[Ad Hoc Committee on Pensions on February 8, 2024.]
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WE'RE CALLED, UH, AD HOC COMMITTEE ON PENSION TO ORDER.
FIRST ITEM ON AGENDA, APPROVAL OF MINUTES.
FIRST, I WANNA THANK YOU FOR BEING HERE TODAY.
I WANT TO START BY ACKNOWLEDGING OUR PRODUCTIVE MEETING LAST MONTH WITH A TEXAS PENSION REVIEW BOARD, WHERE WE DISCUSSED OUR STRIVE CHARTER, A ROBUST FUNDING SOLUTION.
I'M SO THRILLED TO ANNOUNCE OUR NEW DIGITAL RESOURCE, DALLAS DOT GOOD PENSION.
THIS PLATFORM SERVED AS A COMPREHENSION HUB, OFFERED EVERYONE ASSET TO THE LATEST INFORMATION, RESOURCE AND DETAILED INSIGHT INTO OUR EFFORT TO SECURE THE FINANCIAL HELP OF OUR ESTEEM PENSION SYSTEM.
TODAY WE ARE, WE SET HERE FOR, FOR TWO CRITICAL PRESENTATION.
FIRST REPRESENTATIVE FROM SHARON, THE DALLAS POLICE FIRE PENSION SYSTEM, INDEPENDENT ACTUARIAL FIRM, WILL SHARING AN UPDATE TO THEIR INDEPENDENT ACTUARIAL ANALYSIS AND RECOMMENDATION.
FOLLOWING THAT, AT THE REQUEST OF THIS COMMITTEE, WE RECEIVE A OVERVIEW HOW THAT BODY CONDUCT IS INVESTMENT BY LEARN MORE ABOUT ITS INVESTMENT POLICY.
WE HAVE ASKED THE ORGANIZATION TO SHARE INSIGHT INTO AND HOW THEY AND THIS BOARD OF TRUSTEE PERFORM OVERSIGHT OF THE TRUST AS A CHAIR OF THIS AD HOC COMMITTEE.
WE ARE COMMITTED TO THESE TASKS, UNDERSTAND THE PROFOUND IMPACT TO HAVE ON OUR CITY FUTURE AND WELLBEING OF OUR PUBLIC SERVANT.
WITH THAT, I WANNA TURN IT OVER TO JACK ALLEN TO INTRODUCE THE FIRST, UM, AGENDA ITEM.
UH, AS YOU MENTIONED, THE FIRST ITEM ON THE AGENDA IS CHIRON.
AND SO IF Y'ALL WANNA COME DOWN TO THE FRONT.
AND JUST AS A REMINDER FOR THE COMMITTEE, UH, AS PART OF HOUSE BILL 31 58, THERE WAS A REQUIREMENT TO ENGAGE AN INDEPENDENT ACTUARY.
UH, THE PENSION REVIEW BOARD SELECTED CHIRON TO SERVE AS, UH, THE ACTUARY.
UH, THEY WERE PLACED UNDER CONTRACT BY THE DALLAS POLICE AND FIRE PENSION FUND.
THEY CAME BEFORE THIS COMMITTEE IN NOVEMBER WITH A PRELIMINARY REPORT, AND TODAY THEY'RE HERE WITH AN UPDATE TO THAT REPORT.
SO WE HAVE WITH US ELIZABETH WILEY, BILL HALLMARK, AND JAKE LEBOS.
AND JAKE, IF I MESS THAT UP, I APOLOGIZE.
BUT THANK Y'ALL AND WELCOME TO DALLAS.
UH, AND SO I'LL TURN THE MICROPHONE OVER TO, TO BILL, I GUESS YOU TO START US OFF.
UM, IT'S GOOD TO BE BACK HERE IN DALLAS.
AND, UH, WE WILL JUST JUMP RIGHT INTO OUR PRESENTATION.
WE PRESENTED THIS TO THE RETIREMENT SYSTEM THIS MORNING, AND WE'LL JUST WALK THROUGH OUR UPDATED REPORT.
SO IF WE CAN GO TO THE NEXT SLIDE AND LET'S, UH, LET'S GO ONE MORE HERE.
SO I JUST WANTED TO REVIEW OUR PROCESS THAT WE'VE GONE THROUGH.
UH, WE STARTED WITH THE 2022 VALUATION, UH, AND REPLICATED IT AND THEN BUILT OUR INITIAL MODELS AND DEVELOPED OUR, UH, RE PRELIMINARY RECOMMENDATIONS BASED ON THAT EARLIER VALUATION.
WE PRESENTED THAT TO, UH, THE RETIREMENT SYSTEM BOARD HERE AND ALSO TO THE PENSION REVIEW BOARD, UH, AND GATHERED FEEDBACK.
SINCE THEN, WE HAVE, UH, REPLICATED THE 2023 VALUATION.
SO WE'VE MOVED THINGS FORWARD A YEAR, AND WE ARE BACK, UH, WITH AN UPDATED REPORT WITH STILL OUR PRELIMINARY RECOMMENDATIONS.
WE WILL BE FOLLOWING UP WITH A FINAL REPORT AND COPIES OF THAT REPORT, GO TO THE RETIREMENT SYSTEM, TO THE CITY, AND TO THE PENSION REVIEW BOARD.
SO WITH THAT, UH, LET'S MOVE TO THE NEXT SLIDE.
UH, THESE ARE THE PROJECTIONS UNDER THE CURRENT SYSTEM WITH THE CURRENT CONTRIBUTION RATES.
SO ON THE LEFT HAND SIDE, WE SHOW THE GRAY BARS ARE THE PROJECTION OF THE LIABILITY OF THE PLAN.
UH, THE TEAL LINE IS THE PROJECTION OF THE ASSETS, AND AT THE TOP IS THE PROJECTION OF THE FUNDED STATUS.
IT'S VERY SIMILAR TO WHAT WE HAD PRESENTED, UH, IN NOVEMBER.
BASED ON THE, THE PRIOR VALUATION, WE HAD ANTICIPATED, UH, MI MINUS 13% RETURN FOR THE YEAR.
IT WAS ACTUALLY SLIGHTLY BETTER THAN THAT.
UM, AND VERY LITTLE OTHER MOVEMENT.
THE RIGHT HAND SIDE, UH, SHOWS THE CONTRIBUTIONS AND, AND THE MEMBER CONTRIBUTIONS ARE FIXED AT 13 AND A HALF.
THE CITY CONTRIBUTIONS AT 34 AND A HALF, EXCEPT THAT THERE'S SOME TEMPORARY ADDITIONAL PAYMENTS, UH, IN THE FIRST TWO YEARS ON THE
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CHART.THE BLACK LINE IS THE NORMAL COST.
THAT IS THE COST OF THE BENEFITS ATTRIBUTED TO THE CURRENT YEAR OF SERVICE.
SO THAT'S LIKE THE CURRENT ONGOING COST.
ANY OF THE CONTRIBUTIONS THAT ARE ABOVE THAT ARE GOING TOWARDS THE UNFUNDED LIABILITY, UH, AND PAYING THAT.
AND SO I, UH, COVER ALL THAT BECAUSE, UH, WE ARE GONNA GO THROUGH A FEW OTHER CHARTS THAT ARE ALL BASED ON THAT STRUCTURE AND YOU'LL SEE DIFFERENCES IN THE, THE CONTRIBUTIONS AS WE GO.
THE, OUR RECOMMENDATIONS FROM THE FIRST, UH, DRAFT HAVE NOT, UH, CHANGED OUR PRIMARY RECOMMENDATIONS.
WE HAVE DEVELOPED SOME, UH, ADDITIONAL OPTIONS UNDER THE FIRST AND THIRD RECOMMENDATION, BUT THE KEY RECOMMENDATIONS HAVE REMAINED THE SAME.
AND, AND THE FIRST IS, UH, THAT WE NEED TO MOVE FROM THE FIXED RATE AND ADOPT AN ACTUARILY DETERMINED CONTRIBUTION.
AND THIS IS THE MOST IMPORTANT RECOMMENDATION WE'RE MAKING.
IT ALLOWS THE CONTRIBUTION AMOUNTS TO ADJUST TO THE CIRCUMSTANCES OF THE PLAN ON AN ANNUAL BASIS SO THAT YOU DON'T FALL BEHIND.
UH, AND WHEN YOU START CATCHING UP, IT WILL AUTOMATICALLY ADJUST THE CONTRIBUTIONS BACK DOWN.
IT MEANS THAT YOU WOULD ALWAYS COMPLY WITH THE PENSION REVIEW BOARD'S FUNDING GUIDELINES.
ONE DETAIL WE WANTED TO, TO RAISE IS JUST WHEN YOU GO FROM A FIXED RATE TO PAYING AN ACTUARILY DETERMINED CONTRIBUTION THAT CHANGES EVERY YEAR, UH, YOU NEED TO BUILD IN TIME IN THE PROCESS, UH, TO BUDGET FOR THOSE CHANGES.
AND SO THE, THE PROPOSED STRUCTURE IS THAT BASED ON THIS JANUARY 1ST, 2023 VALUATION, YOU WOULD CALCULATE THE ACTUARILY DETERMINED CONTRIBUTION AND THAT WOULD BECOME EFFECTIVE AND THE CITY WOULD START PAYING IT TEN ONE TWENTY TWENTY FOUR, THE BEGINNING OF YOUR FISCAL YEAR, OR 1 1 20 25, THE BEGINNING OF THE PLAN YEAR.
UH, WITH THAT LAG, THAT GIVES YOU TIME TO FIND OUT WHAT THE ACTUAL, UH, CONTRIBUTION IS THAT'S REQUIRED AND PUT IT INTO YOUR BUDGET PROCESS, UH, SO THAT YOU HAVE TIME TO BUDGET FOR IT.
THE SECOND RECOMMENDATION, UH, IS TO REDUCE THE EMPLOYEE CONTRIBUTION RATE GRADUALLY AS THE FUNDING IMPROVES.
THIS HAS NOT REALLY CHANGED SINCE OUR FIRST, UH, PRESENTATION.
THE IDEA IS, UH, TO IT, WELL, UNDER YOUR CURRENT PROVISIONS, ONCE YOU'RE A HUNDRED PERCENT FUNDED, IT WOULD DROP FROM THE CURRENT 13.5% TO 50% OF THE NORMAL COST.
WE'RE KEEPING THAT 50% OF THE NORMAL COST IS THE TARGET, BUT INSTEAD OF WAITING UNTIL YOU'RE FULLY A HUNDRED PERCENT, THE IDEA IS TO START GRADUALLY MOVING THE RATE DOWN, UH, BEFORE YOU GET TO A HUNDRED PERCENT, UH, AND THEN STILL GET TO THE 50% NORMAL COST RATE.
THE THIRD RECOMMENDATION IS TO PROVIDE SOME COLA EARLIER THAN THE CURRENT PROVISIONS.
THE CURRENT PROVISIONS PROVIDE NO COLA UNTIL YOU ARE 70% FUNDED, UH, IN THE, UH, 2023 VALUATION.
THAT'S NOT PROJECTED TO BE UNTIL 2073.
UH, YOU'LL SEE WITH OUR RECOMMEND RECOMMENDED CONTRIBUTIONS THAT MOVES UP, BUT IT STILL DOESN'T HAPPEN UNTIL 2046 OR 2047.
AND SO WE'LL, WE'LL SPEND SOME MORE TIME, UM, SORT OF TALKING ABOUT THE NEED FOR THAT AND WHAT OPTIONS YOU MIGHT HAVE, UH, AND WHAT THOSE OPTIONS WOULD COST.
WE AREN'T MAKING A SPECIFIC RECOMMENDATION FOR A SPECIFIC COLA.
SO WITH THAT, UH, LET'S TALK ABOUT THE, UH, ACTUARILY DETERMINED CONTRIBUTIONS.
AND I'M GONNA TURN IT TO ELIZABETH FOR THE FIRST SLIDE HERE.
SO BEFORE WE GET INTO LOOKING, OH, SORRY, NEXT SLIDE.
AT WHAT THE OPTIONS LOOK LIKE, WE WANTED TO JUST BRIEFLY SHOW WHAT BILL SPOKE ABOUT IN TERMS OF THE COMPOSITION OF HOW THE CONTRIBUTIONS ARE DETERMINED.
CURRENTLY, ALL THE COMPONENTS OF THE CONTRIBUTION ARE DEVELOPED BASED AS A PERCENTAGE OF PAY OTHER THAN THOSE SMALL FIXED AMOUNTS DURING THAT TRANSITION PERIOD.
THE BILL SPOKE TO FROM HB 31 58.
AND THIS MEANS THAT WHEN YOU HAVE CHANGES IN THE PAYROLL AND POPULATION, THE AMOUNTS THAT ARE GONNA BE PAID CHANGE, WHAT OUR
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PROPOSED APPROACH DOES IS IT RECOGNIZE THE DIFFERENCE BETWEEN THE NATURE OF THE ONGOING SERVICE, WHICH WAS THE NORMAL COST CONCEPT THAT BILL INTRODUCED, VERSUS THE UNFUNDED LIABILITY THAT RELATES TO PREVIOUS SERVICE.AND SO WHAT OUR RECOMMENDATION IS, IS THAT THE NORMAL COST WILL CONTINUE TO BE DETERMINED AS A PERCENTAGE OF PAY, BUT THOSE AMOUNTS THAT ARE DESIGNED TO PAY DOWN OR AMORTIZE THE UNFUNDED LIABILITY, THOSE WILL GET DEVELOPED BY THE VALUATION AS FIXED DOLLAR AMOUNTS.
AND NOT ONLY DOES THIS BETTER ALIGN WITH THE BASIS, BUT IT WILL LIKELY WORK BETTER WITH THE BUDGETING.
'CAUSE LIKE IF YOU HIRE MORE EMPLOYEES AND INCREASE THE NUMBER OF ACTIVES, YOU'RE ONLY GONNA HAVE TO INCREASE THE CONTRIBUTION FOR THE NORMAL COST OF THEIR BENEFITS.
THERE'S NOT AN INCREASE IN THAT PIECE THAT PAYS DOWN THE UNFUNDED AMOUNT FROM PRIOR SERVICE JUST BECAUSE YOU HIRED NEW PEOPLE.
SO WITH THAT, THOSE ARE THE PIECES.
I'M GONNA TURN IT OVER TO JAKE TO TALK ABOUT HOW THE TIMING OF THIS DEVELOPMENT WORKS.
SO PAGE NINE KIND OF GIVES YOU A, A VIEW OF THE TIMELINE OF THE ACT OF THE ACTUARILY DETERMINED CONTRIBUTION.
WE START WITH THE JANUARY 1ST, 2023 VALUATION.
THAT'S THE MEASUREMENT DATE THAT THE CALCULATION IS DETERMINED AS OF, BUT THE ACTUAL RESULTS AREN'T GENERALLY AVAILABLE TILL THE END OF THE YEAR.
SO THAT VALUATION IS GENERALLY COMPLETED AROUND JANUARY 1ST, 2024.
AND THAT'S THE POINT AT WHICH YOU WOULD KNOW THE ACTUARY DETERMINED CONTRIBUTION THAT WOULD GO INTO EFFECT THAT THE CITY WOULD START PAYING EITHER TEN ONE TWENTY TWENTY FOUR OR 1 1 20 25.
AND SO THAT GIVES THE CITY EITHER NINE OR 12 MONTHS LEAD TIME TO KNOW HOW MUCH THAT ACTUARILY DETERMINED CONTRIBUTION IS AND CAN BE INCLUDED IN THE BUDGET.
THE ACTUAL CALCULATION FOR THE FIRST PAYMENT, UH, WILL NEED, THERE NEEDS TO BE SOME CHANGES TO THE 2023 VALUATION TO REFLECT THE PLAN THAT IS EVENTUALLY ADOPTED.
AND SO, UM, A MORE TYPICAL TIMELINE IS THE 1 1 20 24 VALUATION, WHICH WILL TYPICALLY BE COMPLETED AROUND THE BEGINNING OF 2025.
AND YOU WOULD HAVE NINE TO 12 MONTHS TO BUDGET THAT CONTRIBUTION BECAUSE THAT CONTRIBUTION WOULD BE EFFECTIVE STARTING EITHER OCTOBER OF 2025 OR JANUARY OF 2026.
AND SO THE CONTRIBUTION THAT'S CALCULATED AS AN ANNUAL CONTRIBUTION THAT WOULD BE MADE FOR ANY 12 MONTH PERIOD, WHETHER IT STARTS TEN ONE OR ONE ONE TILL THE FOLLOWING YEAR WHEN THE REVISED ACTUALLY DETERMINED CONTRIBUTION IS CALCULATED BASED ON THE MOST RECENT VALUATION.
JUST TO GIVE YOU AN IDEA OF THE, THE FLOW OF WHEN, UH, THE CALCULATION IS CALCULATED AS OF AND WHEN IT'S KNOWN AND, AND WHEN THE CONTRIBUTION WOULD ACTUALLY BECOME EFFECTIVE.
WITH THAT, I'LL TURN IT OVER TO BILL.
SO IN, IN SELECTING, THERE ARE A LOT OF DIFFERENT WAYS YOU COULD STRUCTURE AND ACTUARILY DETERMINE CONTRIBUTION.
AND WE'VE GOT, UH, FIVE OPTIONS IN HERE.
BUT THE PRINCIPLES WE WERE LOOKING AT IN, IN DEVELOPING IT ARE FIRST AND FOREMOST WE NEED TO MEET THE PENSION REVIEW BOARD GUIDELINES.
AND SO WE'VE GOT TO MAKE SURE THAT THE FUNDING PERIOD IS NOT MORE THAN 30 YEARS.
THEN THE SECOND IS, UH, ACTUARIAL PRACTICE HAS REALLY, UH, GONE TO USING WHAT'S CALLED A LAYERED AMORTIZATION APPROACH, WHERE WE LOOK AT THE CHANGES EACH YEAR AND SET UP A SEPARATE AMORTIZATION JUST FOR THOSE CHANGES.
UH, AND THOSE AMORTIZATIONS WE'VE, UH, TIED TO A TWO AND A HALF PERCENT INCREASE IN OUR, UM, EXAMPLES THAT'S PROJECTED PAYROLL GROWTH SO THAT THOSE AMORTIZATION PAYMENTS ARE OTHER THAN OUR, UH, STEP IN AND STEP DOWN PERIODS ARE A LEVEL PERCENTAGE OF PAY.
THE THIRD THING WAS TO MAKE SOME BUDGET ACCOMMODATIONS BECAUSE WE KNOW, UH, WE'RE LOOKING AT A VERY SIGNIFICANT INCREASE IN CONTRIBUTIONS AND WE UNDERSTAND THAT BUDGET PROCESSES, UH, CAN'T FLIP ON A DIME.
AND SO MAKING A SIGNIFICANT JUMP IN ONE YEAR, UH, MAY BE DIFFICULT.
AND THEN FINALLY, I DO WANNA POINT OUT THAT, UH, EMBEDDED IN ALL OF THIS, IT, IT DOESN'T, UH, AFFECT THINGS FOR ABOUT 10 YEARS, BUT WE ARE SUGGESTING THAT YOU TRANSITION TO A 20 YEAR LAYERED AMORTIZATION SYSTEM.
AND WHAT THAT MEANS IS IF YOU HAD A GAIN OR A LOSS 25 YEARS FROM NOW, THAT UH, PIECE IS AMORTIZED FOR 20 YEARS.
FROM THAT POINT, YOU DON'T HAVE TO PAY IT OFF ALL IN THE LAST FIVE YEARS, UH, BEFORE THE END OF THE 30 YEAR PERIOD.
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SO IT ADDS SOME STABILITY TO THE CONTRIBUTIONS, UH, ON AN ONGOING BASIS.IT MEANS THAT YOUR FUNDING PERIOD WOULD NEVER BE LONGER THAN 20 YEARS, AND SO YOU WOULD BE WELL WITHIN THE PENSION REVIEW BOARD GUIDELINES AND, AND IT'S CONSIDERED A MODEL PRACTICE AMONG ACTUARIES.
UH, I'LL QUICKLY GO THROUGH THE, THE DIFFERENT OPTIONS.
UH, I DO WANNA SAY THAT ALL OF THESE OPTIONS WE WOULD CONSIDER REASONABLE.
WE LABELED THEM LEAST PREFERRED TO MOST PREFERRED BASED ON, UH, A PRIMARY CRITERIA OF GETTING MONEY INTO THE FUND AS QUICKLY AS POSSIBLE.
AND SO THE TRADITIONAL APPROACH HERE DOES NOT, UH, DO THE STEP UPS THAT I WAS TALKING ABOUT TO ACCOMMODATE BUDGETS.
IT JUST TAKES THE ENTIRE UNFUNDED LIABILITY AND SAYS, WE'RE GONNA AMORTIZE THAT OVER 30 YEARS.
AND SO YOUR, YOUR CONTRIBUTION WOULD STEP UP IMMEDIATELY, BUT THEN BE LEVEL FOR 30 YEARS.
THE THREE YEAR STEP UP AND STEP DOWN OPTIONS, WE SPLIT THE AMORTIZATION INTO TWO PIECES.
ONE PIECE IS, IS LEVEL AT ITS CURRENT RATE, AND IT'S MEANT TO MIMIC THE, THE CURRENT PAYMENT, UH, OF ABOUT 37%, UH, OF PAY.
AND WE PUT ABOUT 2.2 BILLION OF THE UNFUNDED INTO THAT AMORTIZATION.
IT WOULD JUST BE A FLAT 30 YEAR PAYMENT.
AND THEN THE REMAINDER OF THE UNFUNDED LIABILITY GOES INTO A SPECIAL AMORTIZATION BASE THAT HAS EITHER A THREE OR A FIVE YEAR STEP UP TO THE ULTIMATE LEVEL, THEN WOULD REMAIN CONSTANT UNTIL THE END OF THE PERIOD, AND THEN WOULD HAVE A THREE OR FIVE YEAR STEP DOWN TO HELP EASE OUT OF THE THE HIGHER CONTRIBUTIONS.
UH, THEN THE, THE FINAL TWO ARE THE SAME THING, EXCEPT THEY DON'T STEP DOWN AT THE END.
SO THEY JUST STEP UP AT THE BEGINNING, UH, OVER EITHER THREE OR FIVE YEAR PERIODS.
BUT THEN YOU KEEP THAT HIGHER RATE AT THE END.
AND THE DIFFERENCE WOULD BE IS AT THE END YOU WILL HAVE, UH, A LARGER DROP IN, IN CONTRIBUTIONS ALL IN ONE YEAR AS OPPOSED TO THE STEP DOWN, YOU WOULD PHASE DOWN YOUR, YOUR HIGHER CONTRIBUTIONS OVER A COUPLE YEARS.
SO WE'RE GONNA GO THROUGH A FEW GRAPHS.
I'LL LET, UH, ELIZABETH LEAD US THROUGH THOSE.
SO, UM, FIRST WE'RE GOING TO EXPLORE THAT FIRST RECOMMENDATION, WHICH IS THE CHANGING OF THE CONTRIBUTION BASIS FROM THE FIXED STATUTORY AMOUNT THAT IT IS CURRENTLY TO AN ACTUARILY DETERMINED CONTRIBUTION.
AND WE HAVE INCLUDED HERE THE PROJECTION GRAPHS FOR THE FIVE OPTIONS THAT WE'VE INCLUDED FOR THIS RECOMMENDATION.
AND THESE ARE LAID OUT SIMILAR TO WHAT BILL INTRODUCED EARLIER WITH THE CURRENT BASELINE.
AS A REMINDER, THE FUNDED RATIO, WHICH LOOKS AT THE RELATIONSHIP BETWEEN THE ASSETS AND THE LIABILITIES IS SHOWN ON THE LEFT ON EACH ONE OF THESE PAGES.
AND THEN INFORMATION ON THE CONTRIBUTIONS ARE SHOWN ON THE RIGHT.
AND I WANNA NOTE THAT WE ARE PROVIDING THESE AS A PERCENTAGE OF PAY FOR THE EASE OF COMPARISON, BUT ONLY THE NORMAL COST IS ACTUALLY SET ON THIS BASIS.
THESE WOULD BE DOLLAR AMOUNTS SET FOR EACH YEAR.
SO WE ALSO PROVIDE A SUMMARY THAT ALLOWS EASY COMPARISON OF THESE.
SO I'M GONNA JUST QUICKLY HIGHLIGHT SOME KEY INFORMATION ON THE SPECIFIC MODELING OF THE SCENARIO AND THEN WE'LL GO TO THAT COMPARISON.
SO IN THIS FIRST ONE, OPTION ONE A, THAT'S THE TRADITIONAL A DC THAT DOESN'T HAVE ANY RAMP UP OR RAMP DOWN.
WE ARE SEEING THAT THE FUNDED RATIO ACHIEVES 100% BY 2055, WHICH IS NECESSARY TO MEET BOTH THE PRB STANDARDS AND YOUR SPECIFIC STATUTE.
AND THAT IS TRUE ACROSS ALL FIVE OF THESE SCENARIOS.
THE OTHER THING IS THAT ALL FIVE OF THEM HIT THE 70% MARK, WHICH IS WHERE THE CURRENT COLA IS PAID BY EITHER 2046 OR 2047.
SO THE THINGS THAT I'M GONNA HIGHLIGHT AS WE QUICKLY GO THROUGH THESE FIVE IS THE 2029 CITY CONTRIBUTION.
AND THE REASON WHY WE'RE HIGHLIGHTING THAT IS THAT'S THE YEAR UNDER ALL THE SCENARIOS THAT ALL OF THE SMOOTHING FROM THE ASSETS AS WELL AS THE RAMPS HAVE BEEN FULLY RECOGNIZED.
SO IT'S JUST A GOOD POINT FOR THE COMPARISON.
SO IN THIS FIRST SCENARIO, THAT'S THAT TRADITIONAL FORM IN THAT 2029, THE CONTRIBUTION IS AT 50%, AND THAT'S OUR BASELINE THAT WE'RE GONNA COMPARE THE OTHER RECOMMENDATIONS.
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NEXT SLIDE, IT MODIFIES THIS TRADITIONAL A DC BY ADDING IN A THREE YEAR RAMP UP, STEP UP AND A THREE YEAR STEP DOWN AT THE END, AS BILL DESCRIBED.AND WITH THIS, THE 2029 CONTRIBUTION IS 52%.
AND IN GENERAL, IN THE EARLY YEARS, THE CONTRIBUTIONS ARE ABOUT ONE TO 2% HIGHER THAN IN THE TRADITIONAL.
AND THAT'S BECAUSE YOU HAVE TO MAKE UP FOR THE REDUCED CONTRIBUTIONS THAT ARE RECEIVED DURING THE RAMP.
SO YOU HAVE TO PAY A LITTLE MORE IN THE OTHER YEARS.
UM, IF WE GO ON TO THE NEXT SLIDE, THIS IS VERY SIMILAR TO THE PREVIOUS ONE, BUT THE RAMPS ARE JUST EXTENDED OUT TO FIVE YEARS.
AND WITH THOSE LOWER RAMPS, YOU HAVE MORE OF THOSE SMALLER CONTRIBUTIONS THAT HAVE TO BE MADE UP.
AND WITH THAT, THE 2029 NUMBER GOES UP TO 53%.
AND IN GENERAL, IT'S ABOUT TWO TO 3% HIGHER DURING THOSE EARLY YEARS TO COVER FOR THE RAMPS.
ON THE NEXT SLIDE, WE LOOK AT THE FIRST ONE OF THE OPTIONS WHERE WE ELIMINATE THE RAMP DOWN AT THE END.
AND WITH THIS, THE 2029 IS AT 51%, SO THERE'S 1% HIGHER THAN THE BASELINE, AGAIN, RECOGNIZING THE LESS AMOUNTS THAT ARE COMING IN.
AND THEN FINALLY, IF WE GO TO THE NEXT SLIDE, THIS IS JUST THAT ONLY A RAMP UP WITH A FIVE YEAR, AND THIS IS 52% FOR 2029.
AND WITH THAT, I'LL HAND IT BACK TO BILL TO TAKE THE NEXT FUND MONTH WHERE WE COMPARE THE RESULTS OF THESE.
SO, UH, ALL OF THOSE OPTIONS GET YOU FULLY FUNDED BY 2055.
UH, ASSUMING ALL ASSUMPTIONS ARE MET, OBVIOUSLY, UH, BUT HERE WE CAN GIVE A LITTLE BIT OF THE COMPARISON BETWEEN THE OPTIONS.
THE UPPER LEFT CORNER, UH, WE'RE SHOWING THE MINIMUM EXPECTED FUNDED PERCENTAGE.
SO, UH, THE TRADITIONAL WHERE YOU PUT THE MONEY IN RIGHT AWAY, UH, THE FUNDED PERCENTAGE DOESN'T DROP AS MUCH, SO IT STILL, UH, ENDS UP AT 34%.
UM, BUT, UH, ALL OF THE OTHER OPTIONS, IT WOULD DROP A LITTLE BIT LOWER DOWN TO 32.
UH, LOOKING AT THE YEAR, IT WOULD REACH 70%, UH, THE THREE YEAR STEP UP AND DOWN AND THE FIVE YEAR STEP UP AND DOWN ACTUALLY GET YOU THERE JUST SLIGHTLY EARLIER.
AND THAT'S BECAUSE, UH, TO PAY FOR THOSE RAMPS, IT'S HIGHER CONTRIBUTIONS IN THE MIDDLE.
AND SO YOU'RE ACTUALLY ACCUMULATING STUFF IN THE, THOSE MIDDLE YEARS AT A QUICKER RATE.
AND SO YOU GET TO THE 70% SLIGHTLY, UH, SOONER, UH, THAN THE OTHER THREE.
ON THE RIGHT HAND SIDE, WE HAVE A COMPARISON OF THE CITY CONTRIBUTIONS IN 2025 AND 2029.
AND THIS IS LAID OUT THE WAY, UH, WE WOULD ANTICIPATE, UH, ACTUALLY DOING IT, SHOWING THE NORMAL COST RATE AS A PERCENT OF PAY AND THEN A DOLLAR AMOUNT ON TOP OF THAT PERCENT OF PAY.
AND SO YOU CAN SEE IN THE FIRST YEAR THAT TRADITIONAL, UH, NEEDS 6.2% PLUS 209 MILLION, AND THAT'S EASILY THE HIGHEST IN THE 2025.
AND THE OTHER OPTIONS ARE ALL MUCH LOWER IN 2025.
BUT THEN WHEN YOU REACH THE, THE TOP OF THE RAMP IN 2029, THE RELATIONSHIP FLIPS.
'CAUSE IF YOU'VE PUT MORE MONEY IN EARLY THAN THE PEAK IS LOWER.
UH, AND ALSO IF YOU ARE COUNTING ON MONEY AT THE END OF THE 30 YEAR PERIOD BECAUSE YOU'RE NOT STEPPING IT DOWN, UH, THAT, UH, THAT MAKES THE MIDDLE YEARS LOWER, IT'S IF YOU ARE STEPPING DOWN AT THE END, WE'VE BUILT THAT UP IN THE MIDDLE JUST SLIGHTLY SO YOU CAN SEE THE TRADE OFFS FOR THE DIFFERENT PATTERNS THERE.
UH, I THINK THE OTHER THING WE HAVE ON THIS SLIDE IS A COMMENT ABOUT NET CASH FLOW BEFORE INVESTMENTS.
THAT'S ESSENTIALLY, UH, CONTRIBUTIONS, LESS BENEFIT PAYMENTS, UH, AND ADMINISTRATIVE EXPENSES AS A PERCENT OF THE ASSETS.
WE ADDED THIS DUE TO A COMMENT FROM THE PENSION REVIEW BOARD ABOUT THE, THE DIFFICULTY OF MANAGING NEGATIVE CASH FLOW.
AND MAINLY TO POINT OUT THAT UNDER ANY OF THESE OPTIONS, THE HIGHER CONTRIBUTIONS ARE GONNA MITIGATE THE ISSUES OF NEGATIVE CASH FLOW THAT THE SYSTEM IS AT.
SO I, I DON'T REALLY WANNA SPEND MUCH TIME GETTING INTO THOSE ISSUES, BUT JUST TO NOTE THAT THE A DC APPROACH SOLVES, UH, THE CURRENT PROBLEM THAT THEY HAVE.
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SO, UH, JUST TO WRAP UP OUR A DC SECTION, UH, ALL OF THESE OPTIONS ARE REASONABLE.THEY ALL MEET THE PENSION REVIEW BOARD FUNDING GUIDELINES.
UH, I DO WANNA SAY THAT, UH, HAVING THE A DC FROM THE BEGINNING IS IMPORTANT BECAUSE IT AUTOMATICALLY ADJUSTS WITH YOUR EXPERIENCE EACH YEAR.
AND KE ALWAYS MAKE SURE THAT YOU HAVE THE FUNDING GUIDELINES SATISFIED.
WE, WE'VE HEARD PROPOSALS TO HAVE FIXED, UH, STEP UPS AND THEN SWITCH TO AN A DC IN THREE TO FIVE YEARS.
OUR CONCERN WITH THAT IS THAT THE FIXED STEP UP, IT IS NOT ADJUSTED FOR EXPERIENCE IN THE INTERIM, WHICH MEANS THE LAST STEP WHEN YOU SWITCH TO THE A DC, MAY NOT BE THE SMOOTH STEP THAT YOU PLANNED.
AND SO IT, IT PROVIDES A MUCH SMOOTHER TRANSITION IF YOU ARE ADJUSTING FOR YOUR EXPERIENCE IN THE INTERIM.
UH, ALL OF THE OPTIONS WILL IMPROVE THE CASH FLOW.
THEY ALL GET TO A HUNDRED PERCENT FUNDING IN 2055 AND 70% IN EITHER 2046 OR 2047.
UH, GIVEN THE LOW FUNDED STATUS, WE DO PREFER, UH, THAT YOU GET THE CONTRIBUTIONS UP AS QUICKLY AS POSSIBLE.
AND SO WE ORDERED THOSE OPTIONS IN TERMS OF HOW QUICKLY THEY GOT THE, THE CONTRIBUTIONS UP, WE HAVE NOT INCLUDED SPECIFICALLY A LUMP SUM.
UH, I KNOW THERE'S BEEN A LOT OF TALK ABOUT POTENTIALLY MAKING A LUMP SUM.
I WANT TO NOTE THAT THE ACTUARILY DETERMINED CONTRIBUTION WILL AUTOMATICALLY ADJUST WHEN A LUMP SUM IS CONTRIBUTED.
AND SO THE CONTRIBUTION RATE WOULD DROP REFLECTING THAT LUMP SUM.
UH, AND WE, WE HAVE PUT OUR THOUGHTS IN THE APPENDIX PROBABLY MOSTLY FOR OTHER ACTUARIES, UH, ON HOW TO HANDLE THAT.
UH, AND THEN TO MANAGE THE CHANGE TO GET TO A HIGHER LEVEL OF CONTRIBUTIONS, WE, UH, DO PREFER THE STEP UP AND STEP DOWN OPTIONS.
THE STEP UP GIVES YOU THE TIME, UH, TO ADJUST AT THE, THE FRONT END.
THE STEP DOWN PROVIDES A SIMILAR ADJUSTMENT AT THE END.
UH, AND THE REASON WE'RE SUGGESTING BUILDING IT IN NOW, ALTHOUGH YOU'VE GOT A 30 YEAR TIMEFRAME, SO YOU COULD BUILD IT IN A LITTLE BIT LATER, BUT IN OUR EXPERIENCE WITH SYSTEMS THAT HAVE APPROACHED THAT KIND OF CLIFF WHERE YOU HAVE, YOU'VE FINALLY PAID OFF FOR A PAST UAL AND YOU'RE GONNA HAVE A SIGNIFICANT DROP IN CONTRIBUTIONS, THE SPONSOR HAS, UH, RAISED THE ISSUE OF CONCERN OVER A SUCH A SIGNIFICANT DROP IN ONE YEAR AND WHAT THAT DOES TO THEIR BUDGET PROCESS.
AND, AND SO, UH, WE'VE BUILT THE, UM, THE STEP DOWN.
WE THINK IT MAKES MORE SENSE TO BUILD IT IN IN ADVANCE.
UH, IT DOESN'T HAVE TO BE BUILT IN IN 30 YEARS IN ADVANCE, BUT IF YOU GET TOO CLOSE TO THE END BEFORE YOU BUILD IT IN YOU, THE ONLY REALISTIC OPTIONS END UP EXTENDING THE, THE TIME PERIOD TILL YOU PAY ALL OF THAT.
SO BY BUILDING IT IN, YOU WON'T HAVE TO EXTEND THAT.
THAT DOES MEAN THAT THE CONTRIBUTIONS ARE SLIGHTLY HIGHER IN THAT INTERIM PERIOD, BUT THAT ALSO, UH, GOES TO FUNDING THE PLAN MORE QUICKLY.
SO THOSE ARE OUR COMMENTS ON THE ACTUARILY DETERMINED CONTRIBUTION.
I'M GONNA TURN IT BACK TO ELIZABETH TO TALK ABOUT THE EMPLOYEE CONTRIBUTION RATES.
SO LIKE YOU SAID, WE'RE GONNA MOVE INTO EXPLORING OUR SECOND RECOMMENDATION THAT'S RELATED TO THE EMPLOYEE CONTRIBUTION.
AND WHAT WE ARE RECOMMENDING IS A GRADUAL REDUCTION IN THE RATE THAT IS PAID BY THE MEMBERS FOR THE NEW MEMBER TIER FROM THE CURRENT 13.5% DOWN TO 50% OF NORMAL COST, WHICH IS 9.5%.
CURRENTLY, THIS IS SIMILAR TO YOUR CURRENT STATUTE WHERE THE RATE IS REDUCED TO 50% OF NORMAL COSTS WHEN AT A HUNDRED PERCENT FUNDING, BUT WILL OCCUR EARLIER WITH THIS, WHAT THE EMPLOYEE CONTRIBUTION RATE WILL EQUAL IS 9.5%, WHICH IS HALF OF THE NORMAL COST PLUS AN ADJUSTMENT.
AND WE'RE SHOWING POSSIBLE VALUES FOR THESE ADJUSTMENTS IN THE TABLE BELOW.
THESE BEGIN WITH A 4% ADJUSTMENT, WHICH WHEN YOU COMBINE IT WITH THE HALF OF NORMAL COST, THAT RESULTS IN THE RATE BEING THE SAME 13.5%.
AND THAT WOULD BE IN EFFECT UNTIL SUCH POINT AS THE PLAN IS AT LEAST 50% FUNDED, AT WHICH POINT THE ADJUSTMENT COMPONENT OF THE EMPLOYEE CONTRIBUTION WOULD GRADUALLY GRADE DOWN UNTIL THE ADJUSTMENT IS 0%
[00:30:01]
AND THE RATE WOULD JUST BE THE 50% OF NORMAL COST.AND THAT OCCURS WHEN THE PLAN IS AT LEAST 90% FUNDED.
AS WE GO TO THE NEXT SLIDE, WE TAKE THIS IDEA AND WE SHOW PROJECTIONS OF THE CONTRIBUTIONS ADDING IN THIS CHANGE.
WE'RE SHOWING THIS HERE, BUILDING ON THE ONE C SCENARIO, WHICH WAS THE FIVE YEAR UP DOWN.
BUT WE DO WANNA NOTE THAT THIS COULD BE COMBINED WITH ANY OF THE A DC OPTIONS.
WE'RE JUST SHOWING YOU ONE TO SPARE YOU SITTING THROUGH ALL OF THEM.
UM, THE GRAPH ON THE RIGHT IS THE SAME THAT WE'VE BEEN SHOWING.
AND THE MAIN POINT I WANT YOU TO TAKE FROM THIS IS THAT THE TOTAL PERCENTAGE IS THE SAME AS WAS IN ONE C.
THE ONLY DIFFERENCE IS THE DIVISION BETWEEN THE MEMBERS AND THE CITY, AND THAT'S ONLY IN THE NORMAL COST PIECE OF THE CONTRIBUTION.
AND SO TO HELP SHOW THIS, WE ADDED IN A NEW GRAPH ON THE LEFT THAT SHOWS JUST THE NORMAL COST COMPONENT OR THAT ONGOING SERVICE PART OF THE CONTRIBUTION.
AND THIS SHOWS THE GRADUAL DECLINE IN THE EMPLOYEE CONTRIBUTION PERCENTAGE AS THE FUNDING STATUS IMPROVES WITH AN OFFSETTING GRADUAL INCREASE IN THE CITY RATE.
AND WITH THAT, I'LL HAND IT BACK TO BILL.
TAKE US INTO OUR LAST RECOMMENDATION.
OKAY, SO THE LAST ONE IS TO PROVIDE SOME COLA EARLIER.
AND IF WE CAN MOVE TO THE NEXT SLIDE.
UH, I JUST WANTED TO GIVE SOME BACKGROUND ON THE COLA AND THEN, UH, LOOK AT WHERE WE ARE GOING WITH THIS.
UH, THERE USED TO BE A 4% SIMPLE COLA.
IF YOU WERE HIRED PRIOR TO 2007, UH, IT BECAME AN AD HOC SIMPLE COLA IF YOU WERE HIRED AFTER, UH, 2006 WITH THE CHANGE OF HB 31 58.
NOW THE AD HOC SIMPLE COLA DEPENDS ON INVESTMENT RETURNS, NOT ON ACTUAL INFLATION.
UH, WE USE A FIVE YEAR AVERAGE RETURN MINUS 5%.
SO THE, THE SYSTEM ASSUMES OR EXPECTS A 6.5% RETURN.
SO THE FIVE YEAR AVERAGE IT WOULD EXPECT IS ALSO SIX POINT A HALF.
YOU SUBTRACT 5% AND THAT GIVES US AN EXPECTED COLA OF ONE POINT A HALF PERCENT.
NOW THE COLA HAS A CAP, SO IT CAN NEVER GO ABOVE 4% IN A GIVEN YEAR, BUT THE BIGGER PIECE ON THE COLA IS THAT IT CANNOT BE GRANTED UNTIL THE FUND IS AT LEAST 70% FUNDED.
AND SO IN THE CURRENT VALUATION, THAT'S NOT PROJECTED UNTIL 2073 WITH OUR, UH, A DC REQUIREMENTS, THAT WOULD SPEED IT UP TO ABOUT 2046, BUT YOU'RE STILL LOOKING AT MORE THAN 20 YEARS BEFORE WE'RE EXPECTED TO GET THERE.
SO LAST TIME WE HAD MENTIONED THAT THAT COMBINED WITH THE FACT THAT THESE EMPLOYEES ARE NOT COVERED BY SOCIAL SECURITY, UH, RAISE CONCERNS.
AND SO WE WANTED TO TALK THROUGH EXACTLY WHAT THAT, UH, IS AND AND AND WHAT IT MEANS.
AND SO THE CHART ON THE RIGHT IS GRAPHING, UH, A CONCEPT CALLED PURCHASING POWER.
SO WHEN YOU RETIRE, YOUR RETIREMENT BENEFIT PROVIDES A CERTAIN LEVEL OF PURCHASING POWER, AND WE SET THAT AT A HUNDRED PERCENT.
AND THEN EACH YEAR AFTER RETIREMENT, IF YOU GET A COLA THAT GOES UP, BUT YOUR PURCHASING POWER ERODES WITH INFLATION.
AND SO THE CHART IS SHOWING, UH, AN ASSUMPTION OF TWO POINT A HALF PERCENT INFLATION EACH YEAR.
AND THAT BLUE LINE AT THE BOTTOM IS IF YOU GIVE ZERO COLA.
AND SO AFTER 15 YEARS THAT PURCHASING POWER WOULD'VE DECLINED TO 69%.
SO THAT'S, THAT'S LIKE IF YOU STARTED WITH A BENEFIT OF A THOUSAND DOLLARS A MONTH, THEN 15 YEARS LATER THAT COULD PURCHASE ABOUT THE SAME AS IF IT WAS 690 A MONTH, RIGHT? UH, IF YOU PROVIDE THE 1.5% SIMPLE COLA THAT MOVES YOU UP TO THE GOLD LINE THERE, UH, OF 85% AFTER 15 YEARS, AND IF YOU COVER THE FULL TWO POINT A HALF INFLATION, BUT AS A SIMPLE COLA, THAT WOULD BE AT 96%.
IT'S NOT A HUNDRED PERCENT BECAUSE INFLATION COMPOUNDS, IT'S NOT, UH, AS SIMPLE COLA, YOU NEED A COMPOUND COLA TO, TO KEEP UP WITH IT.
[00:35:02]
SO, UH, WITH THAT AS BACKGROUND, WE RECOGNIZE COLAS ARE EXPENSIVE.UH, THEY'RE, THEY'RE NOT CHEAP.
SO, UH, LET'S MOVE TO THE NEXT SLIDE.
SO WHY, GIVEN THAT COLAS ARE EXPENSIVE, WOULD WE SUGGEST THAT YOU CONSIDER ONE? NOW, UH, WE KNOW THERE ARE LOTS OF GOOD ARGUMENTS FOR NOT DOING IT.
THE SYSTEM IS VERY POORLY FUNDED, UH, AND COLAS WILL REQUIRE ADDITIONAL CONTRIBUTIONS TO FUND THE SYSTEM.
AND SO IT WOULD BE NATURAL TO SAY, WELL, LET'S NOT, UH, CONSIDER A COLA RIGHT NOW.
OUR CONCERN IS WHETHER YOU COULD REALLY MAINTAIN YOUR POLICE AND FIRE WORKFORCE WHILE OFFERING NO COLA FOR 20 OR MORE YEARS GOING FORWARD.
AND, AND YOU DON'T HAVE, THESE MEMBERS DON'T HAVE SOCIAL SECURITY COVERAGE AND THEIR OTHER EMPLOYEES AT DALLAS ARE RECEIVING A COLA.
AND SO YOU, IT'S GOING TO PUT A STRAIN ON YOUR WORKFORCE, WE BELIEVE.
AND SO IF YOU BELIEVE THAT AT SOME POINT IN THE NEXT 20 YEARS, YOU WILL NEED TO PROVIDE A COLA, OUR SUGGESTION IS THAT YOU BUILD THOSE COSTS IN.
NOW YOU ARE LOOKING AT A BUDGET PLAN, UH, TO TRY AND BRING THIS SYSTEM BACK UP TO A HUNDRED PERCENT, AND THOSE ARE AN ADDITIONAL COST THAT YOU WOULD INCUR DURING THAT THREE 30 YEAR PERIOD.
AND IGNORING THOSE COULD LEAD TO INADEQUATE FUNDING AS YOU'RE GOING FORWARD.
AND SO WHAT WE'VE TRIED TO DO HERE IS OUTLINE SOME OPTIONS TO COVER A SPECTRUM OF COSTS AND BENEFITS.
IN TERMS OF COLA, WE ARE NOT RECOMMENDING ANY SPECIFIC COLA BECAUSE IT'S NOT REALLY AN ACTUARIAL DECISION, IT'S A POLICY DECISION.
BUT WE WANTED TO GIVE YOU KIND OF A RANGE OF OPTIONS, UH, AND ALSO INTRODUCE A NEW CONCEPT IN, IN THE STRUCTURE OF THE COLA, UH, FOR YOU TO CONSIDER WHILE YOU ARE LOOKING AT OPTIONS.
SO LET'S GO TO THE NEXT SLIDE.
UH, I'M NOT GONNA GO THROUGH THESE DESIGN CHOICES IN DETAIL, BUT THESE ARE THE SORT OF VARIABLES YOU LOOK AT MANIPULATING IN, UH, DESIGNING A COLA.
I WANT TO CALL YOU YOUR ATTENTION THOUGH TO THE FOURTH COLUMN, THE PURCHASING POWER PROTECTION.
SO THE IDEA OF A PURCHASING POWER PROTECTION PROVISION IS THAT YOU CAN SET A FLOOR FOR HOW LOW, UH, A RETIREE'S PURCHASING POWER CAN GO COMPARED TO WHEN THEY RETIRED.
AND SO IF YOU SET A 70% FLOOR, FOR EXAMPLE, YOU MIGHT PAY NO COLA UNTIL THEIR PURCHASING POWER DROPS TO 70%, AND THEN YOU PROVIDE, UH, COLA EQUAL TO INFLATION TO KEEP THEM AT THE 70%.
AND SO IT, IT, IT PROVIDES SOME PROTECTION, UH, FOR THE RETIREES FOR HOW MUCH PURCHASING POWER THEY, THEY COULD LOSE.
UH, IT JUST PUTS A, A, A FLOOR ON IT.
IT DOESN'T PROVIDE, UM, ANY INITIAL GUARANTEE OF A COLA.
THE, THE OTHER PART OF THE PURCHASING POWER PROTECTION IS YOU'RE GONNA END UP GIVING DIFFERENT COLAS BASED ON THE YEAR SOMEONE RETIRES BECAUSE IT TAKES TIME FROM THEIR RETIREMENT DATE UNTIL THEY WOULD FALL BELOW THE FLOOR AND EACH, UH, YEAR PEOPLE RETIRE, THAT DATE BECOMES DIFFERENT.
AND SO IT WOULD KICK IN AT DIFFERENT TIMES FOR DIFFERENT PEOPLE, WHICH ALSO HELPS CONTROL THE COST.
SO WITH THAT, LET'S GO TO THE NEXT SLIDE.
WE'RE GONNA GIVE YOU A SPECTRUM THAT RANGES FROM THE CURRENT POLICE AND FIRE, UH, SYSTEM COLA UP TO THE CURRENT EMPLOYEE'S RETIREMENT FUND COLA.
BOTH ARE SIMPLE, THE POLICE AND FIRE COLAS BASED ON INVESTMENT RETURNS, BUT, UH, WE'RE USING THE AVERAGE, UH, EXPECTED OF 1.5%, UH, BUT ONLY GRANTED ONCE IT'S 70% FUNDED.
UH, THE EMPLOYEE'S RETIREMENT FUND COLA IS A SIMPLE COLA EQUAL TO CPI WITH A CAP OF, UH, 5% FOR PEOPLE HIRED PRIOR TO, UH, 2017 AND 3%, UH, FOR PEOPLE HIRED AFTER THE,
[00:40:01]
ALL OUR EXAMPLES SUM A TWO AND A HALF PERCENT COLA.SO THE CAP HERE DOESN'T COME INTO PLAY IN OUR EXAMPLES.
SO LET'S GO TO THE NEXT SLIDE.
WE RAN, UH, A LOT OF DIFFERENT OPTIONS.
WE'RE NOT GONNA GO THROUGH ALL THESE OPTIONS FOR YOU.
THEY ARE IN THE APPENDIX, IF YOU LIKE, DIFFERENT VARIATIONS.
UM, BUT WE WANTED TO SHOW THE, THE CURRENT AS KIND OF A, A BASELINE.
UH, THE EMPLOYEE'S RETIREMENT FUND IS THE OTHER END OF THE SPECTRUM.
AND THEN WE'RE GONNA HIT THE, THE 70% PURCHASING POWER AND 80% PURCHASING POWER FLOORS.
UH, IN THE PRESENTATION LAST TIME, WE SHOWED YOU THE IMMEDIATE PARTIAL COLA AND UPDATED NUMBERS FOR THAT ARE IN THE APPENDIX.
UH, AND THEN THERE ARE SOME MORE EXPENSIVE OPTIONS ON THE FAR RIGHT.
UM, BUT WE'RE NOT GONNA GO THROUGH THOSE TODAY.
SO, UH, WE HAVE A, A DIFFERENT CHART, UH, FOR YOU TO LOOK AT.
SO I WANNA ORIENT YOU TO THIS CHART, UH, ON THIS SLIDE, AND THEN WE'LL SHOW IT ON THE, FOR THE OTHERS.
UH, SO THIS IS THE PROJECTION OF PURCHASING POWER AND IT'S BASED ON THE RETIREMENT YEAR ON THE LEFT.
AND SO LET'S START WITH THE TOP ROW, WHICH IS FOR ANYONE WHO RETIRED IN 2023.
IN 2024, BY DEFINITION THEIR PURCHASING POWER IS A HUNDRED PERCENT.
BUT THEN OVER TIME, UH, IT ERODES.
AND IF THIS REALLY FOLLOWS THAT SAME LINE THAT WE HAD, UH, ON THE EARLIER CHART, EXCEPT THAT AROUND 2046 WHEN THE SYSTEM'S EXPECTED TO GET TO 70% FUNDED, UH, WE KICK IN WITH THE 1.5% SIMPLE COLA, SO IT DOESN'T KEEP GOING DOWN.
UM, BUT YOU CAN SEE AROUND 2039 IT'S DOWN TO 69%.
UH, SO THAT'S, UH, ABOUT 15 YEARS OUT.
YOU GET THE, THE SAME PROJECTION FOR EACH YEAR OF RETIREMENT, EXCEPT THEY'VE ALREADY EXPERIENCED SOME LEVEL OF COLA OR, UH, EROSION AND EROSION DUE TO INFLATION.
SO, UH, FOR EXAMPLE, IF YOU DROP DOWN TO YEAR OF RETIREMENT OF 2020, YOU CAN SEE THEY START AT AN 83% PURCHASING POWER.
THAT'S BECAUSE THEY HAVEN'T RECEIVED COLAS SINCE THEY RETIRED.
SO WE PROVIDE THAT FOR EACH, UH, RETIREMENT YEAR.
UH, THERE IS A LINE AT 2015 BECAUSE BELOW THAT LINE, WE'RE SHOWING IT IN FIVE YEAR INCREMENTS.
UH, SO YOU CAN SEE THE, THE IMPACT OF THE DECLINE IN PURCHASING POWER.
YOU TURN IT TO JAKE TO TALK ABOUT COSTS AND SET THE BASELINE HERE.
UH, THIS IS THE SAME PROJECTION AS WE SHOWED BEFORE UNDER THE CURRENT COLA PROVISIONS.
UH, AND THIS IS ASSUMING A FIVE YEAR STEP UP AND STEP DOWN OF THE ACTUARY DETERMINED CONTRIBUTION.
SO YOU'VE SEEN THESE NUMBERS BEFORE, BUT JUST WANT DRAW YOUR ATTENTION TO THE 2029 CONTRIBUTION RATE, WHICH IS 53%.
IN THIS SCENARIO, AS WE GO THROUGH, WE'RE GONNA LOOK AT THAT RATE FOR THE OTHER SCENARIOS TO COMPARE THE COST OF, UH, THIS COLA VERSUS OTHER OPTIONS.
SO IF WE FLIP TO THE OTHER END OF OUR SPECTRUM, UH, THIS IS THE CURRENT EMPLOYEE'S RETIREMENT FUND COLA, UH, IT'S, UH, YOU CAN SEE THE PURCHASING POWER, UH, STAYS MUCH HIGHER.
IT'S DOESN'T STAY AT A HUNDRED PERCENT IF YOU'RE LOOKING AT THE 2023 RETIREMENT.
IT, THAT'S BECAUSE IT IS A SIMPLE COLA AND NOT A COMPOUND COLA.
UM, BUT IT DOES, UH, A MUCH BETTER JOB OF KEEP MAINTAINING PURCHASING POWER, UH, OUT IN 2039.
AND ON THE NEXT SLIDE, PAGE 32, AS BILL MENTIONED, THE COLAS CAN BE EXPENSIVE.
AND THIS ONE, THAT CONTRIBUTION RATE IN 2029 GOES FROM 53% TO 70%.
UM, SO THAT IS, UH, A NOTABLE INCREASE IN THE COST.
UH, IN ADDITION, THE, THE CURRENT FUNDED RATIO WOULD DECREASE BECAUSE ADDITIONAL COLAS INCREASE THE LIABILITY OF THE FUNDS.
SO THE CURRENT FUNDED RATIO OF 39% WOULD DROP TO 33% IN THIS SCENARIO.
BUT AGAIN, YOU STILL GET TO A HUNDRED PERCENT FUNDED WITH THE ADDITIONAL CONTRIBUTIONS.
SO HERE WE'RE ADDING, UH, WE'RE STARTING WITH THE CURRENT COLA IN THE POLICE AND FIRE PLAN AND ADDING
[00:45:01]
A 70% PURCHASING POWER PROTECTION, BUT IT'S ONLY 70% OF YOUR PURCHASING POWER IN 2024.AND SO THAT'S TO HELP CONTROL THE COSTS.
WE'RE NOT GONNA BACKFILL, UH, FOR WHAT RETIREES HAVE ALREADY INCURRED, BUT LOOK AT IT JUST ON A GOING FORWARD BASIS.
SO YOU CAN SEE FOR SOMEONE, UH, RETIRING IN 2023, UH, THEY HIT THAT 70% FLOOR IN 2039, ABOUT 15 YEARS FROM RETIREMENT.
AND AT THAT POINT WE HOLD, UH, THEM CONSTANT AT 70% BECAUSE WE'RE PROVIDING INFLATION COLAS FOR THE OTHER GROUPS.
UH, SO IF YOU GO BACK, GO DOWN TO THE 20 THOU 2017, UH, GROUP, THEY'RE CURRENTLY AT 79%.
UH, WE ARE HOLDING THEM TO 70% OF THAT 79%.
SO THEY WOULD DROP TO 55% BEFORE WE KICK IN THE, THE PURCHASING POWER PROTECTION.
AND THE NEXT SLIDE, PITCH 34 SHOWS THE COST, UH, THE CONTRIBUTION RATE IN 2029 WOULD INCREASE TO 55% FROM 53.
UH, THAT'S BASED ON THE CURRENT COLA PROVISIONS.
AND THE FUNDED RATIO WOULD DROP SLIGHTLY FROM 39% TO 37% IN THIS SCENARIO.
SO THE, THE NEXT SLIDE SHOWS THE SAME THING, BUT IF YOU RAISED IT TO AN 80%, UH, PROTECTION, AND SO YOU CAN SEE THE PROTECTION KICKS IN AFTER ABOUT 10 YEARS INSTEAD OF 15 YEARS.
UH, AND SO, UH, YOU END UP WITH HIGHER BENEFITS.
AND OF COURSE, UH, JAKE, THE NEXT SLIDE SHOWS THE COST, WHICH IS, UH, 59% OF PAY IN 2029 COMPARED TO THE 53 FOR THE CURRENT COAL PROVISIONS, OR 55 FOR THE 70%, UH, PURCHASING POWER PROTECTION.
AND AGAIN, THE CURRENT FUNDED RATIO DECLINES SLIGHTLY DUE TO THE ADDITIONAL LIABILITY WHILE ALWAYS GETTING UP TO A HUNDRED PERCENT, UH, FUNDED BY 2055.
SO IF WE CAN GO TO THE NEXT SLIDE.
SO HERE, UH, WE ARE TRYING TO SUMMARIZE ALL THE OPTIONS WE LOOKED AT.
UH, ON THE LEFT HAND SIDE, WE'RE LOOKING AT THE 2029 CITY CONTRIBUTIONS.
AND SO THAT'S, THAT'S NOT THE IMMEDIATE CONTRIBUTION, BUT IT'S AFTER, UH, ANY OF THE RAMP UP HAVE HAPPENED.
UH, YOU CAN SEE THE, UH, THERE'S A DIFFERENCE IN THE NORMAL COST RATE BECAUSE YOU'RE ANTICIPATING HIGHER COLAS IF YOU ADOPT SOME OF THESE PROVISIONS.
AND SO THE NORMAL COST RATE, UH, GOES UP FOR SOME OF THEM.
UH, AND THEN THERE'S ALSO AN INCREASE IN THE UAL PAYMENT, UH, UNDER THE CURRENT PLAN THAT UAL PAYMENT'S ABOUT 245 MILLION.
IF YOU PUT IN THE 70% PURCHASING POWER, IT WOULD INCREASE TO ABOUT 256 MILLION.
UH, BUT THERE'S ALSO, UH, AN INCREASE IN THE NORMAL COST RATE.
UH, ON THE RIGHT HAND SIDE, THE TOP IS SHOWING THE PURCHASING POWER CHART, JUST THE 2023 RETIREES.
SO THE TOP LINE OF THE CHARTS WE'VE SHOWN ON THE PRIOR PAGES, UH, SO YOU CAN COMPARE THE EFFECTS, UH, OF THE, THE DIFFERENT PROVISIONS ON PURCHASING POWER.
AND AT THE BOTTOM WE'RE LOOKING AT THE, THE IMMEDIATE IMPACT ON THE UNFUNDED LIABILITY AND THE FUNDED PERCENTAGE.
AND SO THE CURRENT AL'S 3.2 BILLION, UH, IF YOU ADOPTED THE, THE ERF COLA, THAT WOULD INCREASE IMMEDIATELY TO 4.1 BILLION AND THE FUNDED PERCENTAGE WOULD DROP TO 33 POINT A HALF PERCENT.
UH, YOU CAN SEE GOING DOWN, ADDING THE 70% PURCHASING POWER, IT INCREASES THE UAL TO 3.4 BILLION AND REDUCES THE FUNDED PERCENTAGE TO 37.5%.
SO, UH, YOU CAN LOOK AT THE VARIOUS OPTIONS AND LOOK AT THE, THE, UH, COST AND BENEFIT TRADE OFF.
SO JUST TO CONCLUDE THIS SECTION, COLAS ARE EXPENSIVE.
WE UNDERSTAND THEY ARE EXPENSIVE AND OFTEN WHEN SYSTEMS ARE IN TROUBLE, THEY'RE THE FIRST THING THAT'S CUT BECAUSE, UH, OFTEN PEOPLE DON'T APPRECIATE HOW EXPENSIVE THEY ARE AND APPRECIATE THE BENEFIT.
SO THEY'RE OFTEN THE EASIEST THING TO CUT.
THE KEY QUESTION IS FROM OUR PERSPECTIVE IS CAN YOU CONTINUE TO MAINTAIN YOUR WORKFORCE WITHOUT PROVIDING A COLA FOR 20 OR MORE YEARS? AND, UH, IF YOU BELIEVE THAT YOU ARE GOING TO NEED TO PROVIDE AT
[00:50:01]
LEAST SOME COLA, WE WOULD SUGGEST THAT YOU DETERMINE THE COLA PROVISIONS THAT YOU THINK ARE NEEDED, EVEN IF YOU'RE, UM, BEING CONSERVATIVE IN HOW MUCH COLA YOU THINK MIGHT BE REQUIRED SO THAT YOU CAN BUILD THAT INTO YOUR BUDGET PLAN NOW AND NOT INCUR AN ADDITIONAL COST LATER WHEN YOU DECIDE THAT YOU ABSOLUTELY NEED.NOW THAT DOESN'T PRECLUDE YOU FROM CHANGING THAT COLA PROVISION LATER, IMPROVING IT LATER IF YOU THINGS WORK OUT BETTER, BUT IT'S JUST TRYING TO BUILD SOME COST IN.
NOW IF YOU, UH, BELIEVE YOU'RE GONNA HAVE TO MAKE SOME COLA PAYMENT IN THAT INTERIM, WE'VE TRIED TO PROVIDE A SPECTRUM OF OPTIONS.
THERE ARE LOTS OF DIFFERENT NUANCES THAT CAN BE DESIGNED INTO A COLA.
UM, BUT SO THESE ARE NOT EXHAUSTIVE, BUT WE TRIED TO GIVE YOU A SPECTRUM SO YOU CAN LOOK AT COST AND BENEFIT TRADE OFFS AND DECIDE WHAT'S APPROPRIATE.
UM, AGAIN, THIS IS NOT AN ACTUARIAL, UH, NOT REALLY AN ACTUARIAL DECISION AS TO WHAT LEVEL OF COLA YOU SHOULD PROVIDE.
WE JUST WANTED TO POINT OUT WE THINK YOU ARE LIKELY GOING TO HAVE TO PROVIDE SOME COLA IN THE NEXT 20 YEARS.
SO JUST TO WRAP UP, UM, WE HAVE THREE, UH, KEY RECOMMENDATIONS AND THEN THERE ARE OPTIONS UNDER THOSE RECOMMENDATIONS.
UH, THE MOST IMPORTANT I WOULD SAY IS TO ADOPT AN ACTUARY DETERMINE CONTRIBUTION THAT WILL MAKE YOU COMPLY WITH THE PENSION REVIEW BOARD FUNDING GUIDELINES AND MAKE SURE THAT YOU ALWAYS, UH, COMPLY GOING FORWARD.
UH, WE ALSO SUGGEST THAT YOU REDUCE THE EMPLOYEE CONTRIBUTION RATE AS THE FUNDING IMPROVES SO THAT YOU GRADE INTO THAT 50% OF NORMAL COST, UH, RATE AND THAT YOU CONSIDER THE COLA OPTIONS AND PROVIDE SOME COLA EARLIER THAN WHAT'S CURRENTLY PLANNED.
SO WITH THAT, WE'LL TAKE ANY QUESTIONS YOU MAY HAVE.
UM, I KNOW THAT THANK YOU FOR THE PRESENTATION, AND I GOT A COUPLE QUESTIONS.
UH, NUMBER ONE, WE SPENT A WHOLE LOT OF TIME TALKING ABOUT COLA AND MY CONCERN IS NUMBER ONE, THAT WE ARE TRYING TO MAKE SURE THAT IT'S 70% FUNDED FIRST TO ADOPT A COLA, YOU KNOW, 70% AND WE TRYING TO GET TO THE KOHLER BEFORE WE GET 70%.
THAT MEANS WE GOT A FEW MORE MONEY AND YOU DID MADE A STATEMENT TO MAINTAIN OUR WORKFORCE, A KOHLER WOULD BE SOMETHING THAT WE NEED TO DO.
SO I WANT HAD HR, WOULD HR COME FORWARD, PLEASE.
SO ABOUT FROM HR IN THE, IN THE QUESTION TO MAINTAIN OUR WORKFORCE IN, IN THIS PRESENTATION, UH, A RECOMMENDATION ABOUT A COLA.
UM, WHAT DO EMPLOYEES WANT IN SERVING NOW? ARE THEY WAITING TO GET MORE MONEY NOW? ARE THEY WAITING TILL THEY RETIRE TO GIVE MORE MONEY? WHAT IS THE FIELD OF THE EMPLOYEES? GOOD AFTERNOON.
UH, NINA ARIA, DIRECTOR OF HUMAN RESOURCES.
UM, NINA ARIA, DIRECTOR OF HUMAN RESOURCES FOR THE RECORD.
UH, THANK YOU FOR THAT QUESTION.
WE HAVE DONE QUITE A BIT OF, UM, ACTIVITIES AND RESEARCH, UH, TO UNDERSTAND WHAT APPLICANTS WANT.
UH, RETENTION AND ATTRACTION OF TALENT HAS BEEN A FOCUS OF, UH, COUNCIL AND THE HR DEPARTMENT FOR THE LAST YEAR.
THE FEEDBACK THAT WE RECEIVE FROM CANDIDATES IS THAT THEY WANT MORE MONEY NOW, THEY WANT BETTER BENEFITS, MORE FLEXIBILITY AND CAREER ADVANCEMENT.
THEY WANT THE OPPORTUNITY TO MOVE UP IN THEIR CAREERS AND CAREER DEVELOPMENT.
SO THOSE ARE THE AREAS THAT APPLICANTS TYPICALLY POINT TO AS WHAT MOTIVATES THEM TO COME TO THE CITY OF DALLAS.
AND IT IS VERY, UM, IT'S IN ALIGNMENT WITH WHAT OUR EMPLOYEES SAY WOULD ENTICE THEM TO STATE.
OKAY, UH, JACK, UH, LOOKING AT HB HB 31 58, WE ALSO LOOKING AT WHAT WE HAD TO DO IN 2017 AND WHAT IS OUR PLAN TO PUT FORWARD TO THE PENSION REVIEW BOARD.
OUR PLAN AND OUR PLAN SAID WHAT KOHLER INVOLVED, THEY SAID, WE CAN TALK ABOUT KOHLER INVEST IN KOHLER, BUT WE NEED TO BE AT 70% FUNDED.
[00:55:01]
TRYING TO SAY PUT A COLA BEFORE THEN, THEN WE GOTTA LOOK AT HOW MUCH MONEY AND WHAT IT TAKE TO WHAT PERCENT OR 1% OR HALF PERCENT.BUT YOU HAD TO FUND TO DO THE COLA Y.
ALL OF THOSE THINGS ARE CORRECT THAT YOU SAID.
UM, IN 2017, THE REQUIREMENT THAT WAS STATED IN THE STATE LEGISLATURE IS THAT WE COME UP WITH A, A PLAN THAT WE PRESENT IN 2025 AND THE CURRENT, UH, REQUIREMENT TO RECEIVE A COLA IS TO BE 70% FUNDED.
AND ANY TO, TO CHANGE THAT, TO ACCELERATE THAT WOULD INCREASE THE UNFUNDED LIABILITY, IT WOULD INCREASE THE COST.
AND SO WHEN WE LOOK AT THIS FROM THE ACTUARY, IT DID NOT SAY THAT TO ACTUARY TO PRESENT A COLA.
UH, AND WE ARE LOOKING AT A HALF PERCENT OR 1% OF A COLA.
SO WHAT DOES THAT COST? YOU KNOW, I KNOW WE'RE TALKING ABOUT 1%, HALF PERCENT OF A COLA.
SO WHAT IS THAT NUMBER? SO WE PUT IN THE PRESENTATION THE COSTS FOR A VARIETY OF DIFFERENT CO PROVISIONS, OKAY? AND SO YOU CAN, UH, READ THOSE COSTS ON, I DON'T HAVE IT UP HERE, BUT THOSE SLIDE 37.
YEAH, SLIDE 37, RIGHT? A SUMMARY OF WHAT THOSE COSTS WOULD BE.
AND SO I REALLY WANNA LOOK AT NUMBERS BECAUSE WHEN WE TALK ABOUT FUNDING THAT ONE TIME TO GET, UM, 7% FUNDED $1.5 BILLION TO GET THERE IN 2025 OR 2050 $1 BILLION YOU GET THERE SOONER ABOUT HALF A BILLION DOLLARS.
SO I JUST WANT TO TRY AND TURN YOUR PERCENTAGE TO REAL NUMBERS THAT YOU LOOK AT REAL NUMBERS, WHAT THE PERCENT COST.
SO WE DIDN'T DO IT, UH, BY PERCENT OF COLA, WE DID IT FOR THESE DIFFERENT PROVISIONS, BUT THE LOWER RIGHT CHART THERE SHOWS THE CHANGE IN THE UNFUNDED LIABILITY.
AND SO IF YOU WERE TRYING TO DO A LUMP SUM, UH, TO, TO COVER A PIECE OF THAT, YOU CAN SEE HOW THAT CHANGES THE, THE TOTAL DOLLAR AMOUNT THAT WOULD BE NEEDED, RIGHT? AND, AND THAT'S, UH, COULD YOU DO THAT? COULD YOU GIVE US A LUMP SUM? BECAUSE WHEN WE DO BUDGET, WE ALL WOULD LOOK AT NUMBERS, HOW MUCH IT'S GONNA COST.
I MEAN, I, I UNDERSTAND PERCENTAGE, BUT I'M JUST CURIOUS, YOU KNOW, TO GET THERE FAST, WHAT IS THE DOLLAR AMOUNT? YEAH, SO LIKE TO GO FROM THE CURRENT TO THE FLOOR OF THE 70% PURCHASING POWER, IT'S LIKE $182 MILLION WOULD BE THE INCREASE IN THE UNFUNDED.
AND WE ALL WANNA REITERATE AGAIN THAT THE REASON FOR THE RECOMMENDATION IS IF YOU THINK THAT THIS IS GOING TO BE NEEDED AND WILL BE COMING LATER, IT REALLY NEEDS TO BE REFLECTED IN THE MODEL OTHERWISE.
'CAUSE WHAT WE MODEL DOESN'T DETERMINE THE CHECKS YOU SEND OUT.
THE CHECKS YOU SEND OUT ARE BASED ON WHAT ACTUALLY HAPPENS, BUT YOUR GOAL SHOULD BE TO HAVE THE MODEL AS CLOSEST TO WHAT YOU ANTICIPATE IS GOING TO HAPPEN.
AND THAT'S WHY BELL REITERATED A LOT OF TIMES IT'LL DO IT AGAIN THAT THIS IS NOT ACTUARIAL IT'S POLICY, BUT WE'RE TRYING TO HELP INFORM YOU AS THE DECISION MAKERS.
OKAY? AND, AND THAT'S WHAT I'M TRYING TO MAKE SURE THIS IS ACTUARIAL BUT NOT POLICY.
WE DEAL WITH POLICY, BUT ALSO WANT TO MAKE SURE WHERE THE PENSION REVIEW BOARD SAID WHAT WE NEED TO DO ACCORDING WHAT OUR PLAN NEED TO BE.
SO I'M TRYING TO STICK WITH A PLAN, BUT I DO AGREE WHAT YOU'RE TALKING ABOUT, BUT WE'VE GOT A PLAN THAT WE GOTTA STICK TO.
BUT WITHOUT COME BACK, LET ME START IT WITH, UH, COUNCILWOMAN WILL WILLIS.
UM, SO I ATTENDED THIS MORNING'S MEETING, SO I TOOK SOME NOTES.
SO, UM, IT HELPS SOMETIMES TO GO THROUGH THIS AT LEAST TWO TIMES.
UM, AND MS. WILEY, YOU HAD MADE A REMARK ABOUT, UM, IT WAS DURING, WHEN WE WERE TALKING ABOUT THE DIFFERENT OPTIONS, I THINK, UM, YOU MADE, YOU SAID SOMETHING THAT REALLY STUCK WITH ME AND YOU SAID THAT SOME OF THESE HAVE MECHANISMS THAT CAN HELP MINIMIZE THE BUDGET DISRUPTIVE EFFECT.
AND I THOUGHT, I FELT SEEN AS A TAXPAYER REPRESENTING TAXPAYERS BECAUSE WHILE WE HAVE TO LOOK OUT FOR OUR FIRST RESPONDERS, OUR POLICE, OUR FIRE STAFF SUPPORTING THEM, WE ALSO HAVE TO LOOK AT TAXPAYERS.
UM, SO, UH, I I, THAT WAS ONE OF THE FIRST TIMES I REALLY FELT THE ACKNOWLEDGEMENT OF THIS, UM, AS I DID AT THE, UH, PENSION REVIEW BOARD MEETING WITH MS, UH, LIEB.
REALLY BROUGHT UP THE SIDE OF THE EQUATION THAT IS, UH, WE CAN TALK ABOUT THIS ALL DAY LONG, BUT YOU KNOW, I'LL EVOKE SOME NEWTON HERE.
I MEAN, FOR EVERY ACTION THERE'S AN EQUAL AND OPPOSITE
[01:00:01]
REACTION.AND SO, AND THAT CAN COME DOWN TO, TO CITY SERVICES AND WHAT WE DELIVER TO TAXPAYERS.
SO I JUST WANNA BE SURE THAT EVERYONE UNDERSTANDS THAT AND THAT WE'RE SPEAKING UP FOR THE TAXPAYER HERE.
UM, SO I GUESS AS I, I GO THROUGH SOME OF THE OTHER COMMENTS THAT WERE MADE THIS MORNING AND WE LOOK AT THE A DC, THE ACTUARIAL DEFINED CONTRIBUTION, UM, WHAT IT'S REALLY DOING, I MEAN IT FLUCTUATES WITH A YEAR LAG, BUT WHAT COULD CREATE SOMETHING THAT IS MORE DISRUPTIVE? IS THIS BECAUSE OF A STAFF REDUCTION? WHICH I DON'T THINK IN PUBLIC SAFETY IS SOMETHING WE HAVE ANY HEART FOR, OR IS IT RELATED TO FUND PERFORMANCE? CAN YOU ELABORATE ON THAT? WELL, SO THIS IS ONE OF THE REASONS WHY WE REALLY RECOMMEND THAT YOU CHANGE THE STRUCTURE OF YOUR CONTRIBUTION BECAUSE RIGHT NOW THE, ALL THE PIECES ARE BASED AS A PERCENTAGE OF PAY.
AND WHEN WE'RE TALKING ABOUT THE UNFUNDED AMOUNT THAT'S FOR SERVICE THAT PEOPLE HAVE ALREADY DONE WORKING ON THESE STREETS, YOU KNOW, FIGHTING FIRES AND WHATNOT.
AND SO IT REALLY IS A FLAT AMOUNT THAT'S NOT RELATED TO THE SERVICE.
SO BY CHANGING THAT TO A DOLLAR AMOUNT WHEN YOU MAKE CHANGES, AND NOT JUST REDUCTIONS, BUT LIKE IF YOU HIRED OPEN SOME NEW FIRE STATIONS AND HAD 300 NEW FIREFIGHTERS, THE WAY IT'S STRUCTURED RIGHT NOW, YOU'D HAVE TO PAY THAT VERY LARGE PIECE.
THAT'S THE PERCENTAGE FOR THE UNFUNDED ON THEM, WHICH WOULD DISRUPT THE BUDGET MORE BECAUSE REALLY THE COST OF ADDING A BIGGER FIRE AND POLICE WORKFORCE SHOULD JUST BE THEIR SERVICE GOING FORWARD AND IT DOESN'T INCREASE THE LIABILITY FOR THAT OTHER GROUP.
AND SO, I MEAN THAT'S ONE OF THE REASONS BECAUSE THAT IT'S REALLY JUST LOOKING AT THE INVESTMENT EXPERIENCE IS WHAT'S FLOWING THROUGH FOR YEAR.
AND THERE IS ONE POINT THAT WE MADE A LITTLE BIT MORE THIS MORNING, BUT I'LL BRING UP AGAIN IN THE ACTUARIAL VALUATIONS, YOUR ACTUARY THAT WORKS FOR THE FUND USES UM, ASSETS SMOOTHING.
AND THIS IS TYPICALLY DONE WITH ALL PUBLIC PLANS AND YOU'RE USING WHAT'S CLOSEST TO A GOLD STANDARD AND THAT'S A FIVE YEAR SMOOTHING, RECOGNIZING THAT THE MARKETS ARE VOLATILE AND YOU DON'T WANT YOUR BUDGET TO BE THAT LEVEL OF VOLATILE.
AND I ABSOLUTELY AGREE WITH YOUR COMMENTS ABOUT THE TAXPAYERS, BUT I WOULD ACTUALLY EXPAND IT ONE MORE STEP.
IT'S TO THE BENEFIT OF THE MEMBERS AS WELL THAT YOU NOT HAVE SUCH A DISRUPTIVE EFFECT ON THE BUDGET BECAUSE THE SPONSOR HAS TO BE IN A POSITION WHERE THEY CAN MEET AND FUND THIS AND KEEP IT ONGOING.
SO I, I REALLY THINK THAT THESE PROVISIONS ARE IMPORTANT FOR ALL STAKEHOLDERS.
UH, AND ONE THING THAT WAS BROUGHT UP THIS MORNING WAS WHEN WE'RE TALKING ABOUT COLA IS BY ADDING COLA LIABILITY INCREASES.
CAN YOU TOUCH ON THAT? 'CAUSE I DON'T THINK WE TALKED ABOUT THAT.
SO WE'LL START WITH TALKING ABOUT THE CURRENT PLAN.
SO RIGHT NOW WHERE YOU HAVE THE STATUTORY 34.5 PLUS THE ADDITIONAL AMOUNTS THAT COME FROM 31 58, YOU'RE NOT EXPECTING A COLA TILL OUT IN THE SEVENTIES.
AND SO YOUR ACTUARY SEAGULL, WHEN THEY VALUE IT, THERE'S NOT MUCH LIABILITY.
UM, WE SHOWED THIS WHEN WE WERE HERE IN NOVEMBER THAT IT BARELY MOVES BECAUSE YOU'RE NOT PAYING IT UNTIL WAY OUT IN THE FUTURE.
AND YOU KNOW, TIME VALUE OF MONEY, IF I'M GONNA PAY YOU SOMETHING IN THE SEVENTIES, YOU KNOW, IT'S A MUCH REDUCED RIGHT NOW.
SO, UM, IN ALL OF THESE THEN WE MOVE TO, WELL, WE HAVE TO SATISFY THE FUNDING, SOUNDNESS RESTORATION PLANS.
SO WE ARE IN ALIGNMENT WITH THE PRB AND THAT MEANS THAT YOU'VE GOTTA BE FUNDED BY 2055.
WELL IF YOU HAVE TO BE A HUNDRED PERCENT FUNDED IN YOUR PLAN BY 2055, YOU'RE GONNA GET TO 70 BY THEN BY DEFINITION.
AND SO THE GRANTING OF COLAS MOVES CLOSER IN TIME AND SO THAT DISCOUNTING FOR INTEREST IS REDUCED AND THAT'S WHY IT INCREASES THE COLA.
AND THAT'S WHY WE ARE DEFINITELY NOT RECOMMENDING AS POLICY THAT YES YOU HAVE TO PAY COLAS.
THERE ARE A LOT OF DIFFERENT OPTIONS AND TOTAL COMP AND LUCKILY THAT'S NOT OUR AREA OF EXPERTISE, BUT WE WANNA MAKE SURE THAT YOU ARE CLEAR ON THIS BECAUSE IF, YOU KNOW, EVEN WITH THE 20 46, 47 DATE, IF YOU THINK THAT IS TOO FAR OUT, YOU CAN'T HIT THE TARGET IF YOU DON'T KNOW WHERE IT IS.
AND IF YOU'RE ASSUMING THAT IT'S NOT GONNA BE PAID TILL THEN, BUT REALLY YOU THINK YOU'RE GONNA HAVE TO EARLIER, YOU DON'T KNOW WHERE THE TARGET IS, YOU'RE NOT GONNA BE ABLE TO HIT IT.
AND THAT'S WHERE YOU GET IN SITUATIONS THAT ARE REALLY CHALLENGING.
[01:05:01]
MEAN, IT'S ALREADY REALLY CHALLENGING, BUT WELL, AND WE'VE SPENT A LOT OF TIME TALKING ABOUT COLA AND I THINK EVERYONE WOULD LOVE TO SEE THIS FUND GET TO 70% FUNDING TOMORROW SO THAT THAT WOULD KICK IN AND WE WOULDN'T EVEN HAVE TO HAVE THIS PART OF THE DISCUSSION ANYMORE.ONE OF THE CHARTS I REALLY LOVED IS GETTING TO A POINT WHERE THE EMPLOYEE CONTRIBUTION IS LOWER.
I MEAN, THIS IS SOMETHING I HEAR WHEN TALKING TO RANK AND FILE, UH, INSURANCE COSTS AND THAT CONTRIBUTION.
SO, UM, DEFINITELY LOVE TO SEE THAT HERE FOR US TO KIND OF DREAM ABOUT FOR THE FUTURE AND WHAT THAT WOULD LOOK AT OR LOOK LIKE.
UM, ON, SO THIS FUND IS 34% FUNDED RIGHT NOW, IS THAT CORRECT? IT WELL, DEPENDING ON HOW YOU MEASURE IT,
AND I BELIEVE IT'S 33% ON A MARKET VALUE BASIS IN THAT RANGE.
UM, BUT THE ERF, WHICH I DON'T KNOW THAT YOU TOUCH, IS LIKE IT'S 73% FUNDED.
SO WHEN WE TALK ABOUT THIS, I THINK THERE'S SOME DISTINCTIONS.
'CAUSE I SEE THE COMPARISON IN YOUR, YOUR PRESENTATION AND SO I JUST WANNA BE SURE EVERYONE UNDERSTANDS IT'S NOT REALLY APPLES TO APPLES.
THERE IT IS EMPLOYEES OF THE CITY OF DALLAS, BUT UM, THEY'RE FUNDED AT DIFFERENT LEVELS RIGHT NOW.
UH, I WAS GLAD MS. ARIA, UH, BROUGHT IN A QUANTITATIVE ASPECT TO THE IMPACT OF COLA IN THE RECRUITMENT RETENTION ZONE.
THAT WAS SOMETHING I WAS GOING TO ASK ABOUT.
I MEAN, WE JUST CAME, MANY OF US FROM UNT WHERE WE GOT A, ANOTHER GIFT TOWARD OUR, UM, TRAINING ACADEMY.
SO I THINK WE'RE GOING TO AND HAVE GREAT LEADERSHIP AT OUR POLICE AND FIRE.
AND SO I THINK WE HAVE A LOT OF INCENTIVE FOR PEOPLE TO WORK FOR THE CITY.
AND, UH, BUT I APPRECIATE THAT QUANTITATIVE ASPECT BECAUSE I FEEL LIKE THERE HAVE BEEN SOME ANECDOTAL COMMENTS AND I THINK, UM, CHAIR MORENO AND I HAVE TRIED TO FIND THE, THE CLIP OF, I THINK THE CHIEF EVEN SAYING, UM, THAT IT KIND OF RANKS A LITTLE LOWER ON WHAT CAUSES SOMEONE TO WANNA GO TO WORK FOR DALLAS.
UM, SO CAN YOU TELL ME, IS THERE A RATE OF RETURN BAKED INTO THESE NUMBERS FROM THE PENSION SIDE? IS THAT STILL 6.5? YEAH, WE ARE, ALL OF OUR NUMBERS ASSUME 6.5%.
UH, I DON'T THINK THEY'RE HITTING 6.5.
ARE THEY? WELL, IN 2020, WELL, WE, I THINK THAT'S GONNA BE IN THE NEXT ONE, SO, OKAY.
I, AND SO, BECAUSE I LOOK AT IT AND YOU HAVE A COLA THAT'S RELATED TO AN INVESTMENT RETURN, BUT IF THEY'RE NEGATIVE IN A OR NOT HITTING THE, THE WHERE YOU CAN, HOW DO YOU, HOW DO YOU RECONCILE THAT IF YOU SAY YOU'VE GOTTA BE HITTING AN INVESTMENT RETURN, BUT THEY'RE NOT HITTING A INVESTMENT RETURN, SO YOU GET NO COLA, RIGHT.
SO THE IDEA OF A COLA THAT'S DESIGNED AROUND INVESTMENT RETURN IS THAT YOU'RE ONLY PAYING IT WHEN YOU HAVE THE INVESTMENT RETURN, MEANING YOU HAVE THE MONEY TO PAY IT.
AND, UH, SO IF, IF YOU HAVE POOR RETURNS, UH, THEN YOU MAY PAY ZERO COLA REGARDLESS OF FUNDED STATUS, BUT JUST BECAUSE YOU HAD POOR RETURNS.
AND SO CAN YOU DO THAT ON YOUR WAY TO, UM, FUNDING TO THE 70% AND THEN KICK IN WHEN YOU HIT THAT, THE FUNDING PERCENT AN AUTOMATIC ADJUSTMENT? UH, I'M NOT SURE I FOLLOWED WHAT YOU MEANT BY DOING THAT WAY.
SO, YOU KNOW, WE'RE, WE'RE, WE'RE TRYING TO FUND, AND I GUESS THE QUESTION IS DO YOU FUND THE, THE PENSION OR DO YOU GIVE A COLA IF YOU HAD TO PICK BETWEEN THE TWO? AND THEN, SO IF YOU FUND, WELL, WE'RE, WE'RE SUGGESTING THAT YOU NEED TO FUND THE PENSION.
AND THE QUESTION IS, DOES THE PENSION ALSO INCLUDE A COLA, WHETHER IT'S CURRENTLY DEFINED IN THE PLAN OR NOT? AND IF YOU THINK YOU'RE GONNA NEED TO PAY A COLA, WE'RE SAYING BUILD YOUR FUNDING PLAN TO INCLUDE THAT.
BUT IF YOU, BUT YOU ALSO PUT A SCENARIO THAT SAYS ABOUT INVESTMENT RETURNS.
THERE'S A, UH, YOU, YOU, IT KICKS IN IF YOU HIT THAT INVESTMENT RETURN, CAN YOU DO THAT IN THESE EARLY YEARS BEFORE YOU HIT THE 70%, WHICH IS 2047? YES.
IT, IT'S MORE EXPENSIVE AND THEN YOU GET A PUBLIC BUILT IN.
AND I, I THINK WE HAD THAT AS ONE OF THE OPTIONS.
UM, BACK ON, UM, IF YOU LOOK ON PAGE OR SLIDE SIX, AND YOU HAVE TWO, I MEAN, THERE BENEFITS WHICH ACTUALLY BECOMES A LIABILITY IN THIS WORLD.
HOW DOES THAT GET, HOW DO THOSE TWO, THE, THE CONTRIBUTION RATE AND ECOLA HELP US ACHIEVE THE 30 YEAR FUNDING THAT WE WANT THIS FUND TO BE?
[01:10:01]
SO UNDER ALL OF THE SCENARIOS, WE ARE ADJUSTING THE ACTUARILY DETERMINED CONTRIBUTION TO PAY FOR WHATEVER COLA PROVISION YOU'VE PUT IN.AND SO WE INCREASE, WHICH IS DOLLARS.
WE INCREASE FROM THE TAX, THE DOLLARS THAT YOU WOULD HAVE TO CONTRIBUTE TO THE PLAN SO THAT YOU FUND THE COLA AND YOU STILL GET TO A HUNDRED PERCENT IN 2055.
UM, ARE GUARDRAILS ACCEPTABLE ON AN A, DC.
SO, UM, ONE THING YOU GOTTA KEEP IN MIND IS THAT YOU ARE IN TEXAS.
AND SO YOU DO ALSO NEED TO SATISFY THE PRB REQUIREMENTS.
AND THAT'S WHY ALL OF OUR RECOMMENDATIONS START WITH THIS ACTUALLY DETERMINED CONTRIBUTION BECAUSE YOU CAN'T CHANGE THE COLA PROVISIONS OR REDUCE THE EMPLOYEE CONTRIBUTION UNLESS YOU HAVE A PLAN IN PLACE THAT WILL FUND IT WITHIN THE 30 YEARS.
SO IN ANY OPTION, YOU MUST START WITH THAT.
BUT IF YOU HAVE THAT, YOU ARE SATISFYING THE PRB REQUIREMENTS AND YOU CAN REALLY BE INTENTIONAL ABOUT DESIGNING IT.
UM, AND ONE MORE QUESTION IF I MAY, ABOUT, UM, SO I'M LOOKING AT THE COLA AND YOU PUT THE STATEMENT ABOUT RECRUITMENT AND RETENTION.
UM, IF YOU HAVE A, MY KID IS, WAS BORN IN 1996, I CAN TELL YOU HE'S NOT THINKING ABOUT RETIREMENT RIGHT NOW.
AND IN 50, AT 2 47, AT 2047, HE'LL BE 51 AT RETIREMENT, WHICH MAY, HE MAY BE, BUT THEN YOU ACTUALLY GET THE COLA KICKED IN IF, BECAUSE WE ARE GONNA FUND IT 30 IN 30 YEARS.
SO THE RECRUITMENT PIECE OF IT, HELP ME EXPLAIN HOW THAT IS HURTING THAT PIECE.
AND I CAN UNDERSTAND THE RETENTION BECAUSE WE'RE GETTING FOLKS TO THAT AGE WHERE THEY'RE GONNA RETIRE, BUT THE RECRUITMENT, BECAUSE THEY'RE, IT'S GONNA KICK IN BY THE TIME THEY DECIDE OR THAT THEY'RE GONNA BE ELIGIBLE TO RETIRE IT.
SO IT, I AGREE TO THE EXTENT THAT YOU ARE RECRUITING, UH, PEOPLE IN THEIR TWENTIES, IT'S NOT GOING TO BE A SIGNIFICANT ISSUE TO THE EXTENT YOU WANNA RECRUIT MORE SENIOR PEOPLE, UH, TO FILL YOUR RANKS, THEN IT BECOMES A MORE SIGNIFICANT ISSUE FOR RECRUITMENT.
UM, I I WOULD ACTUALLY ADD, THIS IS ANECDOTAL AND NOT QUANTITATIVE, SO HOPEFULLY THEY HAVE SOME MORE, BUT WHAT WE'VE SEEN IN OTHER PLACES AND THINGS IS EVEN IF THEY'RE NOT REALLY CARING AND PAYING THAT MUCH ATTENTION IN THE POLICE STATION AND THE FIREHOUSES, THEY'RE KIND OF TALKING AND THE PEOPLE THAT ARE CLOSER, THEIR OPINIONS AND APPRECIATION OF THE BENEFIT DOES FLOW DOWN.
AND I MEAN, YOU LOOK AT CHANGES, YOU KNOW, CORRELATION AND CAUSATION IS ALWAYS HARD TO PROVE.
BUT IT, IT DOES APPEAR THAT, YOU KNOW, WITHIN THE GENERAL ATTITUDE AND PEOPLE THAT ARE CLOSER DOES SLOW DOWN.
AND EVEN IF IT'S DIFFERENT, BECAUSE LIKE YOU SAID, BY THE TIME THEY GET THERE, THEY'RE GONNA GET IT THE WHOLE TIME.
THE PEOPLE THAT THEY'RE HEARING FROM THAT SAY EITHER, YOU KNOW, THIS BENEFIT IS GREAT OR THIS IS BENEFIT IS HORRIBLE AND THE, YOU KNOW, REST OF THE CITY EMPLOYEES ARE GETTING THIS AND WE ARE NOT.
BUT I'M AGAIN SAYING THIS IS NOT DATA BASED.
THAT IS DEFINITELY ANECDOTAL AND I WOULD DEFER TO THE EXPERTS.
UM, I'M WONDERING IF IT'D BE ALL RIGHT WITH YOU IF I ASKED SOMEBODY FROM THE AUDIENCE TO COME DOWN, ANSWER A QUESTION? NO, JUST THE PEOPLE AT THE PANEL.
AND THEN YOU HAD HR COME OVER, BUT THAT'S THE STAFF THAT'S THAT'S OUR STAFF, PLEASE.
CAN I ASK HER TO COME BACK? IS THAT POSSIBLE? YES.
UM, SO LET ME ASK YOU, HAVE YOU TALKED WITH THE POLICE RECRUITS ABOUT THEIR INTEREST IN PENSIONS? AND THEN HAVE YOU TALKED WITH OUR FIVE YEAR, 10 YEAR, 15 YEAR, UH, SWORN OFFICERS, BOTH POLICE AND FIRE, ABOUT THEIR INTEREST IN COLA'S IN PENSION? I HAVE SEEN A, THE RESULTS OF OUR ENGAGEMENT SURVEYS, SO I, WELL I HAVE NOT, UH, SPOKEN WITH THEM DIRECTLY, THE ENGAGEMENT SURVEYS TO PROVIDE THE GENERAL SENTIMENT INCLUDING UNIFORM.
OKAY, SO, UM, I'M JUST GONNA SAY AS CHAIR OF PUBLIC SAFETY, MY NUMBER ONE CONCERN ON THIS IS ABOUT STAFFING.
Y'ALL INCLUDED COLA NOT BEING ASKED IN YOUR SCOPE TO DO IT.
AND I'M ASSUMING YOU DID THAT FOR A REASON.
CAN YOU TELL US WHY IT WAS PART OF YOUR INITIAL INTERIM REPORT? YEAH, SO WE WERE LOOKING AT BOTH CONTRIBUTIONS AND BENEFIT PROVISIONS TO CHANGE.
[01:15:01]
AND WE STARTED, UH, ON THE BENEFIT SIDE, WE, AND WE PRESENTED THIS LAST MONTH, WE DIDN'T REPRESENT IT HERE, BUT WE, UH, DID A COMPARISON WITH OTHER PUBLIC SAFETY SYSTEMS AND THE EMPLOYEE'S RETIREMENT FUND, UH, HERE AND COM COMPARED THE BENEFITS BOTH, UH, IN TERMS OF, UH, THE MULTIPLIER, THE RETIREMENT DATE, AND THE COLA, THOSE WERE THE KEY THINGS,SO OUR BENEFITS ON THE PENSION YOU'RE SAYING ARE NOT COMPETITIVE IN THE MARKET AND THE COLA IS A KEY ITEM THAT MAKES US NOT COMPETITIVE.
WE SAID THE OTHER ITEMS WERE COMPETITIVE, BUT THE COLA WAS, WAS NOT, WAS NOT OKAY.
AND IT WAS A CONCERN IN PARTICULAR BECAUSE, UH, THE EMPLOYEES ARE NOT COVERED BY SOCIAL SECURITY.
SO WE HAVE NOT HIT OUR HIRING GOALS FOR SEVERAL YEARS NOW.
AND WE ALSO HAVE A VERY HIGH ATTRITION RATE AND WE HAVE A LOT OF PEOPLE WHO COULD LEAVE WITH A PRETTY DECENT PENSION.
MAYBE IT'S NOT A HUNDRED PERCENT RIGHT, BUT PRETTY DECENT AND GO TO ANOTHER LAW ENFORCEMENT OR ANOTHER FIRE DEPARTMENT AND ACTUALLY VEST IN THAT PLAN THAT THEN WOULD HAVE IT AND THEY WOULD END UP WITH TWO.
AND SO DO YOU SEE THIS, UM, ROBUST BENEFIT, RIGHT? WORKING TO LOWER THE CONTRIBUTION, MAKE SURE THERE'S A COLA, MAKE SURE THEY ALL KNOW IT WILL BE FUNDED AS A WAY TO HELP US RETAIN OUR EMPLOYEES? WELL I THINK THAT'S WHAT WE ARE SAYING IS, IS WE ARE CONCERNED THAT WITHOUT THE COLA, UH, YOU WILL HAVE, WE DID NOT ANALYZE YOUR CURRENT PATTERNS OR ANY OF THAT.
SO WE DID NOT BASE IT ON THAT DATA, BUT MORE ON BROAD PROFESSIONAL EXPERIENCE WITH PUBLIC SAFETY PLANS AND WITH OTHER, UH, PUBLIC PLANS.
AND, AND SO WE WOULD EXPECT THAT, UH, ADDING THE COLA WOULD HELP ALLEVIATE THOSE ISSUES.
UH, BUT WE HAVE NOT DONE A FORMAL STUDY TO DETERMINE THAT.
SO ON YOUR CHARTS, UM, I'M JUST GOING TO PICK PAGE 35.
YOU'RE SHOWING, UM, RETIREMENT YEAR THE, THE LONGEST AGO 1980, AND YOU'RE SHOWING 2024 WITH A 70%, UM, PURCHASING POWER.
AND YOU ACTUALLY HAVE THAT ON EVERY CHART.
SO ARE YOU SAYING THAT GIVEN INFLATION AND GIVEN OUR SEVEN YEARS OF NOT HAVING HAD A COLA, WE ALREADY HAVE OUR FOLKS AT THAT LOW LEVEL? YEAH.
SO THERE AREN'T VERY MANY PEOPLE WHO ARE STILL IN THE SYSTEM RECEIVING BENEFITS WHO RETIRED IN 1980.
BUT FOR THOSE PEOPLE, WE APPLIED THE HISTORICAL COALS UP THROUGH 2016 DISCOUNTED FOR THE ACTUAL INFLATION.
WE USED DALLAS AREA INFLATION, UH, FOR THAT CALCULATION.
AND, AND THEY'RE AT 70%, UM, YOU KNOW, THEY, THE OTHER ROWS ABOVE THAT ALSO EXPERIENCED THE, THE, UH, LACK OF COLAS FROM 2017 TO NOW.
I THINK WHAT PROBABLY SEPARATES THE THE 1980 GROUP IS THEY ALSO EXPERIENCED THE 1980 EIGHTIES LEVEL OF INFLATION.
SO WHEN YOU'RE DOING ALL THESE CALCULATIONS, I MEAN THIS HAS TO BE SOME KIND OF CRAZY ALGORITHM WHEN YOU'RE DOING THIS.
HOW IMPORTANT IS OUR STAFFING LEVEL IN ENSURING THE ACCURACY OF THESE NUMBERS? YOUR STAFFING LEVEL HAS NOTHING TO DO WITH THESE PARTICULAR NUMBERS.
UH, THESE ARE JUST BASED ON THE I THE, I DON'T, I DON'T MEAN THE COLON NUMBERS.
IT IS, NO, I'M NOT SAYING THE COLON NUMBERS.
I'M SAYING THE OVERALL PROJECTIONS OF THE OVERALL PROJECTIONS ARE BASED ON THE FULL CENSUS DATA, UH, FROM THE ACTUARIAL EVALUATION.
SO THEY, SO IF WE DON'T MEET OUR STAFFING GOALS, RIGHT, IF WE CAN'T RE, IF WE CAN'T RECRUIT ENOUGH PEOPLE OR WE CAN'T RETAIN ENOUGH PEOPLE, ARE YOUR PROJECTIONS FOR, UM, OUR 30 YEAR AMORTIZATION, ARE THEY ACCURATE FOR THE 30 YEAR AMORTIZATION? THEY ARE, BECAUSE THAT IS PRIMARILY DEPENDENT ON WHAT'S ALREADY HAPPENED IN THE PAST.
THE NORMAL COST WILL BE EFFECT THE DOLLARS AMOUNT THAT THAT NORMAL COST NEEDS, UH, WILL BE AFFECTED BY STAFFING LEVELS GOING FORWARD.
SO THAT'S WHY WE'RE SETTING IT AS A PERCENTAGE OF PAY, BECAUSE IF YOUR STAFFING LEVELS GO UP OR DOWN THAT PIECE, THE CONTRIBUTION NEEDS TO GO UP OR DOWN ACCORDINGLY.
BUT THE HISTORICAL THING IS, IS LIKE PAYING OFF A FIXED DOLLAR AMOUNT.
[01:20:01]
TO VARY CLEARLY, AND I KNOW WE'VE DONE IT REPEATEDLY, AND SORRY FOR REPEATING OURSELVES.WE WANNA MAKE SURE THAT IT'S CLEAR SEPARATING THE NORMAL COSTS, THAT'S THE SERVICE THAT'S HAPPENING GOING FORWARD FROM THE LIABILITY DETERMINED AT THE VALUATION DATE, WHICH ENT THAT ENTIRELY, THAT UNFUNDED PART RELATES TO SERVICE THAT HAS ALREADY BEEN DONE.
AND THAT'S WHY PUTTING IT AS A DOLLAR IS VERY IMPORTANT BECAUSE YOU NEED A FUNDING PLAN TO GET TO 100% FUNDED BY THAT 2055.
AND SO IF YOU COME UP WITH A PERCENTAGE, BUT THEN THERE'S A VARIATION IN WHAT THE SALARIES ARE, WHAT THE POPULATION IS, IT COULD BE HIGH, IT COULD BE LOW, BUT YOU REALLY NEED A PLAN THAT IS IN PLACE TO SET THAT.
AND THAT IS WHAT THE, HAVING THE ACTUARY DEVELOP IT AS A DOLLAR AMOUNT WILL HELP YOU TO ACHIEVE.
SO I HAVE TWO MORE QUESTIONS IF IT'S POSSIBLE.
SO MY NEXT ONE IS, YOU MENTIONED THAT IT'S IMPORTANT TO HAVE THE DOLLARS COME IN SOONER THAN LATER.
AND I'M WONDERING IF YOU CAN GO THROUGH AND EXPLAIN EXACTLY WHY THE DOLLARS ARE NEEDED UPFRONT.
IT, IT'S PREFERABLE TO GET THE DOLLARS UPFRONT BECAUSE YOU ARE VERY POORLY FUNDED.
AND SO THAT DOES PUT YOU AT SOME LEVEL OF RISK AND PARTICULARLY WITH THE NEGATIVE CASH FLOW THAT YOU HAVE, COMPARING CONTRIBUTIONS TO BENEFITS GOING OUT THE DOOR THERE, THERE'S CONTI, IF YOU WERE TO CONTINUE, UH, AT THE CURRENT CONTRIBUTION LEVELS YOU SAW IN THAT EARLY CHART, THE FUNDED STATUS DROPS DOWN.
CAN, CAN WE PUT SLIDE 17 UP? YEAH.
DOWN TO AROUND 25% IS MY RECOLLECTION.
AND, AND SO THAT'S OUR CONCERN, UH, IS UPFRONT TO DO AS MUCH AS WE CAN AS SOON AS WE CAN, UH, TO START IMPROVING THOSE, THOSE FUNDING LEVELS AND THOSE, THE FUNDED LEVELS WILL NOT REALLY IMPROVE UNTIL YOU'RE, YOU'RE COVERING AT LEAST THE, THE NORMAL COST PLUS THE INTEREST ON THAT UNFUNDED LIABILITY.
AND IT'S GONNA TAKE YOU A FEW YEARS TO GET UP TO THAT LEVEL, UH, TO START PAYING DOWN THE UNFUNDED LIABILITY.
THE SOONER YOU CAN GET THERE, THE BETTER.
AND SO IS, AND TO REITERATE ONE POINT ON THIS GRAPH, LIKE WE SAID BEFORE, THESE ARE ALL BASED ON THE 6.5% RETURN.
BUT IF YOU LOOK AT THAT NET CASH FLOW GRAPH THAT'S SHOWN ON SLIDE 17, YOU'LL SEE THAT THE NET CASH FLOW CURRENTLY IS LARGER THAN 6.5.
SO EVEN IF YOU ACHIEVE THE TARGET, YOU'RE EXPECTING YOUR ASSETS TO GET WORN AWAY FROM.
AND SO THE EARLIER IT COMES IN, THE MORE YOU SHORE UP THE FUND AND ALSO INCREASE CONFIDENCE, WHICH COULD HELP YOU RECRUITING AND RETENTION.
AND THEN THERE'S JUST THE ISSUE OF COMPOUND INTEREST PAY.
I'LL HAPPILY PAY YOU FOR A HAMBURGER TOMORROW.
YOU KNOW, 'CAUSE IT'S WORTHLESS.
SO WHEN WE LOOK AT THESE RAMP UP SCENARIOS, WOULD YOU SAY IT'S TRUE THAT THE YEARS UNTIL WE GET, UM, TO WHERE WE SHOULD BE, UM, THAT WE ARE ADDING TO THE UNFUNDED LIABILITIES, EACH OF THOSE RAMP UP YEARS? YES.
SO WE'RE LITERALLY KICKING THAT RESPONSIBILITY DOWN A COUPLE MORE YEARS AND ADDING TO THAT AMOUNT, YOU, YOU'RE NOT TREADING THE WATER, YOU'RE SINKING DEEPER INTO IT.
THAT'S WHY OUR PREFERENCE IS TO GET IT UP AS QUICKLY AS POSSIBLE.
THE RAMPS ARE THERE BECAUSE WE REALIZE THERE ARE BUDGET REALITIES AND, AND WE NEED SOME TIME TO ADJUST, BUT THE RAMP UP SHOULD BE AS SHORT AS YOU CAN POSSIBLY MAKE IT.
ARE YOU AWARE OF ANY TEXAS MUNICIPAL PENSION THAT HAS THIS HIGH OF AN UNFUNDED LIABILITY? IS MIDLAND
UM, BUT THERE ARE SOME THAT HAVE KIND OF SIMILAR CHALLENGES BUT UM, OF THE LARGER MUNICIPAL NO THANK YOU CHAIRMAN MARINA.
UM, WHEN IT COMES TO RECRUITMENT AND RETENTION, OBVIOUSLY THAT THAT'S TOP OF MIND RIGHT NOW.
UM, HELP ME UNDERSTAND WHEN THERE'S A LATERAL MOVE, SOMEONE WHO'S CLOSER TO RETIREMENT AGE, DOES THAT EMPLOYEE HAVE THE OPTION TO KEEP OR STAY WITHIN THEIR PREVIOUS PENSION AND COULD THEY CHOOSE WHICH PLAN TO INVEST, UH, OR TO PARTICIPATE IN? SO, UM, SO IF YOU'RE HIRING A, A MID-CAREER PERSON, UH, THEIR CURRENT PENSION IS NOT GONNA COME OVER TO DALLAS.
SO THEY'RE GONNA START WITH THEIR PENSION HERE
[01:25:01]
IN DALLAS AND THEY'LL KEEP WHAT THEY HAD SOMEWHERE ELSE.UM, BUT THE, THE VALUE OF THE BENEFIT ACCRUES VERY STEEPLY IN THE, THE, FROM THE MID-CAREER TO THE END OF THE CAREER.
AND SO HAVING A A GOOD ROBUST DEFINED BENEFIT IS VERY HELPFUL IN RECRUITING, ESPECIALLY IF THEY ALREADY HAVE A DEFINED BENEFIT WHERE THEY ARE, IT MAKES IT, UH, DIFFICULT TO, TO RECRUIT MID-CAREER.
AND, UM, THE ISSUE WITH THE COLA IS THEY WILL BE LOOKING AT TRYING TO RECEIVE THE COLA MUCH EARLIER, PROBABLY EARLIER THAN YOU'RE EXPECTING TO START PAYING THE COLA.
AND SO THAT WILL BECOME OR MAY BECOME A CONSIDERATION THAT THEY TAKE INTO ACCOUNT AND MAKING THAT DECISION.
THANK YOU MR. CHAIR, CHAIRMAN STEWART, YOU GUYS HAVE ASKED SOME GREAT QUESTIONS, BUT I'M JUST GONNA TAKE A STEP BACK AND IT'S AS IF I'VE BEEN TO THE DOCTOR'S OFFICE AND GOTTEN A REALLY BAD DIAGNOSIS, RIGHT? OR I'VE BEEN TO SEE MY FINANCIAL ADVISOR AND IT'S 20, IT'S 2008, 2009, 2010.
TWO THINGS ARE LOOKING REALLY BLEAK.
AND I CAN TELL YOU IN THOSE SITUATIONS I HAVE TO GO FIND THE EXPERT.
I HAVE TO GO FIND THE, THE MEDICAL PROFESSIONAL OR THE FINANCIAL PROFESSIONAL WHO IS GOING TO SHOW ME HOW TO GET OUT OF THE PLACE THAT I'VE ENDED UP.
I, AND SO I APPRECIATE, UM, THIS PRESENTATION, YOUR PRIOR PRESENTATION.
UM, I BELIEVE THE A DC IS ABSOLUTELY THE WAY TO GO.
I DO WANNA TRY TO REDUCE THE EMPLOYEE CONTRIBUTION AND I THINK THE COLA IS A MUST.
AND MAYBE THAT'S BECAUSE I'M ALMOST 66
UM, I LOOKED AT SOME OF THOSE, YOUR CHARTS WHERE IT WAS SHOWING, YOU KNOW, HOW MUCH LESS THEIR, THEIR MONEY WAS, WAS WORTH OR ITS BUYING POWER WAS.
SO I'M AFRAID I'VE LOOKED AT THIS FROM A BIT OF AN EMOTIONAL PERSPECTIVE.
HOWEVER, I THINK, UM, YOUR PLAN IS, SEEMS VERY STRONG.
UM, IT SEEMS TO BE VERY DETAILED.
UM, AND IT'S BEEN GOOD TO UNDERSTAND THAT IT'S LIKE WE'RE DIGGING OURSELF OUT OF A HOLE BY MAKING LIKE A, A PAYMENT ON THIS BIG PIECE AS WELL AS TRYING TO KEEP UP WITH AND YEAR IN AND YET YEAR OUT WHAT WE, WHAT WE NEED.
SO, UM, MR. IRELAND, MY QUESTION IS FOR YOU,
UM, AS WE HAVE TALKED ABOUT WITH THE STUDY GROUP AND OTHERS THAT HAVE BEEN BEFORE THE COMMITTEE AND TALKED, UH, WE BELIEVE THAT HAVING A STEP UP APPROACH TO GET TO THE FULL A DC IS MANAGEABLE WITHIN THE BUDGET WITHOUT DOING SIGNIFICANT HARM TO OTHER AREAS OF THE BUDGET.
UH, I KNOW THAT THE, UH, THE CONSIDERATION THAT CHIRON PUTS FORWARD AND, AND WE'VE HEARD FROM OTHERS WOULD BE TO GET MORE MONEY INTO THE FUND WITHOUT STEPPING UP.
I THINK IF WE TAKE THAT APPROACH THAT THERE WILL BE HARM THAT WE WOULD HAVE TO LOOK AT ON HOW WE FUND THAT.
UH, THAT'S WHY WE HAVE TALKED WITH KYRON AND I APPRECIATE THAT BEING A CONSIDERATION.
APPRECIATE THE STUDY GROUP LISTENING TO THAT.
I THINK WHAT'S STEPPING UP, AGAIN, WE COULD MANAGE THAT WITHOUT HARM TO OTHER AREAS.
AND I SAY ALL THAT AND THE BUDGET PROCESS IS VERY LONG AND INVOLVED AND NUMBERS ARE ALWAYS CHANGING.
SO, UH, ALL THAT'S SUBJECT TO CHANGE AS WE GO THROUGH THE PROCESS, MA'AM.
UM, AND THERE WAS SOMETHING ELSE IN THE STUDY GROUP ABOUT GUARDRAILS.
UM, MS. BLACKMAN JUST REFERENCED THAT.
CAN YOU REMIND ME WHAT THE GUARDRAILS WERE AND DO THEY, WOULD THEY APPLY? SO THERE WAS CONVERSATION ABOUT IF WE DO, UH, IMPLEMENT AN A DC, THAT WE HAVE SOME TYPE OF GUARDRAILS IN PLACE SO THAT IF THERE IS SIGNIFICANT CHANGE FROM YEAR TO YEAR THAT WE COULD BETTER MANAGE THAT IN THE BUDGET.
THAT IS NOT PART OF THE RECOMMENDATION OR A CONSIDERATION THAT CHIRON HAS LAID OUT.
I THINK THEY'VE LAID OUT A 20 YEAR LAYERED AMORTIZATION THAT MIGHT, UH, ADDRESS SOME OF THAT.
SO THERE'S SOME WAYS THAT WE CAN TALK THROUGH AND PROBABLY COME TO, TO SOME CONSENSUS ON THAT.
[01:30:01]
BUT WE JUST WANT TO MAKE SURE THAT IF THERE'S BIG SWINGS, ESPECIALLY IN UH, RETURNS IN ANY GIVEN YEAR, THAT WE'RE ABLE TO MANAGE THAT WITHIN THE BUDGET THE BEST WE CAN.I DID GET THE NUMBER FOR COUNCIL MEMBER MENDELSON, UM, BASED ON THE TEXAS SUSPENSION REVIEWS DATA BOARD.
UM, THE ONLY ONE WITH A LOWER FUNDED RATIO IS GALVESTON POLICE, BUT THEY, THEY, THEY PUBLISHED THESE AS OF 22 AND THEY HAVE ACTUALLY INCREASED SINCE THEN.
SO THEY'RE NOW FUNDED UP AHEAD OF YOU.
YEAH, I JUST WANNA BUILD ON THE COMMENT OF THE, THE GUARDRAILS AND TALK ABOUT WHAT IS ACTUALLY IN HERE, UH, ALREADY.
SO THE, THE FIRST PIECE IS THAT THE ASSETS ARE SMOOTHED OVER FIVE YEARS.
AND SO THAT PROVIDES SIGNIFICANT SMOOTHING TO ANY CHANGES IN, UH, INVESTMENT RETURNS.
SO IF YOU HAVE ONE REALLY BAD YEAR, YOU'RE GONNA SEE 20% OF THE EFFECT OF THAT EACH OF THE NEXT FIVE YEARS.
AND SO IF THE MARKET BOUNCES BACK, IT PROVIDES A LOT MORE STABILITY TO THAT, UH, ACTUARILY DETERMINED CONTRIBUTION.
ON TOP OF THAT, ONCE YOU RECOGNIZE IT, THAT CHANGE IS GOING TO BE AMORTIZED OVER, STARTING AT THE BEGINNING 30 YEARS, GRADING DOWN TO 20, BUT AT LEAST 20 YEARS.
AND SO THE COMBINATION OF THAT FIVE YEAR SMOOTHING AND THE 20 YEAR AMORTIZATION IS MEANT TO, TO PROVIDE SOMETHING, UH, SIMILAR TO THOSE GUARDRAILS.
THE GUARDRAILS ARE HARD LINES, UM, AND OUR CONCERN WITH GUARDRAILS IS YOU CAN DESIGN THEM TODAY SO THAT THEY'RE EFFECTIVE AND APPROPRIATE.
BUT AS THINGS CHANGE OVER TIME, WE'VE SEEN GUARDRAILS BECOME INAPPROPRIATE AND START, UM, CAUSING ISSUES WITH THE FUNDING OF THE SYSTEM.
SO THE TRADITIONAL ACTUARIAL APPROACH IS TO USE THE SMOOTHING AND THE AMORTIZATION.
YOU CAN BUILD, UH, GUARDRAILS, BUT YOU HAVE TO BE EXTRAORDINARILY CAREFUL IN HOW YOU DO IT.
AND MY PERSONAL THING WOULD BE THAT, UH, THOSE GUARDRAILS SHOULD BE ABLE TO BE AMENDED BY SOMEBODY WITH FIDUCIARY RESPONSIBILITY FOR THE FUNDING OF THE PLANT SO THAT IF THEY BECOME INAPPROPRIATE AT SOME POINT IN THE FUTURE, THEY CAN BE CHANGED BEFORE YOU GET INTO A BAD SITUATION.
AND ALSO OTHER CASES WHERE PEOPLE HAVE PUT IN GUARDRAILS SUCH AS A CONTRIBUTION CAN'T GO ABOVE EITHER AN ABSOLUTE LEVEL OR A RELATIVE CHANGE BETWEEN YEARS, THESE ARE TYPICALLY, AT LEAST WHEN THEY'RE DONE RIGHT, COUPLED WITH SOME RISK CARRYING PROVISIONS ON THE BENEFITS WHERE YOU HAVE EITHER BENEFIT CUTS LIKE THE COLA BEING REMOVED OR THE EMPLOYEE CONTRIBUTION COMES UP.
THE CHALLENGE WITH THIS SYSTEM IS, AS WE SAW WHEN WE WERE HERE IN NOVEMBER, YOUR EMPLOYEES ALREADY HAVE A PRETTY HIGH CONTRIBUTION AND RELATIVE TO THEIR BENEFITS.
SO, YOU KNOW, 'CAUSE YOU CAN BUILD IN THAT ABILITY TO HAVE THE LIABILITIES OR THE CONTRIBUTIONS OF THE MEMBERS ADJUST TO OFFSET THE FACT THAT YOU'RE CAPPING THE CITY.
BUT THERE'S REALLY NOT GREAT POTENTIAL IN THIS PLAN BASED ON WHERE YOU ARE.
YOU ALREADY MADE VERY SIGNIFICANT CHANGES IN 2017.
UH, JACK, YOU KNOW, YOU KNOW THE COLA, YOU KNOW, WE ARE FOR THE UNIFORM WE ARE TRYING TO GET HERE, BUT WE ALSO LOOK AT THE BUDGET.
YOU KNOW, WE WAS THERE ON THE 25TH AND WE GOTTA PRESENT A PLAN, BUT OUR PLAN IS ALSO TRYING TO DO A COLA SOONER, BUT WE GOTTA GET A PLAN DONE FIRST.
IS THAT CORRECT STATEMENT? YES SIR.
OUR, OUR PRIMARY GOAL IS TO ACHIEVE FULL FUNDING WITHIN 30 YEARS.
THAT'S, THAT'S WHAT WE ARE MOST FOCUSED ON COMING UP WITH, WITH A PLAN THAT WILL DO THAT.
AND IF THERE'S WAYS THAT WE CAN AGREE TO, UH, INCREASE BENEFITS, UH, BEFORE THEY WOULD OTHERWISE BE DUE, THEN WE CAN CONSIDER THAT.
BUT I, I WOULD RECOMMEND OUR FIRST PRIORITY BEING, BEING FULLY FUNDED AND, AND THEN THINKING BEYOND THAT.
AND I THINK THAT'S WHAT I HEARD ON THE 25TH.
WE NEED TO GET FUNDED FIRST, BUT ALSO, UH, LOOK AT, TO LOOK AT SOME ISSUES.
YOU KNOW, WITH SUMMER OF THE INVESTMENT BACK IN 2017, YOU KNOW, THERE ARE SOME INVESTMENT THAT WE GOTTA LOOK AT AND SEE IF THOSE INVESTORS RETURN AT 6% RETURN ON THE DOLLARS WE NEED.
LOOK AT ALSO, UH, THEN WE LOOK AT A BUDGET, HOW WE FUND THAT.
[01:35:01]
TAKE INTO CONSIDERATION AND, AND, AND CHAIRMAN STEWART, THANK YOU FOR YOUR LARGER COMMENT.YOU KNOW, JUST A GREAT PRESENTATION.
BUT MY MAIN DEAL IS FOCUS ON THE FUNDING IN THE STUDY THAT WE GOTTA DO, THE PLAN, WE GOTTA GET A PLAN IN AND WE ALL GOTTA BE ON THE SAME PAGE.
AND I KNOW THE ACTUARY YOU DOING WHAT YOU'RE SUPPOSED TO DO.
THE THE PENSION BOARD CAN DO WHAT THEY'RE GONNA DO AND WE THE COUNCIL AND WE GOTTA PAY THE BILL, BUT WE GOT TO HAVE A SOLID PLAN AND I'M NOT GONNA JUMP AND SAY, HEY, WE CAN WRITE A CHECK FOR $1.5 BILLION A DAY OR A BILLION DOLLAR DAY.
YOU KNOW, WE GOTTA BUILD A POLICYMAKER.
SO THANK YOU FOR PRESENTING THIS, UH, PLAN, UH, THE ACTUARY REPORT.
UH, IS THIS A ACTUARY COMPLETE? DO YOU STILL GOT SOME MORE THINGS YOU GOT TO TIE IT IN BEFORE THEY BE COMPLETE? SO, UH, I THINK TECHNICALLY WE HAVE, UH, 30 DAYS TO ISSUE A FINAL REPORT, UH, TAKING INTO ACCOUNT, UH, ANY COMMENTS WE'VE RECEIVED FROM THE PRELIMINARY, UH, PRESENTATION.
AND THEN THAT REPORT WILL GO, UH, TO THE CITY, TO THE SYSTEM AND TO THE PENSION REVIEW BOARD.
WITH THAT, I KNOW WE GETTING CLOSE JACKS WHEN YOU THE NEXT PRESENTATION SO WE CAN GET STARTED.
SO FOR THE NEXT PRESENTATION, UH, WE HAD REQUESTED THE COMMITTEE HAD REQUESTED, UH, FOR REPRESENTATIVES OF THE DALLAS POLICE AND FIRE PENSION FUND, UH, TO SPEAK ON THEIR INVESTMENT POLICY, UH, AND PERFORMANCE AND OVERSIGHT.
AND SO KELLY, UH, SHAW COMING FORWARD.
AND KELLY, I'LL LET YOU INTRODUCE YOUR TEAM AND, AND START THE PRESENTATION.
THANK YOU FOR ALLOWING US TO, UM, PRESENT ABOUT OUR INVESTMENT PROGRAM TODAY.
RYAN WAGNER, WHO IS SITTING TO MY RIGHT IS OUR CHIEF INVESTMENT OFFICER.
HE WILL BE DOING, UM, THE PRESENTATION AND THE REST OF US ARE HERE FOR QUESTIONS, UM, THAT YOU MIGHT HAVE.
YOU UM, MAY HAVE MET NICK MERRICK BEFORE.
HE'S THE CHAIR OF OUR BOARD AND WE'RE REALLY HAPPY THAT HE'S HERE TODAY.
UM, I'M KELLY GOTCH, THE EXECUTIVE DIRECTOR, AND TO MY LEFT IS JOSH MON, WHO IS THE DEPUTY EXECUTIVE DIRECTOR AND THE GENERAL COUNSEL.
UM, JUST ON BY WAY OF INTRODUCTION, I'VE BEEN WITH THE PLAN SINCE 2012 AND I'VE BEEN IN THE CI ROLE SINCE 2022.
JACK SAID YOU GUYS INVITED US HERE TO REVIEW OUR INVESTMENT POLICY GOVERNANCE OVERSIGHT OF THE PORTFOLIO AND PERFORMANCE, WHICH IS A GOOD FRAMEWORK 'CAUSE THAT'S HOW WE LOOK AT RUNNING OUR BUSINESS OF THE PORTFOLIO.
MOVING ON TO THE NEXT SLIDE, I'LL WALK THROUGH A QUICK OVERVIEW OF THE PLAN HERE.
I'LL START WITH THE TOP LEFT QUADRANT.
UM, WE HAVE 1.93 BILLION IN A UM 1.4 BILLION OF THAT IS IN LIQUID ASSETS.
UM, YOU HEARD ABOUT THE FUNDING LEVEL IN THE LAST PRESENTATION AND THAT FUNDING GAP OF 6% OR ABOUT 10 MILLION A MONTH IS A BIG CONSIDERATION IN HOW WE CONSTRUCT THE PORTFOLIO.
MOVING CLOCKWISE, WE'RE OVERSEEN BY 11% BOARD MAJORITY APPOINTED BY THE DALLAS MAYOR.
THEY'RE SUPPORTED BY AN INVESTMENT ADVISORY COMMITTEE AND I'LL, I'LL COVER THE COMPOSITION OF THOSE TWO GROUPS.
MOVING DOWN OUR ASSET ALLOCATION, WE HAVE 60% IN PUBLIC EQUITY TARGET, 25% TO FIXED INCOME, AND THEN A PRIVATE ALLOCATION OF 5% TO PRIVATE EQUITY, 5% TO REAL ESTATE, 5% TO NATURAL RESOURCES.
CURRENTLY WE'RE STILL 10% OVERWEIGHT TO PRIVATE MARKETS, WHICH LEAVES US 10% UNDERWEIGHT ON THE PUBLIC EQUITY SIDE ROUGHLY.
AND THEN ALL OF OUR ASSETS ARE MANAGED BY EXTERNAL ADVISORS.
WE HAVE 13 MANAGERS ON THE PUBLIC SIDE.
WE HAVE 15 PRIVATE MARKET INVESTMENTS.
WE WORK WITH INVESTMENT CONSULTING FIRMS, MAKITA AND ALL BORN, WHO ARE BOTH FIDUCIARIES TO THE PLAN TO HELP US, UM, PROVIDE ADVICE TO TO THE BOARD.
MOVING ON TO THE NEXT SLIDE, THIS IS LOOKING AT, UH, CONSTRUCTION OF THE BOARD.
AS I SAID, MAJORITY, IT'S APPOINTED BY THE MAYOR.
WE HAVE QUITE A BIT OF INVESTMENT IN BUSINESS LEADERS ON THE BOARD.
UM, THREE OUTSIDE MEMBERS ARE VOTED BY ME MEMBERSHIP, AND THERE'S ONE SEAT FOR POLICE AND ONE SEAT FOR A FIRE MEMBER.
UM, THIS NEW BOARD STRUCTURE WENT INTO EFFECT WITH THE 2017 LEGISLATION.
AND, UM, I'LL MOVE ON TO THE IAC NEXT.
SO THE IAC WAS ALSO CREATED WITH THE 2017 LEGISLATION AND, UM, WE HAVE A MAJORITY FOUR MEMBERS OF THE BOARD ON THAT COMMITTEE.
IT'S LED BY TOM TOLL, WHO'S THE FORMER CIO AT TEXAS EMPLOYEES RETIREMENT FUND.
THERE'S A FEW OTHER CIOS AND QUITE A BIT OF INVESTMENT
[01:40:01]
EXPERTISE ON THAT COMMITTEE.UM, AND I JUST WANNA STRESS THE, THE LEVEL OF EXPERIENCE AND EXPERTISE AND COMMITMENT OF THE BOARD AND THE IAC IS AN INCREDIBLE RESOURCE TO THE FUND AND TO STAFF.
BY WAY OF EXAMPLE, I MEET WITH NICK MONTHLY TO GO THROUGH THE PORTFOLIO FOR THE LAST THREE YEARS AND HAVE ACCESS TO ALL THOSE MEMBERS OF THE IAC AS WELL.
UM, THERE'S A LOT OF DETAILS ON OUR GOVERNANCE STRUCTURE ON THE FOLLOWING THREE SLIDES, BUT I REALLY LIKE THIS CHART HERE 'CAUSE IT GIVES A GOOD FRAMEWORK OF WHAT THE BOARD DOES AND HOW WE SUPPORT THEM AS STAFF, WHERE THE CONSULTANTS PLAY A ROLE AND HOW THE IAC COMES INTO PLAY AS WELL.
SO THE BOARD HAS RESPONSIBILITY FOR THE ENTIRE PORTFOLIO.
UM, MOVING KIND OF TOP LEFT TO THE RIGHT, I WOULD SAY I'D RANK THESE IN ORDER OF IMPORTANCE.
UM, FIRST THEY ADOPT AND APPROVE THE INVESTMENT POLICY STATEMENT.
UM, IF YOU GUYS WOULD WANNA LOOK AT LIKE ONE DOCUMENT THAT WOULD REALLY GIVE YOU A GOOD INSIGHT INTO HOW WE OPERATE THE PORTFOLIO.
IT'D BE THAT, AND IT'S ONLY 25 PAGES, UM, BUT IT OUTLINES 74 DIFFERENT RESPONSIBILITIES OF STAFF, CONSULTANT, EXTERNAL MANAGERS, AND, UH, WHO DOES WHAT IN RUNNING THE PLAN.
THE BOARD ALSO SETS THE LONG-TERM ASSET ALLOCATION TARGETS, DECIDING WHAT ASSET CLASSES WE'LL INVEST IN AND, AND HOW MUCH IN EACH OF THOSE ASSET CLASSES.
UM, THE BOARD HAS HIGHER AND TERMINATION AUTHORITY ON EVERY EXTERNAL MANAGER IN THE PLAN, INCLUDING KEY CONSULTANTS AND SERVICE PROVIDERS.
ONE KEY CHANGE THAT WE MADE IN THE IPS IS THAT EVERY NEW INVESTMENT REQUIRES A DUAL RECOMMENDATION FROM WRITTEN RECOMMENDATION FROM STAFF AND THE CONSULTANT.
UM, SO IT'S A PRETTY ROBUST PROCESS THERE.
AND THE INVESTMENT ADVISORY COMMITTEE IS HEAVILY INVOLVED IN NEW MANAGER SEARCHES AND DOES, UM, SOME HEAVY LIFTING ON THE INTERVIEW PROCESS WITH THAT.
IN TERMS OF MONITORING THE PORTFOLIO AND PERFORMANCE, UH, THE BOARD GETS MONTHLY UPDATES FROM OUR TEAM ON THE PORTFOLIO AND THEN THE CONSULTANT COMES IN ONCE A QUARTER TO PROVIDE AN UPDATE ON PERFORMANCE OF THE PLAN.
WITH THAT, WE CAN MOVE ALL THE WAY TO NINE, UH, TWO.
SO IN TERMS OF OUR CONSULTANT, UM, NIKITA IS THE GENERAL CONSULTANT AND WHAT THAT MEANS IS THEY PROVIDE ADVICE ON THE PUBLIC PORTFOLIO ASSET ALLOCATION AND PERFORMANCE.
WE'VE BEEN WORKING WITH THEM SINCE 2018.
WE JUST WENT THROUGH A SEARCH THIS LAST SUMMER TO SELECT A PRIVATE MARKET ADVISOR.
WE SELECTED ALLBORNE AND WE EXPECT, UM, GIVEN THE OVER ALLOCATION ISSUE TO START WORKING WITH THEM SOMETIME LATER THIS YEAR.
JUST OTHER SERVICE PROVIDERS, WE WORK WITH JP MORGAN AS THE CUSTODIAN BANK.
WE'VE BEEN WITH THEM SINCE 2002.
WE'RE LAUNCHING A SEARCH THERE IN A COUPLE WEEKS.
BDO IS THE FUNDS AUDITOR AND HAS BEEN SO SINCE 2014.
SIEGEL IS OUR ACTUARY SINCE 2016, AND JACKSON WALKER IS THE FIDUCIARY COUNCIL SINCE 2016.
SO WITH THAT OVERVIEW, I'LL GET INTO THE PORTFOLIO A LITTLE BIT.
SO I, I THINK THE NEXT TWO CHARTS REALLY TELL THE STORY OF THE WORK THAT'S BEEN DONE IN THE PORTFOLIO OF THE LAST SEVEN PLUS YEARS.
UM, THIS CHART IS SHOWING THE ALLOCATION TO PRIVATE MARKET ASSETS GOING BACK TO 2016.
AND AT ONE POINT IN 2016, WE HAD TWO THIRDS OF THE PORTFOLIO TIED UP IN PRIVATE MARKET ASSETS.
CURRENTLY WE WE'VE GOTTEN THAT DOWN TO 26%.
AND WHEN I SAY PRIVATE MARKETS, I'M TALKING PRIVATE EQUITY, PRIVATE REAL ESTATE, PRIVATE INFRASTRUCTURE, AG TIMBER.
UM, SO, UM, WE, AS I MENTIONED EARLIER, WE HAVE A 15% TARGET STILL OVER ALLOCATED.
AND THEN IF YOU CAN GO ONTO THE NEXT SLIDE PLEASE.
SO THIS KIND OF WALKS THROUGH WHAT'S GONE ON IN THAT PORTFOLIO.
THE 1.55 BILLION ON THE BLACKBOARD ON THE LEFT WAS THE AMOUNT OF PRIVATE MARKET ASSETS WE HAD IN 2016.
UM, SINCE THEN WE'VE GOTTEN 1.4 BILLION BACK IN CASH INTO THE PLAN FROM SALES.
A LOT OF THE, THE ACTIVITY IN 16 AND 17 WERE THE MORE MARKETABLE ASSETS THAT WE WERE ABLE TO SELL QUICKLY AND GET MONEY BACK.
UM, SINCE THAT TIME WE'VE FUNDED 245 MILLION IN CAPITAL OBLIGATIONS INTO THAT PORTFOLIO.
WE'VE HAD 111 MILLION IN MARKET VALUE INCREASE.
WE'RE CURRENTLY LEFT WITH ABOUT 500 MILLION IN PRIVATE MARKETS.
UM, GIVEN KIND OF THE NATURE OF THE PORTFOLIO, WHAT IS LEFT IN THE PORTFOLIO IS, I WOULD SAY THE MORE COMPLEX UNIQUE ASSETS THAT, YOU KNOW, EXITING IS A LITTLE BIT, UM, TAKING A LITTLE BIT LONGER.
SO, UM, OF THAT 500,000,420 WE HAVE TARGETED TO SELL.
[01:45:01]
UM, THAT AMOUNT IS VERY CONCENTRATED AMONG THREE INVESTMENTS THAT ARE REMAINING.UM, 80% OF WHAT WE PLAN TO SELL WITHIN THOSE THREE.
ONE OF 'EM IS A 2006 ENERGY FUND.
WE HAVE A GROUP OF PRIVATE EQUITY FUNDS AND THEN A LEGACY REAL ESTATE INVESTMENT THAT A W MANAGERS AND THEY TOOK THAT PORTFOLIO OVER IN 2015.
GOING AHEAD TO THE NEXT SLIDE, THIS IS LOOKING AT OUR ASSET ALLOCATION.
UM, THE COLORED BARS ARE THE CURRENT ALLOCATION AND THE BLACK BARS OF THE TARGET TO EACH ASSET CLASS.
ON THE LEFT SIDE OF THE CHART, THE GREEN, THAT'S WHAT WE CALL OUR SAFETY RESERVE.
AND GIVEN THE, THE 6% OUTFLOW THAT WE HAVE EVERY YEAR, WE'VE SET UP A 9% ALLOCATION TO CASH AND SHORT TERM BONDS.
AND THAT'S DESIGNED TO COVER 18 MONTHS OF BENEFIT OUTFLOWS.
AND THAT'S IMPORTANT BECAUSE WHEN THE MARKET HAS HAD SEEN DRAW DOWNS IN 20 AND 22, WE'VE BEEN ABLE TO PAY BENEFITS OUT OF THAT PORTFOLIO WITHOUT HAVING TO SELL ANYTHING AT A LOSS TO FUND THE BENEFIT OUTFLOWS.
UM, AS I MENTIONED, THE THE PUBLIC EQUITY IS JUST OVER, WHICH IS THE GLOBAL EQUITY AND THE EMERGING MARKET EQUITY JUST OVER 50% OF THE PORTFOLIO THAT WAS AS LOW AS 10% IN 2016.
SO WE'VE REALLY TAKEN A LOT OF THOSE PROCEEDS FROM THE PRIVATE MARKETS PORTFOLIO AND BEEN ABLE TO BUILD BACK OUT THE PUBLIC SIDE OF THE PORTFOLIO.
MOVING AHEAD, ONE SLIDE TO 13, I THOUGHT WE MIGHT ONLY HAVE TIME FOR ONE CHART AND IF THERE WAS ONLY ONE CHART I SH I COULD SHOW YOU GUYS, IT WOULD BE THIS ONE.
UM, THIS IS LOOKING AT THE BLUE BARS AS THE NET BENEFIT OUTFLOWS OR THE NET PRIVATE ASSET INFLOWS INTO THE PORTFOLIO DATING BACK TO 2018.
THE GREEN BARS ARE SHOWING THAT ROUGHLY 120 MILLION A YEAR THAT LEAVE THE PLAN TO PAY BENEFITS.
AND OUR PRIVATE MARKET ASSET SALES FROM 2018 ON HAVE COVERED OVER A HUNDRED PERCENT OF THOSE BENEFIT OUTFLOWS, WHICH HAS PREVENTED US, AS I MENTIONED, WITH THE SAFETY RESERVE EARLIER FROM HAVING TO SELL ANYTHING.
AND WE'VE ACTUALLY BEEN ABLE TO REINVEST THESE PROCEEDS INTO PUBLIC MARKETS WHEN THEY'VE BEEN DOWN THE LAST COUPLE YEARS.
THE NEXT SLIDE ON 14, THIS HAS SHOWN A VISUAL OF ALL OUR CURRENT MANAGERS IN THE PORTFOLIO, EVERYONE UNDER PUBLIC EQUITY AND FIXED INCOME OR INSTITUTIONAL QUALITY EXTERNAL MANAGERS THAT, THAT MAKE THE INVESTMENTS ON OUR BEHALF.
UM, ONE THING TO POINT OUT HERE IS ALL BUT TWO OF THESE NAMES THAT YOU SEE UNDER PUBLIC EQUITY AND FIXED INCOME ARE NUIS SINCE 2016.
SO WE'VE REALLY TAKEN THAT SIDE OF THE PORTFOLIO DOWN TO THE STUDS AND BUILT IT BACK OUT MOVING AHEAD TO 15 NOW.
SO THERE IS A TON OF NUMBERS ON THIS CHART AND YOU GUYS SAW A TON OF NUMBERS IN THE LAST PRESENTATION, SO I'LL TRY TO WALK YOU THROUGH IT AND I THINK IT TELLS AN INTERESTING STORY OF HOW WE GOT TO THE PLACE WE'RE AT.
UM, SO JUST TO ORIENT, ORIENT THE PAGE AT THE TOP, YOU CAN SEE THE DPFP LINE AND THAT IS OUR OVERALL PLAN RETURN.
UM, IT WAS GOOD, YOU KNOW, 10.1%, THIS IS AS OF NINE 30 OVER THE ONE YEAR PERIOD.
UM, THE LINE BELOW THAT IS LOOKING AT THE PUBLIC SIDE OF THE PORTFOLIO, WHICH IS WHAT THE BOARD AND STAFF CAN CONTROL RIGHT NOW.
AND THAT SIDE OF THE PORTFOLIO HAS OUTPERFORMED A 60 40 BENCHMARK, WHICH IS 60% STOCKS AND 40% BONDS OVER ALL TRAILING TIME PERIOD.
SO THAT WHEN YOU CARVE OUT THE PRIVATE MARKETS, THE PUBLIC SIDE OF THE PORTFOLIO THAT WE'VE BUILT BACK UP IS PERFORMING WELL.
UM, LOOKING DOWN AT THE THREE ASSET CLASSES BELOW THAT, WE COMPARE EQUITY AND FIXED INCOME BOTH TO A PEER DATABASE OF ANY PENSION PLANS ABOVE 1 BILLION, HOW THEY PERFORM IN THAT ASSET CLASS, AND THEN A BENCHMARK THAT'S RECOMMENDED BY THE CONSULTANT.
AND IF YOU, THERE'S A LOT OF NUMBERS, BUT IF YOU LOOK ACROSS OVER MOST TIME PERIODS, WE HAVE OUTPERFORMED BOTH THE PEER GROUP AND THE BENCHMARK ON THE PUBLIC SIDE.
UM, LOOKING DOWN UNDER THE RED PART OF THE, THE PRESENTATION HERE AND IT'S MOST INSTRUCTED TO LOOK AT AT THE 10 YEAR LONG-TERM RETURNS, ESSENTIALLY ACROSS PRIVATE EQUITY, REAL ESTATE AND NATURAL RESOURCES, WE'VE EITHER SEEN FLAT RETURNS OR NEGATIVE RETURNS OVER A 10 YEAR PERIOD.
SO IT'S REALLY THAT WHAT WAS TWO THIRDS OF THE PORTFOLIO DRAGGING DOWN THE OVERALL RETURNS OF THE PLAN.
UH, ANOTHER WAY TO LOOK AT THIS ON 16 WOULD BE, SO AT THE BOTTOM OF THE PAGE, THIS IS A 10 YEAR RETURN OF DPFP.
THE ACTUAL RETURN OVER THE 10 YEAR PERIOD FOR THE ENTIRE PLAN, INCLUDING PUBLIC MARKETS IS 1.6.
[01:50:01]
RETURN OF 5.4, UM, THE GREEN BARS TO THE LEFT ARE SHOWING WHAT HAS CAUSED THAT UNDERPERFORMANCE BY MAGNITUDE.AND IT'S ESSENTIALLY 90% OF IT IS AMONGST PRIVATE EQUITY AND REAL ESTATE WITH A LITTLE BIT OF DETRACTION COMING FROM THE, THE AG NATURAL RESOURCE PORTFOLIO AS WELL.
AND THE FINAL PAGE HERE, THIS IS LOOKING AT OUR TRAILING RETURNS ESTIMATED AS OF END OF THIS YEAR SOLID RETURNS UP 9.8% OVER THE ONE YEAR PERIOD IN 2023.
AND YOU CAN REALLY SEE THE IMPACT OF THAT.
THE PRIVATE MARKET DRAG WHEN YOU LOOK AT THE FIVE TO 20 YEAR TRAILING RETURNS HERE WITH THOSE BEING TWO TO TWO TO 5% ESSENTIALLY.
SO WITH THAT, UM, IN SUMMARY, I WOULD SAY WE, WE HAVE AN EXPERT BOARD IN IAC WITH A VERY STRUCTURED INVESTMENT PROCESS.
WE'VE MADE A TON OF PROGRESS IN THE PRIVATE MARKETS PORTFOLIO, UM, SINCE STARTING IN 2016, WE'VE BEEN ABLE TO TAKE THOSE PROCEEDS BUILD BACK OUT THE PUBLIC SIDE OF THE PORTFOLIO, WHICH IS WHAT WE ACTUALLY CONTROL AND THAT'S PERFORMING QUITE WELL.
SO I DON'T, NICK, KELLY, ANYTHING YOU GUYS WANNA ADD? OH, SO THANK YOU.
DID YOU WANNA CHAIR? DID YOU HAVE YEAH, I, LET'S, SORRY.
NO, I JUST, I'M GONNA HOLD MY THOUGHTS TILL LATER.
YOU SORRY, DO YOU WANNA START AHEAD? OH, OH, STEWART, CHAIRMAN STEWART, CHAIRMAN MEMBERS, I HAVE A QUESTION FOR YOU.
UM, 9.8% RETURN, THAT'S REALLY AMAZING.
UM, DO WE KNOW WHAT OUR RETURN WAS FOR ERF? YOU SIGNED SAME TIME PERIOD? NO MA'AM, I DO NOT.
YOU KNOW, IN THE PAST THERE WAS A PROBLEM WITH OUR, UM, APPOINTEES TO THE PENSION BOARD, NOT ATTENDING MEETINGS.
SADLY, THEY WERE MOSTLY COUNCIL MEMBERS.
UM, HOW'S ATTENDANCE FOR YOUR, FOR YOUR BOARD? I THINK IT'S ON.
UM, COUNCIL MEMBER MENDELSSOHN, THE ATTENDANCE IS ACTUALLY VERY GOOD.
AND, UM, IN OUR NEW STATUTE THERE'S ACTUALLY A REQUIREMENT THAT IF A ANY MEMBER MISSES A CERTAIN NUMBER OF MEETINGS, THEY, UM, HAVE TO BE, THERE'S RAMIFICATIONS FOR THAT.
UM, AND WE HAVEN'T HAD THAT PROBLEM AT ALL.
SO WE HAVE VERY GOOD ATTENDANCE.
SO I'VE BEEN ATTENDING YOUR MEETINGS FOR THE LAST COUPLE MONTHS JUST TO, TO UNDERSTAND WHAT THEY'RE ABOUT AND HOW THEY GO.
UM, I THINK YOU LEAD A REALLY EXCELLENT MEETING.
UM, AND THANK YOU FOR A VERY, UM, TOUGH VOLUNTEER JOB.
UM, THE OTHER THING I'M JUST GONNA SAY IS THAT I THINK YOUR BOARD IS ASKING REALLY INTERESTING, MEANINGFUL QUESTIONS AND, UM, YOU KNOW, I I ASK A LOT OF QUESTIONS MYSELF AND I FEEL LIKE THINGS THAT I'M LIKE, OH, I GOTTA ASK ABOUT THIS.
WELL, YOU'VE ALREADY ASKED IT AND ANSWERED IT.
SO I FEEL LIKE THERE'S A GOVERNANCE, UM, CHANGE THAT'S HAPPENED OVER THESE YEARS THAT WE CAN BE PROUD OF.
AND, UM, SO I WANNA SAY THANK YOU FOR THAT WORK.
'CAUSE IT'S HARD TO TRANSFORM AN ORGANIZATION.
SO, UM, WITH THAT, THANK YOU FOR THE BRIEFING OF HOW IT ALL COMES TOGETHER.
THANK YOU, CHAIRMAN BLACKBURN.
CAN YOU TELL ME YOUR NAME AGAIN? RYAN WAGNER.
I COULD DIDN'T, YOU WERE TALKING REALLY FAST AND I WAS GETTING, OKAY, SORRY.
OKAY, SO GO TO, IF I COULD LOOK AT PAGE 17 AND YOU HAVE A 9.8% AND THEN IT DROPS TO, OKAY, SO THIS IS GONNA BE YOUR RETURN AS OF 2023.
THIS IS ESTIMATED AS OF THE END OF THE YEAR.
AND THIS IS OF WHICH YEAR? UH, AS 12 31 23 END OF THIS YEAR.
AND THEN YOU'RE GONNA, AND THEN IN THREE YEARS YOU'RE DROPPING TO 4.1? YES.
I MEAN PUBLIC, I'M SAYING NO, YOU'RE SAYING YES,
OVER, YOU KNOW, THE THREE YEARS GOING BACK TO 2020, THE ACTUAL RETURN OF THE PORTFOLIO, YOUR AVERAGES WAS 4.1% PER YEAR.
SO IS IT GONNA BE AN AVERAGE? THE 4.1% WOULD BE 4.1% RETURN ON THE ENTIRE PORTFOLIO, INCLUDING THE PRIVATE MARKET PORTION OVER THAT THREE YEAR PERIOD ANNUALIZED.
IT'S A HISTORICAL NUMBER, SO IT'S, IT'S OKAY.
IT'S THE LAST THREE YEARS THE AVERAGE, SO IT WOULD'VE BEEN ROUGHLY 12 OR 13%.
SO IT'S THE 9.8 WITH THE, THE PRIVATE EQUITY IN IT AS WELL.
SO YOU'RE GONNA POST A 9.8 RETURN THAT'S ESTIMATED.
UM, BUT THAT'S, YOU KNOW, IT'S
[01:55:01]
REALLY NEW NUMBER, BUT, BUT THAT'S WHAT WE'RE PROJECTING.WHEN WILL WE GET THE NON ESTIMATED? WHEN WILL YOU CERTIFY THAT NIKITA COMES INTO THE BOARD IN MARCH TO DO THEIR, UH, NEXT REPORT, WHICH WOULD BE THE Q4 REPORT.
UH, THE NEXT THING, LOOKING ON YOUR BENCHMARKING, WHO DO YOU BENCHMARK WITH? SO THESE ARE ALL PUBLIC TILE OR THE TOP CORE TILE INDICES THAT WHEN WE DO A NEW INVESTMENT OR WE DO THE INVESTMENT POLICY OR ASSET ALLOCATION, MAKITA WILL CONSULT ON WHAT IS AN APPROPRIATE BENCHMARK TO USE FOR THAT INVESTMENT.
AND YOU ARE BENCHMARKING AGAINST OTHER PENSION FUNDS, RIGHT? SO WE'RE SHOWING TWO DIFFERENT THINGS HERE.
WE'RE SHOWING A PEER RANKING OR A PEER COMPARISON AGAINST OTHER PENSION PLANS.
AND WHO ARE THEY IS WHAT I'M ASKING IT.
THERE'S A A DATABASE INVESTMENT METRICS AND IT'S PUBLIC DB PLANS ABOVE.
WHO DO YOU USE?
SO YOU'RE NOT BENCHMARKING AGAINST THE TOP ONES IN THE COUNTRY? NO, WE'RE SHOWING OUR RETURN AGAINST THE MEDIAN.
SO WE'RE, OKAY, SO WE'RE AVERAGING WE'RE GOING AGAINST THE AVERAGE.
MY NEXT THING IS THIS PRIVATE EQUITY FUND, WHEN DID WE ACQUIRE IT? AND I GUESS LET'S CALL 'EM THE LEGACY FUNDS.
SO, OR THE LEGACY ASSETS, LET'S CALL 'EM THE ONE WE TALKED ABOUT THAT WERE LEFT.
IS THAT HUFF ENERGY? HUFF ENERGY, OKAY.
AND THAT, THAT INVESTMENT WAS MADE IN 2006.
AND THEN WHAT'S ANOTHER ONE? UM, LONE STAR BELOW THAT.
THAT IS A GROUP OF PRIVATE EQUITY FUNDS THAT WERE BETWEEN A 2000 VINTAGE FUND AND THE MOST RECENT WAS 2012.
AND THEN THE THIRD, DON'T WE HAVE THREE? THOSE ARE JUST TWO.
THE LAST ONE I I MENTIONED THE A W UNDER REAL ESTATE.
A W THAT'S A, A PORTFOLIO OF REAL ESTATE INVESTMENTS THAT WAS PREVIOUSLY MANAGED BY A, A DIFFERENT REAL ESTATE MANAGER.
UM, INVESTMENTS THERE STARTED 2008, PROBABLY TO 2011.
AND THOSE, UM, MAKE UP THE 30% THAT YOU'RE, THAT YOU TAKE OUT OF THIS, UH, WHAT IT SAYS DPFM EXCLUDING THE PRIVATE MARKETS.
THE EVERYTHING IN THE PRIVATE PORTFOLIO? YES.
THESE, THIS IS THE, SO MY QUESTION IS, IS WHEN DO THEY STOP BECOMING LEGACY AND YOU START OWNING THEM? NICK, OUR KIDS PLAYED FOOTBALL.
SO IT'S LIKE, WHEN ARE WE GONNA SHED THESE AND EITHER CUT OUR LOSSES, CUT BA OR SAY THEY'RE PART OF THE PORTFOLIO? I, I, I THINK THAT IT'S A BALANCING ACT WHEN YOU, UH, LOOK BACK AT, UM, THESE GOING BACK AND YOU SEE THAT, YOU KNOW, THE COMMITMENT DATES ARE AS EARLY AS 2000.
AND WHEN YOU MAKE A COMMITMENT IN A PRIVATE INVESTMENT, YOU OWN IT UNTIL YOU DON'T OWN IT.
AND YOU DON'T, IT'S NOT A PUBLIC MARKET LIKE YOU CAN SELL IT.
UM, THAT WHEN WE FIRST GOT INVOLVED IN 2016, I THINK THE NUMBER IS ROUGHLY 1,000,000,004.
YOU COULD HAVE GOTTEN RID OF THEM ALL VERY, VERY QUICKLY FOR PENNIES ON THE DOLLAR.
BUT INSTEAD WE TRIED TO ENGAGE IN A PROCESS THAT, UH, SOUGHT BETTER PARTNERS, BETTER EXPERTS AND ADVISORS, BREAK 'EM OUT INTO THEIR VARIOUS CATEGORIES.
AND I'VE BEEN PRETTY IMPRESSED WITH SOME OF THE FIRMS THAT HAVE HELPED US MONETIZE SOME OF THESE.
AND WE'VE DONE THAT SYSTEMATICALLY.
OF COURSE, THE INERTIA IS LIQUIDATE, LIQUIDATE, LIQUIDATE, BUT WE'VE HAD TO BALANCE THAT AGAINST JUST THE, THE NUMBERS IN TERMS OF GENERATING CASH FLOW, KEEPING THE PLAN SOLVENT AND ALL THOSE OTHER ISSUES.
UM, RYAN IN PARTICULAR, I MEAN HE'S KIND OF BEEN RAISED IN THIS, UH, FIRM KIND OF DEALING WITH THESE, THESE PRIVATE ASSETS, UH, AND THEN ALSO, YOU KNOW, INCORPORATED THE ADDITIONAL CIO RESPONSIBILITIES.
UM, BUT THE FACT THAT WE'VE BEEN ABLE TO COVER THE NEGATIVE CASH FLOW OF THE PLAN WITH THE MONETIZATION OF THESE, I THINK IS A REAL ACCOMPLISHMENT.
AND THE ONES THAT ARE LEFT, EACH ONE HAS ITS OWN VERY DISTINCT STORY AND EACH ONE HAS ITS OWN SET OF ISSUES.
AND TO VARYING DEGREES IN ONE, WE HAVE SOME ELEMENT OF INFLUENCE, BUT IN, IN HUFF WE REALLY HAVE NO POINT OF INFLUENCE.
AND I, I THINK THAT IF WE TRY TO GO OUT AND SELL EITHER ONE OF THOSE RIGHT NOW, IT WOULD BE AT A VERY, VERY LOW PRICE.
THEN CAN WE JUST OWN IT? CAN, INSTEAD OF SAYING IT'S A LEGACY ONE, CAN WE JUST SAY IT'S PART OF THE PORTFOLIO? WELL, I THINK WE DO.
I THINK WHAT WE WANT TO DO I IS, IS, I, I WANNA DIFFER ON THAT.
WELL HERE'S, HERE'S HOW I'D FRAME THAT.
[02:00:01]
OF WAS THINKING OF AN ANALOGY AND I WAS THINKING THIS IS LIKE EXTREME MAKEOVERAND WE, YOU WOULD BE ASKING YOURSELF THE QUESTION IF YOU DIDN'T ASK IT DIRECTLY, IS, WHY SHOULD WE GIVE YOU GUYS MORE MONEY? RIGHT.
BECAUSE GIVEN THE HISTORICAL PERFORMANCE, I DON'T SEE IT.
SO FOR SEVEN YEARS WE HAVE BEEN IN, WE, I BELIEVE WE HAVE BEEN ENGAGING IN HUNDREDS AND HUNDREDS OF DIFFERENT ACTIONS THAT ARE BUILDING UP TO MORE AND MORE CREDIBILITY, MORE AND MORE COMPETENCE, SO THAT WE CAN LOOK YOU IN THE EYE AND SAY, IF WE ARE ABLE TO COME UP WITH A, A PLAN THAT ADHERES TO THE GUIDELINES, IT ENHANCES THE SOLVENCY OF THE FUND THAT WE BELIEVE WE CAN STEWARD THAT MONEY WELL.
BUT PART OF STEWARDING THAT MONEY WELL IS DEALING WITH THESE LEGACY ASSETS IN THE MOST EFFECTIVE WAY.
AND YOU, IF YOU LOOKED AT 'EM AS A BROAD PORTFOLIO, YOU WOULD SEE THE VAST MAJORITY OF THEM WE MONETIZED EARLY OR OVER SOME PERIOD OF TIME, STILL 30%, BUT WE'RE LEFT WITH A FEW OF THEM.
UM, WE COULD HAVE TO GET INTO A TON OF SAUSAGE MAKING TO EXPLAIN ALL THE INDIVIDUAL THINGS THAT WE'VE DONE, PARTICULARLY WITH ONE OF THEM LONE STAR IN TERMS OF NOW HAVING POINTS OF INFLUENCE THAT WE DIDN'T HAVE BEFORE.
AND AS SOMEONE WHO, YOU KNOW, DOES THIS SORT OF THING PROFESSIONALLY, I REALLY ADMIRE THE WORK THAT THE WHOLE TEAM HAS DONE.
UM, I THINK YOU GUYS, UH, HAVE A GREAT TEAM WITH THESE THREE PEOPLE RIGHT HERE.
AND I FEEL LIKE WE'RE DOING A VERY COMPETENT JOB.
I'VE KNOWN WE'VE ALWAYS WOULD HAVE THIS SORT OF DISCUSSION WHERE WE WOULD HAVE TO SIT THERE AND THE BURDEN IS ON US.
IT'S NOT FOR YOU TO, YOU KNOW, FOR TO DISPROVE.
IT'S, IT'S FOR US TO PRESENT A COMPELLING CASE TO ALL OF YOU THAT WE HAVE COMPETENCE AND THAT WE CAN STEWARD ADDITIONAL CAPITAL WELL IN ORDER ACHIEVING THE, THE GOALS THAT WE ALL DESIRE.
THEN WHY ARE WE AT 55% IN A GLOBAL EQUITY FUND? I JUST FEEL LIKE WHY ARE WE LO WHY ARE WE NOT INVESTING LOCALLY IN DOMESTICALLY? BECAUSE I, THIS PAGE RIGHT HERE, MM-HMM.
THOSE GLOBAL EQUITY FUNDS, WE HAVE FOUR DIFFERENT MANAGERS THAT INDEX ARE COMPARED TO IS 65% US.
SO IT'S REALLY, SO GLOBAL IS THE US YEAH.
SO, AND THEN I'M HOPING NONE OF IT'S CHINA.
WE HAVE A EMERGING MARKETS ALLOCATION, WHICH IS 4.8
UM, THERE'S SOME CHINESE HOLDINGS IN THAT FUND.
THAT MANAGER IS TYPICALLY QUITE A BIT UNDERWEIGHT TO CHINA AND HAS BEEN FOR SOME TIME.
I JUST, I FEEL THAT YOU'VE GOT 29 TO 30% THAT ARE THESE LEGACY ASSETS.
AND IT'S, IT'S EITHER OWN IT AND SAY THIS IS PART OF IT, AND YES, THEY WILL BE SHED IN YEAR 30 OR YEAR 35 OR TOMORROW.
BUT TO SAY, YEAH, WE'RE GONNA TAKE THIS OUT BECAUSE IT'S OVER HERE.
IT'S LIKE YOU'VE HAD, IT'S BEEN SIX YEARS IN MY OPINION.
SO EITHER OWN WHAT YOU'VE GOT AND MAKE IT WORK OR START, YOU KNOW, CUT LINE, YOU KNOW, CUT THE BAIT AND UH, BECAUSE IT SEEMS LIKE IT IS DRAGGING EVERYTHING DOWN.
AND I UNDERSTAND YOU MAY TAKE A HAIRCUT, BUT IT'S, I THINK IT'S UN UNDERSTAND WHAT THAT HAIRCUT IS EARLY AND ADJUST AND MAKE ADJUSTMENTS FOR IT.
AND SO THAT WAY WE CAN ALL MAKE ADJUSTMENTS FOR IT.
AND I JUST, I JUST FEEL THAT, YOU KNOW, NICK, I THINK EVERYBODY SHOULD OWN WHAT THIS WAS IN THE PAST AND MOVE ON.
AND SO, I MEAN, I, I AGREE WITH YOU PARTIALLY, BUT I THINK ALSO THAT WE UNDERSTAND IN ORDER TO ACHIEVE THE GOALS, WE ALL SHARE, WE HAVE TO PROVE COMPETENCE TO YOU.
AND SO WE CAME IN WHEN WE DID, WE SPEND VERY LITTLE TIME TALKING ABOUT THE PAST.
AND I'LL TELL YOU, YOU'VE SAT IN ON MEETINGS.
IF YOU DIDN'T KNOW WHO'S, WHO WOULD YOU BE ABLE TO TELL ME WHO'S A MAYOR APPOINTEE AND WHO'S A FIRE AND WHO'S POLICE YOU WOULDN'T BE ABLE TO TELL BECAUSE WE FUNCTION WELL WITH COMMON SENSE REIGNING THE DAY, EVEN THOUGH PEOPLE BRING DIFFERENT VIEWS AND PERSPECTIVES, WE OWN IT.
THERE'S NO QUESTION ABOUT IT, BUT IT IS APPROPRIATE TO BREAK THINGS OUT INTO VARIOUS CATEGORIES AND DEAL WITH THEM DIFFERENTLY.
AND THEN WE TAKE AN APPROACH THAT WE DO NOT THINK THAT WE SAY, WELL, THAT WAS SOME PRIOR GROUP AND WE'RE NOT TO BLAME, WE OWN THE ENTIRE OUTCOME.
WE OWN THE FUNDING, THE OBLIGATIONS THAT WE HAVE AND YOU KNOW, WE TOOK SOMETHING THAT WAS A PROBLEM, THESE, UH, UH, LEGACY ASSETS AND WE WERE ABLE TO EXTRACT SOME GOOD FROM IT FROM THE STANDPOINT THAT WE'VE FUNDED ALL OF OUR CASH OUTFLOW OUT OF THOSE.
THE THING WE WOULDN'T WANT TO DO IS
[02:05:01]
TO HAVE TO SELL WELL PERFORMING, UH, PUBLIC EQUITY FUNDS IN ORDER TO FUND THAT NEGATIVE OUTFLOW.SO THAT'S A GOOD EXAMPLE OF SHOWING HOW WE'VE EXTRACTED VALUE, BUT WE JUST FEEL LIKE IT'S APPROPRIATE TO SHOW YOU GUYS THE INFORMATION.
BUT I WOULD TELL YOU IN TERMS OF THE DNA, WE OWN IT.
SO IF WE, IF WE ARE PROJECTING TO YOU THAT WE'RE LOOKING TO SOMEHOW, UH, I WOULD SAY THAT, THAT WE ARE DOING A BAD JOB OF PRESENTING BECAUSE WE OWN IT.
COUNCILMAN WILLIS? YEAH, I, I WOULD JUST JUMP ON THAT TO SAY, I MEAN, IT DOES RAISE SOME QUESTIONS.
I KNOW THAT WHAT WE WERE TOLD EARLY ON WHEN WE STARTED TO MEET WAS THERE WAS A THOUGHTFUL APPROACH TAKEN ABOUT DIVESTING THESE PROPERTIES, BUT THERE WAS ALSO, YOU KNOW, A SEVEN YEAR BULL MARKET
SO, UM, IT JUST, IT STARTS TO MAKE ONE QUESTION ABOUT, UM, HOW THE CASH OUTFLOW COULD HAVE BEEN COVERED PLUS SOME, UM, IN, IN LOOKING AT THINGS A DIFFERENT WAY.
SO I THINK, UM, WHILE WE DON'T WANNA DWELL ON THAT PAST, IT JUST, IT, IT MAKES, MAKES ME WONDER.
UM, SO ON SLIDE 10, I THINK IT IS, ON THE PRIVATE MARKETS, UM, IS THIS, SO I SEE WE'VE GOT THE DECLINE.
IS THIS BECAUSE OF LIQUIDITY NEEDS OR FUND PERFORMANCE OR HOW WOULD YOU CHARACTERIZE THAT? THIS IS BA THE DECLINES BASED ON THE SALES IN THAT PRIVATE MARKET PORTFOLIO.
AND THEN YOU MENTIONED, I MEAN, IT LOOKS LIKE PRIVATE EQUITY, LIKE THERE'S NOT ANYTHING TO INVEST HERE.
IS THAT RIGHT IN THE COMING? I, I DON'T UNDERSTAND THE QUESTION THERE.
WELL, I MEAN, I WAS JUST LOOKING AT THE PE FIRM THAT YOU HIRED AND I DIDN'T KNOW WHAT THEY WERE GONNA BE DOING.
THOSE PE FIRMS LISTED THERE ARE ALL INVESTMENTS THAT WERE MADE 2016 OR BEFORE, BUT LIKE ALBURN, WAS THAT A NEW MINE? OH, AUBURN.
UM, AS WE GET, WE'RE KIND OF TO THE POINT WHERE WE ARE 10% OVERWEIGHT STILL.
WE HAVE THREE MAJOR INVESTMENTS AS THOSE PROCEEDS COME BACK AND WE'RE WORKING VERY HARD TO GET 'EM BACK.
SO WE WANT TO BE WELL AHEAD OF WHAT IT LOOKS LIKE WHEN WE START MAKING NEW INVESTMENTS INTO PRIVATE EQUITY, PRIVATE REAL ESTATE.
UM, ALL BORN, WE, WE DID A CER A CONSULTANT SEARCH STARTING IN MARCH OF LAST YEAR.
WE INTERVIEWED NINE FIRMS. UH, I'D SAY THE SELECTION OF ALLBORNE IS THEY'RE A PRIVATE MARKET EXPERT.
ALL THEY DO IS PRIVATE MARKETS CONSULTING AND THEY HAVE VERY STRONG ODD CAPABILITIES AND THAT WAS VERY IMPORTANT TO US AND THE BOARD, GIVEN THE L LEGACY INVESTMENTS IN THE PORTFOLIO.
WELL, WHILE WE ACKNOWLEDGE THAT UM, WE HAVE A LONG-TERM ALLOCATION THAT ENCOMPASSES, UH, PRIVATE EQUITY.
I CAN ASSURE YOU THE BAR WILL BE VERY, VERY HIGH FOR ANY ADDITIONAL PRIVATE EQUITY INVESTMENTS THAT WE MAKE GOING FORWARD.
I MEAN, WHAT WAS IN THE PORTFOLIO? I WOULD SAY THE EARLY SALES THAT WE DID IN 16 AND 17, WE DID, WE TOOK 26 FUNDS OUT TO THE MARKET AND SOLD, AND THAT WAS KINDA THE MARKETABLE PART OF THE PORTFOLIO.
UM, AS NICK MENTIONED, THERE WAS QUITE A FEW UNKNOWNS WITH WHAT WAS LEFT IN THE PORTFOLIO, WHAT, WHAT THE OUTCOME WOULD BE ON THE VALUE.
SO, YOU KNOW, THERE'S STILL SOME UN UNKNOWNS IN THE PORTFOLIO, BUT EVEN THOUGH IT'S ONLY 111, IT COULD HAVE BEEN MUCH, MUCH WORSE IF IT WASN'T, YOU KNOW, FOR THE MANAGERS THAT WE BROUGHT IN TO OVERSEE PARTS OF THE PORTFOLIO AND THE THOUGHTFUL APPROACH THAT THE BOARD TOOK TO EXIT THESE INVESTMENTS AT THE RIGHT TIME AND NOT ALL AT ONCE IN 17 OR 18.
UM, I, I AGREE WITH THE SPIRIT OF YOUR QUESTIONS.
UH, WE'VE USED THE CONCEPT, WE CALL IT TIME THEFT.
WHEN YOU TAKE THE CAPITAL STARTING IN THE EARLY TWO THOUSANDS THAT WAS DEPLOYED AND YOU PUT ANY SORT OF RATE OF RETURN ON THAT, AND YOU, I MEAN, JUST A BASIC RULE IS 7% OVER 10 YEARS DOUBLES YOUR MONEY AND YOU LOOK AT THE LACK OF RETURN ON THAT HUGE AMOUNT OF MONEY OVER AN EXTENDED PERIOD OF TIME.
AND THAT, AND OTHER THINGS ARE THE VAST MAJORITY OF THE SHORTFALLS THAT UNFORTUNATELY WE ALL HAVE TO ADDRESS TODAY.
BUT IT'S, IT'S PURE CLEAR TIME THEFT.
LET'S GO TO THE INVESTMENT MANAGERS.
SO I BELIEVE THAT'S, WHAT DO YOU KNOW ABOUT THE QUARTILE OF THEIR PERFORMANCE? I MEAN, WHAT ARE YOU ON 14 OR 15? I'M SORRY.
WITH ALL THE INVESTMENT MANAGERS LISTED, LIKE ON EACH OF THESE, ARE THEY PERFORMING IN THE TOP QUARTILE IN THE LOWEST, THE MIDDLE? DO YOU KNOW WHERE THEY FALL? YEAH,
[02:10:01]
TYPICALLY MOST OF 'EM ARE OUTPERFORMING THEIR BENCHMARK, WHICH IS THE, THE INDEX.UM, I'M PULLING UP GETTING TO A PAGE HERE.
UM, THEY'RE ALL, UH, REPRESENTED BY MAKITA AS SORT OF THE BEST OF BREED FOR THOSE INDIVIDUAL ASSET CLASSES.
THAT'S ONE OF THE SCREENING TOOLS THAT WE WOULD NORMALLY USE.
I MEAN, BECAUSE ON THE NEXT PAGE I SEE WE'RE PULLING SOME NUMBERS AND WE'RE PULLING MEDIAN VERSUS THE TOP QUARTILE.
UM, AND I JUST IN LOOKING AT 16, I MEAN, THAT, THAT'S, IT'S VERY CONCERNING TO ME.
I MEAN, WE TALK ABOUT THIS, UH, THE THINGS THAT ARE DRAGGING THE FUND DOWN, BUT I GUESS TO, TO, YOU KNOW, CHIME IN ON THE WHOLE OWNING IT.
UM, NONE OF US ARE PENSION EXPERTS.
WE'VE TALKED ABOUT THIS BEFORE.
IN FACT, I THINK AT THE LAST MEETING, CHAIR MENDELSON BROUGHT THIS UP TALKING ABOUT THE ERF, BUT ABOUT THE NEED FOR INDEPENDENCE AND OBJECTIVITY.
AND I FEEL LIKE THIS IS NOT OUR AREA OF EXPERTISE.
WE'VE TRIED TO CALL UPON OUR CONTRACTED PARTNERS TO GET SOME INFORMATION, BUT MR. CHAIR, I FEEL LIKE WE NEED, UM, SOME THIRD PARTY OBJECTIVITY.
I MEAN, I FEEL LIKE WE NEED AN INDEPENDENT ANALYSIS AND MAYBE SOME GENERAL RECOMMENDATIONS BECAUSE WE CONSIDER AND ASK THESE QUESTIONS, THIS IS WHAT YOU ALL DO ALL DAY.
AND SO WE MAY DISAGREE ON SOME OF OUR LAYMAN'S OBSERVATIONS ABOUT A BULL MARKET OR WHATEVER, BUT I FEEL LIKE WE NEED AN ANALYSIS.
I THINK IF, YOU KNOW, LIKE BY OUR APRIL MEETING, HOPEFULLY WE COULD WORK EXPEDIENTLY, UH, AND FIND SOMEONE AND GET THIS IN, NOT JUST FOR THIS FUND, BUT ALSO FOR THE ERF.
WELL, I KNOW, UM, A FEW OTHER COLLEAGUES HAVE, WE'VE JUST HAD SOME DISCUSSIONS ABOUT HOW MUCH WE REALLY KNOW ABOUT THIS MM-HMM.
I MEAN, I WOULD SAY THAT'S SOME DIRECTION, UM, TO DO THAT.
AND THEN FINALLY, UM, I GUESS CHAIR MERRIT, I HAVE SOME EMAILS FROM RESIDENTS, AND WHILE WE DON'T WANNA DWELL ON THE PAST, UM, TAXPAYERS ARE ON THE HOOK FOR WHAT WE'RE TRYING TO DO HERE.
IN FACT, I HAVE ONE, UH, MESSAGE, AND I'LL JUST READ WHAT THIS FELLOW WROTE TO ME.
HE SAID, WERE THOSE RESPONSIBLE FOR INVESTMENT DECISIONS HELD ACCOUNTABLE? THANKS FOR LISTENING, AND PLEASE DO REPRESENT MY VIEWS ON THESE TOPICS.
AND SO I BELIEVE THE FUND, UH, DID AN INVESTIGATION INTO THE HAPPENINGS IN THE PAST.
WAS THIS EVER, WAS THIS EVER GIVEN TO THE BOARD? I I MEAN, I FEEL LIKE OUR TAXPAYERS NEED CLOSURE BECAUSE AS WE TALK ABOUT THE PENSION, THEY'RE KIND OF WAKING UP TO THAT HISTORY.
AND WHILE I DON'T WANNA REHASH ALL OF THAT BECAUSE WE'VE GOTTA LOOK FORWARD AND GET THIS SOLVED, I DO FEEL LIKE THEY NEED CLOSURE.
AND I DON'T REALLY KNOW WHAT TO TELL THEM.
AND WHEN I ASK AROUND HERE, NOBODY SEEMS TO KNOW WHAT TO TELL THEM.
AND THIS IS A LOT OF MONEY AND IT'S THEIR MONEY.
SO IT LOOKS LIKE MR. MON WANTS TO SHARE SOMETHING ABOUT THAT INVESTIGATION.
SO, UM, THE BOARD HIRED A LAW FIRM.
THE REPORT, WHICH IS PRIVILEGED, WAS PROVIDED TO THE BOARD.
UM, ONE OF THE LAWSUITS WAS, UH, CONCLUDED, HAS BEEN DISMISSED, AND ONE OF THE LAWSUITS IS STILL PENDING.
SO, UM, THE OTHER THING I WOULD NOTE, UH, FOR BETTER OR FOR WORSE, UH, IT WAS WELL PUBLICIZED THAT THE FBI INVESTIGATED FOR A VERY LONG TIME.
AND AT THE END OF THE DAY, UM, TO OUR KNOWLEDGE, NOBODY WAS EVER INDICTED OR ANYTHING LIKE THAT.
SO I THINK THERE'S BEEN, I THINK IT'S FAIR TO SAY THAT WHATEVER TRANSPIRED IN THE PAST HAS BEEN EXAMINED.
EXHAUSTIVELY, UH, THE BOARD'S TAKEN THE, THE, THE PRIOR BOARD, UM, UH, UP, UH, PRIOR TO SEPTEMBER 1ST, 2017, TOOK THE ACTIONS IT BELIEVED IT NEEDED TO TAKE.
UM, AND REALLY, THAT'S ABOUT ALL I CAN SAY ABOUT IT.
BUT THERE HAS BEEN EXHAUSTIVE EXAMINATION, AND I APPRECIATE THAT.
I MEAN, I THINK YOU CAN WAIVE THE PRIVILEGE, UH, AND LOOK AT THAT AND SEE WHAT COULD BE SHARED.
SO THAT THE TAXPAYER, I MEAN, INDIRECTLY THEY FUNDED THAT INVESTIGATION WITH THEIR DOLLARS.
IT CAME THROUGH THE, THE FUND.
[02:15:01]
FEEL LIKE WE HAVE THAT CLOSURE.IT'S, THERE'S A PIECE HERE AND THERE'S A PIECE THERE, BUT WHAT'S THE, WHAT'S THE STORY? SO WE CAN SAY, THIS IS WHAT HAPPENED.
THIS IS WHAT WAS DONE, THIS WAS THE OUTCOME.
I MEAN, I'M, I'M, YOU KNOW, I'LL READ IT AGAIN.
WERE THOSE RESPONSIBLE FOR INVESTMENT DECISIONS EVER HELD ACCOUNTABLE.
AND SO I'D LIKE TO BE ABLE TO ANSWER THAT QUESTION FOR ONE OF MY RESIDENTS AND SOME OTHERS WHO HAVE WRITTEN TO ME AS WELL.
WELL, I WOULD COMMEND TO YOU, YOUR CITY ATTORNEY'S OFFICE CAN CERTAINLY PROVIDE YOU THE PLEADINGS IN THE TWO CASES THAT WERE FILED.
THEY CAN, THAT'S, IT'S A LOT OF READING.
UM, AND THAT THAT'S WHAT THEY DO THAT WILL PROVIDE YOU A LOT OF WHAT TRANSPIRED.
SO YOU'RE SAYING THE REPORT? NO, UH, CHAIR MERRIT.
YOU'RE THAT WE SHOULDN'T, IT'S NOT NICK'S CALL.
WELL, I JUST, I MEAN, I'M ASKING BECAUSE MY RESIDENTS ARE ASKING.
UM, HOW YOU DOING, NICK? YOU DOING GREAT? I'M DOING YOU HOLDING UP.
I, I, I THINK, UH, UH, I'M LOOKING FORWARD TO THIS PROCESS AND FINDING COMMON GROUND AND MOST IMPORTANTLY, ENSURING PUBLIC SAFETY FOR DALLAS FOR THE LONG TERM.
WELL, YOU KNOW, THE KEY IS, YOU KNOW, I HAD A LONG CONVERSATION WITH YOU, UM, GOING TO AUSTIN AND COMING BACK.
UM, I JUST WANTED TO SAY TO YOU THE CONVERSATION I HAD, YOU KNOW, UM, WE TALKING ABOUT THAT WE ARE TRYING TO COME WITH A SOLUTION, A PLAN, AND GET IT DONE.
AND I KNOW WE TALK ABOUT HB, HB 30, 31, 58, YOU KNOW, WHO IS RESPONSIBLE FOR THAT PLAN, YOU KNOW, KNOW, BUT I HEAR DOWN IN AUSTIN THAT WE ALL GOTTA WORK TOGETHER.
WE ALL GOTTA HAVE ONE VOICE DOWN IN AUSTIN.
AND SO RIGHT NOW WE HAVE HERE FROM ACTUARY TODAY HERE, THE BOARD HERE, HERE'S THE COUNCIL, UH, AND WE GOTTA PAY THE BILL.
UH, AND OUR TAXPAYER GOTTA PAY THE BILL.
AND RIGHT NOW, OUR HOPE, UH, WE'RE GONNA TAKE A BREAK IN MARCH, WE GONNA COME BACK IN APRIL 11TH.
BUT THE POINT IS, WE GOT TO BE, WE HAVE TO BE ON THE SAME PAGE PAGE.
AND I HEARD THAT FRONT OF, FROM THE PENSION REVIEW BOARD, THEY SAID, WE NEED TO BE ON THE SAME PLA PAGE.
AND I DON'T WANT TO GO TO THE LEGISLATOR TO DO SOMETHING DIFFERENT.
UH, MY JOB IS GET THIS DONE BEFORE NOVEMBER AND HOPEFULLY RIGHT NOW WE DON'T HEAR FROM EVERYONE.
UH, WE KNOW THAT WE ARE LOOKING AT OUR BUDGET, HOW MUCH MONEY WE GOTTA PAY, HOW MUCH MONEY WE GOTTA INVEST INTO THIS PLAN, WHAT WE'RE GONNA DO.
BUT WE GOTTA COME TO A CLOSURE.
AND I THINK THAT WE'VE BEEN KICKING THIS CAN DOWN THE ROAD FOR SEVEN YEARS, NICK, AS YOU SAID, AND I SAID ON THE PLANE, WE NEED TO COME TO A CLOSURE.
I THINK WE DARE I THINK WE GETTING THERE, UH, JUST A ROUGH EDGE AROUND THE END, BUT WE NEED TO, TO PUT THIS TOGETHER.
AND SO I WANT ASK YOU, NICK, AT THE BOARD OVER THERE, YOU KNOW, YOU MAKE SURE THAT YOUR PEOPLE OVER THERE AND, AND THE PARTIES FROM THE MAYOR, THAT WE DO COME UP WITH A PLAN AND, AND, AND THE PLAN THAT WE GOT TO BE ON THE SAME PLAN.
AND WITH THAT, I KNOW, JACK, THAT YOU HAVE A COUPLE OF QUESTIONS, JACK, THAT, THAT YOU WANT TO TALK ABOUT BEFORE WE CLOSE UP.
UM, I, I APOLOGIZE, COUNCIL MEMBER MENDELSSOHN, BUT I FOUND THE ANSWER TO YOUR QUESTION.
SO THIS IS FROM THE JANUARY 11TH MEETING.
SO I'M GONNA LOOK AT, UH, SAM, COULD YOU GO TO PAGE 17? YES, MA'AM.
SO FOR THE ER, ERF RETURNS, AS OF DECEMBER 31ST, 2023.
SO FOR THE SAME TIME PERIOD, UH, THE ONE YEAR RETURN WAS 10.21 COMPARED TO THE 9.8 HERE FOR THREE YEARS, IT'S 5.45 COMPARED TO, UH, THE THREE YEAR WE HAVE HERE FIVE YEAR 7.72 COMPARED TO THE 5.1.
THE SEVEN YEAR FOR ERF WAS 6.65.
THEN THEY DO NOT HAVE IN WHAT WAS IN THE APPENDIX, THE NUMBERS OTHER THAN SINCE 1985, WHICH WAS 8.7.
AND I, I WILL TAKE A PICTURE AND SEND THIS TO YOU SO IT'LL HELP.
SO, UH, I, I APOLOGIZE, I DIDN'T HAVE THAT WHILE AGO WHEN YOU ASKED, BUT I FOUND IT, I KNEW IN ALL THESE PAPERS I WOULD HAVE IT NICK, UH, ON THE HB HB 3 58 FUNDING PLAN, UH, I HEAR WE BROUGHT IT UP DOWN IN AUSTIN, APPROVED BY THE CITY COUNCIL.
WHAT IS THE PROCESS THAT HB 31 58, UM, WELL, THE FULL PLAN WOULD BE APPROVED BY CITY COUNCIL, IS THAT CORRECT? UH, I, I REALLY GET THE YIELD TO JOSH FOR INTERPRETATION FINE OF THE STATUTE.
I MEAN, I WOULD JUST SAY THIS, THAT WE UNDERSTAND THE BROAD PARAMETERS OF THE STATUTE IN TERMS OF OUR OBLIGATION AS A BOARD TO DELIVER A PLAN THAT CONFORMS WITH THE PENSION REVIEW BOARD.
BUT I THINK ALSO WE UNDERSTAND THE SPIRIT OF IT, RIGHT? AND THE SPIRIT GOES BEYOND THE WORDS AND THE SPIRIT SPEAKS TO
[02:20:02]
ENSURING PUBLIC SAFETY.AND UH, AND A WAY TO DO THAT IS TO FIND COMMON GROUND WITH THE LEAST AMOUNT OF CONFLICT WITH ALL OF YOU.
BUT WE ALSO RECOGNIZE THAT THIS IS A PROCESS THAT HAS INHERENT CONFLICT TO IT.
IT'S NOT THAT YOU HAVE A CONFLICT, IT'S HOW YOU ACTUALLY DEAL WITH IT.
SO WE WANT TO DEAL WITH THE INHERENT CONFLICT OF THIS PROCESS WITH YOU GUYS IN THE MOST POSITIVE WAY, ADHERING TO OUR STATUTORY RESPONSIBILITIES, BUT ALSO EXTENDING BEYOND THAT TO THE SPIRIT OF THIS, WHICH IS ENSURING THE GOOD OUTCOME.
AND THAT'S WHAT WE'RE GONNA DO, YOU KNOW, WITH THE SPIRIT.
AND I KNOW THIS BEEN A LONG DAY AND I GOT ANOTHER APPOINTMENT I GOTTA GET TO, BUT I LET FINISH PLEASE.
UH, NUMBER ONE, NICK, I WANT TO THANK YOU FROM THE BOTTOM OF MY HEART.
I MEAN, WE HAD A GREAT CONVERSATION AND, AND, AND I BELIEVE THAT WE THINK WE GONNA ACCOMPLISH SOMETHING.
AND I THINK WE'RE TRYING TO WORK FOR THE SAME GOAL, YOU KNOW, CLOSURE TO GET THIS DONE AND LOOK AT, UH, THAT PEOPLE IN THE UNIFORM TO GET IT DONE.
WE'VE BEEN WORKING AND WE, LIKE I SAID, KICKING THE CAN DOWN AURORA.
BUT NICK, I THANK YOU, UH, FROM THE BOTTOM OF MY HEART.
I MEAN, NUMBER ONE, THE CONVERSATION I HAD YOU ON THE PLANE.
I THINK YOU HAVE THE CITY OF DALLAS IN YOUR HEART, AND I THANK YOU FOR YOUR SERVICE AND WHAT YOU'VE BEEN DOING AND WHAT YOU TALK.
AND I THINK WHAT YOU TALK, YOU, YOU STAND BEHIND WHAT YOU SAID, BUT RIGHT NOW, WE ARE GONNA DEFINITELY GET THIS DONE BEFORE THE END OF THE YEAR AND WE CAN GET IT DONE.
I MEAN, WE GOT HAVE SOME COMMON GROUND, BUT WE CAN GET IT DONE.
SO I THINK THAT WE DON'T NEED TO KICK EVERYONE IN THE BUTT.
WE JUST NEED TO GET IT DONE AND, AND, AND LOOK OUT FOR THE PEOPLE AND, AND FOR THE, THE PEOPLE IN THE UNIFORM, THE EMPLOYEES, WE JUST GOTTA GET IT DONE.
SO I HOPE THAT TODAY THAT WITH A BREAK IN MARCH, WE COME BACK IN APRIL AND WE COME WITH A PLAN AND, AND, AND, AND, AND, AND PICTURE A REVIEW BOARD AND SAY, HEY, HERE'S A PLAN THAT WE GOTTA DO FOR 30, 30 YEARS, A 30 YEAR PLAN IF WE TALKING ABOUT COAL OR WHATEVER WE GONNA DO, WE'VE WORKED THAT IN, BUT IT GONNA TALK, GONNA TAKE MONEY AND WE GOT A BUDGET AND WE TAXPAYER GOTTA PAY THE BILL.
SO YOU GOTTA GIVE US SOME TIME TO FIGURE IT OUT, HOW MUCH MONEY WE GOT IN THE BANK, HOW WE GONNA PAY THE BILL TO DO IT.
BUT IT'S A PLAN WE GOTTA GET DONE FIRST.
AND THAT'S WHAT WE ARE TRYING TO GET DONE.
AND WITH THAT, MS. MILLEN, YOU GUYS WANNA CLOSE WITH MARK REAL QUICK? REAL QUICK? YES.
UM, UH, COUNCIL MEMBER WILLIS, UH, WAS REFERENCING A COMMENT I HAD MADE LAST MONTH ABOUT NOT FEELING LIKE I HAD ALL THE OPTIONS FOR ERF IN FRONT OF US.
THAT WE REALLY WERE ONLY PRESENTED ONE CHOICE ON HOW TO ADDRESS THAT PENSION.
AND MY INTEREST IS IN KNOWING WHAT ALL THE CHOICES ARE.
AND THAT MEANS WHAT IF IT BECAME STATE MANAGED, WHAT IF IT BECAME INDIVIDUAL OR RETIREMENT COUNTS, ALL OF THAT.
AND SO I, I AM ADVOCATING FOR US HAVING THAT OUTSIDE ACTUARIAL AND UM, UH, GUIDANCE THAT DOESN'T HAVE ANY INPUT FROM OUR MANAGEMENT BECAUSE THEY ARE A MEMBER OF THOSE PLANS.
IN OUR CASE, WE HAD THAT PRESENTATION FROM CHIRON WHILE WE DIDN'T HIRE THEM, THEY ARE AN OUTSIDE ACTUARIAL FIRM.
AND THEY DID THAT INDEPENDENT.
I PERSONALLY LEARNED A LOT OF DIFFERENT OPTIONS THAT I DIDN'T KNOW ABOUT, ESPECIALLY ABOUT COLAS.
I DIDN'T UNDERSTAND ALL THE DIFFERENT WAYS IT COULD BE STRUCTURED.
THEY GAVE US LOTS OF OPTIONS AND I'M LOOKING FOR THAT SAME KIND OF, WHAT ARE ALL OF OUR OPTIONS.
WE MAY END UP WITH THE THING THEY RECOMMENDED, BUT I DON'T FEEL LIKE WE ARE KNOWLEDGEABLE ENOUGH.
SO I, I JUST WANNA ECHO, UM, THANK YOU FOR BRINGING THAT BACK UP.
UM, AND THAT WAS REALLY WHAT MY COMMENT WAS ABOUT.
AND, AND WITH THAT, I KNOW WE ARE NOT AN EXPERT, YOU KNOW, BUT WE ARE THE POLICY MAKERS AND WE HAVE A RESPONSIBILITY TO HIRE THE EXPERT TO ENLIGHT US TO WHAT'S GOING ON.
AND NUMBER ONE, WE UNDERSTOOD OF THE TAXPAYER MONEY.
AND NUMBER ONE, WHEN WE TAXPAYER, WE WORK FOR THE TAXPAYER AND WE HAVE TO FUND THIS PLAN.
WHAT ARE WE'RE GONNA DO? WE NEED TO DO ALL THE EXPERTS TO ADVISE OURSELF FOR, TO GET IT DONE.
SAME THING YOU AT YOUR BOARD, YOU HIRED THE MANAGEMENT, THE EXPERT TO TELL YOU WHAT YOU NEED TO INVEST IN, WHAT YOU NEED TO DO AND A RETURN ON YOUR DOLLARS.
AND I RELIED ON JACK AND THE CITY MANAGERS THAT HERE'S THE BUDGET, THIS OPTION MONEY, WE GOT TO INVEST, BUT WE ALL INVEST IN DOLLARS.
WE ARE A GREAT CITY, WE ARE A FINANCIALLY GREAT CITY, BUT WE HAVE TO WORK TOGETHER AND WE GOTTA TRUST EACH ONE.
AND I THINK WE ARE BUILDING THAT TRUST NOW.
WE GOTTA TRUST, WE GOTTA TRUST EACH ONE, BUT WE GOTTA MAKE SURE THAT IN THE OLD DAYS THAT SAID, IT'S NOT IN BLACK AND WHITE, IT DON'T EXIST, RIGHT NICK? IT GOTTA BE BLACK AND WHITE BECAUSE WE ARE STOOD IN BLACK AND WHITE.
SO LET'S PUT EVERYTHING IN PAPER AND SAY THIS IS THE BEST PLAN THAT WE CAN DO.
AND WE GO DOWN IN AUSTIN AND GET THAT PLAN TO THEM BEFORE THE END OF YEAR.
AND WE GO BACK AND WE SAY, UNIFORM EMPLOYEES, YOU ARE WORKING FOR THE BEST CITY IN AMERICA.
AND WE GONNA MAKE SURE THEY ARE WORKING FOR THE BEST CITY IN AMERICA, BUT WE GOT TO WORK TOGETHER.
[02:25:02]
AND WITH THAT, THANK YOU FOR EVERYONE TO PRESENT TODAY AND TOMORROW, MY COLLEAGUES FOR THEIR GREAT QUESTION.WE SHARE TOMORROW AND UPDATE TO THE CITY COUNCIL WITH AN OVERVIEW OF THE SCHEDULE WITH JACK JUST OUTLINED.
IN CONCLUSION, I WANT TO EXPRESS MY SINCERE GRATITUDE TO EVERYONE WHO HAVE CON CONTRIBUTED TO DISCUSSING TODAY, YOUR INSIGHT, EXPERTISE, AND THE VALUE AS WE WORK TOGETHER TO CHART A COURSE FOR THE FUTURE.
OUR COMMENTS IS, IS ON, IS UNWANTED WAITING AND WE'LL ADDRESS THE FUNDING CHANNEL WITH THOUGHTFUL, FEASIBLE RESPONSIBILITY AND DEDICATION TO SECURE THE LONG TERM STATUS OF THE FUND FOR OUR EMPLOYEES AND OUR UNIFORM.
THE AHAN COMMITTEES IS ADJOURNED.