[00:00:01]
HOC COMMITTEE ON THE PENSION TO ORDER[Ad Hoc Committee on Pensions on October 12, 2023. ]
FIRST ORDER OF BUSINESS IS, UH, MINUTES.CAN WE GET A MOTION FOR THE MINUTES? SO MOVED.
FIRST ITEM WE GOT ON THE BRIEFING IS THE EMPLOYEE'S RETIREMENT FUND OF THE CITY OF DALLAS, CHERYL AND DAVID HENDRICK.
WELL, GOOD AFTERNOON, UH, CHAIR, ATKINS AND COMMITTEE MEMBERS.
MY NAME IS CHERYL ALSTON AND I AM THE EXECUTIVE DIRECTOR OF THE EMPLOYEE'S RETIREMENT FUND, THE CITY OF DALLAS.
AND I'M JOINED TODAY BY DAVID ETHRIDGE, THE DEPUTY DIRECTOR FOR THE FUND.
OUR PRESENTATION TODAY WILL PROVIDE AN OVERVIEW OF THE DALLAS E R F AND WE ARE GONNA COVER THREE AREAS.
FIRST, WE'RE GONNA PROVIDE AN UPDATE ON THE CURRENT STATE OF THE FUND.
SECOND, WE'RE GONNA PROVIDE A HISTORICAL REVIEW OF THE CHANGES TO THE PLAN OVER THE LAST 20 YEARS.
AND THEN FINALLY, WE'RE GONNA PROVIDE AN OVERVIEW OF THE NEW REQUIREMENTS FOR THE FUNDING SOUNDNESS RESTORATION PLAN, AND THE STEPS TO MEET THOSE REQUIREMENTS.
ON THE FIRST SLIDE, OUR BACKGROUND IN HISTORY.
UH, THE EMPLOYEE'S RETIREMENT FUND WAS ESTABLISHED IN 1944 AS A DEFINED BENEFIT FUND FOR THE CIVILIAN EMPLOYEES.
NOW, AS YOU KNOW, THE FUND PROVIDES, UH, RETIREMENT BENEFITS AS WELL AS DISABILITY AND DEATH BENEFITS FOR OUR MEMBERS.
WE ARE COVERED BY A SEVEN MEMBER BOARD, WHICH I'M GONNA COVER IN DETAIL ON THE NEXT SLIDE.
UM, AS YOU KNOW, THE CITY OF DALLAS DOES NOT PARTICIPATE IN SOCIAL SECURITY.
UH, DALLAS, E R F DOES NOT HAVE AND HAS NEVER HAD A DROP PROGRAM.
AND OUR COST OF LIVING ADJUSTMENTS ARE BASED ON C P I AND WHAT'S IMPORTANT TO KNOW ABOUT OUR COLAS AS THEY'RE APPLIED TO THE BASE AMOUNT AND THEY'RE NOT COMPOUNDED.
SO, A LITTLE BIT ABOUT THE GOVERNANCE FOR THE FUND.
UM, OUR SEVEN MEMBER BOARD HAS OVER 100 YEARS OF FINANCE AND INVESTMENT EXPERTISE.
THE COMPOSITION OF THE BOARD IS THE FOLLOWING.
THERE ARE THREE THAT ARE APPOINTED BY THE CITY COUNCIL AND, UH, HENRY VERA, WHO IS CURRENTLY CHAIR OF THE BOARD, DR.
JOHN PEEVY, WHO IS CURRENTLY VICE CHAIR OF THE BOARD.
WE HAVE THREE ELECTED BY THE EMPLOYEES.
AND THE EMPLOYEES, VERY IMPORTANT TO NOTE, THEY MUST BE FROM DIFFERENT DEPARTMENTS.
SO IF WE HAVE SOMEONE FROM THE WATER DEPARTMENT, WE CAN'T.
THE SECOND AND THIRD CANNOT BE FROM THE WATER DEPARTMENT.
UH, THIS IS ONE OF THE FEW BOARDS THAT ACTUALLY THE MEMBERS ELECT REPRESENTATIVES.
UM, IT'S REALLY IMPORTANT 'CAUSE IN 2022, THE EMPLOYEES CONTRIBUTED OVER $63 MILLION.
SO THIS IS THEIR REPRESENTATION ON THE BOARD.
AND THE SEVENTH SEAT IS THE CITY AUDITOR THAT SERVES BY VIRTUE OF HIS POSITION AND IS IN HIS POSITION AS THE AUDITOR.
HE IS ONE APPOINTED BY THE COUNCIL, BUT IS ALSO AN EMPLOYEE.
SO WE, UH, AND THE TRUSTEES ARE CONSIDERED FIDUCIARIES OF FUND AND HAD THE SAME FIDUCIARY DUTIES.
UM, AS, AS YOU ARE FAMILIAR WITH NEXT SLIDE, THIS REALLY DEPICTS, UM, THE LONG-TERM HORIZON FOR THE FUND.
YOU'LL SEE THAT THE FUND WAS ESTABLISHED IN 1944.
AND OVER THAT TIMEFRAME, THE FUND HAS LASTED THROUGH SIGNIFICANT FINANCIAL EVENTS.
THREE WARS, GLOBAL FINANCIAL CRISIS, GLOBAL PANDEMIC.
UM, BUT IT REALLY WANTS, UH, THE SLIDE IS, UH, FOCUSING ON THE FACT THAT WE LOOK AT OUR PLAN FOR THE LONG TERM.
WE'RE LOOKING AT A 30 TO 50 YEAR HORIZON, UH, WHEN WE LOOK DO PLANNING FOR THE FUND.
UH, I WANNA SPEND A MINUTE ON OUR INVESTMENT PORTFOLIO.
UH, THIS SLIDE SHOWS 27 YEARS OF INVESTMENT RETURNS FOR THE FUND.
UH, PLEASE NOTE THAT 15 OF THE 27 YEARS, WE'VE HAD DOUBLE DIGIT RETURNS.
17 OF THE 27 YEARS, WE EXCEEDED OUR ACTUAL RATE OF RETURN OF 7.25%, TWO 5%.
THE DOWN YEARS, YOU'LL SEE, WHICH YOU REMEMBER, 2000 TO 2002, THAT WAS THE TECH BUBBLE.
2008, WHICH WE ALL REMEMBER WAS A GREAT FINANCIAL RECESSION.
AND WHEN YOU THINK OF 2000, MORE RECENTLY, 2022, UM, DUE TO THE RISE IN INFLATION, THE STOCK HAD THE WORST, UM, PERIOD SINCE 2008.
AND SO JUST TO GIVE CONTEXT, WE WERE DOWN 8%.
THE S AND P 500 WAS DOWN 18%, AND THE NASDAQ WAS DOWN 33%.
SO IT JUST PROVIDES YOU CONTEXT, THE FACT THAT WE HAVE A DIVERSIFIED PORTFOLIO THAT HELPS WEATHER, UH, THE GOOD AND BAD TIMES.
THIS IS A REAL PICK OF OUR, UM, PORTFOLIO.
WE DO HAVE A CONSERVATIVE DIVERSIFIED PORTFOLIO.
WE HAVE 80% OF THE PORTFOLIO THAT IS NOT IN, UM, KIND OF LONG TERM LIKE PRIVATE EQUITY.
UM, SO IF WE HAD TO LIQUIDATE THE PORTFOLIO, UH, WE COULD DO IT PRETTY RELATIVELY QUICKLY.
OUR BOARD CONDUCTS AN ASSET ALLOCATION EVERY YEAR, AND THE PORTFOLIO IS NOW TILTED TO INFLATION, HEDGING
[00:05:01]
AND RISK REDUCTION.THE BOARD REALLY WANTED TO TAKE SOME RISK OFF THE TABLE.
SO FOR THE ONE YEAR, 7.16% THREE YEARS, 8.27%, 10 YEARS, 6.59.
AND SINCE INCEPTION, UH, 8.7% RETURN, UH, WE CURRENTLY HAVE $3.6 BILLION IN ASSETS UNDER MANAGEMENT.
UH, MOVING TO, FROM INVESTMENTS TO KIND OF THE ACTUARIAL SIDE OF THE HOUSE.
WE CONDUCT AN ACTUARIAL EVALUATION EVERY YEAR.
UH, AND WE ALSO CONDUCT AN EXPERIENCE STUDY EVERY FIVE YEARS.
SO WHAT'S AN EXPERIENCE STUDY? SO WHAT WE DO IS WE LOOK AT TWO CLASSES OF ACTUARIAL ASSUMPTIONS.
WE LOOK AT THE DEMOGRAPHIC ASSUMPTIONS, AND WE LOOK AT THE ECONOMIC ASSUMPTIONS, AND WE LOOK TO SEE WHAT DID WE ASSUME VERSUS WHAT REALLY HAPPENED.
AND BASED ON THAT ANALYSIS WITH THE ACTUARY, THE BOARD WILL MAKE ADJUSTMENTS TO THE ASSUMPTIONS.
IN ADDITION TO THAT, WE ALSO DO AN INDEPENDENT PEER REVIEW.
SO EVERY FIVE YEARS, WE ACTUALLY TAKE ALL OF OUR DATA, WE GIVE IT TO A COMPLETELY INDEPENDENT ACTUARY, THEY HAVE TO RUN IT THROUGH THEIR SYSTEM AND COME UP WITH THE SAME RESULTS.
AND THOSE ARE AS ALSO REVIEWED WITH THE BOARD AS WELL.
SO OUR LAST ACTUAL EVALUATION SUMMARY.
UH, WE LOOKED AT OBVIOUSLY THE LIABILITIES.
OUR, OUR, OUR CONTRIBUTION RATE.
UM, THE RESULTS WERE, OUR UNFUNDED LIABILITY WAS 1.4 BILLION.
OUR VALUE OF ASSETS 3.866, AND THE ACTUAL VARI LIABILITIES IS FIVE POINT, UM, TWO SEVEN.
SO OUR FUNDED RATIO IS 73% AS OF 2022.
THIS GIVES A GLIMPSE OF OUR MEMBERS, OUR ACTIVE, RETIRED, RETIRED AND INACTIVE MEMBERS.
AND YOU'LL SEE THAT THE DALLAS, THE F SERVES 16,000 MEMBERS.
IT SHOWS A TREND IN ACTIVE RETIREE AND INACTIVE.
AND A REALLY IMPORTANT NOTE IS THAT THE AVERAGE RETIREMENT BENEFIT FOR A RETIREE IS $39,000.
SO IT'S, IT'S A REASONABLE BENEFIT.
AND, UM, SO THIS PART CONCLUDES KIND OF THE OVERVIEW OF THE CURRENT STATE OF THE FUND.
I'M GONNA MOVE NOW TO THE NEXT SLIDE, WHICH REALLY LOOKS AT THE HISTORICAL CHANGES THAT WE'VE MADE TO THE PLAN.
SO IN 2004, A STUDY COMMITTEE WAS FORMED, UM, AND THE STUDY COMMITTEE WAS CREATED BY, UH, THE COUNCIL.
AND IT CONSISTED OF MEMBERS FROM THE CITY STAFF, UH, E R F AND, AND ALSO OUTSIDE, UM, EXPERTS.
AND SO WE, THEY LOOKED AT EVERY SOLUTION, UM, EVERY POSSIBLE OPTION, UH, TO REDUCE THE UNFUNDED ACTUARIAL CRY LIABILITY.
AND WHAT THEY RECOMMENDED TO THE COUNCIL IN 2004 WAS THE FOLLOWING.
FIRST, THEY RECOMMENDED ISSUING PENSION OBLIGATION BONDS TO FULLY FUND THE UNFUNDED ACTUARIAL ACCRUED LIABILITY.
THEY ALSO, UH, BELIEVED IN THE, MAINTAINED THE CONTRIBUTION RATE.
SO 63% COMES FROM THE CITY AND 37% FROM THE EMPLOYEES.
THEY ALSO, UH, ADDED AN AUTOMATIC CONTRIBUTION RATE ADJUSTMENT.
SO, UH, TO THE PLAN, UH, ONE IMPORTANT NOTE IS THEY ALSO RECOMMENDED ADDING THE ANNUAL DEBT SERVICE PAYMENTS FOR THE PABS TO THE CITY'S REQUIRED CONTRIBUTION.
AND WE'LL SHOW, SHOW YOU HOW THAT LOOKS.
AND THEY ALSO RECOMMENDED CAPPING THE TOTAL CONTRIBUTION RATE AT 36%.
SO IF WE GO TO THE NEXT SLIDE, IT WALKS THROUGH AND I'LL WALK THROUGH THIS, WE'LL JUST FOCUS ON 2023.
SO THE PRIOR ADJUSTED TOTAL OBLIGATION RATE, WE TALKED ABOUT THE CAP AT 36%.
THAT'S WHERE THE CAP IS RIGHT NOW FOR, UH, LAST YEAR.
NOW, IF YOU LOOK AT THE ACTUARILY REQUIRED CONTRIBUTION RATE FOR THE FUND IS 35.5.
SO IT'S ACTUALLY LOWER THAN THE CAP.
NOW WE'VE MOVED TO THE DEBT SERVICE.
SO THE DEBT SERVICE, UH, PAYMENTS OF $40 MILLION.
WE RECEIVE A SCHEDULE FROM THE CITY OF WHAT THE DEBT SERVICE PAYMENTS ARE, AS WELL AS WHAT THE PROJECTED PAYROLL WILL BE.
WE TAKE THE, UH, DEBT SERVICE PAYMENT DIVIDED BY THE PAYROLL AND COME UP WITH A CREDIT RATE OF 8.22%.
SO IF YOU ADD THE 35.5 TO THE 8.2, YOU COME WITH A CURRENT TOTAL OBLIGATION RATE AT 43.72%.
SO THAT IS WHAT'S NEEDED FOR THE FUND.
BUT REMEMBER, IT'S KEPT AT 36%.
SO IF YOU LOOK AT THE CONTRIBUTION RATE SPLIT, THE EMPLOYEES ARE PAYING 13.32%.
THE CITY'S OBLIGATION IS 22.68%.
BUT REMEMBER, WE MINUS OUT THE 8.2% FOR THE BONDS.
SO WHAT'S ACTUALLY COMING TO THE FUND IS 14.46%.
SO THINK ABOUT IN 2022, THE EMPLOYEES CONTRIBUTED 63 MILLION, THE CITY CONTRIBUTED 67 MILLION.
[00:10:01]
IF WE LOOK AT HOW, SO THE QUESTION, QUESTION, HOW DOES THIS COMPARE TO OTHER MAJOR CITIES THAT ARE IN TEXAS? UM, AND YOU CAN SEE, UM, WE LOOKED AT CONTRIBUTION TO THE RETIREMENT PLAN.SOME CITIES, AUSTIN AND HOUSTON ALSO HAVE SOCIAL SECURITY.
AND THEN WE LOOK AT THE TOTAL CONTRIBUTION.
SO YOU'LL SEE THAT THE 22.68% IS, UM, THE LOWEST CONTRIBUTION FROM ALL THE MAJOR CITIES.
AND THAT'S INCLUDING THE, THE BOND PAYMENT AS WELL.
AND THE CITY OF HOUSTON'S AT 35.
SO, MR. CHAIR AND COUNCIL MEMBERS, WE'RE NOT GONNA CONTINUE THE HISTORICAL PERSPECTIVE OF THE FUND, AND WE'RE GONNA TALK TO YOU A LITTLE BIT MORE ABOUT HOW WE MANAGE THE FUND, WHAT FACTORS WE CONSIDER.
SO THE FIRST SLIDE THAT YOU SEE IS WHAT PENSION CONSULTANTS REFER TO AS THE SEESAW, UH, EFFECT, WHICH BASICALLY FORCES US TO LOOK AT, UH, ADDITIONAL LIABILITIES AND ALSO ASSETS, WHETHER THEY INCREASE OR DECREASE.
FOR THIS EXAMPLE, IN THIS ILLUSTRATION, WE'RE JUST GONNA REALLY TALK ABOUT ADDITIONAL LIABILITIES AND THE REDUCTION OF ASSETS.
SO WHEN YOU LOOK AT THE LEFT OF THE CHART, JUST A FEW EXAMPLES, YOU'LL SEE THAT LONGER LIFE EXPECTANCY ACTUALLY INCREASES LIABILITIES, BECAUSE THAT MEANS THE PENSION FUND HAS TO PAY OUT MORE FOR A LONGER PERIOD OF TIME.
WHEN YOU THINK ABOUT THE INFLATION RATES, IF THE ACTUARY HAS ASSUMED ONE RATE, UM, BUT THE FEDERAL GOVERNMENT HAS DECIDED TO INCREASE THAT RATE, THAT IS ANOTHER, ANOTHER POTENTIAL LIABILITY THAT WE HAVE TO MANAGE AS AN INCREASE.
UM, THE OTHER ONE IS, IT'S A LITTLE BIT UNIQUE BECAUSE SOMETIMES, UH, IT'S A LITTLE BIT CONFUSING.
BUT IF YOU THINK ABOUT THE RATE OF RETURN, YOU KNOW, YOU THINK ABOUT THE RATE OF RETURN AND WHAT'S EXPECTED IN THIS EXAMPLE, A 8.5% RATE OF RETURN, IF IT'S REDUCED, AND THIS EXAMPLE, THE 7.25%, IT ACTUALLY INCREASES LIABILITIES BECAUSE THE ASSUMPTION IS WE CAN ONLY EARN AT 7.25% NO LONGER AT THE 8.5.
SO WE STUDY THESE FACTORS ON LIABILITIES ON THE ASSET SIDE.
UH, AND I'M REALLY WALKING YOU THROUGH THIS BECAUSE THE EXAMPLES THAT ARE FORTHCOMING, UH, YOU'RE GONNA HEAR SOME OF THEM AS IT RELATES TO, UH, WHAT WE DO WITH THIS, UH, SEESAW EFFECT.
WHEN WE THINK ABOUT THE PLAN TO HAVE A RATE OF RETURN, IF THE PERFORMANCE COMES IN LESS THAN THAT ACTUALLY REDUCES THE ASSETS.
BUT ONE OF THE MOST IMPORTANT, UH, FACTORS THAT WE HAVE TO CONSIDER IN OUR ASSETS IS WHAT, UH, YOU'RE GONNA REALLY HEAR US TALK ABOUT.
AND THAT IS THE CONTRIBUTION MADE RELATED TO PAYROLL.
IF THAT REDUCES, THAT CERTAINLY IS A WAY TO REDUCE, UH, THE FUND'S ACCESS ACCESS.
ON THE NEXT SLIDE, THIS SLIDE REALLY TALKS ABOUT ANOTHER FACTOR.
UH, WE TALKED ABOUT LIFE EXPECTANCY, BUT WE WANTED TO GIVE YOU SOME STATISTICS ON, UH, LIFE EXPECTANCY.
IN 2015, E R F RECEIVED NOTICE FROM THE ACTUARY THAT WE REALLY NEEDED TO STUDY LIFE EXPECTANCY.
IF YOU LOOK AT THIS CHART, YOU'LL SEE THAT THERE'S A LINE FOR FEMALES AND A LINE FOR MEN.
UH, THE FEMALES IN, IN 1960, FOR EXAMPLE, WERE LIVING 15.8 YEARS BEYOND THE AGE OF 65.
LIKEWISE, MEN WERE LIVING 13 YEARS BEYOND THE AGE OF 65.
BUT IF WE FAST FORWARD TO 2010, WE'LL SEE THAT THE LIFE EXPECTANCY FOR WOMEN INCREASED BY 22%, UH, WITH THE 20.3 YEARS OF, UH, OF AGE.
AND THEN FOR MEN, 17.7 YEARS, THAT IS A SIGNIFICANT GROWTH.
OVER TIME, WE, WE KNOW THAT IT'S SEVERAL DECADES.
WE, IT'S A FACTOR THAT THE FUND HAD TO MANAGE.
SO LET'S LOOK AT SOME OF THE STATISTICS FOR THE EMPLOYEE'S RETIREMENT FUND.
ON THE NEXT SLIDE, YOU'LL SEE THAT THE OLDEST EMPLOYEE WAS, IS BORN, OR WAS BORN IN 1939, STILL WORKS FOR THE CITY OF DALLAS AT THE AGE OF 83, LIVING LONGER, WORKING LONGER.
UH, THE YOUNGEST EMPLOYEE WAS BORN IN 2004, BUT THE OLDEST RETIREE WAS BORN IN 1922.
AND THAT PARTICULAR PERSON IS 100 YEARS OLD.
NOW, YOU MAY SAY, WELL, THESE ARE ANOMALIES TO US.
THESE ARE INDICATORS THAT WE REALLY HAVE TO GOVERN, AND THEY BECOME THE FACTORS THAT HELP US TO MANAGE BETTER.
UH, JUST TO HIGHLIGHT A FEW MORE, THE OLDEST BENEFICIARY WAS BORN IN 1914 AT A HUNDRED, UH, AND EIGHT YEARS OF AGE.
UH, AND THAT THE 18 RETIREES HAVE BEEN IN PAYMENT STATUS FOR MORE THAN 40 YEARS.
AND THE OTHER THING THAT WE LOOK AT IS THE SECOND TO THE LAST BULLET.
RIGHT NOW WE HAVE 1100 EMPLOYEES APPROXIMATELY, WHO ARE ELIGIBLE TO RETIRE.
SO WE LOOK AT ALL THESE FACTORS TO GOVERN, UH, AND TO BETTER UNDERSTAND.
SO ON THE NEXT SLIDE, WHAT WE WANNA SHARE WITH YOU IS WHAT THE FUNDING SOUNDING RESTORATION PLAN REQUIREMENTS REALLY ARE, AND WHAT DOES IT MEAN, AND THEN WHAT DOES IT MEAN TO THE FUND.
IN 2015, THE TEXAS, UH, LEGISLATORS
[00:15:01]
DECIDED TO IMPLEMENT A NEW BILL THAT REQUIRED ALL PENSION FUNDS TO BASICALLY LOOK AT, QUITE FRANKLY, A 30 YEAR AMORTIZATION REGARDLESS OF THE CAUSE.AND THAT IF THE PENSION PLANS DID NOT MEET THAT EXPECTANCY OVER A THREE VALUATION YEAR PERIOD, THAT A PLAN HAD TO BE PUT IN PLACE.
AND THUS, THE FUNDING SIGNED THIS RESTORATION PLAN.
SO WHAT DID E R F DO? 2015 U R F DID A NUMBER OF THINGS, BUT FIRST THEY ADOPTED A MORE CONSERVATIVE, UH, SET OF ASSUMPTIONS LOWERING THE ACTUARIAL RATE OF RETURN FROM 8% TO 7.75%.
UH, THEY ADOPTED A NEW, WE ADOPTED A NEW MORTALITY TABLE CALLED GENERATIONAL MORTALITY RECOMMENDED BY THE SOCIETY OF ACTUARIES.
TIED BACK TO THE SLIDE PREVIOUSLY MENTIONED.
AND THEN, UH, WE ALSO LOOKED AT A STRATEGY GOING FORWARD ON THE NEXT SLIDE.
AND WHAT YOU WILL SEE IS, UH, THE BOARD, THE E R F BOARD, DECIDED TO ESTABLISH A PENSION PLAN STUDY GROUP.
THE PURPOSE OF THIS PENSION PLAN STUDY GROUP WAS TO LOOK AND EVALUATE VARIOUS SCENARIOS TO DETERMINE HOW WE COULD ACTUALLY REDUCE THE OVERALL LIABILITY OVER TIME.
SO I WON'T GO THROUGH THE FIVE THINGS WE DID, BUT I WILL JUST HIGHLIGHT, WE LOOKED AT THE AGE OF 65 AND BEYOND USING ACTUARIAL BASED DATA.
UH, WE LOOKED AT SEVERAL SCENARIOS.
I THINK AT THE TIME WE HAD APPROXIMATELY 67 DIFFERENT SCENARIOS THAT OUR ACTUARY ACTUARY, UH, WALKED US THROUGH, UH, WITH THE HOPES THAT WE COULD REDUCE LIABILITY.
UM, AND WE DID A STATEWIDE COMPARISON, UH, SIMILAR TO WHAT YOU HEARD CHERYLL MENTION EARLIER.
SO BASED ON THE STUDY, UH, THE, THE COMMITTEE ESTABLISHED RECOMMENDATIONS PRESENTED TO THE BOARD, PRESENTED TO THE COUNCIL, AND AS A RESULT, DETERMINED THAT ESTABLISHING ANOTHER TIER OF BENEFITS WOULD HELP REDUCE THE LIABILITY OVER TIME.
AND SO YOU'RE GONNA HEAR ABOUT TWO DIFFERENT TIERS OF BENEFITS.
ONE IS TIER A AND ONE IS TIER, ONE IS TIER B, BUT THE MAIN FOCUS WAS TO REDUCE NORMAL COSTS AND ALSO TO BASICALLY FIND SAVINGS.
AND THE PROJECTED SAVINGS WAS $2.15 BILLION OVER A 30 YEAR PERIOD.
SO WITHIN, UH, THE TRUST PLAN DOCUMENT THAT THE E R F BOARD MANAGES, UH, WHICH IS DALLAS CITY CODE CHAPTER 40 A, UH, CHAPTER 48 35, REQUIRES THAT THERE BE A THREE STEP PROCESS TO AMEND THE PLAN.
THE PROCESS, UH, INCLUDES THE E R F BOARD, THE CITY COUNCIL, AND THEN THE VOTERS AT LARGE.
AND SO THAT'S WHAT HAPPENED IN 2016.
UH, THE RECOMMENDATIONS WERE BROUGHT, UH, TO THE BOARD AGAIN, AND THEN OF COURSE, TO THE CITY COUNCIL.
IN AUGUST OF 2016, UH, THE BOARD AND COUNCIL AGREED UPON THIS NEW RECOMMENDED TIER, AND IT WAS SENT TO THE VOTERS IN NOVEMBER OF THAT SAME YEAR.
THE VOTERS VOTED 69% IN FAVOR OF THIS CHANGE.
AND AS A RESULT, JANUARY ONE, UH, 2017 FOR ALL NEW HIRES AT THAT TIME, THEY WERE TO, UH, ACCEPT THIS CONDITION OF EMPLOYMENT FOR TIER B AS WE KNOW IT TODAY.
SO ON THE NEXT SLIDE, YOU'LL SEE THE COMPARISON OF THE TWO TIERS, AND THAT'S ON SLIDE 20.
UH, THE, BASICALLY THE SLIDE, BASICALLY WE'LL SHARE WITH YOU THAT TIER A, UM, HAS A NUMBER OF FACTORS DIFFERENT FROM TIER B.
I'M JUST GONNA HIGHLIGHT A FEW.
WE KNOW THAT THE DATE OF THE EFFECT WAS ALL EMPLOYEES WORKING BEFORE DECEMBER 31ST, 2016, PARTICIPATED IN TIER A.
ALL OF THOSE AFTER TIER B, THE CHANGES, JUST TO GIVE YOU THREE OR FOUR, THE MULTIPLIER IN TIER A IS 2.75%, WHEREAS THE MULTIPLIER NOW IN TIER B IS 2.5%.
THE NORMAL RETIREMENT AGE, WHICH IS TRADITIONALLY AGED 60 INCREASE FOR TIER B TO AGE 65 WITH A GUARANTEED FIVE YEARS OF SERVICE.
AND THEN THE, UH, SERVICE RETIREMENT MOVED FROM 30 YEARS OF SERVICE TO 40, I'M SORRY, I'M SORRY, EXCUSE ME.
NORMAL RETIREMENT MOVED FROM AGE 60 TO 65, AND THEN THE SERVICE RE RETIREMENT MOVED FROM 30 YEARS TO 40 YEARS.
SO THESE ARE THE CHANGES THAT WE RECOMMENDED TO THE BOARD AND TO THE COUNCIL.
AND YOU CAN SEE THAT THE BALANCE OF THEM ARE THERE, BUT I IMAGINE THE BIG QUESTION IS WAS, WELL, WHAT WAS THE FORECAST AS MENTIONED? AND HOW DID YOU REALLY MEASURE THAT FORECAST? SO ON THE NEXT SLIDE, YOU'LL SEE THE ORIGINAL FORECASTED CHART.
AND THE CHART, AS YOU CAN SEE, WAS ON SLIDE 21, WAS TO REVIEW A 30 YEAR PLAN.
AND THE 30 YEAR PLAN SAYS, AS TIER A MEMBERS RETIRE AND TIER B MEMBERS INCREASE, THUS
[00:20:01]
THE SAVINGS.AND SO THE FORECAST WAS A $2.15 BILLION SAVINGS.
AND SO I'M SURE YOUR, YOUR QUESTION IS, WELL, DID IT WORK? IF YOU SEE ON THIS CHART, IF YOU LOOK AT BY THE SEVENTH YEAR, YOU'LL SEE THAT THE BLUE LINE, WHICH REPRESENTS TIER A AND THE PINK LINE REPRESENTS TIER B, BUT THE MOST IMPORTANT LINE IS THE GREEN LINE, AND THAT'S THE TIER A MEMBERS ROLLING OFF OF THE PLAN.
THE BLUE LINE REMAINING REPRESENTS THE SAVINGS, THE DIFFERENCE BETWEEN THE COST OF TIER B AND THE COST OF TIER A BASED ON THE ROLL OFF OF MEMBERS.
SO THE NEXT SLIDE ON SLIDE, UH, 22, UM, WE CAN SEE NOW WHERE ARE WE AS OF, UH, CALENDAR YEAR 2022 ON SLIDE 22.
WELL, I'LL, I'LL SLOW DOWN AND WAIT FOR THE DELAY.
UH, SO ON SLIDE 22, WHAT YOU'LL SEE IS, UM, IN 2022, YOU'LL SEE AS OF DECEMBER 31ST, 2022, TIER A MEMBERS ARE AT 52% OF THE MEMBERSHIP, AND TIER B MEMBERS ARE AT 48%.
SO THE HIRING RATE, THE CONDITION OF EMPLOYMENT FOR EVERYONE HIRED JANUARY 1ST, 2017 AND BEYOND, IT ACTUALLY HAS MATRICULATED THIS GOAL.
AND YES, THE PLAN IS WORKING OVER TIME, BUT IT DOES TAKE 30 YEARS TO SEE THE SAVINGS.
AND SO THAT'S THE POINT WE REALLY WANTED TO BRING TO YOUR ATTENTION.
SO ON SLIDE 23, HERE ARE THE NUMBERS THAT REALLY PROVE THAT THE SAVINGS ARE OCCURRING BASED ON LOOKING AT THE REDUCTION OF THE NORMAL COST.
IF YOU LOOK AT THIS CHART, UH, WHEN WE GET TO IT ON SLIDE 23, WHAT YOU'RE GONNA SEE IS THAT THE NORMAL COST ACTUALLY HAS REDUCED SINCE TIER B HAS BEEN PUT IN PLACE.
THE ONLY EXCEPTION WAS WHEN THE BOARD ELECTED TO ACTUALLY REDUCE ITS RATE OF RETURN.
REMEMBER, ON THAT SEESAW, THE RATE OF RETURN HAS ACTUALLY DECREASED.
THE LIABILITIES INCREASED FOR THE ONE YEAR.
YOU'LL SEE THAT IN 2020, REALLY STARTING IN 2019, THE ASSUMPTION DROVE THE NORMAL COST FROM 19.5, THE PREVIOUS 19.56, THE PREVIOUS YEAR, 19, UH, TWO 20.5 IN 2020.
SO THE PLAN, UH, THAT WAS ESTABLISHED IN 2016 IS STILL IN PLAY.
UM, BUT WE'RE STILL WORKING THROUGH A 30 YEAR PERIOD AND WE'RE IN THE SEVENTH YEAR.
AND SO WITH THAT, I'M GONNA TURN IT BACK TO CHERYL TO TALK ABOUT WHERE WE ARE NOW.
SO WE'RE GONNA MOVE TO THE THIRD AND FINAL PART OF THE PRESENTATION, WHICH REVIEWS THE STATE REQUIREMENTS AND THE PLAN TO MEET THOSE REQUIREMENTS.
SO IN 2023, THE P R B ISSUED GUIDELINES AROUND, UH, THE, WHAT WE CALL THE F SS R P REQUIREMENTS.
AND SO WITH THAT, UM, WHAT OUR GOAL IS IS, UH, FUNDING PERIOD, UM, BETWEEN 30 TO 40 YEARS, UH, WE RECEIVED A LETTER THAT WE ARE PART OF THE EXCEPTION, AND I THINK IT IS PART BECAUSE WE DID, WE'RE PROACTIVE IN DOING THE TIER B.
UM, SO, UH, THE GOAL IS TO GET TO AN F S R P BEFORE SEPTEMBER 1ST, 2025, AND WE WOULD REMAIN ELIGIBLE FOR THAT EXCEPTION FOR THE 30 YEAR, UM, PERIOD IF WE, IF IT HAPPENS AFTER SEPTEMBER 1ST, 2025.
NOW ALL PENSION PLANS HAVE TO ADHERE TO A 25 YEAR, WHICH IS A HIGHER BAR AMORTIZATION PERIOD.
SO WE REALLY WANNA MAKE SURE WE HIT THAT DEADLINE.
SO WHEN WE TALK ABOUT, YOU KNOW, UH, UH, DAVID REVIEWED THE SEVERAL LEVERS.
AND SO WHEN YOU LOOKED AT IT, THE INVESTMENTS ARE GOOD.
I MEAN, THE INVESTMENT RESULTS ARE GOOD OVER TIME.
OUR LIABILITIES, THE FUND IMPLEMENTED A TIER B THAT REDUCES THE FUTURE LIABILITIES.
AND WE ARE IN YEAR SEVEN OF THE 30 YEAR PLAN, BUT WE CAN SEE THAT IT'S WORKING BECAUSE THE NORMAL COST IS GOING DOWN.
SO LET'S LOOK AT THE CONTRIBUTIONS WE HAVE SHOWN THE CITY'S CONTRIBUTIONS OF, OF ABOUT 14.46 THAT ARE GOING INTO THE PLAN.
UH, UH, BUT WHAT ABOUT FOR THE MEMBERS' CONTRIBUTIONS? SO THE PERCENTAGE OF THE MEMBERS' CONTRIBUTIONS HAS STAYED CONSTANT, BUT THE NUMBER OF ACTIVE MEMBERS HAS DECLINED.
SO IF YOU LOOK AT 2008, RIGHT BEFORE THE GREAT FINANCIAL FINANCIAL RECESSION, UH, THE CITY HAD 8,371 EMPLOYEES.
WHEN YOU LOOK AT THE GOING TOWARD 2011, WE HAD NEARLY A 19% DROP IN EMPLOYEES, OVER 1600 EMPLOYEES, UM, UH, LESS FOR THE, UH, FOR THE ORGANIZATION FOR THE CITY.
AND SO WHEN YOU LOOK AT IT, IN ADDITION TO THAT WORKFORCE REDUCTION, UH, FOR THE PEOPLE THAT WERE HERE, THEY'LL REMEMBER FURLOUGH DAYS.
THERE WERE DAYS THAT THAT, UM, UH, ACTIVE EMPLOYEES DID NOT GET PAID.
UM, AS WELL AS WE REDUCED, UM, PAY CHANGES, MERIT INCREASES AS WELL.
SO THAT WERE, THERE WAS A FURLOUGH, I GUESS OUR, OUR HALT ON MERIT INCREASES.
AND SO WHEN YOU LOOK AT IT OVER TIME, IF YOU FAST FORWARD TO 2022, WE'RE STILL BELOW
[00:25:01]
THE LEVEL OR OF EMPLOYEES THAT WE HAD IN 2003.SO WHEN YOU LOOK AT THE NEXT SLIDE, SO WHAT WAS THE IMPACT OF THAT? LESS MEMBERS, UM, LESS MEMBERS CONTRIBUTING.
UM, THE CITY'S NOT CONTRIBUTING FOR THE MEMBERS AS WELL.
SO WHEN YOU LOOK AT THE ACTUAL, UH, VERSUS PROJECTED PAYROLL GROWTH, YOU'LL SEE THAT THE PROJECTED WAS THE GREEN LINE.
THE RED LINE IS WHAT WE ACTUALLY RECEIVED OR WHAT THE ACTUAL PAYROLL GROWTH WAS.
AND YOU CAN SEE THE DROP THAT HAPPENED AFTER 2008.
UH, WE DID A CALCULATION TO SEE WHAT THE CUMULATIVE EFFECT OF THAT WAS, AND IT WAS ESSENTIALLY 1.3 BILLION LESS IN PAYROLL GROWTH FROM 2008 TO 2022.
SO WITH THAT, LESS CONTRIBUTIONS COMING INTO THE FUND FROM A REDUCED NUMBER OF ACTIVE EMPLOYEES.
SO WHEN WE LOOK AT, UM, SLIDE 27 AND WHAT ARE WE DOING NOW TO MEET THE REQUIREMENTS? SO WE HAVE FORMED A STUDY GROUP, UH, CONSISTING OF EMPLOYEES OF, OF MEMBERS FROM THE CITY STAFF, AS WELL AS FROM THE EMPLOYEE'S RETIREMENT FUND.
UM, WHAT IS OUR SCOPE OF WORK? WE'RE GONNA LOOK AT ALL THE DIFFERENT OPTIONS IN ORDER TO MEET A 30 TO 40 FUNDING PERIOD.
UM, WE REALIZE THAT EMPLOYEES ARE CONTRIBUTING TO THE SUSTAINABILITY OF THE FUND.
UM, UH, RIGHT NOW WE'RE LOOKING AT ALL OPTIONS.
WE REALIZED, UM, OUR VIEW IS THE CURRENT MARKET FOR PENSION OBLIGATION BONDS IS UNATTRACTIVE DUE TO THE HIGH INTEREST RATES.
UH, SO WE ARE, THAT'S SOMETHING THAT THE BOARD IS NOT LOOKING FOR AT THIS TIME, BUT WE BELIEVE THAT THERE ARE OTHER OPTIONS FOR US TO HELP ACHIEVE THAT GOAL.
SO THE STUDY GROUP DID MEET IN AN ALL GIRL MEETING.
WE ARE MEETING PERIODICALLY AND OUR GOAL IS TO, UH, COME BACK TO THIS COMMITTEE WITH, UM, SEVERAL OPTIONS, NOT JUST ONE, SEVERAL OPTIONS TO MAKE SURE THAT, UH, FOR YOU TO REVIEW, UM, UH, FOR, UH, WHAT WOULD BE A SOLUTION FOR US.
ONE OF THE QUESTIONS YOU MAY ASK IS EXACTLY HOW MUCH, UM, DOES THE FUND NEED? AND SO, UH, WHAT'S REALLY IMPORTANT IS WHEN YOU LOOK AT THE UNFUNDED ACTUARIAL ACCRUED LIABILITY, IT SAYS 1.4 BILLION, BUT THAT'S TO GET TO A HUNDRED PERCENT FUNDING.
RIGHT NOW, THE REQUIREMENT DOES NOT, UH, THE F SS R P REQUIREMENT IS NOT THAT IT IS TO GET TO A FUNDING PERIOD, UH, FOR 30 YEARS TO GET TO A HUNDRED PERCENT.
SO THE AMOUNT THAT WE NEED IS ACTUALLY LESS.
SO WHEN YOU LOOK AT IT FROM AN ANNUAL PERSPECTIVE, OUR, UH, IT'S AROUND 24 MILLION A YEAR, OR THERE WAS A LUMP SUM CONTRIBUTION OF 371 MILLION.
SO IT'S NOT A, UH, IT'S NOT THE 1.4 BILLION.
I WANNA MAKE SURE THAT IT'S VERY, VERY CLEAR THAT IT'S, IT'S A, UH, WE'RE GETTING TO A 30 YEAR FUNDING.
UH, AND ALSO REMEMBER IN 10 YEARS THE BONDS ROLL OFF RIGHT IN 2034, THAT'S AN ADDITIONAL 8% INTO THE FUND.
THE OTHER PART ON THE LIABILITY SIDE, WITH THE REDUCTION IN OUR NORMAL COST, THE LIABILITIES WILL GROW AT A SLOWER PACE.
ALL OF THAT COMBINED, UH, REQUIRES FOR US TO HAVE LESS, YOU KNOW, A LESSER CONTRIBUTION INTO THE FUND.
UM, THE OTHER REQUIREMENT, IN ORDER TO MAKE IT A LONG-TERM SOLUTION, WAS TO, TO REMOVE THE 36% CAP AND LET THE CONTRIBUTIONS ADJUST AS NEEDED, BUT IT ADJUSTS FOR BOTH THE EMPLOYEES AND THE EMPLOYER.
SO THOSE JUST ONE OF THE POTENTIAL OPTIONS, BUT WE WILL BRING BACK A SERIES OF OPTIONS TO YOU.
SO IN CONCLUSION, I JUST WANTED TO SAY THE INVESTMENT PROGRAM, UM, IS CONSERVATIVE AND DIVERSIFIED AND, UH, APPROPRIATE.
OUR PAYROLL CONTRIBUTIONS ARE LOWERED, UH, DUE TO THE DECREASE IN ACTIVE EMPLOYEES.
UM, IN 2004, THE PBS WORK TO INCREASE ASSETS TO LOWER THE CITY'S CONTRIBUTION.
THE, UH, PBS WERE ISSUED AT A 5.41% RATE.
UM, SO WE'VE EARNED SIX TO 7%.
UM, IN 2016, THE BOARD, THE COUNCIL AND THE VOTERS WERE PROACTIVE IN ADOPTING A TIER B BEFORE WE NEEDED, UM, WE'RE REQUIRED TO DO THAT.
UM, THE 2021 STATE LEGISLATURE KIND OF MOVED THE GOALPOST, SO WE'RE HAVING TO DO THIS AT THIS PERIOD OF TIME, WHICH, UM, AND THEN BASED ON THE CURRENT INTEREST RATE ENVIRONMENT, E R F IS NOT REQUESTING ANY ADDITIONAL PENSION OBLIGATION BONDS.
AND THEN, UM, THE STUDY GROUP IS GOING TO COME BACK TO YOU WITH OPTIONS THAT WILL COMPLY WITH THE REQUIREMENTS THAT WILL MEET THE 9 1 25 DEADLINES, SO THAT WE CAN STAY WITHIN THE 30 TO 40 YEAR EXCEPTION.
AND SO WITH THAT WILL CONCLUDE OUR PRESENTATION AND, AND SEE IF, UH, IF YOU HAVE ANY QUESTIONS.
VERY, THANK YOU VERY MUCH MUCH FOR THE PRESENTATION.
UH, MR. RA, THANK YOU FOR YOUR SECOND GO AROUND.
I MISS YOU FOR MANY, MANY YEARS.
AND THANK YOU, ASHLEY, FOR THE, THE GREAT BRIEFING, THE GREAT, UH, INFORMATION COLLEAGUES.
UH, WHAT WE'RE GONNA DO A LITTLE BIT DIFFERENT, UH, I KNOW THERE'S A WHOLE LOT OF QUESTIONS Y'ALL WANT TO ADDRESS.
WHAT I'M GONNA DO, LET EVERYONE
[00:30:01]
DO TWO QUESTION, GET THOSE TWO QUESTION ROTATE AND COME BACK INSTEAD OF SOMEONE DOING FOUR OR FIVE SUCCESS QUESTIONS AT ONE TIME.SO I'M, START IT WITH YOU ON MY RIGHT, PAULA.
SO, CAN YOU TELL ME, WHEN DID WE PUT IN, AND MAYBE YOU TALKED ABOUT THIS, WHEN DID THE POVS ACTUALLY HIT ON THIS LONG-TERM DALLAS? UH, I GUESS ON NUMBER FIVE, LIKE WHEN DID WE SEE THE INFUSION OF EXTRA CASH? THE PENSION OBLIGATION BONDS WERE ISSUED IN 2005, EARLY FIRST QUARTER OF 2005.
AND THEN WE HIT THE DOWN, THEN IT, THEN 2008 HIT 2008 HIT, BUT THEN THAT THOUSAND NINE, WE WERE 80 GAINS AT THAT POINT.
NO, I SAID IN 2009 WE WERE UP 31%.
SO IN 2004, FIVE PBS HIT THE, THE, THE ASSET ON THE BALANCE SHEET, CORRECT? 2005, YES.
AND THEN IT, UH, AND THEN WE HAD, I'VE SEEN ALL OF THE, KIND OF THE ERRATIC AND THEN THE VOTERS VOTED IN WHAT YEAR? THE VOTE, 2000? GO AHEAD.
AND THEN THAT'S WHEN WE CHANGED THE TIER PLAN, CORRECT.
IT'S JUST, JUST TO BE FACTUAL, THE TIER PLAN STARTED JANUARY 1ST, 2017, BUT THE ACTUAL VOTING TOOK PLACE IN NOVEMBER OF THE PREVIOUS YEAR.
UM, MY QUESTION IS ON PAGE 20 THAT GETS INTO THE DISTINCTIONS BETWEEN THE TIERS OF BENEFITS, AND THIS IS ABOUT THE, UM, THE LINE ABOUT FINAL AVERAGE PAY.
AND SO I, I'M NOT SURE HOW WE, I MEAN, THIS HAS BEST OF FIVE, BEST OF FIVE YEARS OR LAST 60 MONTHS.
IN LAST FEW YEARS, GREAT QUESTION.
SO WITH EITHER TIER A OR TIER B, WE CALCULATE BASED ON THE HIGHEST FIVE YEARS FOR TIER A OR THE HIGHEST THREE YEARS FOR TIER B.
AND YES, OVERTIME IS A FACTOR IN THE CALCULATION FOR THE FINAL AVERAGE PAYOUT BECAUSE WE LOOK AT EACH YEAR OF PAY IN THAT FIVE YEAR PERIOD FOR TIER A MEMBERS OVERTIME IS, COULD YOU JUST REPEAT THAT REAL QUICKLY? CAN YOU JUST REPEAT HIS ANSWER? I'M SORRY.
WHEN WE DO THIS, WHEN YOU ASK A QUESTION, THEN REPEAT THE ANSWER.
I'M SORRY, WHAT? THE QUESTION WAS NUMBER ONE? IS NUMBER ONE DUE OVERTIME? IT'S IN THERE.
SO OVERTIME IS CALCULATED IN THE, THE FINAL, UH, FIVE YEAR AVERAGE FORT R A AND FINAL, UH, THREE YEAR AVERAGE FOR TIER B.
WELL, I GUESS THE, THE NUMBERS OF YEARS AND THE AVERAGE OF PAY IS AT THE LAST FIVE YEARS, THE LAST THREE YEARS OF WHAT? SO TIER A MEMBERS HAVE A FIVE YEAR AVERAGE THAT WE LOOK AT THREE YEARS.
TIER A IS THREE, SO TIER A THREE YEARS, TIER B IS FIVE.
JUST GOTTA, JUST GOTTA REVERSE.
SO TIER A IS IS THREE YEARS HIGHEST THREE YEARS, AND TIER B IS FIVE YEARS.
WHEN WE CALCULATE WHAT WE'RE LOOKING AT ARE THE HIGHEST YEARS IN THOSE PERIODS, RIGHT? IF THE HIGHEST YEAR, FOR EXAMPLE, IN YEAR TWO OF THE THREE FOR TIER, UH, A MEMBERS IS $70,000 VERSUS THE OTHER TWO YEARS BEING 60, WE AVERAGE THE THREE YEARS LIKEWISE WITH, WITH, WITH TIER, WITH TIER B AS WELL.
SO ONE OF THE REASONS WE MOVED IT FROM THREE YEARS TO FIVE YEARS WAS TO LESSEN THAT IMPACT OF, OF OVER TIME.
'CAUSE IT'S HARDER TO DO THAT OVER A FIVE YEAR PERIOD.
AND ARE WE STUDYING THIS TO, TO, TO UNDERSTAND IF NO ONE'S WORKED ANY OVERTIME AND THEN ALL OF A SUDDEN THEY'RE WORKING A LOT OF OVERTIME IN THESE LAST THREE YEARS OR LAST FIVE YEARS? I'M JUST, I'M JUST CURIOUS ABOUT, YOU KNOW, GAMING THE SYSTEM OR JUST UNDERSTANDING THIS.
I MEAN THERE'S, YOU KNOW, CERTAINLY LEGITIMATE OVERTIME.
I MEAN, WE KNOW THAT ACROSS SO MANY DEPARTMENTS, UM, THAT, THAT YOU HAVE TO HAVE, THAT'S PART OF WHAT THE CITY NEEDS TO BE RESPONSIVE TO OUR CITIZENS.
BUT I'M ALSO SEEING AN OPPORTUNITY HERE.
I MEAN, ARE WE, DO WE WATCH THAT? HOW DO WE GAUGE THAT? MM-HMM.
SO, SO I'LL ANSWER BY SAYING THIS, AND I'M, I'M A FORMER HUMAN CAPITAL, UH, PERSON FOR THE CITY.
UH, IT'S GONNA VARY BY DEPARTMENT BY YEAR, DEPENDING ON THE NEEDS OF SERVICE.
AND SO OUR OBLIGATION IS TO ACCEPT WHAT THE CALCULATION IS AS FACE VALUE AND THEN CALCULATE THAT BENEFIT.
WE WILL LEAVE THE HUMAN RESOURCES, UH, DEPARTMENT, UH, WITH THE RESPONSIBILITY TO DETERMINE WHY THERE'S AN INCREASE, WHY THERE'S A DECREASE, PARTICULARLY FOR CIVILIAN EMPLOYEES.
SO OUR ROLE IS SIMPLY TO CALCULATE.
AND IS THAT HAPPENING? SORRY, IS, I MEAN, DO, IS HR DOING THAT? THAT'S BE A HR QUESTION.
SO THAT WOULD BE A QUESTION FOR THEM.
[00:35:01]
NOT HERE, SO WE WOULD WRITE THAT DOWN AND NOTE IT FOR HR, HR.MR. WEST, YOU GONNA TAKE YOUR TIME? YOU WANT TO PASS IT? UM, YOU WANNA LET'S PASS IT.
I KNOW, I'M, I WANNA RESERVE THAT.
SO I'M JUST GONNA DO MINE IN ORDER IF THAT'S ALL RIGHT.
SO I'M GONNA START ON PAGE TWO.
UM, I AM SURPRISED TO LEARN, ARE YOU SAYING THAT THIS PLAN IS PROVIDING A DISABILITY BENEFIT AND A DEATH BENEFIT? YES.
SO THE DISABILITY BENEFIT, UH, WE HAVE A VERY STRICT RULE, BUT I WILL ANNOUNCE IT.
IF YOU'RE ABLE TO WORK ANYWHERE IN THE, IN THE WORLD, AND IT IS VERY LIKELY THAT OUR DESIGNATED PHYSICIAN WILL NOT QUALIFY YOU AS A DISABILITY PERSON.
BUT THAT IS A, A BENEFIT THAT EXISTS.
THE DEATH BENEFIT IS BASED ON A PERSON.
WE GUARANTEE ALL MEMBERS A PAYOUT OF 120 MONTHS, UH, EVEN IN DEATH.
AND SO IF THEY DON'T HAVE A BENEFICIARY OR THEY DON'T HAVE A ELIGIBLE BENEFICIARY SHOULD SAY WE'RE STILL GONNA PAY OUT, UH, IF NOT AT AN A LIFETIME ANNUITY IN A LUMP SUM PAYMENT, UH, A MEMBER OF THEIR FAMILY OR THEIR DESIGNATED ENTITY THAT THEY WANT PAID OUT.
AND SO THAT 120 MONTHS, YOU'RE INCLUDING YOUR MEMBERS, ONLY PEOPLE WHO ARE VESTED OR YOU'RE INCLUDING AN EMPLOYEE WHO JUST STARTED IT DEPENDS ON HOW THE DEATH OCCURRED.
IF THE DEATH OCCURRED WHILE WORKING AND THEY'VE ACCOMPLISHED TWO YEARS OF SERVICE, YES, THEY'RE ELIGIBLE FOR THE 120 YEAR PAYOUT.
UM, HOPEFULLY THE ANSWER 20 MONTHS, 120 MONTHS.
I KEEP SAYING
BUT THIS IS AN INCREDIBLE, UM, LIFE INSURANCE BENEFIT THAT I WAS NOT AWARE OF.
AND CERTAINLY AS WE'VE CONSIDERED OTHER BENEFITS THAT MIGHT HAVE BEEN HELPFUL FOR US TO KNOW THAT THERE WAS ALREADY THIS, UM, ABILITY.
SO MY NEXT QUESTION, WHICH IS ON THE SAME SLIDE, IS, UM, THE COST OF LIVING ADJUSTMENT BASED ON C P I, THIS IS NOT REQUIRED.
IS THAT CORRECT? IT'S AN OPTIONAL ITEM.
WELL, IT IS, UH, IT'S ALWAYS BEEN A REQUIREMENT WITHIN OUR PLAN.
AND SO THE COST OF LIVING ADJUSTMENTS BASED ON C P I, WE LOOKED AT THE LAST 12 MONTHS OF, UH, INCREASES.
AND THERE'S BEEN SOME YEARS WHERE THE RETIREES RECEIVED ZERO.
IF YOU REMEMBER, BASICALLY ABOUT THREE OR FOUR YEARS AGO, THERE WAS A 0% INCREASE IN C P I.
THE RETIREES DID NOT RECEIVE ANY INCREASE.
IF YOU LOOK AT LAST YEAR, UM, THERE WAS OBVIOUSLY A GREAT IN INFLATION.
AND SO THEY DID RECEIVE, UH, AN INCREASE.
THE WAY IT'S STRUCTURED WITHIN CHAPTER 40 A IS THAT IT IS PART OF THE PLAN.
SO IT IS, UM, PRESENTED TO THE BOARD, BUT THE BOARD ITSELF DOES NOT HAVE TO APPROVE THE COST OF LIVING ADJUSTMENTS.
BUT THE BOARD IT A CALCULATION BY THE ACTUARY.
THE BOARD IS MADE UP OF MEMBERS, CORRECT? NO, THE BOARD IS MADE UP OF THREE THAT ARE APPOINTED BY THE COUNCIL WHO ARE, UM, NOT EMPLOYEES AT ALL.
THEY'RE INDE, THEY'RE INDEPENDENT EXTERNAL EXPERTS, THREE THAT ARE EMPLOYEES.
SO, BUT THE, BUT THE BOARD CANNOT CHANGE THE COLA.
THE ONLY WAY TO CHANGE THE COLA IS IT HAS TO GO TO RIGHT NOW, I KNOW THAT, BUT RIGHT.
HOW IT'S WRITTEN IN, UH, 48, 35, IT HAS TO BE APPROVED BY THE COUNCIL, THE VOTERS AND THE BOARD.
SO THAT IS THE PROTECTION FOR THE COLA, ALL THREE.
UM, BUT SO THE BOARD ITSELF CANNOT CHANGE IT, IMPACT IT OR DO ANYTHING TO THE COST, COST OF LIVING ADJUSTMENT.
IT IS AN AUTOMATIC CALCULATION DONE BY THE ACTUARY BASED ON NUMBERS.
UM, THAT, BUT BASED ON THE C P I NUMBERS.
SO, AND THIS IS JUST THE SAME QUESTION I'M JUST FOLLOWING UP ON SURE.
AND THIS IS THE END OF THIS ONE.
SO YOU'RE TELLING ME THAT YOUR BOARD VOTED TO GIVE A COLA? NO, NO.
THE, THE, THE COST OF LIVING ADJUSTMENT IS IN THE PLAN DOCUMENT.
AND THE, IT CANNOT BE CHANGED BY, BY THE BOARD ITSELF.
THEY CANNOT INCREASE IT, DECREASE IT.
IT HAS TO, ANY CHANGE TO THE COST OF LIVING ADJUSTMENT HAS TO COME TO THE COUNCIL AND TO THE VOTERS.
WELL, I HOPE THAT WE'RE GONNA FOCUS ON THIS SINCE WE KNOW THAT THERE ARE NO COLAS HAPPENING ON OUR OTHER PLAN.
STEWART? NO, I'LL PASS FOR NOW.
YOU'LL PASS, UH, COUNSEL BLACKMAN.
DO WE GET ONE OR TWO NOW? YOU GET TWO.
SO, UM, I SEE YOUR CONCLUSION, YOU'RE NOT, UM, SUGGESTING, UH, POVS, BUT WE DO HAVE AN A GAP AND YOU'RE SAYING IT'S 24 MILLION? THAT'S NOT A QUESTION.
UM, WHAT, AND THAT'LL GET US, THAT'S A ONE TIME PAYMENT, CORRECT.
AND IF I'M FALSE, YOU CAN SAY FALSE, BUT ANYWAY.
'CAUSE I, IT'S A, IT'S A 24 MILLION IS AN ANNUAL PAYMENT.
THE 3 71 IS A ONE-TIME PAYMENT.
SO 3 71 IS THE, THE, THE NU THE NUMBER THAT YOU REALLY NEED.
[00:40:01]
OKAY.AND IS IT, CAN IT BE DONE IN INSTALLMENTS OR DO YOU NEED IT ALL IN ONE LUMP SUM? OH, IT, IT CAN BE DONE IN INSTALLMENTS.
WHAT'S, WHAT AND WHAT, AND WHAT IS THAT PLAN? DOES IT LOOK LIKE IT'LL BE IN FIVE YEARS, EVERY OTHER YEAR? WHAT IS THAT? WELL, UM, WE CAN COME BACK WITH OPTIONS ON HOW TO WORKING WITH THE CITY STAFF, BUT RIGHT.
WE JUST WANNA PRESENT IT AS AN ANNUAL NUMBER, WHICH IS A 24 MILLION OR A LUMP SUM, BUT HOWEVER THE, THE CITY WOULD LIKE TO SEE IT AND WHATEVER ITERATIONS WE CAN PROVIDE THAT WORKING WITH, UM, YOUR FINANCE DEPARTMENT AND HOW DO WE MAKE SURE WE DON'T GET IN THIS POSITION AGAIN? UH, HOW, WELL, I, I WILL SAY THAT, UM, I THINK THAT THE BOARD HAS BEEN VERY PROACTIVE IN TERMS OF WHAT THEY'VE DONE.
AND YOU'LL, YOU CAN SEE THAT IN TERMS FOR THE INVESTMENT RETURNS, UM, RECOMMENDING TIER B AND GOING, MOVING THAT FORWARD WITH THE CITY AND THE VOTERS, WE'VE BEEN VERY PROACTIVE ON THAT PART.
I THINK ONE OF THE THINGS FOR PEOPLE TO REMEMBER IS THAT WHEN WE ISSUED, UM, UH, THE GREAT FINANCIAL RECESSION, THE PANDEMIC, THAT REALLY DROPPED THE NUMBER OF ACTIVE EMPLOYEES, AND WE, NO ONE COULD ANTICIPATE THAT.
THE CITY COULDN'T ANTICIPATE THAT WE COULDN'T.
AND THAT LOWERED THE CONTRIBUTIONS INTO THE FUND.
AND SO COMING UP WITH A SOLUTION THAT MAKES SURE THAT WE HAVE AN ADEQUATE NUMBER OF CONTRIBUTIONS COMING INTO THE FUND IS SOMETHING THAT'S IMPORTANT.
BUT IT'S, I THINK THAT THERE ARE EXTERNAL EVENTS THAT THE CITY AT THE FUND DID NOT SEE, WHICH WERE GLOBAL AND EXTERNAL TO THE CITY, UH, THAT RESULTED IN LOWER CONTRIBUTIONS FROM LOWER ACTIVE, UH, DECREASE IN ACTIVE EMPLOYEES.
SO ON PAGE NINE, YOU TALK ABOUT THE AVERAGE BENEFIT PAGE TO A MEMBER IS $39,000.
SO, UM, I MEAN THAT, LET ME GO ON AND JUST ASK THIS AND JUST SEE, SEE WHAT YOU SAY.
UH, IS THERE EVER A CHANCE WHEN SOMEONE IS, I MEAN, SINCE WE, WE ARE NOT SURE ON OVERTIME HR FIGURES OUT, YOU KNOW, WHAT, I GUESS THE BACKGROUND ON THAT, YOU ALL JUST TAKE WHAT THEY SEND TO YOU.
UM, I MEAN, IS THERE EVER A CHANCE THAT SOMEONE COULD RETIRE AT HIGHER THAN 100% OF THEIR BASE SALARY IF THEY HAVE A LOT OF OVERTIME FACTORED IN? WELL, FIRST OF ALL, LET ME START OFF BY SAYING, UM, THE BENEFIT IS CALCULATED UP TO A PERIOD OF TIME OF 36.4 YEARS OF SERVICE.
LET ME JUST PUT THAT FACT OUT TO MAKE SURE WE ALL UNDERSTAND THAT.
SECOND, THE CALCULATION IF, CAN THEIR CALCULATION BE HIGHER THAN THEIR BASE PAY OF ONE SINGLE YEAR? IS THAT THE QUESTION? IS THAT WHAT I'M UNDERSTANDING? YEAH, I MEAN, I, I GUESS I JUST WANT TO, YOU KNOW, ARE, ARE, IS ANYBODY RETIRING WITH MORE THAN A HUNDRED PERCENT OF WHAT THEIR BASE PAY WOULD BE? IS THE QUE IS IT'S, IT'S, IT'S, IT'S NOT LIKELY.
UH, BUT ANY, ANY GIVEN ONE YEAR, IF THERE IS OVERTIME THAT ESCALATES THE BASE PAY TO SOMETHING GREATER, IT IS A POSSIBILITY.
NOW THAT IS IN MOST CASES, THAT AN ANOMALY ANOMALY, UM, BECAUSE MOST DEPARTMENTS ARE REALLY MANAGING OVERTIME IN THE CIVILIAN DEPARTMENTS.
AND JUST TO ADD 36.4% IS WHAT'S REQUIRED, UH, TO GET TO A HUNDRED PERCENT OF YOUR PAY.
SO IT, IT'S A VERY FEW ACTIVE EMPLOYEES REACH THAT NUMBER.
I APPRECIATE THE PRESENTATION.
I'M, I WAS JUST TALKING, I THINK, I THINK YOU HAVE FOUR QUESTIONS I'LL TAKE MAYBE.
WELL, HOPEFULLY NOT THAT MANY.
UH, AS I WAS JUST MENTIONING TO CHAIRMAN ADKINS, I'M HAVE DIGESTING ALL OF THIS, UH, FOR MY BUSINESS.
I, WE OUTSOURCE ALL THIS AND IT'S JUST SORT OF HANDLED.
SO FOR ME TO BE IN THE WEEDS ON THIS AS A NEW EXPERIENCE AND I'M LEARNING, UM, THE, THE THING THAT JUMPS TO ME IS, I GUESS MY MOST IMPORTANT QUESTION IS, IS THE OVERTIME TO CONTINUE THAT DISCUSSION, IT SEEMS TO ME THAT THERE WOULD BE AN INCENTIVE TO JUST TRY TO WORK AS MUCH OVERTIME AS POSSIBLE OVER A THREE YEAR PERIOD TO MAXIMIZE BENEFITS.
AND I, I WOULD DO IT TOO IF I WAS AN EMPLOYEE IN THE SYSTEM.
I MEAN, IF THE SYSTEM'S MADE THAT WAY.
LIKE, IS THERE, HAVE YOU SEEN WHERE LIKE CHECKS AND BALANCES WHERE, WHERE IT'S BEEN PUT INTO OTHER, OTHER PROGRAMS ON, ON MAKING SURE IT'S NOT JUST A, UH, LIKE A FREE FOR ALL KIND OF, WITH WITHOUT CHECKS AND BALANCES TO MAKE SURE THAT OVERTIME'S REALLY NOT NEEDED? THAT'S ANOTHER GREAT QUESTION.
UH, BUT I WILL SAY THAT, UH, YET AGAIN, I THINK THIS IS A QUESTION FOR THE HUMAN RESOURCES DEPARTMENT.
UH, AND THE REASON WHY IT'S A QUESTION FOR THEM IS, REMEMBER WE CAN'T CHANGE ANY OF THE EMPLOYEE'S CONTRIBUTION RATES, WHICH INCLUDES OVERTIME ONCE THEY'VE EARNED IT, IT'S A PART OF THEIR CALCULATION WHERE IT'S THE HIGHEST THREE OR HIGHEST FIVE YEAR AVERAGE.
SO THE CHECKS AND BALANCES NEED TO HAPPEN AT, AT THE FRONT END.
AND, UM, I GUESS I WOULD JUST REQUEST IN FUTURE IF THEY COULD COME BE HELPFUL.
UM, AND I NOTICED THAT ON SLIDE 13 AS MY COLLEAGUE HERE, NOT TO STEAL HER THUNDER, BUT
[00:45:01]
AS SHE POINTED OUT, UM, THIS FORT WORTH CONTRIBUTIONS A LITTLE BIT HIGHER THAN OURS IS, UM, IS, IS, HAS THAT BEEN BROUGHT UP AS A CONCERN? UM, YOU KNOW, IN TERMS OF FOR FORT WORTH RETENTION AND RECRUITMENT, UH, FOR RETENTION AND RECRUITMENT IN THE CITY OF DALLAS OR FOR FORT WORTH AND FOR RETENTION IN THE CITY OF DALLAS? UM, BECAUSE WE'VE GOT A SISTER CITY THAT'S, THERE'S A LARGER CONTRIBUTION, UM, TO THEIR, UM, TO THEIR PENSION.WELL, ONE OF THE THINGS THAT WE ARE WORKING THROUGH AND WE HOPE TO BRING BACK TO YOU IS A LITTLE BIT MORE DEPTH ON TOTAL COMPENSATION.
AND AS WE COMPARE OURSELVES TO OTHER PENSION FUNDS AND OTHER MUNICIPALITIES, WHEN WE LOOK AT TOTAL COMPENSATION, THERE ARE SOME GLARING, UH, THOUGHTS THAT WE WANNA BRING BACK TO YOU.
JUST ONE EXAMPLE, THIS CHART ILLUSTRATES THAT BOTH THE CITY OF DALLAS AND THE CITY OF FORT WORTH DO NOT CONTRIBUTE TO SOCIAL SECURITY YET THE AVERAGE BENEFIT THAT E R F UH, SEES, UH, FOR ITS MEMBERSHIP IS JUST A LITTLE UNDER 40,000.
WE DON'T KNOW WHAT FORT WORTH NUMBERS ARE, BUT WE CERTAINLY WANNA LOOK AT THAT.
WE WANNA LOOK AT THE CONTRIBUTIONS ON HEALTHCARE AND OTHER AREAS, BUT IT IS A, THOSE ARE FACTORS THAT WE SHOULD LOOK AT.
AND SO WE'LL BE BRINGING THOSE BACK TO YOU.
WELL, AND THAT'S A REALLY A, I MEAN, IT'S, YOU'RE A BIG PIECE OF IT, OF COURSE, BUT IT'S REALLY LIKE THE OVERALL COMPENSATION PACKAGE, WHICH GOES BACK TO HR, I THINK.
UM, SO I'M GONNA SKIP FORWARD, I THINK, 'CAUSE I'M WORRIED THAT I'M NOT GONNA GET TO ASK ALL MY QUESTIONS.
SO, UM, ON SLIDE EIGHT, YOU'RE TALKING ABOUT PURPOSES AND YOU TALK ABOUT THE ACTUARILY DETERMINED CONTRIBUTION RATE.
UM, WHAT IS YOUR CONTRIBUTION RATE RIGHT NOW? IS THAT THE 36%? UH, YEAH, SO ON, UH, PAGE 12 TALKS ABOUT OUR, THE CONTRIBUTION RATE.
BUT YET WHEN YOU LOOK ON PAGE 12, YOU'RE REALLY SAYING 14.46%.
SO WITH, WITH UH, 30, THAT'S FROM THE CITY.
SO THE 13.32%, 13.32, IT COMES FROM THE EMPLOYEES.
SO FOR, WE RECEIVE A TOTAL OF, UH, 27.78%.
UH, THE OTHER 8.22% GOES TO THE PAY THE PENSION OBLIGATION BONDS.
AND SO THAT DOES NOT COME THROUGH THE FUND AT ALL.
SO IT SEEMS TO ME THAT WHEN THE FIX WAS PUT IN, THERE IS A GLARING MISTAKE TO REDUCE THE PAYMENT FOR THE PENSION OBLIGATION BOND THAT HAD WE BEEN ACTUALLY CONTRIBUTING THE FULL 22.68% THAT YOU'VE CALCULATED, THEN THIS PENSION WOULD PROBABLY BE PROPERLY FUNDED.
THAT'S, UH, I I DO BELIEVE THAT THE ADDITIONAL 8.22% WOULD'VE HELPED CONSIDERABLY YES.
CAN YOU EXPLAIN THAT AGAIN IN YES, THE, UH, VERY SIMPLE TERMS, SO UNLESS YOU WOULD LIKE TO EXPLAIN IT, BE BETTER
UH, SO ESSENTIALLY WHEN YOU LOOK AT PAGE 12, IT TALKS ABOUT, UH, RIGHT NOW THE CONTRIBUTION RATES AT 36%, WHAT'S REQUIRED INTO THE FUND IS 35.5.
RIGHT? WHAT, UH, AS PART OF THE RECOMMENDATIONS FROM THE 2004 STUDY PLAN, THE 8.22% IS CONSIDERED PART OF THE CITY'S CONTRIBUTION.
AND SO THEREFORE, THE CITY'S CONTRIBUTION OF 22.68, WHICH IS LINE SIX B, YOU SUBTRACT OUT THE 8.22%.
SO THE CITY ACTUALLY CONTRIBUTES TO THE FUND UP THAT THE, THE ACTUAL CASH THE FUND RECEIVES FROM THE CITY'S PORTION IS 14.46%.
SO I'M GONNA SAY IN LAYMAN TERMS, OKAY? OKAY.
YOU'RE SO SMART AND THIS IS YOUR BUSINESS.
AND SO I THINK YOU THINK ABOUT THIS ALL THE TIME, BUT WE DON'T, BUT FOR ME, THE WAY I THINK ABOUT IT IS THAT YOU CALCULATE WHAT DOES THE EMPLOYEE PAY? THE EMPLOYEE MONEY IS ACTUALLY COMING INTO THE PLAN.
YOU THEN CALCULATE WHAT SHOULD THE CITY PAY, BUT YOU'RE TAKING OUT THE COST OF THE PENSION OBLIGATION BOND TO PAY THAT DEBT, RIGHT? MM-HMM.
AND SO THEREFORE THE FULL AMOUNT THAT SHOULD BE PAID BY THE CITY ISN'T COMING TO YOU AS A CHECK 'CAUSE PART OF IT'S GOING TO PAY DEBT, CORRECT? THAT'S CORRECT.
AND SO SINCE YOU'RE NOT GETTING THAT FULL FUNDING THAT HAS PUT THIS PLAN AT RISK OR THAT'S ON THE LIST FOR THE PENSION REVIEW BOARD? THAT'S CORRECT.
IS, IS THAT WHAT HAPPENED WHEN WE DID THIS? WHEN WE WENT TO THE VOTERS, YOU KNOW, WITH ALL THREE, WE KNEW THAT WE WERE GONNA BE SHORT, EXCUSE ME, WE KNEW WE WERE GONNA BE SHORT WHEN WE WENT TO THE VOTERS, WHEN WE CHANGED THE, THE, NO, I DON'T THINK WE KNEW, UM, THAT WE WERE GONNA BE SHORT.
IF YOU REMEMBER THE CHART OF THE, THE CHART, RIGHT.
IF YOU REMEMBER THE 8,371 EMPLOYEES, RIGHT? YEAH.
WE ASSUMED THAT WE WERE GONNA HAVE THAT EMPLOYEE BASE, THAT PAYROLL GROWTH, BUT WE DID NOT.
AND ALSO IT WAS IN THE RECESSION BACK THEN 2008 AND WE RECOVERED BACK IN 2009.
[00:50:01]
MM-HMM.SO THE CALCULATION, YOU KNOW, THE MARKET WENT WHEN THE POOP, SO THEN JUST VERY, BASICALLY WHEN I LOOK AT CHART 13, THE CONTRIBUTION THAT ONE WOULD EXPECT, THE CITY WOULD PUT IN THE 22.68% THAT YOU HAVE ON THE PRIOR SIDE.
EVEN THAT AMOUNT IS SIGNIFICANTLY LESS THAN HOUSTON OR FORT WORTH.
BUT THEN WE'RE NOT, WE'RE BASICALLY GIVING HALF OF OF THAT.
IF, MAY I, MAY I ADD SOMETHING TO THE CONVERSATION? SURE.
SO THE, THE CITY'S CONTRIBUTION IS IN TWOFOLD.
WE DO PAY THE CONTRIBUTION TO THE PLAN AND WE DO PAY THE DEBT.
SO WE ARE PAYING THE EXPENSE TO THE CITY REPRESENTS THE 22.68%.
IT WOULD BE BETTER FOR THE FUND IF THAT FULL AMOUNT WENT IN, BUT WE FRONTED THROUGH PENSION OBLIGATION BONDS.
AND NOW WE'RE PAYING FOR THAT.
SO WE DIDN'T DO PENSION OBLIGATION BONDS AND INFUSION OF CASH PLUS HAVE THE HIGHER CONTRIBUTION THAT ALLOWED US TO NET THAT COST OFF.
THAT'S THE WAY IT WAS SET UP AT THAT TIME.
SO AGAIN, YOU'RE SUPER SMART, YOU DEAL WITH THIS ALL THE TIME.
FOR ME, IN THE MOST BASIC OF LANGUAGE, WHAT I'M HEARING YOU SAY IS, OH WAIT, WE'RE STILL CUTTING A CHECK FOR PENSION EXPENSES.
IT'S JUST THAT ONLY HALF OF IT'S GOING TO THE PENSION AND HALF OF IT'S GOING TO DEBT TO PAY FOR WHAT WENT TO PENSION IN 2005, RIGHT? YES.
TO PAY FOR THE DEBT TAKEN ON TO SHORE UP THAT SOLUTION AS A ONE-TIME INFUSION IN 2005.
BUT SO THEN AGAIN, IN THE MOST SIMPLE TERMS THAT I CAN SAY IT, WHAT THAT TELLS ME IS THAT THE PENSION FIX NEVER WAS A FIX BECAUSE THOSE DOLLARS ARE ACTUALLY NOT CONTINUING TO FLOW TO THE PENSION TO SERVICE THE, THE NORMAL COSTS.
IT'S INSTEAD PAYING A DEBT WAS A FIX.
SO I, AND SO WE'RE BASICALLY PAYING INTEREST, WE'RE PAYING DEBT TO PAY FOR OUR NORMAL COSTS.
SO THE, THE, THE PENSION OBLIGATION BONDS AT THE TIME WERE ANTICIPATED TO FIX YES.
UH, HOWEVER, A LOT HAS HAPPENED SINCE THEN.
THE ASSUMPTIONS RELATED TO PAYROLL HAVE CHANGED SIGNIFICANTLY.
THERE HAVE BEEN SOME HARD YEARS IN INVESTMENTS MM-HMM.
SO 18 YEARS LATER WE HAVE TO REVISIT THAT.
WHAT ARE THE CURRENT ASSUMPTIONS TO PAYROLL, ESPECIALLY IN STAFFING, UH, UH, THE CURRENT ASSUMPTIONS FOR PAYROLL? UM, IT IS, WELL, I I CAN ONLY TALK ABOUT WHAT I RECEIVE.
THAT'D BE A JACK ALLEN QUESTION.
THAT'S A GOOD QUESTION FOR YOU, JACK.
THAT'D BE YOUR QUESTION, JACK.
WELL, IN, IN ALL FAIRNESS, IT'S WHAT YOU'RE USING TO CALCULATE YOUR NUMBERS THAT MATTERS EVEN IF IT'S NOT REALITY.
AND SO CLEARLY, YOU KNOW, WHEN WE LOOK AT THIS CHART THAT SHOWS, UM, THAT PAYROLL DIDN'T HAPPEN AS YOU EXPECTED.
SO WHAT NUMBER ARE WE ON? I DON'T KNOW.
SO YOU MADE AN ASSUMPTION THAT WE WOULD INCREASE 3.5% IN STAFFING.
I HOPE WE NEVER HAVE 3.5% STAFFING INCREASES EVERY YEAR.
AND SO I GUESS MY QUESTION FOR YOU IS, ARE YOU STILL PROJECTING A 3.5% INCREASE TO HEADCOUNT EVERY YEAR? OR HAVE YOU REDUCED THAT TO SOMETHING MORE PLAUSIBLE? AND CHERYL, ISN'T THAT AN ANTICIPATED INCREASE IN PAYROLL PAY, PAYROLL COUNT, YOU THINK OF MERIT INCREASES, THAT'S 3%.
THAT WOULD, EVEN IF YOU HAVE THE SAME ACTIVE EMPLOYEE NUMBER, RIGHT.
IF YOU HAVE A A, I THINK ON AVERAGE YOU HAVE A 3% MERIT INCREASE.
SO THAT'S PAYROLL GROWTH, NOT HEADCOUNT.
YOU WANNA DO ONE MORE QUESTION? OH, YOU'RE GONNA LET ME DO ONE? OKAY.
GO TO GO TO, UM, YOU ARE BEING GENEROUS.
JUST 'CAUSE YOU CAME TO THE MEETING TODAY.
SO MY QUESTION FOR YOU IS THIS, WHEN THIS WHOLE, UM, 2015 RULE WENT IN, IT SAYS THAT THE PENSION LIABILITIES WERE 2.15 BILLION.
THAT WAS THE EXPECTED OF SAVINGS OVER 30 YEAR PERIOD OF PUTTING THE FI PUTTING THE TIER B IN.
AND SO WAS 2.15 BILLION OVER 30 YEARS.
SO WHAT WAS THE UNFUNDED LIABILITIES WHEN YOU STARTED THIS WHOLE EFFORT TO SAVE THE 2.15 BILLION? I HAVE TO GO BACK AND LOOK.
I DID NOT BRING THAT NUMBER, BUT I CAN GET THAT TO YOU.
[00:55:01]
OKAY.WELL, I I THINK IT'S IMPORTANT TO UNDERSTAND LIKE WHERE IT WAS AND THEN WHERE IT IS TODAY.
AND I THINK THAT ALSO AS, AS DAVID MENTIONED, THE REASON WHY WE DID TIER B WAS AROUND THE FACT THAT PEOPLE WERE LIVING LONGER.
AND WE COULD SEE THAT WHEN THE GENERATIONAL MORTALITY TABLES, WE COULD SEE THAT IN OUR EMPLOYEE BASE.
AND WE SAID IF PEOPLE ARE LIVING LONGER, THEN WE NEED TO EXTEND, LIKE FOR THE AF AGE OF RETIREMENT FROM 60 TO 65, WE NEEDED TO MAKE THAT LONGER.
SO THAT LONG TERM WE WERE PROVIDING THE SAME BENEFIT FOR TIER B, WHO WOULD HAVE IT LONGER, WHO WOULD LIVE LONGER AND WORK LONGER AS TIER A.
SO THAT, SO ARE YOU SAYING THAT YOU THINK MOST OF THIS IS, UM, OUT OF WHACK, SO TO SPEAK, BECAUSE OF, UM, LIFE EXPECTANCY? NO, NO.
I'M, WHAT I'M SAYING IS THE REASON THAT WE, THE CATALYST FOR TIER B WAS THE FACT THAT PEOPLE, WE SAW PEOPLE WERE LIVING LONGER AND WE NEEDED TO ADJUST THE BENEFIT STRUCTURE TO, TO ACCOUNT FOR THE FACT THAT PEOPLE ARE LIVING LONGER.
BUT TIER A, I MEAN, I JUST WANNA MAKE SURE I'M UNDERSTANDING THIS RIGHT.
TIER A NEVER HAD A BENEFIT CUT, NOTHING CHANGED FOR THEM? UH, NO.
UH, THEY, BECAUSE AT THAT POINT, UM, WE WERE FOCUSED ON THE NEXT GENERATION.
WE WEREN'T FOCUSED, WE WEREN'T NEVER HAD A BENEFIT CUT.
UH, NO, THEY DID NOT HAVE ANY BENEFIT CHANGES.
WES, I'VE GOT SOME, SOME YOU DID YOUR FOUR, RIGHT? NO, BUT I, I WON'T HAVE THAT MANY CHAIRMAN TWO.
I GUESS ONE IS A COMMENT, WHICH CAN BE ONE OF MY QUESTIONS.
IS ON SLIDE 13, UM, WITH THIS CONVERSATION OF US HAVING TO PAY PART OF OUR CONTRIBUTION TO PAY DOWN THE DEBT, THAT WAS NOT CLEAR TO ME.
I'M GLAD IT IS CLEAR NOW, AND I, I THINK I'VE GRASPED IT.
UM, I FEEL LIKE THIS CHART, DO WE KNOW IF AUSTIN FORT WORTH AND HOUSTON, PART OF THEIR CONTRIBUTION IS ALSO TO PAY DOWN ON PAST DEBT? OR DO WE, IS THAT, IS THIS AMOUNT ALL GOING TOWARDS FUTURE CONTRIBUTIONS? UM, SO THIS, THIS, UH, RESEARCH CAME FROM OUR ACTUARY WHO WORKS WITH THESE OTHER PENSION FUNDS.
WE DON'T HAVE THE ANSWER TODAY, BUT CERTAINLY WE CAN BRING THAT BACK RIGHT.
TO IF, SEE IF THERE'S ANY BIFURCATION OF THEIR CONTRIBUTION TO POVS.
'CAUSE I DON'T, AND I THINK IT WOULD BE HELPFUL TO ADD ANOTHER COLUMN HERE TO SHOW HOW MUCH OF OUR 22 POINTS OR SIX 8% IS GOING TOWARDS PAST DEBT.
JUST TO BE MORE ACCURATE ABOUT THIS.
CHAIRMAN WEST NOT CUTTING YOU OFF.
UM, AND DAVID, AND THANK Y'ALL FOR DOING, BUT I THINK THAT, UH, ONE THING I WANNA PUT A POINT PUT ACROSS THAT Y'ALL DO IT ACTUARY ONCE A YEAR, YOU GOT ACTUARY COMING IN AND I THINK IT'S SOMETHING THAT WE, WHAT WE TALKING ABOUT IS ACTUARY.
THEY LOOKING AT THE DATA, THE DATA THAT COME IN AND THEY DETERMINE WHAT'S GOING ON.
SO THEY NOT PREPARED TO DO THAT.
I, I, I'M, I AIN'T TRYING TO COVER FOR YOU MM-HMM.