[Call to Order]
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IT IS 1:11 PM ON OCTOBER 26TH, 2026, AND THIS MEETING OF THE FINANCE COMMITTEE IS CALLED TO ORDER.
[MINUTES]
WE HAVE TWO SETS OF MINUTES TO APPROVE OF.FIRST SET IS FROM SEPTEMBER 22ND, 2026.
DO I HAVE A MOTION TO APPROVE? SO, AND A SECOND.
SECOND SET OF MINUTES IS FROM OCTOBER 19TH, 2026.
SPECIAL CALLED COMMITTEE MEETING ON FINANCE.
[BRIEFING ITEMS]
STRAIGHT DOWN THE AGENDA TODAY, UM, AND GO STRAIGHT INTO BRIEFING ITEM A.I'M GONNA INVITE OUR INTERIM CITY AUDITOR, UM, MR. TER TO COME TO THE, TO THE FRONT HERE.
AND, UM, JUST GIVE US A HIGH LEVEL OVERVIEW OF THE REPORT THAT YOU PRESENTED, I THINK, WHICH IS A LITTLE BIT OF A CARRYOVER FROM WHEN, UH, UM, MS. SPARKS WAS HERE AS WELL.
SO, UH, FEEL FREE TO TAKE IT AWAY.
THANK YOU FOR THE OPPORTUNITY TO BRIEF YOU ON THE TECHNICAL ASSISTANCE REGARDING THE CITY OF DALLAS EMPLOYEE RETIREMENT FUND MEMORANDUM, WHICH WAS PRODUCED BY MOHA SPARKS.
RORY, CAN YOU MAYBE MOVE THE MIC JUST A LITTLE CLOSER? SURE.
AS REQUESTED BY THE FINANCE COMMITTEE MEMBERS, THE PURPOSE OF THE MEMORANDUM WAS TO PROVIDE GUIDANCE ON QUESTIONS THAT SHOULD BE ASKED OF E F'S LEADERSHIP TO GAIN ASSURANCE THAT ERF IS FULFILLING ITS FIDUCIARY RESPONSIBILITIES IN THE LONG-TERM INTEREST OF MEMBERS AND BENEFICIARIES.
THE WORK PERFORMED TO PRODUCE THE MEMORANDUM WAS NOT CONDUCTED AS AN AUDIT INVESTIGATION OR EVALUATION UNDER GENERALLY ACCEPTED AUDITING STANDARDS AND NO ASSURANCE IS PROVIDED.
THE INFORMATION WAS GATHERED FROM CHAPTERS 40 A AND EIGHT OF THE DALLAS CITY CODE AVAILABLE FINANCIAL AND PERSONNEL RECORDS, PEER PENSION SYSTEM COMPARISON DATA PREPARED BY R-S-M-U-S-L-L-P AND INDEPENDENT CONTRACTOR ATTENDANCE AT EFR BOARD MEETINGS AND DIRECT OBSERVATIONS MADE BY THE PRIOR CITY AUDITOR, WHICH SERVED AS AN EX-OFFICIAL MEMBER OF THE ERF BOARD.
THE FIRST AREA THAT THE MEMO LOOKED AT WAS OPERATIONAL EXPENSES.
IT'S IMPORTANT TO UNDERSTAND THAT OPERATIONAL EXPENSES ARE PAID FROM EMPLOYEE AND CITY CONTRIBUTIONS, THEREFORE, EACH DOLLAR OF OPERATIONAL EXPENSE PAID INCREASES THE CONTRIBUTION BY A DOLLAR OR REDUCES THE AMOUNT INVESTED TO PAY BENEFITS BY A DOLLAR.
LOOKING OVERALL AT THE PERFORMANCE OF THE ERF, THE FIRST THING TO LOOK AT IS THE OPERATIONAL COST.
BENCHMARKS THAT ARE ON PAGE NINE OF THE MEMO, RMS CALCULATED AN EXPENSE RATIO OF 0.82% FOR FISCAL YEAR 2024.
IT'S EXHIBIT ONE ON PAGE NINE, ERF HAD THE HIGHEST RATIO EXPENSE RATIO COMPARED TO NINE PURE PENSION PLANS REVIEWED.
THE NEXT HIGHEST RATIO WAS 0.9559% FOR THE CITY OF PHOENIX.
IF YOU CAN SHOW SLIDE ONE PLEASE FOR ME, THAT MEMO WAS FOR THE, THE TEXAS CITIES WAS BASED ON FISCAL YEAR 24 INFORMATION.
SO I'VE UPDATED IT FOR 25 SO THAT YOU CAN SEE WHAT IT LOOKS LIKE NOW IS SLIDE ONE AVAILABLE? THERE IT IS.
NOW YOU NEED TO DISCOUNT THE FORT WORTH, WHICH IS SOMEWHAT OF AN OUTLIER.
IF YOU GO BACK TO FISCAL YEAR 23 FOR FORT WORTH, YOU'LL SEE THEIR EXPENSE RATIO WAS 0.44, AND IN 24 IT WAS 0.41.
SO SOMETHING HAPPENED IN 2025 TO MOVE THEIR EXPENSE RATIO TO 95.
SO IF YOU TAKE THEM OUT, YOU'LL SEE THAT THE CITY OF DALLAS CONTINUES TO STILL BE ONE OF THE HIGHEST EXPENSE RATIOS SHOWS COMPARED TO THE OTHER DALLAS CITIES.
EEF RFS 10 YEAR NET RETURN IS ALSO BELOW EIGHT OF THE NINE PEER CITIES THAT WERE REVIEWED.
ON PAGE 10, THE MEMO LOOKS AT THE PROPOSED 2020 6 27 BUDGET, WHICH IS ON PAGE 23 OF THE MEMO.
AND IT NOTES THAT 13.8 MILLION OR 52% OF THAT PROPOSED BUDGET IS FOR INVESTMENT MANAGEMENT.
11.7 MILLION OR 44% OF IT IS FOR ADMINISTRATIVE COSTS.
AND OF THOSE ADMINISTRATIVE COSTS, 70%, UH,
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OR 8.25 MILLION IS FOR SALARY AND COMPENSATION RELATED COSTS.TABLES ON PAGES SIX AND SEVEN PROVIDE FOCUSED QUESTIONS TO THE COMMITTEE THAT THEY SHOULD BE ASKING ERF REGARDING THESE BUDGET EXPENSES.
GIVEN THAT 70% OF THE ADMINISTRATIVE COST IS FOR SALARY AND COMPENSATION RELATED COSTS, THE COMPENSATION STRUCTURE WAS ALSO ANALYZED.
STARTING ON PAGE SEVEN OF THE MEMO, 1.6 MILLION OR 30.5% OF THE 5.49 MILLION IN OVERALL ERF SALARIES IS FOR SEVEN LEADERSHIP POSITIONS.
TABLE TWO ON PAGE EIGHT SHOWS YOU ANALYSIS OF THIS BREAKDOWN.
TWO OF THE FIVE HIGHEST COMPENSATED LEADERSHIP POSITIONS ACROSS ERF AND THE CITY ARE ERF POSITIONS.
TABLE TWO ON PAGE EIGHT ALSO SHOWS YOU THIS ANALYSIS.
ON PAGE NINE, IT NOTES THAT THE EXECUTIVE DIRECTOR IS ELIGIBLE FOR A TARGET BONUS EQUAL TO 20% OF BASE PAY UNDER THE E F'S INVESTMENT GROUP COMPENSATION INCENTIVE PROGRAM.
STARTING ON PAGE 10, THE BOARD TENURE AND RENEWAL IS ADDRESSED.
THE BOARD APPROVED SIGNIFICANT ERF DECISIONS INVOLVING THE BUDGET, STAFFING LEVELS, COMPENSATION PRACTICES, ADMINISTRATIVE OVERHEAD AND INVESTMENT MANAGEMENT STRUCTURES.
LONG SERVING, APPOINTED AND ELECTED TRUSTEES CAN REDUCE INDEPENDENCE AND OVERSIGHT.
FOR EXAMPLE, ON PAGE FOUR OF ERFS UPCOMING BRIEFING, IT NOTES THAT TINA P RICHARDSON HAS BEEN A TRUSTEE SINCE 2010, WHICH IS 16 YEARS.
THE TEXAS PENSION REVIEW BOARD IDENTIFIES BEST PRACTICES FOR BOARD MEMBER TENURE AS EIGHT TO 10 YEARS.
THE CURRENT PROCESS, THE THE MEMO ALSO NOTES THAT THE CURRENT PROCESS DOES NOT CLEARLY SHOW HOW TRUSTEES ARE APPOINTED OR ELECTED REAPPOINTED OR REELECTED ORIENTED, ROTATED AND REPLACED OVER TIME AND TERMS APPLICABLE TERM LIMITS TRACKED THE BOARD MEMBER'S SERVICE HISTORY IS NOTED ON TABLES THREE ON PAGE 11, AND PAGE TABLE FOUR AND PAGE 12.
ALSO, RMS SUMMARIZES THE GOVERNMENT FRAMEWORK, THE BOARD COMPOSITION AND TERM STRUCTURES ACROSS THE NINE PEER CITY PLANS THAT THEY ANALYZED ON PAGES 20 TO 22.
ON PAGE 13, STAFFING SIZE IS ADDRESSED AND IT INDICATES A JUSTIFICATION THAT EER ERFS INTERNAL STAFFING AND LEADERSHIP STRUCTURE IS APPROPRIATELY SIZED, EFFICIENTLY STRUCTURED, AND ALIGNED WITH ACTUAL WORKLOADS.
OUTSOURCE SERVICES AND REQUIRED EXPERTISE SHOULD BE DEMONSTRATED.
ERF CURRENTLY USES ASSETS UNDER MANAGEMENT AS A BENCHMARK FOR STAFF SIZE AND THE SOCIETY OF HUMAN RESOURCE MANAGEMENT.
FOR OTHER STAFFING COMPARISONS, THE COMPARISON IS BROAD RATHER THAN USING PENSION PLANS WITH THE STRUCTURE AND MEMBERSHIP MORE COMPARABLE TO ERFE F'S STAFF SIZE BENCHMARK IS 25 PENSION PUBLIC PENSION SYSTEMS MANAGING BETWEEN ONE TO 25 BILLION IN ASSETS, AND IT'S OBTAINED FROM THE NATIONAL ASSOCIATION OF STATE RETIREMENT ADMINISTRATORS.
THIS BENCHMARK ONLY INCLUDES TWO CITY RETIREMENT SYSTEMS. THE REST ARE STATE LEVEL EMPLOYEE POLICE AND TEACHER PENSION SYSTEMS AND COUNTY SYSTEMS. THE TWO CI CITIES INCLUDED ARE FORT WORTH AND AUSTIN, IF YOU COULD PUT UP SLIDE NUMBER TWO FOR ME PLEASE.
THIS SLIDE SHOWS THE STAFF SIZE COMPARISON BETWEEN DALLAS AND THE TWO CITIES THAT ARE IN THE BENCHMARK THAT ERF USES.
AND IF YOU NOTE, DALLAS HAS A TOTAL OF 38 STAFF PEOPLE.
FORT WORTH HAS A TOTAL OF 22, AND AUSTIN HAS A TOTAL OF 30.
ALSO, ON PAGE 18 OF THE MEMO, YOU'LL SEE RMS DOES A BREAKDOWN OF THE ACTIVE AND TOTAL PARTICIPANTS FOR THE NINE PIERCE CITIES.
AND IF YOU GO TO THAT, YOU'LL SEE THAT FORT WORTH HAS APPROXIMATELY 14,000 ACTIVE TOTAL PARTICIPANTS.
DALLAS HAS A TOTAL OF ABOUT 18,000, AND AUSTIN HAS A TOTAL OF ABOUT 24,000.
SO IF YOU'RE LOOKING AT IT RELATIVE TO ACTUAL PARTICIPANTS, THAT MAY BE A BETTER BENCHMARK THAN LOOKING AT IT IN TERMS OF JUST ASSETS UNDER MANAGEMENT.
PAGE 14 ADDRESSES JOB DESCRIPTIONS.
ERF RELIES ON FUNCTIONAL DESCRIPTIONS BASED ON CHAPTER FOUR A.
HOWEVER, FUNCTIONAL DESCRIPTIONS DO NOT PROVIDE COMPLETE JOB DUTIES, REQUIRED QUALIFICATIONS, DECISION MAKING AUTHORITY, WORKLOAD EXPECTATIONS, DIRECT REPORTING
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RELATIONSHIPS, OR MEASURABLE DELIVERABLES.A REVIEW, A REVIEW OF ROLES AND RESPONSIBILITIES MAY IDENTIFY OPPORTUNITIES TO IMPROVE EFFICIENCY AND REDUCE ADMINISTRATIVE COSTS.
ON PAGE 14, THE PROFESSIONAL DEVELOPMENT CREDENTIALS ARE ADDRESSED.
ERFS JOB DESCRIPTIONS DO NOT IDENTIFY SPECIFIC CERTIFICATIONS OR PROFESSIONAL CREDENTIALS.
EVEN THOUGH PENSION ADMINISTRATION IS A SPECIALIZED AREA, PREFERRED CREDENTIALS FOR EACH ROLE SHOULD BE IDENTIFIED AND PROFESSIONAL DEVELOPMENT SHOULD BE DIRECTED TOWARDS MEETING THOSE EXPECTATIONS.
FINALLY, RM S'S FULL REPORT TO US IS ON PAGES 17 TO 21, AND THIS GIVES COMPARABLE PENSION PLAN INFORMATION REGARDING THE NINE PEER CITIES THAT THEY USE TO ANALYZE AGAINST THE ERF.
AND WITH THAT, I'LL OPEN IT UP FOR ANY QUESTIONS.
UM, AND I'VE COLLEAGUES, UH, JUST A LITTLE BIT OF CONTEXT HERE.
SO THE AUDITOR SITS AS AN EX-OFFICIO BOARD MEMBER ON THE ERF BOARD.
THAT HAS BEEN THE CASE SINCE YOU'VE BEEN HERE, RIGHT, RORY? CORRECT.
AND SO, UM, THIS SORT OF, THIS REPORT, WHICH IS AS RORY MENTIONED, IS NOT AN OFFICIAL AUDIT OR INVESTIGATION.
THIS IS JUST A PRELIMINARY REPORT WAS GENERATED, UM, AFTER SOME CONCERNS WERE EXPRESSED BY MS. SPARKS, UH, WHO WAS PREVIOUSLY, UM, SITTING AS THE INTERIM AUDITOR POSITION.
UM, SO TODAY WHAT WE'RE HERE FOR IS REALLY JUST TO HEAR, YOU KNOW, THE CONCERNS THAT HAVE COME UP FROM THE AUDITOR'S DEPARTMENT, UM, IN CONJUNCTION WITH A ALREADY SCHEDULED ERF UH, BRIEFING, WHICH, UH, WE WE'RE GONNA HAVE YEARLY HERE ON THIS COMMITTEE.
UH, AS LONG AS THERE'S NOT A STANDING PENSION COMMITTEE THAT'S ACTIVE.
SO IF THERE ARE QUESTIONS ABOUT THE TECHNICAL PROCEDURES THAT YOU'VE, THAT RORY'S GONE THROUGH, IT'D BE APPROPRIATE TO ASK HIM THAT.
NOW, UM, IF WE'D LIKE TO GO, IF, IF, SO, IF ANYBODY HAS ANY OF THOSE, WE'LL JUST TAKE THOSE.
OTHERWISE WE'LL MOVE DIRECTLY INTO THE ERF BRIEFING AND THEN HAVE RORY STANDING BY FOR, FOR TECHNICAL RELATED QUESTIONS AFTER THE ERF BRIEFING.
THAT'S, THAT'S MY INTENT WITH TODAY.
AND THEN AFTER WE'RE DONE WITH BOTH OF THE BRIEFINGS, IF THIS COMMITTEE DECIDES THAT IT WANTS TO PURSUE ADDITIONAL, EITHER AN EXTERNAL AUDIT OR, OR NOT, YOU KNOW, WE CAN MAKE THAT DETERMINATION.
SO, UM, WITH THAT BEING SAID, UH, DOES ANYBODY HAVE ANY QUESTIONS FOR RORY? OKAY, WELL, I WILL ASK YOU JUST TO STAND BY, YOU KNOW, IN, IN THE WINGS, RORY, AND WE WILL INVITE, UM, MR. ETHERIDGE AND ANYBODY FROM THE ERF TEAM WHO'S WITH HIM TO COME PRESENT TO US TODAY.
SO MY NAME IS DAVID ETHERIDGE.
I HAVE THE PLEASURE OF SERVING AS THE EXECUTIVE DIRECTOR FOR THE EMPLOYEE'S RETIREMENT FUND, AND I WANNA THANK YOU FOR THE OPPORTUNITY.
I'M JOINED BY SEVERAL PEOPLE, AND SO I WANT TO INTRODUCE THEM REAL QUICK, UH, SO WE CAN EXPEDITE, UH, FIRST TO MY RIGHT IS NATALIE JENKINS RELL, WHO IS THE CHIEF INVESTMENT OFFICER, AND SHE SERVES IN THAT ROLE, UH, FOR THE PAST YEAR, BUT SHE'S BEEN WITH THE CITY NOW FOR 21 YEARS WITH THE FUND TO MY LEFT.
IN RESPONSE TO THE TECHNICAL ASSISTANCE LETTER, UH, PRESENTED BY MS. MOHA, SPARKS ARE THE, UH, AUDITING FIRM FORS, MAZAR REPRESENTATIVES, MS. CHRISTIE CLEMENTS, AND ALSO MR. JAMIE AMOS.
AND MR. CHAIR, WITH YOUR PERMISSION, CONSIDERING THAT THE, THE LETTER RESPONSE OR THE LETTER WAS PRESENTED FIRST WITH YOUR PERMISSION, I'D LIKE TO START WITH SLIDE 29 AND HAVE FOUR OF US MAZARS RESPOND TO THE CONDITIONS WITH YOUR APPROVAL.
UM, GIVEN OUR TIME TODAY, I AM GONNA FOCUS ON WHY WE WERE ENGAGED, HOW WE CONDUCTED OUR ASSESSMENT, AND THE KEY CONCLUSIONS FROM OUR WORK, AND THEN WE'LL LEAVE IT FOR QUESTIONS.
THIS SLIDE CONTAINS OUR FORMAL INDEPENDENT AUDITOR'S REPORT, THE SCOPE OF LIMITATIONS APPLICABLE TO OUR WORK, AND I'LL TOUCH ON MOST OF THOSE ASPECTS LATER AS WE GO THROUGH THE BACKGROUND.
OUR PRESENTATION ROADMAP IS HERE, SO I'LL BEGIN WITH A BRIEF BACKGROUND AND OUR OVERALL CONCLUSION FOLLOWED BY OUR SCOPE AND APPROACH, AND I'LL EXPLAIN OUR CONCLUSION TERMINOLOGY AND WALK THROUGH THOSE RESULTS.
ON THE NEXT SLIDE, YOU'LL FIND OUR
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BACKGROUND.AND BECAUSE YOU'RE ALREADY FAMILIAR WITH ERF, I'M NOT GOING TO SPEND A GREAT DEAL OF TIME GOING THROUGH THE ORGANIZATIONAL BACKGROUND.
THE MOST IMPORTANT PIECE AND BACKGROUND OF OUR WORK WAS RELATED TO THE JULY 17TH MEMORANDUM ISSUED BY THE CITY OF DALLAS OFFICE OF THE CITY AUDITOR.
THE MEMO RAISED A NUMBER OF MATTERS REGARDING RFS GOVERNANCE, STAFFING, COMPENSATION, ADMINISTRATIVE COST TRANSPARENCY, AND INVESTMENT RELATED MATTERS.
IMPORTANTLY, THE MEMORANDUM ITSELF STATED THAT THE WORK IS NOT AN AUDIT INVESTIGATION, NOR WAS IT AN EVALUATION PERFORMED UNDER GOVERNMENT AUDITING STANDARDS AND THAT NO ASSURANCE WAS PROVIDED.
FOLLOWING THE ISSUANCE OF THAT MEMO, WE WERE ENGAGED TO CONDUCT THE ASSESSMENT OF THE MATTERS RAISED.
OUR ENGAGEMENT WAS NOT A FINANCIAL AUDIT OR AN EXAMINATION, AND WE DID NOT EXPRESS AN OPINION ON EITHER OF THOSE.
RATHER, OUR WORK WAS A POINT IN TIME CONSULTING ENGAGEMENT DESIGNED TO EVALUATE THE SPECIFIC MATTERS RAISED IN THE MEMO.
AND BASED ON THE PROCEDURES PERFORMED AND THE EVIDENCE PROVIDED AND REVIEWED, WE WERE TO CONCLUDE ON THE MATTERS RAISED IN THE MEMO.
THE NEXT SLIDE IS OUR EXECUTIVE SUMMARY.
TURNING TO THE OVERALL CONCLUSION, OUR ASSESSMENT FOUND THE ERF WAS ABLE TO DEMONSTRATE PRACTICES, DOCUMENTATION, AND OVERSIGHT TO ADEQUATELY ADDRESS THE ITEMS NOTED IN THE JULY 17TH MEMO.
AN IMPORTANT PART OF OUR APPROACH WAS THAT WE FOCUSED ON SUBSTANCE.
WE DID NOT CONCLUDE THAT AN ISSUE EXISTED SIMPLY BECAUSE ERF USED A DIFFERENT PROCESS, DOCUMENTATION, OR ACCESS MECHANISM FROM THE ONE DESCRIBED IN THE MEMO.
INSTEAD, WE EVALUATED WHETHER THE REPORTED MATTER WAS APPROPRIATELY ADDRESSED AND SUPPORTED BY EVIDENCE.
AS YOU'LL SEE IN THE DETAILED RESULTS, OUR REVIEW DID NOT IDENTIFY ANY CONCERNS DESCRIBED IN THE MEMO.
ON THE NEXT SLIDE, WE GO THROUGH OUR SCOPE APPROACH AND DISCUSSIONS.
OUR WORK, AS I MENTIONED, IS A POINT IN TIME INDEPENDENT OBJECTIVE EVIDENCE-BASED ASSESSMENT COVERING THE SIX MATTERS RAISED.
WE INTERVIEWED STAKEHOLDERS, MADE INQUIRIES, REVIEWED RECORDS, AND OTHER EVIDENCE, AND EVALUATED THAT EVIDENCE AGAINST THE MATTERS THAT WERE RAISED.
IN THE JULY 17TH MEMO, OUR PROCEDURES, WE INCLUDED A REVIEW OF OVER 85 DOCUMENTS.
UH, WE REQUESTED A GREAT DEAL OF INFORMATION AND EVIDENCE AND DOCUMENTATION, INCLUDING INTERNAL RECORDS MANAGEMENT AND EXECUTIVE REPORTING, RELEVANT REGULATORY REPORTING, AND STATE LEGISLATIVE MATTERS.
I ALSO WANT TO MENTION THAT WE WERE NOT ENGAGED TO, TO ASSESS THIS.
UM, MANAGEMENT WAS ABLE TO PROVIDE THE DOCUMENTATION, WHICH WAS QUITE VOLUMINOUS, UM, TO US IN A TIMELY MANNER IN AN ORGANIZED FASHION, AND HAS AUDITORS.
UM, THAT MEANS, UM, THAT SPEAKS TO US.
IT MEANS THAT THEY'RE ORGANIZED AND THAT MANAGEMENT'S ON TOP OF THINGS.
SO I WANTED TO MENTION THAT THAT WAS SOMETHING THOUGH WE WEREN'T ENGAGED TO SEPARATELY ASSESS THAT.
I DO THINK IT'S IMPORTANT TO NOTE.
ON THE NEXT SLIDE, YOU'LL SEE THE DISCUSSIONS THAT WE HAD WITH A NUMBER OF STAKEHOLDERS.
THOSE DISCUSSIONS INCLUDED BOARD AND INVESTMENT COMMITTEE REPRESENTATIVES, CITY COUNCIL MEMBERS, THE CITY'S CHIEF FINANCIAL OFFICER, AND THIRD PARTIES.
IT'S IMPORTANT TO NOTE THAT WE DID ATTEMPT TO INTERVIEW THE AUDITOR OR THE AUTHOR OF THE MEMO INTERVIEW REQUEST WERE SENT, BUT THE INTERVIEW DID NOT OCCUR BEFORE A COMPLETION OF OUR ASSESSMENT.
WE DID TRY TO INCLUDE HER IN OUR PROCEDURES.
AN IMPORTANT POINT HERE IS THAT STAKEHOLDER INPUT WAS PROVIDED TO US.
IT PROVIDED US CONTEXT AND CLARIFICATION.
NO CONCLUSION THAT WE, WE CAME TO WAS BASED SOLELY ON AN INTERVIEW.
IT WAS ALL EVIDENCE-BASED AND REVIEW OF DOCUMENTATION.
STAKEHOLDER INPUT WAS CONSIDERED WITH THE DOCUMENTATION AND EVIDENCE REVIEWED.
ON THE NEXT SLIDE, UNDERSTANDING OUR CONCLUSIONS, I THINK IT'S IMPORTANT TO GO THROUGH OUR CONCLUSION TERMINOLOGY BECAUSE THAT'S IMPORTANT TO UNDERSTANDING THE REPORT WHERE YOU SEE NO ISSUE IDENTIFIED.
THAT MEANS OUR REVIEW DID NOT IDENTIFY THE MATTER RAISED IN THE MEMO.
WHEN YOU SEE EXPECTATION NOT APPLICABLE, THAT MEANS THAT THE EXPECTATION DESCRIBED IN THE MEMO WAS NOT
[00:20:01]
APPLICABLE TO THE MANNER PRESENTED BASED UPON OUR ASSESSMENT.BEHIND THE DIFFERENCE FROM THE APPROACH DESCRIBED IN THE MEMO BY ITSELF DID NOT INDICATE THAT AN ISSUE EXISTS OR THAT IMPROVEMENT WAS NEEDED.
THAT'S WHERE WE REVIEWED SUBSTANCE.
OUR CONCLUSIONS ARE SPECIFIC TO THE MATTERS RAISED AND SHOULD BE READ TOGETHER WITH THE RELATED ASSESSMENT RESULTS.
ON SLIDE NINE, THE SUMMARY OF RESULTS.
THIS SLIDE BRINGS IT ALL TOGETHER.
AND AS YOU CAN SEE FROM ALL THE MATTERS WHICH WERE SEPARATELY CONCLUDED, EXPECT NO ISSUE IDENTIFIED WITH ONE EXPECTATION, NOT APPLICABLE.
THIS WAS SPECIFICALLY REGARDING THE EXPECTATION IN THE MEMO THAT THE WORKLOAD MEASURES AND MEASURABLE DELIVERABLES SHOULD BE INCLUDED IN JOB PROFILES.
I'LL COVER THAT IN MORE DETAIL SHORTLY.
RATHER THAN READING THIS ROW BY ROW.
WE'LL WALK YOU THROUGH BRIEFLY EACH MATTER THAT WAS RAISED ON SLIDE 10.
THE FIRST FOUR MATTERS RAISED, ADDRESSED TO THE TRUSTEE.
TENURE RECORDS, MEETING TRANSPARENCY, ACCESS TO BOARD MATERIALS, AND AVAILABILITY OF BOARD REPORTING.
WE FOUND THAT ERF MAINTAINS AN ELECTION SCHEDULE.
THEY TRACK TRUSTEE, TENURE TERM EXPIRATIONS ARE TRACKED, REAPPOINTMENTS ARE TRACKED, REELECTIONS ARE TRACKED.
ERF ALSO PUBLICLY PROVIDES ITS ANNUAL MEETING, CALENDAR AGENDAS AND APPROVED MINUTES, INCLUDING MOTIONS AND CORRESPONDING VOTING RESULTS.
REGARDING ACCESS TO THE BOARD MATERIALS, THERE WAS A PASSWORD PROTECTED DOCUMENT IDENTIFIED DURING OUR REVIEW, WHICH WAS A SENSITIVE COMPENSATION ANALYSIS.
RESTRICTING ACCESS TO CONFIDENTIAL INFORMATION OF THIS NATURE IS EXPECTED AND IS NOT UNREASONABLE.
WE VIEW IT AS AN APPROPRIATE SAFEGUARD.
FINALLY, ARCHIVED MEETING RECORDINGS ARE AVAILABLE THROUGH A REQUEST BASED PROCESS.
ALTHOUGH THAT DIFFERS FROM POSTING THE RECORDINGS ON THE WEBSITE, WHICH WAS OUTLINED AND STATED IN THE MEMO, THE UNDERLYING MATTER OF ACCESS WAS ADDRESSED.
BASED ON THAT EVIDENCE, WE WERE ABLE TO VALIDATE THAT THE APPROPRIATE GOVERNANCE AND TRANSPARENCY PRACTICES ARE IN PLACE SPECIFIC TO THE MATTERS RAISED IN THE MEMO.
THE NEXT SLIDE COVERS THE ADMINISTRATIVE SPENDING AND RFS USE OF OUTSOURCE SERVICES HAS POTENTIAL INDICATORS OF EXCESS COST DUPLICATION AND INEFFICIENCY.
OUR REVIEW FOUND THAT THE ADMINISTRATIVE CATEGORY INCLUDES MUCH MORE THAN JUST PERSONNEL.
IT INCLUDES TECHNOLOGY, FACILITIES, INSURANCE, LEGAL, AUDIT, ACCOUNTING, ACTUARIAL SERVICES, AND OTHER OPERATING COSTS.
AS A RESULT, THE ADMINISTRATIVE COST PERCENTAGE CITED IN THE MEMO STANDING ALONE DOES NOT DEMONSTRATE THAT COSTS ARE EXCESSIVE OR INEFFICIENT.
ALONG THOSE SAME LINES, THE USE OF SPECIALIZED EXTERNAL PROVIDERS DOES NOT BY ITSELF ESTABLISH DUPLICATION OR INEFFICIENCIES.
ERS WAS ABLE TO DEMONSTRATE THAT IT MONITORS EXPENDITURES AND OPERATIONAL PERFORMANCE CLOSELY AND A CROSS DEFINED BUSINESS UNITS BASED ON THE EVIDENCE REVIEWED.
ERF HAS A PROCESS IN PLACE TO ACTIVELY MONITOR AND MANAGE THE ADMINISTRATIVE COST STRUCTURES AND MATTERS RAISED IN THE MEMORANDUM.
ON THE NEXT SLIDE RELATED TO LEADERSHIP COMPENSATION, THE MEMO RAISED THE MATTER WHETHER THE COMPENSATION AND CONCENTRATION OF SALARY COST ACROSS LEADERSHIP POSITIONS WAS REASONABLE.
AN IMPORTANT PIECE OF EVIDENCE HERE IS THE RFS INDEPENDENT COMPENSATION STUDY THAT WAS PERFORMED AS RECENTLY AS MAY, 2026.
THE ANALYSIS USED 25 ORGANIZATION PEER GROUP REFLECTING CONSIDERATIONS SUCH AS SIZE, INVESTMENT, STRATEGY, AND ACCOUNTABILITY.
THE ANALYSIS REPORTED AGGREGATE SALARIES WITHIN PLUS OR MINUS 10% OF THE SELECTED PUBLIC FUND PEER GROUP.
OUR ASSESSMENT CONSIDERED THE GOVERNANCE AND DECISION MAKING SUPPORTING THE COMPENSATION, INCLUDING INDEPENDENT BENCHMARKING AND BOARD APPROVED BUDGETING PROCESS.
I DO WANT TO EMPHASIZE AN IMPORTANT SCOPE BOUNDARY HERE.
WE DID NOT EVALUATE OR EXPRESS A CONCLUSION REGARDING THE APPROPRIATENESS OF ANY INDIVIDUAL'S COMPENSATION.
RATHER, OUR ASSESSMENT FOUND THAT THE COMPENSATION MATTER RAISED IN THE MEMO IS ADDRESSED THROUGH ESTABLISHED PROCESSES THAT INCLUDES INDEPENDENT BENCHMARKING AND BOARD
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OVERSIGHT.ON THE NEXT SLIDE, INVESTMENT FEES AND PERFORMANCE FOR INVESTMENT FEES AND PERFORMANCE AND IMPORTANT SOURCE OF EVIDENCE WAS THE INDEPENDENT INVESTMENT PRACTICES AND PERFORMANCE REVIEW COMPLETED BY COOK STREET CONSULTING IN JUNE, 2024.
THEY MAINTAINED, THEY CONCLUDED AND MAINTAINED THAT ERF HAS A DISCIPLINED AND DETAILED PROCESS TO MEASURE, RECONCILE, AND BENCHMARK INVESTMENT FEES.
THE REVIEW ALSO FOUND APPLICABLE FEES AND COMMISSIONS HAD BEEN ASSESSED AGAINST APPROPRIATE BENCHMARKS AND DEEMED REASONABLE.
THE INDEPENDENT REVIEW DOCUMENT, THE ERF REVIEWS INVESTMENT PERFORMANCE MONTHLY USING BOTH GROSS AND NET OF FEES, RETURNS AGAINST BE BENCHMARKS AND EVALUATES MANAGERS QUARTERLY TO PEER GROUPS.
BASED ON THE EVIDENCE REVIEWED, ERF HAS PROCESSES IN PLACE TO EVALUATE INVESTMENT FEES.
THEY MONITOR MANAGER PERFORMANCE AND ADDRESS PERFORMANCE CONCERNS WHEN IDENTIFIED.
ON THE NEXT SLIDE, THE STAFFING MODEL AND WORKLOAD ALIGNMENT.
THIS MATTER QUESTIONED WHETHER ERF STAFFING, ROLE STRUCTURE, QUALIFICATIONS, AND PROFESSIONAL DEVELOPMENT WERE ALIGNED WITH WORKLOAD AND ITS USE OF EXTERNAL PROVIDERS HERE.
THE ERF TALENT MANAGEMENT REPORT OF 2025 AND 2026 WAS AN IMPORTANT SOURCE OF EVIDENCE THAT WE REVIEWED.
IT EVALUATED STAFFING LEVELS, WORKFORCE QUALIFICATIONS AND PROFESSIONAL EXPERIENCE, AND INCLUDES ANALYSIS OF SUCCESSION PLANNING, TURNOVER AND RETENTION, PROFESSIONAL DEVELOPMENT AND STAFFING BENCHMARKS INVOLVING OTHER PUBLIC PENSION SYSTEMS. IN OTHER WORDS, THEY LOOK AT MORE THAN JUST A SINGLE MEASURE.
WE ALSO CONCLUDED THAT THE USE OF SPECIALIZED EXTERNAL SERVICE PROVIDERS DOES NOT BY ITSELF ESTABLISH THE ERF IS INTERNALLY OVERSTAFFED OR THAT ITS STAFFING STRUCTURE IS MISALIGNED.
THE EVIDENCE REVIEWED BY US INDICATED THAT THE STAFFING MATTERS RAISED IN THE MEMORANDUM ARE ACTIVELY EVALUATED ON AN ONGOING BASIS THROUGH RFS WORKFORCE ANALYSIS, TALENT MANAGEMENT PROCESS, AND PEER BENCHMARKING.
THE NEXT SLIDE STATED THAT THE MATTER RAISED WAS THAT ERF DID NOT COM HAVE COMPLETE JOB DESCRIPTIONS ADDRESSING DUTIES, QUALIFICATIONS, AUTHORITY, REPORTING, RELATIONSHIPS, WORKLOAD EXPECTATIONS, OR MEASURABLE DELIVERABLES.
THE WORKDAY PROFILES THAT WE REVIEWED INCLUDED JOB SUMMARIES, ESSENTIAL DUTIES.
THEY IDENTIFIED KNOWLEDGE, SKILL, EDUCATION REQUIREMENTS, EXPERIENCE AND CERTIFICATION REQUIREMENTS.
WE CONCLUDED THAT THE PROFILES CONTAIN THE CORE ELEMENTS THAT YOU WOULD REASONABLY EXPECT TO SEE IN JOB DESCRIPTIONS, WORKLOAD EXPECTATIONS AND MEASURABLE DELIVERABLES WERE NOT SPECIFICALLY IDENTIFIED IN THE WORKDAY PROFILES.
HOWEVER, THOSE ARE ELEMENTS THAT WE TYPICALLY DO NOT SEE IN JOB DESCRIPTIONS.
THOSE ARE INCLUDED IN MANAGEMENT AND PERFORMANCE MANAGEMENT REPORTING AND OPERATIONAL METRICS AND THINGS OF THAT NATURE.
THEREFORE, OUR CONCLUSION OF NO ISSUE IDENTIFIED FOR THE CORE JOB DESCRIPTION ELEMENTS.
AND THEN WE CONCLUDED THAT EXPECTATION NOT APPLICABLE FOR THE WORKLOAD EXPECTATIONS THAT WERE CALLED OUT IN THE MEMO.
ON THE NEXT SLIDE RELATED TO PROFESSIONAL DEVELOPMENT, THE MEMO STATED THAT JOB DESCRIPTIONS DID NOT IDENTIFY RELEVANT CERTIFICATIONS.
BASED ON OUR REVIEW OF THE EVIDENCE, WE NOTED CERTIFICATIONS LISTED AS REQUIREMENTS.
WE SAW A CERTIFICATION REQUIREMENT FOR CEBS, CPAS, ITIL, CFAS.
THESE ARE ALL WHAT YOU WOULD EXPECT TO SEE FOR AN ORGANIZATION OF THIS TYPE.
BECAUSE RELEVANT CERTIFICATIONS WERE IDENTIFIED IN THE PROFILES REVIEWED, THE CONCERN DESCRIBED IN THE MEMO WAS NOT DEMONSTRATED BY THE EVIDENCE WE REVIEWED.
SO IN CLOSING, OUR ASSESSMENT FOUND THAT ERF WAS ABLE TO DEMONSTRATE PRACTICES, PROVIDE EVIDENCE AND DOCUMENTATION AND OVERSIGHT ADDRESSING THE MATTERS RAISED IN THE MEMO.
DID YOU WANT TO, I APPRECIATE THAT.
UM, I WANNA GIVE YOU AN OPPORTUNITY, MR. MR. ETHERIDGE TO GO THROUGH THE FIRST PART IF YOU'D LIKE TO DO THAT.
UM, KIND OF GIVE FOLKS AN OVERVIEW WHO HAVEN'T HEARD ABOUT THE ERF.
UM, JUST IN THE INTEREST OF TIME, YOU'VE ALREADY DONE A GOOD JOB OF KIND OF PARSING IT DOWN TO THE REALLY IMPORTANT STUFF IN HERE.
TRY TO KEEP IT TO 10 TO 12 MINUTES IF YOU CAN.
JUST WE'RE GONNA, WE'RE GONNA KEEP IT AT 10 MINUTES.
[00:30:01]
SO I'M, I'M GONNA HIGHLIGHT, I'M GONNA HIGHLIGHT WHAT IS, UH, CRITICAL AND THEN WE'LL MOVE FORWARD.UH, SO THE, THE FIRST PART OF THE PRESENTATION IS WHAT ERF DOES ANNUALLY, AND THAT IS TO PROVIDE AN UPDATE ON THE PERFORMANCE AND ACCOUNTABILITY PRACTICES OF THE FUND.
AND SO I WON'T, UH, BOY, I'M GONNA SKIP TO SLIDE, UH, SKIP TO THE SLIDE THAT TALKS ABOUT GOVERNANCE AND LEADERSHIP.
AND ON THAT SLIDE, WHAT YOU'LL FIND THAT THERE ARE SIX AREAS.
WE'RE GONNA RUN THROUGH THOSE AREAS PRETTY FAST.
UH, BUT THE MOST IMPORTANT THING IS TO NOTE THAT THERE ARE THREE BOARD MEMBERS ELECTED BY EMPLOYEES, THREE WHO ARE APPOINTED BY THE COUNCIL, AND THEN THE CITY AUDITOR.
BY NATURE OF THE POSITION IN WHICH THEY HOLD, THEY ARE, UH, THE BOARD IS RESPONSIBLE FOR WEARING A FIDUCIARY HAT AND ALL FIDUCIARY DECISIONS SHOULD BE TIED TO, UH, MEMBERS OF BENEFITS AND ALSO PAYOUTS.
WE HAVE SEVERAL CONSULTANTS, UH, I WON'T LIST, I WON'T EVEN NAME THEM, BUT MANY OF THEM ARE NAMED IN DALLAS CITY CODE CHAPTER 40 A, WHICH GOVERNS ERF RFS DALLAS CITY CODE 40 A IS A CITY ORDINANCE.
AND SO IN ORDER TO ESTABLISH OR MODIFY IT AS AN ORDINANCE, IT REQUIRES THE COUNCIL AND VOTER'S APPROVAL.
TO THAT POINT, I'M GONNA GO TO THE NEXT SLIDE AND JUST REALLY HIGHLIGHT JUST WHO THE BOARD MEMBERS ARE.
AS I SAID, THREE ARE ELECTED, UH, THREE ARE APPOINTED.
BUT JUST TO NAME THE TWO, DUPREE SCOVEL IS THE CHAIR.
TINA RICHARDSON, ASSISTANT DIRECTOR OF PUBLIC WORKS IS THE VICE CHAIR BY NATURE OF THE BOARD IN 40 A, THEY HAVE THE OBLIGATION AND OPPORTUNITY TO APPOINT AN EXECUTIVE DIRECTOR.
AND THAT IS THE ROLE THAT I SIT IN.
THERE ARE EIGHT AREAS THAT THE STAFF, WE HAVE MANAGE, AND YOU'LL SEE THOSE EIGHT AREAS LISTED IN THE BOTTOM RIGHT.
I'M GONNA SKIP TO THE NEXT SLIDE AND I'M GOING TO TALK TO YOU A LITTLE BIT ABOUT THE WORKFORCE THAT WE HAVE.
AS MENTIONED, THERE ARE 38 STAFF THAT WERE IDENTIFIED IN 2025.
THE BOARD RECENTLY APPROVED TWO MORE STAFF WHO'RE UP TO 40.
UH, BUT I WANTED TO TALK TO YOU ABOUT THE SECRET SAUCE OF THE EMPLOYEE'S RETIREMENT FUND AND OUR PERFORMANCE.
IT'S BECAUSE THE ATTRITION RATE IS SO LOW COMPARED TO THE BENCHMARK.
IF YOU LOOK AT ALL INDUSTRIES, UH, COMPARED TO ERF, WE'RE AT 5.4%.
AND WHEN YOU LOOK AT ALL INDUSTRIES, THAT'S AT 17.3%.
IF YOU WERE TO COMPARE IT TO BANKS AND OTHER FINANCIAL SERVICES, YOU'LL SEE THAT IT WOULD EVEN BE, UH, MORE OF A DISPARITY AS THEY ARE AT 18.5.
AND THEN THE NEXT BOX, I'LL JUST HIGHLIGHT REAL QUICKLY, THE AVERAGE TENURE OF EMPLOYEES AT ERF ARE 11.4 YEARS.
THE CONTINUITY IS WHAT ALLOWS US TO BE EFFICIENT WITH MEMBERS TO BE EFFICIENT WITH INVESTMENTS.
AND THE OTHER SIX AREAS MENTIONED.
ON THE NEXT SLIDE, I'M GONNA TURN IT OVER TO NOW, THE CHIEF INVESTMENT OFFICER WHO WILL WALK YOU THROUGH THE 2025 INVESTMENT RESULTS.
SO I'M GOING TO HIGHLIGHT HERE ON THIS SLIDE, THE STRONG INVESTMENT PERFORMANCE OF ERF THE FUND ACHIEVED AND 11.92% ACTUARIAL MARKET RETURN IN 2025 COMPARED WITH A 9.18% RETURN IN 2024.
THIS PERFORMANCE EXCEEDED THE FUND'S ACTUARIAL RATE OF RETURN, OUR TARGET, IF YOU WILL, OF SEVEN AND A QUARTER PERCENT.
THIS DEMONSTRATES STRONG INVESTMENT RETURNS FOR THE YEAR.
OUR FINANCIAL REPORTING RESULTS WERE 11.77% NET OF FEES, AGAIN, JUST OVER FOUR AND A HALF PERCENT OVER OUR SEVEN POINT A QUARTER PERCENT ACTUARIAL RATE OF RETURN.
OUR TARGET GROWTH IN FUND ASSETS, THE MARKET VALUE OF THE FUND INCREASED TO 3.97 BILLION IN 2025, REPRESENTING A GROWTH OF APPROXIMATELY 213 MILLION AGAIN FROM THE PRIOR YEAR.
OUR INVESTMENT PORTFOLIO REMAINS DIVERSIFIED ACROSS EQUITIES, FIXED INCOME, PRIVATE MARKETS, REAL ESTATE, AND OTHER AREAS.
AGAIN, THIS DIVERSIFICATION PROVING STRONG RESULTS FOR THE FUND, THE IMPROVEMENT IN OUR FUNDING STATUS, THE FUND'S ACTUARIAL FUNDING RATIO IMPROVED FROM SIX 6.9% IN 2024 TO 67.4% IN 2025.
ADDITIONALLY, THE UNFUNDED LIABILITY DECLINED BY 5.2 MILLION TO APPROXIMATELY 1.85 BILLION COMPARED WITH AN EXPECTED INCREASE OF 87 MILLION.
WHILE THIS IS POSITIVE PROGRESS, THE UNFUNDED LIABILITY DOES REMAIN A LONG-TERM OBLIGATION THAT WE KEEP A VERY CLOSE EYE ON.
FINALLY, TWO OTHER ITEMS I'LL HIGHLIGHT ON THIS PAGE.
INVESTMENT EARNINGS ABOVE EXPECTATIONS.
[00:35:01]
THE SEVEN AND A QUARTER ACTUARIAL ASSUMPTION BY APPROXIMATELY 170.2 MILLION UNDER THE FUND'S FIVE YEAR ACTUARIAL SMOOTHING METHODOLOGY.34 MILLION OF THESE GAINS WAS RECOGNIZED IN 2025, WHILE 136.2 MILLION WILL BE RECOGNIZED OVER 2026 THROUGH 2029.
THIS APPROACH HELPS REDUCE YEAR TO YEAR VOLATILITY IN ACTUARIAL ASSET VALUES.
AND THEN FINALLY, CONSISTENT PERFORMANCE ABOVE OUR BENCHMARK.
THE FUND EXCEEDED ITS SEVEN AND A QUARTER ASSUMED RATE OF RETURN IN THE LAST THREE YEARS, 10.09% IN 2023, 9.14% IN 2024.
AND THEN, AS I MENTIONED EARLIER, 11.77% IN 2025.
AND THESE ARE BASED ON OUR REPORTED NET INVESTMENT RETURNS.
THE 10 YEAR AVERAGE OF 7.62% ALSO EXCEEDED OUR ASSUMPTION OF SEVEN AND A QUARTER PERCENT REFLECTING FAVORABLE LONG-TERM INVESTMENT PERFORMANCE.
SO WE'RE GONNA QUICKLY TRANSITION TO MEMBERSHIP.
I'M GONNA SKIP THROUGH SOME OF THIS MATERIAL BECAUSE I KNOW ANNUALLY WE BRING THIS TO YOU.
UM, BUT THE, THE MOST IMPORTANT THING ON SLIDE 10 REALLY IS TO SHOW THAT CURRENTLY THE HEAD COUNT FOR ACTIVES AND RETIREES ARE AT A ONE-TO-ONE RATIO.
WE ARE A MATURE FUND, BUT THAT ALSO MEANS THAT WE HAVE THE SAME AMOUNT OF PEOPLE CONTRIBUTING AS WE HAVE RECEIVING BENEFIT.
AND IT'S SOMETHING TO THINK ABOUT AS WE HAVE MOVED TO AN ACTUARIAL DETERMINED CALCULATION.
I'M GONNA SKIP US NOW TO THE ERF FIDUCIARY STUDIES, AND I JUST WANTED TO HIGHLIGHT JUST A FEW STUDIES.
BUT THE FIRST THING I WANTED TO SHARE WITH YOU ON THE NEXT SLIDE IS ACTUALLY OVER THE YEARS, WHAT THE FUNDING LEVEL HAS BEEN DOING.
AND YOU SEE WHERE IT STARTS HERE IN 2006.
THERE'S BEEN A GRAVITATION THAT IT HAS FAILED, UH, ALL THE WAY OUT TO 2023.
BUT THEN YOU SEE THAT SINCE THE A DC, IT'S PICKED UP AFTER 2024.
AND THE REASON WHY THAT IS SIGNIFICANT, IT IS SOME EVIDENCE THAT THE A DC MODEL ACTUALLY WORKED BETTER THAN WHAT WE HAD BEFORE, WHICH WAS A CAP OF CONTRIBUTIONS CAPPED AT 36%.
BECAUSE ON THE NEXT SLIDE, WHAT YOU'LL SEE IS WE'RE GONNA WALK THROUGH JUST SOME OF THE HIGHLIGHTS, AND I WON'T GO THROUGH ALL OF THEM, OF THE STUDIES THAT HAVE BEEN DONE OVER THE PAST 10 YEARS BY THE BOARD.
THE FIRST ONE IS ON SLIDE 13 AND ON SLIDE 13, THIS IS EVIDENCE OF THE SECOND TIER OF BENEFITS THAT WERE ESTABLISHED IN 2016 THAT WENT INTO EFFECT JANUARY 1ST, 2017, WHERE WE CREATED A NEW TIER OF BENEFITS BETWEEN THE BOARD, THE COUNCIL, AND THE VOTERS AT LARGE THAT ALLOWED ALL NEW HIRES WHO WERE HIRED IN JANUARY 1ST, 2017 TO HAVE LOWER BENEFITS, WHICH REDUCED THE CITY'S COST.
AND THE ESTIMATED TRAJECTORY OF REDUCTION WAS 2.15 BILLION.
ON THE NEXT SLIDE, I'D LIKE TO SHARE WITH YOU THE 2024 STUDY, WHICH REALLY WAS A STATE MANDATE.
IT WAS THE FUNDING SOUNDNESS RESTORATION PLAN, WHICH REQUIRED THE IMPLEMENTATION OF THE A DC AGAIN, WHERE THE BOARD COUNCIL WENT TO THE VOTERS TOGETHER.
AND 69% SAID THIS IS THE RIGHT THING TO DO.
THE QUESTION THAT WE RECEIVE MOSTLY IS, WELL, WHAT IS A-D-C-A-D-C REALLY IS THE ACTUARILY DETERMINED CONTRIBUTION, WHICH IS A CALCULATION, AND I LIKEN IT TO IT BEING THE SAME AS ANY OF OUR MORTGAGES.
IT'S WHAT THE AMORTIZATION CHART SAYS WE NEED TO PAY ON A MONTHLY BASIS OVER THE LIFE OF THE LOAN.
IN THIS CASE, IT'S FOR 30 YEARS.
IF WE DON'T PAY THE FULL A DC AMOUNT, THEN WE'RE GONNA GET BEHIND ON THE LOAN.
AND THAT'S HOW THE PENSION FUND WORKS WITH A DC.
SO WHEN YOU LOOK AT THIS CHART, WE BASICALLY AGREED TO A FIVE YEAR STEP UP PLAN BECAUSE THE CAP WAS IN PLACE AT 36%.
YOU'LL SEE THAT IN 2026, FOR EXAMPLE, THE CAP MOVED FROM 36% TO 38.22.
THAT WAS AN INCREASE PRIMARILY TO THE CITY BECAUSE THE EMPLOYEE'S BENEFITS HAD A CAP OF TIER A 14% AND TIER B 13.32%.
SO WHEN YOU THINK OF IT FROM THAT STANDPOINT, THIS STEP UP PLAN, WHICH WE TALKED ABOUT TWO YEARS AGO AS GUARDRAILS ALLOWED THE CITY TO MANAGE ITS BUDGET IN AN EXPECTED MOMENT OVER THE FIVE YEAR PERIOD.
AND SO THAT'S WHAT IS IN PLACE.
NOW, 2027 SAYS THAT THE A DC CONTRIBUTION WILL GO UP FROM 38.22 TO 39.45, BUT AGAIN, THE CONTRIBUTION BEING ON SCHEDULE FOR 30 YEAR AM IMMUNIZATION TO SUNSET THE FUND BEING FULLY FUNDED BY 2054,
[00:40:01]
UH, IS THE TARGET THAT WE'RE SEEKING.ON THE NEXT SLIDE, I WON'T GO THROUGH THIS BECAUSE IT'S REALLY DAUNTING, BUT IT'S EVIDENCE THAT THE BOARD TAKES PRUDENT STEPS TO MAKE SURE THAT THE NUMBER ONE PLATFORM THAT WE LOOK AT, WHICH IS THE ASSET ALLOCATION, THIS IS SIMILAR TO COUNCIL MEMBERS, 4 57 PLANS AND WHAT YOU INVEST IN, THIS IS WHAT THE FUND THROUGH ITS BOARD INVEST IN TO MAKE SURE THAT WE HIT THE 7.25% THAT NATALIE TALKED ABOUT OVER THE LAST COUPLE OF YEARS, THE BOARD AND INVESTMENT, UH, ADVISORS AS WELL AS STAFF HAVE WENT THROUGH 130 DIFFERENT SCENARIOS.
AND QUICKLY ON SLIDE ON THE NEXT SLIDE, YOU'LL SEE THAT THE SCENARIO THAT WAS SELECTED EQUATES TO AN ASSET ALLOCATION OF 7.25% OVER 30 YEARS.
THE NEXT SLIDE IS, UH, A STUDY THAT WAS DONE BY THE NATIONAL ASSOCIATION OF STATE RETIREMENT ADMINISTRATORS.
I'LL JUST BE BRIEF ON THIS ONE.
WHAT THE BOARD IS CONSTANTLY LOOKING AT, THERE IS NO DECISION ON IT, BUT IT IS A KEY ASSUMPTION IS THAT THE SEVEN AND A QUARTER PERCENT IS AT THE TOP QUARTILE OF ALL PENSION FUNDS IN TEXAS AND MOST OF THE UNITED STATES, NSRA FOR SHORT BASICALLY STUDIES 132 DIFFERENT PENSION FUNDS.
AND THEIR EVALUATIONS SUGGEST THAT BASED ON MARKET CONDITIONS, 7% IS A MORE REALISTIC 30 YEAR TRAJECTORY THAN 7.25%.
AND SO AGAIN, THE BOARD HAS NOT MADE ANY DECISION ON THIS.
UH, BUT WHAT I WILL TELL YOU IS 73% OF THE 132 PLANS ARE AT 7% OR BELOW.
AND SO WHAT WE'RE STUDYING IS HOW LONG CAN WE KEEP UP THE SEVEN AND A QUARTER RATE OF RETURN.
IF YOU GO TO THE NEXT SLIDE, THIS FURTHER ILLUSTRATES HOW THE FUND ERF HAS BEEN PERFORMING.
IF YOU LOOK AT THE, UH, GRAPH CHART TO YOUR RIGHT, UH, IT BASICALLY SHOWS THE GOLD CHART THAT WE ARE AT THE TOP QUARTILE AND THAT OUR RATE OF RETURN IS AT 7.25%.
BUT WHEN YOU LOOK AT THE LION'S SHARE OF ALL PENSION FUNDS EVALUATED ANNUALLY, THEY'RE BELOW THAT.
ON THE NEXT SLIDE, YOU'LL SEE A LIST OF FUNDS IN THE STATE OF TEXAS.
YOU'LL SEE THAT THIS IS THE FINAL SET OF EVIDENCE ON THIS TOPIC.
UH, THAT ERF IS AT THE TOP OF THE HEAP ALONG WITH THE CITY OF SAN ANTONIO'S POLICE AND FIRE.
YOU'LL ALSO SEE THAT THE CITY'S POLICE AND FIRE FUND IS AT 6.5%.
MOVING TO THE NEXT SLIDE, LET'S JUST SKIP OVER AND GO TO SLIDE 23.
UM, BECAUSE THIS REALLY GETS TO THE NUTS AND BOLTS OF HOW ALL OF THIS, ALL THESE CALCULATIONS REALLY MEASURE OUT TO A BUDGET ITEM.
IF WE WERE TO LOOK AND STUDY THE 2027 PROJECTED COST, THAT'S GOING TO BE FOR THE THREE DIFFERENT CONTRIBUTORS TO THE FUND.
THAT IS THE EMPLOYEES, THE CITY'S BUDGET.
AND THEN OF COURSE, WHAT NATALIE TALKED ABOUT, THE INVESTMENT.
YOU'LL SEE THAT THE EMPLOYEES AT A BLENDED RATE, BECAUSE THEY HAVE TWO DIFFERENT TIERS, HAVE BLENDED RATES THAT THEY THINK WILL BE CONTRIBUTING 79.9 MILLION.
THE CITY OUT OF ITS REGULAR GENERAL FUND WILL CONTRIBUTE 104.7 MILLION.
AND BECAUSE THE PENSION OBLIGATION BONDS, WHICH WERE ESTABLISHED IN 2004 WON'T MATURE TO 2035, UH, THERE'S AN ADDITIONAL 47.6 MILLION.
THIS STRATEGY OF THE FIVE STEP, FIVE YEAR STEP UP PLAN ALLOWS US TO ACHIEVE FULLY FUNDING BY 2054.
ON THE FINAL SLIDE, ONE OF THE OTHER STUDIES THAT THE BOARD ASKED US TO REVIEW, AND WE DID THIS THROUGH OUR ACTUARIES, WAS TO REALLY STUDY THE QUESTION OF HOW DID WE GET HERE BEING 67.4% FUNDED? AND THE ANSWER IS WHEN THE CITY AND THE BOARD ELECTED TO PURCHASE THE PENSION OBLIGATION BONDS IN 2004 AND PUT THE 36% CAP IN PLACE, LESSON LEARNED WAS THE 36% CAP BECAME A RISK.
AND SO IF WE COULD READ TOMORROW'S NEWSPAPER, WE WOULD SAY, LET'S STAY AWAY FROM THE 36%, BUT WE CAN'T.
AND SO WHEN YOU LOOK AT THIS CHART, IT SAYS THAT IF WE WOULD'VE HAD A DC GOING BACK TO 2006 UP TO THE PRESENT TIME, THE FUND WOULD'VE HAD AN ADDITIONAL 548 MILLION IN ITS COFFERS.
AND INSTEAD OF BEING AT 67.4%, WE WOULD BE AT 70, 77% FUNDED.
SO WITH THAT MR. CHAIR, I'M GONNA CONCLUDE IN THE 10 MINUTE MARK AND TO SEE IF THERE ARE ANY QUESTIONS FROM EITHER TEAMS. YOU MET THE GOAL.
I'M GONNA START OFF TO MY LEFT WITH, UH, VICE CHAIR KATHY STEWART.
AND, UH, MR. RIDGE, IT'S GOOD TO SEE YOU.
[00:45:01]
UM, THIS PRESENTATION AND ALL OF THE INFORMATION.IT'S, UM, ONE THAT WE DISCUSSED WHEN WE MET, AND IT'S, I THINK YOU'VE REALLY TOUCHED ON IT.
UM, WHEN IT SHOWS, UM, THE CHART IS, IS GOING DOWN THERE, WHAT HAPPENED IN THAT OH 4, 0 6 TIMEFRAME WAS THE PURCHASE OF THE, UH, PENSION OBLIGATION BONDS AND THEN A DOWNTURN IN THE ECONOMY THAT THEN I THINK CONTRIBUTED TO, TO THE ISSUE IS THAT, COULD YOU KIND OF GO OVER THAT WITH US? SURE.
AND, AND THERE WAS NO WAY TO ESTIMATE THE MARKET IN 2009 AND 2010, THE HOUSING MARKET BASICALLY CREATED A CONDITION THAT SAID THAT THE PENSION OBLIGATION BOND INVESTMENT THAT THE BOARD AND THE CITY COUNCIL, PRIMARILY THE COUNCIL INVESTED, UH, WAS LOST.
WE HAD A 31% LOSS IN 2009, AND THE FOLLOWING YEAR WE CAME BACK TO HAVE ALMOST EQUIVALENT IN GAINS.
BUT ANYONE WHO KNOWS THAT INVESTMENT REQUIRES THAT YOU HAVE A 7.25% RETURN MEANS THAT WE LOST.
AND SO, UH, THAT'S WHAT OCCURRED.
NOW, I WILL ALSO SAY, MS. STEWART, THAT, UH, MARKET CONDITIONS, UH, WERE WAS ONE FACTOR, BUT ALSO THE 36% CAP WAS THE OTHER.
SO YOU SAID A FEW MINUTES AGO IF WE'D HAD THE A DC, IT, WE WOULD'VE BEEN IN BETTER SHAPE.
WE WOULD'VE BEEN IN BETTER SHAPE.
UH, WE STILL WOULD'VE HAD THE CHALLENGE IN 2009 AND 2010, BUT WE WOULD'VE BEEN 548 MILLION BETTER.
THEREFORE, OUR FUNDING LEVEL WOULD BE AT 77% VERSUS THE 67.4.
UM, AND SO THERE ARE ALWAYS GONNA BE CHALLENGES BECAUSE IF ANY OF US COULD PREDICT THE MARKET, WE PROBABLY WOULDN'T BE AT THIS PODIUM RIGHT NOW.
WE WOULD BE SOMEWHERE ELSE IN A VERY LUXURIOUS PLACE.
BUT WE DO HAVE TO DO THE BEST THAT WE CAN WITH MARKET CONDITIONS.
THE NUMBER ONE FACTOR THAT WE CONSTANTLY STUDY IS THE CONDITION THAT WE DRIVE US TO LOSE FOR ANY PENSION FUND IS INFLATION.
AND SO THAT'S WHY WE PAY CLOSE ATTENTION TO THE FEDERAL RESERVE BANK.
WE ALSO PAY CLOSE ATTENTION TO HOW THE PRODUCTS IN WHICH WE'RE PURCHASING FROM MONEY MANAGERS OR INVESTING WITH MONEY MANAGERS COMPARE TO INFLATION.
AND THAT'S THE DECISION THAT OUR BOARD MAKES AFTER WE DO OUR RESEARCH.
WE'RE GONNA MOVE ON DOWN THIS WAY TO COMMITTEE MEMBERS.
UM, I'M GONNA GO TO CHAIRMAN GRACIE NEXT.
UM, AND, AND THANK YOU FOR THIS PRESENTATION.
UM, HOW DOES THIS OVERALL, AND I, I SAW THE COMPARISON IN TERMS OF HOW WE COMPARE IN TERMS OF, UH, RETURN, UH, AS FAR AS THE FUNDING GAP, UH, HOW DO WE COMPARE IN TERMS OF THE FUNDING LEVELS TO OTHERS? DID I MISS THAT? UH, IT'S, IT'S IN THE BRIEFING, BUT WE CAN REVISIT IT BECAUSE I KNOW I FLEW THROUGH THE PRESENTATION AND I WANT TO, UM, BASICALLY ANSWER ALL THE QUESTIONS.
BUT IF WE LOOK AT, UH, FUNDING LEVEL, I'M MISSING IT.
IF WE, THE ANSWER TO YOUR QUESTION IS, UH, FUNDING LEVEL COMPARISONS.
WE DO HAVE A FEW, BUT WHAT I'LL SAY TO YOU IS ON SLIDE, UH, 22 IS THAT THIS IS NOT ALL OF THE PENSION FUNDS THROUGHOUT THE COUNTRY.
THIS IS JUST THOSE THAT WE IDENTIFY WITHIN THE STATE OF TEXAS.
SO WHEN YOU LOOK AT US AT 67.4% ABOVE US, WE RANKED FIFTH AMONG THE TEXAS LARGER TEXAS PLANS, UH, THE HIGHEST ONE THERE BEING THE HOUSTON FIREFIGHTERS RELIEF AND RETIREMENT FUND AT 95.4%.
UH, WHEN YOU LOOK AT THEIR ASSETS UNDER MANAGEMENT AT 5.8, WE COMPARE TO THAT AS OF 2025 AT 3.97.
UH, AND OUR FUNDING LEVEL AT THAT TIME WAS 67.4.
AND, AND, AND I GUESS WHERE I WAS GOING WITH THAT IS YOU ALL HAVE BEEN MANAGING THIS, THIS, THIS, WELL, DESPITE ALL OF THE UPS AND DOWNS OF THE MARKET AND EVERYTHING, AND JUST KIND OF LOOKING AT THIS HOLISTICALLY, TRYING TO SEE WHERE WE ARE IN COMPARISON TO, TO THE OTHER CITIES IN TERMS OF WHAT WE'RE EARNING MM-HMM
BUT ALSO THE FUNDING GAPS ON IT.
SO AGAIN, JUST GREAT JOB ON THIS PRESENTATION AND THANK YOU FOR THIS INFORMATION, SIR.
SO, UH, I THINK YOU KNOW WHAT MAY NOT BE IN THE, THE REPORT THAT THE INTERIM AUDITOR BEFORE HAD DONE IS JUST SOME OF THE ISSUES WITH GETTING INFORMATION AS REQUESTED.
SO I, YOU KNOW, I DON'T KNOW WHY YOU COULDN'T TURN BYLAWS AROUND IN 24 HOURS.
I MEAN, DO YOU BYLAWS OR THE, THE DALLAS CITY CODE 40 A ARE YOU REFERRING, WHEN YOU SAY BYLAWS, I MEAN, I'M, I'M JUST SAYING THAT IF REQUESTS WERE MADE BY A BOARD MEMBER, WHY WOULD THERE BE A DELAY? SO, SO I, I HAVE TO HONESTLY SAY THAT FOR NEW BOARD MEMBERS THAT JOIN OUR BOARD, WE GO THROUGH WHAT WE CONSIDER TO BE AN INTENSIVE TRAINING SESSION AND ALL REQUESTS DURING THAT TIME.
AND ANY OTHER TIME WE DO TURN AROUND, UH, FOR THIS PARTICULAR LETTER, WHICH IS THE TECHNICAL ASSISTANCE LETTER,
[00:50:01]
I'LL BE HONEST IN SAYING WE HAD NO KNOWLEDGE OF THIS UNTIL THIS COMMITTEE RECEIVED IT IN AUGUST OF EIGHT, AUGUST 18TH.UH, SO I CAN'T ANSWER THE RESPONSE TIME IN WHICH IS BEING IDENTIFIED OTHER THAN WE DO OUR VERY BEST TO TURN EVERYTHING AROUND WITHIN 24 HOURS, NOT 48.
I MEAN, I DON'T THINK IT HAD ANYTHING TO DO WITH THE LETTER.
IT'S, I MEAN, I'M JUST, I'M JUST SAYING AS A MATTER OF PRACTICE, IT'S A GOOD PRACTICE IF A BOARD MEMBER'S REQUESTING SOMETHING TO, TO TURN IT AROUND.
BUT, UM, ON THE, UH, I GUESS THIS IS FOR, FOR YOU, I'M SORRY, I DID NOT CATCH YOUR NAME.
UM, YOU WERE TALKING ABOUT THE, I GUESS ON THE ADMINISTRATIVE COSTS THAT IT, UH, INCLUDED A WHOLE LOT OF OTHER THINGS LIKE TECHNOLOGY, ET CETERA, THAT MIGHT NOT MAKE IT APPLES TO APPLES, BUT ON PAGE, UH, THIS IS NOT A NUMBERED PAGE, BUT I THINK THERE WAS SOMETHING TAKEN, AND MAYBE MR. TER CAN CLARIFY IT, BUT FROM THE TEXAS PENSION REVIEW BOARD ON EXPENSES COMPARATIVELY, SO IT WOULD BE APPLES TO APPLES.
I MEAN, I'M JUST NOT, UM, DID YOU LOOK AT THE PIERCE CITIES AND SEE IF THEY TOO HAD THESE FIGURES IN, OR THESE CATEGORIES IN THAT, THAT YOU'RE SAYING WERE INCLUDED FOR THE ERF OR? WELL, WE LOOKED AT, AS I MENTIONED, OVER 85 DOCUMENTS, UM, THAT WE REQUESTED.
WE DID LOOK AT EVIDENCE OF SUPPORTING THE ADMINISTRATIVE COST, BUT IT WAS ALSO LOOKING AT THE GOVERNANCE OVER THAT.
SO IS IT BEING MONITORED? IS IT BEING APPROVED? IS THE BOARD REVIEWING IT? UM, SO, AND, AND THEN THE, THE INDEPENDENT PEER BENCHMARKING WAS ALSO LOOKED AT.
BUT DOES THAT TELL ME THAT THE OTHER CITIES THAT ARE, I MEAN, PEER CITIES ALSO INCLUDED THAT INFORMATION, SO IT WOULD BE ACCURATE OR NOT? YOU KNOW, WE DIDN'T LOOK INTO THE OTHER CITIES INFORMATION.
WE MAINLY RESPONDED TO THE INFORMATION THAT WAS IN THE TECHNICAL MEMO.
SO EVEN THOUGH IT WAS CALLED ADMINISTRATIVE EXPENSES AND IT INCLUDED ALL THESE THINGS THAT YOU'RE SAYING MAYBE IT SHOULDN'T HAVE, MAYBE THAT'S THE WAY OTHER CITIES REPORTED AS WELL.
SO IT WOULD BE COMPARATIVELY, I, I GUESS WHAT I WAS SAYING IS THAT ADDITIONAL ITEMS WERE INCLUDED IN THAT LINE ITEM AND JUST LOOKING AT THAT PERCENTAGE ALONE, LIKE YOU HAD TO UNDERSTAND THE DETAIL AS WELL.
SO IT STILL LOOKS LIKE IF OTHER CITIES DID THAT, AND IT'S REPORTED BY THE TEXAS PENSION REVIEW BOARD AND THEY INCLUDED ALL THAT TOO.
I MEAN, DALLAS IS STILL PRETTY HIGH, SO I MEAN, WHETHER IT DOES INCLUDE IT OR IT DOESN'T INCLUDE IT IF EVERYBODY'S DOING IT THIS WAY OR NOBODY'S, YOU KNOW, I'M JUST SAYING THAT IS IT APPLES TO APPLES AND IT LOOKS LIKE SURE.
LOOKS LIKE IT IS AND IT'S STILL HIGH.
AND ON, YOU KNOW, SOME OF THE DIFFERENT AROUND STAFFING, IT WAS HELPFUL TO SEE THAT.
AND SO EVEN THOUGH YOU MAY HAVE STUDIED THIS AND SAID, HEY, THIS IS IN KEEPING IT IN LINE.
I MEAN, WE ARE IN SOME AUSTERE TIMES AND YOU KNOW, WE DID THE PENSION OBLIGATION BONDS.
I MEAN, WE JUST HAD AN ELECTION ABOUT RA YOU KNOW, RAISING CONTRIBUTIONS.
I MEAN, I, I LOOK AT IT, THAT'S A GREAT DATA POINT TO UNDERSTAND, BUT I ALSO LOOK AT, IS IT RUNNING AS EFFICIENTLY AS IT CAN? I SHOULD DIRECT THIS AT YOU, NOT AT YOU.
UM, AND, AND IS IT NECESSARY? SOME OF THE THING, I MEAN YOU PROBABLY SAW IN THE REPORT COMPARATIVELY, LIKE EVEN ON SALARIES, I MEAN, YOU'RE RUNNING A PENSION, IT'S A $4 BILLION PENSION, BUT THERE IT'S COMPARING TO SALARIES OF PEOPLE WHO ARE RUNNING A WHOLE CITY.
AND SO, UM, YOU KNOW, THAT'S SOMETHING THAT CATCHES MY ATTENTION AND I KNOW YOU'VE GOT THE COMPENSATION STUDY AND THAT SHOULD BE LOOKED AT PRIVATELY, WHICH I WOULD INVITE US TO DO CHAIR.
UM, SO I MEAN THERE ARE JUST SOME OTHER QUESTIONS IN HERE THAT MAYBE WE SHOULD SEND TO YOU AND GET A MEMO BACK ON, UM, AROUND LIKE ONE OF YOUR STAFF MEMBERS IS A BRAND MANAGER.
WHAT IS A, TELL US ABOUT A BRAND MANAGER FOR A PENSION FUND? SO LET ME EXPLAIN, UM, WHAT IS IN OUR TALENT MANAGEMENT REPORT AND WHAT WE PRACTICE AS ALL OF THE CITY DEPARTMENTS DO, THE OFFICIAL TITLES FOR EVERY EMPLOYEE AT ERF IS APPROVED IN THE SALARY ORDINANCE APPROVED BY THE CITY COUNCIL.
THE TITLES IN WHICH ARE IN OUR REPORT ARE FUNCTIONING TITLES.
THEY DESCRIBE WHAT WE DO ACCORDING TO 40 A.
SO THE BRAND MANAGER THAT YOU SEE IS ONE OF THE COMMUNICATION TEAM MEMBERS WHO OFFICIALLY IS A PENSION OFFICER.
TWO, THE BRAND MANAGER IS THE FUNCTIONING TITLE THAT DESCRIBES WHAT THEY DO WITH THE FUND.
WELL WE MAY JUST WANNA DRILL IN AND UNDERSTAND THAT MORE.
I MEAN, I THINK THAT'S SOMETHING THAT'S WHY WE WANT OVERSIGHT ON THIS BECAUSE IT'S NOT SOMETHING THAT, YOU KNOW, WE DEAL WITH ALL OF THE TIME, BUT SURE.
WELL I THINK THERE ARE JUST SOME OTHER QUESTIONS THAT MIGHT BE GOOD FOR ME TO SEND AND THEN IT COMES BACK IN A, A MEMO OR SOMETHING AND THEN WE CAN PURSUE IT, UM, COME BACK.
[00:55:01]
YOU MS. WILLIS.AND THEN ON THE, I THINK ON THE LOWER RATE OF RETURN, YOU DID MENTION THAT.
SO IF THAT IS LOWERED, WHAT DOES THAT DO TO THE CITY'S CONTRIBUTION? SO, GREAT QUESTION.
UH, AND AGAIN, THE BOARD HAS NOT MADE A DECISION, BUT IF WE LOWER THE RATE FROM SEVEN AND A QUARTER TO 7%, 25 BASIS POINTS EQUATES TO 14 MILLION IN ADDITION TO THE FIVE YEAR STEP UP STARTING IN 2030.
SO WHAT WE ARE REALLY STUDYING IS WHETHER OR NOT WE CAN CONTINUE TO PERFORM AT THAT LEVEL.
THE BOARD WILL NOT MAKE A DECISION UNTIL NEXT VALUATION IN WHICH IS MAY AFTER WE STUDY WHAT THE MARKET IS DOING FURTHER.
BUT THAT WOULD AFFECT WHAT THE CITY CONTRIBUTES, WE WOULD HAVE TO CONTRIBUTE MORE.
UM, AND THEN I THINK JUST ON BOARD TERMS, I MEAN, I KNOW EVERYTHING WE'VE BEEN THROUGH ON THAT, BUT JUST AS A MATTER OF PRACTICE, AND I KNOW SOME PEOPLE ARE, YOU KNOW, JUST TICKING OVER TO STARTING OVER WHO'VE BEEN ON THERE FOR A REALLY LONG TIME MM-HMM
AND MAYBE THIS IS ON THEM TO MAKE A DECISION WHETHER THEY KEEP SERVING AFTER A SUPER LONG TENURE.
IT'S JUST, IT'S GOOD PRACTICE, YOU KNOW, TO HAVE MORE PEOPLE COMING IN.
AND SO MAYBE THAT'S A POINT FOR THEM TO CONSIDER, EVEN THOUGH IT'S ALLOWABLE, UM, YOU KNOW, WHETHER IT'S TIME TO ALLOW SOME OTHERS TO BE UP FOR ROLES THERE.
SO THAT'S REALLY TO THEM MORE THAN YOU MAY I RESPOND.
REMEMBER, THREE OF THE BOARD MEMBERS ARE ELECTED BY THE EMPLOYEES.
THAT'S WHAT I'M TALKING ABOUT.
THEY'RE ELECTED EVERY THREE YEARS.
THE ONLY DELAY THAT HAS OCCURRED WAS A LAWSUIT THAT REQUIRED US TO HAVE A HOLDOVER.
LIKEWISE, THOSE WHO ARE APPOINTED BY THE COUNCIL ALSO HAVE A THREE YEAR TERM EACH, BOTH NOT HAVING A TERM TO EXTEND BEYOND NINE YEARS.
SO WE HAVE BOTH ELECTED WHO HAVE SERVED FOR MORE THAN 10 YEARS BASED ON THE HOLDOVER AND APPOINTED WHO HAVE SERVED MORE THAN 10 YEARS BASED ON COUNCIL'S DECISION.
WELL, WE CAN TAKE CARE OF THAT SIDE.
I'M TALKING ABOUT THE OTHER SIDE AND I REALIZE IT'S ELECTED YEAH.
BY STAFF, BUT IT'S JUST, UM, I MEAN, I THINK YOU KNOW WHAT I'M GETTING AT.
AND ALSO, SO THE THREE, THREE YEAR TERM, SO NINE YEARS, THAT'S A PRETTY LONG PERIOD AND THEN YOU LAY OUT FOR A TERM AND THEN YOU CAN COME BACK, RIGHT? THAT'S CORRECT.
SO THAT'S, THAT'S A LONG TIME.
SO I'M JUST, AS A MATTER OF PRACTICE, MAYBE OTHERS FEEL DIFFERENTLY.
IT JUST SEEMS LIKE, YOU KNOW, WHETHER YOU'RE A TREASURER OR YOU KNOW, ANOTHER BOARD MEMBER, IT'S GOOD PRACTICE TO HAVE OTHERS COME IN INSTEAD OF JUST HAVING THAT SET FOR.
JUST A COUPLE FOLLOW UPS FROM ME AND THEN WE'LL GO TO THE NON COMMITTEE MEMBERS.
UM, I MIGHT HAVE MISSED THIS, BUT WHAT IS, SO THE, THE, THERE'S NO TERM LIMITS IS WHAT I'M GETTING THERE.
THERE'S NINE YEARS, BUT YOU CAN SIT OUT AND COME BACK, RIGHT? IF YOU'RE A BOARD MEMBER.
OH, NO, AND I'M SORRY IF I'M CONFUSED.
THE THREE YEAR TERMS SUGGEST N 40 A, THAT YOU CAN'T SERVE MORE THAN THREE TERMS. SO THERE'S THE NINE YEARS, RIGHT, THAT I BELIEVE MS. WILLIS WAS REFERRING TO.
SO THE TERM LIMIT IS A MAXIMUM OF THREE TERMS. SO NO ONE SERVED ON THE BOARD FOR MORE THAN NINE YEARS AT THIS POINT.
UH, THE ANSWER IS YES, THEY HAVE, BECAUSE THERE WAS A FIVE YEAR PERIOD WHERE THERE WAS A HOLDOVER.
THE COURT SAID THAT THOSE WHO WERE IN PLACE NEEDED TO STAY IN SEAT UNTIL THE COURSE CASE HAD BEEN RESOLVED.
AND SO THAT IS WHERE THE LONG TERM CAME IN.
BUT I'LL, I'LL JUST SAY THIS, WE HAD AT LEAST ONE BOARD MEMBER WHO DID LEAVE, UM, AFTER THAT COURT CASE, AND THEN RETURNED LATER.
AND THEY HAD A TWO AND A HALF, THREE YEAR.
THEY HAD A THREE YEAR, UH, BREAK IN SERVICE, WHICH IS THE QUESTION THAT WAS ASKED EARLIER.
IF YOU HAVE A BREAK IN SERVICE, CAN YOU RETURN? THE ANSWER IS YES, BUT IT'S FOR THE ELECTED AND THE APPOINTED WHO CAN DO THAT? WHO'S THE LONGEST SERVING BOARD MEMBER? UH, THAT WOULD BE AN APPOINTED, UH, THAT WOULD BE DR.
JOHN PEEVY, WHO HAS SERVED, UH, AT LEAST NOW THREE DIFFERENT TIMES, UH, SERVING, UH, IN HIS THIRD TERM NOW, I BELIEVE.
UM, I KNOW A COUPLE OF THE OTHER QUESTIONS THAT HAVE COME IN, UM, THAT I WANTED TO FOLLOW UP ON IS THE, THE REASON FOR ERF HAVING SEPARATE LOCATION FOR AN OFFICE FACILITY, UM, WHY IS THAT AS OPPOSED TO LIKE USING ONE OF THE CITY FACILITIES? I WISH I COULD SAY I WAS HERE 25 YEARS AGO, RIGHT? I WAS HERE 21 YEARS AGO.
THERE WAS A DECISION MADE FOR A COUPLE OF REASONS TO MY UNDERSTANDING, UH, BECAUSE OF THE DATA IN WHICH WE HOUSE, IT IS PROTECTED UNDER STATE LAW.
AND SO THUS THE SEPARATION OF TECHNOLOGY AS FAR AS SPACE, I THINK THE BOARD AT SOME POINT DECIDED THAT, UH, BASICALLY PURCHASING, RENTING OR, UH, LEASING SPACE WAS A QUESTION MARK AS IT RELATES TO THE ASSETS IN WHICH THEY MANAGE MM-HMM
AND SO AT SOME POINT, THE BOARD DECIDED TO INVEST IN, UH, A BRICK AND MORTAR, WHICH IS THE ONLY BRICK AND MORTAR THEY INVESTED IN AS FAR AS THE DETAILS.
I WOULD HAVE TO GO BACK AND LOOK TO SEE WHAT THE PURPOSE AND THE CONDITIONS WERE 25 YEARS AGO TO BRING
[01:00:01]
THAT RESPONSE TO YOU.AND WE, WE OFTEN HAVE A LOT OF CONVERSATIONS AT COUNCIL ABOUT SALARIES OF LIKE OUR, OUR NONPROFIT PARTNERS AND OTHERS WHO DO BUSINESS WITH THE CITY.
YOU ALL ARE OF COURSE AN ARM OF THE CITY.
AND ONE OF THE THINGS THAT WAS BROUGHT AS A, AS, AS A CONCERN IS THAT TWO OF THE FIVE HIGHEST PAYING LEADERSHIP POSITIONS IN THE CITY AND ERF ARE WITH THE ERF.
SO RIGHT UP THERE WITH OUR CITY MANAGER.
HOW DO, HOW DO WE JUSTIFY THAT WHEN THAT QUESTION COMES UP FROM AN EMPLOYEE OF THE CITY? SO WHEN IT COMES TO COMPENSATION, UH, THE BOARD HAS TOTAL CONTROL.
AND SO THEY DO OUTSOURCE A STUDY THAT OCCURS EVERY YEAR.
THERE ARE TWO FACTORS WHEN YOU COMPARE IT TO THE CITY.
ERF EMPLOYEES ARE CITY EMPLOYEES, POLICE AND FIRE OR NOT.
THE STUDY THAT WAS DONE BY THE BOARD RECENTLY, WHICH IS DONE EVERY TWO YEARS AND HAS BEEN A STUDY FOR THE PAST 12 YEARS, WAS DONE BY AON MCLAGAN.
AND BASICALLY WHAT THEY DID WAS COMPARED ERF TO AT LEAST 82 OTHER PENSION FUNDS BASED ON JOB DESCRIPTIONS, BASED ON FUNCTIONALITY.
AND BASICALLY SAID, HERE IS WHERE ERF WOULD BE AT THE 50TH PERCENTILE OF THE MARKET.
UH, TO MY KNOWLEDGE, THAT'S THE EXTENT OF THE STUDY THAT I HAVE, BUT CERTAINLY MORE QUESTIONS REGARDING THAT WOULD HAVE TO GO TO THE BOARD.
WELL, YEAH, WE'LL FOLLOW UP WITH THAT.
BUT THAT'S, OTHERWISE, I, I WANNA SAY YOUR PRESENTATION'S VERY CLEAR AND I APPRECIATE YOU PUTTING THE LEVEL OF DETAIL INTO IT.
ANY QUESTIONS FROM NON COMMITTEE MEMBERS? UH, MR. ROTH? UH, THANK YOU.
UM, I, I REALLY WAS HERE JUST TO LISTEN, BUT IT, IT PROMPTED ME TO ASK TO, TO REALLY, I'M TRYING TO LEARN MORE ABOUT THIS SUBJECT, UM, ON THE AUDITING, UH, FUNCTION THAT YOU ALL DID AT VUS AND MEASURES.
UM, IS, IS THIS, IS THIS THE TYPE OF AUDIT AND REVIEW THAT YOU TYPICALLY DO? IS THIS, IN OTHER WORDS, IS THIS IN YOUR, UM, IN YOUR, UH, WHEELHOUSE, IS THIS WHAT YOU DO OTHER THAN JUST FINANCIAL AUDITS? DO YOU ALSO AUDIT OPERATIONAL, UH, UH, ACTIVITIES? WELL, THANK YOU FOR THAT QUESTION.
UM, SO WE SIT INSIDE THE CONSULTING, UH, PRACTICE WITHIN THE FIRM.
WE ARE NOT THE EXTERNAL FINANCIAL AUDITORS.
UM, SO WE ARE IN THE CONSULTING PRACTICE.
UM, WE HAVE A NATIONAL PRACTICE.
I AM THE NATIONAL PUBLIC SECTOR LEADER FOR OUR INTERNAL AUDIT PRACTICE.
SO WE CONDUCT INTERNAL AUDITS, INDEPENDENT OPERATIONAL AUDITS, COMPLIANCE AUDITS.
SO THIS, SO YOU'RE NOT DOING THE FINANCIAL, THAT'S A DIFFERENT FUNCTION? NO, WE ARE NOT DOING FINANCIAL.
YOU'RE COMPLETELY, YOU'RE ONLY DOING INTERNAL OPERATIONAL AUDITS OF, OF THE SALARIES, THE PEOPLE, THE THE PROCESSES, YES.
WE DO ALL ADVISORY SERVICES AND, AND THOSE AND, AND IN, IN THIS CAPACITY, WHEN YOU'RE DOING THIS FOR THIS PARTICULAR, UH, ISSUE HERE, IT SOUNDS LIKE YOU WERE JUST TRYING TO JUSTIFY, AND NOT JUSTIFY, BUT TO TRYING TO VERIFY, UM, THE, THE, UH, THE VARIOUS, UH, ISSUES THAT HAD BEEN BROUGHT UP, THE VA BASICALLY THE 10 OR 12 ISSUES.
SO IN THAT CAPACITY, DID, DID YOU, WHO GAVE YOU THE EVIDENCE THAT YOU WERE REVIEWING? UH, DID, WAS IT GIVEN BY THE, BY THE PENSION, UH, GROUP TO GIVE IT TO YOU TO REVIEW? OR DID YOU HAVE SPECIFIC REQUESTS? DID YOU INVESTIGATE STUFF? WERE YOU, HOW DEEP DIVE DID YOU ALL GO INTO GETTING INFORMATION FROM OTHER SOURCES RATHER THAN JUST RELYING ON THE EVIDENCE THAT YOU WERE GETTING FROM THE STUFF THAT WAS WRITTEN? AND AGAIN, I'M NOT TRYING TO COLOR THE, THE, THE QUALITY OR THE EVIDENCE.
I'M TRYING TO UNDERSTAND THE PROCESS OF HOW DO YOU VERIFY AND VALIDATE STUFF THAT THAT'S HAPPENING? YES.
WHEN YOU HAVE A, AN ISSUE ORIENTED MEMO THAT ASKS SOME QUESTIONS.
SO THE SCOPE OF OUR WORK WAS TO LOOK AT THE MATTERS RAISED IN THE MEMO AND REQUEST EVIDENCE THAT WE WOULD EXPECT TO SEE TO EITHER SUPPORT THAT, UM, OR ADDRESS THE MATTER RAISED.
SO, UM, WE ACTUALLY PROVIDED A VERY COMPREHENSIVE LISTING TO ERF, UM, THAT WE DEVELOPED.
AFTER READING THROUGH THE MEMO AND BECOMING FAMILIAR WITH IT, UH, WE SENT THEM THE REQUEST LISTING OF WHAT WE WOULD EXPECT TO SEE FROM LIKE ORGANIZATIONS, AND THEY TURNED THAT AROUND QUICKLY.
[01:05:01]
UM, AS I MENTIONED, UM, AND IN A VERY ORGANIZED FASHION, WE THEN REVIEWED THE EVIDENCE.WE MET WITH STAKEHOLDERS, WE HAD FOLLOW-UP QUESTIONS.
WE MET WITH THE ERF TEAM TO, UM, ANSWER OUR QUESTIONS.
AND THEN WE, WE CONCLUDED ONLY ON THE MATTERS RAISED.
AND IT SOUNDS LIKE TO ME THAT YOU, THE WAY THE PROCESS WORKS IS YOU'RE GIVING THEM A TEST AND THEN YOU GIVE THEM THE ANSWERS TO THE TEST, AND THEN YOU SAY, WE WANNA SEE WHAT THE INFORMATION IS TEST.
I I THINK THAT, THAT THERE'S A, THE OTHER PART OF THAT EQUATION IS, IS THAT IT SHOULD BE DRILLING DOWN INTO IT A LITTLE BIT MORE FORCEFULLY.
AGAIN, THAT MAY NOT HAVE BEEN YOUR SCOPE OF WORK HERE.
AND, AND THAT'S WHAT I'M TRYING TO DETERMINE IS HOW DEEP OF A DIVE DID YOU GO IN VERIFYING STUFF IS EASY TO SAY.
WHAT, WHY DID YOU DO THIS? WELL, HERE'S THE PAPER I DID IT.
THE REAL QUESTION THAT I THINK WE WERE TRYING TO FIGURE OUT IS WHAT'S THE REAL ANSWER? WHAT'S THE RIGHT THING TO DO? WHAT IS THE RIGHT SALARIES, THE RIGHT VALUES, THE RIGHT UH, PROCESSES, THE RIGHT SORT OF WHATEVER IT IS.
AND AGAIN, I'M I'M TRYING TO JUST UNDERSTAND HOW THE AUDITING PROCESS WORKED IN THE LIMITED SCOPE THAT YOU HAD.
YES, AND I WILL JUST ADD WHILE WE, WE DIDN'T CONCLUDE ON INDIVIDUAL'S COMPENSATION AND WHETHER IT WAS APPROPRIATE OR NOT, THE EVIDENCE THAT WE REVIEWED, IF WE DID SEE AN OPPORTUNITY FOR IMPROVEMENT, OR IF WE DID, UM, NOTE THAT THERE WAS SOMETHING THAT COULD, UM, BE IMPROVED OR ENHANCED BASED ON LIKE ORGANIZATIONS AND WHAT, WHAT I'VE SEEN, WHAT MY TEAM HAS SEEN OVER THE LAST 30 YEARS, WE WOULD'VE MADE THAT RECOMMENDATION.
UM, GOING, GOING INTO THE FINANCIAL PART OF IT, UH, IT LOOKS LIKE THIS IS A DEFINED BENEFIT PLAN.
IS THAT CORRECT? THAT'S CORRECT.
AND, UM, IT DID, I DID, DID I UNDERSTAND THAT THERE HAD BEEN SOME ADJUSTMENT HISTORICALLY IN, IN THE DEFINED BENEFIT, DEFINED BENEFITS THAT WERE BEING PROVIDED, THAT THERE HAD BEEN A REDUCTION IN AN ADJUSTMENT IN THAT IN ORDER TO TRY TO HELP MANAGE THE DEFICIT? THAT'S CORRECT.
MR. ROTH, AND THAT'S A GREAT QUESTION.
IN 2016, UH, STAFF PARTNERED WITH, UH, THE CITY ATTORNEY'S OFFICE AND THE CITY MANAGER'S OFFICE TO ESTABLISH A NEW TIER OF BENEFITS.
THAT NEW TIER HAS LESS BENEFITS THAN THE ORIGINAL BENEFIT TIER A.
SO WE HAVE TWO TIERS, TIER A AND TIER B.
UH, IT PROJECTED A SAVINGS OVER A 30 YEAR PERIOD OF $2.15 BILLION AS WE SEE THE AT OVER HOW LONG OF A PERIOD? I'M SORRY? 30 YEARS? 30 YEARS.
AS WE SEE THE ATTRITION OF TIER A MEMBERS RETIRING, RESIGNING, OR LEAVING THE ORGANIZATION, WE THEN ACCUMULATE NEW MEMBERS AT THE TIER B LEVEL, WHICH HAS LESS BENEFITS.
AND IF I, I WANTED TO RESPOND TO YOUR OTHER QUESTION JUST TO MAKE SURE.
EVERY YEAR ERF IS AUDITED BY WEAVER, THE SAME AUDITING FIRM THAT AUDITS THE CITY OF DALLAS.
THAT'S THE FINANCIAL THAT'S CORRECT.
UM, GENERALLY, WHAT IS YOUR FUND ALLOCATION IN TERMS OF, AND AGAIN, I DON'T WANT TO, I DON'T NEED TO GO INTO THE DETAILS OF, OF, UH, THE, THE TYPES OF STOCKS AND BONDS AND, AND, AND INSTRUMENTS THAT YOU'RE DOING, BUT WHAT'S THE TYPICAL FUND ALLOCATION FOR EQUITIES, BONDS, CASH, OTHER THINGS? SURE.
WE HAVE APPROXIMATELY 45% ALLOCATION TO EQUITIES WITH APPROXIMATELY 31% TO FIXED INCOME, 19% TO REAL ASSETS, 5% TO WHAT WE CONSIDER DIVERSIFYING STRATEGIES.
SO 45 IS EQUITIES AND 31 WERE BONDS? CORRECT.
IS THAT ARE, AND AGAIN, I'M, I'M SORT OF SENSITIVE TO THAT BECAUSE INTEREST RATES ARE GOING UP, SO THIS MIGHT BE A GOOD TIME TO
UM, BUT, AND THEN HOW OFTEN IS THAT, IS YOUR INVESTMENT POLICY, UH, SORT OF REVIEWED IS GREAT QUESTION.
WE REVIEW THE POLICY EVERY THREE YEARS OR SO, BUT I WILL TELL YOU THAT THE BOARD IS VERY PROACTIVE IN LOOKING AT OUR ASSET ALLOCATION AND OUR POLICY EVERY YEAR WITH WHAT I WOULD CALL SUBSTANTIVE CHANGES MADE EVERY THREE YEARS.
AND WAS THERE, UH, IS THERE CAPS ON THE, ON THE AMOUNT OF ALLOCATION FOR DIFFERENT, FOR DIFFERENT, UH, UH, FUND, YOU KNOW, FUND? YES.
WE HAVE A MINIMUM AND A MAXIMUM.
SO WE LET THE MARKET YES, SIR.
UM, IS THERE SOME KIND OF A, IS THERE A SEPARATE, AT ONE POINT SOMEBODY HAD TOLD ME THAT THERE WAS A $50 MILLION, UM, OR IS THERE, IS THERE A SEPARATE TRANCHE IN THE, IN THE EMPLOYEE RETIREMENT FUND
[01:10:01]
THAT'S NOT IN THE GENERAL INVESTMENT CATEGORY IN SOME WAY? NO, NO, SIR.IT'S ALL, ALL THE MONEY IS CORRECT.
SO THE OBLIGATION HASN'T BEEN SEPARATED EXCEPT FOR THE PENSION OBLIGATION BOND? CORRECT.
RIDLEY, DO YOU HAVE ANY QUESTIONS? QUESTIONS FROM ANY FURTHER COUNCIL MEMBERS? ALL RIGHT.
THANK YOU VERY MUCH FOR JOINING US TODAY.
ALRIGHT, COLLEAGUES, UH, WE WILL MOVE ON NEXT TO OUR, UH, UPDATE BRIEFING FROM DALLAS POLICE AND FIRE PENSION FUNDING STATUS AND EXPECTATIONS AND INVESTMENT PROGRAM OVERVIEW.
WE'LL INVITE OUR PARTNERS TO COME ON DOWN.
AND WE ARE ON BRIEFING ITEM C.
AND JUST SO EVERYONE KNOWS WHILE THEY'RE GETTING SET UP, WE DO HAVE TWO ACTION ITEMS TODAY.
UM, WE HAVE THE 2027 FISCAL YEAR AUDIT PLAN.
WE'LL GO AHEAD AND TAKE THAT NEXT, MAKE SURE WE KEEP QUORUM, THAT'S ITEM J.
AND THEN, UM, WE'VE BEEN ASKED FOR, UH, ITEM Q TO AL.
ALSO HAVE A RECOMMENDATION FOR CITY COUNCIL.
UM, WE ARE VERY HAPPY TO BE HERE TODAY.
I WOULD LIKE TO PRESENT, UM, MY COLLEAGUES TODAY.
SO TO MY RIGHT, I HAVE OUR BOARD CHAIR, MICHAEL TAG LEONE.
AND TO MY LEFT, I HAVE RYAN WAGNER, HE'S OUR CHIEF INVESTMENT OFFICER.
NEXT TO RYAN IS JOSH MON, OUR DEPUTY EXECUTIVE DIRECTOR AND GENERAL COUNSEL, AND OUR NEWEST HIRE IS AT THE END OF THE TABLE.
IT'S RELL EVANS JONES SHERELL JOINED US AT THE END OF JULY AND SHE'S OUR NEW CHIEF FINANCIAL OFFICER.
AND I THINK I FAILED TO SAY MY NAME.
UM, MY NAME IS KELLY GOTCH AND I'M THE EXECUTIVE DIRECTOR OF THE PENSION FUND.
THANK YOU FOR THE GREAT INTRODUCTIONS.
AND, UM, IN THE INTEREST OF TIME, WE'RE GONNA LET YOU JUMP RIGHT INTO IT.
AND I KNEW WE ONLY HAD A SHORT TIME FOR THIS PRESENTATION, SO, UM, I'M TAKING IT IN A LITTLE BIT DIFFERENT DIRECTION, BUT IF WE GO TO THE AGENDA HERE, FIRST, I'M GONNA GIVE YOU JUST TWO SLIDES ON WHERE THE PLAN STANDS.
I WANNA SET EXPECTATIONS OF WHAT YOU CAN EXPECT FOR THE FUTURE FUNDING LEVEL OF THE PLAN IF ALL THE ASSUMPTIONS ARE MET.
SO, SO EVERYBODY KNOWS WHERE WE EXPECT TO BE IN THE FUTURE.
UM, RYAN WILL THEN GO OVER THE INVESTMENT PROGRAM.
JOSH WILL GIVE YOU A ONE SLIDE UPDATE ON BENEFIT CHANGE LITIGATION, AND THEN WE'LL BE PREPARED TO ANSWER ANY QUESTIONS THAT YOU HAVE ON THE NEXT SLIDE.
AS OF JANUARY 1ST, 2026, WE HAD A FUNDING LEVEL OF 39.1% BASED ON THE MARKET VALUE OF ASSETS.
AND A 35.2% BASED ON THE ACTUARIAL VALUE OF ASSETS.
AT 1 1 26, WE HAD $2.25 BILLION IN ASSETS AND AN ACTUARY UNFUNDED LIABILITY OF $5.76 BILLION.
SO THAT LEAVES US A UNFUNDED LIABILITY OF $3.51 BILLION, WHICH IS A VERY LARGE NUMBER, AS YOU ARE WELL AWARE.
UM, SO IT WILL TAKE A LONG TIME TO CLOSE THAT GAP UNDER ANY INVESTMENT RETURN ASSUMPTION.
ON THE NEXT SLIDE, ONE OF THE MOST, UM, INTERESTING SLIDES IN OUR ACTUAL WHOLE ANNUAL REPORT IS KIND OF DOESN'T LOOK THAT INTERESTING UNLESS YOU ACTUALLY DO THE NUMBERS.
SO ON THIS SLIDE, UM, YOU CAN SEE THAT THE ACTIVE MEMBERS ARE UP 10% SINCE 2016, BUT NEARLY ALL OF THAT IS FROM 2023.
RETIREES AND BENEFICIARIES ARE UP 19% SINCE 2016.
IF YOU LOOK AT IT, JUST BASED ON THE NUMBERS AND, AND FORGETTING THE PERCENTAGES, UM, FROM 2016 TO 2023, WE ADDED 817 RETIREES AND BENEFICIARIES AND ONLY 27 ACTIVE MEMBERS DURING THAT WHOLE PERIOD FROM 16 TO 23.
UM, AS YOU KNOW, THE CITY'S WORKED REALLY HARD TO INCREASE THE ACTIVE MEMBERS.
WE'VE ADDED 475 ACTIVE MEMBERS, AND WE'VE ONLY ADDED 41 RETIREES.
SO THAT'S REALLY A REMARKABLE CHANGE FOR A, UH, MATURE PLAN.
SO WE, AT WORST CASE, WE WERE AT ONE, 1.07 ACTIVE MEMBERS TO PAY FOR EACH MEMBER AND BENEFIT STATUS, AND NOW WE'RE UNDER ONE.
SO THAT'S ACTUALLY UNUSUAL PROGRESS.
THE NEXT PART OF THIS SLIDE IS SOMETHING I'VE NEVER PRESENTED BEFORE TO YOU ALL, BUT I REALLY WANT TO TRY TO GET US ALL ON THE SAME PAGE OF WHAT CAN WE EXPECT IN THE FUTURE.
SO ALL OF THE SLIDES I'M GONNA SHOW YOU, UM, FROM HERE ON OUT, ASSUME ALL THE ASSUMPTIONS ARE MET GOING FORWARD.
SO THIS IS A SLIDE, UM, THAT REALLY TALKS ABOUT THE HISTORY OF THE PLAN FOR THE PAST NINE YEARS.
[01:15:01]
TO 2025.THE NEXT COLUMN IS CONTRIBUTIONS.
THAT'S BOTH THE CITY CONTRIBUTIONS AND THE MEMBER CONTRIBUTIONS FOLLOWING THAT ARE BENEFITS AND EXPENSES, ACTUAL NUMBERS.
AND THAT GETS US TO A NET CASH FLOW.
THESE NUMBERS ARE ALL IN MILLIONS, BY THE WAY.
AND YOU CAN SEE ALL OF THOSE NUMBERS ARE RED.
SO FOR THOSE THAT NINE YEAR PERIOD, WE WERE PAYING OUT MORE MONEY THAN WE WERE BRINGING IN.
THIS LAST COLUMN IS A LITTLE BIT CONFUSING, BUT WHAT I DID HERE WAS I, I SAID IF WE MET OUR ASSUMED RATE OF RETURN, HOW MUCH OF THAT ASSUMED RATE OF RETURN WOULD ACTUALLY GO JUST TO PAY THAT CASH DEFICIT AND NOT GO INTO THE PLAN FUNDING? AND THAT'S REALLY WHAT IS EXPLAINING WHY THE FUND HASN'T GROWN SINCE 2017.
SO OUR FUNDING, UM, OUR SIM RATE RETURN DID GO DOWN, IT WAS SEVEN, SEVEN AND A QUARTER IN 17 AND 18, THEN IT WAS SEVEN IN 20, UM, 19.
AND SINCE 2020 IT'S BEEN SIX AND A HALF.
BUT YOU CAN SEE WE, WE SPENT, YOU KNOW, GOING OUT OF THE PLAN JUST TO PAY THE BENEFIT PAYMENTS IS $943 MILLION OVER THAT NINE OVER THAT NINE YEAR PERIOD.
SO THE MONEY WAS COMING IN FROM THE INVESTMENT PROGRAM AND JUST GOING OUT THE DOOR TO PAY RETIREES.
THAT'S ONE OF THE REASONS THE FUND WASN'T GROWING ON.
THE NEXT SLIDE IS THE SAME INFORMATION, UM, BUT THIS IS THE PROJECTED, UH, INFORMATION FOR YOU.
SO THESE NUMBERS, UM, IT'S THE SAME SLIDE.
THE CONTRIBUTIONS ARE ACTUALLY THE CITY CONTRIBUTIONS TAKEN FROM PAGE 99 OF YOUR PROPOSED BUDGET.
AND THEN THE MEMBER CONTRIBUTIONS, THE BENEFITS AND EXPENSES ARE PROJECTED BY THE ACTUARY.
AND YOU CAN SEE THAT THE NET CASH FLOW IS STILL GOING OUT, BUT NOT AT THE SAME LEVEL.
AND THIS IS BECAUSE OF THE FUNDING PLAN THAT WAS PUT IN PLACE, UM, AND THE STEP UP.
SO GRADUALLY AS WE BURN OFF THAT STEP UP, WE'LL GET TO 2030 WHEN WE ACTUALLY ARE POSITIVE TO THE NET CASH FLOW.
SO WE'RE STILL GONNA HAVE A DRAW, A DRAW OUT, UM, FOR THE CASH FLOW PIECE, BUT ALSO LIABILITIES CONTINUE TO GROW AS THEY WOULD IN ANY PENSION PLAN.
SO WE'RE NOT GONNA SEE A WHOLE LOT OF IMPROVEMENT GOING FORWARD, UM, AT GREAT SPEEDS.
AND I THINK THAT'S A SURPRISE TO A LOT OF PEOPLE, ESPECIALLY TO COUNCIL.
PEOPLE WHO KNOW YOUR CONTRIBUTIONS TO THE PLAN ARE JUST GETTING BIGGER AND BIGGER AND BIGGER.
YOU WANNA SEE PROGRESS TO THAT FUNDING PIECE.
AND, AND WE, AND WE DO TOO, FRANKLY, ON THE NEXT SLIDE, WHAT I'VE DONE HERE IS I'VE SHOWN OUR SIX POINT A HALF PERCENT PLAN ASSUMPTION, UM, PLAN ASSUMPTION, BUT I'VE ALSO SHOWN WHAT IF WE DO A LITTLE BIT LESS? WHAT IF WE DO BETTER? AND WHAT DOES THAT DO TO THE FUNDING LEVEL? I GAVE IT TO YOU IN 20 30, 20 35, AND 2040.
AGAIN, WE'RE 39.1% OR 2% FUNDED RIGHT NOW.
SO IF WE MEET ALL OF THE ASSUMPTIONS, INCLUDING THE CITY HIRING AND THE RAISES, AND PEOPLE LIVES AS LONG AS WE EXPECT 'EM TO, AND WE MEET OUR INVESTMENT RETURN, WE EXPECT TO BE 70% FUNDED IN 2041.
AND THE 70%, AS YOU KNOW, IS AN IMPORTANT POINT MILESTONE FOR US BECAUSE THAT'S WHEN WE CAN GIVE A COLA TO OUR MEMBERS.
BUT IF WE DO BETTER, LET'S SAY WE EARN SEVEN AND A QUARTER, IT DOESN'T CHANGE IT THAT MUCH.
UM, WE'RE OBVIOUSLY GONNA TRY TO EARN THE, THE MOST MONEY WE CAN PRUDENTLY FOR OUR INVESTMENT FUND, BUT INVESTMENTS ALONE ARE NOT GONNA REALLY MOVE UP THAT 70% FUNDED, UM, LEVEL.
AND IT DOESN'T MEAN ANYTHING IS WRONG OR NOT BEING MANAGED WELL.
WHAT IT MEANS IS IT'S A BIG GAP AND IT'S GONNA TAKE A REALLY LONG TIME, ESPECIALLY AS WE'RE EASING INTO THE A DC, TO REALLY START GETTING THAT FUNDING LEVEL IMPROVED.
THIS NEXT SLIDE IS ALSO A SLIDE I'VE NOT PREPARED BEFORE OR SHOWN ANYWHERE.
AND WHAT I DID HERE WAS TO SAY, WHAT WOULD IT TAKE IF WE EARNED A CONSTANT RATE OF RETURN, UM, TO BE 70% FUNDED, NOT A HUNDRED, BUT JUST 70% FUNDED BY 2030.
IS IT EVEN REALISTIC? SO TO BE 70% FUNDED BY 2030, WE WOULD NEED A 16 POINT A HALF PERCENT RATE OF RETURN ON OUR INVESTMENTS EVERY SINGLE YEAR.
WELL, THAT OF COURSE IS NOT GOING TO HAPPEN.
UM, AND IF YOU LOOK AT 2035, WE WOULD NEED A 9%.
SO SOME OF THESE NUMBERS, I THINK THIS IS REALLY HELPFUL TO SEE.
WE'RE NOT REALLY GONNA MOVE THAT 2040 NUMBER UP MATERIALLY.
UM, SO THAT'S, THAT'S REALLY WHAT I WANTED TO KIND OF SET EVERYBODY'S EXPECTATIONS HERE BECAUSE I THINK IN THE PAST THAT'S KIND WHERE WE WENT ASTRAY A LITTLE BIT IS WE KIND OF KNEW WHAT WAS BEHIND THE NUMBERS, BUT WE DIDN'T DO A GOOD JOB OF COMMUNICATING IT TO YOU ALL.
SO WITH THAT, I'LL TURN IT OVER TO RYAN TO TALK ABOUT THE INVESTMENT PROGRAM.
I APPRECIATE THE OPPORTUNITY TO BE ABLE TO PRESENT, UH, TO YOU GUYS THIS AFTERNOON.
I, IN BEING COGNIZANT OF TIME, I'LL BRIEFLY COVER THE PORTFOLIO, OUR GOVERNANCE STRUCTURE, RECENT PERFORMANCE, AND OUR LONG-TERM ASSET ALLOCATION.
A FEW THINGS, UM, ON THIS SLIDE TO KEEP IN MIND.
UM, CURRENT A UM IS 2.4 BILLION, 2.1 OF THAT IS LIQUID ASSETS.
SO OVER 90% OF THE, THE ASSETS IN THE PORTFOLIO RIGHT NOW
[01:20:01]
ARE, UH, LIQUID SECURITIES.UM, AND THEN I THINK YOU GUYS ARE ALL ARE AWARE OF THIS, BUT WE DON'T MANAGE ANY MONEY IN HOUSE.
WE'RE NOT PICKING STOCKS AND BONDS.
WE'RE HIRING MANAGERS ACROSS OUR ASSET CLASSES TO INVEST ON BEHALF OF THE BENEFICIARIES.
WITH THAT, WE'LL GO TO THE NEXT SLIDE.
SO, UM, HIGH LEVEL ON ON GOVERNANCE.
UM, THE BOARD OF TRUSTEES IS 11 MEMBERS.
I'LL REVIEW WHO THOSE MEMBERS ARE IN A MINUTE.
BUT, UM, WITH THE LEGISLATIVE CHANGES THAT HAPPENED IN 2017, A MAJORITY SIX MEMBERS OF THE BOARD ARE APPOINTED BY THE MAYOR WITH CONSULTATION WITH CITY COUNCIL.
SO IT'S A CITY CONTROLLED BOARD.
UM, THE BOARD SETS THE LONG-TERM STRATEGY POLICY IN DIRECTION BASED ON ADVICE OF THE INVESTMENT ADVISORY COMMITTEE, WHICH IS A SUBSET OF BOARD MEMBERS AND OUTSIDE INVESTMENT PROFESSIONALS, KELLY AND INVESTMENT STAFF, AND ALL OF THE EXECUTIVE STAFF.
BUT THERE'S FOUR PEOPLE WITH ME ON THE INVESTMENT STAFF AND THEN THE INDEPENDENT CONSULTANTS WE USE, WHICH ARE FIDUCIARIES TO, TO DPFP OR MAKITA ON THE GENERAL CONSULTING SIDE, AND ALL BORN ON THE PRIVATE MARKET SIDE.
AND THEN EVERY NEW INVESTMENT, UM, POLICY CHANGE AND MANAGER HIRE REQUIRES BOARD APPROVAL TO GET INTO THE PORTFOLIO.
MOVING ON TO THE NEXT SLIDE, UM, WON'T WALK THROUGH THIS IN DETAIL, BUT, UM, I'LL HIT SOME HIGH LEVEL HIGHLIGHTS ON THE EXPERIENCE WE HAVE ON THE BOARD AND THE INVESTMENT COMMITTEE.
BUT YOU COULD SEE SIX BOARD TRUSTEES ARE APPOINTED BY THE MAYOR, AND THEN THERE'S THREE SEATS FOR OUTSIDE INVESTMENT PROFESSIONALS, UH, VOTED ON BY THE MEMBERSHIP, AND THEN ONE POLICE AND ONE FIRE SEAT ON THE BOARD TO MAKE UP THE 11.
IF WE MOVE ON TO THE NEXT SLIDE, WE'LL LOOK AT WHAT MAKES UP THE INVESTMENT ADVISORY COMMITTEE.
THE BOARD MEETS MONTHLY, THE INVESTMENT ADVISORY COMMITTEE MEETS ON A QUARTERLY BASIS.
SO IN ADDITION TO THREE TRUSTEES THAT SIT ON THE IAC, WE HAVE FIVE OUTSIDE INVESTMENT PROFESSIONALS.
AND I, I THINK ONE OF THE BIGGEST ASSETS WE HAVE AT DPFP IS THE, THE LEVEL OF EXPERIENCE WE HAVE ON THE BOARD IN IAC, UH, TOM TOLL, WHO CHAIRS THE IAC, USED TO BE THE CIO OF TEXAS EMPLOYEES RETIREMENT SYSTEM.
WE HAVE THE FORMER INVESTMENT COMMITTEE CHAIR OF TEXAS TEACHERS, ANOTHER MEMBER THAT SERVED ON THE TEXAS TEACHERS BOARD.
WE HAVE A HEAD OF A LOCAL FAMILY OFFICE, MANY DIFFERENT PRIVATE EQUITY PROFESSIONALS.
SO IT'S A INCREDIBLE RESOURCE FOR THE, THE PORTFOLIO FOR THE SPONSOR AND, AND FOR STAFF.
MOVING TO THE NEXT SLIDE, I'LL BRIEFLY COVER INVESTMENT PERFORMANCE.
AND IT LOOKS LIKE IT DID NOT COME THROUGH PROPERLY, SO I'LL TALK THROUGH THE NUMBERS.
UM, OVER THE FIVE YEAR PERIOD ENDING JUNE 30TH OF THIS YEAR, THE PORTFOLIO HAS PRODUCED A 7.4% RETURN ANNUALIZED NET OF ALL FEES.
IN 2025 FOR THE CALENDAR YEAR, WE RETURNED 16.4% IN THE PORTFOLIO WAS, WHICH WAS THE HIGHEST RETURN FOR DPFP IN 20 YEARS.
UM, AND THEN IF WE, WHAT SHOULD SHOW ON THE BOTTOM OF THAT PAGE, THAT SEVEN 4.4% FIVE YEAR RETURN IS IN THE TOP QUARTILE OF ALL THE PEER PLANS THAT WE'RE COMPARED TO WITH PUBLIC PENSION PLANS BETWEEN ONE AND 5 BILLION.
SO VERY STRONG RETURNS FROM THE PORTFOLIO.
AND THEN SINCE OUR LAST UPDATES TO THE, THE PENSION OF THE FINANCE COMMITTEE A COUPLE YEARS AGO, WE HAVE GENERATED AN ADDITIONAL $300 MILLION IN PRIVATE MARKET PROCEEDS COMING BACK TO THE PORTFOLIO.
SO STRONG LIQUIDITY AND STRONG DISTRIBUTIONS IN THE PORTFOLIO.
IF WE MOVE ON TO THE NEXT SLIDE, WE WILL TALK BRIEFLY TO, WE JUST WENT THROUGH AN ASSET ALLOCATION STUDY, WHICH WAS APPROVED BY THE BOARD IN AUGUST.
SO WE, YOU KNOW, WORKED CLOSELY WITH THE INVESTMENT COMMITTEE AND OUR CONSULTANTS THROUGH THE FIRST HALF OF THE YEAR TO APPROVE THIS NEW ASSET ALLOCATION, WHICH REDUCED THE TARGET TO PUBLIC EQUITY FROM 58% TO 49%.
SO WE HAD SEEN VERY STRONG RETURNS FROM THE PUBLIC EQUITY PORTION OF THE PORTFOLIO, BUT GIVEN WHERE MARKET LEVELS ARE AT RIGHT NOW, WE FELT IT WAS PRUDENT TO REDUCE EXPOSURE THERE A BIT.
WE INCREASED OUR PRIVATE EQUITY TARGET ALLOCATION FROM SIX TO 11%, AND THEN WE ALSO INCREASED, INCREASED OUR FIXED INCOME AND DEFENSIVE PORTION OF THE PORTFOLIO FROM 13 TO 22, AND THEN ADDED A NEW ASSET CLASS, WHICH IS INFRASTRUCTURE AND OTHER REAL ASSETS WITH A 6% TARGET IN THE PORTFOLIO.
AND THE LAST SLIDE I'LL, I'LL TALK TO IS JUST OUR CURRENT POSITIONING AS COMPARED TO THESE NEW LONG-TERM TARGETS.
THE OVERALL TARGET TO, TO PRIVATE MARKETS IS 25%.
WE CURRENTLY HAVE 11% IN THE GROUND, SO WE'RE LOOKING AT ABOUT A THREE TO FIVE YEAR BUILD OUT TOWARDS THAT NEW LONG-TERM PRIVATE MARKET TARGET.
IN THE INTERIM, WE'RE GONNA BE OVERWEIGHT TO OUR PUBLIC MARKET ASSET CLASSES, AND WE ARE HOLDING A LOT OF THAT OVERWEIGHT IN FIXED INCOME AND DEFENSIVE.
SO A RELATIVELY CONSERVATIVE APPROACH.
AND WE'RE ACTUALLY GETTING PAID NOW TO HOLD SOME OF THE FIXED INCOME ASSETS, UH, WITH WHERE, WHERE YIELDS ARE AT RIGHT NOW.
[01:25:01]
SO, UM, AS WE WRAP UP, HAPPY TO ANSWER ANY QUESTIONS YOU GUYS HAVE ON THE PORTFOLIO ONTO TO JOSH BOND.SO IT, WE THOUGHT IT WAS IMPORTANT TO TALK BRIEFLY ABOUT THE CASES THAT HAVE BEEN DISCUSSED OVER TIME.
THE FIRST OF THESE THREE CASES WAS BROUGHT BY MEMBERS.
UM, ESSENTIALLY THE TEXAS CONSTITUTION HAS A PROVISION ARTICLE SECTION, ARTICLE 16, SECTION 66, WHICH, UH, PREVENTS THE REDUCTION OR IMPAIRMENT OF, OF PENSION BENEFITS.
AND THESE THREE CASES ALL TESTED THE SCOPE OF THAT PROVISION, AND THEY WERE THE FIRST CASES TO GO TO THE TEXAS SUPREME COURT TO DO THAT.
SO THE FIRST CASE WAS EDDINGTON, WHERE THE DROP INTEREST RATE RATE WAS REDUCED.
UH, THE SUPREME COURT HELD THAT CHANGE WAS LAWFUL.
THE SECOND CASE WAS THE DEACON CASE, WHICH AROSE OUTTA THE 2017 LEGISLATIVE CHANGES WHERE MEMBERS DROP ACCOUNTS WERE ANNUITIZED.
THE SUPREME COURT ALSO HELD THAT CHANGE WAS LAWFUL, AND IN THE THIRD CASE BROUGHT BY THE, UH, POLICE RETIREES ASSOCIATION ALSO OUTTA THE 2017 CHANGES.
THE, UH, THE CHALLENGE WAS TO THE CHANGE TO THE ANNUAL ADJUSTMENT OR THE, WHAT YOU ESSENTIALLY REFERRED TO AS THE COLA LAW AND HOW IT WAS CALCULATED.
AND THE LOWER COURTS, UH, APPROVED THE CHANGE.
AND THE, AND INTERESTINGLY, THE TEXAS SUPREME COURT, WHICH WAS A SURPRISE TO ALL OF US, DECLINED TO HEAR THE CASE.
I GUESS THEY BELIEVED THAT THE PREVIOUS CASES ESTABLISHED THE LAW PRETTY WELL AS TO WHAT IS A PROTECTED BENEFIT OF WHAT IS NOT A PROTECTED BENEFIT.
SO, UM, THESE CASES, UH, WHICH THEY ARE IMPORTANT OR THEY WERE IMPORTANT BECAUSE ALL THREE, ANY OF THESE THREE CASES WOULD HAVE, UH, I GUESS TO USE A TECHNICAL TERM TANK, THE PENSION SYSTEM, BECAUSE OF THE, THE NEGATIVE EFFECT OF A, OF A LOSS THAT WOULD'VE HAD ON THE PENSION SYSTEM'S FUNDING.
SO THE BOARD WAS SUCCESSFUL IN FENDING OFF, UH, ALL THREE OF THESE CHALLENGES.
AND NOW THERE'S A MUCH CLEARER PATH AS TO HOW BENEFITS CAN BE CHANGED FOR MOST LOCAL PENSION SYSTEMS IN THE STATE OF TEXAS.
AND WITH THAT, I'LL GIVE IT BACK TO KELLY.
SO WITH THAT, WE WILL JUST OPEN IT UP FOR YOUR QUESTIONS JUST TO, YOU KNOW, REITERATE, THE FUNDING APP IS LARGE, UM, AND THE LIABILITIES KEEP GROWING AS THEY DO IN EVERY PENSION SYSTEM.
WE BELIEVE THAT THE PENSION, THE INVESTMENT PROGRAM IS A SOLID PROGRAM.
WE HAVE A LOT OF REALLY STRONG PROFESSIONALS THAT A LOT OF PENSION FUNDS DON'T HAVE THE OPPORTUNITY TO DO.
WE'RE ALWAYS GONNA TRY TO EARN THE HIGHEST RETURN THAT WE CAN.
SO JUST BECAUSE WE'RE AT 6.5% DOESN'T MEAN THAT'S WHAT WE'RE SHOOTING FOR, BUT WE, YOU KNOW, WE HAVE TO BE PRUDENT AND, UM, THAT'S WHAT WE'RE DOING.
SO WITH THAT, WE'RE HAPPY TO ANSWER ANY QUESTIONS YOU MAY HAVE.
WELL, THANK YOU FOR SUMMARIZING A LOT OF INFORMATION AND IN A SHORT AMOUNT OF TIME.
AND CONGRATULATIONS ON 2025 BEING YOUR HIGHEST NET RETURN YEAR SO FAR.
I'LL START WITH OUR LONG SERVING PENSION CHAIR, UH, CHAIR, CHAIR STEWART TO TAKE IT AWAY ON THIS.
UM, KELLY, I WANT JUST WANNA START FIRST WITH YOUR PRESENTATION.
I THINK IT WAS VERY HELPFUL TO, UM, SET EXPECTATIONS, RIGHT? UM, WE LEARN THAT AS PARENTS WITH OUR CHILDREN, WE LEARN THAT IN BUSINESS AS WELL.
UM, IT'S JUST, IT'S, IT'S VERY, VERY WISE.
SO I'M JUST GONNA RESTATE WHAT I HEARD.
THE EXPECTATION IS THAT YOU WERE SETTING, WHICH IS, UM, INCREASING THEIR RETURNS IS NOT THE ONLY FIX AND THAT WE NEEDED TO BE PATIENT.
EVEN THOUGH THE CITY'S CONTRIBUTION IS GOING TO GO UP, IT WILL BE 2030 BEFORE CONTRIBUTIONS EXCEED BENEFIT AND EXPENSES.
AND WE NEED THE A DC, WHICH I KNOW WE ARE GOING TO HAVE THE A DC, BUT I MEAN THAT'S A CRITICAL PIECE TO THIS.
IT'S, IT'S A VERY CRITICAL PIECE AND, UM, I THINK THE FUNDING PLAN WILL HELP US GET THERE AS LONG AS, YOU KNOW, WE GET THE FULL A DC EACH YEAR AND WE DON'T HAVE HAVE, UM, THE GUARDRAILS KIND OF CONSTRAINING THAT THAT WILL BE, THAT'LL BE GOOD FOR THE PENSION PLAN.
BUT EVEN WITH ALL OF THAT, IT'S STILL A LONG TIME TO GET TO 70% FUNDED.
PATIENTS WILL DEFINITELY BE, UM, THE NAME OF THE GAME.
AND THEN, UM, MY OTHER QUESTION, I THINK IT'S FOR RYAN, ON PAGE 14, UM, NO, NOT 14, WHEN WE TALK ABOUT OH 15, UM, THE 299 MILLION IN PRIVATE MARKET PROCEEDS THAT, OKAY, NOW I'M RINGING THE FINE PRINT.
THAT WAS THE SALE OF SOME OF WHAT WE HAVE CALLED LEGACY ASSETS, CORRECT? GREAT QUESTION.
UM, THAT IS, UH, CAME OUT OF THAT LEGACY PORTFOLIO.
OUT OF THAT PORTFOLIO WE HAVE GENERATED 1.8 BILLION IN PROCEEDS SINCE 2016.
SO WE PROVIDED SOME UPDATES ON THAT A COUPLE YEARS AGO.
SO THAT WAS AN ADDITIONAL 300 MILLION OUT OF THAT PORTFOLIO.
THE BIGGEST CHUNK BEING ENERGY PRIVATE EQUITY FUND
[01:30:01]
THAT WE HAD HELD SINCE 2006.AND SO WHERE DO WE STAND WITH LEGACY ASSETS AT THIS POINT? THEY'RE BELOW 7% OF THE PORTFOLIO CURRENTLY.
AND THAT TOTAL WAS 65% OF THE PORTFOLIO IN PRIVATE MARKETS? UM, 10 YEARS AGO.
THOSE ARE JUST BENCHMARKS THAT HELP PUT ALL THIS IN CONTEXT.
I THINK THAT'S WHAT I HAVE FOR NOW.
UM, WE'LL COME BACK TO NON COMMITTEE MEMBERS, UH, CHAIRWOMAN WILLIS.
MAYBE YOUR LAYOUT AND THE CONTENT.
THIS IS VERY HELPFUL, SO APPRECIATE THAT.
UM, I KNOW IN LOOKING AT, I'M GOING TO SLIDE, UM, IT'S THE CURRENT ASSET ALLOCATION VERSUS TARGET.
SO A COUPLE YEARS AGO WHEN WE DID THE KIND OF OUR INDEPENDENT LOOK, UM, PART OF THE CONCERN WAS THAT THE MIX WAS MORE REFLECTIVE OF LIKE BOTTOM QUARTILE PERFORMERS.
AND UH, BUT I SEE THAT YOU'RE MOVING THINGS, I, I KNOW YOU HIRED ALBO OR SOME SOMEONE TO HELP WITH THE PRIVATE.
MAKITA IS A CONSULTANT THAT, THAT DOES GENERAL CONSULTING.
SO THEY'RE THE ONES THAT PROVIDES ASSET ALLOCATION MODELING AND, AND ADVICE TO.
SO WOULD, WOULD YOU SAY THIS IS MORE IN LINE WITH LIKE THE TOP QUARTILE PERFORMERS NOW THESE, YEAH, WE DON'T ALWAYS WANT TO BE CHASING KIND OF WHERE THE TOP QUARTILE HAS BEEN, BUT WHEN WE PUT TOGETHER THE ASSET ALLOCATION, GENERALLY THE PRIVATE MARKETS HAS OUTPERFORMED PUBLIC MARKETS.
SO WE, WE WANTED TO REBUILD THAT PROGRAM BUT ALSO BE VERY AWARE OF OUR FUNDING SITUATION AND OUR LIQUIDITY NEEDS.
AND THEN WHEN WE DESIGN THE ASSET ALLOCATION, WE'RE AWARE OF WHAT PEERS ARE DOING.
WE'RE NOT DESIGNING IT BASED ON WHAT OTHER PLANS ARE DOING.
BUT I THINK IT'S VERY IMPORTANT TO BE AWARE OF HOW WE'RE POSITIONED COMPARED TO OTHER PENSION PLANS THAT WHERE CAPITAL MIGHT BE FLOWING.
SO WE ARE DEFINITELY IN LINE WITH, YOU KNOW, WHAT WE'D SEE IN OTHER PENSION PLANS, INCLUDING TOP PERFORMING PLANS AND WE REALLY HAD TO WAIT UNTIL WE, UM, REALIZED SOME OF THOSE PRIVATE LEGACY PRIVATE ASSETS BEFORE WE HAD ROOM TO TAKE ON MORE PRIVATE INVESTMENTS.
I WAS JUST LOOKING AT WHAT THE COMPARATIVE NUMBERS ARE LIKE NATIONALLY AND PRIVATE.
IT'S LIKE 4.7, BUT IT LOOKS LIKE BY GOING TO 11 EVEN YOU'RE MOVING.
YEAH, I WOULD SAY LIKE THE 11 IS PROBABLY JUST A LITTLE BIT BELOW THE, A PEER AVERAGE, BUT WE'RE, WE'RE REBUILDING THAT OVER TIME AND PACING INTO THAT.
AND ONCE WE GET A LITTLE BIT FURTHER DOWN THE ROAD, WE'LL REASSESS AND ONCE, YOU KNOW, WE BECOME CASH FLOW POSITIVE, BUT WE'VE DESIGNED IT TO BE A LONG-TERM ASSET ALLOCATION.
AND THEN I KNOW THE COLA IS SUCH A SORE SPOT, BUT AT 39%, I MEAN IT WOULD JUST DECIMATE THE FUND.
SO WE ALL WANT GREAT PERFORMANCE FUND HEALTH FOR, UM, OUR RETIREES AND OUR ACTIVES WHO WILL SOON, UM, EVENTUALLY TAP INTO IT.
BUT JUST FOR COLLEAGUES, YOU KNOW, WE CREATED A, UM, KIND OF A STIPEND, IF YOU RECALL, IN OUR BUDGET STARTING IN 2024.
AND THAT WAS PRESENTED BACK TO US I THINK IN, IN MAY THERE WAS A DECK WHERE IT WENT INTO LIKE, WE'RE PAYING ANNUALLY AN AMOUNT EQUAL TO 1% FOR INDIVIDUALS IN RETIREMENT PRIOR TO 1 1 26 AND THEN ANOTHER AMOUNT FOR THOSE IN RETIREMENT NOW AND IN THE FUTURE, UM, TIED INTO THAT.
SO I THINK THAT'S SOMETHING ADJUSTER THE CITY MADE MM-HMM
TO BE ABLE TO, UM, ACKNOWLEDGE THAT WHILE THIS GETS LEGS UNDER IT AND ALL OF THAT.
NON COMMITTEE MEMBERS, UH, MR. RIDLEY? THANK YOU MR. CHAIR.
SO YOU HAVE INDICATED THAT THE CURRENT FUNDING RATIO IS 39.7%.
GIVEN AS SLIDE SEVEN INDICATES THERE WAS GOING TO BE NEGATIVE CASH THROW THROUGH FISCAL YEAR 2029.
DOES THAT MEAN THAT THAT FUNDING RATIO WILL CONTINUE TO DECLINE OVER THAT PERIOD? COUNCIL MEMBER RIDLEY? UM, THE FUNDING RATIO MAY DIP FOR THE FIRST, THE NEXT TWO YEARS, BUT IF YOU LOOK AT SLIDE, UM, SORRY, WHICH SLIDE DO I HAVE THAT ON SLIDE EIGHT? IF WE, IF ALL ASSUMPTIONS ARE MET AND THERE'S, YOU KNOW, A LOT OF DIFFERENT ASSUMPTIONS, WE ARE PROJECTING IF WE EARN SIX, 6.5% AT 20 AT THE END OF 2030, WE WILL HAVE A 44.5% FUNDING LEVEL.
WELL, I'M TALKING ABOUT THROUGH 2029 BECAUSE THAT'S WHEN YOU'RE SHOWING A PROJECTED NET NEGATIVE CASH FLOW.
SINCE YOU'RE PAYING OUT MORE MONEY THAN YOU'RE TAKING IN, IN CONTRIBUTIONS, DOESN'T THAT MEAN THAT YOU'RE ERODING THE FUNDING LEVEL? I AM ERODING THE FUNDING LEVEL ON THAT BASIS ALONE, BUT I AM PROJECTING THAT I'LL EARN 6.5% ON MY INVESTMENTS.
SO THAT WILL OFFSET THAT, THAT, UM, NET
[01:35:01]
OUT.SO THE INVESTMENT RETURNS AREN'T REFLECTED IN SLIDE SEVEN.
SO IT'S JUST THE CONTRIBUTIONS FROM THE CITY, THE CONTRIBUTIONS FROM THE CITY AND THE MEMBERS, BUT THE INVESTMENT RETURNS AREN'T HERE.
WHAT I WAS TRYING TO ILLUSTRATE ON SLIDE SIX WAS HOW MUCH OF THAT INVESTMENT RETURN DO I NEED JUST TO COVER THE, THE OUT THE NEGATIVE CASH OUTFLOW? SO IN 2020 I WAS SAYING IF I EARN 6.5% ON MY INVESTMENTS, I WOULD TAKE 81% OF THAT 6.5% RATE OF RETURN AND USE IT TO PAY BENEFIT PAYMENTS AND THE REST WOULD GO INTO THE FUND.
SO CONSIDERING THE APPRECIATION OF THE FUND EACH YEAR FROM NOW TILL 2030 AND PERHAPS BEYOND THE FUNDING RATIO WILL INCREASE AS YOU PROJECT IN SLIDE EIGHT? YES, SIR.
NOW ON SLIDE 14, THE INVESTMENT ADJUSTMENTS YOU HAVE ILLUSTRATED THE CHANGES THAT YOU ARE PROPOSING OR THE BOARD IS APPROVED.
CAN YOU INDICATE WHY THE SIGNIFICANT CHANGES IN THE PUBLIC EQUITY AND PRIVATE EQUITY ALLOCATIONS? WHY DID THE BOARD DO THAT? OKAY.
UM, THANKS FOR THE QUESTION, COUNCIL MEMBER REDLEY, UM, WHEN WE WERE LOOKING AT LONG-TERM AS THE ENTIRE ASSET ALLOCATION CONSTRUCTION PROCESS IS BASED ON LONG-TERM ASSUMPTIONS AND RISK LEVELS FOR EACH OF THE ASSET CLASSES.
AND GENERALLY ALL OF THE GROUPS THAT PUT THESE TOGETHER, INCLUDING OUR CONSULTANT MAKITA, WILL PROJECT A HIGHER RETURN IN PRIVATE EQUITY THAN THEY DO IN PUBLIC EQUITY.
SO IT'S JUST A MATTER OF HOW MUCH RISK THAT'S A HIGHER RISK ASSET CLASS AS WELL.
SO WHAT IS THE TRADE OFF BETWEEN RISK AND RETURN BETWEEN YOUR PUBLIC EQUITIES AND EVERYWHERE ELSE YOU CAN INVEST A DOLLAR TO EARN A RETURN COMPARED TO PRIVATE EQUITY? I THINK THE PUBLIC EQUITY MARKETS HAVE BEEN ON A HISTORIC RUN THAT THE THREE AND FIVE YEAR RETURNS ARE NEAR HIGH LEVELS THAT WE'VE SEEN HISTORICALLY.
SO WE WANTED, WE'VE HAD A, A HIGHER THAN AVERAGE ALLOCATION TO PUBLIC EQUITY, SO WE FELT IT WAS PRUDENT TO BRING THAT DOWN AND THEN INVEST INTO WHAT WE EXPECT TO BE A HIGHER RETURNING ASSET CLASS WITH PRIVATE EQUITY.
SO THE FUND GOT INTO TROUBLE WITH THE NOW REFERRED TO AS LEGACY ASSETS, WHICH WERE PRIVATE INVESTMENTS.
SO WHAT SAFEGUARDS HAVE YOU PUT IN PLACE TO PREVENT A RECURRENCE OF THE LOSSES INCURRED FROM THOSE PRIVATE INVESTMENTS? IF WE GO BACK A COUPLE SLIDES, UH, TO SLIDE 12 ON THE GOVERNANCE MODEL, UM, I WOULD SAY ALMOST EVERYTHING ON THIS PAGE NOW WE HAVE AN INVESTMENT EXPERTISE ON THE BOARD AND THE IC LEVEL.
UM, AND QUITE A BIT OF IT, WE DID NOT HAVE AN INVESTMENT ADVI ADVISORY COMMITTEE IN PLACE PRIOR.
WE HAD CONSULTANTS THAT MAY NOT HAVE BEEN, YOU KNOW, CONSULTING THE WAY THEY SHOULD HAVE BEEN CONSULTING IN TERMS OF PROVIDING AFFIRMATIVE RECOMMENDATIONS.
SO OUR CURRENT INVESTMENT POLICY SAYS THAT EVERY NEW INVESTMENT THAT COMES INTO THE PORTFOLIO NEEDS TO HAVE A DUAL RECOMMENDATION, WRITTEN RECOMMENDATION FROM INVESTMENT STAFF AND THE CONSULTANT WE HIRED ALLBORN ON THE PRIVATE SIDE WHO'S, YOU KNOW, BEST IN CLASS AT WHAT THEY DO ON DOING VERY THOROUGH INVESTMENT DILIGENCE AND OPERATIONAL DILIGENCE ON EVERY NEW INVESTMENT.
ASSURE YOU THAT NONE OF THE INVESTMENTS THAT, YOU KNOW, THE LEGACY INVESTMENTS THAT ENDED UP PROBLEMATIC WOULD'VE MADE IT THROUGH EITHER OF THOSE PROCESSES.
SO I WOULD SAY IT'S THE COMBINATION OF, OF THE WRITTEN RECOMMENDATIONS FROM STAFF AND CONSULTANTS, THE THE QUALITY OF CONSULTANTS WE HAVE IN PLACE, AND THEN THE IAC IN COMBINATION WITH THE QUALITY PEOPLE THAT ARE SERVING ON THAT, THOSE COMMITTEES WITH THE BOARD AND THE IAC.
AND IS THAT DUE DILIGENCE BY THE STAFF ON THE ONE HAND AND THE CONSULTANTS ON THE OTHER HAND INDEPENDENT OF EACH OTHER? YES.
UH, WE, WE TALK WITH OUR CONSULTANTS TO SHARE VIEWS, BUT WE HAVE A, YOU KNOW, WE PARALLEL OUR PROCESS ON UNDERWRITING INVESTMENT WITH WHAT THE CONSULTANT IS DOING AND THEN COMPARE NOTES.
SO ONE'S NOT JUST RUBBER STAMPING? NO, IT IS, IT IS NOT.
IT, IT REQUIRES, YOU KNOW, AND THE GROUP THAT IS APPROV THESE INVESTMENTS WILL RELY HEAVILY BOTH ON STAFF AND CONSULTANT TO UNDERSTAND WHAT THE INVESTMENT IS AND WHAT THE RISK OF IT ARE BEFORE RECOMMENDING ANYTHING TO THE BOARD FOR APPROVAL.
IF I COULD ADD TO THAT, WE ALSO HAVE AN, UM, COMMITTEE CALLED THE PROFESSIONAL SERVICES COMMITTEE.
AND WHAT THAT COMMITTEE DOES IS ONCE A YEAR IT MEETS WITH ALL OF OUR OUTSIDE CONSULTANTS.
SO OUR AUDITOR, OUR ACTUARY, OUR INVESTMENT CONSULTANTS WITHOUT STAFF IN THE ROOM.
AND THE PURPOSE OF THAT MEETING IS TO GIVE THE CONSULTANTS AN OPPORTUNITY TO SAY IF THEY'RE HAVING ANY PROBLEMS WITH STAFF,
[01:40:01]
IF STAFF IS TRYING TO FILTER THEIR RECOMMENDATIONS IF WE'RE NOT RESPONSIVE, IF THEY HAVE ANY, ANY KIND OF CONCERNS.AND WE'VE BEEN DOING THAT SINCE 2016.
AND THAT'S A COMMITTEE OF THE BOARD? IT'S A COMMITTEE OF THE BOARD.
THE OTHER THING I'D ADD COUNCIL MEMBER ON THE, ON THE CONSULTANT IS COUNCIL MEMBER WILLIS MENTIONED ALLBORNE AND THAT'S THE CONSULTANT ON THE PRIVATE ASSETS.
AND THEY DO, THEY DO AN ANALYSIS ON THESE INVESTMENTS, NOT JUST FOR DPFP BUT FOR ALL THEIR, THEY HAVE, THEY HAVE HUNDREDS OF CLIENTS AND THEY, THEY PROVIDE THE SAME ANALYSIS TO ALL THOSE CLIENTS THAT THEY DO TO US.
SO IT'S, IT'S NOT A, IT'S NOT A BESPOKE ANALYSIS FOR US.
THEY LOOK AT A LOT OF DIFFERENT MANAGERS AND DO AN, DO AN ANALYSIS THAT THEY GIVE THE SAME THING TO THEIR, ALL THEIR CLIENTS.
THANK YOU FOR THOSE QUESTIONS.
ANYONE ELSE? UH, MR. ROTH, GO AHEAD.
THANK YOU ALSO FOR THE EDUCATION HERE.
UM, THE, UM, IT SEEMS LIKE TO ME THAT, AND I'M TRYING TO LEARN ABOUT THIS, UH, WE NEED TO PUT MORE, WE NEED MORE CONTRIBUTIONS AS PART OF THE SOLUTION TO ENHANCE OUR, OUR INVESTMENT OPPORTUNITIES.
AND WHAT YOU'RE SAYING IN THAT, IN, IN SECTIONS SIX AND SEVEN THAT THE CONTRIBUTIONS DO NOT INCLUDE THE 300 MILLION IN, IN ADDITIONAL, UH, PROFIT OR ASSET, UH, ALLOCATION.
UH, COUNCIL MEMBER ROTH? YES, THAT'S TRUE.
THESE ARE JUST THE CONTRIBUTIONS YOU CALL, YOU CALLED THAT ARE ON THE BUDGET AND THE MEMBER CONTRIBUTIONS, NO OTHER ADDITIONAL FUNDING.
SO, SO THE CONTRIBUTIONS REALLY DID ADD 300 MILLION THIS YEAR, IS THAT CORRECT? YES.
DID INVESTMENT GAINS IN THE PORTFOLIO, WHAT ARE YOU WELL, THE CONTRIBUTIONS.
2 94 ON PAGE SIX IN, IN THE PRIVATE MARKET PROCEEDS, THOSE ARE DIFFERENT.
I'M SORRY SIR, I THOUGHT YOU WERE TALKING ABOUT THE BOTTOM OF PAGE 26.
NO, I'M TALKING ABOUT PRIVATE MARKET PROCEEDS.
IS THAT, SO THE, THE PROCEEDS FROM THE PRIVATE MARKET THAT IS JUST CONVERTING WHAT WAS THE PRIVATE ASSET THAT WAS LONG HELD IN THE PORTFOLIO INTO A PUBLIC ASSET, IT DIDN'T ADD TO THE CORPUS OF THE FUND, IF THAT MAKES SENSE.
SO YOU, WE GOT CASH BACK FROM AN INVESTMENT, BUT IT WASN'T PART OF THE, IT'S NOT, IT'S NOT NEW MONEY.
NO, IT'S NOT A GAIN, IT, IT, IT IS CONVERTING A LEGACY ASSET INTO SOMETHING WE COULD PUT INTO A PRODUCTIVE PART OF THE PORTFOLIO, IF THAT MAKES SENSE.
SO IS IT A DEAD PIECE OF PROPERTY THAT YOU SOLD AND YOU MADE A PROFIT ON? OR IS IT AN EQUITY, IS IT JUST A STOCK, YOU SOLD THE STOCK AND YOU BOUGHT ANOTHER ONE? IT WAS A ENERGY PRIVATE EQUITY FUND, BUT I'M JUST, I'M, BUT THAT'S WHAT YOU, THAT WAS JUST A TRANSFER, CORRECT? IT'S NOT NEW MONEY.
SO WHERE ELSE CAN, WHAT ELSE, WHERE CAN YOU GET NEW MONEY IS WHAT I'M TRYING TO FIGURE OUT.
IS THERE STILL REAL ESTATE ASSETS THAT ARE NOT PRODUCING, THAT ARE SITTING IN THE, IN THE, UH, PORTFOLIO? THERE'S NO NEW MONEY WE, WE CAN EARN GAIN ON OUR CURRENT PORTFOLIO, BUT THERE'S NOT OTHER LA YOU KNOW, LEGACY ASSETS THAT AREN'T PART OF THE PORTFOLIO THAT, YOU KNOW, WOULD BECOME PART OF THE PORTFOLIO.
SO ALL OF OUR ASSETS, WHETHER THEY'RE LEGACY OR NOT, WE HAVE ON THE BOOKS OF WHAT WE THINK THEIR FAIR MARKET VALUE IS AND IF WE SELL THEM FOR THEIR FAIR MARKET VALUE, WE GET RID OF THE ASSET AND WE GET CASH, BUT WE DON'T HAVE A GAIN.
SO, YOU KNOW, WE WOULD EXPECT AND HOPE, ESPECIALLY WITH THESE LEGACY ASSETS THAT WE CAN TURN THEM INTO CASH FOR EQUAL TO OR A LITTLE BIT MORE, BUT THERE'S NO, THERE'S NO NEW MONEY, RIGHT? THERE'S NO NON-PRODUCING ASSETS RIGHT? IN THE PRODU IN THE PORTFOLIO IS WHAT I'M TRYING TO GET AT.
UM, IT LOOKS 16% IN ONE YEAR, THAT'S EXCEPTIONAL.
BUT THAT'S, THAT'S NOT TYPICAL MM-HMM
AND SO IS, AND I'M I'M PERSONALLY JUST WONDERING, AND I, WE JUST HAD A PRESENTATION BY THE PREVIOUS GROUP, Y'ALL ARE PROJECTING SEVEN AND A QUARTER, SIX AND A HALF, 7% RETURNS IS WHAT YOU'RE PROJECTING.
THAT SEEMS TO BE PRETTY AGGRESSIVE.
IS THAT, YOU KNOW, IS THAT, UH, TO ME THOSE ARE HIGH NUMBERS ON LONG TERM STRATEGIES.
IS, IS THERE, CAN YOU EXPLAIN TO US HOW DO YOU COME UP WITH THAT BASED, NOT BASED ON HISTORICAL BUT BASED ON PROJECTION? SO I'LL, I'LL START AND THEN I'LL LET RYAN A ADD MORE INTO IT.
SO WE HAVE LOWERED OUR ASSUMED RATE OF RETURN OVER TIME, AS HAS MOST PENSION FUNDS.
SO WE'RE CURRENTLY SITTING AT 6.5% RATE OF RETURN, RIGHT? ANNUALLY.
UM, WE, WE LOOK AT THE CAPITAL MARKET ASSUMPTIONS FROM OUR INVESTMENT CONSULTANT AND WE DO AN ASSET ALLOCATION EVERY THREE YEARS BASED ON OUR ASSET ALLOCATION.
UM, AND OUR CONSULTANTS EXPECTATIONS OF THE RETURN ON THE VARIOUS ASSET CLASSES.
THEY BELIEVE THAT THE 6.5% RATE OF RETURN IS A GOOD NUMBER.
DO YOU KNOW WHAT THE 2010 AND 20 YEARS, THE 20 YEAR ASSUMPTION I BELIEVE IS JUST OVER SEVEN FROM MAKITA.
AND WE KINDA HAVE TWO CONFLICTING
[01:45:01]
FORCES GOING ON IN THE MARKETS WHERE THERE'RE ASSUMING SOME MEAN REVERSION WHERE EQUITY MARKETS HAVE BEEN ON A TEAR, THEY EXPECT THAT TO REVERT, YOU KNOW, IF THEY HAVE AN 8% LONG TERM ASSUMED RETURN FOR EQUITIES AND IT'S RETURNED 15%, THEY'RE GONNA KIND OF, THAT'S GONNA COME DOWN A BIT ON THE NEAR TERM.WHAT IS HELPING TO PUSH AGAINST THAT DYNAMIC IS NOW THAT WE'RE EARNING, WE CAN EARN FIVE PLUS PERCENT IN FIXED INCOME.
THAT MAKES IT A BIT EASIER, BUT THE EXPECTATION OF EQUITY MARKETS COMING BACK DOWN TO REALITY A BIT OVER TIME, YOU KNOW, ARE, ARE MOVING AGAINST EACH OTHER, BUT WE STILL THINK SIX AND A HALF IS, UM, CONSERVATIVE COMPARED TO A LOT OF OTHER ASSUMPTIONS ACROSS THE, THE UNIVERSE INDEFINITELY ACHIEVABLE OVER THE LONG TERM.
UM, AND THEN MY LAST QUESTION, UH, IN, IN YOUR PRIVATE EQUITY INCREASE IN YOUR ALLOCATIONS.
LOOK THAT'S, I I WOULD, I WOULD HOPE THAT THE, THAT GENERAL INVESTMENT POLICY WOULD BE THAT YOU'RE NOT CHASING RETURNS AND, UH, GOING INTO MORE RISKY AND, AND DIFFICULT, UH, LIKE PRIVATE EQUITY, PRIVATE DERIVATIVES, SOME OTHER UNUSUAL, UH, SITUATIONS.
AND I WOULD HOPE THAT THE INVESTMENT POLICY THAT WE HAVE, UH, PUTS SOME LIMITATIONS AND SOME GUARDRAILS ON THAT.
UM, AND I, THIS EXTRA IS 5% OF THE PORTFOLIO, WHICH IS, UH, SIGNIFICANT.
UH, OUT OF A, WHAT DO WE HAVE, UH, $3 BILLION OR $5 BILLION, SO THAT'S MM-HMM
SO YOU'RE TALKING ABOUT, UM, YOU KNOW, BASICALLY, UH, YOU KNOW, HUNDREDS OF MILLIONS OF DOLLARS THAT YOU CAN PUT INTO PRIVATE EQUITY.
I WOULD HOPE THAT THAT WOULD BE VETTED IN A PROPER WAY AND THAT, UH, IN A CAUTIOUS WAY.
AND, AND THAT'S WHAT WE'RE TRYING TO DO.
UM, IN TERMS OF RETURN CHASING, I, I THINK THAT WOULD PROBABLY BE MORE MONEY GOING INTO PUBLIC EQUITIES VERSUS PRIVATE EQUITY.
ALL THE FUNDS THAT WE'VE INVESTED IN, WE'VE DONE FOUR FUNDS SINCE WE'VE KIND OF RESTARTED THIS PROGRAM ON THE PRIVATE EQUITY SIDE.
AND THREE FUNDS ON THE PRIVATE CREDIT SIDE ARE ALL VERY INSTITUTIONAL QUALITY FUNDS.
AND THEN WE HAVE GUARDRAILS AND OUR INVESTMENT POLICY TO ENSURE THAT DPFP IS NOT TOO LARGE, THE FUND IS BIG ENOUGH TO BE CONSIDERED INSTITUTIONAL QUALITY AND THAT DPFP IS NOT MORE THAN 10% OF ANY FUND WE'RE GOING INTO.
I'LL TELL YOU, I'M, I'M A LITTLE BIT, I'M, I'M, I'M A LITTLE BIT, UH, CONCERNED ABOUT THAT SLIDE NINE AND IT'S A GREAT SLIDE.
I'M GLAD THAT YOU PROVIDED THAT BECAUSE I THINK YOU REALLY, IT, IT SORT OF IDENTIFIES THAT WE'VE GOT A LOT OF CATCHING UP TO DO, UH, IN ORDER TO SORT OF STAY EVEN.
AND WE APPRECIATE YOU BEING HERE TODAY AND GREAT JOB.
WE ARE GOING TO MOVE ON COLLEAGUES.
THANK CO AND SKIP PAST ITEM D FOR JUST
[MEMORANDUMS]
A MINUTE.GO TO ITEM J, THE OFFICE OF CITY AUDITOR FISCAL YEAR 2027, PROPOSED AUDIT WORK PLAN.
UM, IF THERE ARE ANY QUESTIONS WE'LL TAKE THEM NOW.
I'VE ASKED, UH, RORY TO COME BACK UP.
IF, IF THERE'S NOT, I WILL ASK FOR A MOTION HERE IN A MOMENT.
ALRIGHT, I WILL START TO MY, I'LL START ON THE FAR END THIS TIME.
I KNOW YOU HAD SOMETHING, RIGHT? YEAH.
SO IN LOOKING AT THE, THE AUDITS THAT ARE UNDERWAY, I BELIEVE THE DALLAS GO PLATFORM WAS ONE THAT'S IN PROGRESS, IS THAT CORRECT? WE'RE IN PLANNING RIGHT NOW.
SO WHAT WOULD AN ANTICIPATED DELIVERY BE ON THAT? OFF THE TOP OF MY HEAD, I DON'T HAVE, I'D HAVE TO GO BACK AND TAKE A LOOK AT THE ENGAGEMENT LETTER, BUT WE DID ESTIMATE PROBABLY, I WOULD SAY PROBABLY ABOUT MARCH TO APRIL.
WE JUST, I KNOW I'M NOT ALONE AND RESIDENTS HAVING EXPRESSED SOME RIGHT ISSUES WITH THAT.
AND SO I WOULD JUST SAY WE'D LIKE TO UNDERSTAND MORE ABOUT THAT AND HOW TO NOT HAVE THAT HAPPEN IN THE FUTURE.
UM, I'LL GIVE YOU A MORE DEFINITE DATE WHEN I GO BACK AND TAKE A LOOK AT OUR PLANNING.
AND WHILE YOU'RE DOING THAT, UH, COLLEAGUE, I'LL JUST SAY FOR ANYBODY WHO'S CONCERNED OR ONCE IN A, WE'RE AT, WE'RE ON ITEM K, I DON'T THINK I MENTIONED THAT ITEM K ON, UM, NO IT'S NOT JJ I'M SORRY,
IT'S A LONG BRIEFING ITEM J SO IT'S JUST A MATTER OF PRINCIPLE.
DO YOU, I MEAN AS YOU LOOK AT THESE DIFFERENT THINGS THAT ARE PROPOSED TO SEE, FOR INSTANCE, HAS ENOUGH DATA BEEN COLLECTED FOR YOU ALL TO BE ABLE TO MAKE OR, OR HAVE AN AUDIT THAT'S REASONABLE IN ITS FINDINGS? I MEAN I'M LOOKING LIKE, I KNOW ON FLOCK CAMERAS IT'S SOMETHING THAT THERE'S, YOU KNOW, THERE ARE QUESTIONS AROUND, I KNOW WE ARE HAVING IT COME BACK TO PUBLIC SAFETY IN JANUARY, BUT THE PROGRAM HAS ONLY BEEN UP AND RUNNING I THINK
[01:50:01]
A COUPLE OF YEARS.I JUST WANNA BE SURE IF WE'RE DOING AN AUDIT, IT'S WHEN WE HAVE A ROBUST NUMBER OF CAMERAS THAT WE'RE PULLING INFORMATION FROM AND, OR I GUESS REALLY IT'S ABOUT DPD PRACTICES, BUT UM, I WOULD IMAGINE THAT'S PART OF YOUR PLANNING PROCESS, CORRECT AT THIS POINT THAT WAS REQUESTED BY COUNCIL MEMBER AND WE WILL GO BACK IN OUR PLANNING TO DETERMINE WHAT WE CAN DO IN TERMS OF ACTUAL DATA AVAILABLE AND WORK WITH DPD TO GET.
AND IF WE DON'T THINK THAT THERE'S ENOUGH DATA AT THIS POINT, WE WOULD HAVE TO CANCEL OR DELAY IT UNTIL WE GET ENOUGH DATA IF THAT'S WHAT YOU'RE CONCERN ABOUT IT.
WELL, AND I KNOW THAT THE GUIDELINES, WHILE THERE ARE GUIDELINES IN PLACE, TAKING A FRESH LOOK AT THOSE IN JANUARY IS ALSO PART OF WHAT WE'RE DOING.
SO IF YOU'RE GOING TO DO THE EXPLORATORY OF IT, I JUST WANT TO BE SURE THAT IT'S NOT OVER DATED INFORMATION.
IT'S, WELL, I MEAN YOU MAY HAVE A DIFFERENT POINT OF VIEW, BUT, BUT THAT IT IS REFLECTIVE OF, YOU KNOW, WHAT OUR CURRENT PRACTICE IS AND IS THAT WORKING WELL, THE PRELIMINARY OBJECTIVES, WE, WE WERE GIVEN ROUGHLY 10 REQUESTED ITEMS FROM THE P COUNCIL PERSON THAT REQUESTED IT.
THOSE HAVE BEEN INCORPORATED OR SUMMARIZED BY THE THREE OBJECTIVES THAT WE'VE GOT IN PLACE RIGHT THERE.
SO WE ARE GONNA LOOK AT THE PROCEDURES IN PLACE TO GUIDE THE USE OF FLOCK CAMERAS AND THE PROCEDURES BEING FOLLOWED.
WE'RE GONNA LOOK AT THE RESULTS FOR THE USE.
SO THAT'S WHERE YOU WOULD REALLY BE LOOKING AT POSSIBLE DATA THAT WOULD BE AVAILABLE TO DO THAT.
AND THEN THIRDLY, WE'RE GONNA LOOK AT COMPARE IT AGAINST PEER CITIES.
LET ME PROVIDE YOU WHAT WAS REQUESTED THE OTHER, AND YOU CAN TAKE A LOOK AT THAT TO SEE.
ALRIGHT, IT'S JUST STILL A LITTLE BIT FLUID.
AND SO IT'S LIKE, DO WE WANNA LOOK AT SOMETHING THAT MIGHT HAVE BEEN A PRACTICE THAT WE DON'T NECESSARILY DO? SO HOW DOES THAT INFORM, HOW DOES THAT INFORM US IF IT'S SOMETHING THAT WE'VE ALREADY MADE A CHANGE TO? SO I'M JUST SAYING BE, BE MINDFUL OF THAT AS WE LOOK AT THIS.
WE WOULD WORK WITH DPD AND IF THERE'S, IF THERE'S NEW POLICIES BEING IN PLACE, WE WOULD NOT LOOK AT OLD POLICIES THAT ARE NOT GONNA BE IN EXISTENCE GOING FORWARD.
WE WOULD LOOK AT SOME SOMETHING THAT IS CURRENT.
ALRIGHT, I'LL JUST JUMP IN AND WE'LL JUST GO DOWN THE LINE HERE.
UM, I FULLY SUPPORT YOUR, UH, PRIORITIZED, UM, ITEMS FOR 2027.
COUNCIL MEMBER OR CHAIRMAN JOHNSON FOR THE PARKS AND REC CONTRACT OVERSIGHT, WHICH IS PRIORITIZED IN MR. ROTH AS WELL.
UM, THERE WAS ANOTHER ONE IN THERE, BUT THE ONE, I THINK IT WAS FROM THE CFO, BOTH OF THOSE I THOUGHT WERE GOOD TO PRIORITIZE AS, AS YOUR RESOURCES BECOME AVAILABLE.
ALSO AGREE WITH, UH, CHAIRWOMAN WILLIS AT THE DALLAS GO AUDIT THAT'S FROM THIS LAST YEAR.
ABSOLUTELY NEEDS TO BE A PRIORITY.
'CAUSE I, I HEAR FROM RESIDENTS STILL ABOUT THAT.
UM, OTHER THAN THAT, YEAH, I SUPPORT THE FLOCK CAMERA AUDIT AS WELL, UH, ONCE WE HAVE THE APPROPRIATE DATA AND I THANK YOU TO COUNCIL COUNCILWOMAN ADEENA FOR BRINGING THAT FORWARD.
ALRIGHT, VICE CHAIR, NO QUESTIONS.
NO QUESTIONS, CHAIRMAN? UH, ANYBODY? OKAY, GO AHEAD.
YEAH, SO ONE OF THE REASONS WHY I, UM, ADDED THE FLOCK CAMERA IS BECAUSE I FOUND OUT THAT WE HAVE DONE A AUDIT ON THE BODY-WORN CAMERA AND IT GAVE SOME GOOD INFORMATION.
UM, FLOCK HAS BEEN AROUND AND USED BY DPD FOR A NUMBER OF YEARS.
UM, AND THEN I WAS ALSO ABLE TO GET A COPY OF THE AUSTIN POLICE DEPARTMENT, UM, AUDIT THAT THEY RECENTLY DID.
AND SO USE SOME OF THE INFORMATION FROM THAT AUDIT IN REQUESTING SOME INFORMATION FOR THIS ONE AS WELL.
SO THAT'S JUST SOME BACKGROUND.
YES, I, UM, MOVE, UM, TO APPROVE THE 2027 AUDIT PLAN AND MOVE IT TO FULL COUNSEL.
ALRIGHT, WE HAVE A MOTION TO SECOND DISCUSSION.
ALRIGHT, MOVING ON COLLEAGUES.
[REPORTS]
D, BUT I WANNA MOVE FORWARD AND JUST SEE WHICH OF THESE OTHER ITEMS I CAN RELEASE.YOU KNOW, I DO THIS SOMETIMES.
UM, ANY QUESTIONS ON ITEM E MONTHLY AUDIT INSIGHTS FOR THE AUDIT OF TAMMY PALINO LEAVING? WE DO THIS WITH OUR DIRECT REPORTS AND ALSO CITY AUDITOR MARK MARK SWAN.
THAT'S A NO, WE'RE GONNA RELEASE THAT ONE.
UH, I HAVE QUESTIONS ON MONTHLY PROCUREMENT ACCOUNTABILITY, SO IF Y'ALL DO, THAT'S FINE.
MONTHLY BUDGET ACCOUNTABILITY REPORT.
UM, I'VE, I'VE GOT A COUPLE QUESTIONS ON THAT.
SO THAT WILL BE HELD FOR THE WHOLE COMMITTEE, UH, MONTHLY TECHNOLOGY ACCOUNTABILITY REPORT.
ANYONE HAVE QUESTIONS? ITEM H I'M SAYING NONE.
[01:55:01]
IS THE ARPA UPDATE FOR THE PERIOD ENDING SEPTEMBER 30TH, 2026.ANY QUESTIONS ABOUT ITEM I? NOPE.
ITEM K IS THE PROPOSED AMENDMENTS ADOPTING FIXED DOLLAR CONTRIBUTIONS, OPTIONS FOR THE DEFERRED COMPENSATION, VOLUNTARY CONTRIBUTION PLANS.
YOU HAVE SOME QUESTIONS? YEAH, I, I JUST NEED TO GET AN UNDERSTANDING OF, OF, OF THAT.
ALRIGHT, UH, ITEM LI BELIEVE WE HAVE QUESTIONS ON ITEM M IS JUST THE FORECAST.
AND WHAT ABOUT ITEMS N THROUGH Q? ANYONE? YOU HAVE SOME? OKAY.
N WE'RE GONNA HOLD O, P OR Q AND I WAS ASKED FOR A MOTION ON Q, BUT INFORMED BY CITY ATTORNEY, WE DO NOT NEED IT.
SO WE'RE, WE'RE, UH, WE'RE GONNA JUST LET THAT ONE GO AS WELL.
WITH THAT BEING SAID, WE WILL GO BACK TO THE MUCH DELAYED ITEM D I'M SURE MS. WHEATON WOULD LOVE TO TALK ABOUT THAT WITH US TODAY.
THE 20 26 27 DEBT PROGRAM OVERVIEW AND PLAN DEBT TRANSACTIONS.
I TOLD YOU WE GET IT TO THE AGENDA ONE OF THESE DAYS.
JUST BE CONSCIOUS OF TIME HERE.
UH, GOOD AFTERNOON, JEANETTE WHEEDON, UH, BUDGET AND MANAGEMENT SERVICES AND JOINING ME THIS AFTERNOON, UH, JENNY KURTZMAN, WHO IS THE, UH, ASSISTANT DIRECTOR OF TREASURY IN THE CITY CONTROLLER'S OFFICE.
AND FELICIA HERNANDEZ, WHO IS THE DEBT ADMINISTRATOR IN THE CITY CONTROLLER'S OFFICE.
SO, AS MENTIONED, WE ARE HERE TO TALK ABOUT THE FISCAL YEAR 27 DEBT PROGRAM, OUR FISCAL YEAR 27 UPCOMING, UH, PLANNED, UH, DEBT TRANSACTIONS, AND THEN TO ANSWER ANY QUESTIONS THAT YOU MAY HAVE.
SO, MOVING ON TO SLIDE NUMBER TWO.
UM, I'LL SPEND A LITTLE BIT OF TIME TALKING ABOUT THE GENERAL OBLIGATION, UH, BOND PROGRAM.
UM, PROVIDE A SUMMARY OF OUR OUTSTANDING DEBT AND THEN THE, UH, UH, JENNY AND HER TEAM WILL TALK ABOUT THE PLANNED DEBT ISSUANCE.
SO, UM, STARTING ON SLIDE NUMBER FOUR, UH, NUMBER FOUR, SLIDE FOUR PROVIDES A SUMMARY OF OUR OUTSTANDING DEBT AS OF SEPTEMBER 30TH.
THIS DEBT INCLUDES DEBT THAT IS REPAID BY PROPERTY TAXES, WHICH IS LISTED AT THE TOP AS TAX SUPPORTED DEBT AND DEBT REPAY BY REVENUE BONDS ISSUED FOR THE CONVENTION CENTER, DALLAS WATER UTILITIES, DRAINAGE PROJECTS, DALLAS LOVE FIELD, AND THE DOWNTOWN, UH, DEVELOPMENT AUTHORITY.
SO THE BOTTOM OF THE CHART REPRESENTS OUR REVENUE BONDS.
THE TOP OF THE CHART TAX SUPPORTED DEBT.
UM, REVENUE BONDS ARE SUPPORTED BY BUSINESS TYPE ACTIVITIES.
THEY ARE SELF-SUSTAINING, UM, FUNDED THROUGH USER FEES AND THEY ARE NOT PROPERTY TAX DOLLARS.
SO AGAIN, BOTTOM OF THE CHART DOES NOT REFLECT PROPERTY TAX SUPPORTED DEBT.
UH, THIS, UH, SLIDE PROVIDES A SUMMARY OF GENERAL OBLIGATION DEBT.
THIS SLIDE IS TAX SUPPORTED DEBT.
SO THEY ARE DIRECT OBLIGATIONS OF THE CITY PAYABLE AND SECURED BY PROPERTY TAXES ON ALL PROPERTY, UH, WITHIN THE CITY.
UH, 52% OF, UH, PROPERTY TAX COMES FROM COMMERCIAL PROPERTY AND 48% COMES FROM OUR RESIDENTIAL PROPERTY.
AND THEN, UM, OVER ON THE SIDE YOU SEE OUR CURRENT, UH, BOND RATINGS FOR THAT DEBT.
AND I'LL TALK ABOUT THAT A LITTLE BIT LATER AND WE'LL GET TO SLIDE 29 AND 30.
UM, MOVING ON TO SLIDE SIX, UH, CONVENTION CENTER DEBT.
UM, THIS IS REVENUE THAT IS PLEDGED, PLEDGED BY, UH, SPECIAL OBLIGATIONS OF THE CITY.
THESE BONDS ARE NOT BACKED BY PROPERTY TAXES.
A SPECIAL OBLIGATION MEANS THE BONDS ARE PAYABLE FROM PLEDGE REVENUES, UM, AND FOR THE CONVENTION CENTER THAT PLEDGE REVENUES, UH, INCLUDES THE HOTEL OCCUPANCY TAX AND FOR THE CONVENTION CENTER HOTEL DEVELOPMENT CORPORATION, THE PLEDGE REVENUE IS THE HOTEL REVENUE.
AND THEN AGAIN, UH, VERY SIMILAR TO OUR GENERAL OBLIGATION BONDS.
YOU CAN SEE THE CREDIT RATINGS OVER TO, UH, THE SIGN ON THE SAME CHART.
MOVING ON TO SLIDE NUMBER SEVEN, UH, DALLAS WATER UTILITY DEBT IS LISTED HERE, UH, SIMILAR TO CONVENTION CENTER.
THESE BONDS ARE NOT BACKED BY PROPERTY TAXES.
THESE BONDS ARE PAYABLE, UH, FROM PLEDGE REVENUES FROM UTILITY RATE PAYERS.
UH, THE BOND ORDINANCES FOR THE OUTSTANDING DEBT, UH, FORMALLY PLEDGES THESE REVENUES, UH, THE CITY ISSUES, THE DEBT MANAGES THE UTILITY THAT GENERATES THE PLEDGE REVENUE AND ENSURES THAT THOSE REVENUES ARE COLLECTED AND USED FOR REPAYMENT.
HOWEVER, IF THE PLEDGE REVENUES ARE INSUFFICIENT, THE CITY IS NOT LEGALLY OPER, UH, REQUIRED TO USE OTHER FUNDS TO MAKE THESE PAYMENTS.
AND THAT'S VERY SIMILAR TO THE CONVENTION CENTER AS WELL.
MOVING ON TO SLIDE EIGHT, UH, AVIATION OUTSTANDING DEBT IS LISTED HERE, AND THIS IS THE DEBT OF THE LOVEFIELD
[02:00:01]
AIRPORT MODERNIZATION CORPORATION.UH, THE LOVEFIELD AIRPORT MODERNIZATION CORPORATION, THAT'S A LOT TO SAY, WAS FORMED WITH THE AUTHORITY TO ISSUE BONDS TO FUND THE MODERNIZATION OF THE AIRPORT.
THESE BONDS ARE NOT BACKED BY PROPERTY TAXES.
THE AIRPORT BONDS ARE PAYABLE SOLELY FROM REVENUES OF THE AIRPORT SYSTEM, WHICH IS NET REVENUES REMAINING AFTER DEDUCTING CURRENT OPERATING AND MAINTENANCE EXPENSES OF THE AIRPORT SYSTEM.
THE SPECIAL FACILITY BONDS, UH, PAYMENTS THAT ARE LISTED ARE SECURED BY FACILITY PAYMENTS MADE BY SOUTHWEST AIRLINES PURSUANT TO THE, UH, FACILITY AGREEMENT.
SO AGAIN, UH, OUT THE CURRENT RATINGS, UH, FOR THE, THE, UH, OUTSTANDING DEBT IS LISTED HERE ON SLIDE EIGHT AS WELL.
AND AGAIN, UH, THESE, UH, BONDS ARE NOT, UH, UH, UH, PAYABLE BY PROPERTY TAX.
AND THEN, UH, SLIDE NUMBER NINE.
UH, THE LAST ENTITY IS THE DOWNTOWN DEVELOPMENT AUTHORITY.
UH, THE DOWNTOWN DEVELOPMENT AUTHORITY WAS ESTABLISHED TO PROMOTE ECONOMIC DEVELOPMENT OF THE DOWNTOWN AREA AND IMPROVE THE TAX BASE.
THIS, THESE BONDS ARE NOT BACKED BY PROPERTY TAX.
UH, THE BOND IS PAYABLE, UH, SOLELY FROM THE TAX INCREMENT IN ACCORDANCE WITH THE TERMS OF AN ILA BETWEEN THE CITY AND DALLAS COUNTY.
AND AGAIN, THE, UH, RATING IS LISTED HERE, UM, ON, UH, SLIDE NUMBER NINE.
MOVING ON TO OUR GENERAL OBLIGATION BOND PROGRAM.
AND SO, UM, AS YOU KNOW, THE CITY HISTORICALLY HAS USED, UH, UH, GEO BONDS TO FINANCE LONG-TERM INFRASTRUCTURE NEEDS OF THE CITY.
UH, THE COST OF THE, UH, INFRASTRUCTURE IS SPREAD OVER THE LIFECYCLE OF THE ASSET.
THE USE IS GOVERNED BY STATE LAW.
IT DOES REQUIRE VOTER APPROVAL, AND THIS DEBT IS REPAID BY PROPERTY TAXES.
UH, THE CITY IS REQUIRED TO LEVY A SUFFICIENT TAX RATE TO COVER THE PRINCIPAL AND INTEREST PAYMENTS.
ON SLIDE 12, YOU CAN SEE, UH, OUR HISTORY OF THE VOTER APPROVAL, UH, GEO BOND PROGRAMS ALL THE WAY BACK FROM, UH, 1998 TO OUR CURRENT, UH, 2024, UH, BOND PROGRAM OF ONE POINT, UH, TWO 5 BILLION.
MOVING ON TO OUR DEBT CAPACITY ON SLIDE 13.
UM, YOU CAN SEE THAT, UH, SLIDE 14, AS I MENTIONED, GEO BONDS ARE REPAID WITH PROPERTY TAXES.
UM, WHILE THE CURRENT OR THE RECENT, UM, TAX-BASED GROWTH HAS BEEN STRONG, UM, OUR PROJECTIONS, WE LOOK AT, UH, LONG-TERM GROWTH OF PROPERTY VALUE OVER TIME.
WE DO VERY SIMILAR TO OUR, UH, GENERAL FUND, UH, WE MAINTAIN A FORECAST MODEL THAT LOOKS AT, UH, HISTORICAL, UH, UH, UH, DEBT, OUR HISTORICAL VALUE GROWTH, AND THEN WE MAKE PROJECTIONS, UM, OF THE AVAILABLE DEBT THAT WE CAN AFFORD.
SO, UM, OUR FISCAL YEAR 27, UH, ASSESSED VALUE GROWTH WAS 4.97%.
AND OUR AVERAGE GROWTH, UM, SINCE 1986 HAS BEEN 4.43%.
AND SO, AGAIN, WE LOOK AT HISTORICAL, UH, GROWTH, LOOK AT, UM, UH, UH, EXISTING OUTSTANDING DEBT, AND THEN WE DETERMINE CAPACITY BASED ON THE GROWTH.
AND WE AL ALWAYS ASSUME, UH, NO INCREASE IN THE TAX RATE.
SLIDE 15 PROVIDES A GRAPHIC REPRESENTATION OF OUR STRONG PROPERTY TAX, UH, BASED GROWTH DATING BACK TO 1986, YOU CAN SEE THE AVERAGE GROWTH, UM, TREND, AND THAT'S THE DOTTED YELLOW LINE COMPARED TO OUR AVERAGE GROWTH TREND, WHICH IS THE SOLID BLUE LINE.
UM, AS YOU KNOW, UH, THE PROPERTY TAX, UH, REVENUE IS BASED ON THE VALUE THAT'S SET BY THE APPRAISAL DISTRICTS AND THE TAX RATE THAT'S APPROVED BY CITY COUNCIL.
UM, HISTORICALLY, AS I MENTIONED, WE HAVE CONSISTENT REDUCTIONS IN OUR DEBTS DEBT SERVICE TAX RATE, AND THAT'S BEEN REALLY A DIRECT, UH, RESULT OF OUR STRONG FINANCIAL MANAGEMENT AND OUR HEALTHY TAX-BASED GROWTH.
AND SO, UM, THE DEBT SERVICE TAX RATE HAS DECREASED BY POINT, UH, ONE 0 CENTS, UH, IN THIS CURRENT FISCAL YEAR FOR FISCAL YEAR 27, AND HAS DECREASED BY 4.21 CENTS SINCE FISCAL YEAR 16.
AND AGAIN, OUR FORECAST MODEL ASSUMES, UH, NO CHANGE IN THE DEBT SERVICE TAX RATE.
UH, SLIDE 17 REFLECTS THE HISTORICAL DISTRIBUTION OF THE TAX RATE BETWEEN THE GENERAL FUND AND THE DEBT SERVICE FUND.
UH, OVER THE PAST 10 YEARS, WE HAVE MAINTAINED, UM, ANYWHERE BETWEEN A 72 TO 28% TO 73 TO 27% SPLIT BETWEEN THE TWO FUNDS.
AND YOU CAN SEE THAT THE DEBT SERVICE PORTION SHOWS A CLEAR DOWNWARD TREND OVER TIME AS THE CITY HAS BENEFITED FROM THAT STRONG BASE, UH, PROPERTY TAX BASED GROWTH.
AND THEN, OF COURSE, OUR CONSERVATIVE, UH, LONG-TERM DEBT, UH, PLANNING ON SLIDE 18, YOU CAN SEE THAT THIS, YOU'VE SEEN THIS CHART BEFORE.
UM, THIS CHART REFLECTS THE HISTORICAL
[02:05:01]
CHANGE IN THE TOTAL TAX RATE.AND SO, UM, YOU CAN SEE THAT OVER TIME, UH, THE CITY HAS, UH, SUSTAINED AT LEAST SINCE FISCAL YEAR 16, UH, PERIODS OF RATE REDUCTIONS.
MOVING ON TO SLIDE 19, UH, THIS SLIDE SHOWS THAT, UH, THE 2024, UH, UH, GE GENERAL OBLIGATION BOND PROGRAM.
AND SO THE TOTAL AUTHORIZED BY THE VOTERS WAS 1.2 BILLION IN FI IN 2024.
AND SO, UH, THIS COMING UPCOMING DECEMBER, WE WILL ISSUE OUR THIRD TRANCHE OF BONDS FROM THE 2024 BOND PROGRAM.
AND SO YOU CAN SEE OUR PLAN ISSUANCES LAID OUT, UM, THROUGH FISCAL YEAR 29.
SLIDE 20 PROVIDES AN OVERVIEW OF THE PLAN ISSUANCE IN OUR DEBT FUNDING MODEL.
SO YOU CAN SEE THAT WE'VE GOT OUR 2024 BOND PROGRAM LISTED HERE AS WELL AS, UM, EQUIPMENT NOTES AND MASTER LEASE.
AND SO, UM, WE SHOW, UH, ONE POINT, UH, 1 2 5 0.2 MILLION PLAN BETWEEN FISCAL YEAR 27 AND FISCAL YEAR 30.
ON SLIDE 21, I'VE KIND OF TALKED ABOUT THIS, BUT THE CAPACITY FOR FUTURE, UH, UH, GEO DEBT, UM, AGAIN, WE LOOK AT, UH, OUR HISTORICAL, UH, TAX-BASED GROWTH.
UH, WE DON'T ASSUME AN INCREASE IN THE TAX RATE.
AND, UM, WE HAVE TALKED ABOUT THIS, UM, IN MORE RECENT BRIEFINGS HISTORICALLY, OR OVER THE LAST FEW YEARS, WE HAD RESERVE CAPACITY FOR PENSION OBLIGATION BONDS, BUT THAT CAPACITY HAS SINCE BEEN REMOVED.
AND SO, UH, WANTED TO POINT THAT OUT.
AND THEN MOVING ON TO OUR DEBT PROFILE.
UM, HERE, THIS SLIDE PROVIDES A HISTORICAL LOOK AT OUR OUTSTANDING DEBT.
UM, THE DEBT SERVICE PAYMENT IN FISCAL YEAR 27 IS 451 MILLION.
UM, OUR AVERAGE IN INTEREST RATE FOR AT DEBT ISSUANCES IS 4.55%.
AND OF COURSE, WE, UM, MAINTAIN A LEVEL PRINCIPLE, AND SO IT ALLOWS US TO AMORTIZE OUR DEBT QUICKLY.
UM, AND SO 78% OF OUR DEBT WILL BE REPAY WITHIN 10 YEARS.
MOVING ON TO SLIDE 24, UM, OUR DEBT MANAGEMENT, UH, APPROACH, UM, THE CITY FOLLOWS VERY STRICT, UM, FINANCIAL POLICIES TO ENSURE THAT OUR DEBT REMAINS WITHIN RESPONSIBLE LEVELS.
UM, AS YOU KNOW, UM, THE CITY, UH, UH, OUR FINANCIAL REPORTS ARE AVAILABLE ONLINE.
THE CITY MAINTAINS AN INVESTOR RELATIONS WEBSITE, AND SO WE ARE COMMITTED TO TRANSPARENCY.
WE ENCOURAGE RESIDENTS TO VIEW OUR REPORTS DIRECTLY, UM, ONLINE.
MOVING ON TO SLIDE 25, THIS SLIDE PROVIDES A HIGHLIGHT OF OUR FINANCIAL POLICIES.
UM, THEY'RE LISTED HERE, AND SO YOU CAN SEE THAT, UM, FOR THE POLICIES THAT WE HAVE PROVIDED HERE, WE ARE WITHIN COMPLIANCE.
SO YOU'LL SEE THE CRITERIA LISTED IN THE SECOND COLUMN, AND THEN OUR ASSUMPTIONS FOR, UH, THE FISCAL YEAR, UH, 27 BUDGET, UH, LISTED THERE.
MOVING ON TO SLIDE 26, UM, IT'S, UH, THE CITY OF DALLAS GEO DEBT PER CAPITA.
UM, WE HAVE A FEW SLIDES BASED OR LOOKING AT DEBT PER CAPITA BECAUSE IT'S AN OFTEN USED MEASURE.
HOWEVER, UM, IT, IT'S ONLY A SIMPLE SNAPSHOT, SO IT'S REALLY NOT A MEASURE OF THE FISCAL HEALTH OF THE CITY.
UM, IT TAKES THE TOTAL AMOUNT OF DEBT OWED AND THEN DIVIDES IT BY THE POPULATION.
AND SO, UM, WE HAVE OFTEN SAID, UM, THAT IT'S USED TO COMPARE US TO PEER CITIES.
HOWEVER, THAT ANALYSIS DOES NOT ACCOUNT FOR THE PROPERTY VALUE OF THE TAX BASE.
IT DOESN'T, UH, ACCOUNT FOR THE AGE OF THE CITY ODOR.
CORE CITIES, UM, HAVE A NEED TO MAINTAIN AGING INFRASTRUCTURE.
IT'S, IT ALSO DOES NOT ACCOUNT FOR, UH, TRENDS OVER TIME DUE TO, UH, VOTER APPROVED BOND PROGRAMS. AND SO I MENTIONED THIS PREVIOUSLY THAT THE CITY HAS A LONG HISTORY OF, UH, UH, BOND, UH, PROGRAMS. AND SO DEBT PER CAPITA DOES NOT TAKE THAT INTO ACCOUNT.
UM, AND SO AGAIN, JUST LOOKING AT THAT ALONE IS NOT A TRUE REFLECTION OF THE CITY'S FINANCIAL HEALTH.
MOVING ON TO SLIDE 27, THIS SLIDE ACTUALLY PROVIDES AN OVERVIEW OF DEBT PER CAPITA HERE AT THE CITY.
AND SO WHAT WE'VE TRIED TO DO WITH THIS SLIDE IS EXPLAIN WHAT'S HAPPENING, UM, AS A RESULT OF OUR DEBT PER CAPITA.
SO YOU CAN SEE THAT WE'VE LAYERED ON THE BOND PROGRAMS THAT HAVE BEEN APPROVED BY COUNSEL.
UH, YOU CAN SEE ON HERE, UM, THE PAY REF, UH, BONDS THAT WERE
[02:10:01]
ISSUED TO SETTLE LAWSUIT, AS WELL AS COS AND, AND, AND THEN OUR MOST RECENT BOND PROGRAM.AND SO THIS CHART IS REALLY DESIGNED TO KIND OF LAY OUT, UH, THE FACTORS THAT ARE IMPORTANT AND THAT IM IMPACT AT PER CAPITA HERE AT THE CITY.
UH, THIS CHART ON SLIDE 28 IS THE ONE THAT WE'RE OFTEN ASKED TO PROVIDE.
AND SO IT PREPARE, PROVIDES A COMPARISON OF DEBT PER CAPITA TO OUR PEER CITIES AND OTHER CITIES IN NORTH TEXAS.
AND SO YOU CAN SEE THAT, UM, WE ARE USING DATA AS OF SEPTEMBER 30TH, 2025, UM, BECAUSE, UH, THE SOURCES BUDGET DOCUMENTS, AND AT THE POINT OF THIS, WHEN THIS BRIEFING WAS PREPARED, NOT ALL OF THE DOCUMENTS HAD BEEN UPDATED.
UM, AND THEN YOU CAN SEE, UH, THAT THE CITY'S DEBT PER CAPITA AT 19, ABOUT 1,910 WE'RE AT MID RANGE COMPARED TO PEER CITIES.
BUT AGAIN, UM, IT'S, IT'S REALLY NOT A REFLECTION OF THE TAX-BASED STRENGTH OR INFRASTRUCTURE NEEDS OF A CITY.
UM, MOVING ON TO SLIDE 29, UH, CREDIT RATINGS, WE'VE TALKED ABOUT THIS IN THE PAST AS WELL.
SO THIS SLIDE, UM, PROVIDES THE HISTORY OF THE CREDIT RATING.
UM, WE OFTEN HAVE THE QUESTION THAT'S ASKED WHAT IMPACTS THE CITY'S CREDIT RATING.
SO THIS PARTICULAR SITE IS DESIGNED TO, UM, PROVIDE DETAIL ON THE CHANGES IN THE CREDIT RATING AND WHAT WAS HAPPENING AT THE TIME.
AND SO YOU CAN SEE THAT, UM, THE NEGATIVE FACTORS IMPACTING OUR CREDIT RATING HAVE PRIMARILY BEEN, UH, PENSION, UH, POLICE AND FIRE, UH, BACK PAY LAWSUIT.
THEN OF COURSE, UM, PROP PROP U AND THEN, UH, PUBLIC SAFETY OR THE INCREASE IN PUBLIC SAFETY EXPENSES.
UM, SLIDE 30 PROVIDES OUR CURRENT RATINGS.
AND SO, UM, YOU CAN SEE THAT POSITIVE FACTORS UM, INCLUDE, UM, OUR, UH, GROWING TAX BASE, UM, OUR HEALTHY RESERVES, AND THIS IS OFTEN NOTED THE LAST BULLET, UM, DURING OUR RATING, UM, MEETINGS WITH THE RATING AGENCIES, OUR PROVEN ABILITY TO BALANCE THE BUDGET.
AND SO, UM, THOSE, UM, POSITIVE FACTORS ARE LISTED THERE.
AND THEN PREVIOUS NEGATIVE RATINGS AND OUTLOOKS, UH, CHANGES ARE LISTED HERE ON SLIDE 29 AS WELL AS I'VE PREVIOUSLY MENTIONED.
AND SO WITH THAT, I'LL TURN IT OVER TO, UH, JENNY KURTZMAN TO WALK YOU THROUGH OUR PLANNED DEBT FOR FISCAL YEAR 27.
THANK YOU, JEANETTE, FOR THE OVERVIEW OF THE DEBT PROGRAMS. THIS SLIDE ON, UH, SLIDE 32 WILL PROVIDE YOU SOME BACKGROUND ON THE BOND ISSUANCE PROCESS.
AS YOU KNOW, THE TREASURY DEPARTMENT COORDINATES WITH OTHER DEPARTMENTS TO IDENTIFY FINANCIAL NEEDS.
WE WORK WITH OUR FINANCIAL ADVISORS TO DEVELOP THIS STRUCTURE FOR THE SALE AND WITH OUR BOND COUNCIL TO ENSURE THAT ALL THE LEGAL ASPECTS OF OUR COVER.
AND THEN FROM THERE, WE WORK WITH THE READY AGENCIES TO ESTABLISH THE BEST RATINGS BEFORE GOING INTO THE MARKET.
AS JEANETTE MENTIONED EARLIER, WE ALSO MAINTAIN THE INVESTORS RELATIONS WEBSITE, THE CITY OF DALLAS BONDS.COM.
SO THAT IS A, A RESPONSIBILITY OF THE TREASURY STAFF TO ENSURE THAT WE HAVE ALL THE DOCUMENTATION AVAILABLE FOR OUR, UM, INVESTORS.
UH, THE BOND ISSUANCE IS PLANNED, UH, USING DIFFERENT, UH, VARIABLES, OF COURSE, MARKET CONDITIONS AND THE TIMING OF THE NEEDS FOR THE, THE CAPITAL NEEDS.
AND, UH, ANY OTHER ITEMS THAT COULD COME INTO PLAY WHEN WE ISSUE THE DEBT.
UH, ONE OF THE THINGS THAT I'M VERY PROUD TO HOTLINE IS THAT WE'RE ALWAYS FOCUSING ON FINDING OPPORTUNITIES FOR SAVINGS.
AND RIGHT NOW, JUST RECENTLY WE BROUGHT TO COUNCIL FOR THE REQUEST FOR APPROVAL OF THE EXTENDABLE COMMERCIAL PAPER PROGRAM.
SO THAT WILL BE REPLACING THE, UM, TRADITIONAL COMMERCIAL PAPER PROGRAM.
AND SOME OF THE GREAT THINGS THAT THIS PROGRAM IS BRINGING IS THAT NOT ONLY THE PROCESS IS COST EFFECTIVE, BUT THE BIGGEST IMPACT THAT IS THE ELIMINATION OF THE CREDIT FACILITY FEES FOR BACKUP LINES FOR, UM, OF CREDITS FROM BANKS.
UM, WE WILL CONTINUE TO WORK WITH OTHER DEPARTMENTS TO SEE WHERE WE CAN COME IN WITH, UM, THIS TYPE OF PROGRAM, BUT WE ARE VERY EXCITED.
I HAVE A LITTLE MORE INFORMATION IN THE NEXT SLIDE TO TALK ABOUT IT.
UH, SO NOW GOING ON TO, UH, SLIDE 34.
IT SHOWS YOU THE COMPARISON BETWEEN THE TRADITIONAL COMMERCIAL PAPER PROGRAM AND THE BRAND NEW EXTENDABLE COMMERCIAL PAPER PROGRAM.
SO IT HAS THE DIFFERENT FEATURES OF, UH, ONE BETWEEN THE OTHER, UH, ON PAGE 35.
SO THEIR UPCOMING SLIDES WILL PROVIDE DETAILED INFORMATION ON THE PLANNED DEBT TRANSACTIONS FOR THE UPCOMING YEAR.
AS JEANETTE MENTIONED, WE WILL HAVE THE THIRD TRANCHE OF THE COMMERCIAL
[02:15:01]
PAY OF THE, UM, 24 PROGRAM.UH, WE WILL BE ISSUING 250 MILLION IN ADDITION TO THE EQUIPMENT NODES AND THE MASTER LEASE.
UH, IN THIS, UH, SLIDE, YOU SHOW THAT, THAT WE HAD APPROXIMATELY 57.7 OF, UH, REFUNDING, BUT DUE TO THE CURRENT MARKET CONDITIONS, I DON'T BELIEVE THAT WE'LL BE HAVING ANY REFUNDING IN THIS.
UM, UPCOMING SALE, UH, WE WILL HAVE THE RECOMMENDATION TO COUNCIL ON START OCTOBER 28TH.
UM, AND THEN WE WILL MOVE TO THE COMPETITIVE SALE WITH THE EXPECTATION OF CLOSING IN DECEMBER.
UH, NEXT SLIDE, 36, SIMILAR TO, UM, WHAT JEANETTE COVER AND PAGE 19.
SO THIS IS THE BREAKDOWN OF THE 215 MILLION THAT WE HAVE SCHEDULED, UH, FOR THE 2027 YEAR.
UH, PAGE 37 AGAIN IS THE EQUIPMENT NOTES THAT IT'S, UH, ALSO PLANNED WITH THE GEO CELL COMING UP.
AND THAT SHOWS YOU THE DIFFERENT DEPARTMENTS THAT UTILIZE THESE TWO DIFFERENT, UM, CELLS OR PROGRAMS. AND PAGE 38 AGAIN, IS THE COMMERCIAL PAPER PROGRAM.
AS I MENTIONED, WE ARE VERY EXCITED THAT WE HAVE THIS BRAND NEW, UH, PROGRAM, THE EXTENDABLE COMMERCIAL PAPER PROGRAM.
UM, IT'S ESTIMATING US AT $1.3 MILLION OF SAVINGS AND APPROXIMATELY A HUNDRED THOUSAND DOLLARS OF SAVINGS BY TERMINATING THIS PROGRAM EARLY.
I'LL PASS IT ON TO FELICIA HERNANDEZ, OUR DEBT ADMINISTRATOR TO DO THE DALLAS WATER UTILITIES.
UM, ON THE ENTERPRISE SIDE, WE ARE CURRENTLY IN THE WORKS ON ANNUAL DEBT TRANSACTIONS AND SEVERAL OF COMING LARGE MASTER PLAN PROJECTS.
SO ON SLIDE 39, UM, FOR DALLAS WATER UTILITIES, AN ORDINANCE IS SCHEDULED FOR OCTOBER 28TH TO APPROVE THE FIFTH AND FINAL ISSUANCE OF A FIVE YEAR COMMITMENT WITH THE WATER DEVELOPMENT BOARD FOR 34 MILLION.
THIS IS PART OF THEIR SWT, UM, PROGRAM.
AND OF COURSE, WE KNOW THE WATER DEVELOPMENT BOARD PROVIDES LOW COST FINANCIAL ASSISTANCE TO CITIES, UM, FOR STATE APPROVED PROJECTS.
ALSO, WE ARE CURRENTLY EVALUATING THE POTENTIAL BOUNDARY FUNDING TO CAPTURE SAVINGS ON OUTSTANDING WATER BONDS AT THE TIME THAT THIS BRIEFING WAS ORIGINALLY POSTED.
OUR ANALYSIS, UH, FORECASTED APPROXIMATELY $24 MILLION IN SAVINGS.
UM, BUT WE WILL CONTINUE TO MONITOR THE MARKET FLUCTUATIONS, UM, TO ENSURE THAT OUR REFUNDING WILL BE PRUDENT AND WITHIN COMPLIANCE OF THE CITY'S FINANCIAL POLICY.
UM, BEFORE RETURNING TO COMMITTEE FOR REVIEW AND APPROVAL ON SLIDE 40 FOR STORM STORMWATER.
UM, SLIDE 40 IS SIMPLY A REMINDER THAT CITY COUNCIL APPROVED A NEW 125 MILLION COMMERCIAL PAPER PROGRAM FOR STORMWATER TO PROVIDE INTERIM FINANCING FOR THEIR CAPITAL PROJECTS THAT WAS APPROVED ON AUGUST 25TH, AND IT WAS EFFECTIVE SEPTEMBER 29TH.
ON SLIDE 41, UH, DW IS CONTINUING TO WORK WITH THE WATER DEVELOPMENT BOARD ON SECURING GRANT AND LOAN FUNDING UNDER THEIR STATE FLOOD INFRASTRUCTURE FUND SEPARATE FROM THEIR SWT FUND.
UM, AND THIS IS TO PROVIDE, UM, FLOOD CONTROL, FLOOD MITIGATION AND DRAINAGE PROJECTS.
AND THE POTENTIAL AWARD FOR THAT FUNDING IS ANTICIPATED IN EARLY 2027.
ON SLIDE 42, A CONVENTION CENTER MASTER PLAN FINANCING UPDATE WAS PRESENTED TO COMMITTEE ON SEPTEMBER 22ND.
UM, AND SLIDE 42 JUST REITERATES THE PLANNED ISSUANCES INCLUDED IN THAT UPDATE FOR THE CONVENTION CENTER IN FAIR PARK IN 2027.
UM, WE'RE ANTICIPATING SPECIAL TAX REVENUE BONDS FOR THE, FOR THE CONVENTION CENTER IN EXCESS OF 1.5 BILLION, WHICH INCLUDES TAKING OUT OR REFUNDING THE SERIES 2025 NOTES, WHICH IS ALSO KNOWN AS THE BRIDGE LOAN.
AND AN ESTIMATED 72 MILLION BONDS FOR FAIR PARK AND TREASURY STAFF WILL CON CONTINUE TO WORK WITH THE DEPARTMENT AND THE STAKEHOLDERS ON THE STRUCTURING.
AND WE'LL PRESENT THAT INFORMATION TO COMMITTEE AS THOSE DETAILS ARE REFINED FOR SLIDE, UH, 43 FOR AVIATION.
TREASURY IS ACTIVELY WORKING WITH THE AVIATION DEPARTMENT, UM, WITH THEIR FINANCIAL LEADERSHIP AND THE CITY'S FINANCIAL ADVISORS ON THEIR LEAP MASTER PLAN, UM, ON THAT STRUCTURING, INCLUDING THE POTENTIAL ISSUANCE OF BONDS, UM, TO FUND CAPITAL PROJECTS OR REFUND OUT CURRENTLY OUTSTANDING BONDS.
UM, AND FY 27 IN THE INTERIM, TREASURY STAFF AND AVIATION ARE FINALIZING A REPLACEMENT LEFT FIELD COMMERCIAL PAPER PROGRAM.
UM, AND THAT WILL REPLACE THEIR CURRENT PROGRAM OF 150 MILLION WITH
[02:20:01]
A HYBRID PROGRAM OF 300 MILLION, WHICH WOULD BE A COMBINATION OF TRADITIONAL AND EXTENDABLE COMMERCIAL PAPER, WHICH IS WHY WE PROVIDED A LITTLE BIT MORE INFORMATION ON THAT.UM, AND THAT IS ANTICIPATED TO BEGIN IN DECEMBER.
AND THEN LASTLY, TO RECAP THE NEXT STEPS, JENNY MENTIONED THAT THE GENERAL OBLIGATION COMMERCIAL PAPER PROGRAM WAS APPROVED BY COUNCIL ON OCTOBER 14TH, BUT STAFF IS SEEKING AND RECOMMENDS THE APPROVAL OF ORDINANCES ON THE OCTOBER 28TH COUNCIL AGENDA, UM, AUTHORIZING THE SALE OF THE GENERAL OBLIGATION BONDS, EQUIPMENT ACQUISITION NOTES, AND THE WATER SWT BONDS.
AND AGAIN, WE WILL CONTINUE TO UPDATE THE COMMITTEE ON UPCOMING BOND ITEMS AND CONTINUE TO FOLLOW UP WITH CITY COUNCIL FOLLOWING BOND ISSUANCES WITH, UH, MEMORANDUMS. THANK YOU.
SO THIS CONCLUDES OUR PREPARED BRIEFING.
HAPPY TO ANSWER ANY QUESTIONS.
ANY QUESTIONS, CHAIRWOMAN? THANK YOU.
I DON'T KNOW THAT IT'S A QUESTION SO MUCH AS IT'S A POINT OF INFORMATION FOR THE PUBLIC BECAUSE YOU SEE THESE NUMBERS, AND I THINK YOU HAD ON PAGE FOUR THAT WE LOOK AT OUR OUTSTANDING DEBT AT THAT $9.6 BILLION.
BUT IN REALITY, ABOUT 36, 30 7% OF IT IS WHAT COMES FROM THE GENERAL FUND, RIGHT? IT'S, IT'S THE TAX SUPPORTED DEBT THAT COMES FROM PROPERTY TAX.
AND SO THAT'S WHY I WAS TRYING TO EMPHASIZE IN THE BEGINNING OF THE PRESENTATION THAT THE TOP PORTION OF THIS PARTICULAR CHART REPRESENTS DEBT THAT IS SUPPORTED BY PROPERTY TAXES.
AS YOU KNOW, YOUR PROPERTY TAX RATE IS SPLIT INTO TWO PARTS.
THE GENERAL FUND PORTION PAYS FOR THE DAY-TO-DAY OPERATIONS OF THE CITY, AND THEN THE DEBT SERVICE PORTION PAYS FOR THE TAX SUPPORTED DEBT.
AT THE TOP OF THIS CHART, EVERYTHING ELSE LISTED BELOW UNDER REVENUE BONDS REPRESENT, UM, DEBT THAT IS SUPPORTED BY REVENUE BONDS, UM, USER FEES, RATE PAYERS.
UM, IT IS NOT TAX SUPPORTED DEBT.
THE, UH, PROPERTY TAX RATE IS NOT REQUIRED TO PAY, UH, THESE, UH, DEBT OBLIGATIONS.
AND WHEN WE LOOK AT THE COMPARISON, AND I DON'T REALLY LOVE IT 'CAUSE I THINK I SAW SOMETHING ABOUT RICHARDSON AND PLANO AND ALL THAT, AND THEY ARE NOT OUR SIZE AND THEY DO NOT HAVE THE KIND OF OBLIGATIONS THAT WE HAVE, BUT DO WE ALSO COMPARE AT, UH, PIER UNITED STATES CITIES? I MEAN, OR IS THAT TO APPLES TO ORANGES? SO WE CAN LOOK AT THAT.
HISTORICALLY, WE'VE JUST COMPARED OURSELVES TO, UM, CITIES IN TEXAS BECAUSE OF THE STRUCTURE OF THE PROPERTY TAX.
UM, WE CAN CERTAINLY LOOK AT OTHER AREAS.
ONE OF THE THINGS, THE ONLY REASON WHY WE INCLUDE THAT SLIDE IN THAT CONVERSATION IN THE BRIEFING, BECAUSE IT'S AN OFTEN ASKED QUESTION.
HOWEVER, I ALWAYS LIKE TO EMPHASIZE THAT FOR THE CITY OF DALLAS, UM, THIS BODY HAS HISTORICALLY HELD A BOND ELECTION, RECOMMENDED A BOND ELECTION TO THE VOTERS EVERY FIVE YEARS.
AND SO IF THERE IS A DESIRE TO REDUCE, UM, SORT OF THAT DEBT PER CAPITA, THAT WOULD BE A PLACE TO START.
THAT'S NOT, UM, ANYTHING THAT I THINK THAT THIS BODY WOULD BE INTERESTED IN.
UM, ALSO, IT, IT ONLY LOOKS AT, IT ASSUMES THAT ONLY, UM, EVERY, LIKE THE POPULATION, IT TAKES THE CALCULATION AND DIVIDES IT BY THE POPULATION.
AND AS YOU KNOW, OUR TAX SUPPORTED DEBT IS SPLIT INTO TWO PARTS.
UM, IN TERMS OF ON THE DEBT SERVICE SIDE, YOU'VE GOT, UM, HALF OF COMMERCIAL, UH, PROPERTIES PAY PROPERTY TAX, AND THEN THE OTHER HALF IS RESIDENTIAL.
SO IT'S NOT REALLY A POPULATION CALCULATION.
WELL, AND AS IN THINKING OF US CITIES, I MEAN, WE'VE GOT THREE TOP CITIES IN TEXAS, SO, UM, WE CAN COMPARE TO THAT, BUT I THINK WE JUST ALL WANNA BE SURE THAT OUR HEALTH AND WHERE WE ARE IS NORMATIVE, UH, IN THIS.
SO THANK YOU VERY MUCH FOR THE DECK FOR LAYING IT ALL OUT.
ANYONE ON THIS SIDE? MR. ROTH? GO AHEAD.
UM, SO IN YOUR THANKS FOR THE PRESENTATION, UM, WE ARE, YOU WERE TALKING ABOUT, UH, ON, ON WEDNESDAY WE'RE GONNA BE APPROVING ORDINANCES OR ASK YOU ASK US TO APPROVE ORDINANCES TO GO AHEAD AND ISSUE THE BONDS.
IS THAT WHAT WE'RE TALKING ABOUT? AND, AND THAT MAY BE ITEM N BUT IT'S, IT'S SORT OF RELATED.
UM, IS THAT WHAT WE'RE, IS THAT WHAT WE'RE TALKING ABOUT WITH THESE THINGS THAT ARE COMING UP? CORRECT.
AND SO THE AMOUNTS THAT ARE BEING REFLECTED IN THE, IN THE, UM, COUNCIL AGENDA HAVE CERTAIN AMOUNTS THAT ARE COST AMOUNTS.
ARE THOSE THE ISSUING COSTS OR, OR ARE THOSE THE, THE ACTUAL OBLIGATION COSTS? 'CAUSE I THINK IN THE, IN THAT, IN THE, UH, UH, ACTUAL, UH, AGENDA, IT'S, IT'S
[02:25:01]
ALL WE'RE WE'RE VOTING OR WE'RE ASKING TO ALLOCATE CERTAIN AMOUNTS, COUPLE OF HUNDREDS OF THOUSANDS OF DOLLARS OR MILLION DOLLARS, CORRECT.RELATIVE NOT TO HUNDREDS OF MILLIONS OF DOLLARS.
THOSE ARE THE COST OF ISSUANCE FEES, AND THOSE ARE BASED ON THE PAR AMOUNT THAT WAS ESTIMATED OR THE NOT TO EXCEED AMOUNT TO GO TO MARKET.
PART OF THAT WILL BE ADJUSTED DOWN BECAUSE WE'LL NO LONGER INCLUDE THE REFUNDING PORTION.
SO THOSE FEES WILL ALSO GO DOWN BASED ON PAR AMOUNT.
AND SO PART OF THIS MONEY IS ALREADY IN THE 250 MILLION TRANCHE FROM THE 1.2 BILLION, 1.25 BILLION, AND WE'RE JUST AUTHORIZING PART OF THAT AS PART.
AND THEN THE OTHER AMOUNTS ARE NEW, ARE NEW REQUESTS FOR, FOR, FOR, UH, ISSUING BONDS? YES.
THE, OR WERE THEY PREVIOUSLY APPROVED? SO COUNSEL HAS PREVIOUSLY APPROVED A RESOLUTION AUTHORIZING THE PREPARATION AND PLANNING OF THE BONDS.
UM, BUT IN TERMS OF THE BOND PROGRAM, YES, THAT WAS PREVIOUSLY APPROVED.
THE SECONDARY PORTION OF THE GEO NEW MONEY ARE FOR THE EQUIPMENT NOTES THAT WOULD BE TECHNICALLY CONSIDERED NEW MONEY THAT WASN'T PREVIOUSLY APPROVED BY VOTERS OR COUNCIL.
AND WHAT ARE, WHAT ARE EQUIPMENT NOTES FOR, FOR, FOR, FOR WHAT? FOR IS IT FOR? YEP.
FOR EQUIPMENT FLEET, UM, LARGE MACHINERY, TYPICALLY WE CAN PROVIDE AN UPDATED LIST.
UM, BUT TYPICALLY WE SEE THAT FOR STREETS.
I MEAN, BUT YOU'RE TALKING GENERAL FLEETS, YOU'RE TALKING ABOUT LOTS OF MONEY.
I MEAN, YOU'RE TALKING HUNDREDS OF MILLIONS OF DOLLARS FOR STUFF.
IF YOU COULD PLEASE, UH, ADD, UH, BRAIN ABOUT PAGE 37, THAT SHOWS YOU THAT IT'S 35.5 MILLION FOR EQUIPMENT NOTES THAT IS GONNA BE USED FOR THIS DIFFERENT DEPARTMENTS.
AND THEN THE MASTER LEASE IS JUST TO FUND THE PUBLIC SAFETY EQUIPMENT AND IT, AND OTHER FLEET AND EQUIPMENT PLAN FOR THE YEAR.
AND, UM, IN ON SLIDE, UH, 39, IT SAYS THAT YOU, THERE WAS AN ORDINANCE APPROVED ON OCTOBER 14TH, OR WE'RE GONNA BE APPROVED ON 14TH, I'M SORRY, NOT ON 39.
UM, ON, ON 44 WHERE YOU SAID NEXT STEPS.
WAS THAT OCTOBER 14TH OR IS THAT SOME OTHER DATE? SO THIS BRIEFING WAS ORIGINALLY POSTED I THINK SEPTEMBER 22ND.
AND SO AT THAT TIME WE WERE REQUESTING APPROVAL.
UM, THIS WAS ORIGINALLY POSTED IN SEPTEMBER 22ND, AND AT THE TIME WE WERE SEEKING APPROVAL OF THE GEO EXTENDABLE COMMERCIAL PAPER PROGRAM THAT WAS ON THE OCTOBER 14TH AGENDA.
UM, BUT SINCE THIS BRIEFINGS BEEN DEFERRED, WE KEPT IT THE SAME AND PROVIDED THAT UPDATE THAT IT'S SINCE BEEN APPROVED.
BUT THE OTHERS ARE FOR THE UPCOMING OCTOBER 28TH AGENDA, IT HAS BEEN APPROVED.
UM, WHEN, WHEN YOU SAY SOMETHING IS, IS REFUNDING DEBT, WE'RE NOT GETTING ANY MONEY BACK, WE'RE JUST REFUNDING THE DEBT
WE ARE TAKING, THAT'S, I'M JOKING.
YEAH, WE'RE TAKING ADVANTAGE OF THE MARKET.
WE JUST, UH, WITH THE DIFFERENT MARKET MOVEMENTS, I GET IT.
YEAH, I MISSED THE OPPORTUNITY.
UM, AGAIN, THIS IS LOTS AND LOTS OF MONEY AND IT'S A LOT OF DEBT, BUT YOU'RE NOT NECESSARILY ISSUING IT ALL IMMEDIATELY.
YOU'RE JUST GETTING THE AUTHORIZATION TO ISSUE IT BASED ON WHEN, WHEN THE MARKET ALLOWS IT, WHAT THE INTEREST RATES ALLOWED, AND IF YOU AS YOU NEED THE MONEY FOR SPECIFIC PROJECTS.
IS THAT CORRECT? SO, UM, REMEMBER THE VOTERS IN 2024 APPROVED A $1.25 BILLION BOND PROGRAM.
AND SO WE ARE ISSUING, WE PLAN TO ISSUE THE THIRD TRANCHE IN DECEMBER, WHICH IS THE 250 MILLION AS MENTIONED, THAT THAT, UM, PLAN ISSUANCE INCLUDED ABOUT 57 MILLION IN REFUNDING.
SO THE REFUNDING WE'RE GONNA PULL BACK ON, UM, BECAUSE OF THE, THE, THE MARKET, UM, WE ARE PLANNING TO MOVE FORWARD WITH THE 250 MILLION, UM, THAT WAS PART OF THE THIRD TROCHE IN DECEMBER.
UM, UNLESS, I MEAN, ANYTHING CAN HAPPEN BETWEEN NOW AND DECEMBER MM-HMM
IF ANYTHING HAPPENS BETWEEN NOW AND DECEMBER, UM, WE, WE CAN PAUSE THAT ISSUANCE AND THEN CONTINUE TO AWARD CONTRACTS WITH OUR COMMERCIAL PAPER PROGRAM.
AND WHAT WOULD, WHAT WOULD BE SORT OF AN ISSUE THAT WOULD CAUSE THAT, WHAT DO YOU, WHAT WOULD YOU, I MEAN, WOULD IT BE A, SOME UNUSUAL SITUATION? SOME UNUSUAL SITUATION IN, IN THE WORLD? NOT ANYTHING.
[02:30:01]
RIGHT.WE'RE GONNA GO DOWN TO REPORTS, UH, PICK UP ON ITEM F.
I WANT TO THANK DIRECTOR ORTIZ FOR ANSWERING MOST OF MY QUESTIONS.
A COUPLE RELATED PROCUREMENT ITEMS THAT I HAVE, AND THEN I'LL OPEN IT UP TO MY COLLEAGUES.
UM, JUST WANT TO UNDERSTAND WHAT THE PAGE TEN ONE YEAR SERVICE CONTRACT TO PROVIDE NURSING HOME OMBUDSMAN SERVICES OF $150,000 IS FOR HI, GOOD AFTERNOON.
HELLO FOR ERICSON, DIRECTOR OF HOUSING AND COMMUNITY EMPOWERMENT.
UM, THIS SERVICE HELPS SUPPLEMENT, UH, THE SENIOR SOURCE OMBUDSMAN PROGRAM.
SO OUR SENIORS THAT LIVE IN NURSING HOMES, ASSISTED FACILITIES.
UM, THIS SERVICE IS, UH, AN ON-CALL SERVICE TO HELP THEM NAVIGATE THEIR CHALLENGES, ACCESS DIFFERENT RESOURCES.
WE'VE HAD THIS SERVICE FOR, FOR A VARIETY OF YEARS.
UM, LAST YEAR WE SERVED 2,853 PEOPLE, UH, THROUGH THE SERVICE CONNECTING THEM TO RESOURCES.
IT WAS A, AS PART OF OUR GENERAL FUND PLAN, AS PART OF OUR AGE-FRIENDLY CITY INITIATIVE AND TO SUPPORT OUR SENIORS MOVING FORWARD.
SO THIS IS, THIS IS FUNDED FROM GENERAL FUND DOLLARS? THAT'S CORRECT.
UM, IT'S A YEARLY COMMITMENT THAT WE HAVE, OR DO WE? YEAH.
SO YES, IT'S A YEARLY COMMITMENT.
UM, I MEAN, AS WE'RE, I, I DEFINITELY WANNA SUPPORT OUR SENIORS.
I UNDERSTAND THERE'S PROBABLY A NEED FOR, FOR THIS TYPE OF PROGRAM AS WE'RE LOOKING FOR BUDGET CUTS.
I MEAN, THESE ARE THE KINDS OF THINGS I THINK WE AT LEAST HAVE TO BE QUESTIONING.
AND, UM, WAS THIS, WHAT CITY GOAL DOES THIS, UM, SPECIFICALLY SUPPORT? YEAH, THANK YOU.
SO PART OF OUR, OUR CITY GOAL IS TO HAVE AN AGE FRIENDLY CITY, MAKING SURE THAT THERE'S A, A PLACE FOR ALL OF OUR RESIDENTS OF ALL DIFFERENT AGES.
AND, UH, IN OUR CITY, OUR SENIOR POPULATION CONTINUES TO BE THE MAJORITY POPULATION IN TERMS OF AGE COHORTS CONTINUE TO HAVE, UH, CHALLENGES AS THEY CONTINUE TO AGE.
SO THIS, THIS SERVICE ALLOWS, UM, OUR SENIORS THAT LIVE IN NURSING FACILITIES, ASSISTED CARE FACILITIES TO RECEIVE SOME GUIDANCE AND SUPPORT WHEN NEEDED.
IS THERE AN INCOME THRESHOLD? IS IT AVAILABLE TO ALL SENIORS OR IS IT LOWER INCOME SENIORS? IT'S AVAILABLE TO ALL SENIORS, BUT WE FIND THAT PRIMARILY LOW MOD INCOME SENIORS ARE ACCESSING THE SERVICES.
UM, BUT I, I CAN PROVIDE A, A FURTHER BREAKDOWN ON THE RESIDENTS THAT WE'VE SERVED.
IT'S ALSO PART OF OUR, UH, SENIOR STRATEGIC PLAN, UH, THAT WE'RE, UM, WORKING ON GETTING THAT BRIEFED IN FRONT OF FULL COUNCIL IN TERMS OF THE SERVICES THAT WE PROVIDE FOR OUR, UM, SENIORS AND OUR AGE FRIENDLY INITIATIVES.
I CAN ALREADY TELL, I KNOW MY SENIOR AFFAIRS COMMISSIONER IS GONNA BE CALLING ME ABOUT THIS, THAT I'M EVEN ASKING THESE QUESTIONS, BUT I THINK THIS IS THE KIND OF THING WE NEED TO BE LOOKING AT A MEMO ABOUT AS WE'RE CUTTING PROGRAMS ACROSS THE CITY.
THIS IS, WE, WE NEED TO, I NEED TO HAVE A BETTER UNDERSTANDING OF IT AND, UM, AND HOW IT ALIGNS WITH CITY GOALS.
THE OTHER ITEM IS, UM, MS. ORTIZ HAD MENTIONED, UH, GIVEN ME A LITTLE INFORMATION ON THIS, AUTHORIZE A CONTRACT FOR THE LIEUTENANT ASSESSMENT CENTER.
WE PAID THE OMNI DALLAS HOTEL $177,547.
WHAT, WHY DID WE, WHY ARE WE PAYING THE OMNI TO ASSESS LIEUTENANTS? UM, I DON'T BELIEVE THAT JARED, UM, THE CIVIL SERVICE DIRECTOR, JARED DAVIS, IS HERE.
UM, BUT WE CAN DEFINITELY GET YOU A RESPONSE TO THAT QUESTION.
UH, FROM MY UNDERSTANDING AND THE SUBJECT AND THE ADMINISTRATIVE ACTION, IT'S FOR ACCOMMODATIONS, MEETING ROOMS, BREAKFAST AND LUNCH FOR THE ASSESSMENT CENTER, FOR THE LIEUTENANT POSITION FOR THE DALLAS FIRE RESCUE DEPARTMENT.
IT, UH, NORMALLY IT, IT SET IN THE BACKGROUND THAT WE'VE CONDUCTED THESE IN AT THE K-B-H-C-C-D, BUT DUE TO, UM, THE CONSTRUCTION, THEY MOVED IT TO THE OMNI HOTEL.
UM, AND SO, BUT I CAN GET YOU MORE INFORMATION ON THE BREAKDOWN.
UM, WHEN I GET AHOLD OF JARED, I'D LIKE A MEMO ON THAT.
$177,547 IS A LOT FOR TESTING.
UM, YOU KNOW, WE NEED LIEUTENANTS, WE WANNA SUPPORT OUR FIRE DEPARTMENT.
THAT'S A LOT OF MONEY AND, UM, IT'S CONCERNING TO ME.
ANYBODY ELSE ON THE PROCUREMENT REPORT? YEAH, NO.
ITEM G IS A MONTHLY BUDGET ACCOUNTABILITY REPORT.
ANY QUESTIONS ON ITEM G? COLLEAGUES? I WAS GONNA, I'LL, I HAVE ONE ON, UH, PAGE NUMBER TWO.
I SEE UNDER THE EXECUTIVE SUMMARY THAT, UH, PLANNING AND DEVELOPMENT IN THE REVENUE DEPARTMENT IS 21% OVER BUDGET.
I ASSUME
[02:35:01]
YES, SUZANNE ZEMAN BUDGET MANAGEMENT SERVICES, IT'S PERMITTING ACTIVITY.UM, I DON'T HAVE THE BREAKOUT IN FRONT OF ME OF WHETHER IT'S COMMERCIAL OR MULTI-FAMILY, BUT WE CAN GET THAT INFORMATION AND GIVE IT TO YOU.
AND THEN CAN YOU GIVE US A HIGH LEVEL ON HOW WE'RE LOOKING ON SALES TAX REVENUE, UM, PROJECTED VERSUS ACTUAL, LIKE FOR THE END OF THE YEAR? SO WE HAVEN'T UPDATED OUR FORECAST, UM, IN THE LAST COUPLE MONTHS WE'VE BEEN, UM, SO FAR THIS YEAR WE'RE ABOUT 3 MILLION UNDER BUDGET ON OUR ACTUALS.
THERE'S STILL ONE MONTH LEFT FOR COLLECTIONS, SO WE'LL RECEIVE THOSE, UM, TWO WEEKS FROM NOW.
SO WE'LL PROVIDE OUR LAST FY 26 UPDATE ON SALES TAX COLLECTIONS THEN.
SO WE ARE TRENDING A LITTLE BIT HIGHER THE LAST THREE MONTHS, UM, BECAUSE OF SOME FIFA REVENUES.
AND SO WE HAVEN'T UPDATED OUR FORECAST YET BECAUSE WE ORIGINALLY PLANNED FOR THE FIFA REVENUE NOT TO BE DEPOSITED IN THE GENERAL FUND.
UM, SO THAT'S WHY WE HAVEN'T CHANGED OUR FORECAST YET, BUT IT LOOKS LIKE WE WILL RECEIVE AROUND 3.5 MILLION, UM, FROM FIFA.
SO OUR ESTIMATES WERE, UM, PRETTY ON POINT.
ANYBODY ELSE ON BUDGET? ACCOUNTABILITY.
ITEM K WHEN SOMEONE HAD ASKED TO HOLD THIS ONE TO TALK ABOUT, WAS THAT, YEAH, IT WAS JUST A, A QUICK, UM, UNDERSTANDING.
JUST WANTED TO, TO MAKE SURE, I THINK I UNDERSTAND WHAT IT'S DOING AND JUST KIND OF UNDERSTAND WHAT DROVE THAT CHANGE.
SHERRY KOWALSKI, CITY CONTROLLER, AND I HAVE WITH ME, UH, CLAUDIA MORRIE.
CLAUDIA IS OUR BUSINESS OPERATIONS MANAGER AND DEFERRED COMPENSATION ADMINISTRATOR IN THE CONTROLLER'S OFFICE.
THIS CHANGE WAS, UH, VOTED ON BY THE BOARD TO ALLOW A FLAT DOLLAR AMOUNT BECAUSE IF PEOPLE GET A LOT OF OVERTIME, THEY DID NOT WANT IT TAKING THE PERCENTAGE OUT.
SO A LOT OF UNIFORM EMPLOYEES AND SOME CIVILIAN EMPLOYEES, AND THE BOARD VOTED ALMOST UNANIMOUSLY TO HAVE THIS.
IN ADDITION, I CHECKED WITH THE CITY OF HOUSTON, THEY ALSO USE FIDELITY AND THEY ALLOW THE SAME OPTION AND IN AUSTIN AS WELL, BUT THEY USE A DIFFERENT PROVIDER.
SO THIS WAS JUST GETTING US ANOTHER OPTION THAT MIGHT HELP PEOPLE, ESPECIALLY WITH RISING COSTS.
NOT HAVE THEIR OVERTIME GO TO THAT AND THEY WOULDN'T QUIT CONTRIBUTING.
AND, AND IT'S, IT'S NOT A NON-STANDARD.
WE WERE ACTUALLY ONE OF THE ONES THAT DID NOT DO IT.
ALL RIGHT, MOVING ON TO ITEM L, DIRECTOR ODOM, COME ON DOWN.
UH, REPUBLICAN NATIONAL CONVENTION COSTS AND REIMBURSEMENT STATS.
I FEEL LIKE YOU'VE BEEN UP HERE ALL DAY.
KEVIN, YOU, YOU JUST MOVE INTO THE HORSESHOE.
WELL, I SLEEP BACK THERE SOMETIMES I GUESS.
KEVIN ODEN, DIRECTOR OF EMERGENCY MANAGEMENT AND CRISIS RESPONSE.
I'M ALSO JOINED BY, UH, SOME OF OUR PEER DEPARTMENTS TODAY IN CASE THERE'S ANY QUESTIONS ON THE MEMO THAT WE PROVIDED AS AN UPDATE.
UM, JUST IF I CAN, UH, START OFF THE TOP.
SO THE NEXT TWO STEPS WE SEE WITH THE TOTAL COST OF THE EVENT FIRST IS, UH, THERE ARE SOME CONTRACTUAL PAYMENTS WE EXPECT TO RECEIVE FOR DPD VIA A CONTRACT WITH THE US CAPITOL POLICE.
THOSE COSTS HAVE NOT YET BEEN, UH, SENT OVER.
WE'RE STILL WORKING THROUGH THAT PROCESS AFTER THOSE COSTS ARE INVOICED AND PAID FOR THE, THE BALANCE OF THAT WE'RE WORKING THROUGH, UH, THOSE COSTS POTENTIALLY BEING INVOICED AND REIMBURSED BY, UM, ONE OF THE, THE PARTIES THAT WAS INVOLVED WITH THE PLANNING AND EXECUTION OF THE EVENT.
SO, UH, MY COMMITMENT TO THIS BODY STILL STANDS THAT ONCE WE DO SEND THOSE COSTS OVER, UH, WE WILL UPDATE THIS BODY, UH, ON HOW THAT REIMBURSEMENT GOES.
WITH THAT, I'M HAPPY TO TAKE ANY OTHER QUESTIONS ON THE EVENT AND, UH, THE COST OF IT.
SO THE COST CAME IN, UH, SO FAR AND THESE ARE FINAL, FINAL DEPARTMENTAL COSTS ARE 804,000, 2 29 AND 46 CENTS.
THIS WAS LOWER THAN PROJECTED, UH, QUITE A BIT LOWER.
OUR ORIGINAL ESTIMATE WAS JUST AT ABOUT $2 MILLION TOTAL.
UM, COLLEAGUES, YOU HAVE QUESTIONS? GO AHEAD.
SO IN THE MEMO IT TALKS ABOUT THESE EXPENSES WERE ON DUTY, PERSONNEL COSTS ALREADY ACCOUNTED FOR WITHIN ADOPTED DEPARTMENTAL BUDGETS.
SO I MEAN, YOU KNOW, THERE WERE OBVIOUSLY A LOT OF PEOPLE TRAINED ON ONE PARTICULAR AREA.
SO THAT TELLS ME THAT IF THEY'RE THERE, IS IT THEY WERE EXTRA GETTING OVERTIME OR WERE THEY JUST NOT RESPONDING TO OTHER PARTS OF THE CITY? CORRECT.
SO FOR, I'LL USE AN EXAMPLE OF LIKE MYSELF.
SO I WORKED DURING THE EVENT AND I WAS STILL PAID MY NORMAL AMOUNT EVEN, EVEN THOUGH I WAS FOCUSED ON THIS EVENT.
SO WE DID HAVE SOME OF THAT WITH OUR UNIFORMED OFFICERS BOTH IN DPD AND FIRE.
[02:40:01]
COST AND THEN I, UH, FLESHED OUT, WE HAD ABOUT $150,000 TOTAL IN, UH, CATEGORIES SUCH AS VEHICLE USE, WRECKER USE, BARRICADES, UM, AND THEN CONSUMABLE PRODUCTS USED BY OUR EMS IN, IN DFR.SO THERE WERE THOSE EQUIPMENT COSTS AS WELL ASSOCIATED WITH THE EVENT.
SO YES, THERE, THIS WAS OVER AND ABOVE IN SOME INSTANCES.
I MEAN, YOU KNOW, I MEAN WE MAY HAVE BUDGETED FOR THEM, BUT CORRECT, YES.
THERE, THERE, THERE WERE SOME OVERTIME COSTS.
THERE WERE OBVIOUSLY A LOT OF ON-DUTY STAFF COSTS AS WELL, BUT THERE WAS A MIXTURE OF BOTH IN THIS.
OKAY, SO YOU'RE COMING THROUGH THIS, YOU'RE SAYING US CAPITOL POLICE WILL BE MAKING SOME SORT OF REIMBURSEMENT, BUT YOU DON'T KNOW HOW MUCH.
YES, MY COMPLETE UNDERSTANDING IS WE DO HAVE A CONTRACT WITH THEM FOR REIMBURSED COSTS FOR SPECIFIC RESPONSIBILITIES WE DO OUTSIDE OF JUST THIS EVENT.
SO WHEN THERE ARE DIGNITARIES IN TOWN AND WE PROVIDE SERVICE TO THEM, WE'RE REIMBURSED FOR THOSE COSTS.
THAT CONTRACT WILL COVER, UM, SOME OF THIS COST.
AGAIN, WE, WE HAVE TO SEPARATE OUT THOSE RESOURCES THAT PROVIDED THAT SERVICE INVOICE THAT, AND THEN THE REMAINDER, UH, OUR EXPECTATION IS TO PROVIDE AN INVOICE FOR THAT AS WELL.
MR. JOHNSON, I JUST WANNA MAKE SURE I'M, I'M, YOU KNOW, I'M HEARING THIS CORRECT.
WE HAVE NOT RECEIVED A FORMAL PAYMENT AS OF YET.
DO YOU KNOW WHEN? SO OUR, OUR FIRST STEP IS TO INVOICE THE CAPITOL POLICE, GET THOSE MONIES BACK ONCE WE MAKE THAT INVOICE.
UM, AND THEN WE WOULD INVOICE THE REMAINDER OF THE AMOUNT TO, UH, EITHER THE RNC OR THE HOST COMMITTEE, WHICHEVER PAYS THE BILL BACK.
WHAT, BEFORE I MAKE MY STATEMENT, WHAT, WHAT IS THE CORRECT PROTOCOL WHEN WE HAVE THESE TYPE OF EVENTS? I KNOW WE WANNA MAKE SURE EVERYONE IS SAFE AND ET CETERA, BUT WHEN WE, WHEN BEYOND SAFETY, LET'S TALK BUSINESS.
WHAT IS OUR NORMAL PROTOCOL WHEN WE'RE USING, SOMEONE WANTS TO USE THE CITY, DO THEY MAKE A DEPOSIT OR DO WE SAY, HEY, WE'RE JUST GOING TO MAKE THIS HAPPEN AND YOU JUST GET WITH US WHEN YOU GET WITH US, WE JUST WANNA MAKE SURE EVERYTHING IS SAFE.
WHAT IS OUR PROTOCOL? SO THERE'S, THERE'S MULTIPLE STREAMS THAT YOU TALK THROUGH.
IN THE CASE OF THIS PARTICULAR INCIDENT, IT WAS A PRIVATELY FUNDED EVENT.
WORKED OUT THROUGH, UH, VISIT DALLAS AND THE, THE AMERICAN AIRLINE CENTER, AS WELL AS PRIVATELY FUNDRAISE COSTS FOR THAT.
WE DO WORK DOZENS, MAYBE HUNDREDS OF EVENTS A YEAR, SUCH AS PROTESTS AND THINGS WHERE THERE'S NOT A SPECIAL EVENT PERMIT OR THERE THERE IS NO REIMBURSEMENT COST FOR US PROVIDING PUBLIC SAFETY TO THE COMMUNITY.
AND THAT'S WHAT FELL UNDER, UH, ON THIS PARTICULAR EVENT.
SO I JUST WANNA MAKE SURE THAT ORANGE C HAS NOT PAID THE CITY.
WHAT'S, WHAT'S REQUIRED TO DEPOSIT OR WHATEVER TO, TO, UH, PUT THE DEBT TO, TO REST? YOU ARE CORRECT IN SAYING THAT WE HAVE, WE HAVE NOT FOR THIS MONEY RECEIVED ANY FUNDING FROM ANY GROUP ASSOCIATED WITH THE COST OF THE EVENT.
HOWEVER, WHEN, WHEN PEOPLE USE OUR CITY AND FACILITIES, IT COMES WITH A DEPOSIT AND INTEGRITY SAYS, PAY YOUR BILL, ESPECIALLY ON WHERE WE'RE DEALING WITH THINGS LIKE THIS AND THAT, DEALING WITH THE BUDGET THAT WE JUST DEALT WITH.
I'M, I'M JUST REALLY UNCOMFORTABLE AND I FEEL THAT THIS IS WRONG, THAT THIS HAS NOT BEING RECTIFIED AT THIS MOMENT.
I'M GONNA ASK YOU AGAIN, DO WE KNOW WHEN THIS IS GOING TO TAKE PLACE? DO WE KNOW WHEN EVERYTHING IS GONNA BE, UH, PAID IN FULL? HAVE YOU GUYS BUILT THEM YET? WHAT HAVE, WHAT STEPS HAVE YOU GUYS TAKE TO GET THE FUNDING THAT'S NEEDED FOR THE CITY? YEAH, SO I'LL GIVE YOU THE, THE TIMELINE.
SO WE FINALIZED ALL OF THESE COSTS WITH THE BACKUP DOCUMENTATION LAST THURSDAY.
THAT'S WHAT ALLOWED ME TO, UH, PUT TOGETHER THIS MEMO.
OUR NEXT STEP IS TO DO THE CONTRACTUAL REIMBURSEMENT WE HAVE WITH THE US CAPITOL POLICE DPDS FUNDING UNIT.
WE TALKED TO THEM WHILE THIS MEETING WAS GOING ON AND THEY'RE WORKING ON THAT.
THE BALANCE OF THAT THEN WOULD BE INVOICED FURTHER TO, UH, WHOEVER MIGHT POTENTIALLY PAY US BACK FOR THE REMAINDER OF THE COST FOR PROVIDING SAFETY AND SECURITY FOR THE EVENT.
WELL, THANK YOU KEVIN, UH, FOR BRINGING A REPORT TO THIS COMMITTEE.
WELL, THIS IS ABSOLUTELY RIDICULOUS AND IT'S SOMEWHAT DISRESPECTFUL TO OUR CITY.
OTHER COMMITTEE MEMBERS? UH, VICE CHAIR GO AHEAD.
I JUST WANNA FOLLOW UP, KEVIN, SO WE, WE KNOW, UM, WE PLAN TO BILL THOSE TWO ENTITIES FOR THIS 800 AND WHATEVER THOUSAND.
THAT IS MY, THAT IS MY INTENT.
AND DO YOU HAVE AN EXPECTATION THAT THEY'LL, HAVE YOU BEEN GIVEN SOME ASSURANCES OR HAD SOME CONVERSATIONS OR IS, I MEAN, DO WE THINK THAT WE'LL GET AT LEAST A PORTION OF IT?
[02:45:01]
WELL, EVERYTHING THAT HAS BEEN SAID PUBLICLY IS THAT THEY WANTED TO OFFSET ALL OF THE DEFRAY, ALL OF THE COST ON THE CITY FOR HOSTING THE EVENT.SO IF WE'RE, IF WE'RE TO JUDGE BY THAT, THEN I WOULD SAY WE WOULD EXPECT TO GET, UH, THE, THE COST OF PROVIDING THE SERVICE BACK.
BUT ARE THERE EVENTS, PUBLIC EVENTS THAT HAPPEN, UM, IN OUR CITY WHERE WE DON'T EXPECT TO GET ANY REIMBURSEMENT? WELL, SURE.
UM, IT'S ALL THE TIME THAT WE HAVE EVENTS AND PROTESTS THAT POP UP AND THAT WE'RE NOT NECESSARILY PLANNING FOR A YEAR FROM NOW THAT THE CITY, WE JUST HAVE TO MAKE SURE EVERYBODY'S SAFE AND WE HAVE TO GET RESOURCES TO THOSE EVENTS.
SO YOU'RE CORRECT, SO THAT SOMETHING HAS HAPPENED, THERE'S A RESPONSE, THERE'S, THERE'S A, A PUBLIC OUTCRY AND THERE THERE'S A PROTEST OF SOME FORM AND, AND THAT WE'RE NOT LOOKING FOR AN ORGANIZATION TO, TO REIMBURSE US FOR THAT.
THAT'S JUST PART OF OUR JOB AS THE CITY OF DALLAS IS TO PROVIDE PUBLIC SAFETY TO THOSE CITIZENS AND RESIDENTS WHO ARE OUT THERE, UM, EXERCISING THEIR FIRST AMENDMENT.
AND THIS IS DISTINGUISHED BECAUSE IT'S A PLANNED EVENT.
IT WAS, UM, YOU KNOW, I MEAN WE KNEW THAT THIS, UM, THIS CONVENTION WAS GOING TO HAPPEN, BUT THEY, BUT THEY DIDN'T FILE ANY KIND OF A A PER, DIDN'T ASK FOR ANY KIND OF A PERMIT OR HAVE A SPECIAL EVENT PERMIT OR ANYTHING LIKE THAT? NO.
THAT THIS, THIS EVENT OPERATED OUTSIDE OF THAT WITH THE WAY IT WAS, IT WAS A PRIVATELY SCHEDULED, PRIVATELY PLANNED, PRIVATELY FUNDED EVENT.
BUT IT WAS ON, SOME OF IT WAS ON PUBLIC PROPERTY.
SO FOR INSTANCE, THERE WAS ONE EVENT DURING, UH, A RALLY THAT WAS HERE ON CITY HALL PLAZA THAT HAD A STAGE AND SOME OTHER THINGS.
THEY WENT THROUGH THE NORMAL PROCESS.
THEY DID, I ASSISTED THEM, UH, IN THE CONVENTION CENTER WITH IT.
AND THEY PAID THE BILL THEY NEEDED TO PAY FOR THAT EVENT TO TAKE PLACE HERE.
SO THROUGHOUT THIS EVENT, WE'VE, WE KNOW WHAT THE PROCESS IS FOR THE DIFFERENT EVENTS, THE DIFFERENT PEOPLE ENGAGED, AND EVERYBODY PRETTY MUCH FOLLOWED THE RULES AND WAS IN COMMUNICATION.
AND RIGHT NOW WE'RE JUST EXPECTING TO BE REIMBURSED, BUT YOU'RE GONNA KEEP US IN THE LOOP ON THIS, RIGHT? SO THAT WE KNOW HOW THIS PLAYS OUT BECAUSE THIS IS, I MEAN, THIS IS A, A CONCERN THAT'S BEEN IN THE MEDIA AND BEEN DISCUSSED A LOT.
AND, UM, IT IS OUR JOB AS STEWARDS OF OUR TAXPAYER DOLLARS TO WATCH OVER SOMETHING LIKE THIS AND TO MAKE SURE THAT WE DO GET THAT REIMBURSEMENT.
SO I WOULD JUST SAY CHAIR, IF WE COULD JUST GET, UM, MONTHLY, OR EVEN, I THINK WE'RE GONNA MEET TWICE A MONTH, SO WE COULD ASK FOR TWICE A MONTH REPORT ON WHERE WE STAND ON THIS.
KEVIN, YOU WANNA COME EVERY TWO WEEKS?
IF YOU WANNA HAVE MIND, LISTEN, IT'LL BE SHORT.
MY COMMITMENT STILL STANDS AS SOON AS WE, UH, MAKE AN INVOICE OR WE SEND IN ANYTHING, OR CERTAINLY WE RECEIVE SOMETHING BACK, WE WILL MAKE THIS COMMITTEE AWARE OF THOSE STEPS TAKING PLACE.
WE'LL, A QUARTERLY UPDATE, I DON'T THINK THERE'S BEEN AN INVOICE YET, YET.
UH, ANYBODY ON THIS END WHOSE COMMITTEE WILL COME BACK AFTER, UH, CHAIRMAN MORENO.
THANK YOU, UH, CHAIR KEVIN, THANK YOU FOR THE PRESENTATION.
SO DO WE EVER HAVE ANY SORT OF INSURANCE POLICY FOR SPECIAL EVENTS, EVEN THOUGH IT'S TECHNICALLY DIDN'T GO THAT ROUTE, BUT WE KNOW THAT THERE'S ESTIMATES AND QUOTES THAT ARE GIVEN OUT, UH, BUT THEN THE INVOICES COME AT A LATER, LATER DATE.
AND SO IF THERE'S A SHORTFALL, WHAT'S THE BACKUP PLAN IF A ORGANIZATION CANNOT FINANCIALLY COVER THEIR DEBT? SO I WOULD NEED TO GET THAT ANSWER FOR YOU FROM PROBABLY OFFICE OF SPECIAL EVENTS, THEN THAT'S KIND OF MY GUESS AS TO WHO I WOULD CALL FIRST TO GET THAT ANSWER FOR YOU.
I'M HAPPY TO PROVIDE THAT EFFORT AND, AND GET THAT BACK TO YOU.
THAT'S JUST WAY OUTSIDE OF MY KNOWLEDGE BASE.
IF IT'S NOT SOMETHING THAT WE HAVE IN PLACE, THAT MIGHT BE SOMETHING THAT WE CAN LOOK AT IN ORDER TO ENSURE THAT THE CITY'S NOT LEFT, UM, YOU KNOW, WITH THE BURDEN OF A, OF A FINANCIAL, UH, HARDSHIP.
I'LL GET YOU AN ANSWER FOR THAT AND, AND PROVIDE THAT IN WRITING WHAT I LEARNED.
UM, AND I'LL, I'LL JUST SAY, AND THEN WE'LL GO TO MR. ROTH.
HE'S, UM, AND ANYBODY ELSE NOT ON COMMITTEE WHO WANTS TO CHIME IN THAT I, I DO BELIEVE WHETHER IT'S THE RNC THE DEMOCRATS, OR WHETHER IT'S A RELIGIOUS ORGANIZATION OR ANY GROUP, WE SHOULD BE SEEKING REIMBURSEMENT FOR OUR TAXPAYERS.
I THINK WE GOTTA TREAT EVERYBODY THE SAME.
AND, UM, THIS FOR ME IS, IS I'M GLAD YOU'RE, YOU'RE PURSUING THIS.
I THINK WE SHOULD INVOICE THEM AND CONTINUE FOLLOWING UP UNTIL WE GET PAID OR WE HIT A DEAD END AND THEN WE TAKE ANOTHER ROUTE.
SO, UM, WE, WE NEED TO JUST BE FAIR AND EQUITABLE IN OUR BILLING, IN OUR, IN OUR SERVICES.
[02:50:01]
NEXT.AND AGAIN, YEAH, LISTEN THERE, IF WE'RE, IF WE'RE PROVIDING, UH, PRIVATE SERVICES TO PEOPLE, I THINK THAT'S, THAT'S A GOOD THING TO DO.
UM, MY QUESTION, AND IT'S NOT RELATED JUST TO THIS EVENT, BUT IN CONCEPT GENERALLY IS, IS IT IS WHEN YOU ALL ARE FIXING THE PRICE, IS IT JUST A, A REIMBURSEMENT OF ACTUAL HOURS OR IS THERE, AND, AND MAYBE WE DON'T NEED TO GET INTO THE WEEDS, BUT IS THERE AN OVERHEAD? IS THERE A, IS THERE AN ADDITIONAL, UH, COST FOR, FOR OTHER SERVICES BEYOND JUST THE, THE ACTUAL, UH, SALARY COMPONENT OR THE ACTUAL, UM, MANPOWER OR WHATEVER IT IS? I'LL, I'LL TAKE THAT.
SO WE FOLLOW THE GENERAL SAME PROCESS.
WE FOLLOW WHEN WE'RE SEEKING REIMBURSEMENT FROM, FOR INSTANCE, THE FEDERAL EMERGENCY MANAGEMENT AGENCY FOLLOWING AN EMERGENCY OR DISASTER.
UM, WE'VE GOTTEN PRETTY PROFICIENT AT TRACKING OUR COST AND PUTTING THEM BACK IN AT A, LIKE FOR LIKE, SO WE WE'RE NOT MARKING UP OR ANYTHING LIKE THAT.
UM, WE COLLECT ALL OF THOSE COSTS FROM THE DEPARTMENT.
WE TIE BACK TO KEVIN ODEN WORKED AT THIS LOCATION STARTING AT THIS TIME UNTIL THIS TIME USING THIS VEHICLE, RIGHT? AND SO WE HAVE THE COST OF HOW MUCH ALL OF THOSE THINGS, UH, TAKE.
NOW FOR A SPECIAL EVENT LIKE THIS, YOU PROBABLY HAVE TO DO THAT TWO OR 300 TIMES TO ACCOUNT FOR ALL OF THE ON-DUTY PERSONNEL YOU HAVE.
AND THEN ONCE YOU RECONCILE THAT, UH, YOU HAVE YOUR, YOUR BIG WHOLE NUMBER, THEN YOU HAVE AN EXCEL WORKBOOK OF, UH, LINE BY LINE WHAT EVERYTHING COSTS AND THAT'S WHAT YOU USE TO, TO SEEK COST RECOVERY AND TO COUNCIL MEMBER MORENO'S POINT IS MAYBE, UH, THAT MIGHT BE SOMETHING TO EVALUATE, UH, HOW WE DO CHARGE AND HOW WE DO PRICE PRIVATE EVENTS IN THE FUTURE.
AND, AND WHAT WOULD BE THE FORMULA FOR REIMBURSEMENT DIFFERENT FROM THE, FROM A INTERGOVERNMENTAL, UH, TYPE OF A REIMBURSEMENT SITUATION.
UM, WE HAVE THE FORECAST AND THEN I'M GONNA ASK MR. ROTH ON ITEM N IF CITY CONTROLLER CAN GET WITH YOU.
[UPCOMING AGENDA ITEMS]
SO FOR, I'M JUST GONNA POINT OUT FOR THE FORECAST, WE HAVE ONE MEETING IN NOVEMBER AND WE ARE GOING TO CANCEL THE DECEMBER MEETING, UH, FOR FINANCE.THE, UH, FAIR PARK QUARTERLY AND ANNUAL BRIEFING IS SCHEDULED FOR THAT MONTH.
WE'RE GONNA MOVE THAT TO JANUARY.
AND THE 2026 EXTERNAL AUDIT PLANNING WILL BE IN JANUARY AS WELL.
AND EVERYTHING ELSE IS REALLY JUST A MEMO.
SO, UM, OR IT'S, IT'S THE MONTHLY REPORTS AND THOSE CAN BE DONE VIA MEMO.
SO WITH THAT BEING SAID, IT WELL, ANY QUESTIONS ABOUT THE, UH, FORECAST? NO, IT IS 4:04 PM THIS MEETING IS ADJOURNED.