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ME.CAN I PLEASE HAVE EVERYONE'S ATTENTION?
[Ad Hoc Committee on Pensions on June 6, 2024.]
WE'RE OVER CAPACITY IN THE ROOM.SO IF WE COULD, IF YOU ARE NOT IN A SEAT, CAN YOU PLEASE GO TO THE FLAG ROOM AND THEY WILL BE BROADCASTING THE MEETING IN THE FLAG ROOM.
SO IF YOU EXIT THE DOORS AND GO TO THE LEFT AT THE END OF THE HALLWAY, MAKE A LEFT.
I CALL THE AD HOC COMMITTEE ON THE PENSION TO ORDER.
CAN I GET A MOTION FOR THE MINUTES? ALL IN FAVOR SAY AYE.
A ASK CARRIED FIRST BRIEFING IS THE DOLLAR POLICY FIRED PENSION, EMPLOYEE RETIREMENT FUND, INVESTMENT PORTFOLIO.
UH, JACK, ARE YOU DOING THAT? UH, WHO IS YOU? INTRODUCE THE PERSON.
UH, ACTUALLY WE HAVE, UH, COMMERCE STREET INVESTMENTS WHO, UH, DID SOME WORK FOR US LOOKING AT THE INVESTMENTS OF BOTH FUNDS.
AND SO, MR. DORY WILEY WILL BE DOING THE PRESENTATION.
HE'S AT THE TABLE FRONT NOW, AND I BELIEVE READY TO BEGIN WHENEVER YOU ARE, SIR, GO AHEAD.
DO I HAVE TO START OVER? OKAY.
IF I'M YELLING AT YOU, I APOLOGIZE.
I'VE GROWN DEAF IN MY OLD AGE.
ON THE NEXT PAGE, WHAT THE CITY HAS ASKED US TO DO IS GO THROUGH AND COMPRISE A REPORT OF THE FOLLOWING OBJECTIVES.
I'M NOT GONNA SPEND A WHOLE LOT OF TIME ON THESE.
WE'RE GONNA SPEND TODAY JUST A LITTLE BIT OF TIME TALKING ABOUT PEER GROUPS, COMPARISONS AND MAYBE ASSET ALLOCATION.
YOU CAN SEE THE, THE, THE REQUEST LIST IS VERY DEEP AND, AND ACTUALLY PRETTY INTRUSIVE INTO THE FUNDS, WHICH IS UNDERSTANDABLE BECAUSE THE CITY IS RESPONSIBLE FOR THE CONTRIBUTIONS.
WE HAVE NOT HAD THE CHANCE TO SIT DOWN WITH THE MANAGEMENT TEAMS, UH,
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OF THE FUNDS AND GO OVER SOME OF THESE ITEMS, NOR HAVE WE REALLY SPENT MUCH TIME WITH THEM ON WHAT WE'RE TALKING ABOUT TODAY.SO I WANT TO CAVEAT EVERYTHING WE DO, THAT THERE NEEDS TO BE A LOT MORE WORK DONE, BOTH AT THE A HUNDRED THOUSAND FOOT LEVEL AND AT THE DEEP DIVE LEVEL WITH WHAT, WHAT WE'RE DOING HERE.
AND I THINK IF WE'RE GIVEN THE OPPORTUNITY TO DO THAT, TO WORK WITH THE STAFFS, THEY BOTH, BOTH FUNDS HAVE ASSURED US AT COMMERCE STREET THAT THEY'RE WILLING TO COLLABORATE AND WORK WITH US TO ACHIEVE THOSE OBJECTIVES THAT WE TALKED ABOUT IN FULL TRANSPARENCY AND SHOWING OPTIMAL, OPTIMAL MANAGEMENT PERFORMANCE EITHER NOW OR STRIVE, CONTINUING TO STRIVE TO GET THERE, WHICH IS ALL WE CAN ASK OF ANYONE TODAY.
SO WE'RE CONTINUING TO WORK ON THIS DEEP DIVE ISSUE, BUT IT'S GONNA TAKE A LITTLE BIT MORE WORK.
WHAT WE WANT TO CREATE IS A FEEDBACK LOOP WITH THE CITY.
SO IF THERE'S CONTINUAL UPDATING RATHER THAN A ONCE A YEAR OR SOMETHING LIKE THAT, THIS CONTINUAL FEEDBACK LOOP WILL, I THINK, EASE SOME OF THE TENSIONS AND ALSO HELP THE CITY MEET SOME OF THESE DEADLINES.
IN ADDITION TO WHAT THE DEADLINES FROM THE TEXAS PENSION, UH, REVIEW BOARD, WE'RE GONNA START WITH BENCHMARKING.
NOW, BENCHMARKING IN OUR BUSINESS IS COMPARING OUR PERFORMANCE RETURNS RISK, ALONG WITH, UH, INDICES.
UM, I'M HEARING THAT THE AUDIO IS ACTUALLY NOT BEING BROADCAST FOR THIS MEETING.
THAT MIGHT HAVE BEEN IN THE BEGINNING.
WHAT ABOUT NOW? I DON'T, JUST CHECK, HOLD ON.
I HAVEN'T GOTTEN ANOTHER MESSAGE.
CHRIS, JUST, JUST PAUSE FOR A SECOND, PLEASE.
UM, SO BENCHMARKING IS BASICALLY COMPARING YOUR PERFORMANCE EITHER TO AN INDEX OR YOU CAN BENCHMARK AGAINST PEER GROUPS.
PEER GROUPS CAN BE, UH, OTHER MONEY MANAGERS, OTHER PENSION FUNDS, OTHER PENSION FUNDS, YOUR SIZE, OTHER CITIES, ALL KINDS OF THINGS.
PERSONALLY, I REALLY THINK IT'S IMPORTANT TO DO IT AGAINST NUMEROUS TYPES OF BENCHMARKS BECAUSE YOU CAN LEARN FROM BENCHMARKS.
THERE'S NO COPYRIGHT IN INVESTMENT MANAGEMENT.
SO YOU CAN LEARN ALL KINDS OF THINGS ABOUT WHAT'S WORKING AND WHAT'S NOT WORKING.
AND UNFORTUNATELY, IN INVESTMENT MANAGEMENT, IT'S A COMPLEX BUSINESS.
AND LIKE BASEBALL, NO ONE BATS A THOUSAND.
SO YOU'RE JUST TRYING TO MINIMIZE MISTAKES AND GET EXPOSURE TO ASSET CLASSES AND DO THE BEST YOU CAN AND USE GOOD SCIENCE, UH, AND RECOMMENDATIONS TO DO SO.
SO OUR PHILOSOPHY IS WE SHOULD DEFINE A VERY STRONG PEER GROUP, RIGHT? IT'S LIKE PLAYING A FOOTBALL GAME.
DO YOU WANT TO WIN 10 FOOTBALL GAMES OR DO YOU WANNA WIN FIVE? WELL, WE WANNA WIN 10, OKAY? WE WANNA DO A STRONG PEER GROUP.
SO WE DON'T WANT TO COMPARE TO THE WORST FOOTBALL TEAMS. WE WANNA COMPARE TO THE BEST FOOTBALL TEAMS. AND IF OUR PEERS ARE DOING SOMETHING OUTPERFORMING US, THEY'RE THROWING THE BALL.
WELL, THAT MIGHT BE MORE RISKY, OR THEY'RE RUNNING THE BALL TO RUN A CERTAIN PLACE OR DOING CERTAIN THINGS.
AND THAT'S EXACTLY WHAT HAPPENS IN FOOTBALL.
BUT IT ALSO IS WHAT HAPPENS IN INVESTMENT MANAGEMENT AS WELL.
AND SO WE'RE VERY BIG ON DEFINING A VERY STRONG PEER GROUP.
AND THE UNDERPERFORMANCE, IF WE ARE UNDER PERFORMANCE, IT'LL SHOW UP IN TWO AREAS.
ONE MA ASSET ALLOCATION, WHICH MEANS WHAT ASSET CLASSES ARE WE INVESTING IN? STOCKS, BONDS, PRIVATE EQUITY, REAL ESTATE, ET CETERA.
OR, YOU KNOW, WHAT ARE THE PERCENTAGE INVESTMENTS IN THOSE? AND THEN IT'LL SHOW UP IN MANAGER SELECTION.
WHAT OUTSIDE MANAGERS ARE WE PICKING AND HOW ARE THEY PERFORMING? AND WE HAVE TO HAVE A MONITORING FEEDBACK LOOP, UH, A WAY OF, UH, MEASURING THAT PERFORMANCE, GETTING RID OF MANAGERS, GETTING NEW MANAGERS, AND GOOD GOVERNANCE.
AND WHEN WE DO THAT, YOU WIND UP DOING PRETTY GOOD.
SO, UH, THE NEXT NEXT POINT HERE IS BENCHMARKING WILL HELP THE CITY AND THE PLANS IN MANY WAYS, WHICH IS WHAT WE'RE DOING TODAY, BECAUSE IT'S GONNA GIVE YOU A 10,000 FOOT LEVEL, OKAY? UH, IT PROVIDES SOME TRANSPARENCY FOR PERFORMANCE MANAGEMENT AND GOVERNANCE.
UH, AND IT CAN GIVE US NEW INSIGHT AND THEN IDEAS INTO WHAT'S WORKING.
AND IF IT'S DONE CORRECTLY, IT LAYS THAT GROUNDWORK FOR OUTPERFORMANCE.
YOU KNOW, VINCE LOMBARDI ALWAYS SAID, WE SHOULD STRIVE FOR PERFECTION.
WE MAY NOT ACHIEVE IT, BUT ALONG THE WAY, WE'LL, WE'LL ACHIEVE EXCELLENCE.
AND THAT'S WHAT WE'RE TRYING TO DO.
'CAUSE NO ONE'S GONNA GET PERFECTION AND INVESTMENT MANAGEMENT, I CAN ASSURE YOU.
BUT IF WE STRIVE FOR IT, WE CAN GET ABOVE AVERAGE.
AND IF WE'RE BELOW AVERAGE, WE WANT TO GET TO AVERAGE.
AND IF WE'RE AVERAGE, WE WANT TO GET TO ABOVE AVERAGE.
WE WANT TO GET TO TOP DECILE PERFORMANCE AMONG OUR PEERS.
NOW, ON THE NEXT PAGE HERE, THIS IS A GRAPH.
AND, AND THIS IS FROM THIRD PARTY, OKAY? THIS IS FROM THE TEXAS PENSION REVIEW BOARD.
NOW, THERE'S LOTS OF WAY TO COMPARE THINGS.
SO IF SOMEONE, THIS IS JUST ONE WAY AND THERE'S SOME FAULTS WITH IT.
YOU KNOW, SOME OF THESE FUNDS IN HERE ARE
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SMALL, SOME OF 'EM HAVE AN INVESTMENT STAFF, SOME OF 'EM DON'T.SOME OF 'EM HAVE ALTERNATIVE ASSETS, SOME DON'T.
SOME 'EM HAVE DIFFERENT LIABILITY REQUIREMENTS, ET CETERA, ET CETERA, ET CETERA.
I CAN GO ON AND ON AND QUALIFY THIS REPORT.
BUT THE POINT BEING IS THIS IS ALL PENSION FUNDS IN THE STATE OF TEXAS WITH GREATER THAN A HUNDRED MILLION IN ASSETS.
AND WE CAN GO, HEY, WHERE DO WE FALL ON THIS WITH OUR FUNDS? AND WE HAVE, UH, IF, IF YOU HAVE REALLY FINE UNDER 40 EYESIGHT, YOU CAN SEE ON HERE, UH, I CAN'T, BUT I, IF YOU LOOK AT THE ARROWS, THE ONE THAT'S ABOUT MIDWAY UP IS THE EMPLOYEE RETIREMENT SYSTEM OF TEXAS.
AND THE BOTTOM TWO ARE, ARE DALLAS POLICE AND FIRE.
ONE WITH THE PRIVATE ASSETS, UH, AND ONE X THE PRIVATE ASSETS, UH, THE PRIVATE ASSETS, OR WHAT I CALL LEGACY ASSETS PRIOR TO 2016, WHICH WAS A MAJOR PROBLEM FOR THEM AT THAT TIME THAT I THINK MOST PEOPLE ARE, UH, FAMILIAR WITH.
SO, UH, THEY HAVE TWO WAYS OF REPORTING IT.
UM, AS YOU CAN SEE ON HERE, IT SHOWS UNDER PERFORMANCE.
NOW, IT MAY OR MAY NOT BE A PROPER PEER GROUP.
SO LET'S LOOK AT IT IN, UH, A DIFFERENT WAY.
DALLAS POLICE AND FIRE AND ERF VERSUS RETURNS OF SOME OF THE LARGER TEXAS CITIES, YOU KNOW, HOUSTON, TEXAS COUNTY, AND DISTRICT RS, AUSTIN, SAN ANTONIO, ET CETERA.
I, I THINK EVERYONE UNDERSTANDS THAT SOME OF OUR PEER CITIES AND WHO THEY ARE, UH, NOW THIS IS NOT APPLES TO APPLES EITHER.
THEY HAVE DIFFERENT FUNDING RATIOS, DIFFERENT LIABILITY REQUIREMENTS.
UH, EVEN WE EVEN HAVE SOME DATE ISSUES FOR SIX MONTHS ON THE HOUSTON PLANS.
SO THE SHORT TERM RETURNS ARE GONNA BE A LITTLE BIT, YOU KNOW, APPLES TO ORANGES VERSUS APPLES TO APPLES.
WE EVEN TOOK THE ONE YEAR OUT OF THERE 'CAUSE IT'S TOTALLY IRRELEVANT.
AND WE LIKE TO LOOK AT LONG TERM.
THE LONGER TERM THE RETURNS ARE, THE MORE YOU GET A PURE NUMBER OF RISK.
NOW, WHAT DOES THAT MEAN? THAT MEANS YOU CAN OUTPERFORM IN A SHORT TIME BY TAKING MORE RISKS, BUT IT'S VERY DIFFICULT FOR YOU TO OUTPERFORM IN THE LONG TERM BY TAKING MORE RISK.
SO THE MORE RISK ADJUSTED LONG-TERM, YOU CANNOT OUTPERFORM YOUR PEERS IN THE LONG TERM CONTINUALLY BY TAKING MORE RISKS BECAUSE THE MARKET WILL PUNISH YOU.
SO HOPEFULLY THAT MAKES SOME SENSE.
AND THAT'S WHERE WE KINDA LIKE TO FOCUS.
SO YOU CAN SEE THE 10 YEAR RETURNS, HOUSTON MAPS IS REALLY DOING A VERY GOOD JOB.
I WILL TELL YOU THAT'S, THAT'S ABOUT A TOP DECILE RETURN NATIONALLY, THEY'RE DOING A VERY GOOD JOB.
AND IT'S INTERESTING, I DON'T KNOW EXACTLY WHAT ALL THEY'RE DOING, BUT I'VE GOT AN IDEA AND PART OF OUR CONTINUING WORK WITH THE TWO PLANS, WHICH WE'VE, UH, YOU KNOW, GOTTEN THEIR SURE THEY WANNA WORK WITH US ON, IS TO DO DEEP DIVE ON HOUSTON MAPS AS WELL AS SOME OF THESE OTHERS TO FIGURE OUT WHAT THEY'RE DOING GOOD AND WHAT THEY MAY NOT BE DOING AS WELL AT.
SO UNLESS YOU HAVE SOME QUESTIONS ON THAT, UH, THAT JUST SHOWS YOU, UH, THAT DALLAS, UH, ERF IS SOMEWHERE IN THE MIDDLE AGAIN, AND, UH, UH, UH, DALLAS POLICE AND FIRES IS STILL, IS STILL STRUGGLING AGAIN.
AND I WANNA ADD JUST TO, TO HELP DALLAS POLICE AND FIRE OUT.
AGAIN, IT'S NOT JUST THE LEGACY ASSETS THAT THEY ARE DEALING WITH, BUT THEY'RE DEALING WITH LIQUIDITY ISSUES AND THEY'RE TRYING TO MANAGE THE FUND.
IT APPEARS TO ME I NEED TO SPEND MORE TIME WITH 'EM IN A MANNER THAT KEEPS THEM VERY LIQUID BECAUSE THEY'RE WORRIED ABOUT LIQUIDITY NEEDS.
OKAY? SO, UH, I UNDERSTAND THAT.
UH, NEXT PAGE ALSO, WE DECIDED TO COMPARE THEM, UH, TO NATIONAL.
THIS IS ON PAGE SIX, RIGHT? YEAH.
WE WANNA COMPARE 'EM TO, TO SOME, UH, BOTTOM QUARTILE DB PLANS AND TOP QUARTILE.
AND I THINK SOME OF THOSE NUMBERS ARE FROM THE, UH, UH, I THINK IT'S MAKITA OR ONE OF THE CONSULTANTS FOR DALLAS POLICE AND FIRE.
UH, THEY WERE GRACIOUS TO SEND THOSE OVER TO US AND THEY SHOW WHERE THOSE NUMBERS ARE.
BUT IF YOU LOOK AT THE 10 YEAR NUMBERS, YOU CAN SEE, UH, WHERE, UH, UH, WE STILL STRUGGLE A LITTLE BIT.
WE STILL STRUGGLE A LITTLE BIT.
AND, AND SO THE QUESTION IS, YOU KNOW, WHAT CAN WE DO TO, TO PERFORM BETTER? SO I WANT TO GO THROUGH A LITTLE CLASS DISCUSSION ON THE NEXT PAGE ON HOW WE KINDA LOOK AT THINGS.
AND IF YOU LOOK AT THIS, YOU SEE SOME GRAPHS, YOU MAY NOT BE ABLE TO SEE WHAT ALL THAT MEANS DOWN THERE, BUT YOU CAN LOOK AT THE BIG GRAY AND THE LITTLE GRAY.
THE LITTLE GRAY ARE STOCKS AND BONDS IN THE PUBLIC MARKETS, OKAY? SO YOU HAVE GLOBAL STOCKS, GLOBAL BONDS, UH, AND ALSO POOR US REAL ESTATE.
AND THE POINT BEING IS THE TITLE OF THIS SLIDE REALLY OUGHT TO BE WHERE DO I SPEND MY TIME AS AN INVESTMENT MANAGER? THE DIFFERENCE BETWEEN A TOP PERFORMING PUBLIC STOCK FUND MANAGER AND A BOTTOM PERFORMING IS VERY SMALL, AS YOU CAN SEE OVER HERE ON THE LEFT.
THAT'S WHY THOSE GRAY BARS ARE SO TIGHT AND BETWEEN A TOP PERFORMING
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AND BOTTOM PERFORMING BOND MANAGER IS VERY TIGHT AS WELL.SO IN OTHER WORDS, IF I GO OUT THERE AND TRY TO FIND THESE GREAT MANAGERS AND THEY'RE REALLY, REALLY GOOD, THEY ONLY OUTPERFORM BY A LITTLE BIT.
SO SHOULD I REALLY SPEND MY TIME OVER THERE OR MAYBE OVER IN WHAT WE CALL THE ALTERNATIVE ASSET SECTION, WHICH IS, UH, UH, YOU KNOW, VENTURE CAPITAL, PRIVATE EQUITY, NON-CORE REAL ESTATE AND HEDGE FUNDS, PARTICULARLY PRIVATE EQUITY, WHICH IS THE SECOND ONE.
IF YOU NOTICE, IF YOU'RE REALLY BAD AT PICKING IT, EVEN THE BOTTOM QUARTILE STILL MAKES POSITIVE NUMBERS.
SO WE LIKE PRIVATE EQUITY, MAN, THAT GIVES YOU A, A NICE HEDGE.
BUT IF YOU'RE GOOD AT IT OR EVEN AVERAGE AT IT, YOU DO PRETTY WELL.
NOW IN OUR BUSINESS, THE BIG SECRET IS THAT KEEP IN MIND ON PRIVATE EQUITY IS IT HAS WHAT'S CALLED THE LOWEST SHARP RATIO.
WHICH BA OR THE BEST SHARP RATIO, WHICH IS THE HIGHEST RETURN PER UNIT OF RISK, OKAY? IT IS HIGHER THAN STOCKS, IT'S HIGHER THAN BONDS, IT'S HIGHER THAN A LOT OF THE OTHER ASSET CLASSES.
BUT IT COSTS YOU, WHAT DOES IT COST YOU? LIQUIDITY, OKAY? NOW, THE NEAT THING IN THIS WORLD IS THAT THERE ARE LIQUID PRIVATE EQUITY ALTERNATIVES OUT THERE NOW AS WELL.
SO THE WORLD'S CHANGING ON THAT.
SO YOU DO HAVE TO HAVE A NICE ALLOCATION TO THAT ASSET CLASS IF YOU WANT TO TAKE LESS RISK.
NOW WHAT DOES THAT MEAN? WHY AM I SAYING THAT? SOME PEOPLE THINK WHEN YOU SAY PRIVATE ASSETS LIKE PRIVATE EQUITY, IT MEANS MORE RISK, NOT NECESSARILY IN THE CONTEXT OF PORTFOLIO MANAGEMENT.
IT CAN BE A NICE BREAK ON LOSSES WHEN THE MARKET CRASHES LIKE IN 2000 AND 2008 OR IN THE PANDEMIC, THEY TEND TO SMOOTH THINGS OUT, BUT THE COST IS LIQUIDITY, OKAY? SO IF YOU DO THE RIGHT ALLOCATION AND YOU DON'T NEED LIQUIDITY OR YOU GET IN SOME LIQUID PRIVATE EQUITY INVESTMENTS, IT COULD BE A NICE BREAK ON DOWNTURNS TO REALLY SAVE YOUR PORTFOLIO.
AND WE'RE ALL ABOUT ON THE INVESTMENT MANAGEMENT SIDE, WE LIKE TO LOOK AT THINGS AS IF I WANT TO OUTPERFORM, YOU HAVE TO BE A RISK MANAGER.
AND THAT IS DEFINE RISK, REDUCE RISK, AND I'LL MAKE MORE MONEY IN THE LONG TERM IF I DON'T, I HAVE TO GO BACK TO SQUARE ONE.
I DIDN'T DEFINE THE RISK CORRECTLY.
AND THAT HAPPENS, BUT THAT'S THE PROCESS OF WHAT WE CALL INVESTMENT MANAGEMENT, BUT IT'S REALLY BEING A RISK MANAGER.
AND SO PRIVATE EQUITY CAN BE VERY MUCH MISUNDERSTOOD.
AND I JUST KIND OF WANTED TO GO THROUGH THAT WITH YOU BECAUSE THAT'S GONNA BE PART OF THE ISSUE HERE.
AND I WANT PEOPLE TO NOT THINK OF PRIVATE EQUITY AS RISKIER.
IT'S ACTUALLY IF DONE PROPERLY, LESS RISKY IN THE CONTEXT OF A PORTFOLIO.
SO IF YOU GO TO THE NEXT PAGE, OR ACTUALLY, YEAH, I THINK WHEN YOU HIT THAT, THAT'LL, THAT'LL GO AHEAD.
SO THIS IS THE ASSET ALLOCATION OF BOTH DALLAS POLICE AND FIRE AND DALLAS ERF.
AND AGAIN, I PREFER TO DO THESE IN SEPARATE PRESENTATIONS.
BUT, UH, JUST FOR A QUICK SUMMARY FOR YOU TO GIVE YOU AN IDEA OF WHAT WE'RE WORKING ON AND WHAT WE WANNA SPEND TIME WITH THE DIFFERENT STAFFS ON, YOU CAN SEE WHAT THEIR ALLOCATIONS ARE.
WHAT I WANT YOU TO FOCUS ON IS EQUITY, EQUITY IS STOCKS, THOSE ARE PUBLIC STOCKS.
SO DALLAS POLICE AND FIRES AT 51%.
AND FIXED INCOME, THAT'S BONDS, OKAY? BOND MARKET, THAT'S 21% AND 29% RESPECTIVELY.
AND PRIVATE EQUITY AT 10 AND 12.
NOW, IF YOU BRING UP A COUPLE EXAMPLES OF PEERS, LET'S JUST FOR EXAMPLE, USE THE HOUSTON MEPS AND THE PEER GROUP OF THE OTHER LARGE CITIES IN THE STATE OF TEXAS.
ONE, THE PUBLIC EQUITY OR STOCK PERCENTAGE IS LOWER IN HOUSTON THAN IT IS BOTH DALLAS, ERF AND DALLAS POLICE AND FIRE.
AND THE PEER GROUP IS ABOUT THE SAME AS ERF, BUT LOWER THAN, THAN DALLAS POLICE AND FIRE.
NOW THERE'S A REASON FOR THAT AND WE WON'T SPEND A LOT OF TIME ON IT, BUT IT PROBABLY HAS SOMETHING TO DO WITH LIQUIDITY FOR DALLAS POLICE AND FIRE.
THEY WANT LIQUIDITY, UH, BECAUSE OF THEIR NEEDS, AND I UNDERSTAND THAT, BUT I NEED TO VERIFY THAT OR WE NEED TO VERIFY THAT AND GO OVER THROUGH THOSE THINGS IN DETAIL.
NOW, THERE'S A PRICE TO BEING MORE IN A LOT IN STOCKS AND BONDS, AND WHAT IS THAT MORE RISK, MORE VOLATILITY MARKET GOES SOUTH, LIKE 2008 OR TWO, 2000.
THEN YOU CAN HAVE A NICE 30 TO 40% DROP IN VALLEY.
AND WE NEED BREAKS AGAINST THAT.
AND THAT'S WHAT SOME OF THE, UH, OTHER ASSET CLASSES ARE MEANT TO DO NOW IN HOUSTON.
I'M NOT SAYING THEY'RE THE BE ALL END ALL, OKAY? WE'RE, THEY'RE JUST AN EXAMPLE, BUT THEY'VE GOT A MUCH LARGER ALLOCATION TO PRIVATE EQUITY THERE.
THEY ACTUALLY HAVE A LARGE ALLOCATION OF FIXED INCOME.
AND WE'RE GONNA GO THROUGH THAT IN JUST A MINUTE ON WHAT THAT'S DOING FOR 'EM.
ON THE NEXT PAGE, WE'RE GONNA ANALYZE A LITTLE BIT HERE ON THE INVESTMENT WEIGHTS OF BOTH THE FUNDS
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VERSUS THE PEER GROUP, WHICH IS BASICALLY WHAT WE WERE LOOKING ON ON THE OTHER PAGE.BUT THIS TELLS US A LITTLE BIT BECAUSE NOT ONLY ARE WE GONNA LOOK AT THE WEIGHTS IN THE BOTTOM TABLE, WE'RE GONNA LOOK AT THE RETURNS, OKAY? SO THINK ASSET SELECTION, WHICH IS WEIGHTS AND MANAGER SELECTION, WHICH IS RETURNS, OKAY? SO ON THE TOP PART WE CAN SEE THAT, UH, LIKE WE TALKED ABOUT PUBLIC EQUITY OR PUBLIC STOCKS, UH, WE'RE A LITTLE MORE OVER ALLOCATED IN DALLAS POLICE AND FIRE THAN THE PEER GROUP.
AND WE'RE UNDER ALLOCATED ON PRIVATE EQUITY, FIXED INCOME, YOU KNOW, SOMEWHERE IN THE MIDDLE.
AND OTHER ALTS, WHICH IT COULD BE REAL ESTATE HEDGE FUNDS AND WHATNOT, UH, ARE ARE, YOU KNOW, SOMEWHERE A LITTLE BIT LOWER THAN THE OTHER FUND.
NOW LET'S LOOK AT THE RETURNS.
THIS TELLS US A LITTLE BIT OF A STORY.
DALLAS POLICE AND FIRE IS DOING A REALLY GOOD JOB ON PUBLIC EQUITY COMPARED TO HOUSTON MEPS AND THE PEER GROUP.
REMEMBER WE TALKED ABOUT SPENDING, THAT'S WHERE THEY'VE BEEN SPENDING THEIR TIME AND THEY'VE DONE A PRETTY GOOD JOB WITH THAT.
AND SO THEY DESERVE SOME CREDIT FOR THAT 'CAUSE THAT'S NOT EASY TO DO.
UH, BUT HAVING SAID THAT, UM, WE GO TO THE PRIVATE EQUITY AND THEN THAT'S WHERE THE UNDER PERFORMANCE IS.
SO IT'S 4.8 VERSUS 17.6, 17.47.
AGAIN, PART OF THAT IS LEGACY ASSETS.
HOW DO WE DEAL WITH THOSE LEGACY ASSETS? UH, THEY'VE BEEN DEALING WITH THEM FOR SEVEN YEARS.
I KNOW THEY'RE STILL DEALING WITH THEM AND THAT'S A STORY ON ITS OWN THAT I'M NOT REALLY GONNA FOCUS ON TODAY.
UH, FIXED INCOME IS ALSO PRETTY INTERESTING.
1.1400000000000001%, WHICH IS BELOW THE 2.64 PEER GROUP, BUT NO, HOUSTON MEPS 7.41.
NOW I'M SKEPTICAL OF THAT BECAUSE I KNOW WHAT BONDS HAVE DONE OVER THE LAST SEVERAL YEARS AND THERE'S NO 7.41% TO BE HAD UNLESS YOU PROBABLY INVESTED IN WHAT'S CALLED PRIVATE CREDIT.
SO THAT WOULD BE LIKE PRIVATE EQUITY ON ITS PRIVATE LENDERS AND PRIVATE CREDIT.
AND THEY TOOK THOSE ASSETS AND PUT 'EM IN THE FIXED INCOME ALLOCATION.
THAT'S PROBABLY WHAT HAPPENED.
IT MAY NOT HAVE, BUT WE'RE GONNA RESEARCH IT AND FIND OUT.
UH, BUT THERE'S SOME ABERRATION GOING ON THERE BECAUSE WITH A 500 BASIS POINT RATE SHOCK GOING ON, MOST PEOPLE HAVE BELOW MARK BELOW, YOU KNOW, LOW RETURNS FOR THEIR FIXED INCOME BONDS.
UM, AND THEN OTHER O, OTHER ALTS, I THINK SOME OF THAT IS ALSO THE REAL ESTATE OR LEGACY ASSETS THERE AS WELL.
UH, NEXT PAGE, THAT WAS DALLAS POLICE AND FIRE.
THIS IS THE SAME ANALYSIS FOR ERF.
SO YOU CAN KINDA LOOK AT THAT.
I KNOW I'M THROWING A LOT OF NUMBERS AT YOU AND WE'RE TRYING TO GET THROUGH THIS IN A HURRY, BUT THE BASIC STORIES IS A LITTLE BIT DIFFERENT HERE AND WE CAN GO TO THE RETURNS AND TALK ABOUT THAT A LITTLE BIT HERE.
NOTICE, UH, RFS, THAT'S PRETTY CLOSE TO WHERE HOUSTON MEPS IS AND A LITTLE BIT BELOW THE PEER GROUP THAT TELLS ME THEY'RE NOT, IF, IF THEY HAVE PASSIVE MANAGERS, THEN THEY'RE NOT SPENDING A LOT OF TIME THERE.
THEY'RE FOCUSING ON ALTERNATIVE ASSETS.
IF THEY ARE DOING ACTIVE MANAGERS WHERE PEOPLE ARE ACTIVELY PICKING STOCKS AND TRYING TO BE THE INDEX, THEN UH, THEN MAYBE THEY'RE HAVING SOME ISSUES ON WHO THEY'RE PICKING.
UH, I'M NOT SURE, BUT IT'S NOT A LOT OF BIG DIFFERENCE THERE.
SO I'M NOT REAL WORRIED ABOUT IT.
UH, THE PRIVATE EQUITY, UH, NOTICE HOW THAT PERFORMANCE IS VERY GOOD COMPARED TO WHAT WE SAW ON THE LAST PAGE.
WELL, THEY DON'T HAVE THE LEGACY ASSETS.
THEY PICK SOME PRETTY GOOD MANAGERS AND THEY'RE RUNNING, YOU KNOW, MAYBE JUST A LITTLE BIT BELOW AVERAGE OR THE PEER GROUPS, BUT NOT TOO BAD.
UH, FIXED INCOME, SAME STORY AS DALLAS POLICE AND FIRE ONLY A LITTLE BETTER.
UH, AND HOUSTON MEPS, YOU KNOW, AGAIN, I THINK IS THROWING PRIVATE CREDIT IN THERE OR SOMETHING SO THAT THE PROBLEM REALLY IS NOT ON THE RETURN SIDE, RIGHT? WITH ERF, BECAUSE WE SHOWED THEIR PERFORMANCE EARLIER ON THE TOTAL PORTFOLIO, IF YOU LOOK UP TOP, IT REALLY SHOWS UP IN THE ALLOCATION.
WE'RE ONLY ALLOCATED 10% TO PRIVATE EQUITY, WHEREAS HOUSTON MEPS IS AT 28% AND THE AVERAGE PEER FUND IS OVER TWICE OF WHAT WE DO.
WE DON'T HAVE THE EXPOSURE TO THE PRIVATE EQUITY THAT WE PROBABLY NEED, SO WE JUST NEED TO SIT DOWN AND VISIT WITH THEM AND GO, IS THERE A CONSTRAINT? WE'RE NOT AWARE OF EITHER LIQUIDITY OR POLICY WISE OR RISK WISE THAT WE'RE NOT, UH, SURE OF, UH, BUT JUST KNEE JERK A HUNDRED THOUSAND FEET.
UH, THAT WOULD BE ONE OF THE FIRST QUESTIONS I COULD ASK THAT COULD IS THAT COULD CHANGE A LOT OF THINGS AT THAT FUND, UH, IN A HURRY.
THIS IS JUST AN EDUCATIONAL PAGE.
SO IF I CAN GET YOUR FOCUS ON IT, REALLY, I THINK IT'LL TELL YOU A STORY EVEN THOUGH IT'S A VERY BORING PAGE.
THINK ABOUT THE TOP 25% OF ALL NATIONAL PENSION FUNDS WITHIN THIS SIZE GROUP THAT'S COMPARABLE TO THESE FUNDS, OKAY? AND HOW THEY PERFORM, WHAT ARE THEY DOING? AND WHAT THIS IS, IS WE TOOK THE
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WEIGHTING, THE ASSET ALLOCATIONS OF THOSE PENSION FUNDS, AND THIS IS AN AVERAGE OF THEM, OKAY? AND IF YOU TAKE THOSE WEIGHTINGS, IT SHOWS YOU WHAT, WHAT THEY'RE IN, IN STOCKS, BONDS, PRIVATE EQUITY, ET CETERA.AND THEN YOU PUT OVER THERE ON THE RIGHT SIDE UNDER THREE AND FIVE AND 10 YEARS, WHAT IS THE AVERAGE RETURN FOR THAT ASSET CLASS? NOT THE BEST RETURN, NOT THE TOP QUARTILE RETURN, BUT JUST AVERAGE IF WE'RE JUST BORING, AVERAGE.
AND IN PUBLIC STOCKS, THAT'S BUYING INDICES, YOU KNOW, IN BONDS THAT'S BUYING INDICES ON THE PRIVATE EQUITY THAT'S JUST USING A PRIVATE EQUITY INDEX.
AND IF YOU REMEMBER THE SLIDE I SHOWED YOU A WHILE AGO, YOU COULD DRIVE A MACK TRUCK BETWEEN THE TOP AND BOTTOM QUARTILE OF PRIVATE EQUITY AS WELL AS WHAT IS AVERAGE IN TOP QUARTILE.
BUT IF WE'RE JUST AVERAGE, AND WE DID THE TOP QUARTILE WEIGHTINGS, AN ASSET ALLOCATION NOTE, THE 8.7% OVER THE LAST 10 YEARS, NOW THIS IS ALL MONDAY MORNING QUARTERBACKING AND IT'S FINE AND IT'S LOOKING BACKWARD AND WOULD'VE, SHOULD'VE COULD HAVE, RIGHT? BUT IT'S NOT ABOUT THE RETURNS, IT'S ABOUT THE WEIGHTINGS.
AND THE WEIGHTINGS DON'T REALLY CHANGE A WHOLE LOT OVER A TIME PERIOD EXCEPT FOR TACTICAL REASONS.
OKAY? SO WHAT WOULD I DO TO USE THIS INFORMATION AND MONEY MANAGEMENT IN ANY PENSION FUND OR A SEPARATE ACCOUNT OR ANYTHING LIKE THAT? THIS IS VERY VALUABLE TO ME.
IT'S ALMOST LIKE A CHEAT SHEET TO WHERE, OKAY, I CAN START WITH THESE WAITINGS AND THEN I CAN HAVE BIASES TOWARDS WHERE I THINK RETURNS ARE GONNA BE GOING FORWARD.
MOST FUNDS AND MOST INSTITUTIONS AND MOST FAMILY OFFICES THAT I SEE GET FORECAST FROM JP MORGAN OR WALL STREET OR WHATEVER AND USE THAT TO DETERMINE THEIR ASSET ALLOCATION OR THEY DON'T SPEND ENOUGH TIME ON IT, WE HAVE TO SPEND A LOT OF TIME ON ASSET ALLOCATION BECAUSE THAT'S THE KEY.
NOW, THAT 8.7% IS A LOT, YOU KNOW, THE NATIONAL TOP QUARTILE RANKING FOR 10 YEARS IS A HUNDRED BASIS POINTS BELOW THE 8.7%.
THAT'S HOW IMPORTANT THE WEIGHTINGS DO.
AND THEN WHEN YOU COMPARE THAT TO THE 10 YEAR PERFORMANCE, THEN YOU KIND OF GO, OH, OKAY, I CAN SEE NOW IT'S NOT ABSOLUTE THIS THERE, I CAN FIND FAULT WITH THIS ANALYSIS ALL DAY LONG TIME PERIODS, REPORTING THIS, THAT AND THE OTHER.
IF IT'S ANYWHERE CLOSE TO THE 2, 3, 4, 500 BASIS POINTS, VE NEAR IT AT LEAST STILL TELLS ME A STORY THAT I NEED TO WORK WITH.
SO WHEN WRAPPING UP, 'CAUSE I KNOW YOU HAVE A LOT OF PRESENTATIONS HERE, AND AGAIN, WE'RE REALLY APPRECIATIVE OF WORKING WITH, UH, THE FUNDS AND, AND THE, THE FACT THAT THEY'VE BEEN, THEY PLEDGED TO BE OPEN WITH US AND WORK WITH US ON BEHALF OF THE CITY SO THAT WE CAN, UH, HELP ANALYZE WHAT THEY'RE DOING AND HELP UNDERSTAND WHAT'S GOING ON.
AND IF WE CAN HELP IMPROVE, THEN TERRIFIC.
UH, ONE, UH, WE, WE, HERE'S SOME THOUGHTS YOU SHOULD CONSIDER.
ONE, ANALYZE IN DETAIL WHAT THESE TOP PERFORMING PEERS HAVE DONE.
AGAIN, IT'S NOT PATENTED AND MOST OF 'EM ARE PRETTY FORTHCOMING.
UH, TWO, COLLABORATE WITH BOTH PLANS TO IDENTIFY STRATEGIES FOR IMPROVEMENT.
IMPROVEMENT INCLUDES RISK REDUCTION.
DO NOT JUST, WE DO NOT DETERMINE IMPROVEMENT BY INCREASED RETURNS.
WE DE WE DETERMINE IMPROVEMENT OVER THE LONG TERM, UH, RISK REDUCTION AND IMPROVED RETURNS.
AND THAT CAN BE DONE IF YOU ASK US.
UH, BUT WE NEED TO CONFIRM THAT.
'CAUSE WE MAY BE WRONG ON SOME OF OUR ASSUMPTIONS WITH THESE PLANS.
THREE, WORK TO IMPROVE THEIR GOVERNANCE POLICIES AND PROCEDURES AS NEEDED.
THEY MAY HAVE EVERYTHING WORKING A HUNDRED PERCENT GREAT.
WE GOTTA GET IN THERE AND, AND WORK WITH THEM.
SO I'M NOT, WE'RE WE, WE DON'T KNOW, BUT WE SUSPECT JUST LIKE, UH, EVERYONE, INCLUDING OUR OWN BUSINESS, WE CAN ALL IMPROVE, RIGHT? SO, SO LET'S JUST SIT DOWN AND SEE IF THERE'S SOME WAYS TO HELP FOUR, UH, WORK TO IMPROVE THE WORKING RELATIONSHIPS OF KEY FIDUCIARIES.
THAT MEANS THE BOARDS, THE CONSULTANTS, ET CETERA, TO THESE PLANS AS NEEDED.
AND THEN WE WANT, WE, WE WANNA PREPARE MONTHLY WORK WITH THE, WITH THE ONGOING, WITH THE CITY, WITH REPORTS OF THE CITY OF DALLAS.
UH, HERE ARE, HOW ARE THINGS GOING HERE? ARE THINGS IMPROVING? HERE'S WHAT'S WORKING.
UH, YOU DON'T HAVE TO DO ANYTHING.
OR HERE ARE THE CHANGES COMING, ET CETERA, ET CETERA.
WE KNOW THAT THIS NEEDS TO BE FAST TRACKED AND WE'RE PREPARED TO DO THAT.
AND THE, AND WE KNOW THAT, THAT BIG CITIES AND GOVERNMENTS AND BUREAUCRACIES ARE NOT PREPARED TO MOVE FAST.
AND THE TIMEFRAME IS NOT JUST FROM THE PENSION REVIEW BOARD, IT'S THE DETERIORATING FUNDING
[00:30:01]
RATIOS OF THE PLANS.ALL THAT DOES IS INCREASE THE LIABILITY FOR THE CITY ON CONTRIBUTIONS.
AND THAT KIND OF BRINGS UP THE LAST THING.
WE WANT TO PROVIDE CONCRETE RECOMMENDATIONS FOR CONSIDERATION TO HELP, TO IMPROVE EVERYTHING POSSIBLE THAT WE CAN, WE DON'T HAVE ALL THE ANSWERS, BUT IF WE CAN ADD A LITTLE, LITTLE VALUE AS FELLOW CITIZENS OF THE OF DALLAS, THEN WE WANT TO DO THAT.
AND WE WANT TO HELP YOU IN WHAT YOU'RE DOING.
'CAUSE YOU HAVE A HUGE BURDEN IN DEALING WITH THIS CHECK.
YOU'RE GONNA HAVE TO WRITE AND GOING TO THE TAXPAYERS AND THE RESPONSIBILITY WITH THAT, IN ADDITION TO ALL THESE GOOD PEOPLE OUT HERE WHO ARE PARTICIPANTS OR BENEFICIARIES OF THESE PLANS AND ARE WORRIED ABOUT COST OF LIVING ADJUSTMENTS AND PAYMENTS FOR THEIR RETIREMENT.
THESE ARE ALL VERY IMPORTANT AND WE'RE VERY HONORED TO BE HERE AND WE APPRECIATE THE OPPORTUNITY TO, UH, UH, BE HERE TODAY.
UH, I'M GONNA OPEN FOR QUESTIONS.
SO LET'S KIND OF BE BRIEF AND BE DIRECT.
UH, WE GOT TWO MORE VERY IMPORTANT BRIEFING TO GET ON STARTED TO MY LEFT.
MS. BLACKMAN, THANK YOU FOR THIS REPORT.
UM, SO REAL QUICK, UM, WHEN YOU, YOU TALK ABOUT RISK MANAGEMENT, DO THESE FUNDS PROVIDE THAT? WELL, I, I WOULD HAVE TO SPEND TIME WITH THEM.
YOU KNOW, THAT'S PART OF THEIR JOB.
THE QUESTION IS HOW EFFECTIVE ARE THEY DOING IN RISK MANAGEMENT? AND AGAIN, THAT'LL SHOW UP IN SOME OF THE ATTRIBUTION ANALYSIS WE'VE DONE ON WAITINGS OR, UM, UH, MANAGER SELECTION, ET CETERA.
I THINK WE CAN ALL AGREE, YOU KNOW, IF, IF, YOU KNOW, THE HISTORY OF OF THE DALLAS POLICE AND FIRE THAT RISK MANAGEMENT WAS, WAS, UH, PRIOR TO 2016 WAS PRETTY POOR
AND WE'RE STILL PAYING FOR THAT.
SO, UH, UH, I WOULD, I WOULD JUST SAY WE NEED TO WORK WITH THEM BEFORE I CAN SAY DEFINITELY THAT THERE IS, THERE IS A RISK MANAGEMENT PROBLEM OR A RETURN MANAGEMENT PROBLEM, UH, BECAUSE WE NEED THEIR INPUT.
AND I DON'T WANNA MAKE ANY FALSE ASSUMPTIONS.
UM, AND AS YOU GO, AS I AND YOU WERE GOING THROUGH THIS AND VERY, VERY THANK YOU, IT'S VERY SIMPLE AND IT'S VERY UNDERSTANDABLE.
WHAT WOULD BE THE HEADLINE THAT WOULD COME OUT OF THIS IF YOU COULD WRITE ONE? MY PREFERENCE, MY PREFERENCE IS THERE'S NO HEADLINE THAT
MAYBE IT'S A LARGE WAY OR A SMALL WAY, BUT HERE, I GUESS THIS WOULD BE NEWS FOR THE DAY, IS I'M ENCOURAGED, I'M ENCOURAGED BY WHAT I'VE LOOKED AT AND THE, AND JUST THE SHORT CONVERSATIONS I'VE HAD, UH, WITH, WITH THE STAFF OF BOTH AND LEADERSHIP AND THAT THEY SEEM TO EMBRACE, HEY, WE UNDERSTAND THE RESPONSIBILITY THAT THE CITY'S UNDER AND THE CITY'S GOTTA WRITE THIS CHECK, AND WE'RE WILLING TO SIT DOWN WITH YOU AND GO OVER RISK RETURN.
AND WHAT WE'RE DOING, IT PROBABLY, IT IS PROBABLY GONNA SEEM A LITTLE REDUNDANT TO THEM BECAUSE
UH, AND, AND HOPE I'M ENCOURAGED BECAUSE I ACTUALLY SEE A PATH TO REDUCING RISK AND IMPROVE IT.
I CAN'T A HUNDRED PERCENT MAP IT OUT YET, BUT I THINK ONCE WE MEET WITH THEM AND GET SOME UNDERSTANDING OF WHAT LIMITATIONS THEY HAVE, WE WE CAN HELP THEM IMPROVE.
AND IT COULD BE A PRETTY SIZABLE NUMBER IN PERFORMANCE.
SO YOU DID HIT ON SOMETHING THAT, YOU KNOW, WE'RE GONNA WRITE A SIZABLE CHECK AND, UM, AND I, I THINK THIS COUNCIL HAS, WE, WE'VE PLEDGED THAT WE ARE GONNA BE GONNA MAKE IT WHOLE, BUT THIS LAST STATEMENT ON 12 CAN, CAN YOU READ IT? AND I'M JUST CURIOUS.
I MEAN, I CAN READ, GIVE CONFIDENCE TO CITIZENS AND STAKEHOLDERS OF GOOD FIDUCIARY STEWARDSHIP WHEN CONFRONTED WITH ADDITIONAL CONTRIBUTIONS TO THE PENSION FUND.
AND THAT'S, THAT'S WHERE WE ARE AS A COUNSEL.
WELL, YES, THAT AND WHEN YOU JUST READ IT, BUT I, I DO WANT TO EMPHASIZE IT BECAUSE I THINK WHEN THE CITY FIRST TALKED ABOUT HIRING US, THAT'S THE FIRST THING WE SAID.
UM, UH, AND AS A FELLOW CITIZEN, YOU KNOW, AND, AND IN MEETING SOME, SOME OF YOU I'VE SAID THAT, YOU KNOW, WE CAN'T GO TO THE PUBLIC, AT LEAST IN MY HUMBLE OPINION, AND ASK 'EM TO WRITE A CHECK OR SELL ASSETS OR DO ANYTHING UNLESS THEY HAVE CONFIDENCE THAT FUNDS THAT THEY HAVE ARE BEING MANAGED, UH, TO THE BEST MM-HMM,
NOW, I DON'T THINK THAT MEANS, I DON'T THINK THAT MEANS PERFECTION.
I DON'T EVEN THINK THAT MEANS CORRECT, CORRECT.
THE, THE BEST OF EVERYBODY OUT THERE OR THE TOP DECILE.
BUT WHAT DOES IT MEAN? IT, IT PROBABLY MEANS BETTER THAN AVERAGE, BUT ARE WE EVEN AVERAGE PROB MAYBE TOP QUARTILE, BUT ARE WE AVERAGE OR, UH, I'M, I'M GONNA, I SHOWED YOU SOME PEER GROUPS EARLIER THAT I THINK SHOW, UH, BELOW AVERAGE ON,
[00:35:01]
ON A LOT MORE FOR ONE THAN THE OTHER ONE.UH, THERE'S SOME REASONS FOR THAT, BUT I THINK I COULD PROBABLY, PARTICULARLY WITH DALLAS, UH, ERF SHOW SOME PEER GROUPS WHERE THEY'RE PROBABLY DOING ABOVE AVERAGE.
IT JUST SORT OF PICK, DEPENDS ON WHO YOU PICK.
SO I WANNA DO A DEEPER DIVE AND UNDERSTAND WHAT'S MORE COMPARABLE FOR THEM AND WHAT WORKS, UH, UH, BEFORE I COME TO THAT CONCLUSION.
AND SO THIS STATEMENT AND LAST QUESTION, SO WE CAN GET TO, UM, I MEAN, DO YOU FEEL THAT WHAT WE HAVE NOW DOES GIVE CONFIDENCE TO CITIZENS AND STAKEHOLDERS IF WE KEPT THE STATUS QUO, DO YOU FEEL THAT, THAT, BECAUSE THAT IS HOW I'M LOOKING AT THIS, I'VE GOTTA GO TALK TO FOLKS AND SAY, IT'S TIME, YOU KNOW, WE HAVE TO TIGHTEN UP OUR BELTS.
YOU MAY NOT GET YOUR, UH, PARKS PICKED UP AS MUCH.
YOUR STREETS MAY HAVE TO GO A LITTLE LONGER BECAUSE WE WE'RE GONNA MAKE THIS WHOLE, BUT I DON'T WANT IT TO GO TO A A I DON'T WANT IT TO GO SOMEWHERE.
AND THEN IN 20 YEARS LATER, A COUNCIL IS BACK AT IT AND IT'S STILL A MESS.
I, I DON'T THINK THAT'S FOR ME TO SAY THAT'S YOUR OPINION OR THAT'S A CITIZEN'S OPINION.
UH, MY JOB IS TO GET THE DATA AND PUT IT IN FRONT OF YOU.
BUT I ALSO WOULD SAY THIS, I DON'T THINK YOU HAVE TIME TO WAIT.
I THINK YOU GOT A SIMULTANEOUS DUAL JOB HERE, WHICH IS YOU, YOU GET YOUR HOUSE IN ORDER AND FIGURE OUT HOW YOU'RE GONNA WRITE A CHECK BECAUSE THAT'S GONNA HAPPEN NO MATTER WHAT.
MM-HMM,
AND THEN OUR JOB, WHAT WE'D LIKE TO DO IS WORK WITH YOU AND WORK WITH THESE MANAGERS AND FIGURE OUT HOW THEY CAN OPTIMALLY PERFORM.
AND IF IT, IF THEY PERFORM $1 BETTER AND THAT'S $1 LESS THAT WE HAVE TO DO, THAT YOU HAVE TO WRITE, THEN IT, THEN IT WAS WORTH IT.
THANK YOU FOR THE PRESENTATION.
UM, I THINK IT'S REALLY GOOD FOR NOT ONLY THIS COMMITTEE, BUT COUNCIL, STAFF, TAXPAYERS, AND REALLY MOST IMPORTANTLY, THE MEMBERSHIP OF BOTH OF THESE FUNDS TO BE ABLE TO HAVE THIS OBJECTIVE LOOK AT THE PERFORMANCE OF BOTH OF THE FUNDS.
SO THANK YOU FOR QUICKLY PUTTING TOGETHER, UM, THE, THE RESEARCH ON THIS.
UM, YOU KNOW, I'M, I'M LOOKING FLIPPING BETWEEN PAGE FIVE AND 11 AND IT, IT JUST STINGS.
UM, IT MAKES ME WONDER AS I LOOK AT THIS MASSIVE UNFUNDED LIABILITY ABOUT WHAT COULD HAVE BEEN WITH TOP QUARTILE ALLOCATION WITH JUST AVERAGE RETURNS.
AND SO, UM, MAYBE THAT'S SOMETHING WE CAN DO AS A LOOK BACK AT ANOTHER TIME.
I REALLY LIKE THE SPIRIT OF, YOU KNOW, WE'VE GOTTA ACT NOW, BUT THAT THERE'S AN OPPORTUNITY.
UM, AND SO WHAT I'D LIKE TO KNOW FROM YOU IS WE ARE JUST, YOU KNOW, GOING ROUND AND ROUND, EXPLORING EVERY SINGLE OPTION FOR WHAT CAN HELP US CLOSE THIS GAP AND FUND THESE, UM, FUNDS.
AND SO WHAT DO YOU SEE THE PATH FORWARD BEING AT THIS POINT THAT, THAT WE SHOULD, THAT WE SHOULD TAKE? UH, IF YOU'RE, ARE YOU RELATING THE WHOLE PICTURE? I THINK IT'S A COMBINATION OF EVERYTHING.
I MEAN, YOU'VE GOT TWO, YOU GOT TWO FUNDS, BUT I MEAN, BUT IF YOU'RE JUST TALKING ABOUT THE INVESTMENT SIDE, UH, I, WELL, YEAH, I MEAN, I'M OBVIOUSLY, I THINK THE PATH FORWARD IS, YOU KNOW, YOU'VE GOT TWO REALLY GOOD STAFFS.
UH, UH, THEY'RE VERY DIFFERENT.
UH, WE WANT, WE WANT TO GO IN AND, AND KIND OF GET TO KNOW BOTH OF 'EM A LITTLE BETTER.
UH, I'VE, I'VE KNOWN SOME OF THEM, YOU KNOW, FOR A GOOD PERIOD OF TIME.
BUT WE'LL, WE'LL GO IN AND ASK A LOT OF QUESTIONS, UH, ASK A LOT OF THINGS AND, AND NOT NECESSARILY, WE DON'T WANNA BE CONFRONTATIONAL.
WE WANNA BE A CATALYST FOR IMPROVEMENT.
AND I THINK, YOU KNOW, LOOKING BACK IN THE PAST 10 YEARS AND WHAT COULD HAVE BEEN, IT DOESN'T MATTER EXCEPT UNLESS IT HELPS US GO FORWARD.
AND SO WE JUST WANNA BE A CATALYST FOR IMPROVEMENT AND GO, HOW DO WE, HOW DO WE CAPTURE SOME OF THIS GOING FORWARD THAT MAYBE WE MISSED IN THE PAST, YOU KNOW, UH, POOR DALLAS POLICE AND FIRE FOR WHAT HAPPENED PRIOR TO 2016.
YOU KNOW, I'VE GOT A LOT OF OPINIONS ON THAT, BUT THAT'S FOR ANOTHER DAY.
BUT YOU KNOW, THERE'S THIS HUGE OPPORTUNITY TO MOVE FORWARD AND, UH, CAPTURE SOME OF THIS SO THAT YOU, YOUR CHECK ISN'T AS BIG.
AND SO I'M VERY ENCOURAGED BY THAT.
AND I'M VERY ENCOURAGED BY THE DISCUSSIONS, UH, I HAVE WITH THE STAFF OF BOTH FUNDS.
WELL, AND I'M, I'M GLAD IT'S BEEN COLLEGIAL.
I MEAN, I WOULD SAY AFTER REVIEWING THIS, I WOULD HAVE A REAL EXPECTATION ON THE, THE ON ON BOTH FUNDS BEHALFS TO UH, SAY THAT THIS IS SOMETHING THAT WHEN YOU LOOK AT THE ALLOCATIONS, I WOULD WANNA KNOW IF THERE WASN'T A SPIRIT OF SOME SORT OF LEARNING OR CHANGE OR WHATEVER, I MEAN, IT WOULD NEED TO BE DEFENDABLE.
AND THEN MAYBE NOT IN THE NEAR TERM.
CERTAINLY IN THE LONG TERM, I WOULD EXPECT TO SEE SOME DIFFERENT RESULTS THAN WHAT WE'RE LOOKING AT HERE.
AND SO, UM, I GUESS THIS IS JUST MY MESSAGE TO SAY, UM, YOU KNOW, I KNOW YOU'RE WILLING TO, TO HAVE THOSE DISCUSSIONS AND, AND WORK WITH THEM AND DO THE RESEARCH.
I LIKE WHAT YOU'RE SAYING ABOUT RESEARCHING HOUSTON MORE WHERE THEY'RE THE SAME OR DIFFERENT FROM THE FUNDS 'CAUSE THEIR PERFORMANCE IS, IS GREAT.
UM, BUT I WOULD DEFINITELY WANT TO HEAR RECEPTIVITY TO WORKING ON THIS.
THE OTHER THING I WOULD SAY IS ON PAGE 12, YOU USED TWO
[00:40:01]
WORDS.YOU PROBABLY DIDN'T KNOW THIS, BUT CHAIR ATKINS PROBABLY DELIGHTED IN THAT THIRD BULLET BY READING ABOUT POLICY AND PROCEDURE.
UM, BUT YOU TALK, WE TALK ABOUT GOVERNANCE POLICIES AND PROCEDURES, AND SO WE HAVE SOME PROPOSED CHANGES AND, UH, I DON'T KNOW IF WE'RE MISSING ANYTHING.
I MEAN, YOU WORK WITH A LOT OF DIFFERENT FUNDS.
AND SO IF THERE'S SOMETHING THAT DALLAS IS MISSING OR THAT WOULD MAKE THIS STRONGER, I MEAN, WE'RE AT A, WE'RE AT A POINT WHERE WE'RE PUTTING ALL OF THIS TOGETHER.
AND IF THERE'S SOMETHING THAT YOU CAN INFORM US ON THAT WE SHOULD INCLUDE OR BE LOOKING AT, I'D REALLY LIKE TO HEAR WHAT THAT IS SO WE CAN WORK IT IN NOW AS WE'RE MOVING SO CLOSE TO OUR FSRP.
AND I APPRECIATE YOUR COMMENTS.
UH, I WILL SAY THIS, UM, THE, THE REACTION OF BOTH FUNDS HAS BEEN VERY POSITIVE.
YOU KNOW, NO ONE LIKES TO BE CRITICIZED, YOU KNOW, AND THAT'S CERTAINLY NOT THE SPIRIT OF WHAT WE'RE DOING.
BUT I CAN TELL YOU THIS GOING FORWARD, THE REACTION OF THE TWO FUNDS WILL BE ONE OF TWO WAYS.
ONE, IT'LL BE COLLEGIAL AND LET'S GET BETTER.
I KNOW THAT, UH, WE'VE MANAGED MONEY AND WE'VE HAD FUNDS NOT DO SO WELL, AND WE'VE HAD FUNDS DO GREAT.
AND I TRY TO LEARN AS MUCH AS I CAN FROM OTHER PEOPLE, BUT IF I GET DEFENSIVE ABOUT IT, I'M NOT GONNA LEARN ANYTHING.
YOU'RE GONNA, YOU MAY GET REACTION FROM THE FUNDS.
I DON'T THINK YOU WILL, BECAUSE I HAVEN'T HAD THAT SO FAR.
UH, BUT YOU KNOW, HEY, THIS IS A WRONG PEER GROUP OR, OR THIS IS THE WRONG TIME PERIOD OR BLAH, BLAH, BLAH.
BUT IF THE GENERAL A HUNDRED THOUSAND FOOT MESSAGE IS REALLY, YOU KNOW, MAYBE WE CAN, WE CAN DO A LITTLE BETTER, THEN THAT'S, THAT'S WHAT I'M HOPING TO, TO RUN INTO.
WELL, AND I DON'T KNOW HOW MUCH YOU'VE LOOKED AT WHAT WE'RE TALKING ABOUT ON THE ACTUARIAL DEFINED CONTRIBUTION, BUT WHEN THE, THE FUND DOES BETTER, THE TAXPAYER IS HAVING TO CONTRIBUTE LESS.
AND SO THERE'S TREMENDOUS INCENTIVE FOR US TO WANT THIS FUND TO DO BETTER.
NOT TO MENTION ALL THESE PEOPLE WHO ARE IN THIS GALLERY AND WHO MAY BE WATCHING AND WHO, WHO ARE JUST OUT ON ACTIVE DUTY TODAY, OR WHO ARE RETIRED.
SO, UM, THIS IS SUPER IMPORTANT AND I'M, I'M, WE'RE REALLY LOOKING FORWARD TO SEEING WHAT CAN COME OF, OF, OUT OF THIS, NOT ONLY IN YOUR NEXT REPORT, BUT EVENTUALLY IN THE RETURNS THAT WE SEE.
WELL, AND SOME MAY THINK THIS IS A, UH, A CONFLICT OF INTEREST, BUT I'LL FULLY DISCLOSE IT.
I HAVE A VERY SELFISH INTEREST OF BEING HERE.
I DON'T WANT MY PROPERTY TAXES INCREASED.
UH, CHAIRMAN STEWART, THANK YOU.
UM, FIRST OF ALL, I JUST WANNA SAY I APPRECIATE YOUR POSITIVE APPROACH.
WE, WE'VE HAD LOTS OF NEGATIVITY JUST BECAUSE THIS SITUATION HAS BEEN DIFFICULT AND CHALLENGING, AND IT'S A BREATH OF FRESH AIR TO, FOR SOMEONE TO COME IN AND SAY, WE CAN, WE CAN FIX THIS, AND WE CAN DO IT IN A WAY THAT I THINK WILL LIFT UP THE PEOPLE WHO ARE WORKING ON THIS AND, AND NOT BE OVERLY CRITICAL AND SAY, IN THE PAST, WE, WE'VE GOT TO MOVE FORWARD.
I'VE HEARD YOU SAY SEVERAL TIMES, MOVE FORWARD.
YOU WERE TALKING ABOUT THE LIQUIDITY ISSUES IN A PRIVATE EQUITY FUND.
SO TYPICALLY, HOW LONG ARE YOUR FUNDS TIED UP SO THAT YOU IN PRIVATE EQUITY? IN PRIVATE EQUITY, SO THAT YOU WOULDN'T, YOU KNOW, IT DEPENDS.
A TYPICAL, NOT TO GET TOO MUCH IN THE WEEDS, BUT A TYPICAL PRIVATE EQUITY FUND IS SET UP AS A 10 YEAR FUND, FIVE YEAR DRAWDOWN.
IT HAS AN AVERAGE LIFE OF SOMEWHERE BETWEEN FOUR AND SIX YEARS.
DEPENDS ON WHAT KIND OF FUND IT IS.
AND SO THE PROBLEM WITH SETTING THAT UP IS, IS IT'S ILLIQUID AND YOU WON'T GET YOUR MONEY BACK UNTIL THE DEALS HARVEST.
HOWEVER, THERE ARE FUNDS THAT HAVE QUARTERLY LIQUIDITY FEATURES.
THERE ARE FUNDS THAT WHERE YOU CAN PUT ALL YOUR MONEY TO WORK AT ONCE, SO YOU DON'T HAVE TO WORRY ABOUT A J CURVE.
UH, YOU GIVE UP SOME THINGS, YOU GIVE UP SOME, SOME OF THE HIGHER RETURN PROBABILITIES, BUT IT'S MORE DIVERSIFIED, IT'S LESS RISKY, AND IT GETS YOU THAT DIVERSIFIED, YOU KNOW, RETURN AT LEAST AN AVERAGE RETURN IMMEDIATELY.
UH, THERE ARE OTHER WAYS TO DO IT.
YOU CAN BUY SECONDARY FUNDS, YOU CAN INVEST IN PRIVATE CREDIT, YOU CAN INVEST IN SOME PRIVATE EQUITY FUNDS THAT HAVE CASH FLOW IN THEM.
THERE'S ALL KINDS OF WAYS TO KIND OF DEAL WITH THAT.
IT GETS A LITTLE MORE CHALLENGING WITH SIZE SOMETIMES, BUT, UH, I THINK THERE'S A WAY TO DO A BLEND OF SOME OF THAT STUFF.
I'M ASSUMING YOU'RE TALKING ABOUT DALLAS POLICE AND FIRE.
'CAUSE THIS IS NOT AN ISSUE WITH, WITH E-R-E-R-F.
UH, I THINK THERE'S A WAY TO KIND OF, TO KIND OF DO THAT.
AND, AND I WAS, I WAS A LITTLE CONCERNED, YOU KNOW, ABOUT THEIR ALLOCATION AND, UM, UH, THE TARGET ALLOCATION, AT LEAST IN WHAT WE GOT, YOU KNOW, SHOW SMALLER AMOUNT, 5%.
BUT I, I'VE VISITED A LITTLE BIT WITH STAFF, NOT MUCH.
AND THEY'VE, THEY'VE TOLD ME THEY'RE, THEY'RE EAGER TO GET MORE INTO PRIVATE EQUITY AND MOVING FORWARD.
SO WE'RE, WE'RE EXCITED ABOUT HAVING THOSE DISCUSSIONS WITH THEM ON HOW TO DO THAT WITHOUT HAVING NEGATIVE RETURNS.
HOW TO DO THAT WITHOUT HAVING A LIQUIDITY DRAG ON THE FUND.
AND IT'S NOT EASY, BUT IT IS POSSIBLE.
[00:45:01]
THANK YOU.UH, AND I APOLOGIZE I DIDN'T CATCH YOUR NAME, UH, OR YOUR TITLE.
UH, DORY WILEY, UH, LIKE THE FISH WITH NO MEMORY.
SO IF I REPEAT MYSELF, YOU'LL KNOW WHY
AND WHAT'S THE PARTNERSHIP BETWEEN THE CITY OF DALLAS AND YOUR ORGANIZATION? UH, THE CITY OF DALLAS HAS HIRED US ON A SHORT TERM CONTRACT THROUGH AUGUST TO DO AN ANALYSIS OF THOSE EIGHT ITEMS THAT I LISTED ON THE SECOND PAGE OF THE PRESENTATION.
AND DO WE KNOW IF THERE'S GOING TO BE AN EXTENSION OF THAT MOVING FORWARD? WE DO NOT KNOW.
I THINK THAT'S KIND OF THE, THE, UH, UH, I'M SORT OF LAYING SOME OF THE GROUNDWORK FOR THAT NOW.
I THINK THERE'S A WHOLE LOT MORE WORK TO BE DONE THAN WHAT'S IN THAT INITIAL CONTRACT.
AND SO HOW MUCH TIME HAVE YOU HAD TO BE ABLE TO REVIEW THE, THE FUNDS? JUST A, JUST A FEW WEEKS.
SO I, I FIRST WANNA SAY, I, I WANNA CON COMMEND YOU FOR WANTING TO IMPROVE THE COMMUNICATION AND THE RELATIONSHIP WITH, WITH BOTH FUNDS TO MAKE A TRUE PARTNERSHIP SO THAT WHEN YOU ARE DOING YOUR FINDINGS AND GIVING INFORMATION, I THINK IT IS OKAY TO BE CRITICAL, BUT KNOWING THAT THE OUTCOME IS FOR THE BETTERMENT OF, OF THE FUNDS.
UM, PAGE 12, I REALLY LIKE IT'S TALKING ABOUT JUST MOVING FORWARD AND WHAT WE CAN BE DOING AND SOME CONSIDERATIONS, UH, MOVING FORWARD.
HOW THOUGH, DO WE, ON SOME OF THE REPORTS THAT, FOR EXAMPLE, ON NUMBER FIVE, WHAT DO YOU SEE THAT, LIKE, WHAT DOES THAT MEAN? DOES THAT MEAN A REPORT COMING ANNUALLY? DOES THAT MEAN MONTHLY? MONTHLY? I DON'T THINK YOU HAVE TIME
THAT'S ALL I HAVE FOR THIS DRAFT.
SO THAT, THAT WOULD WIND UP, YOU KNOW, THAT WOULD WIND UP CHANGING WHAT OUR ORIGINAL CONTRACT IS, BUT, UH, I JUST DON'T THINK YOU HAVE TIME TO MESS AROUND WITH THIS.
AND I THINK IF, UH, UM, WELL ANYWAY, THAT'S, I'M, I'M ELATING THE OBVIOUS.
UH, CHAIRMAN MENISON, THANK YOU.
UM, I'M SORRY I'M NOT FAMILIAR WITH YOUR FIRM.
I'M WONDERING IF YOU CAN TELL US, ARE YOU CURRENTLY CONSULTING WITH YOU MANAGE FUNDS FOR OTHER GOVERNMENT PENSIONS? WELL, UH, SAY THAT AGAIN.
AND YOU HAVE A, YOU'RE RIGHT IN THAT OCTAVE WHERE I DON'T HEAR
SO I'M NOT FAMILIAR WITH YOUR FIRM.
AND I'M WONDERING IF YOU CURRENTLY MANAGE OR CONSULT FOR OTHER GOVERNMENT PENSIONS? UH, NOT AT THIS TIME.
I, I PREVIOUSLY SERVED ON THE BOARD OF TEACHER RETIREMENT SYSTEM, $187 BILLION FUND.
UH, AND I CHAIRED THE, UH, UH, INVESTMENT COMMITTEE AND ALTERNATIVE ASSET COMMITTEE AND WAS ON NUMEROUS OTHER COMMITTEES.
AND, AND, UH, BUT WE HAD A STORY THERE THAT, AND YOU DID THAT WHILE YOU WERE WITH THIS FIRM? YES.
AND SO WHEN WAS THAT? PARDON ME? WHAT YEAR WAS THAT? 2008.
AND DID THIS CONTRACT COME TO CITY COUNCIL? I'LL ANSWER THAT.
JACK ARLAND, CHIEF FINANCIAL OFFICER.
UH, WE DID A REQUEST FOR PROPOSAL AND WE EXECUTED THE CONTRACT BY AN ADMINISTRATIVE ACTION BECAUSE OF THE VALUE OF THE CONTRACT BEING, UH, I BELIEVE IT'S LESS THAN 50,000 BUCKS.
WELL, YOU CAN GO UP TO A HUNDRED THOUSAND.
DO YOU KNOW WHAT THE DOLLAR AMOUNT WAS? I, I'M PRETTY SURE IT WAS 50.
UM, ARE YOU FAMILIAR WITH THE, UM, GOVERNANCE STRUCTURE FOR THE DALLAS POLICE FIRE PENSION FUND? UH, THAT'S A BROAD QUESTION.
SO THAT
DO YOU HAVE A MORE SPECIFIC QUESTION YOU'D LIKE ME TO ADDRESS? WELL, SPECIFICALLY THEY SEEM TO HAVE A WHOLE GROUP OF INVESTMENT ADVISORS AND A BOARD.
AND SO YOU ARE QUESTIONING SOME OF THESE INVESTMENTS.
ARE YOU FINDING THAT UNDER THEIR CURRENT STRUCTURE, I MEAN, I GUESS WE'RE GONNA NOT TALK ABOUT BEFORE 2017, BUT ARE YOU FINDING UNDER THEIR CURRENT STRUCTURE THAT YOU FEEL THAT THEY MAY NOT BE RECEIVING APPROPRIATE INVESTMENT ADVICE? WELL, WE'LL SEE.
WE'RE GONNA VISIT WITH THEM, GET THEIR INPUT.
THEY'VE GOT SOME, UH, NICE, WELL-KNOWN FIRMS THAT THEY'RE WORKING WITH.
AND I'D LIKE TO GET THEIR INPUT BEFORE I GET BACK TO YOU.
ALL I CAN TELL YOU IS MY CURSORY ANALYSIS THAT WE'VE DONE AND WE WANNA BE COLLEGIAL AND WORK WITH THEM AND SEE IF THERE'S A WAY TO ADD VALUE.
THEY MAY BE DOING EVERYTHING PERFECTLY, BUT FROM MY INITIAL ANALYSIS IT DOESN'T APPEAR.
SO, AND, AND I DON'T MEAN THIS TO BE A COMBATIVE QUESTION, BUT DO YOU THINK YOU'RE QUALIFIED TO MAKE THE DECISION TO ADVISE US? I MEAN, THAT, THAT'S UP TO YOU.
I'VE BEEN DOING THIS FOR A LONG TIME.
I'VE GOT AN UNDERGRAD IN ACCOUNTING AND FINANCE, A GRADUATE DEGREE, UH, AND A MASTER'S FROM SMU.
[00:50:01]
I'M A CFA, I'M A CPA, I'M AN RIA, I HAVE A SERIES 24 65 I'M SERIES.I'M GONNA PAUSE FOR JUST A SECOND.
WELL, I'M GONNA SAY I'M THE, I'M THE LAST I CHECKED, I'M THE MOST LICENSED PERSON IN THE INDUSTRY IN TEXAS.
SOMEONE MAY HAVE TAKEN ANOTHER TEST AND GOTTEN ME, WELL, THERE ARE A LOT OF TESTS FOR THIS, UM, RIGHT.
I DON'T HAVE ALL THE ANSWERS THOUGH, BUT I DO THINK I CAN ADD VALUE.
WELL, AND YOU'RE NOT CURRENTLY DOING THIS WORK IN THE GOVERNMENT PENSION SPACE IS WHAT YOU JUST PREVIOUSLY, RIGHT? IT'S A LOT OF WORK.
PARDON? UH, IT'S A LOT OF WORK AND I'LL TELL YOU, AND IT'S A LITTLE BIT THANKLESS, I'LL BE HONEST WITH YOU.
IF IT WASN'T DALLAS, I WOULDN'T DO IT.
I'M DOING IT 'CAUSE I'M A CITIZEN.
I'LL BE HONEST WITH YOU, IT'S SORT OF LIKE SEEING A HURT DOG IN THE ROAD.
AND I KNOW IF I GO HELP IT, I'M GONNA GET BIT.
THIS IS THE BEST CITY IN THE WORLD.
WE SHOULDN'T HAVE HAVE, UH, ANY PENSION FUND PROBLEMS. SO ON SLIDE FIVE, UM, I, I HAVE TO ASK THIS QUESTION.
IS IT POSSIBLE TO EARN THE SAME KIND OF RETURNS AS THE LIGHT BLUE AREA WHEN THEY ARE? SO, UM, WHEN THE FUNDING LEVEL IS SO LOW, WHAT'S YOUR QUESTION AGAIN? IS IT POSSIBLE TO EARN PEER GROUPS WHEN YOUR FUNDING LEVEL? YES, IT IS.
BUT IT DEPENDS ON THIS CONSTRAINTS.
AND IF YOU HEARD ME EARLIER, I TALKED ABOUT THEY'RE GONNA HAVE LIQUIDITY CONSTRAINTS.
AND I'M VERY, VERY FAMILIAR WITH THAT.
SO THAT'S WHY I CONDITIONED THIS ANALYSIS ON WORKING COLLABORATIVELY WITH THEM TO MAKE SURE.
SO MAYBE WE CAN IMPROVE THE RETURN FROM 2% OVER 10 YEARS TO 3%.
WELL, AGAIN, MAYBE IT'S 4%, MAYBE IT'S FIVE.
WE NEED TO WORK WITH THEM AND TALK TO 'EM ABOUT IT.
THEY, AGAIN, THEY MAY BE DOING EVERYTHING PERFECTLY.
I JUST DID A, WE JUST DID A CURSORY ANALYSIS AND WE THINK WE MIGHT BE ABLE TO HELP THEM.
UM, I GUESS IT'S DIFFICULT TO TALK ABOUT 10 YEARS WHEN WE'RE REALLY TALKING ABOUT A SEVEN YEAR PERIOD SINCE THE LEGISLATION.
SO YOU'RE REALLY INCLUDING THREE YEARS THAT, UM, HAD A VERY DIFFERENT GOVERNANCE STRUCTURE.
AND THAT'S WHY WE PUT X PRIVATE MARKETS, RIGHT? BECAUSE THOSE ARE LEGACY ASSETS AND WE CAN GO BACK AND DO THIS FOR 10 YEARS AS WELL.
IF I'M RUNNING THAT FUND, I CERTAINLY DON'T WANT THE LEGACY OF THE OTHER THREE YEARS.
AND WE'RE, AGAIN, WE'RE NOT POINTING FINGERS AT ANYONE.
WELL, ALL WE WANT TO DO IS JOIN HANDS AND GO, HEY, HOW DO WE OWN THIS TRACK RECORD TODAY? 'CAUSE IF YOU DON'T OWN IT AFTER SEVEN YEARS, WHEN DO YOU OWN IT? RIGHT? SO IF WE CAN GO BACK TO SEVEN YEARS, AND I'M SURE THE RESULTS WILL BE MUCH DIFFERENT, THEY'D PROBABLY BE MUCH BETTER.
THAT'S WHY WE HAVE FIVE YEARS UP THERE, BUT WE CAN GLEAN FROM THE FIVE YEARS THAT WE STILL HAVE AN UNDERPERFORMANCE PROBLEM.
WELL, I'M, I'M GONNA JUST PAUSE THERE.
I MEAN, I THINK YOUR OWN WORDS WERE THINGS LIKE YOU'RE NOT SURE, YOU DON'T KNOW WHY WE MIGHT BE WRONG AND WE DON'T KNOW.
SO I'M NOT CERTAINLY GONNA MAKE THAT CHARACTERIZATION.
AND I THINK IT'S DIFFICULT WHEN YOU'VE SAID YOU HAVEN'T SAT DOWN WITH THEM YET, THAT YOU'RE KIND OF THROWING THEM UNDER THE BUS, YOU KNOW? AND I APPRECIATE YOU BRINGING THAT UP.
MY PREFERENCE WOULD BE NOT TO BE HERE TODAY.
I'D RATHER SIT DOWN WITH THEM.
I, I THINK THAT, BUT WE WERE ASKED TO GIVE A REPORT REPORT AND SO WE'RE DOING, SO I AGREE WITH YOU.
SO THE, THE NEXT THING I JUST WANTED TO BRING UP WAS ON PAGE 11, YOU KNOW, YOU'RE TALKING ABOUT PEER GROUPS AND MY QUESTION IS, IF THE PEER GROUPS THAT YOU'RE LOOKING AT NOW ALSO HAVE FUNDING IN THAT 30% RANGE AND THOSE SAME KIND OF CONSTRAINTS, BECAUSE IF YOU'RE GONNA EVALUATE PERFORMANCE AGAINST PERFORMANCE, THEY HAVE TO BE ABLE TO BE APPLES TO APPLES.
AND YOU KNOW, I THINK WHEN I HAVE, WELL FIRST OF ALL, I'VE BEEN TRYING TO LISTEN TO ALL OF THE BOARD MEETINGS AND I'VE LEARNED A LOT FROM THAT.
AND THEN WHEN YOU LOOK AT THE STATE PENSION LIST AND THIS PENSION IS WAY, WAY AN OUTLIER BY THE SIZE AND THE LACK OF FUNDING.
RIGHT? AND SO I'M JUST WONDERING WHAT PEER GROUP ARE YOU LOOKING AT? BECAUSE IT'S NOT RIGHT TO LOOK AT EVERYBODY ELSE.
AND I'LL JUST USE THIS EXAMPLE.
IF YOU WERE TRYING TO SAY THIS IS FOR SOMEONE WHO'S 57 YEARS OLD, THEY SHOULD BE ABLE TO RUN THIS FAST OF A MILE.
I WILL NEVER MEET MY PEER GROUP.
I'M NOT ABLE TO MEET MY PEER GROUP.
SO IS THAT REALLY THE RIGHT GROUP TO MEASURE ME WITH? AND THAT'S WHAT MY QUESTION IS HERE IS ARE YOU MEASURING SOMEBODY WHO MIGHT BE ON CRUTCHES, WHICH IS A LITTLE BIT OF OUR PENSION PLAN HERE AGAINST A GROUP THAT IS A HUNDRED PERCENT FUNDED, 80% FUNDED.
AND I DON'T SEE HOW THESE REALLY ARE APPLES TO APPLES AT THIS POINT.
AND MAYBE IT'LL COME BACK, BUT IT IS.
OR YOU CAN CHANGE THAT PEER GROUP SO THAT WE CAN ACTUALLY SEE WHAT'S HAPPENING.
BUT THIS DOESN'T TELL ME THE THINGS THAT I THINK YOU'RE TRYING TO SHOW US.
SO I APPRECIATE YOUR COMMENTS AND I APOLOGIZE TO YOU.
[00:55:01]
I MUST HAVE STUTTERED OR FUMBLED.I REALLY TRIED TO CONDITION THIS IN THE BEGINNING THAT WE'VE NOT DONE A LOT OF WORK ON DEFINING THE EXACT PROPER PEER GROUP.
SO I APOLOGIZE FOR MISCOMMUNICATING TO YOU.
I WANNA MAKE THAT REALLY CLEAR.
WE CAN FIND ERRORS AND, AND, AND WAYS TO SAY THIS IS NOT THE RIGHT PEER GROUP.
SO THAT'S WHY I CONDITIONED THAT IN THE BEGINNING.
SO I APOLOGIZE IF I MISCOMMUNICATED 'CAUSE YOU'RE ABSOLUTELY RIGHT.
BUT I WILL SAY THIS, WE CAN LEARN FROM PEOPLE THAT AREN'T OUR PEER GROUP.
AND I HAVE NO PROBLEM WITH THAT.
SO, AND I APPRECIATE THE EXPERTISE THAT YOU'VE DEVELOPED IN THIS AND I REALLY LOOK FORWARD TO WORKING WITH YOU ON MAKING THIS BETTER BECAUSE IT SOUNDS LIKE YOU'VE DONE A LOT OF WORK ON IT ON YOUR OWN AND I APPRECIATE THAT.
WELL I DON'T HAVE AN EXPERTISE IN THIS.
SO MY LAST QUESTION IS FOR JACK ACTUALLY.
UM, SO HAS THIS REPORT HELPED YOU? ARE YOU ALREADY RECEIVING THIS KIND OF INFORMATION FROM OUR PENSIONS OR WAS THIS FOR US? IS THIS FOR THE MEDIA? I MEAN, WHO, WHO IS THIS REPORT REALLY FOR? THE, THE REPORT FOR WAS FOR US, THE CITY TO HAVE A BETTER UNDERSTANDING OF THE PERFORMANCE OF THE TWO FUNDS SO THAT EITHER WE COULD UNDERSTAND AND LEARN FROM IT OR WE COULD GAIN CONFIDENCE FROM IT.
AND SO I APPRECIATE THE WORK THAT'S BEEN DONE AND THAT WILL CONTINUE TO BE DONE.
AND WE'VE ASKED YOU TO DO THE WORK, UH, PRETTY QUICKLY.
UH, BUT HOPEFULLY IT WILL EITHER BRING US CONFIDENCE THAT THINGS ARE MO MOVING WELL OR IT WILL GIVE US SOME OPPORTUNITIES TO LEARN.
SO DO YOU FEEL LIKE YOU'VE BEEN MISSING INFORMATION ALL THESE YEARS THAT YOU SHOULD HAVE HAD, OR THIS WAS JUST THE RIGHT TIME TO LOOK AT IT.
I THINK THIS, FOR ME, HAS BEEN THE RIGHT TIME TO LOOK AT IT IN THAT THE LAST, UH, SINCE SEPTEMBER, HOWEVER MANY MONTHS THAT HAS BEEN, AS YOU KNOW, WE'RE, WE'RE ALL DRINKING FROM THE FIRE HOSE HERE, TRYING TO LEARN AS MUCH AS WE CAN ON THE PENSION SYSTEM AND WAYS TO IMPROVE IT AND, UH, IMPROVE ITS FUNDING OVER THE LONG TERM.
SO, UM, COULD IT HAVE BEEN DONE EARLIER? OF COURSE, BUT LET'S, LET'S TAKE THIS AS AN OPPORTUNITY TO LEARN AND TRY TO MOVE FORWARD IN A BETTER WAY.
DO YOU THINK IT'S THIS LAST QUESTION YOU JUST SAID FOR IT WAS YOUR LAST QUESTION.
I'M TRYING TO CUT YOU OFF, BUT WE GOT TWO MORE ITEMS WE GOTTA GET TO.
IT'S REALLY, IT'S FOR JACK THOUGH.
SO THE ONLY QUESTION IS, DO YOU THINK WE SHOULD HAVE BEEN DOING THIS ALONG, OR THIS IS NOT REALLY OUR, OUR WHEELHOUSE? I MEAN, DID WE MISS SOMETHING? I, I THINK IT IS APPROPRIATE FOR US AS A CITY TO, UH, PROVIDE MORE OVERSIGHT THAN WE HAVE HISTORICALLY TO BOTH OF THE FUNDS.
NOW, WHETHER THAT IS BRINGING THEM TO GPFM MORE OFTEN, BRINGING THEM TO THE FULL CITY COUNCIL MORE OFTEN, BUT I THINK WE NEED TO BE ASKING MORE QUESTIONS ON A REGULAR BASIS AND JUST MAKING SURE THAT NOBODY'S SURPRISED BY ANYTHING.
AND, AND I'M NOT SAYING WE WERE SURPRISED BY WHERE WE ARE.
I JUST WANT US TO BE MORE UPFRONT AND TRANSPARENT WITH THE COUNCIL AND THE COMMUNITY GOING FORWARD.
AND I HOPE WE HAVE THE OPPORTUNITY TO DO THAT.
I KNOW B YOU'RE NOT ON THE COMMITTEE.
YOU GOT A QUICK QUESTION FOR ME? YOU NOT? OKAY.
UH, I GUESS THE CITY MANAGER HERE AND, AND I WANT TO THANK JACK AND THANK THE CITY MANAGER FOR BRINGING THIS FORWARD.
THIS REALLY WAS INFORMATION, YOU KNOW, LET US KNOW WHAT'S GOING ON.
THERE WAS NO RIGHT ANSWER, NO WRONG ANSWERS.
IF YOU GO TO A CHEMISTRY CLASS, WHATEVER, YOU KNOW THE CHEMISTRY YOU WANT TO KNOW WHAT YOU NEED TO DO FOR YOU GET BLOWN UP.
SO THEREFORE WE DON'T WANNA BLOW NOTHING UP, BUT WE JUST TRY AND GET BASIC INFORMATION AND THAT'S WHY JACK, THANK YOU FOR FINDING SOMEONE TO DO THAT.
AND ALSO, KIM, I THANK YOU FOR MAKING SURE THAT WE HAD TO MOVE THIS FAST.
SO WE NEED TO TRY TO GET SOME INFORMATION RIGHT HERE.
WITH THAT, UH, WE'RE GONNA GO TO OUR NEXT BRIEFING AND I KNOW WE'RE GONNA RUN OVER TIME, SO I DON'T WANNA RUSH NO ONE.
SO WE GONNA PLOW THROUGH THIS AND IT'S GONNA BE EMPLOYER RETIREMENT FUND OF THE CITY OF DALLAS.
AND, UM, THEY MISSED THE, THE LAST, UH, BRIEFING, UH, WITH CHERYL AND DAVID ESRA WITH EMPLOYMENT RETIREMENT FUND ON THE CITY.
AND, AND IF YOU CAN KIND OF STAY TO THE POINTS WHERE YOU'RE TRYING TO GET AND KIND OF LEARN THIS OUT.
GOD, WE DO GOTTA DO THE, THE POLICE AND FIRE.
MAYOR PROM, A MEMBER OF THE CITY COUNCIL.
LOOK CLOSER TO THE MIC, PLEASE.
GOOD AFTERNOON, MAYOR PRO TEM AND MEMBERS OF THE CITY COUNCIL.
I AM THE EXECUTIVE DIRECTOR OF THE DALLAS EMPLOYEES RETIREMENT FUND.
I'M JOINED TODAY BY DAVID ERIDGE, WHO IS THE DEPUTY DIRECTOR.
UH, THE PRESENTATION IN FRONT OF YOU, WE'RE GONNA MOVE.
I REALIZE YOU'RE ON A TIME ON PAGE TWO.
AND SO JUST TO PROVIDE WITH EVERYONE KIND OF THE BACKGROUND AND HISTORY OF
[01:00:01]
FOR THE FUND.UH, WE PROVIDE RETIREMENT, DISABILITY, AND DEATH BENEFITS FOR THE CIVILIAN EMPLOYEES.
UH, WE ARE GOVERNED BY A SEVEN MEMBER BOARD, THREE THAT ARE APPOINTED BY THE CITY COUNCIL, THREE THAT ARE ELECTED BY THE EMPLOYEES.
AND THEN THE CITY AUDITOR SERVES BY VIRTUE OF HIS POSITION.
AS YOU KNOW, THE CITY OF DALLAS DOES NOT PARTICIPATE IN SOCIAL SECURITY.
DALLAS, ERF DOES NOT HAVE AND HAS NEVER HAD A DROP PROGRAM.
AND OUR COST OF LIVING ADJUSTMENTS ARE BASED ON, UH, CONSUMER PRICE INDEX.
WE'VE LISTED OUR BOARD CONSULTANTS.
UH, OBVIOUSLY WE HAVE ACTUARY, INVESTMENT CONSULTANTS AND LEGAL FIRMS THAT WE WORK WITH.
ON PAGE THREE, JUST TO KIND OF GIVE YOU AN IDEA, UH, WE JUST TALKED A LITTLE BIT ABOUT INVESTMENTS.
I DID WANNA LET YOU KNOW THAT, UM, YOU KNOW, WE HAVE A LOT OF RESPECT FOR DORY WILEY.
WE HAVE A LOT OF RESPECT FOR COMMERCE STREET.
UH, WE'RE COMMITTED TO WORKING TOGETHER WITH HIM AND TO MAKE SURE THAT WHATEVER INFORMATION THAT YOU NEED, HE NEEDS IN ORDER TO DO THAT, UH, WE ARE OPEN TO IT.
AND, UH, WE ARE, UM, WE SAW THE PRESENTATION, BUT THERE'S SOME INFORMATION THAT HE DID NOT KNOW.
'CAUSE HE HASN'T HAD AN OPPORTUNITY TO WORK WITH US.
SO WE HOPE TO COME BACK WITH YOU, WITH, UH, WITH ALL THE FACTS THAT YOU NEED, ALL THE FACTS THAT HE NEEDS, BUT WE'RE COMMITTED TO WORKING TOGETHER WITH HIM GOING FORWARD.
WANTED TO LET YOU KNOW, KNOW THAT THIS JUST TALKED A LITTLE BIT ABOUT, OUR ERF HAS A LONG-TERM HORIZON.
UH, WE WERE ESTABLISHED IN 1944, BUT IT REALLY JUST SHOWS TO YOU JUST HOW MANY PERIODS THAT WE'VE GONE THROUGH, INCLUDING, UM, UH, ABOUT TWO WARS.
UM, OBVIOUSLY THE GREAT FINANCIAL RECESSION, THE PANDEMIC, UM, UM, BUT WE HAVE A LONG-TERM HORIZON WHEN WE THINK ABOUT, UH, THE INVESTMENTS FOR THE FUND.
SO IF WE TURN TO THE NEXT PAGE, WHICH IS PAGE FOUR, THIS REALLY GIVES YOU A 25 YEAR HISTORY.
UH, FOR THE FUND, WHAT'S IN GREEN IS 7.25%.
THAT'S OUR ACTUARIAL RATE OF RETURN.
AND SO WHEN YOU LOOK OVER THE LAST 25 YEARS, TWO THIRDS AT A TIME THAT WE HAVE EXCEEDED OUR ACTUAL RATE OF RETURN, ACTUALLY IN ABOUT, UM, UH, 10 OF THOSE PERIODS, WE'VE HAD DOUBLE DIGITS.
THERE ARE ONLY DOWN PERIODS, UH, NOT ONLY DOWN PERIODS, BUT THE DOWN PERIODS ARE OBVIOUSLY THE TECH BOOM, 2008, THE GREAT FINANCIAL RECESSION, AND THEN A SLIGHT DOWN PERIODS.
UM, BUT THE MARKET WAS DOWN OVERALL AS WELL.
BUT THIS JUST GIVES YOU A, UH, OPPORTUNITY TO SEE, UH, A LONG TERM.
WHAT HAS OUR INVESTMENT HISTORY BEEN ON PAGE FIVE, UH, ONE OF THE QUESTIONS, UH, THAT, UH, WE WERE ASKED IS, YOU KNOW, ARE, IS THIS BETTER THAN INVESTING PASSIVELY? SO WE WENT BACK AVIDLY 34 YEARS, AND WE WANTED TO LOOK AND SAY, IF YOU'D INVESTED IN A GLOBAL 60 40 PORTFOLIO VERSUS THE FUND, WHAT WOULD THAT LOOK LIKE? THE DARK BLUE LINE IS THE DALLAS ERF.
THE LIGHT BLUE LINE IS ACTUALLY THE, UH, 60 40 PORTFOLIO, AND YOU CAN SEE THAT OVER THE DIFFERENT TIME PERIODS.
UH, WE DID, UM, UH, DO BETTER THAN, UH, OF DOING, UH, THAN INVESTING PASSIVELY.
ON NEXT PAGE, ON PAGE SIX, UH, WE'RE JUST REALLY PLEASED.
UH, WE'RE, UH, INSTITUTIONAL INVESTOR MAGAZINE HAS RECOGNIZED DALLAS ERF AS VISIONARY OF THE YEAR AWARD, WHICH WILL RECEIVE THIS SUMMER.
AND SO IT, IT'S HOPEFULLY THE TESTAMENT THAT PEOPLE WITHIN OUR INDUSTRY THINK THAT WE ARE DOING A REALLY GOOD JOB.
THE BOARD IS DOING A REALLY GOOD JOB.
AS FAR AS FOR THE INVESTMENTS, OUR FUND IS IN GOOD STANDING.
UM, WE HAVE A GLOBAL INVESTMENT PORTFOLIO THAT'S CONSERVATIVELY INVESTED WITH 80% VALUE DAILY.
UM, WE, UH, I PROVIDED RETURNS BOTH ON ONE YEAR, 10 YEAR, AND THEN ALSO FROM 1985.
AND YOU'LL SEE THAT FROM INCEPTION AND FROM 1985 THAT WE HAVE EXCEEDED OUR 7.25%.
OUR ASSETS UNDER MANAGEMENT AS OF THE END OF THIS YEAR WAS 3.65 BILLION.
UM, WHAT'S REALLY IMPORTANT WHEN YOU TALK A LITTLE BIT ABOUT GOVERNANCE AND WHAT WE DO, WE DO AN ACTUARIAL VALUATION EVERY YEAR, AND WE JUST COMPLETED OUR ONE FOR DECEMBER 31ST, 2023.
WE ALSO DO AN EXPERIENCE STUDY EVERY FIVE YEARS.
SO WE LOOK AT WHATEVER OUR ASSUMPTIONS WERE FOR, UM, RETIREMENTS DISABILITIES, AND WE COMPARE IT TO WHAT THE ACTUAL RESULTS ARE, AND WE MAKE ADJUSTMENTS QUARTERLY, AND THAT'S CONDUCTED BY OUR ACTUARY AND ALSO DO AN INDEPENDENT REVIEW OF OUR AUDIT.
AND SO WE ACTUALLY TAKE, EVERY FIVE YEARS, WE TAKE ALL OF OUR DATA, WE GIVE IT TO A COMPLETELY INDEPENDENT ACTUARY, AND THEY RUN IT THROUGH THEIR SYSTEM, AND THEN THEY COME BACK AND REPORT TO THE, TO THE BOARD TO SEE WHETHER THEIR RESULTS MATCHED OUR ACTUARY'S RESULTS.
UM, IN ADDITION TO THAT, YOU'RE PROBABLY FAMILIAR ALSO, WHICH IS NOT ON THE SLIDE, BUT I WANNA MAKE SURE YOU KNOW, SENATE BILL 3 22.
SO SENATE BILL 3 22 REQUIRES THAT ALL PUBLIC FUNDS DO AN DO AN AUDIT OF THEIR INVESTMENTS AND GOVERNANCE STRUCTURE, UM, EVERY THREE YEARS.
AND SO WE'VE DONE ONE OBVIOUSLY THREE YEARS AGO.
WE'RE IN THE MIDST OF THAT RIGHT NOW, AND THE RESULTS WILL BE OUT THIS SUMMER.
SO WE LOOK AT INVESTMENT POLICY STATEMENTS AND ASSET ALLOCATION, HOW WE TRADE FEES, ALL OF THAT IS DONE BY AN OUTSIDE FIRM.
AND THEY WILL THEN REPORT BACK
[01:05:01]
TO THE BOARD.UM, AND THAT INFORMATION IS ALSO PROVIDED TO THE PENSION REVIEW BOARD.
SO ONCE THE BOARD ACCEPTS THAT REPORT, WE SEND THAT REPORT TO THE PENSION REVIEW BOARD TO QUALIFY, YOU KNOW, TO MAKE SURE THAT WE'VE SATISFIED SENATE BILL 3 22.
WHEN WE LOOK AT OUR FUNDED RATIO, I JUST WANNA MAKE SURE, UM, WE JUST FINISHED OUR ACTUAL REPORT PROBABLY A FEW WEEKS AGO.
OUR FUNDED RATIO IS NOW 70% AS OF 1231 2023.
AND OF COURSE YOU'LL SAY, WHY IS, WHY IS THE DROP, WHY DO WE HAVE A DROP? AND IT'S REALLY AROUND OUR PAYROLL GROWTH, UH, INCREASE.
SO THE INCREASE, UH, INCREASED BY 5.3%, WHICH IS GREATER THAN OUR ASSUMPTION OF 2.5%.
AND THAT INCREASED THE UNFUNDED LIABILITY, WHICH THEN AS A RESULT REDUCED THE FUNDING LEVEL.
SO THAT WAS ESSENTIALLY THE REASON FOR THE DECREASE IN FUNDING.
MAYOR PRO TIM, AND COUNCIL MEMBERS, UH, THANK YOU SO MUCH FOR THE TIME.
WE'RE GONNA BE BRIEF TO TALK TO YOU JUST A LITTLE BIT ABOUT THE EMPLOYEES THAT THIS FUND IMPACTS THE CIVILIAN EMPLOYEES, UH, OBVIOUSLY, WHICH MAKES UP MORE THAN 7,000 EMPLOYEES WITH THE CITY.
UH, CURRENTLY THE AVERAGE BENEFIT THAT WE PAY OUT TO ANY RETIREE IS JUST A LITTLE BIT MORE THAN 42,000 PER YEAR.
IT'S IMPORTANT TO UNDERSTAND BECAUSE THIS IS WHAT THESE PEOPLE LIVE WITH ON A BALANCE FOR THE REST OF THEIR LIVES.
LAST YEAR IN 2 20 23, WE PAID OUT A PAYROLL OF 327 MILLION.
UH, THAT COVERED ALL WHO WERE PARTICIPATING AS RETIREES AND BENEFICIARIES WHO ALSO WERE ELIGIBLE FOR LIFETIME ABILITIES.
THE HEAD COUNT, YOU CAN SEE THERE, UH, 7,800, A LITTLE BIT, ALMOST 7,900, UH, ACTIVE EMPLOYEES, AND THEN 7,900 RETIREES.
YOU CAN SEE THAT THE HEADCOUNT OF THE RETIREES ARE A LITTLE BIT GREATER, UH, BUT REALLY, UH, RIGHT ALMOST AT THE SAME HEAD COUNT.
WE LIKE TO SEE MORE, UH, ACTIVES THAN RETIREES AT ALL POINT.
THE OTHER THING THAT I WANTED TO POINT OUT IS IN THE EVENT THAT, UH, CURRENTLY WE HAVE 900, UH, POTENTIAL RETIREES, CURRENT EMPLOYEES WHO CAN'T RETIRE, IF WE HAVE TO PAY OUT OF THE CITY, THAT IS, UH, THE TOTAL COST OF VACATION, THE SICK LEAVE, THAT WOULD COST THE CITY APPROXIMATELY $12 MILLION IF ALL 900, UH, WAS TO LEAVE THE CITY AT ONE TIME.
SO WE WANTED TO BRING THAT TO YOUR ATTENTION.
ON THE NEXT SLIDE, WE WANNA JUST GIVE YOU SOME OTHER HIGHLIGHT FACTS CONSIDERING THE TIME.
UM, THESE ARE FUN FACTS, WE LIKE TO CALL 'EM THAT, BUT CURRENTLY THE OLDEST CURRENT EMPLOYEE WORKING FOR THE CITY WAS BORN IN NINETEEN THIRTY NINE, EIGHTY FOUR YEARS OF AGE.
I DON'T HAVE ANY MORE DETAIL, SO, OH, SORRY.
UH, THE YOUNGEST EMPLOYEE BORN WAS BORN IN, UH, 2005 AND THEY'RE 18 YEARS OF AGE.
WE TALKED ABOUT THE 900 PLUS EMPLOYEES.
THE OLDEST LIVING RETIREE WAS BORN IN 1922, AND THE OLDEST BENEFICIARY WAS BORN IN 1912.
IT'S NOT ME, I'M NOT 111, I PROMISE YOU.
UM, ON THE DISABLED ASIDE, WE DO RETIRE PEOPLE BASED ON DISABILITY.
LET ME JUST SHARE WITH YOU, THE RULE IS DIFFERENT FROM SOCIAL SECURITY.
WE SAY THAT IF YOU CAN WORK ANYWHERE IN THE UNIVERSE, THEN YOU'RE NOT DISABLED.
AND SO WE ARE CAREFUL WITH, UH, DISABILITY RETIREMENTS, BUT THE OLDEST LIVING, UH, DISABLED PERSON IS 91 YEARS OF AGE.
UH, THEY'VE BEEN IN THAT STATUS FOR 58 YEARS.
ON THE NEXT SLIDE, I WANTED TO JUST GIVE A PERSPECTIVE OF WHO THESE CIVILIANS ARE.
AS YOU THINK ABOUT THE WORK THAT THEY DO.
IF WE LOOK AT JUST FOUR CLASSIFICATION TITLES THAT IMPACT ALMOST EVERY DISTRICT IN THE CITY, UH, INCLUDING DISTRICT THREE WHERE I LIVE, CODE ENFORCEMENT OFFICERS HAVE A PAY RANGE OF 42,000 TO 55,000.
A LITTLE BIT MORE MAINTENANCE WORKERS, UH, WHO BASICALLY WORK IN A VAST NUMBER OF DIFFERENT DEPARTMENTS, UH, INCLUDING, UH, PARKS AND RECREATION, THE WATER DEPARTMENT AND PUBLIC WORKS.
THEIR PAY RANGE IS BETWEEN 40,040 8,000 WATER PLANT OPERATORS.
OUR WATER IS INCREDIBLY IMPORTANT TO US.
IT CREATES REVENUE FOR THE CITY.
UM, THOSE WATER PLANT OPERATORS WHO BASICALLY KEEP THE FILTRATION AND THE WATER CLEAN HAVE AN AVERAGE PAY OF 45,000 TO 64.
AND THEN FINALLY, I WON'T GO INTO DETAIL.
I THINK WE ALL ARE FAMILIAR WITH THE THREE ONE OPERATORS.
WHAT WE LEARNED IN A STUDY THAT WE DID, AND WE PRESENTED IT LAST DECEMBER, BUT WE JUST WANTED TO REMIND YOU, CIVILIAN EMPLOYEES, AS OF 2023, ARE PAID BELOW THE MARKET RATE.
CITY MANAGER'S OFFICE IS CONSTANTLY TRYING TO APPROVE THAT, BUT THAT'S TIED TO THE BUDGET.
BUT WE WANTED TO BRING TO YOUR ATTENTION, UH, THAT THAT IS A CHALLENGE THAT ALSO IMPACTS CONTRIBUTIONS TO THE FUND.
ON THE NEXT SLIDE, I WANTED TO SHARE WITH YOU HISTORICALLY THE HEADCOUNT, THE HEADCOUNT OF CIVILIAN EMPLOYEES, AND HOW IT HAS EBBED AND FLOWED OVER THE PAST SEVERAL YEARS, UH, SINCE 2003.
UH, BUT I REALLY WANTED TO DRAW YOUR ATTENTION TO 2008 BECAUSE THAT WAS THE PEAK YEAR
[01:10:01]
WHERE THE CIVILIAN HEADCOUNT WAS A LITTLE BIT MORE THAN 8,300 EMPLOYEES.YOU CAN SEE SINCE THAT TIME, WE HAVEN'T REALLY REBOUND AS AN ORGANIZATION TO SEE THAT HEADCOUNT FOR CIVILIAN EMPLOYEES.
WHY IS THAT IMPORTANT FOR EVERY DOLLAR THAT AN EMPLOYEE MAKES? BECAUSE IT'S A CONDITION OF EMPLOYMENT, THEY CONTRIBUTE, WE CONTRIBUTE TO THE FUND.
SO WHEN THE HEADCOUNT REDUCES, THE CONTRIBUTIONS REDUCE AND IT HAS IMPACT TO LIABILITY THAT WE MANAGE.
ON THE NEXT SLIDE, IN GOING THROUGH THIS, I WANNA TALK ABOUT THE HISTORY OF ALL THE THINGS THAT THE CITY HAS DONE, WHICH HAS BEEN A GREAT JOB TO MANAGE THE HEADCOUNT, UH, WHEN BUDGET SHORTFALLS COME.
SERVICES ARE CONSIDERED, BUT IT DOES IMPACT US ON PAGE 11.
WHAT I WANTED TO SHARE WITH YOU IS, IS THAT THE PAYROLL GROWTH IS SOMETHING THAT WE MONITOR THROUGH OUR ACTUARIES EVERY YEAR.
OUR ACTUARIES HAVE BEEN ASSUMING A 3.5% GROWTH, UH, OVER TIME.
AND YOU CAN SEE THAT IF YOU LOOK AT FROM 2003 TO 2012, THAT PAYROLL GROWTH HAS SHRUNK, THIS IS YET ANOTHER WAY OF LOOKING AT THE CONTRIBUTION.
WHEN THE PAYROLL GROWTH REDUCES, THEN THE CONTRIBUTION IS REDUCED.
IF WE WOULD'VE HAD THE PAYROLL GROWTH, UH, KEPT AT 3.5%, THEN THE PAYROLL ITSELF WOULD'VE HAD AN INCREASE OF 1.3 BILLION.
ERF WOULD'VE RECEIVED A PERCENTAGE OF IT BASED ON THE CONTRIBUTIONS THAT HAVE CHANGED OVER YEARS.
IT WOULD VARY, BUT IT WOULD MEAN THAT MORE CONTRIBUTIONS WOULD'VE CAME TO THE FUND.
SO HISTORICALLY, LET'S TALK ABOUT ON THE NEXT SLIDE WHAT IN FACT, UH, WE LOOKED AT IN 2016.
THERE WERE MORE THAN 40 DIFFERENT SCENARIOS THAT STAFF AS WELL AS THE ACTUARIES LOOKED AT TO TRY TO CREATE WHAT WE KNOW TODAY AS TIER B.
UH, THERE ARE THREE SIGNIFICANT ADJUSTMENTS THAT WE MADE FOR NEW HIRES WHO HIRED IN JANUARY 1ST, 2017.
UH, THE FIRST ONE IS TO SAYT RA MEMBERS.
THEY'RE ELIGIBLE TO RETIRE AT THE AGE OF 60 WITH NO NECESSARILY, UH, YEARS OF SERVICE REQUIRED.
TIER B MEMBERS ARE REQUIRED TO, UH, ARE, ARE ELIGIBLE TO RETIRE AT THE AGE OF 65, BUT THEY MUST HAVE FIVE YEARS OF SERVICE.
WHY IS THAT IMPORTANT? IT MEANS THAT WITH EVERY TIER B MEMBER THAT IS HIRED, YOU HAVE A RETENTION PLAN BUILT IN.
AND THUS, WHEN YOU LOOK AT AGE 65 IS VERY CLOSE TO SOCIAL SECURITY RIGHT NOW AT 67.
AND SO WE RECOGNIZE THAT EMPLOYEES ARE LIVING LONGER.
THE SECOND SIGNIFICANT WAS THE NORMAL FORM OF PAYMENT CHARGE TO LIFE, UH, ONLY ANNUITY.
WHAT DOES THAT MEAN? REALLY THAT MEANS IF A MEMBER RETIRES AND THEY RECEIVE THEIR ANNUITY, IF THEY WANT THEIR SIGNIFICANT OTHER OR SPOUSE WHO IS ELIGIBLE TO RECEIVE IT, THEY MUST PAY FOR THE DIFFERENCE.
AND SO WE BASICALLY HAVE SAID THAT WE WANTED TO MAKE SURE THAT WE TAKE CARE OF THE EMPLOYEE, UH, WHO HAS DONE THE WORK.
THE LAST ONE THAT I'LL HIGHLIGHT IS THE BENEFIT MULTIPLIER.
THE BENEFIT MULTIPLIER WAS CHANGED FROM 2.75% TO TWO POINT.
I MEAN, YEAH, 2.75% TO 2.5 UH PERCENT.
AND OVERALL, WE BASICALLY ARE SAYING THAT IF YOU COMPARE TIER B TO TIER A, WE REDUCE BENEFITS BY NEARLY 39%.
THE VERY NEXT PAGE, THE LAST SLIDE THAT I HAVE, I WANTED TO SHARE WITH YOU, IT REALLY SHOWS YOU, UH, JUST HOW FAR WE'VE COME IN A SHORT PERIOD OF TIME SINCE THE CHANGE IN 2017.
WE CURRENTLY, AS OF THIS PAST, MAY NOW HAVE 58% OF OUR TOTAL POPULATION AT TIER B.
WELL, THE REAL QUESTION IS, DID THE PLAN CHANGE FOR NEW HIRES WORK? THE ANSWER IS YES.
OVER TIME, WE PROJECTED, UH, $2.15 BILLION SAVINGS AND WE'RE ON COURSE TO ACHIEVE THAT.
UH, WHAT HAS BEEN DIFFERENT IS THAT OF COURSE WE HAVE TO COMPLY WITH THE PENSION REVIEW BOARD, WHICH GIVES OUR AMORTIZATION A SHORTER TIME PERIOD, WHICH CHERYL WILL NOW WALK THROUGH, UH, ON HER THE SECOND HALF OF THE BRIEFING.
UH, SO FOR ON PAGE 15, UH, WE'RE GONNA LOOK AT CONSIDERATIONS AND ACTION PLAN.
WE DO HAVE A RECOMMENDATION FOR, UM, THE COMMITTEE TODAY.
SO ON PAGE 15 JUST REALLY TALKS ABOUT THE REQUIREMENT.
AND I'M NOT GONNA GO IN DEPTH 'CAUSE I KNOW YOU KNOW IT VERY, VERY WELL.
UH, BUT ESSENTIALLY THE TEXAS GOVERNMENT CODE 8 0 2 0.2015 REQUIRES THAT US TO REQUIRES FOR ALL PLANS IN THE STATE OF TEXAS TO HAVE A PLAN, UH, FOR A FUNDING PERIOD THAT NOT TO EXCEED 30 YEARS.
AND, UH, BY AND HAVE THAT PLAN BASICALLY APPROVED BEFORE SEPTEMBER 1ST, 2025.
UH, WITH, IF YOU MISS THAT DEADLINE, ANY PLAN MISSES THAT DEADLINE.
IT GOES FROM 30 YEARS TO 25 YEARS, WHICH MEANS IT WILL COST MORE.
WHAT WE'VE UH, SEEN IS THAT THAT COST WILL BE AN ADDITIONAL $150 MILLION OVER 10 YEARS.
BUT I BELIEVE THAT WE ARE ON TRACK, UH, TO
[01:15:01]
MAKE, UH, A PLAN THAT CAN BE APPROVED IN TIME.ON PAGE 16, WE'RE JUST GONNA TALK A LITTLE BIT ABOUT THE ASSUMPTIONS IN OUR PLAN.
UH, WE ARE ASSUMING THAT, UH, AS YOU KNOW, THAT THE ACTUALLY DEFINED CONTRIBUTIONS ARE A LEVEL CONTRIBUTION RATE FOR 30 YEARS OVER 20 2025.
UM, RIGHT NOW FOR US, THE LEVEL OF CONTRIBUTION RATE DOES INCLUDE THE DEBT SERVICE.
UH, WE'RE ASSUMING OUR ACTUAL RATE OF RETURN OF MARKET VALUE OF ASSETS ARE GROWING AT SIX 7.25%.
WE'RE ASSUMING A PAYROLL GROWTH OF 3%.
UM, AND ALL THE SCENARIOS THAT WE HAVE, WE'RE LOOKING AT A FIVE YEAR STEP UP TO GET TO THE ACTUAL DEFINED CONTRIBUTION RATE FOR, UM, FOR THE CITY AND THE PARTIES ON PAGE 17.
IT'S JUST A REALLY REMINDER, THIS IS OUR CURRENT, UM, CALCULATION FOR OUR CONTRIBUTIONS.
THIS IS WHAT'S IN PLACE RIGHT NOW.
IT'S ACTUALLY ORDINANCE 2 5 6 9 5.
AND SO WHAT IT TALKS ABOUT, AND WE'LL JUST LOOK AT 2023, UH, WHEN WE TALK ABOUT THE 36% CAP, THERE IS A CAP IN TERMS OF HOW MUCH, UH, CAN BE CONTRIBUTED TO THE FUND.
AND THAT CAP HAS BEEN ON SINCE 2005.
AND SO FOR THE ALMOST, ALMOST 20 YEARS, WE'VE HAD A CAP ON THE NUMBER OF CONTRIBUTIONS.
IF YOU GO DOWN TO THREE, THAT'S THE DEBT SERVICE FOR THE PENSION OBLIGATION BONDS.
AND SO THE PENSION OBLIGATION BOND, UH, DEBT SERVICE PAYMENT OVER THE PAYROLL IS WHAT THE CREDIT RATE IS FOR THE CITY.
SO THE CITY'S PAYMENT TO THE, FOR THE PENSION OBLIGATION BONDS IS CONSIDERED PART OF THE PAYMENT FOR THE FUND.
WHEN YOU LOOK AT, UH, PAGE, UH, THE 36% CAP, YOU'LL SEE A NUMBER SIX, SIX A IS WHAT THE EMPLOYEES PAY, 13.32% AND THE CITY PAYS 22.68% AND THEN YOU MINUS OUT THE PENSION OBLIGATION BONDS.
SO THE ACTUAL MONEY COMING CASH COMING TO THE FUND IS 14.46.
IF YOU MOVE TO THE NEXT PAGE, WHICH, UH, HAS OUR RECOMMENDATION.
SO OUR RECOMMENDATION IS ESSENTIALLY REMOVING THE, UH, 36% CAP, UH, THAT HAS BEEN ON FOR ALMOST 20 YEARS.
UM, WE'RE ARE RECOMMENDING THAT WE DO REALIZE THAT WE DID REDUCE TIER B'S BENEFITS, BUT RIGHT NOW THEY'RE CURRENTLY CONTRIBUTING THE SAME AMOUNT OF MONEY.
SO WE'RE, WE ARE, ARE RECOMMENDING IS THAT TIER A'S CONTRIBUTIONS GO FROM 13.32 TO 14%.
UH, THE NEXT TWO BULLETS REALLY TALK ABOUT WE ARE NOT ASKING FOR BONDS, WE'RE NOT ASKING FOR SALES.
IF SOMETIME DURING THE CITY, THE CITY COUNCIL OR SOMEONE DECIDES THAT THEY WANNA DO THAT AND, AND PUT A LUMP SUM IN, WE'LL JUST RE AMORTIZE THE MONEY AND LEVEL IT OUT AND LOWER THE CONTRIBUTION.
BUT WE'RE NOT ASKING FOR THAT.
BUT WE JUST WANNA MAKE SURE THAT WHEN IT'S WRITTEN, THERE'S UM, YOU KNOW, THAT THERE'S AN ACCOUNTING FOR THAT.
UH, IN THE ACTION PLAN, WE WOULD, UH, RECOMMEND, UM, UH, HAVING DRAFT CHANGES WORKING WITH, UH, YOU AND THE CITY ATTORNEY'S OFFICE TO CHANGE, TO DRAFT CHANGES TO CHAPTER 40 A, UH, FOR DALLAS CRF, IT HAS TO GO RIGHT NOW, UH, UH, TO, FOR VOTER APPROVAL, WHICH WOULD, WOULD MEAN THAT THE COUNCIL WOULD HAVE TO APPROVE THE CHANGES IN AN AUGUST MEETING TO PUT IT ON FOR THE NOVEMBER, 2024 BALLOT.
IF THE VOTERS APPROVE, UH, THEN THE CONTRIBUTION RATE FOR THE CITY OF DALLAS AND ERF MEMBERS CAN GO INTO EFFECT JANUARY 1ST OR OUR OCTOBER 1ST, YOU KNOW, CALENDAR YEAR OR FISCAL YEAR.
IT'S, IT'S, YOU KNOW, WE WILL, IT'S UP TO WHAT IS BEST FOR THE ORGANIZATION.
THIS KIND OF WALKS THROUGH, UM, THE RECOMMENDATION.
LET'S GO TO PAGE 20 ALSO, UH, IN LAST TIME WE PRESENTED WAS IN DECEMBER OF 2023.
AND AT THAT POINT THERE WAS A THOUGHT THAT WE MIGHT GO FOR THE MAY ELECTION AT THAT TIME.
AND SO WHAT, UM, WE DID IN PREPARATION FOR THAT WAS WE ASKED OUR ACTUARY TO SEND THE RECOMMENDATION TO THE PENSION REVIEW BOARD TO SEE IF THEY APPROVED.
'CAUSE WE DIDN'T WANNA GO FORWARD WITH A DOCUMENT OR A PLAN THAT THE PRB DID NOT, UM, DID NOT APPROVE OF, OR DID NOT FELT MET THE REQUIREMENTS.
SO THIS IS JUST A LETTER THAT THE FEB, UH, THAT THE PRB SENT BACK ON FEBRUARY 8TH.
AND BASICALLY THEY HAD THEIR ACTUARY REVIEW, OUR ANALYSIS AND DISCERNED IT WAS CONSISTENT WITH ACTUARIAL STANDARDS.
AND THEY SAID IF ADOPTED AS PRESENTED, THE SYSTEM WOULD BE A HUNDRED PERCENT FUNDED BY 2055 AND WOULD MEET THE 30 YEAR REQUIRED FUNDING PERIOD.
AND THEY SAID, PLEASE NOTE THIS LETTER IS A PRELIMINARY DETERMINATION ONLY AND IS NOT FINAL APPROVAL.
'CAUSE IT IS NOT FINAL UNTIL BOTH THE CITY AND THE CO AND THE FUND SUBMITTED ON PAGE 21.
THIS GIVES, GIVES AN IDEA IF WE DO A FIVE YEAR PHASE IN OF THAT, WITH THE, WITH THE KNOWLEDGE THAT IN THIS RECOMMENDATION TIER A EMPLOYEES WOULD INCREASE THEIR CONTRIBUTION, UH, TO 14% IN THE FIRST YEAR, YOU CAN SEE THE, UH, THE PATH
[01:20:01]
OF THE LIABILITIES.BUT BY 2055, WE WOULD BE A HUNDRED PERCENT FUNDED ON 2034, UH, THAT IS WHEN THE PENSION OBLIGATION BE BONDS, DEBT SERVICE, UH, WILL, UH, ROLL OFF.
AND SO THEREFORE THE CITY WILL NO LONGER HAVE TO PAY THAT 8.2% FOR THE BONDS.
AND THAT CAN HAVE NEEDED ENROLL THAT INTO THE FUND AT THAT TIME.
I KNOW THIS IS A CONFUSING, SO I JUST WANNA FOCUS YOUR EYE.
THERE'S A LOT OF CHARTS, BUT IF WE LOOK AT, THERE'S TWO, THERE'S A CURRENT STATE AND THEN THERE'S OUR RECOMMENDATION.
I JUST WANNA FOCUS ON THE CITY CONTRIBUTION TO ERF, WHICH IS THE, WHICH IS THE FIRST ONE.
SO IF WE DID, WE DIDN'T DO ANYTHING, THE CITY WOULD CONTRIBUTE 79.2 MILLION TO THE FUND.
THE OTHER 8%, WHICH IS A DEBT SOURCE ON A COUPLE PENSION OBLIGATION BONDS IS A 44.8, UH, RESULTING IN A TOTAL OF 124 MILLION.
AND THE BOARD REC AND THE RECOMMENDATION, UM, THE 79.2 WOULD GO TO 85.5, SO IT'LL BE A $6.3 MILLION INCREASE.
THE DEBT SERVICE AND THE BONDS REMAINS EXACTLY THE SAME.
SO THAT GIVES YOU AN IDEA OF HOW TO READ IT TO SHOW OVER THE NEXT FIVE YEARS, UH, WHAT THAT WOULD LOOK LIKE.
AND, UM, WE ARE GONNA WORK WITH, UM, THE CFO AND STAFF.
WE ARE COMMITTED TO DO A 30 YEAR, UM, TO THE ENTIRE 30 YEARS TO SEE WHAT THAT WOULD LOOK LIKE, AS WELL AS, UM, WHERE THAT MONEY WOULD COME FROM, FROM YOUR, WE DON'T HAVE THAT INFORMATION.
WE HAVE TO WORK WITH HIM TO FIGURE OUT HOW THAT LOOKS BECAUSE A DEBT SERVICE, FROM WHAT I UNDERSTAND, COMES FROM ANOTHER BUCKET THAN THE THE AGENDA GENERAL FUND.
SO, BUT WE ARE COMMITTED TO GIVING YOU A 30 YEAR VIEW WORKING WITH STAFF AND WE WILL PROVIDE THAT TO YOU.
SO WITH THAT, UM, WE GO TO PAGE 23.
ONE OF THE THINGS THAT WE WERE ASKED TO DO, UM, BY, UH, CITY STAFF, UM, WAS TO PRESENT AN ALTERNATIVE SCENARIO.
UM, THIS IS NOT A SCENARIO THAT, UM, WE DON'T FEEL IS NEEDED IN ORDER TO GET THERE.
AS YOU KNOW, THE PRB UH, GAVE US A PRELIMINARY DETERMINATION THAT THE, UH, JUST A CHANGE IN THE, UH, TAS OF, UH, CONTRIBUTION AND THE CITY'S CONTRIBUTION WILL GET US THERE.
BUT THIS SCENARIO ASSUMES THAT TIER A AND TIER B ACTUALLY SAYS THE SAME.
SO INSTEAD OF GOING TO 14%, THEIR SCENARIO KEEPS BOTH CONTRIBUTIONS FOR TIER A AND TIER B THE SAME.
AND THE SCENARIO RIGHT NOW, UMT, RA AT A 2.75 MULTIPLIER, TIER B HAS A 2.5 MULTIPLIER.
IT, IT ASSUMES THAT AS OF JANUARY 1ST, 2026, THE MULTIPLIER FOR TIER A WILL GO DOWN TO 2.5.
UH, THE OTHER THING THAT THEY'VE ASKED US TO MODEL, WHICH IS A COLA MAXIMUM OF 3% FOR ALL MEMBERS, INCLUDING CURRENT RETIREES.
SO IT DOES PROVIDE A COST SAVINGS FOR IN FIVE YEARS OF APPROXIMATELY $10 MILLION AND A COST SAVINGS OVER 30 YEARS OF APPROXIMATELY 300 MILLION.
SO WHY, WHY DON'T WE RECOMMEND THIS? AND THE REASON WHY IS FOR A FEW THINGS.
ONE, AS DAVID NOTED, WE HAVE 900 EMPLOYEES THAT ARE ELIGIBLE TO RETIRE.
AND SO A CHANGE IN THEIR BENEFITS WILL POTENTIALLY FORCE THEM TO RETIRE SOONER.
SO IT'S KIND OF AN UNINTENDED CONSEQUENCE BECAUSE NOW WHAT WE'VE DONE, IF THEY RETIRE ONE, THERE'S A PAYOUT OF STICK AND VACATION PAY, WHICH IS AN IMMEDIATE $11.4 MILLION OUTFLOW FOR THE CITY IF THEY HAD TO PAY THAT FOR ALL 900.
ALSO, WHEN YOU THINK ABOUT IT, IF THE 900 PEOPLE'S 900 OUT OF 7,600, RIGHT? SO IF THEY LEFT, THEN THE CONTRIBUTIONS TO THE FUND WOULD GO DOWN, RIGHT? BECAUSE PAYROLL WILL GO DOWN, OUR LIABILITIES WILL GO UP.
'CAUSE NOW PEOPLE THAT WE DIDN'T, WE, WE KNOW, WE ASSUME A STEADY STREAM OF RETIREMENTS, IF WE HAD A MASS OUTFLOW OF RETIREMENTS, OUR LIABILITIES WILL GO UP.
SO I THINK OUR ISSUE IS THE POTENTIAL COST SAVINGS THAT WE MAY HAVE.
IT MAY, UH, WE MAY NOT RECEIVE THOSE COST SAVINGS AND IT MAY COST US MORE IN, IN THE, IN, IN THE CURRENT TIME.
ALSO THE FACT THAT WE'RE NOT GETTING THE EXTRA, UH, FUNDS FROM TIER A AS WELL.
SO THOSE ARE THE REASONS WHY, UH, WE DON'T, WE DO NOT RECOMMEND THE SCENARIO.
'CAUSE LIKE WE BELIEVE THAT, UH, IS A POSSIBILITY THAT WE WILL NOT ACHIEVE THE COST SAVINGS AND IT'LL ACTUALLY BE A STRESS ON BOTH THE FUND AND THE CITY WITH THOSE PAYOUTS.
SO ON PAGE 24, JUST IN SUMMARY, UH, FIRST, UH, THE LONG-TERM INVESTMENT PERFORMANCE SINCE 1985 WE'VE SHOWN YOU IS EXCEEDS A 7.25% ACTUARIAL RATE RETURN.
AS WE STATED IN 2016, WE ACTUALLY LOOKED AT 40 DIFFERENT SCENARIOS, UM, AND FOR NEW
[01:25:01]
HIRES, WHICH SAVED OVER $2 BILLION AND WAS NOTED ABOUT IT IN THAT, IN THE ANALYSIS, WHICH, UM, WAS APPROVED BY THE BOARD AND THE COUNCIL AND THE VOTERS APPROVED BY 69%.THAT ANALYSIS NEVER ASKED FOR ADDITIONAL MONEY.
SO WE AT THAT POINT, UM, SO OUR RECOMMENDATION IS THAT THE, WE DO GO TO THE ACTUAL DETERMINED CONTRIBUTION RATE OVER A FIVE YEAR STEP UP THAT THET RA EMPLOYEES DO INCREASE THEIR CONTRIBUTION RATE, UM, TO 14%.
UH, JUST TO REMIND YOU THAT WE, THIS PLAN, UM, WAS PRELIMINARILY, UM, PRELIMINARY DETERMINATION.
LEMME MAKE SURE I USE EXACTLY THEIR LANGUAGE.
SO THEY HAVE REVIEWED IT AND FELT THAT THIS WOULD SATISFY THE REQUIREMENTS.
AND THEN IN TERMS OF A TIMELINE WITH COUNSEL APPROVAL, UH, IN AUGUST, IT WOULD GO TO A NOVEMBER 20, 24 BALLOT.
AND IF THE VOTERS APPROVED IT, THEN IT WOULD BE EFFECTIVE ONE ONE 2025 OR OCTOBER 1ST, 2025, WHICHEVER WE WORK OUT IS BEST FOR THE CITY.
AND FOR, UH, PAGE 25, JUST TALKED A LITTLE BIT ABOUT THE TIMELINE, UM, GOING FORWARD AND IT JUST ALSO HIGHLIGHTS SOME OF THE THINGS THAT WE'VE DONE IN THE PAST.
AND WITH THAT, I WOULD OPEN IT UP AND SEE IF THERE'S ANY QUESTIONS.
I KNOW WE'RE GONNA BE OVER FIVE O'CLOCK, SO IN ANYONE WHO HAD TO LEAVE EARLY, BE SURE LET ME KNOW.
UH, NUMBER ONE, WHAT WE'RE GONNA TRY TO DO, UM, TRY TO STICK TO A DIRECT QUESTION THAT PERTAINING TO THE PRESENTATION, YOU KNOW, LET'S TRY TO BE DIRECT AND MAKE SURE, BECAUSE WE GOT ANOTHER BRIEF WE GOTTA DO.
AND I WANNA SUMMARIZE AT THE END WHAT WE PROBABLY GONNA DO WITH OUR RECOMMENDATION STARTING WITH CHAIRMAN BENISON.
UM, IN THE INTEREST OF TIME, I'M JUST GONNA JUMP RIGHT INTO 'EM.
UM, YOU'RE TALKING ABOUT THE 900 THAT ARE ELIGIBLE TO RETIRE, AND YOU SEEM TO THINK THAT HA HAVING A CHANGE WOULD ACTUALLY FORCE MORE PEOPLE TO RETIRE SOONER, BUT ACTUALLY WOULDN'T IT MORE LIKELY KEEP THEM HERE SO THAT THEY HAD MORE YEARS OF SERVICE AND THEY'D HAVE MORE TIME TO HAVE AN AVERAGE PAY THAT'S HIGHER? YOU DON'T KNOW THAT THAT WOULD ACTUALLY FORCE PEOPLE TO LEAVE? UH, UH, I WOULD SAY THAT I, AND I THINK WE'VE SEEN IT.
I MEAN OUR, WHICH IS NICE IS THAT THE DALLAS EMPLOYEES ARE HIGHLY DESIRABLE.
WE'RE SEEING MEMBERS GO TO OTHER DIFFERENT CITIES THAT MAY HAVE DIFFERENT FUNDS AT OR DIFFERENT PAYMENT.
SO I FEEL THAT IF THEY FEEL THAT GOING FORWARD THEY MIGHT GET A BETTER DEAL AT ANOTHER CITY, THAT, THAT, THAT AND THE SKILLS THAT THEY'VE, UH, EARNED AS FAR AS, UH, WITH THE WATER OR PARKS, I, I DO FEEL THAT THEY HAVE OPTIONS AND I AM VERY CONCERNED ABOUT THE FACT THAT WE MIGHT HAVE, UH, OUTFLOW OF RETIREMENTS AND UM, AND THEREFORE INCREASING OUR LIABILITIES AND DECREASING THE AMOUNT OF MONEY COMING INTO THE FUND.
AND OF COURSE YOU'RE TALKING ABOUT IT FROM ONLY A PENSION PERSPECTIVE.
IN MY CASE, I WOULD MOST, I'D BE VERY DESIRABLE OF HAVING A REDUCED NUMBER OF EMPLOYEES FOR THE CITY BECAUSE WE HAVE A HUGE COST SAVINGS ON OUR GENERAL FUND ON SALARIES.
UM, SO I WANNA ASK YOU SPECIFIC TO YOUR PLAN.
WOULDN'T IT BE TRUE THAT AN EMPLOYEE THAT'S ONLY BEEN HERE FOR TWO YEARS, THREE YEARS, WOULD ACTUALLY NOT TAKE THE FULL CONTRIBUTION THAT'S GONE INTO THE PENSION? THEY WOULD ONLY TAKE THE AMOUNT THAT CAME FROM THEIR PAY, BUT THE CITY'S CONTRIBUTION TO PENSION FOR THEM, DOESN'T THAT STAY RETAINED IN THE PENSION? SO TO ANSWER YOUR QUESTION, UH, AN EMPLOYEE WHO HAS NOT REACHED A TENURE TO BE VESTED WITH THE PLAN, IF THEY DECIDE TO LEAVE YES, THEY'RE REFUNDED THEIR AMOUNT.
THE BALANCE DOES STAY WITH THE PLAN.
SO IT'S ACTUALLY ADVANTAGEOUS WHEN YOU HAVE TURNOVER TO THE PLAN.
AND IS THAT INCLUDED IN YOUR RETURNS OR NO? WHEN YOU TALK ABOUT PLAN RETURNS, IS IT ONLY ON AMOUNT INVESTED OR DOES THAT INCLUDE DOLLARS THAT WERE RETAINED FROM EMPLOYEES THAT LEFT? WELL, OUR ACTUALLY DOES AN ASSUMPTION AS FAR AS TURNOVER BASED ON HISTORICAL TURNOVER FOR THE CITY.
UM, SO WE DO LOOK AT THAT, BUT WE DON'T LOOK AT SOME SORT OF INCREASED IN TURNOVER.
UM, SO WE, WELL, SO WE DO HAVE A, A SMALL ALLOCATION IN TERMS OF WHAT WE THINK IF PEOPLE LEAVE BEFORE FIVE YEARS.
I MEAN, SO ASSUMPTION FOR THAT.
BUT WE DON'T, UH, YOU KNOW, WE, WE BELIEVE IT'S GOOD TO HAVE LONG-TERM EMPLOYEES THAT WORK FOR THE CITY THAT, UM, SO THAT'S, UH, WELL THAT'S THE INTENTION OF THE PENSION, CORRECT.
SO CAN YOU TELL US WHAT IS THE AVERAGE, UM, AMOUNT OF, UH, WORKING TIME THAT YOUR, UM, YOUR PLAN PARTICIPANTS, I'M SORRY, I WANNA MAKE SURE I SAY IT RIGHT, THAT YOUR RETIREES HAVE HAD AS WELL AS PLAN PARTICIPANTS.
AND THEN IF YOU COULD TELL US WHAT ARE YOUR ASSUMPTIONS FOR HIRING THAT ARE GOING FORWARD BECAUSE
[01:30:01]
THEY MIGHT NOT HAPPEN.AND THEN WHAT ARE YOUR ASSUMPTIONS FOR TURNOVER? SO SEVERAL QUESTIONS I WANNA SEE IF I CAN'T, SIMPLE FACTS THOUGH.
I WANNA HIGHLIGHT JUST A COUPLE THINGS.
AND I, I AM THE FORMER HR DIRECTOR, SO I WANNA SPEAK TO RETENTION A LITTLE BIT.
THE HISTORY HAS BEEN SINCE 2003, ANYTIME THERE'S BEEN BENEFIT REDUCTIONS, EMPLOYEES NEED, THAT'S JUST A FACT.
UH, SO ANYTIME THAT YOU ASSUME YOU'RE GONNA REDUCE BENEFITS, YOU CAN ASSUME THAT THOSE EMPLOYEES WHO ARE ELIGIBLE, A LARGE PERCENTAGE OF THEM WILL CONSIDER TO ANSWER YOUR OTHER QUESTIONS.
IF I CAN GO IN ORDER, AND I MAY FORGOT ONE OR TWO, UM, BUT I THINK WHAT YOU'RE SAYING IS WHAT DO WE SEE AS A TENURED BASED STRUCTURE FOR EMPLOYEES? WE CAN'T REALLY SPEAK TO THAT.
AND I'M SURE THE HR DIRECTOR WILL HAVE THOSE STATISTICS.
WHAT WE CAN TALK TO YOU ABOUT IS THE ELIGIBILITIES THAT WE LOOK AT FOR TRA, UH, 30 YEARS OF SERVICE FOR THE RULE OF 78.
I'M NOT ACTUALLY ASKING FOR THE PLAN DESIGN.
I'M SAYING WHAT IS CURRENTLY OF THE PEOPLE WHO ARE PART OF A PENSION PLAN, WHAT IS THEIR TENURE? AND THEN OF YOUR RETIREES, WHAT WAS THEIR WORKING TENURE WHILE WHILE THEY WERE, UM, ACCRUING? WELL, WE'LL HAVE, YEAH, WE'LL HAVE TO PROVIDE THAT TO YOU.
WE CAN PROVIDE THAT THROUGH THAT.
THAT'S ACTUALLY IN OUR ACTUARIAL EVALUATION.
WE ACTUALLY HAVE THAT BY CATEGORY.
AND THEN, SO WE CAN PROVIDE THAT, THAT TO YOU.
AND THE THIRD THING TO PROVIDE THAT PLEASE, IS YOUR ASSUMPTIONS ON OH, HIRING AND TURNOVER.
THANK YOU MR. MINISTER, MAYOR PRO.
TIM, IF I MAY, YES, MR. JACK, UM, ANYTHING THAT'S ASKED THAT WE DON'T ANSWER TODAY, I WILL ADD TO MY ROW LIST AND, AND TRY TO GET THOSE TO YOU AS QUICK AS I CAN.
WELL, SOME OF THOSE WERE ALREADY ON THE LIST, BUT WHAT I WAS GONNA SAY, I THINK THOSE WERE ALREADY ON THE LIST.
UH, THANK YOU FOR, UH, PAGE NINE.
IT, UH, GIVES US A GOOD SNAPSHOT GLIMPSE OF WHAT SOME OF OUR EMPLOYEES ARE, ARE MAKING.
UM, I WOULD ALSO LIKE TO REQUEST THOUGH, WHAT SOME OF OUR, UH, EXECUTIVE CO UH, JUST TO HAVE A COMPARISON OF, OF A SCALE OF, OF DIFFERENT JOBS WITHIN CITY HALL, UH, OF WHAT THE, OF WHAT THOSE BASE PAYS ARE, UM, THE IMPACT OF, OF DECREASING IN ACTIVE EMPLOYEES.
IF WE WERE TO DECREASE THE AMOUNT OF STAFF MEMBERS BUT INCREASE THEIR SALARY OR THE BASE PAY GOES UP, HOW DOES THAT AFFECT THE OVERALL, UH, FUND? I, I WILL, I WILL JUST SAY THIS, UH, ONE, WE WON'T BE ABLE TO PREDICT, UH, THE TENURE.
IF YOU MAKE ADJUSTMENTS, WE'LL JUST TELL YOU THAT WE ARE RESPONSIBLE FOR MANAGING THE RESULTS.
UH, AS FAR AS, UH, YOUR QUESTION REGARDING IT, COULD YOU REPEAT THE SECOND QUESTION? 'CAUSE SURE.
I WANNA MAKE SURE THAT WE'RE CLEAR ON IF THE ACTIVE EMPLOYEES WENT DOWN, THE NUMBER OF ACTIVE EMPLOYEES WENT DOWN, BUT THE, THEIR BASE PAY WOULD INCREASE.
HOW WOULD THAT AFFECT WHAT I WOULD SAY WE LOOK AT PAYROLL GROWTH, THE ENTIRE PAYROLL.
SO IF YOU REDUCE THE NUMBER OF EMPLOYEES AND INCREASE THEIR PAY, IT'S A QUESTION IS WHETHER OR NOT IS THAT A WASH, IS THAT 0% GROWTH OR IS THAT TWO ONE OR TWO OR THREE? THAT'S WHAT WE LOOK AT IS PAID NOT THE NU WE DON'T LOOK AT THE NUMBER OF EMPLOYEES.
CHAIRMAN STEWART? THAT'S ONE WILLIS.
SO WE'VE ISSUED THE OBS FOR THIS FUND BEFORE.
SO THEN THAT'LL ROLL OFF IN 35.
AND WE'RE SAYING THAT CAN BENEFIT THE FUND THAT WE'RE NOT HAVING TO PAY THAT DOWN ANYMORE.
I MEAN, MAYBE I'M GETTING OUT OF THIS, BUT I MEAN, HOW, HOW, HOW ARE THOSE FUNDS USED? I MEAN, IT SEEMS LIKE WE'RE STILL IN NEED HERE.
ARE YOU SAYING IT'S JUST THE DECREASE IN HEADCOUNT THAT IS RESULTED IN COMING BACK TO THE WELL OR WHAT UH, YES.
SO IT IS, IF YOU LOOK AT PAGE 11, IT'S THE DECREASE IN THE PAYROLL GROWTH.
AND SO THEREFORE THERE WERE LESS CONTRIBUTIONS COMING INTO THE FUND IS, YOU'LL SEE WE ISSUED THE BONDS IN 2005, OR THE CITY ISSUED THE BONDS IN 2005 AND YOU'LL SEE THAT IT MATCHED ALL THE WAY UP UNTIL THE GREAT FINANCIAL RECESSION RIGHT UNTIL 2008.
AND THAT'S WHEN THE CITY DID WHAT THEY NEEDED TO DO AND IN ORDER TO MANAGE THE BUDGET.
AND THERE WAS A SHARP DECREASE IN THE NUMBER OF ACTIVES.
THE OTHER RE SO AS A RESULT OF THAT, UM, NOT A RESULT OF THAT, BUT GOING FORWARD WE DID THE CHANGES FOR TIER B.
SO WE REDUCED THE FUTURE LIABILITIES BY 2.15 BILLION.
THE REASON WE ARE BACK HERE IS BECAUSE THE PENSION REVIEW BOARD CHANGED THE GOALPOST.
WE, THE CHANGE PENSION REVIEW BOARD MOVED THAT TO 30 YEARS AND WE HAD TO BE AND HAVE A PLAN DONE BY SEPTEMBER 1ST, 2025.
[01:35:01]
THAT IS WHY, UM, YOU'LL, YOU'LL SEE THAT FOR THE TIER B MEMBERS, WE'RE AT 58%.OUR NORMAL COST IS GOING DOWN JUST HOW WE PREDICTED.
SO WE ARE ON OUR WAY, BUT WE HAVE TO GET THERE SOONER THAN WE HAD A PLANNED ON BECAUSE THE GOAL POST HAS CHANGED.
AND I MEAN, I, YOU KNOW, I TOO DON'T THINK WE'RE LOOKING TO ADD A LOT OF HEAD COUNT.
SO WE'RE, UM, WE'RE WANTING TO, TO, UM, BE VERY EFFICIENT IN THAT AREA.
AND SO, UM, YOU KNOW, I DON'T KNOW THAT THAT'S GONNA BE SOMETHING THAT'S GOING TO HELP THE FUND IN THE NEAR TERM, BUT I TOO HAVE SOME CONCERNS AROUND PAGE 23 AND THE 900 EMPLOYEES ELIGIBLE TO RETIRE.
I MEAN, WE'VE ALSO, THE CITY HAS SWEETENED THE POD IN SOME WAYS IN LOOKING AT, YOU KNOW, EVEN THOUGH THE MARKET RATE PAY MAY BE LOWER, I KNOW THAT THERE HAVE BEEN IMPROVEMENTS MADE.
UM, AND THEN ALSO ON THE BENEFITS SIDE, I THINK, YOU KNOW, THERE, THERE HAVE BEEN SOME, UM, SOME IMPROVEMENTS MADE THERE.
SO I DON'T KNOW THAT WE'D BE LOOKING AT A 900 PERSON EXODUS.
HOWEVER, I DO APPRECIATE YOUR BACKGROUND IN HR AND, AND THE INSIGHT THAT THAT GIVES.
UM, AND THEN GOING BACK TO PAGE 19 OR WHERE YOU START TALKING ABOUT THE CITY'S CONTRIBUTION.
SO YOU'RE SAYING WE WOULD INCREASE THIS BY 2% THE FIRST YEAR, THEN ANOTHER 2%, THEN ANOTHER 2%, THEN ANOTHER 3%, AND THEN OKAY.
'CAUSE WE WANTED A FIVE YEAR STEP UP PLAN.
AND SO THAT, THAT IS WHY THERE IS THE STEP UP THE FIRST YEAR, UH, OF THE 2%, ABOUT 0.68% WILL BE THE EMPLOYEES.
AND THEN FROM THAT POINT, SO WE'VE WORKED WITH, UM, THE CFO AND STAFF TO MAKE SURE THAT THAT STEP UP, UH, PLAN HAS BEEN, UM, THAT WE PROVIDED THOSE NUMBERS FOR THEM.
BUT WE ARE COMMITTED TO GIVING YOU A 30 YEAR LOOK MM-HMM.
AND WHAT THAT WOULD LOOK LIKE FOR YOUR, FOR THE, OR HE WOULD PROVIDE FOR THE BUDGET.
SO YOU SAY IT'S A 3% PAYROLL, IT DOESN'T HEAD COUNT, DOESN'T MATTER.
IT'S ABOUT, NO, IT'S PAYROLL GROWTH.
AND SO JACK, MY QUESTION IS WHAT DOES THAT EQUATE TO? DO YOU HAPPEN TO KNOW THAT NUMBER AT 3% PAYROLL GROWTH? SO CHERYL, DO YOU HAVE THE PAYROLL THAT YOU'RE USING FOR YOUR ASSUMPTIONS? OH YEAH.
WILL YOU HAVE A MIC JACK? WE GO TO THE MIC WHEN YOU TALK.
YEAH, MS. BLACKMAN, I APOLOGIZE, BUT LET US GET YOU THAT.
WE'LL I GUESS GUESS MY QUESTION IS, IS THAT YEAR OVER YEAR TOO? IS THAT IS YES, IT IS.
SO I MEAN, UH, WE GONNA PLAN TO DO 3% PAY.
I MEAN, 'CAUSE THAT ASSUMPTION AS I TALKED TO CHERYL ABOUT THIS, IT, IT, THAT MATTERS.
I MEAN, UH, YOU'VE GOTTA PUT THAT IN THE PIPELINE.
AND IF WE'RE NOT GONNA DO THAT, WHAT DOES THAT DO TO THE OVERALL PLAN? RIGHT? AND, AND SO HAVE A SUIT IN OUR BUDGET.
WE TURN THAT MIC ON, WE PROBABLY CAN'T HEAR YOU.
HOW ABOUT THAT? YEAH, A LITTLE BETTER.
UM, SO AS YOU KNOW, WE'VE HISTORICALLY, AT LEAST FOR THE LAST 5, 6, 7 YEARS, UH, HAD AN AVERAGE MERIT POOL FOR NON-UNIFORM EMPLOYEES OF 3% HAS KIND OF BEEN OUR STANDARD.
AND I BELIEVE THAT'S THE NUMBER THAT CHERYL HAS BEEN USING.
SO IT'S REALLY MORE ABOUT THAT GROWTH AND THE EQUITY ADJUSTMENTS THAT WE'VE BEEN DOING, TRYING TO MOVE UP THE LOWER, UH, PAID EMPLOYEES KEEPING UP WITH THE MIT LIVING WAGE.
UH, AND THOSE TYPES OF ADJUSTMENTS THAT WE'VE MADE HAVE GROWN OUR, UH, UH, PAYROLL NUMBER.
IT'S NOT NECESSARILY THE HEAD COUNT AS CHERYL MENTIONED.
YEAH, IT'S REALLY INCREASING THE SALARIES.
BUT LET US GET YOU THE NUMBER THAT WE HAVE IN RIGHT NOW AND, AND GIVE YOU SOME MORE NOTICE.
'CAUSE IF WE DO HAVE A RE REDO IN OUR REF, THEN THAT WILL AFFECT ALL THIS AS WELL, IF DON'T, EVEN IF YOU'RE RAISING SALARIES AND YOU REDUCE EMPLOYEES.
AND MY NEXT QUESTION IS, UH, WHAT IS THE TIMELINE ON THIS? I KNOW YOU'RE NOT PREPARED TO MAKE IT.
YOU'RE GONNA GO BACK AND PLUG THESE IN AND LOOK AND SEE WHAT IT IT DOES FOR THE CITY.
OUR, OUR CURRENT PLAN WOULD BE TO TAKE, UH, BOTH PLANS TO FULL COUNSEL ON JUNE THE 18TH.
UH, WE WOULD LIKE TO HAVE SOME TYPE OF APPROVAL ON PLANS ON JUNE THE 26TH.
UH, AS CHERYL MENTIONED, IF ANYTHING NEEDS TO GO TO THE VOTERS, UH, WE WOULD NEED TO CALL AN ELECTION BY AUGUST THE 14TH FOR A NOVEMBER ELECTION.
NOW I SAY THAT AND THEN HER PLAN IS REALLY NOT DUE UNTIL SEPTEMBER OF 25.
SO WE REALLY HAVE A LITTLE DIFFERENT RUNWAY.
WE HAVE OUR GOAL AND OUR, OUR PATH FORWARD ON IT.
BUT THERE, THERE IS OPPORTUNITY THERE IF NECESSARY.
AND LET ME JUST GO AND, AND IN THIS, UH, STATE MANAGER TO, UM, QUESTION TO YOU.
I KNOW THIS IS GONNA AFFECT OUR BUDGET.
YOU KNOW, WE DID HAVE A BUDGET LAST WEEK.
WE TALKED ABOUT A BUDGET, WHAT THE PLAN GONNA BE.
[01:40:01]
AND THERE IS SOME QUESTION NEED TO BE ADDRESSED.YOU LOOK ON PAGE, UM, 23, YOU KNOW, WHAT, WHAT WOULD HAPPEN TO THIS FUND.
BUT, BUT ALSO JUST LOOK AT THE LAST, A COST SAVING TO THE CITY CONTRIBUTION IN FIVE YEARS.
AND WE LOOK AT THOSE NUMBERS, BUT I'M TRYING TO BE SURE THAT WE UNDERSTAND THAT WE ARE STILL IN THE BUDGET.
WE'RE STILL TRYING TO MAKE SURE ALL NUMBERS IS, IS, IS CALCULATED CORRECTLY SO WE KNOW WHAT ARE GONNA AFFECT THE BUDGET.
AND RIGHT NOW THERE IS SOME QUESTION AFTER RIGHT NOW THAT WE NEED TO RUN THE NUMBERS AND TO SEE THE CFO NEED TO RUN THOSE NUMBERS TO SEE THE MANAGER NEED TO GO BACK AND LOOK AT IT, WHY THEY'RE GONNA DO A BUDGET.
AND, AND RIGHT NOW, YOU KNOW, AND, AND TO MAKE A RECOMMENDATION, WE ARE SAYING, OKAY, THIS IS WHAT WE'RE GOING FORWARD, BUT WE'RE STILL WORKING TOGETHER TO COME UP WITH A PLAN TO HOPEFULLY IN OUR NEXT MEETING.
I BELIEVE ON THE 18TH, WE ARE NOT PROBABLY GONNA HAVE A MEETING BECAUSE, UH, I THINK THEY PROBABLY BE COUNCIL, I'M NOT FOR SURE.
SO THERE MIGHT BE ANOTHER SPECIAL CALL MEETING A CERTAIN DAY.
AND WE PROBABLY KNOW THAT SOMETIME, MAYBE BEFORE THE END OF THIS WEEK.
SO I DON'T LET TO SEE THE MANAGER KIND OF TELL YOU THE SCHEDULE.
'CAUSE THE SCHEDULE'S GONNA CHANGE A LITTLE BIT BECAUSE WE'LL HAVE ANOTHER DATE BECAUSE THE 18TH IS NOT GONNA BE THEIR DATE.
SO WE ARE CURRENTLY WORKING TO SEE IF WE CAN FIND AN ALTERNATIVE DATE FOR JUNE THE 18TH.
UM, THAT DATE IS STILL THERE CURRENTLY IT HASN'T BEEN CANCELED, BUT WE KNOW THAT WE HAVE SEVERAL CITY COUNCIL MEMBERS PLANNING TO BE OUT OF THE CITY ON THAT DATE.
AND WE DEFINITELY WANTED TO MAKE SURE THAT WE HAD, UM, COUNCIL MEMBERS PRESENT FOR THE, NOT ONLY THE PENSION CONVERSATION, BUT WE DO HAVE SOME BUDGET DISCUSSIONS THAT WE NEED TO DO ON THAT DATE AS WELL.
SO WE'RE, AND WE ACTUALLY NEED TO FINISH UP OUR CHARTER REVIEW AMENDMENT PROCESS.
SO WE'LL BE SHARING MORE OF THAT INFORMATION HERE WITH THE CITY COUNCIL AS IT RELATES TO THIS PIECE.
WE'LL CONTINUE TO WORK WITH, UM, OUR ERF REPRESENTATIVES TO MAKE SURE THAT WHEN WE COME BACK, THEN WE CAN COME BACK WITH THAT SOLID RECOMMENDATION AND THEN BE ABLE TO SHOW YOU OUR OVERALL BUDGETARY IMPACT AS WELL.
I ASK, UH, THE COMMITTEE IN THE QUESTION THAT YOU HAVE, UH, YOU CAN TALK TO MSAU ONE ON ONE TO GET THE, UH, THE, THE BOARD, YOU KNOW, THERE MIGHT BE, UH, A, A, UM, A NOTICE TO GET BACK WITH OUR COLLEAGUES, WHATEVER.
THEN THAT WAY WHEN WE DO HAVE OUR NEXT MEETING, THOSE QUESTIONS WOULD BE ALREADY ADDRESSED AHEAD OF TIME.
YES, JUDGE, I MEMBERS
BUT WE DIDN'T HAVE THE SAME THING DONE FOR ERF AND I ASKED FOR THAT.
UM, I ALSO ASKED FOR A DISCUSSION ABOUT WHAT IF WE DISCONTINUED THE PENSION ALTOGETHER AND HAD A PORTABLE RETIREMENT PLAN FOR EMPLOYEES, WHICH IS ACTUALLY MARKET BASED.
IT'S NOT MARKET BASED TO HAVE A PENSION IN THIS ENVIRONMENT.
AND SO WE HAVEN'T EVEN EXPLORED EITHER OF THOSE.
AND I'M, I'M CONCERNED ABOUT THE TIMETABLE O OKAY, AND LET ME KIND OF JUMP INTO THAT.
THE COW RUN ACTUARY WAS, WAS, UH, PUT ON THEM BY THE STATE PENSION.
YOU KNOW, UH, THEY DO HAVE A ACTUARY, YOU KNOW, THAT THEY CAN GET TO THAT.
SO TO DO THAT WITH UH, UH, MESSIAH AND JACK IS NOT TO PUT ON THE SPOT, BUT WE AREN'T IN A PROCESS TO LOOK AT A PROCESS, LOOK AT EACH PENSION DIFFERENT 'CAUSE THIS IS EMPLOYEES PENSION.
UH, WHEN YOU GO TRY TO GO TO THE PRIVATE SECTOR, YOU HEAR THE, THE CONCERN THERE, IT'S A DIFFERENT MARKET.
SO I DON'T WANNA COMPARE APPLICANT'S ORANGES.
WHAT I WANT TO DO IS, NUMBER ONE, WE HAVE THIS FUND TODAY, THE EMPLOYEES FUND.
AND SINCE WE DO HAVE AN EMPLOYEE FUND, LET'S FOCUS ON THAT.
MAKE SURE THEY, UH, A PLAN THAT DOES COUNCIL CAN PAY ON THE BUDGET, A 30-YEAR-OLD PLAN, HOW THEY'RE GONNA GET PAID FOR.
MAKE SURE THE EMPLOYEES, WHEN THEY LEAVE, THEY GET A BENEFIT.
WE DON'T FOCUS THAT WE NEED TO CHANGE HOW THEY INVEST TO CHANGE THE GOVERNMENTS AND ALL THAT.
THAT'S SOMETHING DOWN THE ROAD.
BUT WE DO KNOW THEY FUND, IT'S ALREADY 7% FUNDED.
SO THEY DID SEND A PREVIEW TO THE PENSION BOARD AND THEY LOOK AT THE, OH, YOU'RE DOING GOOD, YOU ON SCHEDULE AND A PLAN, BUT THEY NOT IN THAT HIGHWAY OR HIGH WATER RIGHT NOW.
BUT, BUT, BUT WE ARE IN A PROCESS.
WE'RE GONNA WORK THROUGH THIS.
WE'RE HAVE A CONVERSATION WITH THAT.
SO WITH THAT, JACK, CAN YOU ADD A LITTLE BIT TO THAT PLEASE? YES.
I JUST WANTED TO ADD THAT, THANK YOU MS. MENDELSON, UH, ABOUT THE QUESTION REGARDING LIKE THE 401K PLAN AND SO FORTH.
UH, DELOITTE HAS BEEN ASKED AND THEY, THEY'RE FINISHING THAT UP AND IT WILL BE PROVIDED TO THE COMMITTEE.
SO WE DO HAVE THE QUESTION AND WE DO PLAN TO ANSWER IT.
SO THE THE POINT THOUGH IS THAT CHIRON WAS AN INDEPENDENT ACTUARY AS OPPOSED TO DELOITTE, WHICH IS THE CITY'S ACTUARY.
[01:45:01]
AND HAVING SOMEBODY OUTSIDE LOOK AT THIS AS OPPOSED TO AN ACTUARIAL FIRM THAT WE DIRECT IS VERY DIFFERENT.AND SO THAT WAS WHAT MY WISH WAS.
AND YOU KNOW, IF IT'S NOT GONNA HAPPEN, IT'S NOT GONNA HAPPEN.
WELL, WELL, I I AIN'T GONNA SAY NOTHING.
IT'S NOT IMPOSSIBLE IF, IF THAT'S A REQUEST OF THE BODY OF THE COUNCIL THAT'S AHEAD, LET US LOOK AT ANOTHER ACTUARY TO LOOK AT IT AND FEEL LIKE THAT.
WHAT WE SHOULD DO, UH, IS THAT BE AN ADMINISTRATION OF ACTION, UH, TO BE A COUNCIL OF ACTION, DEPENDS ON WHAT'S IT COST AND HOW LONG THEY TAKE TO GET IT DONE.
BUT THIS PLAN IS ON SCHEDULE TO, TO BE HERE BEFORE GET DONE BEFORE THE END OF THE YEAR.
SO NOTHING THAT, THAT IS POSSIBLE.
I DON'T, I'M TRYING TO PUSH EVERY QUESTION YOU ASK IS A QUESTION THAT WE'RE GONNA GET ADDRESSED, BUT WE ARE NOT GONNA SAY, WE'RE NOT GONNA DO THIS BECAUSE WE DONE HAD A CAR RUN DO ACT, BUT THAT WAS FO FORCE ON THE, THE UNIFORM, BUT NOT FORCE ON THE INDEPENDENT.
WE'RE GONNA TRY TO COMMUNICATION WORK TOGETHER, GET THIS DONE.
AND ONE THING I WANNA MAKE SURE THE EMPLOYEES OUT THERE ARE GONNA BE HAPPY ON THE RETURN AND MAKE SURE WE DON'T HAVE EMPLOYEES LEAVING.
THEY'RE GONNA STAY AND, AND MAKE SURE THEY GET THEIR RETIREMENT CHECK WHEN THEY RETIRE.
BUT CHAIR, THAT'S ACTUALLY MY POINT IS THAT WE DO HAVE EMPLOYEES IN THIS DAY AND AGE THAT DON'T ACTUALLY INTEND TO STAY, STAY FOR 20 YEARS.
RIGHT? WELL, I, I DON'T, I DON'T KNOW.
AND SO THEY HAVE EXPRESSED AN INTEREST TO HAVE A MORE PORTABLE PLAN.
AND SO WE TALK ABOUT MARKET-BASED WAGES, BUT THIS IS A BENEFIT THAT IS ACTUALLY NOT MARKET.
AND SO MY, MY WHOLE POINT IN THIS IS TO SAY THAT CHIRON WAS FORCED ON ALL OF US, RIGHT? BUT IT ENDED UP BEING SOMETHING THAT, UM, ALMOST EVERY COUNCIL MEMBER I HAVE HEARD EXPRESS, UM, HOW POSITIVE THAT EXPERIENCE HAS BEEN AND HOW INSTRUCTIVE AND INFORMATIVE.
AND SO I WOULD JUST LIKE TO REQUEST THE SAME SORT OF INFORMATION THAT WE HAVE NOT YET HAD.
I I, I WOULD AGREE WITH, WITH ONE THING.
BUT WHEN YOU CHAIN INVESTORS, HOW YOU GONNA INVEST YOUR MONEY? YOU'RE NOT GONNA GET IT DONE OVERNIGHT.
YOU'RE GONNA HIRE ACTUARY, YOU'RE GONNA HIRE ALL THESE PEOPLE, COME IN AND, AND, AND REVIEW YOUR, YOUR PORTFOLIO.
IT GONNA BE DONE, IT GONNA GET THAT DONE.
SO THAT'S SOMETHING I DON'T BELIEVE YOU GET DONE IN TWO DAYS OR A MONTH OR WHATEVER TAKES SOME TIME.
I RUN BEEN IN THIS MARKET WITH THE, WITH A UNIFORM FOR ALMOST A YEAR, SINCE 2017.
WHEN THEY START GET THERE, LET, LET HARDLY IT TAKE AND WE NOW GETTING INTO THE DETAIL WHAT IT CAN GET DONE.
SO I DON'T WANNA CONFUSE THIS CHIRON BECAUSE CHIRON QUOTE THIS ACTUARY, THERE ARE NEW ACTUARY AND, AND I HEAR WHAT YOU'RE SAYING, DELOITTE IS A CITY ACTUARY, BUT ALSO CHIRON IS A ACTUARY THAT OVER THE PENSION WHO WORKED WITH THE PENSION IS NOT MUCH DIFFERENT BECAUSE THEY, YOU KNOW, THEY GET PAID BY THE PENSION.
SO I DON'T WANT TO, YOU KNOW, PUT APPLES ON.
BUT WE ARE GONNA BE TRANSPARENT TO BE OPEN TO THE PUBLIC THROUGHOUT WHAT WE ARE DOING.
SO YOUR QUESTION IS A VITAL QUESTION.
WE'RE GONNA ADDRESS THAT AND THIS AND THIS COLLEAGUE AND, AND THIS BOARD.
WE ARE GONNA MAKE SURE WHAT IS BEST TO THE RESIDENT AND ALSO WHAT VETS FOR THE CITIZEN AND ALSO EMPLOYEES AND ALSO THE UNIFORM.
UH, WITH, OH, LIKE WITH THAT, I KNOW WE GOT THE, THE NEXT PENSION, THE UNIFORM.
SO LET'S GET THERE AND LET'S GO TO HIGH LIFE.
I THINK EVERYBODY BEEN WAITING ON THIS.
UH, BUT I, I, AGAIN, I'LL APOLOGIZE, YOU KNOW, FOR UH, FOR DOING SO LONG.
BUT IT'S SOMETHING WE NEED TO HAVE EVERYONE UNDERSTAND WHAT WE'RE GOING THROUGH.
SO JACK, CAN YOU JUST GET ON THE HIGH POINT? SO WE'VE BEEN THROUGH THIS BEFORE, SO, AND THE RECOMMENDATION THAT WE ARE LOOKING AT.
JACK IRELAND, CHIEF FINANCIAL OFFICER FOR THE CITY.
SO ON SLIDE, I'LL GO QUICKLY THROUGH THIS.
UH, BUT ON SLIDE TWO JUST CONTINUING OUR DISCUSSION REGARDING THE DALLAS POLICE AND FIRE PENSION SYSTEM AND TODAY CONSIDERING STAFF'S RECOMMENDATIONS WHICH WE MADE IN DETAIL ON MAY THE 23RD.
SO ON SLIDE THREE, UH, THIS IS A SUMMARY OF THE RECOMMENDATIONS THAT STAFF MADE REGARDING A FUNDING SOUNDNESS RESTORATION PLAN FOR DPFP.
SO FIRST, UH, ACTUARIAL DETERMINED CONTRIBUTION METHODOLOGY WITH A FIVE YEAR STEP UP.
UH, WE, UH, AGREED THAT AN ACTUARIAL DETERMINED CONTRIBUTION METHODOLOGY IS APPROPRIATE BECAUSE AS YOU GO THROUGH TIME AND YOU REALIZE GAINS OR LOSSES THAT ARE DIFFERENT THAN WHAT WAS IN THE ASSUMPTION, YOU'RE CONSTANTLY MAKING THOSE ADJUSTMENTS SO THAT YOU STAY ON TRACK TO MEET YOUR FULL FUNDING IN 30 YEARS.
UH, PART OF OUR RECOMMENDATION WAS NOT TO CHANGE THE EMPLOYEE CONTRIBUTION RATES.
THE THIRD BULLET, UH, FOR OUR RECOMMENDATION WAS CONTINUE COMPLIANCE WITH HOUSE BILL 31 58 IN REGARDS TO BEING 70% FUNDED BEFORE THE AD HOC SIMPLE COLAS BECOME AVAILABLE
[01:50:01]
FOR THE RETIREES.WE DID SUGGEST MODIFYING THE METHODOLOGY TO BE BASED ON CPI, NOT TO EXCEED 1.5%.
AND THE REASON THAT WE DID THAT WAS BECAUSE THE CURRENT MODELING, THE CURRENT ACTUARIAL ASSUMPTIONS ARE BASED ON A 1.5%, BUT USING A DIFFERENT METHODOLOGY TO GET THERE.
THE A METHODOLOGY THAT'S BASED ON RATE OF RETURN, WE THOUGHT, UH, THAT A, UH, COLA METHODOLOGY THAT WAS BASED ON INFLATION RATHER THAN RATE OF RETURN WOULD BE MORE APPROPRIATE.
WE ALSO ACKNOWLEDGED THAT IF THERE'S AN OPPORTUNITY, UH, TO HAVE LUMP SUM CONTRIBUTION OR ADDITIONAL REVENUE STREAM, THAT WE WOULD REALLY LIKE TO GO UP TO, UH, A 3% COLA, UM, BASED ON CPI, UH, BUT IT WOULD ALL BE CONTINGENT UPON US BEING ABLE TO PUT SOME ADDITIONAL MONEY INTO THE FUND STILL, THIS BEING BASED ON ACHIEVING 70% FUNDING BEFORE THE COLA WOULD BE, UH, ELIGIBLE.
SO SINCE IT'S SO FAR OUT BEFORE A COLA WOULD, UH, BE EFFECTIVE, WHAT DO WE DO IN THE MEANTIME? SO WE RECOMMENDED THAT WE OFFER SOME TYPE OF SUPPLEMENTAL PAY TO BRIDGE THE PERIOD BETWEEN 2025 AND 2046.
AND AGAIN, 2046 IS WHEN IT'S FORECAST FOR THE FUND TO BE, UH, AT THAT 70% THRESHOLD.
SO WHAT WOULD THAT BRIDGE FUNDING LOOK LIKE FOR THE NEXT, UH, 20 YEARS? SO WE WOULD RECOMMEND A 1% INCREASE ADDED TO THE RETIREE BASE IN 2025, AND THEN WE WOULD ALSO MAKE AVAILABLE AN ADDITIONAL 1% PER YEAR STIPEND FOR THE YEARS 2026 THROUGH 2045.
AS LONG AS IN EACH YEAR, UH, DPFP HAD POSITIVE RETURNS NOT ADDED TO THE BASE, BUT JUST A STIPEND FOR THAT YEAR.
WE ALSO RECOMMENDED THAT WE STRENGTHEN OUR CITY OVERSIGHT.
WE ALSO RECOMMEND THAT WE CONTINUE TO REVIEW AND IDENTIFY WAYS FOR LUMP SUM CONTRIBUTION, OUR REVENUE STREAMS. AND THEN WE STILL WANT TO CONTINUE WORKING WITH DPFP TO TRY TO COME TO CONSENSUS, ALTHOUGH WE DON'T HAVE CONSENSUS ON OUR RECOMMENDATION AT THIS POINT.
SO THAT IS THE SUMMARY OF OUR RECOMMENDATION.
AND ON THE NEXT COUPLE OF SLIDES, YOU CAN SEE THE COST RELATED TO OUR RECOMMENDATION VERSUS THE DALLAS POLICE AND FIRE, UH, PENSION STAFF RECOMMENDATION.
UH, ON SLIDE FIVE IN BLUE, UH, DPFP STAFF RECOMMENDATION COST $11.6 BILLION OVER THE 30 YEARS.
THE CITY STAFF RECOMMENDATION COST $11.2 BILLION OVER THE 30 YEARS.
SO THE POLICE AND FIRE PENSION, UH, BOARD, UH, STAFF ARE REQUESTING AN ADDITIONAL $419 MILLION ABOVE WHAT THE CITY STAFF HAS RECOMMENDED.
UM, AND WHAT THAT COMES FROM IS, AS OPPOSED TO, UH, THE COLA THAT WE'VE RECOMMENDED, UH, BEING EFFECTIVE IN 2046, THEY HAVE SELECTED ONE OF THE SCENARIOS THAT CHIRON RECOMMENDED OR PRESENTED, UH, WHICH WAS A 70% PURCHASING POWER METHODOLOGY, UH, THAT COSTS MORE MONEY, AND THEN A SUPPLEMENTAL PAY.
INSTEAD OF THE 1% INCREASES THAT WE RECOMMENDED, THEY RECOMMENDED A DIFFERENT TYPE OF SUPPLEMENTAL PAY THAT'S, UH, BASED ON $5 A YEAR, TIMES, YEARS OF SERVICE TIMES, YEARS RETIRED.
UH, AND SO THAT COSTS MORE MONEY.
SO THERE TWO RECOMMENDATIONS RELATED TO COLA AND SUPPLEMENTAL PAY COST, AN ADDITIONAL $420 MILLION ABOVE WHAT THE CITY STAFF RECOMMENDATION IS.
SO ON SLIDE SIX, JUST AS A REMINDER, THIS IS A SLIDE FROM TWO WEEKS AGO, UH, PUTTING IN THE CITY STAFF RECOMMENDATION FOR THE COST OF, UH, THE PENSION VERSUS THE BOTTOM IS D PFPS RECOMMENDATION.
AND THE THIRD ROW ON EACH TABLE IS THE COST.
SO IN 25 FISCAL YEAR 25 CITY STAFF PROPOSAL IS TO COST $202.5 MILLION, WHEREAS THE POLICE AND FIRE, UH, PENSION RECOMMENDATION IS 215.4 MILLION IN FISCAL YEAR 26.
AGAIN, THAT THIRD ROW, $221 MILLION IS WHAT THE COST WOULD BE FOR CITY STAFF.
RECOMMENDATION $247 MILLION IS THE, UH, RECOMMENDATION FROM FROM THE PENSION FUND.
SO YOU CAN SEE HOW THAT IMPACTS, UH, THE SHORTFALL THAT WE HAVE.
UH, WE HAVE ABOUT A $38 MILLION SHORTFALL BASED ON CITY STAFF RECOMMENDATION.
THE SHORTFALL GROWS BECAUSE, UH, THEIR RECOMMENDATION, UH, IS MORE EXPENSIVE, AND
[01:55:01]
SO THE SHORTFALL IS GREATER.SO, UH, SLIDE SEVEN, AGAIN, THE, THE NEXT STEPS WE MENTIONED JUST A FEW MINUTES AGO, JUNE 18TH, WE'RE CURRENTLY SCHEDULED FOR BRIEFING, DEPENDING ON WHAT HAPPENS WITH THAT.
AND THEN JUNE 26, UH, HAVE SOME TYPE OF ACTION BEFORE CITY COUNCIL.
AND SO, UH, AGAIN, PAGE THREE IS JUST A SUMMARY OF OUR RECOMMENDATION.
UH, YOU'VE HEARD IT ALL BEFORE.
AND SO I, I KNOW THAT Y'ALL HAVE SENT ME SOME QUESTIONS AND I'M WORKING ON THOSE, AND I WILL GET THOSE TO YOU.
UH, AND I APOLOGIZE THEY'RE NOT ALL ANSWERED YET, BUT THERE ARE A LOT OF QUESTIONS AND I WILL GET THEM TO YOU.
SO, UH, MAYOR PROTI, THAT'S WHAT I GOT, AND I'LL TURN IT BACK TO YOU, SIR.
I KNOW IT'S COUNCIL, COUNCIL WARMAN, UH, BLACKMAN, YOU KNOW, YOU HAVE ANY QUESTION? OKAY.
SO I'M LOOKING AT PAGE THREE, AND WE'RE TALKING ABOUT THE 1% PER YEAR AS A STIPEND CONTINGENT ON DP, UM, FP POSITIVE RETURNS.
SO, I MEAN, AFTER SEEING OUR FIRST PRESENTATION TODAY AND THINKING ABOUT WAYS THAT WE CAN STRENGTHEN THIS AND INCREASE PERFORMANCE, UM, I'M REALLY EXCITED ABOUT THAT.
WHEN I SEE THESE NUMBERS, I'M FEELING A LITTLE BIT BETTER ABOUT MAYBE SOME WAYS THAT THE FUND CAN HELP DELIVER ON THIS.
AND IT DOESN'T JUST COME OUT OF THE, UH, THE TAXPAYER'S POCKET.
UM, BUT THERE'S NOTHING THAT SAYS THIS IS LOCKED IN AND WE COULDN'T COME BACK AND REVISIT THIS.
LIKE, IF THE FUND REALLY STARTS PERFORMING BETTER THAT IN FIVE YEARS OR SOMETHING, WE MIGHT COME BACK AND SAY, WE WANNA ADJUST THIS UP.
WE DO NEED TO SUBMIT A, A PLAN BEFORE NOVEMBER 1ST.
UM, UM, BUT YES, THERE'S ALWAYS OPPORTUNITIES TO, TO AMEND THE PLANS GOING FORWARD.
AND THEN ONE THING TO EXPLORE MIGHT BE, UM, WE'RE TALKING ABOUT, I THINK RIGHT NOW THE DISCOUNT RATE OR WHAT THE RETURN IS ON THE, THE FUND IS 6.5%.
THE, UH, DALLAS POLICE AND FIRE PENSION FUND USES A 6.5% ASSUMED RATE OF RETURN.
AND WHAT DOES THE ERF DO? DO YOU KNOW WHAT THEIR YEAH, THEY, THEY PER, UH, THEY'RE, UH, 7.25% IS THEIR, UH, ASSUMED RATE OF RETURN IN THEIR ACTUARIAL ANALYSIS.
WELL, I NOTICED ONE OF YOUR QUESTIONS, UM, IT TALKS ABOUT DELOITTE HAS CALCULATED THAT D PFPS, UNFUNDED ACTUARIAL ACCRUED LIABILITY WOULD DECREASE BY APPROXIMATELY 450 MILLION IF THEY USE THE 7.25% DISCOUNT RATE INSTEAD OF 6.5.
SO DELOITTE CAME UP WITH THAT.
THAT WAS DELOITTE'S CALCULATION THAT THE DIFFERENCE IN THE DISCOUNT RATE THAT'S BEING USED OR THE RATE OF RETURN THAT'S BEING USED, UM, THAT CHANGE FROM SEVEN AND A QUARTER TO 6.5 HAS A VALUE OF ABOUT $450 MILLION BASED ON DELOITTE'S CALCULATION.
OKAY, WELL THAT'S, THAT'S, THAT'S A LARGE AMOUNT OF MONEY THERE.
SO I MEAN, IT SEEMS LIKE, I DON'T KNOW IF WE CAN VISIT THAT BAR AND WHERE IT'S BEING SET.
UM, THE OTHER THING I WOULD SAY IS THIS LAST THING IS ON, UM, ON THAT SUPPLEMENTAL CHECK, UM, WE'RE SAYING THAT IT WOULD ADDITIONAL 1% PER YEAR A STIPEND CONTINGENT ON POSITIVE RETURNS THAT WOULD NOT BE ADDED TO THE BASE.
AND I THINK AT THE LAST MEETING, I THOUGHT I WAS JOKING WHEN I SAID, WHAT'S A POSITIVE RETURN 1E-08%.
AND, UH, ACCORDING TO THE ANSWER ON QUESTION 18, UH, YEAH, I WAS NOT OFF.
AND I'M JUST, I'M ASKING FOR HELP FROM THE MEMBERSHIP HERE.
YOU KNOW, THIS IS YOUR FUND AND THIS IS YOUR RETIREMENT, AND I'M JUST WONDERING IF WE SHOULD HAVE A BAR THERE THAT GIVES INCENTIVE AND GIVES INCENTIVE FOR PERFORMANCE, BUT ALSO INCENTIVE FOR VOICE.
UM, I MEAN, I THINK VOICES IN THE PAST MIGHT NOT HAVE BEEN HEARD WHEN THERE WERE CONCERNS AROUND SOME THINGS.
AND I MEAN, SPEAK UP AND I, I, I'M JUST WONDERING ABOUT WHY WE ARE AT LITERALLY LIKE 1E-06% ON THAT.
WHERE IS THAT COMING FROM? AND THANK YOU, UH, COUNCIL MEMBER.
UM, THE, THE IDEA WAS BETWEEN 2025 AND 2046, WE REALIZED THAT THAT IS A LONG PERIOD OF TIME BEFORE WE REACH 70% FUNDING.
AND THE MEMBERSHIP WILL GO A LONG TIME WITHOUT A COLA.
AND SO WE WERE TRYING TO COME UP WITH SOMETHING, ALBEIT MODEST, THAT WOULD PROVIDE SOME TYPE OF, UH, ADDITIONAL FUNDING.
WE ARE, UH, SENSITIVE TO, UH, THE MEMBERSHIP AND WANTED TO TRY TO DO SOMETHING AND NOT MAKE IT A HIGH, OBVIOUSLY WE SET THE BAR VERY LOW TO, TO ACHIEVE ANYTHING ABOVE ZERO.
UM, SO IT, IT WAS JUST OUT OF OUR EFFORT TO
[02:00:01]
TRY TO PROVIDE SOME TYPE OF ADDITIONAL FUNDING.AND I UNDERSTAND THAT IT IS ABOVE AND BEYOND WHAT THE HOUSE BILL REQUIRES, BUT THAT'S RIGHT, IT IS ABOVE AND BEYOND THE OBLIGATION.
I'M JUST, I GUESS COMING OFF OF ALL THIS, I'M JUST THINKING WHAT, WHAT ELSE CAN BE OUT THERE TO BE MORE OF A PARA OR A STICK? I DON'T KNOW.
UM, BUT I, I HEAR YOU AND I UNDERSTAND THE MOTIVATION FOR THIS, SO I'M GONNA CONSIDER THAT THAT'S IMPORTANT.
AND ONE THING THAT I WILL SAY IT WAS, I'VE ALSO HAD SOME CONVERSATIONS WITH, UH, KELLY, ABOUT IS THERE SOME OTHER WAY TO, TO DO THAT RATHER THAN IT BEING A 1%, WOULD IT BE BETTER IF IT WAS 2% EVERY OTHER YEAR OR 3% EVERY THIRD YEAR? I MEAN, JUST AS LONG AS IT COSTS THE SAME AMOUNT OF MONEY OR SO, I'M OPEN TO THE DIALOGUE ABOUT WHAT MIGHT BE A LITTLE MORE MEANINGFUL.
IT DOES, THAT DOESN'T CHANGE THE COST VERY MUCH.
AND ULTIMATELY IT MAY NOT BE SOMETHING WE NEED TO, TO ADD MUCH OF A BAR ON IN THIS CASE.
SO CHAMA STEWART? YES, JACK, CAN WE GO TO THE STRATEGIZING HERE A LITTLE BIT? WE WERE JUST TALKING ABOUT IF THE FUND BEGINS TO PERFORM BETTER, PERHAPS WE WOULD, WE WOULD HAVE SOME ADDITIONAL DOLLARS FOR THE STIPEND, BUT WOULDN'T WE WANT TO PUT THAT MONEY IN THE FUND, KEEP IT IN THE FUND SO THAT WE'RE GONNA REACH THIS 70% MORE QUICKLY? I MEAN, IF ALL OF A SUDDEN WE WAVE A MAGIC WAND AND WE'VE GOT BETTER RETURNS, THAT MEANS OUR FUND IS GROWING, RIGHT? SO, UM, EACH YEAR THE A DC IS RECALCULATED, RIGHT? AND SO BASED ON THE EXPERIENCE, IT'S GOING TO BE DIFFERENT THAN THE ASSUMPTIONS.
OKAY? SO RIGHT NOW THEY HAVE ASSUMED THE ACTUARY IS ASSUMED SIX AND A HALF PERCENT GROWTH EVERY YEAR.
OKAY? THAT'S REALLY AN AVERAGE, RIGHT? MM-HMM,
SOME YEARS YOU'RE GONNA EARN LESS THAN THAT, BUT THE GOAL IS TO AVERAGE AT 6.5.
AND SO, UH, IF WE DO, IF WE WERE TO HAVE THREE, FOUR REALLY, REALLY GOOD YEARS, WHAT THAT WOULD DO IS ACTUALLY LOWER THE CITY'S CONTRIBUTION BECAUSE THE A DC WOULD BE RECALCULATED, AH, AND WE WOULD ACTUALLY BE CONTRIBUTING A LITTLE BIT LESS.
IT DOESN'T GET, SO IT DOESN'T MOVE 70% SOONER.
IT JUST KEEPS US ON THE CORRECT PATH.
IT'S, YOU KNOW, HOW YOUR CAR, SOMETIMES YOU SAY RECALIBRATING, IT KIND OF RECALIBRATES AS YOU'RE GOING TO KEEP YOU ON COURSE.
COULD WE MAKE THE DECISION THAT WE WOULD RATHER THAT GO TOWARDS GETTING US MORE QUICKLY TO THE 70% VERSUS REDUCING OUR A DC? YOU COULD.
UH, THAT IS JUST ADDITIONAL, IT'S GONNA LAST RISK THAT YOU'RE TAKING ON, UH, IF, IF THE CITY'S GONNA TAKE ALL THE DOWNSIDE, WE'RE GONNA ACCEPT ALL THE LOSSES AND ALLOW THEM TO KEEP ALL OF THE GAINS.
OR WE COULD THEN LOOK THE DIFFERENCE.
WE COULD, YEAH, WE COULD, WE COULD DO A LITTLE OF BOTH.
I MEAN, IT JUST SEEMS LIKE IF WE'RE REAPING A BENEFIT HERE BECAUSE WE'VE REALLY ROLLED UP OUR SLEEVES AND WE'VE MADE SOME ADJUSTMENTS AND WE'RE NOW, WE'RE IN PRIVATE EQUITY AND DIFFERENT, WHATEVER DECISIONS HAVE BEEN MADE ABOUT OUR ALLOCATIONS MM-HMM.
I, I'M JUST, I'M JUST PULLING TOGETHER WHAT I'VE LEARNED IN THE LAST, YOU KNOW, HOUR AND A HALF, TWO HOURS.
UM, BUT IT, IT JUST SEEMS TO ME IF WE COULD MAKE THOSE CHANGES AND WE DO BEGIN TO SEE RE SOME BETTER RETURNS, I WOULD LIKE US TO JUST HIT THE PAUSE BUTTON AT THAT POINT AND HAVE A GROUP OF, OF A COMMITTEE OR A, OR WHOMEVER, THE COUNCIL JUST LOOK AT THAT AND SAY, HOW DO WE WANT THAT TO IMPACT OUR A DC OR OUR GETTING TO OUR 70%? I, I THINK IT'S WORTH LOOKING AT.
I MEAN, IT'S, IT'S, IT'S A LITTLE BIT PIE IN THE SKY.
WE HAVEN'T MADE THAT HAPPEN YET.
AND UM, BUT I THINK IT'S WORTH, I THINK IT'S WORTH LOOKING AT PERSON.
I THINK IT'S VERY IMPORTANT THAT GOING FORWARD, THAT WE ARE MUCH MORE ACTIVELY HAVING CONVERSATIONS YES.
WE CAN'T JUST, UM, PUT ALL THESE PIECES IN PLACE AND THEN WALK AWAY.
WE, WE REALLY GOT TO, UM, STAY FOCUSED.
AND I THINK THAT'S ONE OF THE RECOMMENDATIONS IS THAT WE GOT REPORTS REGULARLY AND, UM, AND WE'RE JUST, WE'RE CONSTANTLY EVALUATING AND ASSESSING AND, AND YOU KNOW, IT, WE, WE CAN'T SEE PROBABLY TOO MUCH INTO THE FUTURE TO KNOW HOW WE WOULD MAKE THOSE DECISIONS.
BUT I THINK I, I WOULD JUST LIKE TO SEE US CONSTANTLY MAKING THOSE EVALUATIONS.
SO, AND SO THEN BACK TO THE, JUST THE DETAILS OF THE STIPEND, I'M NOT A GOOD MATHEMATICIAN.
SO IF SOMEBODY'S, UH, PENSION, ANNUAL PENSION BENEFIT IS SAY 45,000 PER YEAR, THAT'S LIKE AN AVERAGE AMOUNT MAYBE, RIGHT? SO I BELIEVE THE AVERAGE FOR POLICE AND FIRE IS ABOUT 51,000.
UH, ERFI THINK THEY SAID THEIRS WAS 42, I BELIEVE E POLICE AND FIRE IS OF 50,000.
SO 1% OF THAT, WHEN THEY GET THEIR, THEIR STIPEND CHECK, THEY GET
[02:05:01]
FIVE.AND SO IN, UM, 2025, THAT 500 WOULD BE ADDED TO THEIR BASE AND THEY WOULD GET $50,500.
AND THEN THE NEXT, ALL THE NEXT SEVERAL YEARS, IT WOULD BE 1% OF 50,500, WHICH IS $5 MORE.
SO, UH, BUT THOSE ONLY THE FIRST ONE GETS ADDED TO THE BASE.
ALL OF THE OTHERS DO NOT GET ADDED TO THE BASE IS THE WAY WE LAID IT OUT.
OPEN TO OTHER WAYS TO SLICE THAT.
BUT THAT'S THE WAY IT'S LAID OUT RIGHT NOW AND RECOMMENDED.
SO IT'S A SMALL AMOUNT, WHICH I'M, I HAVE TO EXTRAPOLATE ON THIS 'CAUSE I DON'T HAVE THE NUMBER YET, BUT I, I'M WONDERING IF MAYBE IT'S A SMALL AMOUNT FOR THE CITY, THE STIPEND.
SO SO THE COST FOR THE STIPEND OF 1% PER YEAR OVER ALL OF THOSE YEARS? NO, JUST FOR JUST PER YEAR.
JUST HOW MUCH ARE, HOW MUCH DOES IT COST US PER YEAR? OKAY.
UH, THAT WAS NOT ONE THAT I WAS ANSWERING, BUT I I I, I WAS LOOKING AT IT WRONG.
I I'M WITH YOU NOW, BUT I THINK I ANSWERED THAT JACK.
I THINK YOU LOOK AT THE FIRST YEAR ONE 1%, IT PROBABLY COSTS ABOUT 800 SOMETHING A THOUSAND DOLLARS AND THEY KEEP GOING OVER AND OVER.
UH, THE CHART, RIGHT? SO YOU GOTTA LOOK AT IT, YOU KNOW, SO, AND I DON'T KNOW THAT THE RIGHT CHART OR NOT, YOU KNOW, BUT I KNOW WE DID A CALCULATION IF A 1%, BUT EACH YEAR, WHAT WOULD IT COST EACH YEAR AS YOU KEEP GOING UP? IT'S JUST 1%.
$850,000 AS A ONETIME PRODUCT, RIGHT? 850,000.
I HAD FIGURED IT TO BE MUCH LESS THAN THAT.
SO I'LL WE'LL THINK, BUT OKAY, SO TO DOUBLE THAT IT WOULD BE 1,000,006, SEVEN, WHATEVER.
BUT, UH, YES, CHAIRMAN, I WANT TO TRY TO MAKE SURE TO KNOW I DID RUN A NUMBER.
IF YOU DO THE 1% AND YOU LOOK AT BASED ON POSITIVE GROWTH OVER 30 YEAR, THAT COSTS ABOUT ABOUT $133 MILLION OVER 30 YEARS.
SO WE PROBABLY FIGURE THOSE NUMBERS, YOU KNOW, WE FIGURE THOSE NUMBERS, BUT IT BY 1 33 YEAR, I LOOK AT OVER 30 YEAR PERIOD.
BUT YOU LOOK AT THAT 1% EACH YEAR.
'CAUSE THEY'RE GONNA INCREASE EACH YEAR FOR 30 YEAR.
AND I DO, WE DO HAVE A CHART AND, AND I MAKE SURE THAT EVERYONE WILL GET THAT CHART THAT WE CAN'T CALCULATE.
WELL, IT DOESN'T REALLY INCREASE BECAUSE WE'RE NOT ADDING TO THE YEAH, IT, IT DO INCREASE EVERY YEAR.
WELL, BECAUSE YOU HAVE MORE RETIREES, UH, WHERE, WHERE'S THE INCREASE? I MEAN, THEY'RE, THEY'RE MAKING NOW 50,500 PER YEAR AND THAT'S NOT CHANGING.
COUNCIL MEMBER, LET ME, UH, VISIT WITH, UH, YEAH, I'M THINK YOU ON THE SPOT WITH A LOT OF STAFF, UH, SURE.
THE DPFP STAFF AND GET YOU AN ANSWER.
I JUST THINK IT'S REALLY IMPORTANT FOR US TO LOOK AT FIGURING OUT WHAT THAT ANNUAL COST IS AND WHETHER IT GROWS EVERY YEAR.
AND, UH, BECAUSE IF WE CAN INCREASE THAT, UM, I'D LIKE TO MAKE IT MORE, A LITTLE BIT MORE MEANINGFUL THAN THE $500.
NOT THAT THAT'S NOT MEANINGFUL, BUT I, I JUST FEEL LIKE MAYBE WE COULD DO A LITTLE BETTER.
UM, I APPRECIATE THE OVERSIGHT THAT WE'RE PUTTING INTO THIS, UM, MOVING FORWARD.
AND I JUST WANNA GET CLARITY, NO MATTER WHICH PLAN WE MOVE FORWARD WITH, ANYTHING ON TOP OF THAT, WHETHER IT BE A SALE OF A PROPERTY WILL GO DIRECTLY, UM, TO THAT FUND.
AND THEN WE DON'T HAVE TO, WE DON'T HAVE TO MAKE ANY, ANY ADJUSTMENTS THAT WE MAKE DON'T HAVE TO, DON'T REQUIRE AN APPROVAL.
SO, UH, MS. TOLBERT MIGHT WANT TO HELP ME WITH THIS, BUT I, I THINK WE WOULD, IT WOULD BE POLICY, A DECISION OF THE COUNCIL, WHAT TO DO WITH THE PROCEEDS FROM THE CELL OF PROPERTY AND WHAT PARAMETERS YOU PUT AROUND WHAT GOES TO THE PENSION FUND VERSUS LIKE RIGHT NOW WE HAVE A POLICY, WE HAVE AN OLD RESOLUTION THAT SAYS WHEN WE SELL SURPLUS PROPERTY, WE PUT IT INTO MAJOR MAINTENANCE.
DO YOU WANT TO KEEP EVERY SALE THAT'S ONLY LESS THAN A MILLION DOLLARS FOR MAJOR MAINTENANCE? DOES IT HAVE TO BE HIGHER THAN A CERTAIN AMOUNT TO GO DIRECTLY TO THE PENSION? WOULD KIND OF BE HOW WE WANT TO APPROACH THAT.
BUT I WOULD RATHER IT BE AUTOMATIC.
SO, SO THAT YOU'VE ALREADY MADE THAT DECISION AND, AND WE'LL, THANK YOU SO MUCH, JACK AND, AND WHAT WE WOULD DO IN THAT REGARD.
WE COULD ACTUALLY BRING BACK, UM, SOME POSSIBLE PARAMETERS AND LET THE COUNCIL THEN GIVE THAT POLICY DIRECTION AND THEN WE WOULD THEN DEVELOP THEN THOSE
[02:10:01]
SCENARIOS AROUND THAT DIRECTION.I THINK IT WOULD BE IMPORTANT FOR US TO TRULY UNDERSTAND WHAT THE COUNCIL DESIRES.
UM, AS WE'RE, AS WE MOVE FORWARD AND, AND PREPARE TO SEND THIS TO FULL COUNCIL, UM, WHAT WILL, WILL THIS BODY BE PUTTING OUT A, A RECOMMENDATION TO FULL COUNCIL? WHAT, WHAT, WHAT DOES THAT LOOK LIKE? MY INTENTION, UM, TODAY WAS, UH, TO TRY TO MAKE A RECOMMENDATION, SOME TYPE OF RECOMMENDATION TO, UM, THE COUNCIL ON 18TH.
AND IT LOOKED LIKE ON 18TH, WE, WE HAD THAT MEETING AND WE WOULD BE TALKING ABOUT WHAT WE'VE DONE THROUGH THAT HOC COMMITTEE, THE MEETING THAT WE HAVE.
SO WE, WE WOULD BE MAKING SOME KIND OF RECOMMENDATION BECAUSE THAT'S JUST A BRIEFING, RIGHT.
UM, TO, TO THAT, YOU KNOW, WE, THIS COMMITTEE HAS SPENT QUITE A FEW MONTHS ON THIS.
IT HAS NOT BEEN EASY TO ABSORB EVERYTHING.
IT'S BEEN A, A LEARNING CURVE FROM ME.
UM, I THINK THE SAME FOR SOME OF MY COLLEAGUES.
I WANNA, UH, SEE HOW WE'RE GONNA GET OUR COLLEAGUES UP TO SPEED IN, IN A MONTH'S TIME PROCESS SO THAT THEY UNDERSTAND WHERE WE START, WHERE WE'RE AT, AND MAKING SURE THAT THEY'RE MAKING A, A SOUND DECISION, UM, WITH THE TIME THAT'S AVAILABLE.
OKAY, LET ME KIND OF ADDRESS THAT A LITTLE BIT.
UM, IN 2017, THE PLAN, THE SOUND AND RECREATIONAL PLAN, SOUND OF SOUND FUND AND RECREATION PLAN IS SAYING, HEY, WE NEED TO COME UP WITH A PLAN, NOT MONEY, JUST A PLAN NOT TO WRITE A CHECK.
AND WHAT IS OUTSIDE THE PLAN? IS IT JUST LIKE A HOUSE? DO YOU WANT TO HAVE A SWIMMING POOL? YOU WANNA HAVE A ANA? IT'S JUST A MINUTE.
WE CAN SEND A PLAN IN TODAY, WE CAN DO THAT RIGHT NOW.
A PLAN ATTORNEY CAN DRAFT ONE, SEND IT IN.
BUT WE ARE TRYING TO BE FAIR WITH OUR UNIFORM, OUR POLICE AND FIRE PUBLIC SAFETY AND TRYING TO SAY, HEY, THE ONE WHO WILL RETIRE, WHAT CAN'T WE DO BETTER? IF'S APPROPRIATION THAT WE'RE TRYING TO MONETIZE ASSET, UH, SELL WHATEVER.
BUT THE PLAN SAID ONE THING, WE SHALL NOT PUT IN THE PLAN IN THE MONEY THAT YOU DON'T HAVE IN THE BANK RIGHT NOW.
ONLY THING WE DEALING WITH THE CITY MANAGER, WHATEVER MONEY SHE GOT IN THE BANK RIGHT NOW, THAT'S THE MONEY WE DEALING WITH.
AND SO THAT'S TRYING TO GET COMPLICATED NOW TO GET THE, THE COUNCIL UP SPEED AND EVERYTHING.
WE CAN DO THE PLAN, BUT WE'RE TRYING TO MAKE SURE THE BUDGET, I WOULD NOT BE HERE.
YOU WILL BE HERE DOWN THE ROAD AND THEN IN AN ALLOCATION PREPARATION THE MONEY CAN BE HERE.
WE'RE TRYING TO MAKE IT COMFORTABLE.
SO THEREFORE WHATEVER WE DO, WE ARE NOT BE BACK HERE 10, 15 YEARS DOWN THE ROAD.
THAT'S WHAT WE'RE TRYING TO DO.
I KNOW IT'S VERY DIFFICULT, BUT THAT'S SOMETHING I CAN PUT IT.
AND COUNCIL MEMBER, I WILL, UH, MAKE MYSELF AVAILABLE TO THE OTHER SEVEN COUNCIL MEMBERS TO MEET WITH THEM INDIVIDUALLY IS NECESSARY TO TRY TO FILL IN AS MUCH AS I CAN BEFORE WE GET TO THAT FULL COUNCIL MEETING.
WELL, I JUST WANNA CORRECT THE MATH.
UM, AS FAR AS RECOMMENDATIONS, UM, OF PLANS GOING TO THE FULL COUNCIL, I'M NOT SURE HOW WE CAN DO THAT WHEN WE HAVEN'T EVEN RECEIVED BACK THE ANSWERS TO THE QUESTIONS WE SUBMITTED.
SO I STILL HAVE A NUMBER OF QUESTIONS THAT I, I WOULD NOT BE ABLE TO, UM, RECOMMEND ANYTHING.
UM, THE NEXT THING AS FAR AS THE IDEA OF REVISITING PLAN CHANGES IN THE FUTURE, THIS SOUNDS LIKE HOPE SPRINGS ETERNAL, BUT IT'S CERTAINLY NOT THE WAY TO GOVERN A PLAN.
AND IF YOU THINK ABOUT HOW LONG IT'S TAKEN US TO EVEN GET TO THIS POINT, AND WE ARE REQUIRED BY LAW, THIS IS WITH A DEADLINE, YOU'RE DRAGGING US TO THIS, THERE IS NO WAY THERE WILL BE PLAN CHANGES AT THE, UM, IDEA OF A COUNCIL.
UM, I CAN'T EVEN SEE HOW THAT COULD POSSIBLY HAPPEN.
WHAT I WOULD BE INTERESTED IN THAT WE HAVEN'T REALLY TALKED ABOUT IN TERMS OF ASSET SALES IS IF WE COULD MAKE SOME SORT OF STATEMENT THAT WE AGREE TO A CERTAIN AMOUNT OF ASSET SALES, UM, OF A CERTAIN FIXED DOLLAR BIAS DATE CERTAIN, AND TO ME, WHAT I SEE IN THE WAY CITY HALL OPERATES IS THAT ACTUALLY FORCES CITY HALL TO ACT.
IF IT'S, WELL, WE COULD SELL SOME ASSETS DOWN THE ROAD AND THAT'LL HELP OUR ADAC.
IT PROBABLY WON'T HAPPEN AND THAT'S WHY WE HAVEN'T HAD ANY REAL ESTATE SALES IN A VERY, VERY LONG TIME.
SO I WOULD LIKE TO GIVE US OUR OWN GUARDRAILS TO MAKE SURE THAT WE DO THE WORK THAT OUGHT TO HAVE ALREADY BEEN HAPPENING, IN MY OPINION.
[02:15:02]
THIS PLAN THAT WAS PRESENTED LOOKS SUPER FAMILIAR TO THE LAST TIME THAT YOU PRESENTED, UM, THE A DECK.UM, I DON'T AGREE WITH THE FIVE YEAR RAMP UP.
I DON'T THINK WE SHOULD BE CONSIDERING THE LEAST PREFERRED OF THE FIVE OPTIONS.
COLA I DON'T THINK THIS IS AN APPROPRIATE COLA AND IS SO FAR FROM WHAT'S HAPPENING IN ERF THAT IT IS COMPLETELY UNFAIR TO OUR SWORN OFFICERS, IN MY OPINION.
AND, UM, IT COMPLETELY IGNORES THE RECOMMENDATION FROM CHIRON ABOUT REDUCING THE EMPLOYEE CONTRIBUTION.
SO MY CONCERNS THAT I'VE SAVED FROM THE BEGINNING AND CONTINUE TO SAY IS THAT I DON'T UNDERSTAND HOW THIS PLAN THAT STAFF'S PRESENTING WOULD ACTUALLY ALLOW US TO DO THE RECRUITING AND RETENTION THAT WE NEED DESPERATELY NEED FOR POLICE AND FIRE AND LONG TERM.
THAT'S WHAT MY CONCERN IS FOR OUR CITY, AND I DON'T THINK THIS MEETS THAT GOAL.
SO THOSE ARE MY CONTINUED CONCERNS.
UH, THE GOAL OF THIS COMMITTEE IS BASED ON 2017, THE PLAN FOR THE LEGISLATOR.
AN ASSIGNMENT IS TO DO THAT PLAN AND CITY ATTORNEY, WILL YOU COME FORWARD PLEASE? WHAT IS THE GUIDELINE IN THE PLAN THAT BY STATE LAW, BY THE LEGISLATOR, WE GOTTA TURN IN? CAN YOU JUST GIVE AN OVERVIEW? WHAT DO THEIR PLAN CONSISTS OF? DO THE CONSISTS OF FUTURE MONEY DOWN THE ROAD? WHAT DO IT IS ACTION SAID WHAT WE HAVE TO DO.
SO THE PLAN, UM, THE PLAN UNDER 62 43 A ONE, WHICH IS THE POLICE AND FIRE PENSION STATUTE, REQUIRES, UM, THE PLAN TO BE FILED BY NOVEMBER 1ST.
THIS YEAR, THE UNDER 8 0 2, THE TRIGGER, UM, THAT REQUIRES A FUNDING SIN RESTORATION PLAN BY, UM, SEPTEMBER 1ST, 2025, THE GOAL WAS TO MAKE, HAVE ONE PLAN TO COMPLY WITH BOTH STATUTES.
SO YOUR QUESTION ABOUT WHETHER THE FUNDING STATUS, RESTORATION PLAN ADOPTED UNDER THIS SECTION OR, UM, 62 43 A ONE HAS TO ALSO USE THE 8 0 2 STRUCTURE.
IT STATES THAT THE FSRP, UM, MAY NOT INCLUDE ACTIONS THAT ARE SUBJECT TO FUTURE APPROVAL BY THE GOVERNING BODY OF EITHER THE PUBLIC RETIREMENT SYSTEM OR THE ASSOCIATED GOVERNMENTAL ENTITY.
DOES THAT ANSWER YOUR QUESTION? YES, IT DO.
AND SO, UH, STUART, UH, UH, GO AHEAD.
COULD, COULD YOU JUST READ THAT REALLY SLOWLY ONE MORE TIME? THE THE PART, YEAH.
IF FUNDING SOUND IS, RESTORATION PLAN MAY NOT INCLUDE ACTIONS THAT ARE SUBJECT TO FUTURE APPROVAL BY THE GOVERNING BODIES OF EITHER THE PUBLIC RETIREMENT SYSTEM OR THE ASSOCIATED GOVERNMENTAL ENTITY.
AND SO WHAT THAT MEANS IS WHAT WE'RE CONSIDERING SELLING PROPERTY THAT CANNOT BE PART OF THIS PLAN, UM, OR PENSION OBLIGATION BONDS COULDN'T BE PART OF THIS PLAN AND IT SHALL, IT COULD BE DONE BY THE WORD SHELL.
SO, UH, I I GUESS THE, THE QUESTION IS THAT THIS WOULD BE SOMETHING FOR THE CITY MANAGER.
I I, I WOULD NOT BE HERE, YOU KNOW, AND, AND SOME COUNCILMAN Y'ALL WOULD BE HERE, BUT I WOULD NOT BE HERE.
BUT I'M JUST TRYING TO BUILD A FOUNDATION AND I'M TRYING TO MAKE SURE THAT THE OBLIGATION, I SAID BACK IN 2015 THAT WHEN SOMEONE RETIRED, THEY SHOULD GET THEIR PENSION IN THE MAIL, THEY SHOULD GET THEIR MONEY.
AND I'M, I'M, I'M WORKING MY TAIL OFF TO MAKE SURE I LOOK AT EVERYTHING AND TURN EVERY ROCK OVER TO MAKE SURE I FOUND MONEY TO HELP THE PLAN.
BUT ALSO WE HAVE A CITY MANAGER HERE THAT WE DO A BUDGET EVERY YEAR.
RIGHT NOW WE ARE $38 MILLION IN A HOLE.
AND IF WE JUST ADD THAT 1% COLA, IT WILL INCREASE THAT BUDGET BY $13 MILLION RIGHT NOW.
SO THEREFOR INSTEAD OF $38 MILLION, WE AT 51 MILLION RIGHT NOW, JUST AT 1%.
NOW IF WE SAID THAT, OKAY, WE'RE GONNA SELL SOME PROPERTY DOWN THE ROAD, THAT'S DIFFERENT.
YOU WANNA GET ANOTHER COLA, YOU CAN SAY, I SELL THIS PROPERTY TO DO ANOTHER COLA, YOU CAN DO WHATEVER.
[02:20:01]
THAT I WOULD NOT BE HERE, BUT I WANT HERE TRY TO MAKE SURE, PUT SOME GUARDRAILS TO PUT SOME FINANCE IN PERSPECTIVE THAT WE WOULD NOT BE BACK HERE FIVE YEARS, 10 YEARS DOWN THE ROAD.I DON'T WANT TO KEEP THE CAN DOWN THE ROAD, BUT I WANNA MAKE SURE WE ARE A GOOD STEWARD AND WE CANNOT PROMISE, WE DON'T KNOW WHO THE OTHER COUNCILS ARE GONNA BE, WHO THE OTHER AMERICA GONNA BE.
ONLY THING WE KNOW WHAT WE CAN DO TODAY.
AND WHEN WE GET THAT PLAN DONE, IF WE CAN DO TODAY, WE CAN MONETIZE ASSET, WE CAN SELL PENSION BOND DOWN THE ROAD, YOU KNOW, GET A BILLION DOLLAR SOMEWHERE OR WHATEVER TO REDUCE IT TO GET THERE.
BUT WE JUST CAN'T JUST PUT MONEY OUTTA SKY, WHICH WE DON'T HAVE.
AND I DON'T WANNA PUT US IN THAT POSITION.
AND I ALSO DON'T WANT TO COMPARE UNIFORM AGAINST EMPLOYEES BECAUSE THEY ALL, BOTH WORKERS, I DON'T WANNA COMPARE THAT.
I JUST WANNA MAKE SURE BOTH PLANS IS DONE CORRECTLY.
BUT I ALSO GOTTA HEART OUT FROM THE RETIREES.
AND I WAS ON THE BOARD, I WAS THERE, SOME OF THOSE PEOPLE NOT LEFT.
DID I TAKE THEIR MONEY OUT? SOME OF THE PEOPLE LEFT THEIR MONEY IN THERE.
I GOT 2,500 RETIREES THAT GOT OVER A BILLION DOLLARS IN THERE.
AND THEY ONLY WAY TO GET THEIR MONEY ON A NEW FOR 30 YEARS.
THEY CAN'T GET THE MONEY, CAN'T ASSET THAT MONEY.
AND THAT'S WHY WE ARE TRYING TO DO EVERYTHING POSSIBLE TO SAY WE DIDN'T FORGET ABOUT Y'ALL 2,500 EMPLOYEES WHO GOT A BILLION DOLLARS IN THE BUDGET.
AND I GOT LEGISLATED TALKING ABOUT THAT.
AND I UNDERSTAND THAT YOU GOT PEOPLE OUT THERE 60, 70 YEARS OLD WORKING BECAUSE THEY HAVE NOT HAD A COST OF LIVING.
BUT ALSO THAT I FEEL LIKE WE GOT A FIDUCIARY RESPONSIBILITY WHEN SOMEONE LEAVE THE CITY.
WE DO EVERYTHING IN OUR POWER.
TRY TO HELP THEM THAT BY SELLING ASSET OR BONDS OR WHATEVER TO GET IT DONE QUICKER.
LOAN ON THE CHAIR RIGHT HERE TODAY, I'M GONNA DO MY POWER TO MAKE SURE THAT EVERYBODY BENEFIT AS YOU, AS THE COLLEAGUES ON THE COMMITTEE AND THE COMMITTEE AS A WHOLE AND THE CITY MANAGER HERE TO LET HER KNOW WHAT WE TRYING TO ACCOMPLISH.
AND SINCERELY THERE, WE SAID PUBLIC SAVINGS IS OUR NUMBER ONE CONCERN.
WE SAID WE NEED PUBLIC SAFETY, BUT IT NOT JUST ABOUT THE GUNS.
ALSO ABOUT THE FIRE DEPARTMENT TOO, YOU KNOW, THEY PUBLIC SAFETY ALSO AND ALSO ABOUT THE RETIREES OUT THERE.
AND YOU JUST IMAGINE THAT IF YOUR PARENTS HAVE A MILLION DOLLARS ASSET AND DON'T THINK THEY CAN GET THEIR MONEY OVER A 30 YEAR PERIOD, IF THEY DIE, THEIR KIDS IS STILL GOT THAT ANNUITY.
AND THAT'S WHAT KILLING ME WHEN YOU GOT MONEY, THAT TYPE OF MONEY YOU KINDA ACCESS TO YOUR MONEY AND THAT'S RIGHT.
AND THEY LEFT THAT MONEY IN THERE.
AND SO I WANNA MAKE SURE THAT, AGAIN, I'M GONNA BE REDUNDANT, PASSIONATE ABOUT IT.
I WAS PASSIONATE ABOUT IT WHEN I WAS A TRUSTEE.
I DID HIRE DELOITTE, I DID PUT OVERSIGHT IN THERE, WE DID CHAIN THE BOARD, I DID THAT.
AND THAT'S WHY I'M VERY PASSIONATE ABOUT WHAT I DO.
AND I'M TRYING TO MAKE SURE EVERYONE UNDERSTAND THAT WHATEVER WE DO HERE, WE CAN GO DOWN LEGISLATIVE, WHATEVER.
WE ARE NOT GONNA, THEY'RE NOT GONNA WRITE A CHECK, NOTHING LIKE THAT.
BUT THE POINT IS, WE GOTTA MAKE SURE THAT WE ARE GOOD STEWARD AND WE GOTTA MAKE SURE I CITY THE MANAGERS SAY, HEY, THIS IS OUR BUDGET, THIS IS WHAT I CAN DO RIGHT NOW, YOU KNOW, NOT NO PIE SKY.
SO THAT'S WHAT I'M TRYING TO DO AND THAT'S WHAT I'VE BEEN SAYING FOR DAY ONE.
SO IN AN IDEAL INTERCOURSE, YOU NEED TO ASK JACK AND, AND INSTEAD OF MANAGERS AT GUARANTEE, AND RIGHT NOW WE MET MONDAY WITH SENATOR ROSS WEST, WITH KELLY JOCK.
WE MET, UH, TUESDAY MORNING, JACK BEEN MEETING WITH THE, THE PINCH BOARD EIGHT O'CLOCK EVERY MORNING FOR THE LAST TWO WEEKS.
WE CAN'T SAY THE STAFF HAD NOT BEEN WORKING.
WE ARE TRYING TO WORK TOGETHER IN HARMONY.
SENATOR ROSS, WE BEEN WORKING WITH US, WE TALKED TO THE, THE PENSION AND ALSO WE TALKED TO THE ATTORNEYS AND ALSO THEY ALL ON A CONFERENCE CALL.
THE CITY MAN WAS THERE TO UNDERSTAND WE ARE TRYING TO WORK TOGETHER AND TRY TO PUT EVERYTHING NICK MERIT WAS THERE, EVERYONE IN THERE.
SO ONLY JUST BRINGING IT BACK IN THE PASSION, WHATEVER WE DO, WE ALL GOT A RIGHT TO CHANGE OUR MIND.
AND SO ONLY THING I'M TRYING TO TRY AND GET SOMETHING TO THE FULL COUNSELOR AND AGAIN, EDUCATE ALL THE OTHER COUNCIL MEMBERS SO THEY CAN TO SPEAK.
AND THEN TOO, YOU SHOULD EDUCATE YOUR COLLEAGUES.
YOU SHOULD BE TALKING TO YOUR COLLEAGUES THAT HEY, THIS IS WHAT GOING ON, THIS IS WHAT WE NEED TO DO BECAUSE WE ALL IN THIS TOGETHER.
IT IS NOT JUST ABOUT THE MAJORITY.
I READ ALL 15 HERE TO SAY THIS IS WHAT WE WANT TO DO.
UH, CHAIRMAN
WHAT IS THE METHOD TO, UM, REQUIRE THAT ORDINANCE RESOLUTION SOME OTHER WAY?
[02:25:03]
WELL, I, THERE THERE'S A COUPLE OF ISSUES.I THINK THERE'S A RESOLUTION RIGHT NOW THAT SAYS IF YOU SELL, UM, CITY PROPERTY, IT HAS TO GO TO MAJOR MAINTENANCE.
AND THEN, UM, I, YOU KNOW, WE COULD THINK THROUGH A POLICY ON HOW YOU GUYS WANNA MAYBE DO A TIERED STEP, BUT WE NEED TO BE CAREFUL NOT TO BIND FUTURE COUNCILS, UM, ON REQUIRING CERTAIN SALES.
WELL, IT, IT IS CLEAR TO ME THAT THE CITY PROBABLY WILL SELL, AND IT WON'T BE THOUGH UNTIL WE GET TO A CONTRIBUTION TO THE POLICE FIRE PENSION FUND OF 300, 400 MILLION A YEAR WHERE WE'LL BE CRIPPLED IN OUR BUDGET AND WE'LL HAVE TO MAKE THAT CHANGE.
AND THAT IS, AGAIN, THAT KICKING THE CAN DOWN THE ROAD UNTIL IT IS SO PAINFUL IN OUR GENERAL FUND, THAT WILL BE THE THING THAT WILL COMPEL THE CITY TO ACT IF WE DON'T DO IT IN A PROACTIVE WAY.
UM, CHAIR, I THINK YOU HAVE WORKED EXTREMELY HARD ON THIS.
I I'VE SEEN YOU, UM, TAKE EVERY MEETING, TRY TO GET EVERYBODY TOGETHER.
I DO THINK YOU HAVE TRIED TO EXPLORE EVERY SINGLE THING AND I JUST WANNA SAY THANK YOU AND RECOGNIZE ALL OF THAT EFFORT.
UM, YOU, YOU IDENTIFIED THAT THIS COUNCIL REPEATEDLY SAYS PUBLIC SAFETY IS NUMBER ONE, BUT YET YOU'RE BRINGING FORWARD PLANS WHERE PUBLIC SAFETY IS NUMBER TWO.
AND AGAIN, I'M NOT AWARE OF ANY CITY THAT PUTS THEIR PUBLIC SAFETY PLAN SECOND INSTEAD OF FIRST.
UM, AND WHILE YOU MAY NOT WANNA COMPARE THOSE TWO PLANS AND YOU MIGHT NOT LIKE THAT KIND OF COMPETITION OF WHICH PLAN HAS RICHER BENEFITS AND CONTRIBUTION, THE REALITY IS THE EMPLOYEES ALREADY DO THAT AND THEY MAKE DECISIONS FOR THEIR OWN EMPLOYMENT IN THAT WAY.
AND I THINK IT SAYS SOMETHING ABOUT WHO WE ARE, ABOUT WHO WE ARE AND WHAT WE VALUE.
AND UM, YOU KNOW, EVERYBODY'S IMPORTANT, BUT AT THE END OF THE DAY, THE MONEY'S GONNA SHOW WHAT, WHAT WE REALLY VALUE.
SO I DON'T THINK THAT WE HAVE THIS FUNDING BALANCE PROPERLY, UM, ALIGNED AT THIS TIME.
BUT I DO WANNA COMMEND YOU FOR THE ENORMOUS AMOUNT OF WORK WE'VE PUT INTO.
WELL I JUST WANT TO MAKE CLEAR THAT WE SAID PUBLIC SAFETY IS NUMBER ONE, BUT IT, SOMEONE WHO CLEANED THE TOILETS, WHO MOPPED THE FLOOR, CHOSE TO DO THAT WORK.
AND SOMEONE WHO PUT A GUN BESIDE TO BE SAFE TO, THEY SHOULD HAVE SAID THE SAFE, WHEN THEY RETIRE, THEY SHOULD GET THEIR MONEY.
AND I DON'T WANNA PUT UNIFORM IN PLACE.
THEY ARE HUMAN BEINGS AND WHOEVER, WHATEVER JOB THEY DO, THEY CHOSE TO DO THAT JOB.
IT'S OUR RESPONSIBILITY WHEN THEY RETIRE TO GET THEIR SALARY, TO GET THEIR BENEFIT, THEIR RETIREMENT.
THAT'S OUR RESPONSIBILITY NOT TO JUDGE WHAT WORK THEY DO.
MY MOM WAS A COOK ALL OF LIFE, YOU KNOW, AND I HAVE AN UNCLE SERVED IN MILITARY AND I DO HAVE RELATIVE IS A POLICE OFFICER.
I DO HAVE MAIDS IN MY FAMILY, BUT THEY DESERVE WHEN THEY RETIRE TO GET THE SAME BENEFIT.
SO I DON'T WANNA PUT UNIFORM OVER EMPLOYEES OR EMPLOYEES OR UNIFORM.
THEY ARE HUMAN BEINGS AND I'LL NEVER WILL DO THAT.
BUT I ALSO TO MAKE SURE THEY GOT THE SAME BENEFIT AND THEY DESERVE THE BENEFIT.
IF YOU WORK FOR 20 YEARS OR 10 YEAR IN RETIREMENT AND YOU EXPECT THAT CHECK COME TO MAIL ON THE FIRST AND 15TH, THEY SHOULD GET THEIR CHECK.
IT'S OUR RESPONSIBILITY TO MAKE SURE THEY GET A CHECK.
THAT'S THE CITY MANAGER'S RESPONSIBILITY TO SAY WHAT WE GOTTA CUT, WHAT WE GOTTA DO TO MAKE SURE THEY GET PAID.
IF WE NEED TO SAY WHAT WE GONNA DO, WE GOTTA BE LIKE BACK IN THE DAY, CUT LIBRARIES OUT, CUT REC CENTER, DON'T FIX THE STREET.
DO FURLOUGH DAYS FOR PUBLIC SAFETY.
IF THAT'S WHAT HIS BODY WANTED TO DO, THAT'S YOUR RESPONSIBILITY.
THAT'S WHAT YOU DO TO CUT SERVICE TO DO THAT.
THAT'S OUR RESPONSIBILITY IF WE WANNA MAKE THAT DECISION.
SO I AIN'T GONNA PUT, YOU KNOW, ONE PERSON, ONE UNIFORM OVER HUMAN BEINGS BECAUSE THEY ARE A HUMAN BEING AND I'M VERY PASSIONATE ABOUT THAT.
AND THAT'S, THAT'S THE WAY I WOULD GROW IT UP.
I WHEN A BROUGHT UP, REGARDLESS YOU GOT A UNIFORM ON, ARE YOU CLEANING THE TOILET? BUT WHEN YOU RETIRE YOU WANT YOUR MONEY.
AND I THINK THAT THAT'S WHAT WE NEED TO SAY THAT BECAUSE WE ARE THE POLICYMAKER TO MAKE SURE WE THE STEWARD, WE GOTTA FIDUCIARY RESPONSIBILITY TO TAKE CARE OF THOSE PEOPLE.
WHEN THEY SAY THEIR WORK REGARDING THE, THE FUNDING WAS A BAD
[02:30:01]
INVESTMENT OR WHATEVER HAPPENED TO THAT, IT'S STILL OUR RESPONSIBILITY AND STILL OUR TAXPAYER TO PAY THAT BILL AND THAT'S LOAN ON MATURE AND THAT'S WHAT I'M GONNA DO, YOU KNOW, WHATEVER, GONNA DO WORK WITH A CITY MANAGER AND WORK WITH JACK AND WORK WITH A COLLEAGUES, LET'S FIND A WAY.THEY HAVE COMMON GROUND AND THAT'S WHAT I WANT.
THEY HAVE COMMON GROUND, WE WALK AWAY, YOU KNOW, DON'T GO TO SUPPER AND SOMEBODY WALK AWAY, THEY'RE STILL HUNGRY.
UH, THE CITY MANAGER YOU HAD ANYTHING, A CLOSE REMARK BECAUSE I THINK THAT IT LOOKED LIKE, UH, WE'RE GONNA HAVE A MEETING ON 18TH OF JUNE.
SO IF I COULD JUST JUMP IN FOR JUST A SECOND AND THANK YOU SO MUCH TO ALL THE COUNCIL MEMBERS WHO MAKE UP THIS BODY.
I KNOW THAT WE HAVE HAD CONVERSATIONS WITH COUNCIL MEMBERS OUTSIDE OF THE COMMITTEE, UH, JUST TO REITERATE HOW IMPORTANT THIS ISSUE IS.
AND WE'RE NOT JUST KEEPING OUR COMMENTS ONLY WITH THE, THE, UM, THE AD HOC COMMITTEE AND WE'LL CONTINUE TO DO THAT.
UH, WHEN WE SENT OUT, UH, WHEN WE SENT OUT THE QUESTION KIND OF THE Q AND A, WE'RE GONNA MAKE SURE THAT THE FULL CITY COUNCIL SEES ALL OF THE QUESTIONS THAT WE RECEIVED AND ALL OF THE RESPONSES.
OUR GOAL IS TO START SENDING THOSE OUT, BUT WE HAVE BEEN TRYING TO MAKE SURE THAT WE'RE FULLY ANSWERING THE QUESTION.
WE AGREED TO, MAKING SURE THAT THE QUESTIONS ARE ANSWERED AND WE DON'T GIVE YOU SOMETHING AND THEN IT CREATES THE NEED TO SEND ME FIVE MORE SETS OF QUESTIONS AROUND THAT QUESTION.
SO WE ARE TAKING AN INTENTIONAL EFFORT TO MAKE SURE THAT THOSE QUESTIONS ARE THOROUGHLY ANSWERED.
UH, THE GOAL WOULD BE, UM, A CHAIR ATKINS.
UM, IF THERE IS A NEED TO HAVE ANOTHER SPECIAL CALL MEETING, UM, TO MAKE SURE THAT EVEN ONE, ONCE WE PUT THE ANSWERS OUT, IF THERE ARE ADDITIONAL THINGS THAT WE NEED TO BRING BACK TO THE BODY BEFORE YOU GO TO FULL CITY COUNCIL, WE WILL BE PREPARED TO DO THAT.
AND THANK YOU ALL VERY MUCH FOR JUST CONTINUING TO ENGAGE WITH US.
YOUR FEEDBACK HAS BEEN HELPFUL.
UM, WE DO APPRECIATE, WE KNOW THAT THIS IS CONSUMING A LOT OF YOUR TIME, BUT WE'RE VESTED, WE'RE ENGAGED AND WE'LL CONTINUE TO WORK VERY COLLABORATIVELY WITH ALL OF THE PARTNERS UNTIL WE GET IT RIGHT.
SHAQ, DO YOU HAVE ANY LAST COMMENT? NO, THANK YOU.
ANYONE ELSE HAVING ANY LAST COMMENT? ANYTHING? ANYONE? YEAH, THE MIC IS OPEN.
IT IS NOW 5 43 AND THIS ADC COMMITTEE IS A JOURNAL ADJOURN.