[00:00:01]
I'M GOING TO BRING THE JOINT MEETING BETWEEN THE PALM BAY POLICEMAN FIREFIGHTERS
[CALL TO ORDER:]
PENSION PLAN BOARD OF TRUSTEES AND THE CITY COUNCIL. THIS IS A WORKSHOP FOR DISCUSSION. SO ROLL CALL TERRY. MAYOR CAPOTE. HERE. DEPUTY MAYOR ANDERSON. HERE. COUNCILMAN SANTIAGO. HERE. COUNCILMAN BAILEY. HERE. COUNCILMAN JOHNSON. HERE. MRS. MORRELL. PRESENT.MRS. SMITH. HERE. CHAIRMAN LANCASTER. HERE. VICE CHAIRMAN [INAUDIBLE]. HERE. MR. BRUCK. HERE.
MR. ADAMS. HERE. OK. WE USUALLY LEAVE PUBLIC COMMENTS TOWARDS THE END SO WE DON'T HAVE ANY ISSUES [INAUDIBLE] PUBLIC SO WE'LL GO FROM THERE. BUSINESS DAYS
[1. Presentations and discussion of the Palm Bay Police and Firefighters’ Pension Plan.]
PRESENTATION AND DISCUSSION OF THE PALM BAY POLICE AND [INAUDIBLE] FIREFIGHTERS PENSION PLAN. WE'RE GOING TO GO IN THIS ORDER. ARE WE READY [INAUDIBLE].PATRICK. [INAUDIBLE]. ALL RIGHT. [INAUDIBLE]. THEY WERE ON. [INAUDIBLE]. OK. EVERY YEAR AS OF OCTOBER 1ST WE DO A VALUATION OF THE PENSION PLAN. WE LOOK AT THE ASSETS IN THE PENSION PLAN AND THEN WE PROJECT OUT ALL THE FUTURE RETIREMENT BENEFITS LIABILITIES AND THEN WE DETERMINE AN APPROPRIATE FUNDING REQUIREMENT FOR THE NEXT YEAR. AND SO WE DO IT FOR ALL THREE GROUPS OF EMPLOYEES. WE HAVE THE FIREFIGHTERS, WE HAVE THE POLICE OFFICERS, AND THEN WE HAVE A FEW PEOPLE THAT WERE GENERAL EMPLOYEES IN AN OLD PLAN. AND SO THE THE GENERAL EMPLOYEE PART IS EASY BECAUSE THERE WAS THERE'S ONLY TWO MEMBERS LEFT AND THE SAME TWO MEMBERS LIVED ANOTHER YEAR BUT WE HAVE MORE THAN ENOUGH ASSETS FOR THAT GROUP TO COVER THEIR FUTURE BENEFITS. SO THAT VALUATION HAS NO IMPACT ON THE CITY AT ALL. AND THEN WE GO TO THE POLICE OFFICERS AND FIREFIGHTERS. SO THE FIREFIGHTERS WE HAVE A CITY REQUIREMENT AND FOR THE CURRENT YEAR IS 2 MILLION 526 IS THE REQUIREMENT FOR THE CURRENT YEAR. AND THEN THE REQUIREMENT FOR NEXT YEAR IS 2 MILLION 677 IT WENT UP ABOUT ONE HUNDRED AND FIFTY THOUSAND DOLLARS THE REQUIREMENT WHICH IS WENT FROM IT'S ABOUT 1 PERCENT OF PAYROLL. IT WASN'T REAL SIGNIFICANT BUT A LITTLE BIT OF AN INCREASE. ONE ASPECT LIKE I SAID IS THE INVESTMENTS. AND SO WE USE A SMOOTHING TECHNIQUE A FOUR YEAR SMOOTHING TECHNIQUE WITH THE ASSETS. AND SO FOR 2018 WE GOT EIGHT POINT THREE EIGHT PERCENT INVESTMENT RETURN AND WE EXPECT SEVEN POINT SEVEN FIVE SO IT WAS A GOOD YEAR FOR THE PLAN. NOW WHAT WE DO IS WE TAKE THAT GAIN WHICH WAS A FIVE HUNDRED AND TEN THOUSAND DOLLAR GAIN THAT WE HAD AND WE SPREAD THAT OUT OVER A FOUR YEAR PERIOD. BUT WE REALLY ONLY RECOGNIZED A HUNDRED AND TWENTY SEVEN THOUSAND OF IT THIS YEAR. AND THEN WE'LL RECOGNIZE ANOTHER HUNDRED TWENTY SEVEN NEXT YEAR. SO IT SPREADS IT OUT SO THAT IF WE HAVE BIG GAINS OR LOSSES THE CITY'S COSTS DON'T GO WAY UP OR WAY DOWN IN ONE YEAR. AND SO THE 2015 WAS A [INAUDIBLE] SO WE HAD A LOSS THAT YEAR OF 6 MILLION COMPARED TO WHAT WE EXPECTED TO GET. SO THAT'S 6 MILLION DOLLARS WE RECOGNIZED ONE POINT FIVE IN 2015 ONE POINT FIVE IN 2016, 17, AND 18. SO THIS WAS THE LAST YEAR WHERE WE HAD TO RECOGNIZE THOSE LOSSES FROM 2015. SO ON AN ACTUARIAL BASIS OUR RETURN THIS YEAR WAS 7 [INAUDIBLE] JUST BECAUSE WE HAD THREE GOOD YEARS AND ONE BAD YEAR BUT THE BAD YEAR
[00:05:01]
WAS THE BIGGEST COMPONENT SO THAT'S GONE NOW. SO NEXT YEAR AND THE YEAR AFTER AND THE YEAR AFTER. WE'VE GOT SOME GAINS STORED UP. WE REALLY HAVE A ONE POINT EIGHT MILLION DOLLARS OF GAINS THAT WE'RE SPREADING OUT OVER THE NEXT THREE YEARS.SO THIS CURRENT YEAR LARRY WILL TALK ABOUT THAT. BUT YOU KNOW WE'RE NOT OFF TO A PERFECT START. YOU KNOW WE'RE PROBABLY GOING TO END UP A LITTLE BIT UNDER THAT SEVEN POINT SEVEN FIVE FOR THE CURRENT FISCAL YEAR BUT THAT'S GOING TO BE OK BECAUSE WE'VE GOT THREE GOOD YEARS BEHIND IT. 2018, 17, AND 16 WE'RE ALL ABOVE THE ASSUMPTION. SO THIS IS WHERE THE SMOOTHING TECHNIQUE IS WORKING WELL. SO IF WE'RE HAVING A LITTLE BIT OF AN OFF YEAR THIS YEAR IT WON'T EVEN HURT THE CITY'S SPENDING REQUIREMENTS BECAUSE WE'VE GOT THREE GOOD YEARS BEHIND. DOES EVERYBODY UNDERSTAND THAT. YEAH. IF I MAY. I DID WANT TO ASK A QUESTION ABOUT THAT. IS THE ONE POINT EIGHT MILLION DOLLARS IS THAT THE ACCRUAL OF SPREADING OUT THE 16 [INAUDIBLE] 16, 17, 18, GAINS FOR THE FOR THIS CURRENT YEAR. RIGHT. WELL FOR OR IN 2016 WE HAD A GAIN OF FOUR HUNDRED NINETY THREE THOUSAND AND WE ALREADY RECOGNIZED PART OF IT BUT WE HAVE A HUNDRED AND TWENTY THREE THOUSAND THAT WERE DEFERRED SO. AND THEN IN 2017 WE HAD A GAIN OF TWO POINT SIX MILLION AND WE STILL HAVE ONE POINT THREE MILLION OF THAT WE'RE DEFERRING. AND THIS YEAR WE HAD A FIVE HUNDRED AND TEN THOUSAND OTHER GAIN SO WE'RE STILL DEFERRING THREE HUNDRED EIGHTY TWO THOUSAND. SO IF YOU ADDED THOSE THREE UP WE'RE STILL DEFERRING ONE POINT EIGHT MILLION THAT'S WHERE THAT NUMBER IS. SO NEXT YEAR WE'LL BE DEFERRING NINE HUNDRED AND TWELVE AND THE YEAR AFTER ONE HUNDRED TWENTY SEVEN THOUSAND. SO WE'LL HAVE SOME WE'LL GET SOME GAINS THAT WERE RECOGNIZED AND OVER THE NEXT THREE YEARS. SO EVEN IF WE GET A LOSS THIS YEAR OF FIVE HUNDRED AND TEN THOUSAND WE'LL ONLY BE RECOGNIZING ONE HUNDRED AND TWENTY SEVEN OF IT AND THE NET EFFECT WILL BE A GAIN WE'LL HAVE AN INVESTMENT GAIN DEPENDING ON HOW WE DO THIS YEAR. ANY OTHER QUESTIONS. COUNCIL. SO THEN THE OTHER ASPECTS THAT AFFECT THE VALUATION ARE SALARY INCREASES, TURNOVER, MORTALITY, SO WE HAVE AN UNFUNDED ACTUARIAL ACCRUED LIABILITY SO THE TOTAL UNFUNDED ACTUARIAL ACCRUED LIABILITY RIGHT NOW IS 18 MILLION 197 LAST YEAR WITH 17 MILLION 325 AND SO THERE WAS A LITTLE BIT OF AN INCREASE THERE AND FIVE HUNDRED AND SEVENTY THOUSAND OF IT WAS FROM THAT FOUR YEAR SMOOTHING ON THE INVESTMENT. SO OUR UNFUNDED LIABILITY WENT UP BECAUSE OUR FOUR YEAR AVERAGE WAS SEVEN PERCENT INSTEAD OF SEVEN POINT SEVEN FIVE. SALARY INCREASES WERE ONLY FIVE POINT TWO PERCENT ON AVERAGE THIS YEAR AND WE EXPECTED FIVE POINT SEVEN SO THAT HELPED THE LIABILITIES IF SALARY INCREASES ARE SMALLER THEN THOSE BENEFITS [INAUDIBLE] RETIREMENT ARE SMALLER YOU KNOW THE WHOLE IDEA'S YOUR BENEFIT IS YOUR MULTIPLIER AT TIMES YOUR YEARS OF SERVICE TIMES YOUR FINAL AVERAGE SALARY HOURS ARE LOWER THAN YOUR BENEFITS ARE LOWER. SO THAT WAS A GAIN OF ONE HUNDRED AND EIGHTEEN THOUSAND. THE OTHER ACT OF DECREMENT WAS A LOSS OF FIVE HUNDRED AND FIVE THOUSAND WHICH I'LL TALK ABOUT IT IN A MINUTE AND THEN INACTIVE MORTALITY WAS A LOSS OF THREE HUNDRED SIXTY SEVEN THOUSAND. THOSE ARE THE REASONS THAT LIABILITIES WENT UP A LITTLE. SO YOU HAD ABOUT YOU HAD 57 RETIREES, YOU HAVE 14 [INAUDIBLE] MEMBERS, 3 BENEFICIARIES, 8 DISABILITIES. SO YOU HAD ABOUT 93 PEOPLE THAT WERE RETIRED OR TERMINATED VESTED AND NONE OF THEM PASSED AWAY SO OBVIOUSLY THAT'S A GREAT THING. BUT FOR THE FURTHER PENSION PLAN YOU KNOW THEY ALL GOT ONE MORE YEAR OF BENEFITS AND AND THAT WAS A LOSS. SADLY YOU KNOW IF PEOPLE DIE THEN THAT HELPS THE PENSION PLAN BUT IF THEY DON'T THAT HURTS THE PENSION PLAN. SO THAT ACTUALLY WAS THE CASE BOTH ON THE FIRE AND THE POLICE. YOU
[00:10:05]
HAD NO NO MORTALITY NO DEATH DURING THE YEAR WHICH IS YOU KNOW A GREAT THING BUT IT DOES CAUSE AN INCREASE IN THE [INAUDIBLE]. TURNOVER WE HAD TWO FIREFIGHTERS TERMINATED AND WE EXPECTED THREE. SO THAT'S A LITTLE LESS TURNOVER. SO AGAIN THAT'S GOOD FOR THE DEPARTMENT. BUT IT DOESN'T HELP THE PENSION. YOU ALSO HAD A MEMBER WHO HAD WAS A LAST YEAR WE HAD HIM AS A VESTED TERMINATED BUT THEY WERE GRANTED A DISABILITY [INAUDIBLE]. SO THAT WAS A LITTLE BIT OF A LOSS [INAUDIBLE].BEFORE YOU MOVE ONTO THE NEXT SECTION WHICH ONE OF WHICH OF THE WAS A SALARY TURNOVER MORTALITY CHANGES IN RETIREES THAT ARE ON THE PLAN WHICH ONE OF THOSE HAD THE GREATEST IMPACT AS FAR AS IMPACTING THE DOLLAR FIGURES. WHICH HAD THE MOST IMPACT.
YEAH I DIDN'T GET QUITE ALL THE NUMBERS THAT YOU PUT OUT I'M SORRY.
THE INACTIVE MORTALITY THE FACT THAT NOBODY PASSED AWAY NOW IS A THREE HUNDRED AND SIXTY SEVEN THOUSAND DOLLAR IMPACT ON THE UAL ON THE UNFUNDED [INAUDIBLE] LIABILITY. THE TURNOVER WHICH INCLUDES THE FACT THAT ONLY TWO PEOPLE TERMINATED. AND THE FACT THAT WE HAD THE DISABILITY THAT WAS FIVE HUNDRED AND FIVE THOUSAND AND THEN THE SALARY INCREASES WAS A GAIN OF ONE HUNDRED AND EIGHTEEN THOUSAND. SO THEY WERE REALLY ALL OF THE LOSSES WERE KIND OF FAIRLY EQUAL I GUESS TO ANSWER YOUR QUESTION. [INAUDIBLE] WAS A HUGE IMPACT. THEY WERE ALL JUST. SO WHAT THE CITY THOUGH PUTS ON THEIR BALANCE SHEET IS THE [INAUDIBLE] INFORMATION THE GOVERNMENTAL ACCOUNTING STANDARDS AND THE NET PENSION LIABILITY WHICH IS LIKE THE UNFUNDED ACTUARIAL ACCRUED LIABILITY THAT WAS 15 MILLION 098 LAST YEAR AND IT WAS 14 MILLION 178 THIS YEAR SO THAT WAS PRETTY MUCH THE SAME. AND THE REASON FOR THAT IS THAT [INAUDIBLE] USES THE MARKET RETURN THEY DON'T USE ANY SMOOTHING OF THE ASSETS.
SO WE GOT TO USE THAT MARKET INVESTMENT RETURN WHICH WAS BETTER THAN OUR ASSUMPTION. SO THAT THE [INAUDIBLE] WAS DECENT THIS YEAR BECAUSE WE DON'T USE THAT FOUR YEAR SMOOTHING. BUT IF THIS YEAR WE HAVE AN OFF YEAR THEN THE [INAUDIBLE] WILL LOOK WORSE.
YOU KNOW IT'S GOING TO BE MORE VOLATILE BECAUSE YOU DON'T DO ANY SMOOTHING WITH THE [INAUDIBLE]. SO IF WE HAVE A GOOD YEAR IT'S GOING TO LOOK GOOD. IF WE HAVE A BAD YEAR IT'S GOING TO LOOK BAD. WE CAN'T DO THAT SMOOTHING [INAUDIBLE]. FUNDED RATIO ON THE [INAUDIBLE] WENT FROM EIGHTY FOUR POINT FIVE PERCENT TO EIGHTY FIVE POINT ZERO PERCENT. SO IT WAS A SLIGHT SLIGHT INCREASE IN THE FUNDED RATIO AND THAT PLAN SHOULD BE IN THE 80 TO 100 PERCENT AND YOU'RE AT 85 PERCENT. SO THE PLAN IS IN THAT HEALTHY RANGE OR THE THAT UNFUNDED [INAUDIBLE] LIABILITY OF 15 MILLION SOUNDS LIKE A LOT BUT EVERY PLAN IN THE COUNTRY PRETTY MUCH HAS AN UNFUNDED [INAUDIBLE] AND THAT PUTS YOU IN IN THE HEALTHY RANGE. THOSE WERE THE HIGHLIGHTS FOR THE FIRE. DID ANYBODY HAVE ANY QUESTIONS. ANY QUESTIONS. JUST GOT A QUICK QUESTION WITH REGARDS TO THE MORTALITY PART OF IT. I WAS JUST WONDERING BECAUSE I KNOW I WAS PRETTY LOUD FOR EXAMPLE I KNOW THAT WITH REGARDS TO MORTALITY YOU KNOW THINGS HAVE BEEN IMPROVING HEALTH CARE YOU KNOW IN HEALTH CARE WITH REGARDS TO PEOPLE LIVING LONGER AND YOU KNOW IN THAT AREA I'M JUST WONDERING IF YOU'VE SEEN A TREND OVER THE YEARS AND DOES THAT WARRANT SOME SORT OF ADJUSTMENT IN YOUR ACTUARY TO TO ADJUST FOR THOSE CHANGES OR ARE YOU STILL WORKING
[00:15:03]
OFF OF AN OLDER MODEL. NO WE'RE ACTUALLY USING A NEWER MODEL NOW. THE STATE PASSED A LAW ABOUT FIVE YEARS AGO AND THEY SAID THAT YOU KNOW THEY WERE WORRIED ABOUT THE ACTUARIES USING YOU KNOW NOT CONSERVATIVE ENOUGH ASSUMPTIONS ON MORTALITY AND SO THEY REQUIRED NOW THAT ALL PLANS IN THE STATE HAVE TO USE THE SAME ASSUMPTION AS THE FLORIDA RETIREMENT SYSTEM DOES AND THEIR THEIR ASSUMPTION IS PRETTY CONSERVATIVE. THEY'RE THEY'RE USING A AN ASSUMPTION THAT SAYS HERE'S THE 2014 MORTALITY RATES BASED ON NATIONAL MORTALITY IN 2014 AND THEN IT ASSUMES THAT IT'S GOING TO GET BETTER EVERY YEAR GOING FORWARD. SO IT ALREADY ASSUMES THAT MORTALITY PEOPLE ARE LIVING LONGER IN 2018 THAN THEY WERE IN 2014 AND IT AND IT DOES THAT FOREVER SO IT'S PRETTY CONSERVATIVE. IT KEEPS UP WITH THE FACT THAT PEOPLE ARE LIVING LONGER AND IN REALITY AND THIS PAST YEAR THE OVERALL MORTALITY RATES IN THE COUNTRY ACTUALLY TICKED UP A LITTLE BIT. PEOPLE DIED EARLIER IN 2018 THAN THEY DID IN 2017 BECAUSE OF THE OPIOID EPIDEMIC I THINK. SO WE FEEL LIKE WE'RE VERY HEALTHY WE'RE FINE WITH THAT ASSUMPTION. THAT'S PRETTY CONSERVATIVE AS IT IS AND WE'RE NOT SO SURE IT NEEDS TO BE THAT CONSERVATIVE. BUT BUT BE THAT AS IT MAY. SURE WE'RE BETTER SAFE THAN SORRY BUT IT'S GOOD TO KNOW THAT THAT'S ALREADY BEEN FACTORED IN. CORRECT. ALL RIGHT THAT'S ALL I HAVE. WILL YOU BE ABLE TO PROVIDE A COPY OF THE EVALUATION. I KNOW YOU HAD ASKED IF WE HAD ONE. WE PROVIDED TO THE [INAUDIBLE]. [INAUDIBLE] TO GO BACK. WELL I DON'T KNOW IF WE CAN PUT IT UP ON THE SCREEN OR NOT. I DON'T KNOW. THE POLICE ONE. [INAUDIBLE] FIREFIGHTERS. WE NEED THE POLICE. THERE YOU GO. WOULD YOU MIND JUST IF I TELL YOU THE PAGE NUMBER JUST. THANK YOU. SO PAGE 5 IS IS THE. SO THIS IS WHAT I TALKED ABOUT ON FIRE WHERE YOU KNOW THERE'S A TOTAL REQUIRED CONTRIBUTION EACH YEAR THAT WE DEVELOP AND THEN THE MEMBERS MAKE CONTRIBUTIONS AND THEN THE STATE MAKES CONTRIBUTIONS. AND SO THE BALANCE FROM THE CITY OR THE POLICE THIS YEAR IS ONE MILLION EIGHT THIRTY FIVE AND THEN NEXT YEAR IT'S TWO MILLION AND TWENTY. SO THE POLICE WENT UP ABOUT TWO HUNDRED THOUSAND. A LITTLE BIT MORE THAN THE FIRE AND VERY SIMILAR REASONS FOR THE POLICE AS FOR THE FIRE BUT ON THE INVESTMENT RETURN YOU CAN SEE THAT ON PAGE 19. SO THE POLICE PLAN IS A LITTLE BIT LARGER THAN THE FIRE PLAN. SO THE DOLLAR AMOUNTS HERE ARE A LITTLE BIT LARGER THAN WHAT I DESCRIBED ON THE FIRE BUT YOU CAN SEE THERE THAT FOR 2015 WE HAD A LOSS OF SEVEN POINT EIGHT MILLION AND NOW WE'RE DONE WE HAVE NO MORE DEFERRALS THERE AS OF 10/1/18. SO WE DID RECOGNIZE A QUARTER OF THAT IN THE 2018 YEAR. AND THEN 2016 WE HAD A GAIN OF ONE POINT EIGHT MILLION. WELL WE'VE ALREADY RECOGNIZED[00:20:01]
THREE FOURTHS OF THAT BUT WE STILL HAVE FOUR HUNDRED SIXTY ONE THOUSAND LEFT TO RECOGNIZE. AND THEN 2017 WE HAD A GAIN OF THREE POINT THREE MILLION. THIS YEAR WE HAD THE GAIN OF ONE POINT SEVEN MILLION. SO THAT'S WHERE YOU CAN SEE WE'RE DEFERRING THREE POINT FOUR MILLION IN GAINS THAT WE HAVEN'T YET RECOGNIZED. AND THEN NEXT YEAR IT'LL BE DOWN TO ONE POINT SIX MILLION. SO REGARDLESS OF WHAT WE DO THIS YEAR WE'RE GONNA HAVE A LITTLE BIT OF A GAIN BECAUSE WE'RE RECOGNIZING YOU KNOW ONE POINT EIGHT MILLION DOLLARS IN GAINS IN 2019. AND THEN NEXT AND THEN THE FOLLOWING YEAR WE'LL BE DEFERRING FOUR TWENTY. SO WE'VE GOT A CUSHION THERE OF THREE POINT FOUR MILLION RIGHT NOW. SO THEN IF YOU SCROLL BACK TO PAGE 26. SO WE HAD ONE HUNDRED AND FORTY FOUR ACTIVE NON [INAUDIBLE] POLICE OFFICERS 10/1/17 THEN WE HAD 13 TERMINATE AND WE ACTUALLY EXPECTED 11. SO THE TURNOVER THERE HELPED A LITTLE BIT ON THE POLICE SLIGHTLY MORE TURNOVER THAN WE EXPECTED BUT THEN WE HAD ONE DISABILITY RETIREMENT THERE. WE HAD TWO PEOPLE ENTER THE DRAFT AND THEN YOU HIRED ELEVEN NEW POLICE OFFICERS. SO THE NON DRAFT POLICE OFFICERS WENT FROM ONE FORTY FOUR TO ONE THIRTY NINE. IF YOU SCROLL DOWN TO THE BOTTOM OF THE PAGE. SO AGAIN YOU KNOW WE HAD ONE HUNDRED AND FOURTEEN RETIREES AND DISABILITY AND DROP AND ZERO MORTALITY. AND THEN WE HAD ONE MEMBER THAT WE HAD CONSIDERED A VESTED TERMINATED LAST YEAR AND THEY GOT A DISABILITY AND THEN THERE WAS A DISABILITY AT THE TOP. SO THE DISABILITY FROM LAST YEAR WAS [INAUDIBLE] AND THE DISABILITY FOR THIS YEAR WAS [INAUDIBLE]. AND [INAUDIBLE] HAD TEN YEARS OF SERVICE AND [INAUDIBLE] HAD THREE YEARS OF SERVICE AND BOTH OF THEM WERE GRANTED SEVENTY FIVE PERCENT DISABILITY. SO THOSE TWO DISABILITIES YOU KNOW THE BOARD HAS NO CONTROL OVER THAT IT DOESN'T IT CAN'T CONTROL WHEN PEOPLE ARE GOING TO BECOME DISABLED BUT THAT IT DID HURT THE PLAN. [INAUDIBLE] ALREADY TOWARDS THE BACK IF YOU GO TO PAGE 43. SCROLL DOWN TO THE BOTTOM OR TOWARDS THE BOTTOM RIGHT THERE. THAT'S GOOD. SO THE THING ABOUT THE LIABILITIES IS THAT THEY'RE ALWAYS A YEAR BEHIND ON THE [INAUDIBLE] STATEMENTS ALSO. SO FOR THE POLICE PLAN THE NET PENSION LIABILITY ACTUALLY WENT FROM EIGHT POINT SIX MILLION LAST YEAR TO SEVEN POINT EIGHT MILLION THIS YEAR. AND YOU'RE FUNDED RATIO WENT FROM NINETY TWO POINT THREE TO NINETY THREE POINT FOUR. AND THE FACT THAT YOUR UNFUNDED LIABILITY IS LOWER AND YOUR FUNDED RATIO IS HIGHER ON THE POLICE THAN THE FIRE HAPPENS EVERY TIME I GO TO A MEETING ACROSS THE STATE BECAUSE THE FIREFIGHTERS REMEMBER HOW WE MENTIONED THAT THERE WAS TWO FIREFIGHTERS THAT TERMINATED EMPLOYMENT AND THERE WAS 13 POLICE OFFICERS THAT TERMINATED EMPLOYMENT AND THAT'S WHAT HAPPENS EVERYWHERE. FOR SOME REASON FIREFIGHTERS TEND TO STAY AND POLICE OFFICERS HAVE A LOT MORE TURNOVER. SO WHEN THAT HAPPENS AS WE SAID BEFORE HIGHER TURNOVER MEANS IT'S GOOD FOR THE PLAN. IF EVERYBODY TERMINATED AT NINE YEARS THERE WOULD BE ZERO FUNDING REQUIREMENT BECAUSE NOBODY WOULD EVER GET A PENSION BENEFIT. SO THAT'S WHAT HAPPENS BETWEEN THE POLICE AND FIRE. SO BETWEEN THE TWO IF YOU TOTAL THEM YOU KNOW YOU'D BE AT ABOUT 90 PERCENT FUNDED RATIO. SO YOU'RE IN GOOD SHAPE AS FAR AS THE COMBINED TWO PENSION PLANS. SO IF WE GET TO THAT UNFUNDED [INAUDIBLE] ACCRUED LIABILITY THAT'S BACK ON PAGE 15. SO LAST YEAR IT WAS 12 MILLION 133 AND WE MAKE A[00:25:05]
PAYMENT EACH YEAR TO PAY THAT DOWN. SO WE EXPECT IT TO COME DOWN A LITTLE. WE EXPECTED IT TO COME DOWN TO 11 MILLION 910. AND THEN IF YOU SCROLL DOWN JUST A LITTLE BIT IN THE END IT WAS 2 MILLION I MEAN SCROLL DOWN A LITTLE BIT MORE IN THE END IT WAS 14 MILLION 264 AND SO WE HAD A LOSS THERE 2 MILLION 353.SORRY JUST SCROLL UP A TINY BIT. THERE YOU GO. SO AT 2 MILLION 353 THIS IS WHERE YOU CAN GET YOUR MAGNITUDES YOU ASKED FOR ME ON THE FIRE PLAN BUT THE INVESTMENT RETURN WAS A LOSS OF ONE HUNDRED AND EIGHTEEN THOUSAND USING THAT FOUR YEAR SMOOTHING. SALARY INCREASES WERE ACTUALLY WE EXPECTED FIVE POINT SIX PERCENT AND THE AVERAGE WAS SIX POINT EIGHT PERCENT FOR THE POLICE. SO A LOT OF TIMES TURNOVER DOES THAT BECAUSE THEN PEOPLE GET PROMOTIONS AND SUCH. SO YOU CAN END UP WITH A HIGHER SALARY INCREASES ON AVERAGE WHEN YOU HAVE MORE TURNOVER. ACTIVE DECREMENTS THOSE WERE THE THE ONE ACTIVE DISABILITY AND THEN AND THEN INACTIVE MORTALITY WAS THREE HUNDRED NINETY THOUSAND. AND THEN THE NINE HUNDRED NINETY THREE WAS FROM THE OLD VESTED TERMINATED THAT BECAME DISABLED AND THE FACT THAT YOU HIRED SEVERAL POLICE OFFICERS THAT HAD PRIOR MILITARY SERVICE AND SUCH AND YOU GUYS HAVE A PROVISION THAT IF THEY WORK 10 YEARS I BELIEVE IT IS. IS IT 10. 10 YEARS FOR THE DEPARTMENT THEN THEY THEY GET THOSE EXTRA FOUR YEARS OF PRIOR MILITARY AT A SMALL COST SO WE WE VALUE THAT IN WHEN PEOPLE ARE HIRED THAT HAVE A PRIOR MILITARY. SO THAT WAS ANOTHER REASON FOR THAT OTHER LOSS THERE. SO THE TOTAL WAS 2 MILLION 353. SO THOSE WERE KIND OF THE HIGHLIGHTS OF ALL THREE REPORTS THAT I WANTED TO GO OVER BUT I'D BE HAPPY TO ANSWER ANY QUESTIONS. ANY OTHER QUESTIONS FOR PATRICK.
OK I GUESS. WELL I GUESS I DID HAVE ONE NOT REALLY ON THE AGENDA BUT THERE WASN'T MUCH ON THE AGENDA ANYWAY BUT THERE WAS A NEW LAW THAT PASSED FOR FIREFIGHTERS. SO MAYBE CAN YOU PUT THE FIRE REPORT UP THERE. AND GO TO PAGE 35. BUT THE NEW LAW BASICALLY SAYS THAT IT ADDED A BUNCH OF ANSWERS TO THEIR LIST OF OF ISSUES WHERE IF YOU HAVE THAT WHEN YOU'RE A FIREFIGHTER AND YOU BECOME DISABLED OR DIE BECAUSE OF IT THEN IT WILL BE AUTOMATICALLY CONSIDERED IN LINE OF DUTY AND SO IF YOU LOOK AT AT THE BOTTOM OF THAT PAGE. SO RIGHT NOW THERE IS OUR ASSUMPTIONS ABOUT DISABILITY. PEOPLE ARE MORE LIKELY TO BECOME DISABLED WHEN THEY'RE OLDER. A 20 YEAR OLD WE DON'T HAVE MUCH ASSUMPTION THAT THEY'RE GOING TO BECOME DISABLED. A 50 YEAR OLD IT'S A 1 PERCENT CHANCE THAT THEY'RE GOING TO BECOME DISABLED THAT'S OUR ASSUMPTIONS BUT THEN WE HAVE TO SAY WELL IF THEY'RE DISABLED IS IT LINE OF DUTY OR NOT IN LINE OF DUTY BECAUSE LINE OF DUTY HAS EXTRA BENEFITS. I THINK THAT'S 75 PERCENT THAT I TALKED ABOUT. AND SO RIGHT NOW WE'RE ASSUMING THAT 75 PERCENT OF THEM WILL BE LINE OF DUTY DISABILITY. WELL WITH THE NEW LAW WE'RE GOING TO CHANGE THAT TO 90 PERCENT BECAUSE MORE OF THE DISABILITIES THAT THAT ARE GRANTED ARE GOING TO BE LINE OF DUTY. IN THE OLD DAYS A CANCER PERSON THAT HAS CANCER AND BECOMES DISABLED IT MAY HAVE BEEN CONSIDERED LINE OF DUTY OR MAY NOT HAVE BEEN MORE LIKELY NOT BUT NOW IT WILL BE CONSIDERED LINE OF DUTY. AND SO WE'LL DO AN ACTUARIAL IMPACT STATEMENT BECAUSE TO THIS CITY AND THE BOARD ALREADY PREPARED AN ORDINANCE THAT'LL COME BEFORE YOU AND WE'LL DO AN IMPACT STATEMENT AND SHOW YOU THE IMPACT ON THE FUNDING. IT'S NOT
[00:30:01]
GOING TO BE MUCH BECAUSE NOT MANY PEOPLE BECOME DISABLED OR DIE LUCKILY AND ALL WE'RE CHANGING IS 75 PERCENT CHANCE OF LINE OF DUTY TO 90 PERCENT. SO I JUST FIGURED SINCE I'M HERE I MIGHT AS WELL TELL YOU GUYS. THANK YOU. MOVING ON. TO LARRY [INAUDIBLE] CHAMBERS AND ASSOCIATES. WELL GOOD EVENING. GOOD SEE YOU ALL. THE GOOD NEWS IS MY REPORT MY MATH MAKES A LOT MORE SENSE [INAUDIBLE] MATH IS ALWAYS HARD I'VE SAT IN ON A LOT OF THOSE BUT OURS IS A LITTLE SIMPLER. SO HOPEFULLY WE GET THROUGH IT BREAK QUICK FOR YOU BUT. THE INVESTMENT RETURNS REALLY HAVE BEEN PRETTY WILD IN THE FISCAL YEAR. REMEMBER YOUR FISCAL YEAR FOR THESE PLANS STARTS ON OCTOBER 1. SO THE FIRST QUARTER OF THE FISCAL YEAR WAS THAT TERRIBLE QUARTER IN THE MARKETS THE FOURTH QUARTER OF 2013=8. GOOD NEWS IS THE FIRST QUARTER OF 2019 THINGS CAME ROARING BACK WE MADE ABOUT ALL OF THAT BACK UP AND ACTUALLY WE DID MAKE ALL THAT BACK UP AND THEN THE SECOND QUARTER HAS ACTUALLY BEEN A LITTLE BIT POSITIVE SO I'LL KIND OF GIVE YOU AN UPDATE TOO. NUMBERS I'M GOING TO SHOW YOU ON HERE ARE THROUGH MARCH 31 [INAUDIBLE] THE MATERIAL OUT BEFORE WE HAD THE JUNE 30 NUMBERS ALL IN BUT I'VE GOT THEM WITH ME TODAY. [INAUDIBLE]. THAT FIRST PAGE JUST SHOWS THE THE ASSET ALLOCATION HASN'T CHANGED TOO MUCH SINCE MARCH 31 SO IT'S PRETTY ACCURATE BUT WE CONTINUE TO BE A LITTLE BIT OVERWEIGHTED IN THE DOMESTIC EQUITIES AND MAYBE I'LL BACK UP JUST ONE SECOND TO REMIND YOU WHAT OUR ROLE IS IN THE PLAN. WE DON'T ACTUALLY MANAGE THE MONEY OUR FIRM ARE WE ARE THE INVESTMENT CONSULTANT. SO WHAT WE DO IS HELP THE BOARD SET UP THE INVESTMENT POLICY STATEMENT SET UP THE GOALS IN THERE. WHAT ARE WE TRYING TO DO. HOW MUCH ARE WE TRYING TO MAKE. WHAT KIND OF RISK ARE WE WILLING TO TAKE. SET THEN AN ASSET ALLOCATION WHAT WE THINK IS THE BEST ASSET [INAUDIBLE] THOSE OBJECTIVES THE MIX OF STOCKS, BONDS, REAL ESTATE, INFRASTRUCTURE, AND PUT THAT TOGETHER. ONCE THAT'S PUT TOGETHER THEN TRY TO FIND THE BEST LINEUP OF MANAGERS FOR EACH OF THOSE PIECES OF THE ASSET ALLOCATION PIE. SO IN THIS CASE THE PLANS HAVE ABOUT I THINK WE'RE AT 14 MANAGERS THAT MANAGE THE ASSETS. WHEN WE'RE NOT OUT DOING THE BOARD MEETINGS WHICH WE'RE ABOUT TO START THAT CYCLE AND RUN AROUND TO ACTUALLY PRESENT TO BOARDS THE QUARTERLY UPDATES. WE SPEND MOST OF OUR TIME OR A LOT OF OUR TIME ANYWAY DOING DUE DILIGENCE ON INVESTMENT MANAGEMENT FIRMS AROUND THE COUNTRY. SO WE'RE EITHER GOING THERE OR THEY'RE COMING TO OUR OFFICE AND WE'RE TRYING TO FIND THE BEST IN CLASS. SO WE'RE LOOKING FOR A LARGE CAP GROWTH MANAGER AND WE WANT TO HAVE A STABLE OF TWO THREE FOUR OR FIVE THAT WE KNOW HAVE HAD GOOD LONG TERM RESULTS. AND IF WE HAVE TO DO A SEARCH WE'LL PUT THOSE MANAGERS MAYBE IN A SEARCH IT'S A CONSTANTLY CHANGING LIST THAT DOESN'T STAY. IT'S VERY DYNAMIC. SO THAT'S OUR ROLE. AND SO EVERY QUARTER THEN WE MEET WITH THE BOARDS AND GIVE THEM AN UPDATE ON THE PERFORMANCE HOW THE PLAN DID ON ABSOLUTE BASIS HOW DID IT DO RELATIVE TO THE OBJECTIVES WE SET OUT IN THE INVESTMENT POLICY AND ALSO WE COMPARE HOW DID IT DO RELATIVE TO OTHER PUBLIC PENSION FUNDS AROUND THE COUNTRY.SO THAT'S SORT OF THESE ARE JUST EXCERPTS FROM THAT REPORT THAT THEY GET EVERY QUARTER. SO THIS IS JUST THE ASSET ALLOCATION THE GOLD IS THE KIND OF THE TARGET ALLOCATION TO THESE DIFFERENT ASSET CLASSES. IT'S SPELLED OUT IN THE INVESTMENT POLICY AND AGAIN WE RUN ALL KINDS OF MODELS THAT TELL US WHAT IS THE OPTIMAL ASSET ALLOCATION. YOU KNOW WE HAVE A SEVEN AND THREE QUARTER ASSUMPTION RATE. WE WANT TO TRY TO EARN SEVEN AND THREE QUARTERS PERCENT PER YEAR OVER THE LONG TERM. WHAT'S THE BEST WAY TO DO THAT WITH THE LEAST AMOUNT OF VOLATILITY WHAT COMBINATION OF ASSETS WILL GIVE US THE LEAST VOLATILITY AND STILL ACHIEVE THAT OBJECTIVE. THAT'S SORT OF WHAT DRIVES THAT. AND SO ON THE DOMESTIC EQUITY SIDE YOU CAN SEE THE TARGET OF THIRTY FIVE PERCENT THAT'S WITH THAT GOLD BAR THE BLUE LINE IS WHERE WE ACTUALLY WERE AS OF MARCH 31. SO WE'VE LET IT RUN A LITTLE BIT. THE MARKETS HAVE BEEN GOOD. THE MARKETS BEEN GOOD TO US NOW FOR SEVERAL YEARS FOR THE MOST PART. SO WE LET IT RUN WE DO REBALANCE OCCASIONALLY OTHERWISE IT WOULD BE A WHOLE LOT HIGHER THAN THAT WITH THE KIND OF BULL MARKETS WE'VE HAD IN THE LAST 10 YEARS. SO WE'RE STILL A LITTLE BIT OVERWEIGHTED IN DOMESTIC EQUITY. WE STILL LIKE DOMESTIC EQUITY AND NOW THEY'VE HAD A GREAT RUN. SOME PEOPLE ARGUE THE VALUATIONS ARE A LITTLE HIGH I SAY BASED ON WHERE INTEREST RATES ARE THE VALUATIONS ARE PROBABLY STILL PRETTY CHEAP BECAUSE THERE'S VERY LITTLE COMPETITION FOR THE INVESTMENT DOLLARS WHEN YOU STILL HAVE THE 10 YEAR TREASURY NOTE FOR INSTANCE 10 YEAR TREASURY BONDS AT 2 PERCENT. SO THAT'S WHY A LOT OF MONEY IS IN EQUITIES. YOU HAVE ACTUALLY YOU HAVE JAPAN I'M GOING A LITTLE OFF TRACK HERE BUT YOU HAVE JAPAN'S 10 YEAR AND GERMANY'S 10 YEAR BONDS ARE ACTUALLY IN NEGATIVE TERRITORY.
[00:35:01]
I'VE BEEN IN THE INVESTMENT BUSINESS ABOUT 40 YEARS I DON'T KNOW HOW THAT WORKS. YOU GIVE THEM YOUR MONEY THEY GIVE YOU LESS BACK AND YOU THINK YOU'VE GOT A GOOD DEAL. SO THEY'RE NEGATIVE. AND THE REASON I POINT THAT OUT IS THAT THAT'S ALSO ONE OF THE REASONS OUR RATES ARE STAYING SO LOW IS BECAUSE EVEN THOUGH WE'RE WAY DOWN THERE QUOTE AT 2 PERCENT THAT'S 2 PERCENT HIGHER OR MORE THAN WHAT INVESTORS CAN GET IN THOSE 10 YEAR BONDS. SO A LOT OF FOREIGN MONEY HAS COME IN BUYING U.S.TREASURIES AND THAT MORE DEMAND THAT DRIVES THE YIELD DOWN. SO THAT'S WHY YOU'RE SEEING RATES WHERE THEY ARE AND CONTINUE TO STAY LOW AND YOU HEAR TALK REALLY THE NEXT MOVE THE FED WILL MAKE WILL BE LOWER. SO WHICH IS REALLY QUITE DIFFERENT THAN WHAT WE WERE THINKING JUST SIX MONTHS AGO AS RECENTLY AS SIX MONTHS AGO. EVERYBODY THOUGHT THE FED WAS GOING TO KEEP RAISING RATES BUT THEN THAT FOURTH QUARTER ACTUALLY IT WAS NINE MONTHS AGO. THEN THAT FOURTH QUARTER 2018 ROCKED THE MARKETS THE TARIFF WAR TALK. THERE WERE A LOT OF THINGS GOING ON WITH CHINA. AND NOW WE'VE GOT IRAN. OF COURSE THERE'S ALWAYS THINGS OUT THERE THAT CAN SCARE YOU TO DEATH IN THE MARKETS AND WE CERTAINLY HAVE OUR FAIR SHARE NOW. BUT ANYWAY WE STILL LIKE THE DOMESTIC EQUITY THAT'S WHERE WE'RE OVERWEIGHTED. MLP'S ARE THE PIPELINES AND THE STORAGE FACILITIES FOR OIL AND NATURAL GAS HERE IN THE US. SO A LITTLE BIT OF AN ENERGY PLAY HERE IN THE US. AS YOU KNOW OR AS YOU MAY KNOW WE'RE ACTUALLY ONE OF THE LARGEST PRODUCERS IF NOT THE LARGEST PRODUCER OF OIL NOW. PRODUCE MORE OIL THAN SAUDI ARABIA.
WE DON'T RELY ON MIDEAST OIL ANYMORE OR NATURAL GAS. WE'RE AN EXPORTER OF NATURAL GAS AND NOW WE'RE EXPORTING OIL SO THAT WORLD HAS CHANGED SO DRAMATICALLY OVER THE LAST DECADE. IT'S INCREDIBLE. SO IT'S BEEN A VERY VOLATILE PLACE TO BE THAT'S WHY YOU DON'T HAVE A WHOLE LOT OF MONEY IN THERE. CONVERTIBLES ARE THE HYBRIDS OF BONDS AND STOCKS IT'S A BOND THAT ACTUALLY ALLOWS YOU TO CONVERT THAT BOND INTO SHARES OF COMMON STOCK OF THAT COMPANY. SO IF YOU HAD AN IBM BOND CONVERTIBLE BOND IT MIGHT TELL YOU THAT I'LL JUST GIVE YOU A KIND OF A BASIC EXAMPLE. SAY THAT IBM BOND A THOUSAND DOLLAR BOND IS CONVERTIBLE INTO 20 SHARES OF COMMON STOCK OF IBM ANYTIME YOU WANT TO HOLD THE BOND. YOU'VE GOT A FIVE YEAR MATURITY ON THE BOND THAT PAYS YOU A TWO PERCENT COUPON AT ANY TIME DURING THAT FIVE YEARS IF YOU WANT TO CONVERT IT INTO 20 SHARES OF IBM STOCK YOU CAN. SO IF IBM STOCK TAKES OFF YOU SAY WELL IT MIGHT BE WORTH MORE TO CONVERT IT OVER. WELL WHAT'LL HAPPEN IS THE PRICE OF THAT CONVERTIBLE WILL GO UP. IF IT GOES DOWN THOUGH IT DOESN'T GET HIT AS HARD BECAUSE IF IT GOES DOWN TOO MUCH IT WILL JUST START ACTING LIKE THE BOND THAT IT IS. YOU'LL GET YOUR TWO PERCENT FOR FIVE YEARS AND GET YOUR MONEY BACK IF IT DOESN'T DEFAULT. SO I CALL IT I'VE SAID SOME OF YOU HAVE HEARD ME SAY THIS BEFORE I CALL IT THE CHICKEN WAY TO PLAY THE STOCK MARKET. I LOVE THE ASSET CLASS OVER THE LONG TERM IT GIVES YOU ABOUT 75 TO 80 PERCENT HOPEFULLY OF THE UPSIDE OF THE STOCK MARKET WITH ONLY ABOUT 50 TO 60 PERCENT OF THE DOWNSIDE AND YOU COMPOUND THAT OVER MANY MANY YEARS YOU'RE GOING TO LIKE THE RATIO. IT'S A GOOD ASSET CLASS. IT'S NOT BIG ENOUGH FOR US TO GO TOO MUCH MORE IN THERE IT'S NOT AS LIQUID AS THE STOCK MARKET. BUT IT'S BEEN A GOOD PLACE FOR US TO BE. WE USED THAT ASSET CLASS TO LOWER OUR BOND EXPOSURE SEVERAL YEARS AGO WHEN RATES STARTED GOING LOW WE FELT LIKE THAT ISN'T GOING TO HELP US GET THE SEVEN AND THREE QUARTERS PERCENT OR WHATEVER OUR ASSUMPTION RATE WAS BACK THEN. AND SO WE HAD TO LOWER OUR BOND EXPOSURE FROM I THINK PROBABLY A HIGH OF 40 PERCENT NOT TOO AWFULLY LONG AGO DOWN AS YOU CAN SEE TO TWENTY ONE PERCENT BUT WE DIDN'T WANT TO JUST ADD RISKY STOCKS TO THE PORTFOLIO. SO WE ADDED SOME OTHER ASSET CLASSES. CONVERTIBLES ARE ONE THE MLP'S ARE ONE. OF COURSE WE HAVE EXPOSURE TO INTERNATIONAL. INTERNATIONAL STOCKS ARE KIND OF COMPELLING RIGHT NOW THE VALUATIONS ARE VERY ATTRACTIVE BUT THE RISK IS VERY HIGH. WHEN YOU TALK ABOUT BREXIT AND A WHOLE LOT OF THINGS GOING ON OVER THERE RIGHT NOW IT'S JUST NOT A PLACE I WANT TO PUT ANY MORE MONEY. BUT THERE ARE A LOT OF GOOD COMPANIES OVER THERE RIGHT NOW WITH EXTREMELY GOOD VALUATIONS THAT MAYBE THEY'RE LABELED AS AN INTERNATIONAL COMPANY BUT THEY MIGHT DO 80 PERCENT OF THEIR BUSINESS OUTSIDE OF THEIR HOME COUNTRIES. SO YOU HAVE PROFESSIONAL MANAGERS RUNNING THAT AND THAT'S WHAT THEIR JOB IS TO IDENTIFY THOSE COMPANIES. PRIVATE REAL ESTATE.
THIS IS A COMMINGLED REAL ESTATE ASSET CLASS WHERE IT'S A FUND INVESTMENTS INDUSTRIAL COMMERCIAL APARTMENTS AND OFFICE SPACE AND BEEN A REALLY GOOD STEADY PERFORMER OVER THE LAST FIVE YEARS AND THEN THEN WE HAVE BONDS WHICH REALLY HAVEN'T GIVEN US TOO MUCH SO WE'RE UNDERWEIGHTED IN THAT ASSET CLASS. THE IMPORTANT THING IF YOU GO SKIP OVER TWO MORE SLIDES IF YOU WOULD. YEAH SKIP THAT ONE AND SCROLL DOWN JUST A LITTLE BIT ON THAT ONE. SO THE RESULTS ON THIS HAVE BEEN PRETTY GOOD. IF YOU GO DOWN TO THE BOTTOM FOR THE QUARTER. THIS WAS A QUARTER ENDING MARCH 31
[00:40:01]
AGAIN WE WERE UP NINE POINT EIGHT PERCENT THE [INAUDIBLE] JUST FOR THE QUARTER THAT'S NOT AN ANNUALIZED NUMBER SO I TOLD YOU IT CAME BACK KIND OF STRONG. THE BENCHMARK IF WE JUST INVESTED WITH THE TARGET WE WOULD HAVE BEEN UP NINE POINT TWO AND THAT NUMBER IN PARENTHESES RANKS THE PLANS AGAINST OTHER PUBLIC PENSION FUNDS AROUND THE COUNTRY. THE 10 MEANS THAT THE PLAN RANKED FOR THE QUARTER IN THE TOP 10 PERCENT OF ALL PUBLIC PENSION FUNDS IN THIS UNIVERSE. I THINK DON'T HOLD ME TO THIS BUT I THINK THERE IS FOUR TO FIVE HUNDRED PUBLIC PENSION FUNDS IN THIS UNIVERSE. AND SO ALL THE WAY ACROSS THE BOARD YOU CAN SEE AND THE RANKINGS HAVE BEEN PRETTY STEADY. SO THE PLAN YOU'VE HAD SOME REALLY GOOD MANAGERS DOING A PRETTY GOOD JOB FOR YOU IN THIS PLAN. SO SOME OF THE ASSET ALLOCATION HAS HELPED US OUT TO BE A LITTLE BIT OVERWEIGHTED IN STOCKS. SO THAT'S ONE OF THE REASONS WHY YOU'RE THE NUMBERS ACROSS THE BOARD ARE RANKED HIGH. BEAT THE BENCHMARK AND RANK HIGH RELATIVE TO YOUR PEER GROUP. NEXT. YEAH GO TO THE NEXT SLIDE. THIS SLIDE JUST IS A PRETTY SIMPLE SLIDE BUT WHAT IT DOES IT GOES BACK FIVE YEARS THE GREEN LINE IS THE NET CASH FLOW OF THE PLANS. SO AND BY THE WAY THESE ARE COMBINED THIS IS POLICE FIRE PLANS COMBINED. SO WHAT THAT'S SAYING IS THIS IS A MATURE PLAN. THEY'RE PAYING OUT THERE'S MORE MONEY BEING PAID OUT OF THIS PLAN AND THERE IS GOING IN. THAT'S WHAT THE GREEN LINE REPRESENTS. SO EVERY MONTH EVERY QUARTER WHATEVER THERE'S MORE MONEY GOING OUT THAN COMING IN. SO THIS IS LOOKING BACK OVER THE LAST FIVE YEARS AT THAT NET CASH FLOW AGAIN THAT'S THE GREEN LINE THE BLUE LINE HOWEVER REPRESENTS THE MARKET VALUE OF THE PLAN OVER THAT SAME PERIOD OF TIME. AND SO AS YOU CAN SEE THE MARKET VALUE FOR THE MOST PART HAS BEEN GOING UP THERE'S SOME VOLATILITY THERE. BUT IN 2015 PARTICULARLY WHAT YOU CAN SEE FOR THE MOST PART HAS BEEN GOING UP. YOU DO SEE THE VOLATILITY IN THAT FOURTH QUARTER OF 2018 WHERE IT WENT DOWN ON THE FAR RIGHT HAND SIDE. AND THEN IT CAME BACK UP PRETTY STRONG. BUT THE DIFFERENCE BETWEEN THAT GREEN LINE AND THAT BLUE LINE REALLY REPRESENTS THE INVESTMENT EARNINGS FOR THE LAST FIVE YEARS. AND WHILE IT'S NOT ON THAT PAGE THAT NUMBER IS JUST A LITTLE BIT UNDER 60 MILLION DOLLARS FOR THE FIVE YEARS. SO THE MARKETS HAVE BEEN VERY GOOD VERY GOOD TO US FOR THE MOST PART. ANY QUESTIONS ON THAT SIMPLE SLIDE. ANY QUESTIONS. YEAH [INAUDIBLE] MAYOR.ALL RIGHT. SO BY THE LOOKS OF THIS GRAPH BASICALLY IT'S SAFE TO SAY THAT THIS IS PURELY SUSTAINABLE ONLY BECAUSE OF THE PERFORMANCE OF THE MARKET NOT BECAUSE OF WHAT'S GOING IN. IS IT FAIR TO SAY THAT. I GUESS THAT'S I'D ALMOST LOOK TO PATRICK FOR THAT BUT THE POINT IS THAT YOU HAVE MORE RETIREES THAN YOU DO NEW PEOPLE PUTTING MONEY IN TERMS OF DOLLARS GOING INTO THE PLAN SO EVENTUALLY THAT MAY CHANGE AND THAT YOU HAVE TO DO A LOT MORE HIRING TO REPLACE OLDER OFFICERS OR WHATEVER AND MAYBE YOU'LL SEE THAT CHANGE A LITTLE BIT BUT FOR THE MOST PART AS A PLAN GETS OLDER THIS IS KIND OF A NORMAL PICTURE THAT WE WOULD EXPECT TO SEE. OK. SO WE SORT OF HAD LIKE SAY I GUESS A WASH IF YOU WILL. AND NO EARNINGS. THAT WOULD NOT BE GOOD. THAT WOULD NOT BE GOOD. THAT WOULD NOT GOOD. SO WE WOULD HAVE TO BE ABOVE AND THAT NUMBER IF I'M NOT MISTAKEN AN ACTUARY PROBABLY CAN REMIND ME OF THIS. I THINK IT WAS ABOUT 8 PERCENT OR SO HAVE TO BE EARNED ON YEAR OVER YEAR IN ORDER TO BE ABOVE THAT OR TO HAVE THAT GAP THERE. WELL THE WAY WE HAVE DESIGNED THE FUNDING IS THAT IF WE GET SEVEN POINT SEVEN FIVE PERCENT THAT'S OUR EXPECTATION EACH YEAR. THEN IF THE CITY PUTS IN THE AMOUNTS WE TELL THEM EACH YEAR THEN THERE'LL BE ENOUGH MONEY TO PAY ALL THE RETIREMENT BENEFITS WHEN THEY'RE DUE. SO YES I MEAN IF BUT THAT'S WHY WE DO THE VALUATION EVERY YEAR. WE LOOK IF WE DIDN'T MEET THE RETURNS IF ONE YEAR WE DON'T GET OUR IF WE GET A 0 PERCENT INSTEAD OF SEVEN POINT SEVEN FIVE THEN IT AUTOMATICALLY ADJUSTS WHAT THE CITY NEEDS TO CONTRIBUTE TO MAKE SURE THAT THERE IS ENOUGH MONEY IN THERE WHEN EVERYBODY RETIRES AND THAT'S MY JOB. OK. ALL RIGHT. THAT'S ALL I HAVE MAYOR THANKS. YEAH I MEAN THE WHOLE POINT OF YOU KNOW YOU GET CONTRIBUTIONS FROM THE MEMBERS THE CITY AND THE STATE. THAT'S WHAT GOES INTO THE PLAN AND YOUR INVESTMENT RETURN. AND THEN WHAT GOES OUT OF THE PLAN IS THE EXPENSES AND THE BENEFIT PAYMENTS AND IN THE END THOSE HAVE TO BALANCE. SO THE MORE YOU GET FROM YOUR INVESTMENT RETURNS THAT MEANS LESS THAT THE CITY NEEDS TO CONTRIBUTE AND VICE VERSA. YEAH GO TO THE NEXT SLIDE. THESE ARE THE FISCAL YEAR RETURNS DATING BACK TO 2005. NOW THESE ARE EACH YEAR'S RETURN AS
[00:45:05]
PATRICK'S ALREADY POINTED OUT TO YOU. THEY SMOOTH IT THEY KIND OF TAKE THE AVERAGE IF YOU WILL OF SEVERAL YEARS BUT IT DOES SHOW YOU. TO ME IT'S SORT OF A TOOL WE USE WHEN THEY SAY IS YOUR ASSUMPTION RATE REASONABLE OR SHOULD WE CHANGE THAT ASSUMPTION RATE. IF YOU GO THROUGH THERE YOU'LL SEE THAT 9 OUT OF THE 14 YEARS NINE OUT OF THE PAST 14 YEARS. THE PLANS HAVE BEATEN THE SEVEN POINT SEVEN FIVE ASSUMPTION RATE AND THAT FISCAL YEAR TO DATE NUMBER REMEMBER THIS IS A MARCH REPORT IT SAYS ZERO POINT FIVE EIGHT. I JUST GOT THE JUNE NUMBERS AND [INAUDIBLE] THEY ARE FOUR POINT THREE PERCENT THROUGH JUNE. SO THE QUARTER WAS A REALLY GOOD QUARTER AND IF YOU'D ASKED ME LAST QUARTER ARE WE'RE GOING TO HAVE ANY CHANCE AT ALL OF MAKING THE SEVEN POINT SEVEN FIVE THIS YEAR I'D HAVE PROBABLY SAID NO. BUT NOW YOU KNOW I THINK MAYBE IT'S 50 50 MARKETS STILL LOOK PRETTY STRONG EARNINGS ARE COMING IN REALLY GOOD THIS QUARTER. SO YOU KNOW HOPEFULLY WE CAN GET A COUPLE MORE PERCENT OUT OF THE MARKETS HERE THIS NEXT TWO THREE MONTHS AND HAVE A DECENT FISCAL YEAR. BUT I DON'T THINK IT'S GONNA BE THE CATASTROPHE AS SOON AS I SAY THAT SOMETHING WILL HAPPEN. BUT I DON'T THINK IT'S GONNA BE A BAD NEGATIVE YEAR BECAUSE WE ARE AT 4.3 PERCENT YEAR TO DATE. I'M JUST CURIOUS DO YOU KNOW WHAT THE AVERAGE IS OVER THESE AS YOU SAID 13 YEARS. OVER THOSE YEARS. THAT'S A GOOD QUESTION. NO I HAVEN'T DONE IT. THAT'S OKAY. I FEEL LIKE IT WOULD BE [INAUDIBLE] I DON'T KNOW THAT ONE 2008 WASN'T TOO KIND TO US. THAT'S LIKE [INAUDIBLE] ALMOST. HOPEFULLY WE DON'T SEE THAT ANYTIME IN NEAR FUTURE. THAT WAS THE FINANCIAL CRISIS IF YOU REMEMBER. THAT'S OK IT'S NOT THAT. I CAN GO BACK TO DO THAT. I CAN'T DO THAT IN MY HEAD. I WAS TRYING TO DO THAT IN MY HEAD. WE CAN GO BACK AND DO THAT LATER. I'M GOING TO GUESS IT'S PROBABLY AROUND 7 TO 8 BUT THAT'S KIND OF A GUESS. MAYBE THE ACTUARY CAN DO THAT WHILE WE'RE.OK. APPROXIMATELY. YEAH. AND THEN MAYBE THE LAST SLIDE. THANKS. THIS IS A SLIDE I'VE SHOWN YOU ALL BEFORE AND IT'S JUST KIND OF A LITTLE BIT OF A LONGER TERM VIEW OF THE PLAN AND HOW IT'S DOING. A LITTLE HARD TO READ UP THERE BUT IN THE TOP LEFT BASICALLY YEAH THAT TOP LEFT. THESE ARE FIVE YEAR ROLLING PERIODS STARTING FIVE YEARS AGO SO THAT WOULD BE 10 YEARS WORTH OF DATA. AND SO EVERY QUARTER WE LOOK BACK FIVE YEARS AND SAY HOW DID THE PLAN RANK AGAINST THIS PEER GROUP. SO AGAIN IF YOU START FIVE YEARS AGO LOOKING BACK FIVE YEARS THAT'S 10 YEARS WORTH OF DATA. SO EVERY QUARTER AND WE'VE HAD A GOOD COMBINATION OF MANAGERS HERE IT'S WORKED OUT PRETTY WELL THINGS HAVE WORKED OUT WE'VE GOT A 100 PERCENT OF THE TIME IN THOSE ROLLING FIVE YEAR PERIODS THE PLAN'S RANKED IN THE TOP 25 PERCENT. SO YOU KNOW I DON'T SEE THAT CONSISTENCY EVERYWHERE. WE DO HAVE FOR THE MOST PART PRETTY GOOD RETURNS BUT THIS IS ONE OF THE BETTER PLANS IN THAT REGARD. NOT UNUSUAL TO SEE MAYBE 80 OR 75 PERCENT THERE BUT TO HAVE 100 PERCENT OF THEM IN THERE IS PRETTY CONSISTENT RETURNS. AND THEN IF YOU COULD SCROLL DOWN TO THE BOTTOM RIGHT. FURTHER.
UP MARKET DOWN MARKET CAPTURE [INAUDIBLE] WHAT WE TRY TO DO IS PUT I TOLD YOU WE'RE TRYING TO GET THE OPTIMAL LINEUP OF ASSET CLASSES AND MANAGERS TO GIVE US THAT SEVEN POINT SEVEN FIVE OR MORE WITH AS LITTLE OF RISK AS POSSIBLE. AND ONE OF THE WAYS WE MEASURE THAT OVER THE LONG TERM IS THIS DOWN MARKET CAPTURE AND UP MARKET CAPTURE. SO WHAT THAT'S TELLING US OVER THE LAST FIVE YEARS IN PERIODS WHEN THE MARKET WAS DOWN AND THE MARKET IS DEFINED AS THE BENCHMARK IN THIS CASE IT'S A COMBINATION OF BONDS AND REAL ESTATE AND STOCK. WHENEVER THAT NUMBER HAS BEEN NEGATIVE WE'RE ONLY CAPTURING ABOUT NINETY THREE PERCENT ALMOST 94 PERCENT OF THE DOWNSIDE BUT WHEN THE MARKET HAS BEEN UP CAPTURING 104 PERCENT OF THE UPSIDE. SO AGAIN WE WANT. I ALMOST EXPECT THAT DOWN MARKET CAPTURE TO BE A LITTLE BIT LOWER AND THE UP MARKET TO BE A LITTLE BIT LOWER. BUT I'M STILL HAPPY WITH THE RELATIONSHIP WE HAVE HERE. WE'RE PROTECTING THE ASSETS WHEN THE MARKET GOES DOWN AND WE'RE GAINING A LITTLE BIT MORE THAN THE MARKET WHEN THE MARKET GOES UP.
SO WHAT THAT MEANS IS A LITTLE LESS HOPEFULLY OVER THE LONG TERM A LITTLE LESS VOLATILITY A LITTLE LESS RISK ANYWAY. THAT'S REALLY ALL I HAD. AS I SAID WE'VE HAD A COMBINATION OF TWO THINGS. WE'VE HAD NICE BULL MARKETS FOR THE MAJORITY OF THE LAST DECADE WHICH IS ONE OF THE REASON I'M STILL WORKING AND I HOPE WE CAN GET
[00:50:05]
ANOTHER DECADE OUT OF IT. BUT AND ALSO WE'VE HAD PRETTY GOOD EXPERIENCE WITH THE MANAGERS THAT WE'VE HAD IN PLACE. IT DOESN'T MEAN WE HAVEN'T FIRED A COUPLE ALONG THE WAY OR THE BOARD HADN'T FIRED A FEW ALONG THE WAY AND REPLACED THEM WITH OTHER MANAGERS. BUT FOR THE MOST PART WE'VE HAD A PRETTY GOOD RUN THERE. ANSWER ANY QUESTIONS. OKAY AT THIS TIME IT'S TIME FOR THAT DIALOGUE.GO AHEAD. I JUST GOT ANOTHER QUESTION. YOU JUST MENTIONED YOU KNOW WE HAD ABOUT 10 YEARS OF PRETTY GOOD TIMES AND YOU KNOW THERE'S BEEN CHATTER OBVIOUSLY ON THE STREET OF THE FACT THAT WE HAVEN'T HAD ANY RECESSION FOR QUITE A WHILE. BUT THEY DO GO IN CYCLES. DO YOU FORESEE THAT AND HAVE YOU I GUESS FACTORED THAT INTO YOUR INVESTMENT PLAN GOING FORWARD. WE DON'T SEE A RECESSION ON THE NEAR-TERM HORIZON SO TO ANSWER THAT QUESTION. BUT EVEN IF WE DID WOULD WE CHANGE THIS DRAMATICALLY. NO. WOULD WE MAYBE LOWER OUR EQUITY EXPOSURE. YES. WOULD WE TAKE EQUITY IS OFF THE TABLE. NO WE DON'T MAKE DRAMATIC MOVES LIKE THAT. WE DON'T TRY TO TIME THE MARKETS BECAUSE YOU CAN'T DO IT. YOU JUST CAN'T DO IT AND I'LL GIVE YOU A GREAT EXAMPLE OF THAT. JUST THIS YEAR CALENDAR YEAR NOT YOUR FISCAL YEAR BUT JANUARY 1 HOW MANY PEOPLE WOULD HAVE SAT HERE AND SAID THE BOND MARKET IS GOING TO BE UP 8 PERCENT AND STOCKS ARE GONNA BE UP 18 PERCENT BY JUNE 30TH. YOU WOULDN'T HAVE FOUND ANYBODY TO MAKE THAT KIND OF PROJECTION. AND THAT'S EXACTLY WHAT THEY WERE FIRST SIX MONTHS OF THIS YEAR BONDS ARE ACTUALLY UP 8 PERCENT IF YOU'RE NOT FAMILIAR WITH HOW BONDS WORK YOU KNOW WHEN INTEREST RATES GO DOWN THE MARKET VALUE OF THE BOND GOES UP. SO YOU HAVE YOUR 2 PERCENT COUPONS OR 3 PERCENT COUPONS AND THEN YOU HAVE APPRECIATION. YOU DIDN'T HAVE TO. WE DIDN'T HAVE ANY BOND MANAGERS CALLING FOR RATES TO COME DOWN FIRST SIX MONTHS OF THE YEAR. SO MY POINT IS IT'S VERY HARD TO PREDICT AND YOU CAN'T REALLY MANAGE A PORTFOLIO YOU CAN'T SET A TARGET OF SEVEN AND THREE QUARTERS AND MANAGE A PORTFOLIO FOR BLACK SWAN EVENTS OR 2008 EVENTS THEY'RE GOING TO HAPPEN. THEY'RE FOR STANDARD DEVIATION EVENTS AND THEY ARE GOING TO HAPPEN BUT BY DEFINITION FOR STANDARD DEVIATION EVENTS ARE UNPREDICTABLE. AND SO I DON'T REALLY AGREE WITH THE PUNDITS. A LOT OF THE PUNDITS HAVE BEEN SO WRONG OVER THE LAST YOU KNOW THEY HAVE BEEN CALLING FOR A RECESSION FOR SEVERAL YEARS MOST OF THEM QUITE A WHILE. WHAT I DO KNOW IS WE ARE IN A VERY LONG BULL MARKET. THAT CONCERNS ME. BUT IF YOU GET RID OF ALL THE NOISE AND THAT'S HARD TO DO ESPECIALLY WITH THIS ADMINISTRATION AND THERE'S A LOT OF NOISE A LOT OF TWEETS A LOT OF BACK AND FORTH.BUT IF YOU GET RID OF ALL THE NOISE AND JUST TAKE A LOOK AT FUNDAMENTALS THE FUNDAMENTALS ARE GOOD. EARNINGS ARE COMING IN STRONG. YOU SEE THE NUMBERS ON THE ECONOMY YOU SEE THE UNEMPLOYMENT NUMBERS. WE'RE STARTING TO SEE A LITTLE BIT OF INFLATION AND THAT'S A GOOD THING NOT A BAD THING. BUT INTEREST RATES ARE STAYING VERY LOW FOR A LOT OF DIFFERENT REASONS. BUT THEY'RE GOING TO STAY LOW I THINK FOR QUITE A WHILE AND AS LONG AS THEY STAY IN AT THAT LEVEL I WOULD ARGUE THAT THE VALUATION PERSPECTIVE ANYWAY ON STOCKS THEY'RE CHEAP THEY'RE ACTUALLY PRETTY CHEAP MAYBE CLOSE TO FAIRLY VALUED BUT MAYBE A 10 OR 15 PERCENT DISCOUNT OVERALL WOULD BE KIND OF WAY I'D LOOK AT IT. SO IT WILL HAPPEN. THERE WILL BE A RECESSION WHETHER IT'S IN ONE YEAR TWO YEARS THREE YEARS OR 10 YEARS. I CAN'T TELL YOU BUT I KNOW THAT WE JUST HAVE TO KIND OF STAY THE COURSE WHEN IT GETS NOISY LIKE THIS AND JUST TRY TO GO BACK TO FUNDAMENTALS AND SEE WHAT WE THINK IS GOING TO WORK. I'M JUST CURIOUS WHAT WHY WOULD YOU SAY THAT THE INFLATION SITUATION THAT WE HAVE IS A GOOD THING BEING THAT DOES ERODE BUYING POWER. A LITTLE BIT OF INFLATION IS HEALTHY BECAUSE IF YOU GET NO INFLATION YOU'LL HAVE NO INVESTMENT. YOU WON'T SEE REAL ESTATE DO ANYTHING YOU WON'T SEE YOU KNOW PEOPLE WILL BE HOARDING THEIR MONEY RATHER THAN TRYING TO SPEND IT OR TRYING TO INVEST IT. SO I THINK THE FED IS TRYING TO GET THE FED TO TARGET WOULD BE 2 PERCENT OR SO. AND I THINK WE'RE RUNNING PRETTY CLOSE TO THAT. YOU KNOW THE FED GETS A LOT OF GRIEF NOT ONLY FROM TRUMP BUT FROM A LOT OF PEOPLE. BUT IF YOU ACTUALLY LOOK BACK OVER THE LAST 10 YEARS I WOULD ARGUE THEY'VE DONE A GREAT JOB AND I MIGHT BE IN A MINORITY THERE BUT I THINK THE FED'S DONE A REALLY GOOD JOB. THEY HAVE MANAGED IT. AND THE PROOF IS IN THE NUMBERS. WE'VE GOT A STRONG ECONOMY. THE GROWTH HAS TICKED UP A LITTLE BIT NOW TO CLOSER TO 3 PERCENT MAYBE A LITTLE OVER DEPENDING ON WHICH QUARTER THEY'RE REPORTING. BUT WE'VE GOT FAIRLY DECENT GDP GROWTH VERY VERY LOW UNEMPLOYMENT WHICH NORMALLY WOULD PRODUCE A RISK OR SCARE OF INFLATION. BUT THE WAGES ARE STARTING TO TICK UP A LITTLE BIT NOW PARTICULARLY FOR THE LOWER EARNERS.
[00:55:02]
IT'S STARTING TO TICK UP A LITTLE BIT. SO IT HASN'T REALLY CAUSED A LOT OF INFLATION BUT WE'RE SEEING YOU KNOW MAYBE THE 2 PERCENT GET A LITTLE CLOSER TO THEIR TARGET OF 2 PERCENT. SO TO ME WE'RE KIND OF IN A SWEET SPOT. I DON'T KNOW HOW LONG WE'LL STAY THERE BUT I LIKE WHERE WE ARE RIGHT NOW. THAT'S ALL I GOT MAYOR. THANK YOU. ANY OTHER ANYBODY ELSE. NO. ANYTHING FROM THIS SIDE. IF NOT I GUESS WE'RE GOING INTO PUBLIC COMMENTS. WE HAVE TWO PUBLIC FROM THE PUBLIC. OK. I THINK THAT WHEN IT COMES TO INVEST SPECIFICALLY WITH PLANS BECAUSE I GET TO SEE A LOT OF THE ONES ACROSS THE NATION. BACK WHEN 07 08 AND 09 IT WAS A NIGHTMARE. IT WASN'T ABOUT WHAT COUNCILMAN SANTIAGO HAD JUST MENTIONED YOU DON'T HIT THE PANIC BUTTON BECAUSE THIS WHOLE THING IS ABOUT SMOOTHING IT OUT OVER TIME. AND THE PLAN ADJUSTS ACCORDING OR THE INVESTMENTS THAT WE HAVE IN PLAY ARE TO GO OVER LONGEVITY IS NOT ABOUT ONE PARTICULAR YEAR BECAUSE YOU SAW THERE IN 2008 IT WAS LIKE IT'S WHAT 15 PERCENT OR SOMETHING ON THE NEGATIVE SIDE. BUT OVER TIME IF YOU ALLOW THE PLAN TO WORK FOR ITSELF IT'S GONNA MAKE UP THE DIFFERENCE.IT'S NOT ABOUT ONE PARTICULAR YEAR IT'S ABOUT 5, 10, 15, 20 YEARS OUT AND THAT'S WHY THE ACTUARY DOES IT ACCORDING TO THAT TABLE TO ALLOW YOU TO UNDERSTAND THAT THE CITY SIDE OF IT THAT HAS TO INVEST INTO THE PLAN IS GOING TO FLUCTUATE AND SOMETIMES IT'S GOING TO BE HIGHER SOMETIMES IT'S GOING TO BE LOWER. BUT THE THING IS TO HAVE A HEALTHY PLAN AND I BELIEVE THAT WE'VE BEEN GOOD STEWARDS OF THAT. THE MEMBERS OF THE PENSION BOARD. SO THAT'S ABOUT THE ONLY THING I HAVE TO ADD. COUNCILMAN SANTIAGO.
YEAH AND LET ME FIRST SAY THANK YOU. THANK YOU FOR THAT PRESENTATION. BOTH THE ACTUARY AND THE INVESTOR AND REALLY APPRECIATE YOU BRINGING THAT FORWARD AND INFORMING US AND THE PUBLIC WHOEVER IS HERE AND HOPEFULLY WATCHING WATCHING US. SO I REALLY DO APPRECIATE THAT. AND YOU GUYS DO A PHENOMENAL JOB. BY THE WAY THERE'S NO DOUBT ABOUT THAT I THINK ALL THE BOARD BY THE WAY ALL OF YOU HAVE BEEN DOING A PHENOMENAL JOB OF OVERSEEING THE PENSION FUND AND ENSURING THAT IT IS BEING MANAGED THE RIGHT WAY. SO I THANK YOU FOR THAT. MY ONLY CONCERN AND HAS NOTHING TO DO WITH THE BOTH OF YOU OR ANY OF YOU BUT SOMETHING THAT I HAVE SORT OF ECHOED YEAR OVER YEAR IS THE FACT THAT YOU KNOW WE DO HAVE MORE CONTRIBUTIONS GOING OUT THAN CONTRIBUTIONS GOING IN. AND SO WHILE WE'RE DOING A REALLY GOOD JOB OF ENSURING THAT WE HAVE THOSE CONSISTENT RETURNS IF IT'S NOT BECAUSE OF THOSE RETURNS THEN WE WILL HAVE AN ISSUE. WE'LL HAVE A PROBLEM. AND I DON'T SEE THAT AS BEING SUSTAINABLE. ESPECIALLY DURING A TIME IF WE HAD TO GO THROUGH ANOTHER EITHER I'M NOT EVEN TALKING ABOUT A RECESSION. JUST PERHAPS JUST A CORRECTION OF SOME SORT OR SOME LONG TIME OR YOU KNOW MAYBE A YEAR OR TWO OF CORRECTION AND THAT CAN AGAIN JUST CONTINUE TO PUT MORE OF A BURDEN ON THE CITY IN TERMS OF COST AND COVERING THOSE COSTS. SO BUT OVERALL I LIKE WHAT I SEE. YOU KNOW THE PENSION IS VERY VERY HEALTHY AND IT IS SO BECAUSE OF THE GREAT JOB THAT OUR ACTUARY AND I OUR INVESTOR IS DOING OVER HERE AND MAKING SURE THAT THOSE EARNINGS ARE COMING IN. I GUESS I'M A LITTLE BIT MORE CONSERVATIVE. I LIKE TO SEE MORE GOING IN THAN THERE ARE GOING OUT AND THEN SEEING THOSE EARNINGS ACTUALLY BEING THE CREAM ON THE TOP IF YOU WILL THAT WILL HELP NOT ONLY THE CITY SAVE MORE MONEY BUT ALSO KEEP THAT KEEP THAT PENSION FUND REALLY HEALTHY TO ENSURE THAT OUR POLICE AND FIREFIGHTERS YOU KNOW ARE CERTAIN THAT THEY'RE ALWAYS GOING TO GET THAT PAYCHECK FOR AS LONG AS THEY LIVE AND THAT TO ME IS THE NUMBER ONE CONCERN AND WHAT I ALWAYS LOOK AT IS TO ENSURE THAT YOU KNOW OUR MEN AND WOMEN IN UNIFORM ARE BEING TAKEN CARE OF EVEN AFTER THEY LEAVE SERVICE. SO THAT'S ALL I HAVE TO SAY. MAYOR I GUESS WE'RE
[01:00:08]
GOING TO HAVE A COUPLE COMMENTS HERE. I'LL GO AND ADD IT. YOU KNOW I DEFINITELY AGREE THAT IF WE HAVE A ANOTHER DOWNTURN THERE'S GOING TO BE INCREASE IN WHAT WE'RE GOING TO PAY OUT. THE CITY IS GOING TO HAVE TO MAKE HIGHER CONTRIBUTIONS. PLEASED TO SEE THIS YEAR WAS SOMEWHAT MINOR AND THAT'S EVEN YOU KNOW DESPITE THE FACT THAT WE'VE TRIED TO EXPAND OUR FORCE ALTHOUGH THAT'S PROBABLY ACTUALLY HELPED US ADDING SOME NEW EMPLOYEES TO IT RIGHT NOW. BUT THE ONE THING TO ALSO REMEMBER THOSE. I THINK THAT THE INVESTMENT WE'VE DONE GREAT. I MEAN OBVIOUSLY THE NUMBERS ARE THERE I MEAN I'M NOT AN AUDITOR TO MAKE SURE THAT THOSE NUMBERS ARE ACCURATE BUT THAT'S KIND OF ALMOST HARD TO BELIEVE THAT WE'RE NOW DOING THAT WELL ON OUR RETURNS ON OUR INVESTMENT SIDE. SO KUDOS ON THAT. I THINK THAT THAT'S CERTAINLY A GREAT THING BUT CERTAINLY IT WOULD NOT BE 90 PERCENT FUNDED TODAY WITHOUT THE PENSION OBLIGATION BOND. SO WITHOUT A CASH INFUSION AT SOME POINT IN TIME WHICH IS A WHOLE DIFFERENT. I KNOW IT'S A WHOLE DIFFERENT THING AND IT'S SOMETHING THAT'S THERE WHETHER WE LIKE IT OR NOT IT'S THERE AND THAT'S ANOTHER SET OF PAYMENTS WE WOULD HAVE. SO THERE ARE 2.5 AND WHATEVER IS TOO ABOUT FOUR AND A HALF MILLION DOLLARS IS THAT CORRECT. TOTAL CONTRIBUTIONS THIS YEAR. IT WOULD BE MUCH HIGHER OR EITHER OUR FUND BALANCE WOULD BE MUCH LOWER. BUT YOU KNOW THAT'S THERE. IT'S KIND OF A FIXED COST I MEAN IT'S A FIXED THING NOW BUT IT'S JUST SOMETHING JUST TO REMIND OURSELVES THAT YOU KNOW WE'RE DOING WELL. BUT THERE'S ALSO ANOTHER COST OUTSIDE OF WHAT WE'RE TALKING ABOUT IN THIS PENSION BOARD THAT THE CITY'S STILL PAYING ON RESPONSIBLE FOR ACCRUING INTEREST GOING THE OTHER WAY. SO ANYWAY I JUST WANT TO MAKE SURE I MENTIONED THAT AND OTHERWISE JUST MAKE SURE I THANK YOU GENTLEMEN FOR YOUR PRESENTATIONS. AND ON THAT NOTE MEETING ADJOURNED.* This transcript was compiled from uncorrected Closed Captioning.