we expected for some members so it's actually kind of where we expected to be about 249 million.

Now talking about assets obviously we've heard you know where the fund was as a June 30th where it is today or as a September 30th but that snapshot as a June 30th the market value of assets was 253.5 million dollars when we do our funding valuation which is what we're looking at here we actually develop what we call an actuarial value of assets.

Another way to think about that is a smooth value so we actually look at like a 3 year rolling average so in the actuarial value this year is a little less than the market value because we had that over 12% return last year right so the last 12 months we expected 6 so we earned 6% more than we expected we defer some of those gains to the future so the market values higher than the actuarial value but the actuarial value is what we use for developing the market value.

We have recommended contributions and you can see that the actuarial value still achieved about 8% return based on that 3 year rolling average in the valuation so higher than our 6% assumption so a gain on the unfunded liability which you can see in the next section here plan funded status we compare the liability to the actual value of assets and the remainder is our unfunded liability.

So I think they talked about 75% for CalPERS and CalSTERS here we've got about 5.8 million dollars unfunded liability on the actuarial basis that smooth value basis were about 98% funded so really close there to 100% funded and if we actually looked at the market value basis which is really the amount of assets being invested in the fund we'd be about 102% funded.

Right around 100% funded gas be when I go over that next they do require that we use market value of assets so the city will report a surplus position in their financial report for June 3rd to 24 of 102% 101.6%.

Moving forward on a couple items and please if you have questions along the way please let me know.

I just wanted to talk about actually let's go so the assets you know I don't want to focus too much here but we do show the reconciliation you know that obviously we've talked about the first part of the meeting going from you know 250 million dollars last year to just over 253.5 million dollars you can see the investment income there of over 30 million dollars city contributed about 1.4 which was our recommended contribution not in last year's valuation.

So the valuation we're looking at here will set forth the city's recommended contribution for 2526 so that the year beginning next July 1st and then benefit payments for about 26.9 million you see expenses so you had a little bit more inflows and outflows so the assets increased from 250 to 250 3 based on that 12.3% return so again outperforming our actual assumption at 6% and that's based on the updated.

We shifted to 1.5% right from equities to fixed income so really didn't change our long term trajectory of that 6% rate and we'll continue to monitor as if that if you continue to shift each at the end of each fiscal year.

So we do show the current allocation I don't think you need to see that and then there's the updated target allocation that was approved in May.

And then we do go through the development of that smooth value of assets where you can see the difference between our expected actual value the market value and we basically take you know include a third of the difference to keep that 3 year rolling average so we've got essentially you know 10 million dollars of deferred investment gains so if next year we earn 6% we'll recognize some of those gains and have continue to have a gain on our smooth value if for what even reason you know investment markets are volatile.

That's the idea here is that you're not going to earn exactly 6% per year so we're going to use a 3 year rolling average so we've got some cushion if we don't earn 6% on a market value basis.

Moving forward to section 4 so here's our contribution development this is really you know the primary goal of what we're going over here is you know what do we need to contribute the city need to contribute to the fund each year to be on that track to 100% funding so obviously it's really where we are in this this group is it's really

comprised of that unfunded liability payment right how much unfunded liability do we have and to pay off and last year you know that was what did I say it was 11.8 million dollars this year we're about 5.8 so about half of that amount so last year we had about 1.3 million dollar

dollar amnesty payment this year it's down to 162,000 so basically what we're doing to develop that 162,000 is we're taking the current unfunded liability of 5.76 million dollars and we're spreading it over the average expected life expectancy of the group which is about 10 years so we're creating it essentially a 10 year mortgage payment to pay off that unfunded liability.

As you can see this year's payment 2425 quite a bit higher the other piece is normal cost normal cost is the cost of active members accruing benefits you know this the member that's there is you know I think almost 70 so there's not much left to fund as far as accruing benefits and we assume I think that they will will retire this year but that's based on evaluation assumption so we'll see so that's just an or

normal cost I mean just not a piece of the contribution requirement at this point really so what we're recommending for next fiscal years that the city contribute 163,000 so we're at the point where it's almost zero and that's because we're 98% funded you know if we go to the next page we we do project out where we expected to be of the next several years and we actually expect that that surplus position will occur so there will be no city required contribution into that.

So in the year 2020, the caveat there obviously is that is assuming that experience lines up with our assumptions inflation is what it is you know we earn 6% each year life expectancy matches our assumptions so that can deviate a little bit each year and that's the purpose of doing these

Still 3040 years you've got some 55 60 year old members in there you know they could live 200 so still long term forecast on this plan even though it's you know been closed for several years.

Any questions on the valuation report any specifics that we went over not a lot of moving variables you know based on where the plan is but I think overall good news you know outperform Calpers this year.

Yeah I was going to say just simply about to John and Stacy and the investment team because you know that less city contribution it flows right into helping to solve our budget issues so great job.

Every year we get this report so every year we get this report we go to page 12 immediately.

Thank you for this presentation and yeah it is quite stunning I worked with another public agency and this is highly enviable or important if I'm turning this shade of this umbrella that's the reason but just the question is so the UAL is it's declined by half and your market value of assets didn't grow very much I'm looking at the summary page the executive summary and you know the slight increase there and yet and yet the the funded level grew at the same time.

Is it maybe over generalize but it seems like in the market side there wasn't a big change but demographically lost 30 members or so is that the bigger is that the dominant driver in that change.

Is actually where I kind of stopped was where we actually develop that gain loss okay so what were we expected the unfunded liability be relative to where it ended and you can see it here on page 13 so.

On the liability side you can see that we expected as a gen 3024 if our assumptions were meant perfectly right that we would be at 249.6 million dollars liability winded up at 249.4 so there were a couple offsetting factors there like I said the cola was more than expected all the members got a 3% plus a little bit extra to their bank.

Where we expected 2.5% to be paid so that again from the liability perspective is a loss liabilities are higher than expected.

We had an offset in game primarily due to more deaths than expected right not great for the members is typically what's good for liability right but really the decrease in the unfunded liability was driven by the investment gain on the assets so you can see 4.9 million dollars investment gain even on the state.

The investment gain even on the smooth value of assets where the total gain was 5.26 and then benefit payments relative to our expectation or a little bit less 119,000 not not much but that's really this shows you you know why how we reconciled from we expect there to be 11 million dollars unfunded liability and winds up at 5.8.

Are there any other members who want to speak on this. Any members of the public. Thank you. We have no speakers is there a motion on the second.

Move by member of the tool.

I'll second second by member use of.

Thank you members please unmute member Coletto.

I vice chair Colville.

Yes members have an item.

I.

Member O tool and chair beta yes thank you the motion passes.

Okay item number 13 is the foster and foster scurs actual value well well my best foster and foster scurs gas be 67 and 68 report.

Yeah so I think you know we'll make this really quick so.

When we do the updated valuation each year that will set forth our lot the underlying basis that we use to develop the accounting the required accounting disclosures so governmental accounting standards board.

And so if we go back gosh it's been 10 years now there used to be gas be 2527 it was literally like three pages we would add to the end of our valuation.

To satisfy the governmental accounting service you know for whatever reason they change the accounting standards we have to put together quite a lengthy report.

That's used for footnotes used in the city's financial annual financial report so this sets forth the get the required this required disclosures for gas be 67 68.

That will go in the city's financial scores really you know guys when we look at this the main difference is we're using the same data.

We're using the same valuation date the same liability you know if we look at the liabilities 249.4 million dollars is they call total pension liability instead of actually a crude liability so different terms.

But they require gas be requires us to use market value of assets you can't use that smooth value of assets we use for funding.

We're going to use the higher amount this year to 53.5 million so the net pension liability or the unfunded liability that we talked about in the valuation is actually negative so a surplus or excess assets over liabilities of $4 million.

So this is what will actually go in the city's financial report is that you'll show 101.6% funded for this plan.

This other stuff is really supplementary information so gas be requires us to show what the liability would be if we assume we're going to earn 7% or 5% instead of 6.

It's just a little sensitivity analysis so this is really you know what gas be requires to I think the idea here was to put more focus on governmental retirement systems and what the liabilities are and show some more detail.

So it really matches what we show in the valuation we should show a history of what the contributions were relative to the requirements of this year the city contributed the actual determined contribution to the number.

There's other plans across this country that might not satisfy the actual determined contribution and this is used when bond rating agencies are looking at you know cities for a very string bond stuff like that.

So it's just important information that the city will need for their disclosures but really you know there's not much to go over here.

The only thing I would mention is so I talk about the smooth value of assets and the funding valuation for the accounting we do track how on a year by year basis did we.

How did the fund perform relative to that 6% assumption and any plus or minus relative that 6% spread over 5 years and it's recognized in expense and as deferred inflows and outflow so this year you can see we have $8.5 million of deferred inflows of asset gains and the actually the pension expense or was that just.

Is actually a negative so it's a pension income so the city will show that they have an additional asset on the financial statement instead of an expense for this pension plane so that's really all I wanted to share otherwise the numbers really match up it's just it's just nuances that accounting requires us to do different things then we do for recommending the contribution amounts to the fund.

There's no other options on that.

Any members who want to speak on this item. Any members of the public.

Thank you, Chair. We have no speakers.

Is there a motion on the second for the item?

Move by member Coletto.

Second by member O'Toole.

Thank you. Members please unmute.

Member Coletto.

Vice Chair Colville.

Yes.

Members emanute in.

I.

Member O'Toole.

And Chair Bader.

Yes.

Thank you.

Thank you.

Thank you, Chair.

Almost.

Next item is member comments ideas questions.

Any members who should speak on this?

Nope.

Okay.

Makes it easy.

And the last item is public comments.

We have no speakers.

Speakers.

Okay. This concludes today's meeting.

Thank you for everyone for your participation.

Happy holidays.

Meetings adjourned.