►
From YouTube: SEP 30, 2021 | Joint City Council & Retirement Boards Study Session - Pension Obligation Financing
Description
City of San José, California
City Council Study Session of September 30, 2021
Topic: Pension Obligation Respective Roles and Responsibilities for Policy Development
Pre-meeting citizen input on Agenda via eComment at https://sanjose.granicusideas.com/meetings.
This public meeting will be held at San José City Hall and also accessible via Zoom Webinar. For information on public participation via Zoom, please refer to the linked meeting agenda below.
Agenda pending
A
B
B
B
E
C
A
B
F
B
A
F
A
F
H
F
B
Thank
you
all
right.
Hopefully
we
have
everybody
and
there
probably
will
be
a
few
other
people
joining
us.
So
we
have
a
pretty
robust
discussion
that
we're
going
to
have
today
and
julia
and
her
staff
have
prepared
an
extensive
slide
presentation
and
so,
and
she
has
he
and
she
and
her
team
have
created
a
pretty
elaborate
and
comprehensive
story
that
she's
going
to
be
telling
he's
going
to
have
a
some
drama,
some
twists
and
turns
so
get
ready.
B
B
G
G
Team
members
include
our
staff,
presenters
and
consultants
along
with
staff
members
working
behind
the
scenes.
I
want
to
specifically
thank
city
staff,
julia
cooper,
jim
shannon,
sheryl,
parkman,
nick
nikolai
scarla
and
the
debt
staff,
I'm
from
our
city,
attorney's
office,
karen
mirabita
and
rose
rosa's
song
tatari,
and
our
retirement
services,
staff,
roberto,
pena
and
prabhu
kalani,
the
retirement
stakers
solutions.
Sorry,
the
retirement
stakeholders,
solutions
working
groups,
the
mouthful
was
formed
in
the
fall
of
2019,
was
tasked
to
address
retirement
fund
resilience
and
to
protect
employee
and
retiree
benefits.
A
G
Yeah,
thank
you.
The
city
council
participated
in
a
substantive
and
in-depth
four-hour
study
session
april
2021
on
pension
obligation
bonds.
The
retirement
boards
have
also
engaged
in
conversations
with
their
actuary
investment
advisors,
fiduciary,
council
and
with
city
staff.
In
august
and
september
staff
view
pension
obligation,
bonds,
as
julie
will
say,
the
last
tool
in
our
toolbox
to
create
a
meaningful
solution
to
address
the
unfunded
pension
liability
in
our
two
retirement
plans.
G
G
Our
joint
need
today
is
not
the
first
conversation,
nor
will
it
be
the
last.
There
will
be
other
opportunities
along
the
way
to
continue
to
explore
ways
to
address
our
common
interests,
and
that
is
how
to
improve
the
funded
status
of
our
retirement
plans
and
the
resiliency
of
the
city
in
meeting
its
funding
obligations.
G
J
Thank
you.
Thank
you
jennifer.
So
as
slide,
three
just
summarizes
the
presenters
on
the
city
and
retirement
services
and
then
on
the
next
slide,
our
presenters
advisors
to
the
city,
along
with
advisor
to
the
board
bill,
palmer
the
actuary.
So
our
presentation
agenda
today
we
will
start
off
by
kind
of
framing
the
study
session
kind
of
how
did
we
how
we
got
here
and
where
we
need
to
go
and
talk
about
the
roles
and
responsibilities
of
both
the
city
and
the
retirement
boards.
J
So
as
we
start
off
the
the
framing
of
the
study
session,
I
do
want
to
thank
jennifer
for
her
opening
comments
and,
as
you'll
see
during
the
course
of
the
presentation
you
know
things
are
looking
better
than
where
they
were
in
april
as
a
result
of
the
unprecedented
historical
returns
for
both
plans
that
they
experienced
in
fiscal
year
21..
But
we
need
to
remember,
as
we
look
through
kind
of
where
we've
been
and
where
we're
headed
the
city's
ual
in
both
plans
is
an
issue
and
it's
an
issue
that
we've
worked
on
to
address.
J
But
it's
important
to
remember
that
any
ultimate
decision
the
city
council
will
have
to
issue.
Pension
obligations
will
be
made
on
a
plan
by
plan
basis.
So
the
decision
on
the
federated
plan
may
be
different
than
a
decision
on
the
police
and
fire
plan,
recognizing
the
differences
in
the
need
for
the
city
to
pay
its
bills.
So
with
that,
I'm
going
to
turn
it
over
to
shell
cheryl
to
start
framing
the
issues
and
the
conversation.
K
K
K
So
what
you
have
in
front
of
you
on
this
slide
is
important
context
for
the
story
that
we're
going
to
tell
today.
So
in
our
federated
plan,
we
actually
have
more
retirees
than
we
do
active
members
and,
as
you
can
see,
it's
about
1.6
retirees
to
one
active,
a
better
ratio
would
be
one
to
one,
and
why
is
that
a
better
ratio,
because
that
means
you
have
as
many
actives
paying
into
the
plan
as
you
have
retirees.
K
So
why
is
it
an
issue
if
you
have
more
retirees
and
actives
well,
it
can
exacerbate
any
any
issues
in
the
plan,
such
as
less
than
expected
investment
returns,
while
it
can
also
magnify
greater
investment
returns,
it
definitely
can
exacerbate
that
problem.
So
that's
important
for
you
to
know
just
as
we're
going
through
this
slide,
keeping
that
in
mind,
and
so
this
is
the
federated
maturity
ratio
and
then
on
our
next
slide,
you
can
see
for
the
police
and
fire
ratio.
It's
around
the
same.
K
So
when
these
you
know,
when
you
have
mature
plans-
and
this
is
one
of
the
the
measures
of
these
mature
plans-
these
investment
returns
can
can
be
magnified
and
as
we're
talking
about
investment
returns
on
the
next
slide,
what
we
can
see
is
our
historical,
federated
earnings.
Now
the
black
line
that
you're
going
to
see
on
this
graph
is
the
expected
investment
returns
from
the
federated
plan.
K
K
So
in
the
years
where
you
do
not
see
us
hitting
that
black
line,
that
means
that
we've
increased
our
unfunded
liability.
Now
I
have
to
say
in
2021
we
had
a
fantastic
year
as
julia
mentioned,
but
we
also
have
these
other
years
where
we
did
not
reach
what
we
needed
to
which
again
increases
that
unfunded
liability.
K
Investment
returns
change
from
year
to
year
and
can
be
exacerbated
by
the
maturities
of
our
plans.
So
as
we
head
into
the
next
slide,
what
we
can
see
is
these
historical
returns,
where
you
know,
judging
in
in
the
last
year,
to
to
2021
they're
wildly
different.
So
in
the
year
fiscal
year
2020,
you
know
we
we
had,
you
know
pretty
good
returns.
K
We
we
almost
met
our
our
our
discount
rate,
but
in
some
years
we
didn't-
and
so
I
guess
what
I
want
you
to
get
from
this
slide
is
that
there
can
be
anomaly
years
where
we
absolutely
go
above
and
beyond
what
our
expected
rate
of
return
is.
But
there
are
many
years
where
maybe
we're
not
going
to
hit
that
and
that's
there's
a
lot
of
you
know
factors
that
go
into
that,
but
it
increases
our
challenge
on
a
yearly
basis,
because
we're
always
looking
backward
to
see
what
those
returns
are.
K
K
That's
why
we're
constantly
contributing
constantly
investing
to
get
to
those
higher
funding
ratios,
but
we
still
have
this
challenge
that's
presented
to
us,
where
we
need
to
make
sure
that
we
have
enough
of
these
assets
to
pay
the
benefits
down
the
road
for
our
current
retirees
and
our
future
retirees-
and
this
slide
illustrates
between
the
bar
graph
and
the
line
that
we're
not
that
we're
not
there.
Yet
we
still
have
a
ways
to
go
until
we're
hitting
our
100
funding
ratio,
and
some
of
that
has
to
do
with
the
maturity
of
the
plan.
K
The
the
investment
returns
a
whole
sorts
of
of
different
things,
but
we
still
have
this
challenge
that
presents
itself.
So
if
we
go
to
the
next
slide,
what
we
can
see
is
this
challenge
presents
itself
in
dollar
amounts
in
dollar
amounts
that
the
city
needs
to
pay
on
an
annual
basis
to
ensure
that
we're
getting
to
the
right,
the
right
funding
ratio,
and
so
we
showed
this
slide
back
in
april.
K
Incredibly,
strong
investment
returns
that
came
out
of
both
retirement
plans
and
you'll.
You'll
definitely
see
that
in
these
upcoming
slides
they're
going
to
show
you
the
impact
that
it's
going
to
have
on
our
funding
ratio
and
our
contributions
and
we're
updating
it.
So
what
you
saw
in
april
we're
now
updating
it,
something
that
I
think
that
you're
gonna
hear
is
that
one
year
of
investment
returns
is
is
really
good.
We
need
to
continue
to
have
those
high
years
and
everything
be
you
know
equal
and
above
average,
before
we
hello,
our
100
status.
K
Alone
right
everything
needs
to
remain
static
in
order
for
that
to
happen,
and
I
think
that
we
know
in
the
world
there's
a
lot
of
volatility,
there's
a
lot
of
things
that
can
change.
So
what
are
the
other
things
that
we
can
do
to
ensure
that
this
process
happens,
and
so
I'm
going
to
kick
it
back
over
to
julia,
to
talk
a
little
bit
to
you
about
credit
ratings?
Okay,.
J
J
This
is
a
graph
from
that
s.
P
report
back
in
2000,
where
you
can
see
graphically
where
san
jose
lined
up
with
the
other
top
large
cities
in
the
country
and
again
number
two
only
to
chicago
so
not
not
a
situation
where
we
like
being
near
the
top
ranking
on
this
metric.
We
prefer
to
be
near
the
bottom
so
on
the
next
slide,
as
jennifer
pointed
out,
and
as
we've
told
this
story
we've,
this
has
been
a
long
effort
on
the
city's
part
to
fix
the
problem,
starting.
J
So
on
the
next
slide
kind
of.
Where
have
we
been
in
the
in
the
more
short
term?
You
know
mayor
licardo,
formed
the
retirement
stakeholder
solution
working
group
and
they
met
and
issued
a
final
report.
The
councils
had
several
study
sessions
to
look
at
pobs,
including
the
most
recent
one.
In
april
we
had
a
council
meeting
in
may,
which
directed
us
to
draft
the
validation
documents
and
we,
as
jennifer
pointed
out,
the
city
staff
has
met
with
both
the
federated
and
police
and
fire
retirement
boards.
J
We
have
this
study
session
today
and
then
on
tuesday,
we'll
be
bringing
to
the
council
to
consider
the
actions
related
to
filing
the
validation
suit.
Since,
in
order
for
the
city
to
issue
pension
obligation
bonds,
we
have
to
go
through
a
validation
process.
So
with
that,
I
turned
over
to
jim
to
talk
about
why
the
city
is
considering
issuing
povs.
L
L
I
think
you
know
one
of
the
good
takeaways
from
that
is
we're
in
a
stable
position.
You
can
see
that
that
yellow
line
has
essentially
flattened
since
a
lot
of
the
pension
reform
efforts
were
implemented.
So
even
though
retirement
costs
have
grown,
you
can
see
in
the
blue
line
as
a
percentage
of
the
general
fund.
It's
relatively
stable,
which
means
it
doesn't
crowd
out
services
or
other
programs.
L
The
city
may
provide,
even
though
that
retirement
costs
are
going
because
revenues
are
generally
growing
as
as
well
there,
but
what
that
does
still
tell
us
is
that
we
still
have
quite
a
bit
of
a
challenge
ahead.
So
going
from
six
percent
of
your
general
fund
budget
to
22
percent,
I
mean
that's
a
lot
of
of
capacity.
L
L
You
know:
why
are
we
considering
the
pob
from
a
city's
perspective
so
number
one?
We
really
want
to
make
sure
that
we
can
improve
the
city's
funding
levels.
The
funding
levels
of
the
retirement
plan,
the
city-
is
always
going
to
pay
its
its
its
pension
bill,
and
so
you
know
we'll
make
sure
that
it's
it's.
We
make
our
payments,
but
we
want
to
make
sure
that
those
plans
are
in
the
best
funded
position.
L
That's
practically
possible,
and
so
pobs
is
a
potential
tool
to
use
that,
as
a
a
important
side
benefit
would
be
the
reduction
in
budgetary
costs
related
to
supporting
the
uil.
So
as
that,
ual
goes
down,
that's
more
resources
that
could
be
spent
on
other
city
city
services
and
it's
really
sort
of
managing.
You
know
the
organization's
long-term
financial
sustainability
and
success
as
an
organization
to
serve
our
community.
L
We
said
this
a
couple
times:
it
is
sort
of
the
last
tool
in
our
toolbox.
We
did
a
lot
of
really
heavy
lifting
you
know
10
years
ago
for
pension
reform,
and
so
you
know
so
now
what
what
else
is
really
left
and
being
able
to
issue?
Pobs
is
probably
one
of
those
last
options
to
make
a
meaningful
difference
outside
getting
25
returns
on
our
investment
every
every
year.
L
I
suppose
that
would
be
even
even
better
if
that
was
possible,
and
so
what
povs
do
is
they
allow
us
to
to
borrow
funds
to
pay
down
the
ual,
be
part
of
a
long-term
strategy
and
comprehensive
approach
that
we
would
be
talking
about
with
both
you
know
the
city,
council
and
the
boards.
We
would
not
consider
this
as
part
of
our
normal
costs
or
as
a
pure
strategy
just
to
balance
the
general
fund.
L
J
Thank
you
jim,
so
so
how
can
pobs
save
the
city
money
so
they're
really
only
issued
when
the
borrowing
costs
are
expected
to
be
lower
than
the
long-term
assumed
rate?
And
you
know
we
can
replace
the
ual,
which
has
a
higher
cost
obligation,
that's
owed
to
the
pension
plans
with
a
lower
cost
debt
owed
to
bondholders.
So
that's
where
we
get
the
savings,
because
the
ual
is
right
now,
amortized
at
that
six
and
five
eights
for
both
plans.
J
Then
they
have
been
trending
that
that
number
down
lower,
but
in
the
current
market
we
could
lock
in
a
pension
obligation
rate
at
somewhere
between
2.75
and
three
and
a
half
percent.
So
while
the
actual
returns
maybe
vary
the
city,
the
city
staff,
to
is
comfortable
in
given
the
current
market
conditions.
J
J
So
they
we
use
the
value
of
the
cost
of
the
future
pension
payments
to
today's
dollars
to
kind
of
amortize
that
ual,
so
it's
comprised
and
and
bill
will
get
into
a
lot
of
detail
about
this.
But
the
ual
is
comprised
of
many
amortization
bases,
so
just
think
of
it
as
a
lot
of
loans,
stacked
on
top
of
each
other
and
they're
all
discounted
or
calculated,
based
on
that
same
rate
of
return,
which
is
the
six
and
five
eights
so.
J
But
the
bond
market
offers
the
ability
for
this
for
the
city
to
serialize
those
bonds
and
therefore
that
we
pay
interest
rates
based
on
each
maturity
of
the
bonds.
So
the
shorter
bonds
would
pay
in
lower
interest
rate
than
the
longer
bonds
and
then,
when
all
averaged
together,
the
overall
interest
rates
in
today's
market.
As
I
said
earlier,
average
between
two
and
three
quarters
and
three
and
a
half
percent.
J
So
this
is
an
example
of
a
recent
pob
that
was
issued
by
huntington
beach
and
you
can
see
how
their
interest
rates
were
the
dotted
blue
line
where's
the
treasury
yield
on
that
particular
day
that
those
bonds
were
sold,
and
then
you
can
see
the
interest
rate
that
was
for
each
of
the
serial
each
of
the
bonds
in
the
in
the
bond
issuance
and
what
those
interest
rates
were.
So
you
can
see
for
a
one-year
maturity.
It
was
as
low
as
22
basis
points
and
the
the
final
maturity
they
issued.
23-Year
maturity,
bonds.
J
J
J
J
It
would
increase
the
funding
levels
for
the
plans
and
then
obviously
reduce
the
reliance
on
the
city
for
contributions
in
order
to
fund
the
payments.
Due
to
retirees,
it's
important
to
remember:
there's
no
payment
obligation
for
the
pobs
from
the
retirement
plans.
That's
100
the
city's
responsibility,
then,
on
the
next
slide.
You
know,
as
we're
start
trying
to
talk
through
in
this
presentation
in
terms
of
you
know
who
who's
responsible
for
what
the
city
is
always
responsible
for
funding
the
pension
liabilities.
We
get
a
bill
and
we
pay
it.
J
J
J
J
J
J
So,
on
the
next
slide,
some
of
the
things
that
the
city
would
look
at
in
a
pension
funding
policy
would
be
what
are
the
potential
funding
sources,
whether
it
be
bonds,
budgetary
savings,
one-time
money?
How
would
we
structure
the
guidelines
if
I'm
in
issuing
pension
obligation
bonds?
What
kind
of
minimum
thresholds
would
you
want
to
see
in
doing
that?
J
What
kind
of
spread
would
we
want
to
see
between
our
borrowing
cost
and
then
the
assumed
discount
rate
that
the
plans
had
in
place
at
the
time
and
that
we
would
also
have
no
extension
of
the
term?
So
if
the
ual
is
amortized
over,
you
know,
15
years
we
wouldn't
be
issuing
bonds
for
30
years,
so
that
would
be
an
important
policy
decision
to
make.
J
So
then,
finally,
we
say
what
is
kind
of
the
alignment
of
the
interest,
so
we've
talked
about
the
city
has
determined.
We
need
to
determine
our
funding
strategy
and
our
policy,
and
we
have
an
obligation
to
make
these
annual
contributions
to
the
plans
and
the
retirement
boards.
Obviously
their
interest
is
to
invest
those
proceeds
and
meet
their
benchmarks,
determine
an
appropriate
asset
allocation
and
set
their
own
policies.
But
at
the
end
of
the
day,
we,
both
all
three
of
us,
have
the
goal
to
have
an
improved,
funded
status
of
both
plans.
F
F
I
can
tell
you
that
cheryl
parkman
did
an
outstanding
job,
providing
you
some
background
and
past
history
on
how
the
plans
got
to
where
we
are
today.
So
if
we
can
go
to
the
next
slide
so
again,
I'll
be
speaking
about
the
difference
between
the
two
plans
today,
prabhu
will
be
speaking
about
investment
strategy
and
later
on,
bill
hormer
will
be
addressing
the
actuary
for
divorce.
He
will
be
addressing
amortization
strategies
and
existing
policies
that
both
plans
have
in
existence
right
now.
F
F
Those
numbers
are
63.7
percent
for
market
and
55,
and
a
half
for
tutorial
so
first
point
I'd
like
to
make
is
the
contributions
that
are
determined
by
the
actuary
and
that
the
city
pays
on
the
emerald
basers
to
the
plans
are
based
on
the
actuarial
funded
ratio.
It
is
not
based
on
the
market
again,
it
is
based
on
the
actuarial
number.
F
F
F
There
may
be
years
that
they
don't
move
it
and
then
all
the
years
it
may
go
down
twelve
and
a
half
basis
points.
So
if
the
boards
elect
to
decrease
the
discount
rate
one
more
time
that
will
have
an
impact
on
the
actuarial
side,
that
would
increase
the
accrual
liability
and
by
increasing
that
reliability
that
will
decrease
everything
else
equal,
it
will
decrease
the
funded
ratio.
F
So
I
just
wanted
to
kind
of
give
you
again
a
general
understanding
as
to
where
are
the
two
plans
today
and
and
the
basic
difference
between
the
market
and
the
actual
value,
and
most
of
you
that
have
been
at
the
with
the
city
council
for
a
few
years.
Know
that
when
I
go
one
of
my
slides
include
the
smooth
process,
which
is
a
a
process
that
actually
what
it
does
is
it
takes
investment
returns.
F
I
spread
it
over
five
years,
and
so
the
difference
between
the
market
value
and
the
actual
value
is
that
the
market
value
is,
is
the
actual
value
of
the
assets
as
of
june
30th,
the
accurate
value
how
we
get
to
that
is.
We
actually
take
20
of
each
one
of
the
last
five
years
returns
and
recognized
so
for
june
30th
on
an
actual
basis.
F
The
returns
that
we're
recognizing
are
not
the
full
returns
for
june
30th
on
a
market
basis,
but
20
for
2017
20
for
2018,
20
from
2019
and
so
on,
and
so
forth.
That's
what
the
difference
is
it
just
so
happened
that
today
the
actual
value
is
lagging
the
market,
but
over
time
there
could
be
a
situation
where
the
market
will
be
lagging.
The
actual
value
so
again,
bottom
line
is
contributions
are
made
to
the
plans
on
actual
basis.
F
F
The
first
one
and
foremost,
is
to
sort
of
kind
of
give
you
a
sense
and
what
are
the
expected
contributions
from
the
city
for
the
next
20
years
or
so,
and
you
see
for
federated
the
contributions
for
the
fiscal
year,
ending
2022,
which
are
really
based
on
the
evaluation
for
last
year
for
june
30th
2020
are
206
million
dollars
and
again
I
want
to
make
it
clear.
These
are
just
pension
contributions.
F
F
F
Obviously,
the
most
critical
assumption
here
is
that
they're
going
to
be
making
the
assumed
rare
return
going
forward,
along
with
all
the
other
assumptions
that
we
have
in
terms
of
retirement
and
and
and
longevity
for
the
members
and
everything
else,
and
I
think
that
you
earlier
heard
cheryl
telling
you
that
one
thing
that
we
know
for
sure
is
that
we
know
going
forward
with
all
the
volatility.
We
know
we're
not
going
to
be
actually
earning
the
actual
return
we
may.
F
We
may
do
earn
that
over
time,
but
it
doesn't
mean
that
it's
the
same
return
every
year,
and
so,
if
you
can
go
to
the
next
slide,
I
won't
repeat
everything
I
explained,
but
it's
the
same
concept.
It
assumes
that,
based
on
the
2020
evaluation,
the
the
line
on
top
is
the
one
that
we
were
expecting
those
contributions
to
be
for
the
police
affair
plan,
because
we
were
assuming
that
in
2021
the
plan
was
going
to
be
earning
six
and
five
eights.
F
As
we
know,
the
plan
earned
more
than
that
and
given
the
preliminary
numbers
based
on
the
new
expected
actuarial
funding
ratio,
the
new
expected
contributions
are
the
one.
The
combination
of
the
I
think,
purple
and
yellow,
so
those
are
lower
numbers
going
forward
again.
The
caveat
here
is
that
these
row,
four
numbers
assume
that
the
plans
will
be
meeting
all
the
assumptions
going
forward,
which
we
know
for
a
fact
that
wouldn't
be
the
case
or
for
purposes
of
discussion,
because
we
don't
know
how
the
future
is
going
to
behave.
F
We
just
assume
that
all
the
assumptions
are
going
to
be
met
later
on
when
bill
hallmark
from
kyron
speak
to
you.
He
does
have
a
model
that
he
use
as
a
stress
test
where
he
can
actually
input
different
numbers
instead
of
the
assumptions
or
the
assuming
return
he
can
actually
in
his
model,
he
can
actually
use
different
numbers
and
show
you
how
a
better
returns
or
worse
returns
will
impact
these
contributions
going
forward.
F
M
Thank
you
roberto
good
afternoon
everyone.
I
was
actually
asked
to
talk
about
a
potential
investment
strategy
for
any
proceeds
that
we
receive
from
pob
issuance
and
unfortunately
it's
a
little
premature
to
talk
about
that,
because
there's
a
lot
of
unknowns,
we
don't
know
the
size
of
a
pob
issuance.
We
don't
know
the
timing
of
a
pob
issuance.
M
We
don't
know
the
structure
of
a
pob
issuance,
but
I
thought
I
can
lead
off
by
showing
you
this
chart,
which
actually
has
a
current
asset
allocation
for
both
plans
and,
typically
you
know
in
the
past,
we've
tended
to
move
in
incremental
fashion.
So
hopefully
this
gives
you
some
clue
as
to
how
we
we
will
think
about
investing
any
additional
proceeds
that
we
receive
in
addition
to
the
8
billion
dollars,
plus
that
we
manage
today,
which
is
both
pension
plans,
as
well
as
the
health
care
trusts.
M
Now,
of
course,
all
of
this
assumes
that
things
are
stable
and
somewhat.
You
know
if
there
isn't
a
lot
of
volatility.
As
you
all
know,
in
march
of
last
year
there
was
considerable
volatility
and
we
did
make
some
big
changes
to
the
plan
and
that
could
always
happen
right
and
so
typically
the
the
process
that
we
follow.
When
we
decide
to
deploy
any
proceeds,
is
you
know
we
get
capital
market
assumptions
from
our
investment
consultants
every
year?
M
That
typically
happens
at
the
beginning
of
the
year,
and
then
we
look
at
market
conditions,
and
then
we
decide
how
to
invest
those
proceeds.
We
come
up
with
the
discount
rate.
We
come
out
with
a
with
an
asset
allocation.
This
is
extensively
discussed
at
our
investment
committee
meetings
and
then
by
the
boards,
and
then
we
decide
what
to
do
with
the
proceeds.
So
it's
a
little
difficult
for
us
to
say
you
know
next
year.
You
know
if
there's
a
pob
issuance
how
we'll
actually
invest
those
proceeds,
but
I
think
it's
suffice
to
say
now.
M
M
And
I'd
also
like
to
point
out
that
in
the
last
quarter,
just
in
that
quarter
alone,
both
plans
actually
added
something
like
400
million
dollars
in
investment
returns
and
again
that
that's
easily
absorbed.
And
we
put
that
in
the
grand
scheme
of
things
into
the
whole
part,
and
then
we
decide
how
an
asset
allocation
has
to
work.
Now.
A
lot
depends
on.
You
know.
M
On
on
timing
in
the
market,
as
you
all
know,
we've
had
a
fantastic
year
this
year
and,
as
you
can
see
from
this
chart,
the
important
thing
here
is
at
the
bottom.
You
see
the
average
annual
expected
return
for
10
years
for
the
federated
plan.
It
was
6.3
percent,
police
and
fire,
it
was
5.9
and
the
20-year
return
was
7.1
and
6.8.
M
If
we
continue
to
have
a
good
year
this
year,
you
can
expect
that
those
returns
expected
returns
are
going
to
be
even
lower
next
year,
when
we
consider
our
asset
allocation
right,
and
it
also
means
that
markets
are
going
to
be
very,
very
expensive
next
year.
So
we
have
to
take
all
of
that
into
consideration
when
we
come
up
with
our
asset
allocation.
M
Again,
I'm
showing
you
our
current
asset
allocation
as
a
guide,
because
we
always
start
with
our
current
asset
allocation
and
it's
usually,
we
use
an
incremental
approach,
but
I'm
going
to
give
you
some
numbers
just
to
put
things
in
context,
just
to
show
you
how
expensive
the
stock
markets
are.
We
did,
of
course,
get
a
windfall
last
year
because
the
market
suddenly
became
very
cheap
in
march
and
april
of
2020,
and
we
took
advantage
of
that.
M
But
since
then
the
markets
have
actually
been
on
a
tear,
as
you
all
know,
so
I'll
give
you
two
two
measures
here.
One
is
a
simple
pe
ratio
and
the
other
is
a
cyclically
adjusted
pe
ratio.
If
you
look
at
a
look
at
a
simple
pu
ratio
and
I'm
I've
looked
at
data
going
back
150
years,
our
current
p
e
ratio
for
the
s
p
500,
which
I
use
as
a
proxy
for
the
stock
market
and
on
august
1st,
the
pe
ratio
of
the
s
p
500
was
34.71.
M
M
M
Its
all-time
high
was
on
march
1st
of
2000,
which
was
43.22
so
we're
not
too
far
from
there
and
again,
if
you
go
back
to
the
great
depression
september,
1st
1929,
that
number
was
32.56,
so
markets
are
very,
very
pricey
again.
If
you
look
at
the
last
150
years,
you
know
if
you
look
at
a
30-year
time
period
in
those
last
150
years.
If
you
had
invested
the
proceeds,
any
proceeds
entirely
in
the
equity
market.
Just
to
give
you
an
example,
and
I'm
not
suggesting
that
we
do
that.
M
M
But
if
you
look
at
a
10-year
time
period,
there
have
been
multiple
time
periods
in
the
last
150
years
that,
beginning
on
the
start
and
end
day,
you'd
have
actually
lost
money.
The
last
such
instance
was
in
2010.,
so
if
you'd
actually
invested
money
in
2000
and
if
you've
taken
that
money
out
in
2010,
even
without
adjusting
for
inflation,
there's
about
15
or
20
months
time
period,
when
you've
actually
lost
money,
now
I'm
not
suggesting
that
this
is.
You
know
we
are
in
the
great
depression
or
we're
anything
close
to
that.
M
On
the
contrary,
the
fed
has
actually
started
removing
its.
You
know
it's
going
to
stop.
It's
started
tapering,
which
means
that
there
is
a
lot
of
strength
in
the
economy,
but
I
just
wanted
to
share
those
numbers
just
to
show
that
we
are
in
an
expensive
market
and
our
boards
will
take
that
into
account
and
other
information
provided
by
our
investment
consultant.
M
When
we
have
that
big
pot
of
money,
the
eight
billion
that
we
currently
manage
any
potential
pov
proceeds
that
we
have
that
we
get
will
be
added
to
that
eight
billion,
and
we
look
at
that
entire
pot
of
money
and
then
decide
how
we
should
actually
invest
that
entire
pot
of
money,
whether
that's
eight
and
a
half
billion
or
nine
billion
dollars.
So
with
that,
I'm
actually
going
to
stop
my
formal
comments.
I
will
be
happy
to
take
questions.
I'm
assuming
that's
going
to
be
at
the
end.
So
thank
you
very
much.
N
N
So
right
now,
as
roberto
showed,
the
police
and
fire
plan
is
87
funded.
It's
on
track
to
be
a
hundred
percent
funded
in
eight
years
by
2029..
When
I
say
on
track,
though,
that
means
that
all
of
our
future
assumptions
are
met.
The
current
contribution
policy
stays
in
place,
all
the
assumptions
stay
in
place
and
we
actually
earn
six
and
five-eighths
percent
each
year.
So
there's
there's
variability
around
that,
but
our
baseline
projection
would
have
the
police
and
fire
plan
fully
funded
by
2029.
N
N
N
Then
the
the
board
decisions
that
really
go
through
the
actuarial
side
prabhu
talked
about
the
the
investment
piece
which
is
related
to
some
of
our
decisions,
but
our
key
decisions
that
affect
the
city
are
the
discount
rate
and
the
amortization
methods.
Amortization
methods
are
how
we
pay
off
an
unfunded
liability
and
those
decisions
reflect
changing
market
conditions.
N
N
N
N
N
N
N
The
outside
lighter
lines
show
a
one-year
positive
shock
and
a
one-year
negative
shock
one
year
positive
shock.
We're
saying
is
a
30
investment
return
for
one
year,
followed
by
six
and
five-eighths
percent
returns.
The
negative
shock
is
a
minus
fifteen
percent
return
for
one
year,
followed
by
six
and
five-eighths,
and
so
just
looking
at
the
unfunded
liability
you
could
you
could
see
that
that
range
could
have.
Our
unfunded
liability
go
right
back
up
to
about
1.6
billion
with
the
minus
15
returns
or
turn
into
a
surplus
of
500
million
with
another
30
return
year.
N
The
five-year,
moderate,
negative
and
five-year
moderate
positive
scenarios
are
a
two
percent
return
each
year
for
five
years
or
a
ten
percent
return
each
year
for
five
years,
and
we
just
picked
those
based
on
makita's
capital
market
assumptions.
Roughly
half
of
the
returns,
we
would
expect
to
fall
between
those
two
numbers
over
a
five-year
period
and
you
can
see
those
have
pretty
dramatic
effects
as
well,
both
on
the
unfunded
liability
or
surplus
and
on
city
contributions.
N
N
N
The
contributions
on
the
right
also
are
much
more
stable.
There's
no
decline
projected
they
bounce
around
a
little
bit
as
we
recognize
the
investment
returns
and
as
we
increase
payments
on
the
unfunded
liability
but
they're
roughly
about
200
million
dollars
a
year
over
the
next
15
years
and
a
long
ways
from
the
minimum
contribution
of
the
purple
bar
for
normal
cost.
N
N
We
could
go
above.
250
million
but
we're
starting
at
a
200
million
dollar,
roughly
baseline
projection,
so
there's
there's
less
variability
on
federated
side.
Why
is
that?
Well,
there
are
less
assets,
federated
has
about
2.9
billion
in
assets,
whereas
police
and
fire
has
about
4.7
billion
in
assets,
and
so,
if
you
have
less
assets,
that's
less
sensitivity
to
those
investment
returns.
Both
positive
and
negative.
N
N
N
Impact
on
the
discount
rate
we're
good.
We
set
the
discount
rate
with
a
focus
on
the
current
capital
market
assumptions
in
the
asset
allocation
and
those
capital
market
assumptions
change
when
market
conditions,
change
and
prabhu
talked
about
a
lot
of
this.
The
market
interest
rates,
change
the
price,
earnings
ratios
change
and
that
changes
our
expectations
going
forward
for
2021
the
capital
market
assumptions
are
lower
than
they
were
for
2020
and,
as
prabhu
indicated,
we
might
even
expect
for
2022
for
those
to
continue
going
down
depending
on
what
the
market
does.
N
N
So
in
order
to
get
the
eight
and
a
quarter
percent
return,
the
plan
just
had
to
exceed
the
yield
on
a
10-year
treasury
bill
by
two
and
a
quarter
percent
and
the
asset
allocation
at
that
time
was
about
50,
fixed
income
and
it
was
very
simple.
There
was
an
allocation
to
public
equities
and
to
some
real
estate.
N
Last
year
it
had
dropped
all
the
way
down
to
point
seven
percent,
but
at
one
and
a
half
percent,
if
we
were
taking
that
same
level
of
risk,
that
expected
risk
premium
being
the
difference
between
what
we
expect
to
return
and
what
we
could
get
in.
A
a
risk-free
bond
we'd
be
looking
at
about
a
3.75
to
4
discount
rate,
but
instead
over
time.
N
What
the
boards
have
done
is
some
sort
of
blend,
of
reducing
the
discount
rate
and
changing
the
asset
allocation
and
changing
the
asset
allocation
so
that
we
can
get
a
larger
expected
risk
premium
above
the
yield
on
the
10-year
treasury
now
that
bounces
around
every
year.
So
you
can't
look
at
it
precisely
every
year,
but
you
can
see
the
general
trends
and
those
general
trends
in
the
market
make
a
huge
difference
both
in
the
asset
allocation
and
what
the
expected
return
or
discount
rate
will
be
going
forward.
N
We
really
don't
want
to
have
a
sudden
increase
in
the
city
contributions
that
hit
your
budget
all
in
one
year.
We
also
tend
to
not
like
to
have
the
contributions
drop
off
a
cliff
and
suddenly
decrease,
because
we
know
if
the
markets
reversed
themselves,
it
would
be
hard
to
restore
the
level
of
contribution
we
had
before.
N
So
the
the
boards
periodically
act
on
the
amortization
policy
and
make
some
changes.
The
police
and
fire
board
a
few
years
ago
was
looking
at
an
upcoming,
cliff
and
some
volatility
in
the
pattern
of
contributions
and
made
some
changes
to
stabilize
that
and
create
that
nice
smooth
down
downward
pattern
that
we're
seeing
now.
N
O
Thank
you,
so
this
is
wing
c
fox
with
urban
futures,
serving
as
the
city's
municipal
advisor
on
pension
funding
solutions.
So
this
afternoon
we
were
asked
to
provide
some
illustrative
examples
of
a
pension
obligation
bond
issuance
next
slide.
Please
and
we
recognize
that
pobs
have
not
been
authorized
yet,
and
no
parameters,
including
the
size,
maturity
or
timing
of
potential
pobs,
have
been
decided
on
yet.
O
Ultimately,
the
size
and
the
structure
for
pension
obligation
bonds
will
be
informed
by
the
stated
goals
for
issuance
of
pobs
as
julia
and
jim
reviewed
earlier.
But
as
a
recap,
one
of
the
primary
goals
of
the
city
is
to
ensure
the
long-term
sustainability
of
the
retirement
systems
by
improving
funding
ratios
of
the
plans.
So
the
city
and
the
retirement
plans
can
jointly
discuss
a
desired
target
funding
ratio
which
would
inform
the
size
of
the
pobs.
O
But,
setting
that
side
aside
for
now
and
to
move
discussions
forward
and
dovetailing
off
of
bill's
presentation,
we
wanted
to
focus
in
on
the
impact
of
the
retirement
plans,
amortization
policies
on
the
ual
payments.
The
city
is
responsible
for
making
and
that
addresses
the
city's
goal
to
reduce
the
annual
burden
of
ual
payments
that
potentially
crowd
up
services
and
create
budget
stability.
O
So
in
order
to
provide
a
reference
point
we
this
week,
this
slide
recaps
the
midpoint
pob
scenario
that
was
presented
to
council
on
the
april
study
session.
This
assumed
a
total
1.4
billion
dollar
issuance
960
million
for
federated
and
about
520
million
for
police
and
fire,
and
this
is
also
based
on
the
2020
actuarial
report.
O
We
will
update
once
the
2021
actual
report
is
released,
but
it
doesn't
change
the
concepts
that
we're
presenting
here.
We
wanted
to
provide
a
comparison
of
what
you've
seen
previously,
so
our
prior
scenarios
assumed
a
base
election
targeting
strategy,
essentially
selecting
one
of
the
bases
to
pay
off
with
the
pob
proceeds,
and
this
is
a
standard
approach
for
many
calpers
member
agencies.
O
O
So
on
the
left
graph,
we'll
see
that
any
savings
is,
is
really
pushed
to
the
back
end
with
a
level
debt
pob
scenario,
but
the
amortization
policy.
The
20
year
with
the
2.75
annual
escalation
matches
the
federated
plans,
ual
payment
schedules,
which
also
escalate
over
about
a
19
or
20-year
term.
So
in
this
case
it
may
make
sense
to
issue
a
pension
obligation
bond
for
federated
with
a
20,
19
or
20-year
term
next
slide.
Please
so
for
police
and
fire.
O
You
see
the
same
structure
of
escalating
credits,
so
savings
are
on
the
back
end.
However,
the
amortization,
the
15-year
with
the
2.25
annual
escalation,
is
longer
than
the
ual
payments
which
amortize
faster.
You
see
on
the
right
hand
side.
So
in
this
case
it
may
make
sense
to
structure
povs
with
a
shorter
term
a
nine
or
ten
year
term
and
have
the
credit
amortization
match
the
shorter
pov
term
so
again
to
walk
through
the
scenarios
in
more
detail.
I'll
turn
it
over
to
my
colleague,
julio.
I
Thank
you
winxy,
so
we've
now
gone
through
55
slides,
and
I
will
try
to
make
this
as
brief
as
possible
and
there
are
a
lot
of
charts
but
I'll
get
to
this
part.
It's
actually
the
egg
we're
going
for
the
egg
first,
the
amortization
policy
and
then
the
chicken,
the
big
decisions
will
come
later,
but
you'll
see
how
it's
so
integral
in
trying
to
make
these
decisions
make
sense.
I
So
long
story
short,
we
agree
with
the
actuaries
recommendation
and
I'll
hopefully
illustrate
why
we
think
it
gets
you
to
a
better
solution
or
can
get
you
to
the
solution
easier
if
you
are
able
to
match
the
terms
so
right
now,
winxy
was
talking
about
having
a
15
and
a
20
year,
amortization
credit,
so
think
of
it.
This
way
you
issue
a
pob
and
what
bill
says?
Is
you
get
a
credit
over
a
number
of
years,
a
loan
and
a
credit?
I
What
happens,
though,
is
the
shape
of
the
cash
flows?
Will
change
over
time,
so
they're
static
at
the
long
story.
Short,
you
have
a
static
credit
of
15
and
20
years,
which
looks
okay
now,
but
if
you
can
imagine
in
five
years,
you
issue
something:
you'll
have
a
credit,
see
this
gray
when
you're
talking
about
these
unused
credits,
that's
essentially
one
of
the
problems
with
having
a
static,
15
and
20
year,
amount
that
you'd
be
leaving
money
on
the
table
or
not
being
able
to
get
take
advantage
of
that.
The
second
component
is
wings.
I
He
said,
is
you
see
how
it
starts
to
escalate
down,
but
it's
going
up
you're,
not
also
getting
the
full
advantage
of
that.
So
this
idea
that
you
either
leave
credits
on
there
or
you
can't
match
the
cash
flows
to
the
solution
you
want
is
really
what
we
are
trying
to
illustrate.
So
it
works.
The
current
policy
works
right
now,
but
our
notion
was
looking
forward
where
you
look
at
cash
flows.
Next
slide.
Please.
I
Is
it's
working
okay,
but
you
see
underneath
in
this
slide,
you
see
these
little
credits
that
you're
not
taking
advantage
of
and
down
the
line.
You
will
probably
end
up
with
a
more
pronounced
impact
that
you're
leaving
credits
on
the
table
or
you
can't
manage
the
cash
flows
in
the
same
manner.
So
bill
mentioned
a
couple
things,
this
concept
of
mismatch,
which
we
hope
will
illustrate
the
next
time
and
also
this
idea
of
predictability
and
manageability.
I
I
These
are
cash
flows.
You
see
some
of
the
savings.
So
if
some
of
you
like
a
graph,
this
is
the
chart,
but
the
next
slide
we're
going
to
talk
about
what
happens
if
you
actually
match
the
terms-
and
you
see
here
what
we
did
is
we
gave
you
a
19
year
and
a
9
year
pov,
so
as
opposed
to
20
and
15.
We
shortened
it,
but
you
see
what
happens.
Is
that
little
gray
line
that
was
there
before
that
unused
credit
right?
This
is
like
a
credit.
I
I
I
I
You
can
compare
this
is
here
for
illustration.
If
someone
sees
the
numbers
but
long
story
short,
it's
the
egg,
we
want
to
go
towards
the
amortization
policy.
Two
we'd
like
to
match
it
to
have
more
predictable
and
manageable
cap
cash
flows
and,
more
importantly,
eliminate
that
potential
mismatch
either
now
or
down
the
road.
From
there
I'll
hand
it
over
to
julia.
J
Okay,
thank
you
julio
and
thanks
all
of
our
presenters
today,
so
with
that
vice
mayor
and
the
council
on
the
boards.
This
concludes
our
part
of
our
presentation.
I
do
have
some
final
wrap-up
slides
at
the
end
of
the
discussion,
so
I'll
turn
it
over
to
you
vice
mayor
to
facilitate
the
public
comment
and
the
board
and
council
discussion.
B
P
There
you
go
okay!
Thank
you
very
much.
This
is
very
interesting,
but
of
course,
the
projections
are
of
a
very
stable
future
and
we
have
a
very
unstable
future
and
we're
supposed
to
be
homo
sapiens.
Homo
sapiens
means
wise
humans
and
we
need
a
lot
of
forethought
and
that's
what
that?
That's?
What
separates
us
from
the
other
species?
It's
our
fourth
or
fourth
thought
and
we're
not
using
that,
because
we
know
the
science
is
telling
us
that
we
are
coming
into
catastrophe,
and
this
is
our
future.
B
M
P
Okay,
I
know
I'm
gonna
connect
it
back
to
your
budget
and
to
your
all
your
finances,
about
our
police,
and
so
I
really
want
to
connect
it
to
the
police
and
fire,
because
that
is
a
big
issue
about
how
much
of
our
of
our
budget
is
going
towards
police
and
fire.
And
so
when
we
do
this,
when
we
do
this
investment
and
and
create
bonds
to
support
the
these
large
pensions
that
they
are
requiring.
P
We
have
to
really
look
at
and
we're
doing
that
now
we're
supposed
to
be
reimagining
police,
because
we've
had
a
lot
of
problems
with
the
police.
So
when
we're
going
forward
and
giving
them
all
this
salary
and
all
this
money
from
our
our
general
fund,
it's
very
large
the
amount
that
goes
to
police,
to
policing.
Let's
just
look
at
policing
and
and
yet
we're
we're.
P
Having
so
many
problems
and
and
when
we
look
at
reimagining,
like
other
cities,
are
and
other
countries,
other
countries
don't
use
guns
at
all
and
we've
had
a
thousand
deaths
from
police,
and
you
know
and
when,
when
so
much
of
our
actually,
the
conference
of
interest
comes
that
the
police
are
funding
the
campaigns
of
our
politicians.
We
saw
that
with
deb,
yes,
okay,
so
what
I'm
saying
is
the
conflict
of
interest,
because
when
you
are
deciding
how
much
money
goes
towards
these
these,
you
know
you
know
these.
These
police
retirement
funds.
P
G
Hi
blair
beekman
here,
thanks
for
the
meeting
today,
it
was
very
informative.
I'll
definitely
be
reviewing
this
meeting.
Thank
you
to
offer.
You
know
some
ideas
of
of
tessa.
You
know
to
be
considering
green
sustainability
ideas
in
how
we
and
how
we
will
be
planning
financially
be
planning
our
future.
G
G
You
know
with
that
said,
a
a
polite
reminder
that
we
may
have
to
be
considering.
I
try
to
offer
this
possible
earthquake
scenarios
in
the
next
few
years
in
san
jose
how
we
plan
our
budget.
Yes,
please
man!
I
am
sticking
on
the
point
chappie.
I
got
a
very
important
point
here
that
we
have
to
plan
our
financial
concepts.
G
If,
if
we're
going
to
think
of
those
terms
and
if
not
an
earthquake
in
the
next
few
years,
then
the
next
decade
there's
natural
disaster
issues
of
wildfire
and
a
sea
level
rise
that
we
have
to
consider
and
that
we
will
be
considering
so
just
a
good
luck,
how
we
plan
ourselves
and
that
we
can
plan
for
a
renewable
energy
future.
It
does
not
have
to
be
fossil
fuel.
That's
important
concept
to
build
our
future.
Thank
you.
Thank
you.
A
A
A
You
guys,
I
hate
to
say
you
guys.
I
gotta
learn
better
vocabulary.
You,
ladies
and
gentlemen,
you
keep
people
in
retirement,
you
keep
them
with
their
medical.
You
have
to
deal
with
all
those
numbers.
You
have
to
deal
with
a
lot
of
grief
when
the
economy
goes
up
and
down.
I
highly
respect
what
you
do.
I
I
couldn't
do
it
and
I
really
wanted
to
say
thank
you
for
all
you're
doing
for
san
jose
and
the
retired
people.
Thank
you.
H
Thank
you.
I
just
wanted
to
summarize
a
couple
of
things
that
I
heard
and
then
ask
a
question
of
the
board
that
I
think
is
a
really
important
question
to
or
the
boards,
which
I
think
is
a
really
important
point
to
get
a
sense
of
today.
So
I
heard
from
mr
palani
the
cio
that
the
likely
returns
in
upcoming
years,
because
we've
had
a
very
very
good
year
likely
returns
in
the
in
the
upcoming
years,
are,
are
to
be
lower
than
average.
Did
I
hear
that
correctly?
H
H
M
All
right
take
two,
so
what
I
was
trying
to
say
was:
I
showed
our
current
asset
allocation
with
expected
returns,
10
and
20
years,
and
what
I
was
trying
to
say
was
that,
because
we've
had
such
a
good
year
in
some
sense,
we've
borrowed
from
the
future
and
because
asset
prices
are
so
high
going
forward.
If
you
look
at
10
and
20
year
ex
projections,
you
can
expect
those
projections
to
be
correspondingly
lower
a
simple
rule
of
thumb.
M
This
is
not
entirely
accurate
if
we
had
a
20
20
year
or
25
year,
divide
that
by
20
years
and
accordingly
reduce
your
expected
return.
So
again,
just
working,
you
know
back
of
the
envelope.
I
would
say
that,
given
the
past
year
and
what
we've
had
you
can
expect
our
expected
returns
going
forward
for
20
years
to
be
lower
by
say,
50
basis
points,
so,
instead
of
six
and
a
half
percent,
or
so
you
can
now
think
it's
going
to
be
about
six
percent.
M
H
Thank
you.
I
I
turned
off
my
video
and
I
was
able
to
hear
that
so
six
percent
is
lower
than
the
current
discount
rate
for
a
20-year
return.
It's
lower
than
the
current
discount
rate,
although
it
I
will-
and
I
will
point
out
that
it
is
higher
than
than
what
we
think
that
the
interest
rate
is
going
to
be
for
the
the
povs,
but
I
I
just
wanted
to
make
that
make
that
point.
I
thought
it
was
important.
H
The
other
point
I
wanted
to
make
sure
to
summarize
here.
I
remember
you
said
we
are
in
an
expensive
market,
which
means
we're
not
going
to
get
the
best
value
for
our
dollars
right
now.
If
we
invested
them,
if
we,
if
we
had
an
influx
of
cash,
an
infusion
of
cash
into
either
of
the
pension
funds
wanted
to
point
that
out
the
next
point-
and
I
can't
remember-
I
think
bill
made
this
point
from
chiron.
The
city
always
has
to
pay
the
normal
cost,
regardless
of
the
funding
level.
H
H
H
Now
the
important
point
there
is
the
board
has
to
agree
to
it
or
the
boards,
depending
on
whether
we
only
use
pobs
for
federated,
because
they
have
a
a
much
lower
funded
ratio
or
or
both.
So
I
I
the
question
that
I
have
the
reason
I
did
all
of
this
summarizing
was
to
lead
up
to
a
question
that
I
have
for
the
members
of
the
boards,
which
is
what
are
your
thoughts
on
that
having
been
at
the
federated
meeting
last
week
or
two
weeks
ago.
I
can't
remember
now.
H
I
think
it
was
last
week.
The
advice
from
your
fiduciary
counsel
was
basically
to
not
take
that
advice
from
chiron
and
to
to
set
your
amortizations.
However,
you
want-
and
so
I'm
asking
as
a
member
of
the
city
council,
if
having
an
agreement
about
setting
the
amortization
for
the
pob,
specifically
that
amount
that
gets
credited
having
a
specific
amortization
is
something
that
is
palatable
to
you.
As
members
of
the
board
it.
There
was
a
little
bit
of
a
discussion
very,
very
briefly
about
memorandum
of
understanding
or
a
funding
agreement,
and
what
is
your?
H
I
would
like
to
hear
from
the
members
of
the
board-
and
I
would
say
specifically
federated
frankly,
because
the
funding
ratio
is
lower
and
I
think
we
are
more
likely
to
fund
that
with
pobs
than
than
police
and
fire.
But
I'd
like
to
hear
from
the
board
members
about
their
ideas
and
thoughts
on
having
a
funding
agreement
or
an
mou
of
sorts
specifically
related
to
an
amortization
and
credit
for
pob
funds.
B
D
That
said,
I
think
we
value
the
advice
and
input
from
our
actuarial
counsel
very
highly,
and
I
don't
think
we
are
adverse
to
following
his
amortization
recommendation,
but
that
is
something
that
would
be
decided
at
a
future
board
and
I
can
certainly
not
make
any
assurance
at
this
time.
I'm
not
sure
any
other
trustee
would
either,
but
I
certainly
welcome
their
their
views
on
this.
Q
This
conversation
is
deeply
philosophical,
so
devil
make
it
deal,
and
if
you
can
tell
me
that
the
future
will
pattern
wise
match
the
past,
I
can
promise
you
anything.
You
want
right,
but
if
the
future
doesn't
match
the
past,
which,
by
the
way,
is
how
we
got
into
this
mess
in
the
first
place,
I
can't
I
don't
know
what
the
future
will
bring,
and
so
I
can't
tell
you
that
I
can
meet
that
and
that's
the
issue.
The
philosophical
issue
is
pobs
are
an
absolute
no-brainer.
Q
If
you
tell
me,
the
future
will
be
more
or
less
like
the
past.
That's
what
peru
said
shoot
we
can
model
this
out
for
all
time.
Right,
povs
make
perfect
sense
if
the
future's
like
the
past,
but
we've
gotten
this
jam
in
the
first
place
because
well
it
was,
I
think,
was
mark
twain.
The
future
doesn't
repeat
itself,
but
it
rhymes.
Q
Q
R
R
No
20,
no
20
year
cycle
had
a
or
only
one,
I
guess
20-year
period
had
a
loss
if
you
were
to
invest
in
a
20-year
period
that
that
20-year,
that
was
based
on
a
net
zero
right
with
that
not
based
on
a
paying
back
a
interest
rate
on
a
on
a
pob
right.
So
there
there's
a
base
amount
that
we
have
to
recover
in
order
to
make
sure
we
don't
have
a
net
loss
here.
So
is
there
so
so
I
just
want
to
make
sure
I
mean
I'm
I'm
fairly.
R
M
Yeah,
so
I
I
just
gave
that
as
an
example
of
what
happens
historically
in
terms
when
you
invest
in
an
expensive
market
that
you
could
actually
have
a
negative
return
and
that
did
not
have
any
kind
of
a
three
and
a
half
percent
built
into
it.
It
was
just
a
price
at
the
beginning
and
at
the
end,
and
also
I
did
make
the
point
that
that
was
a
nominal
return,
not
a
real
return.
So
if
you
actually
factor
in
inflation,
that
return
would
have
been
even
lower.
M
So
it's
just
to
show
that
it's
not
wise
to
invest
in
the
market
when
it's
very
expensive,
especially
over
shorter
time
periods.
Now
I
also
have
to
add
the
caveat
that
here
we
use
the
proxy
as
the
s
p
500
and,
as
you
all
know,
our
asset
allocation
is
not
just
public
equities.
We
do
invest
in
a
variety
of
asset
classes
which
pushes
the
blow
in
a
downturn.
But
again
I
was
just
trying
to
illustrate
the
point
that
it's
never
a
good
idea
to
invest
in
very
expensive
markets.
R
And
you
and
you
presented
a
wise
asset
allocation,
which
obviously
would
balance
out
and
would
be
unlikely,
even
more
unlikely
to
to
hit
have
that
kind
of
negative
return
than
what
you
presented.
In
fact,
I
I'm
very
confident
you,
you
projected
a
six
six
and
a
half
to
seven
percent
average
rate
of
return,
which
I
you
know
based
on
you
know
my
experience
over
the
years
is
a
pretty
conservative
estimate.
R
So
I
you
know,
I'm
for
you
know,
feel
like
it's
a
fairly
reasonable
assumption
for
that
allocation
that
you
showed
and
then
the
other
thing
I
wanted
to
point
out,
and
I
don't
think
this
was
talked
about
much.
The
proposal
here
is
not
for
us
to
buy
into
the
market
all
at
one
time
right
I
mean
we're
talking
about
a
dollar
cost
averaging
and
a
some
kind
of
multi-year.
R
Buy-In
with
this
pro
with
this
program
we
wouldn't
be
buying
in,
for
example,
buying
a
some
amount
of
bonds
and
investing
everything
right
now
at
this
peak.
What
we
think
might
be
some
high
level
of
market
we're
talking
about
a
multi-year
investment
strategy
right.
Someone
want
to
address
what
kind
of
strategy
we're
we're
looking
at.
J
Yeah,
so
so
the
so
part
of
the
policies
that
we'll
be
bringing
forward
will
be
addressing
kind
of
what
those
funding
levels
would
be
what
the
market
looks
like,
but
as
I,
as
I
pointed
out,
the
policy
would
never
assume
that
we
would
fund
a
hundred
percent
of
the
unfunded
liability
at
one
particular
point
in
time,
and
so
so
so
rest
assured.
While
we
have
an
unfunded
liability,
you
know
around
three
billion
dollars.
We
would
never
bring
to
you
a
pob
of
three
billion
dollars
for
for
lots
of
lots
of
reasons.
J
So
so
yes,
it
would
be
something
that
we
would
look
at.
You
know
each
at
different
points
in
time.
What
is
the
funding
status
is
now
the
right
time
to
issue
pension
obligation
bonds
to
help
bring
the
fund
into
the
funds
into
better
funded
status.
So
it
would
and
then
because
we
would
hand
over
the
proceeds
to
the
retirement
boards,
then
they
would
have
those
investments
to
make
at
that
particular
point
in
time.
So.
R
R
The
board
itself
wouldn't
be
necessarily
investing
at
all
in
one
lump
sum,
but
having
some
strategy
to
invest
it
over
time
in
order
to
make
sure
that
we're
not
that
we're
not
trying
to
time
in
the
market
with
a
single
lump
investment
at
one
time
in
order
to
be
safer,
if
you
invest
over
a
two
year
period,
you're
you're
not
running
at
the
risk
of
of
buying
at
a
peak
and
you're
and
you're.
But
maybe
I
should.
Q
Q
Let
me
let
me
give
you
two
quick
two
quick
answers:
councilman
we're
going
yeah.
In
fact,
the
reason
he
had
great
returns
is
because
we
didn't
try
time
markets
and
we
we
try
to
think
very
thoughtfully
about
this.
So
no,
I
I
think
you
can
safely
assume
we
think
very
deeply
about
how
we
would
sequence
that
money
into
the
market
to
get
the
best
return
and
again
over
10
20
30
years.
Q
Had
you
invested
money
over
a
30-year
period
any
year,
starting
back
to
before
my
parents
were
born
the
great
depression
1928
based
on
data
from
our
consultants,
who
are
who
are
sharp
people
and
have
all
this
history,
whether
you
factored
in
inflation
or
not
actual
return
or
real
return?
There
is
no
period
in
which
you
would
not
have
returned
more
than
a
seven
percent.
Q
So
again,
if
god
comes
down
tomorrow
and
says
yeah,
the
future
will
be
kind
of
like
the
past
one
way
or
the
other.
This
is
this,
conversation
isn't
taking
place,
it's
a
no-brainer,
and
so
what
we're
worried
about
in
this
conversation
is
what
we
don't
know
and
as
bill
pointed
out,
we
got
bitten
by
that
10
20
years
ago,
when
everybody
said
well,
inflation's
always
been
five
or
six
percent
it'll,
always
sort
of
average
out
five
or
six
percent
it
hasn't.
Q
Inflation
is
doing
something
we've
not
seen
at
least
since
1928.
Maybe
I
don't
know,
maybe
since
the
roman
empire
right
and
we
got
in
this
jam
because
we
forecast
prudently,
you
guys
did
we
did
and
then
somebody
threw
us
a
curveball
so
yeah
if
the
fusion
like
the
past.
This
is
easy.
It
will
return.
Seven
percent,
but
yeah.
R
R
But
secondly,
if
the
market
somehow
has
something
out
of
line
with
his
with
these
historical
trends
that
you
will
always
over
30
years
return
this
amount
that
will
affect
us
whether
we
do
this
or
not,
I
mean
the
the
pension
problem
will
get
worse
because
we
won't
meet
our
projections
if
we're
below
the
six
percent
either
way.
But
if
we're
below
six
percent
and
above
three
and
a
half,
we
will
still
come
out
ahead
on
the
bond
portion
by
doing
the
pension
obligation
bonds.
R
While
we're,
while
we'll
be
negative,
either
way
on
the
other
portion
of
our
investment
right,
I
mean
that
so
we
run
a
risk,
regardless
of
whether
we
do
the
pension
obligation
bonds.
If
the
markets
don't
pay
off
on
the
typical
trend,
so
I
just
want
to
make
that
clear.
We're
we're
in
tr.
We
will
be
hurt
on
the
return
by
poor
returns,
whether
we
do
this
or
not,
but
the
question
is
whether
or
not
we
have
some
level
of
confidence
that
you
know.
R
Q
I
don't
need
to
monopolize
the
floor,
but
so
for
police
and
fire.
We
give
the
presentation
you
smart,
smart,
councilman
cohen,
so
you
could
say
in
the
shock.
We
have
a
bigger
pool
because
we
took
a
pob.
How
much
more
do
we
lose?
You
know
if
you've
got
a
20
hole.
If
you
got
a
big
it's
negligible,
so
we
can
analyze
that
and
your
your
instinct
is
right.
You
you
get
hit
either
way,
but
a
bigger
pob
at
least
five
or
ten
percent
bigger.
It's
it's
negligible.
Q
It's
it's
down
in
the
weeds,
I
I
think
also
councilmember
cohen.
I
think
we're
doing
the
right
thing
where
we're
separate
from
you
from
julia.
You
know
and
that's
right,
but
once
I
think
we
agree
once
you
say
we're
going
to
do
this,
we're
going
to
sync
up
with
with
you
guys
with
julia
right
and
as
you
say,
if
we
say
I
don't
think
this
good
time
to
give
us
the
money.
Q
Hopefully,
the
city
will
say:
okay,
the
interest
rates
are
holding
we're
like
an
issue
now,
and
the
place
we
get
in
trouble,
of
course,
is
if
the
interest
rates
on
the
bond
start
to
go
up
at
a
time
when
we
don't
want
to
invest
the
money,
I'm
done.
I
think
we
put
our
heads
together
and
figure
out
what
the
right
strategy
isn't.
Q
C
C
I
you
know
I
want
to
start
by
picking
up
where
councilmember
cohen,
left
off.
My
understanding
from
our
last
study
session
was
that
the
success
of
a
of
the
pob
here
would
really
largely
come
down
to
returns
in
the
first
few
years.
I
recall
that
from
some
of
the
scenarios
I
believe
we
looked
at
earlier
in
the
year
and
I'm
just
I
I'm
not
sure
if
I
missed
it,
but
I
didn't
see
that
repeated
today.
Could
we
just
could
someone
talk
us
through
that
particular
dynamic.
O
Yeah,
I
mean
certainly
we
you
know
we
will
we'll
be
digging
and
diving
a
lot
into
risks
right
and
this
conversation
is
sort
of
the
starter,
and
so
there's
a
lot
to
talk
about.
You
know,
there's
the
borrowing
side
and
then
there's
the
investment
side
and
what
the
risk
is
with
the
investment
side.
So
yeah
I
mean
it's
the
leverage
that
we've
been
discussing
right,
that
you
just
said
the
more
you
have
when
there's
a
shock.
You're
you've
got
a
larger
pool,
and
so
we
can
get
into
that.
O
However,
you
know
other
things
like
the
discount
rate
or,
as
councilmember
cohen
said,
not
having
good
returns,
is
affecting
the
plans
in
general,
and
the
goal
here
is
to
get
to
a
healthy
funding
status
and
also
to
for
that
budget.
Stability
and
cash
flow
stability,
but
yeah.
So
there's
a
level
factor
of
right,
there's
a
leverage
factor
of
if
your
portfolio
is
larger,
just
as
there's
a
huge
shock,
then
you're
going
to
lose
more
than
if
that
portfolio
was
smaller
and
same
same
on
the
flip
side.
J
Yeah,
so
so
so
my
recollection
from
the
slides
that
you're,
referring
to
counselor
mayhem,
was
to
show
that
over
the
term
of
the
pob,
you
could
have
the
same
average
rate
of
return
over
that
20-year
period.
But
depending
on
what
you
earned
in
each
individual
year,
it
could
have
a
difference
in
how
it
impacted
the
ual.
That's.
J
O
Other
piece
that
julia
was
the
cushion,
though,
was
really
important
right,
so
I
think
we've
been
talking
about
the
borrowing
rate
and
how
important
that
cushion
is
your
borrowing
rate
and
and
so
all
of
that
factors
into
the
ultimate
ending
portfolio.
When
we
go
back
and
analyze
the
success
of
the
pension
obligation.
C
Sure
sure,
but
I
think
to
to
the
I
I
appreciated
how
drew
you
know,
articulated
the
fact
that
we
we
just
at
least
my
view-
is
I
I'm
a
little
skeptical
that
we
should
look
forward
and
and
say
that
100
years
worth
of
data
points
is
sufficient.
Here
I
mean
we
just
these
dynamics
change
and
we
really
don't
know
what
the
world
ahead
holds.
I
I
guess,
as
I
understood
it
from
april,
I
mean
it
actually.
C
What
what
part
of
what
concerns
me
about
this
potential
strategy
is
that
it
actually
is
fairly
dependent
on
timing.
I
I
guess
I
I'm
somewhat
disagreeing
with
with
the
way
that
I
thought
I
heard
council
member
cohen,
characterize
this
strategy,
because
it
I
I
thought
I
don't.
If
I'm
miss
characterizing,
what
you
said,
councilman
cohen,
please
tell
me,
but
it
sort
of
was
implying
that
this
is
just
if
we
stay
in
the
market.
C
R
I
don't
know
if
you
want
me
to
take
my
first
crack
at
it,
since
you
were
kind
of
asking
me
first,
I
mean
my
point.
My
point
I
think
drew
said
this
too.
You
don't
necessarily
invest
it
all
at
once.
You
you,
you
get
borrow
it
all
at
once,
and
you
invest
it
you
you
can
invest
part
of
it
hold
some
of
it.
R
Invest
it
at
various
times
so
just
be
so
because
you
might
have
some
downtime
doesn't
mean
that
you're
taking
the
hit
on
the
entire
investment
and
because
you
you
invested
at
various
times
you
you
end
up
with
some
of
it
actually
investing
at
lower
points
that
that
causes
actually
some
gains
when
the
market
goes
up,
so
you
don't
necessarily
take
all
that
hit
by
borrowing
it
now
at
a
high
point
in
the
market.
The
point
is
that
you
borrow
it
at
a
low
interest
rate
time,
but
the
investment
board
will
decide.
When
is
the.
C
I
actually
want
to
ask
prabhu
I
mean
I
I
I
understand
your
point,
but
we
nonetheless
oh
we
we
have
to
pay
that
three
three
percent
or
whatever
it
ends
up
being.
We
have
to
pay
that
debt
every
year,
whether
or
not
we've
invested
the
proceeds.
So
I
guess
probably,
could
you
tell
us
a
little
more
about
this
concept
of
dollar
cost
averaging?
I
know
vanguard's
done
a
lot
of
research
on
this.
Looking
at
different
scenarios
over
10
20
30
years,
does
it
really
is
there
as
much
protection?
C
M
M
If,
if
the
future
looks
like
the
past
right-
and
we
don't
know
that,
but
you
know
we
do
have
150
years
of
data
right,
but
over
shorter
time
periods
and
that's
what
the
data
shows
that
you
know
5
10
15
years,
you
could
actually
end
up
losing
money
right,
and
so
that's
something
that
I
just
wanted
to
point
out
and
the
reason
to
point
out
all
this
is
just
just
to
share
that
when
we
make
a
decision
when
we
recommend
to
the
boards
various
options,
we
studied
the
data
very
carefully.
It's
a
very
deliberate
decision.
M
We
take
our
time
in
doing
it.
Now
we
haven't
followed
in
the
past.
To
my
knowledge
we
haven't
done
any
dollar
cost
averaging
right.
So
I
think
that
would
be
really.
I
mean
I'm
sorry
going
out
on
a
limb
here
and
forgive
me
if
I
am,
but
you
know
it
it's
up
to
the
city
to
say:
look
we're
going
to
issue
x.
M
If
I
get
another
200
million,
I
manage
now
8.2
billion
dollars
and
I
take
a
look
at
that
part
of
money
and
decide
what
the
what's
the
best
asset
allocation
going
to
be.
For
that
now
we
can
certainly-
and
this
is
something
that
we
have
discussed
in
the
past-
we
can
certainly
link
to
any
proceeds.
Any
proceeds
that
we
get
to
some
kind
of
you
know
is
the
market
very
expensive.
M
Q
Q
This
always
makes
a
lot
of
sense,
always
always
100
guaranteed.
We
can
go
back
and
look
at
the
data
and
say
well.
Have
we
paid
three
percent
on
the
debt?
How
much
would
we
return
now
you
heard
correctly
with
hook,
although
my
hand,
I
had
the
numbers
here
and
I
can't
find
them
if
I
remember
this
for
envy
or
prabhu.
Q
If
you
look
at
the
delta
between
the
best
of
those
30-year
periods
going
back
to
28
and
the
worst,
I
think
the
best
you
would
have
gotten
20
times
your
money
and
the
worst,
you
would
have
gotten
like
four
or
five
times
your
money,
so
you
really
would
love
to
put
the
money
in
on
that
best.
One,
that's
a
big
delta,
but
in
every
if
the
future's
like
the
past
is
a
no-brainer.
Q
C
I
appreciate
it.
That's
actually
the
point
I'm
I'm
trying
to
make
is
that
I
I
for
one,
don't
have
a
tremendous
amount
of
confidence
that
the
next
30
years
will
look
like
the
last
hundred.
We
have
declining
birth
rates.
We
have
people
living
long.
We
have
a
lot.
We
have
a
lot
that
has
changed
fundamentally
and
I'm
no,
I'm
not
an
actuary.
I'm
not
a
demographer
there's
a
lot
of
a
lot
of
things.
B
I
I'd
love
to
just
kind
of
a
slight
refinement,
because
I
think
the
way
we
approach
this,
it
really
is
an
intellectually
honest
conversation,
but
they're
somewhat
different.
One
is
you're,
taking
a
loan
that
you
have
for
a
past
due
amount.
Let's
be
clear:
this
is
a
past
due
amount.
Every
employee
has
already
earned
this
benefit,
as
have
the
retirees.
I
So
this
is,
it
is
forward-looking,
but
we're
paying
off
a
pass-through
amount
and
we're
on
a
payment
plan
of
6.625
at
a
much
lower
rate
that
those
economics,
those
cash
flows,
will
work,
no
matter
what
that's,
how
a
traditional
refinancing
work
council
member.
However,
what
makes
it
somewhat
unique?
Is
it
isn't
a
traditional
refinance,
we're
taking
a
pot
of
money
and
giving
it
to
the
two
boards
and
having
them
invested?
I
So
then,
what
I
was
asked
by
the
city
is
well
give
us
an
analysis
of
whether
it
works
out
better
and
it's
a
little
different,
because
it
is
a
mixed
portfolio
of
fixed
income,
other
assets
in
the
equity
market,
and
you
compare
that
lump
sum
amount
that
we
see
was
talking
about
leveraging
this.
Let's
think
about
it.
I
This
way
you
take
25,
I
have
a
six
month
old
child
I
take
25,
I
put
it
into
an
account,
was
now
the
right
time
to
do
it
next
week
or
six
months-
that's
kind
of
the
decision,
but
I
think
everyone
agrees
in
most
cases.
If
you
do
it
now,
as
opposed
to
six
years
from
now,
it's
going
to
grow
more
and
more
so
that
power
of
compounding
is
what
the
pob
really
provides
and
drew
keeps
on
driving
home.
I
That
point,
there's
a
power
of
compounding
that
works
to
your
advantage,
but
then
we
also
stated
that
that
power
of
compounding
is
also
highly
suspect
to
market
timing
right.
Clearly,
it's
much
better
for
you
to
issue
pobs
last
year,
when
you
have
this
great
return
and
you're
going
to
get
this
great
head
start
and
then
I'm
going
to
address
your
point
great
julio,
but
we
don't
know
where
we
are
going
forward
right.
I
So
then
we
said
well.
What
are
the
types
of
solutions
we
can
have?
One?
Is
this
idea
of
doing
it
over
time?
A
dollar
cost
averaging
investing
over
time
and
deru
said
something
that
to
me
was
remar
and
in
part
for
using
your
first
name
dude,
but
a
really
fantastic
comment
that
gives
you
some
flexibility
which
says.
Well,
maybe
we
believe
the
city
believes
it's
a
great
time
to
issue,
but
the
investment
side,
because
they
don't
necessarily
align,
believes
maybe
it's
best
to
hold
it
in
cash
or
a
certain
investment
for
a
certain
time.
I
So
what
I
find
encouraging
is
that
the
the
prospect
of
this
is
that
you're,
seeing
is
one
complex,
requires
some
coordination
and
can
probably
come
to
that
solution.
I
don't
believe,
certainly
as
advisors,
we
ever
tell
people.
This
is
a
panacea
and
a
fail
safe,
but
generally
with
very
low,
historically
low
interest
rates
compared
to
what
they
were
before.
It
is
far
more
compelling
and
much
more
likely
to
give
you
positive
results.
C
C
You're
going
to
need
more
than
that,
but
I'm
doing
the
same
thing
with
my
kids.
But
what
you
didn't
say
is
that
you,
you
borrowed
at
a
three
percent
interest
rate
to
put
it
to
invest
it,
and
so
I
I
understand
the
power
of
compounding,
but
the
combination
of
future
uncertainty,
the
market
being
pretty
pricey
right
now,
and
the
fact
that
we're
obliged
then
to
pay
a
fixed
interest
rate
tells
me
that
there's
there's
more
risk
here
than
you
just
taking
25.
I
I
was
pardoned,
I
was
breaking
this
up
in
two
parts
because
remember
the
first
part
we
refinanced
at
a
lower
cost
and
the
second
part
was
the.
What
is
the
outcome
of
the
investment
decision?
You're
absolutely
right,
but
I'm
trying
to
break
it
down,
because
that
liability
you're
going
to
save
money
anyway
percent
versus
6.625
you're
saving
tons
of
money.
That's
like
me,
taking
money,
the
opportunity
cost
of
investment.
I
was
trying
to
break
it
up
into
these
component
parts
because
it
gets
to
be
difficult.
C
I
No,
your
ual
payments
are
set
at
6.625
at
an
escalation
factor
of
7.25.
Those
are
your
past
due
payments,
I'm
not
talking
about
the
few
future,
that's
a
another
same
6.625,
but
different
your
payment
stream.
That
goes
from
about
304
million
up
to
347
million
dollars.
Each
and
every
year
are
fixed
dollar
payments
and
that's
we're
trying
to
lower
that
fixed
dollar
payment
stream.
I
That
would
be
a
slam
dunk
if
it
was
traditional
refinancing
that
julia
and
her
team
has
done
a
number
of
times.
What
makes
this
somewhat
different
is
the
money
now
goes
to
an
investment
board
and
I'm
trying
to
break
up
those
two
little
components:
yeah
and
it
gets
to
be,
unfortunately,
a
little
complex
and-
and
I
can't
get
you
an
absolute
result
right
right.
D
D
When
you
borrow
you
add
leverage
and
you
add
leverage
means
you're,
gonna,
goose,
your
returns
to
the
upside
and
you're,
going
to
gush
your
returns
to
the
downside.
So
the
question
is,
while
my
fellow
chair
drew,
is
absolutely
correct
over
a
30-year
period,
this
is
probably
going
to
pay
off.
If
the
past
is
anything
like
the
future,
it
is
a
fact
that
in
the
short
term,
we
could
be
underwater
for
several
years,
so
how
many
years
underwater
will
you
tolerate
before
you
decide?
D
D
So
I
think
that's
the
thing
to
consider.
The
other
thing,
I
would
add,
is
in
any
financial
decision.
You
need
to
waive
risk
and
reward
so
there's
considerable
risk
here,
as
I've
just
explained,
but
what's
the
reward?
What's
the
upside,
if
we
were
to
take,
I
saw
some
analysis
on
a
250
million
dollar
pob
for
federated,
a
250
million
dollar
pob
looks
like
it
might
reduce
the
city's
annual
payments
on
the
order
of
single
digit
millions
per
year
and
single
digit
millions.
That's
that's
more
than
I
take
in
a
year.
D
S
Yeah,
thank
you
very
much
and
I
was
myself
getting
nervous
on
the
questions
that
councilman
mayhem
was
posing,
because
I
saw
heads
going
different
ways,
so
I
think
it
just
ex.
I
think
it
describes
how
complicated
and
certainly
what
perspective
you
may
be
looking
at
this
from,
but
the
responses
could
be
slightly
different
and
that
you
know
obviously
just
describes
how
how
complicated
it
is.
S
Even
for
experts
on
the
panel
more
experts
than
me
at
least
to
maybe
have
a
slightly
different
take
on
on
the
questions
that
count
the
councilmember
man
was
posing.
I
do
think
in
the
descriptions,
though
everybody
seems
to
be
on
on
the
same
page,
in
regards
to
what
we're
looking
at
it's
just
a
matter
of
of
how
you're
describing
it
and
where
you're
looking
from
and
then
how
far
you're
looking
out.
S
I
think
that
one
of
the
factors
for
me
that
that
is
that
is
existent,
regardless
of
our
opinions,
is
that
we're
in
this
boat,
whether
we
like
it
or
not,
and
so
the
decision
to
both
issue
pension
obligations
and
then
the
decision
to
invest
those
dollars
is
done
right.
We
we
we,
we
all
got
in
that
boat
long
before.
S
S
What
they
think
returns
will
be
certainly
they're
more
longer
term,
I
would
say
we
as
a
council
should
be
looking
long-term
as
well
we're
making
the
obligation
obligational
payments
year
over
year,
and
those
of
us
have
an
impact
on
what
we're
doing,
but
we're
also
trying
to
set
up
the
city
for
success.
You
know
15
30
50
years
from
now,
and-
and
I
think
that's
you
know,
that's
what
makes
these
conversations
so
challenging
and
and
at
the
same
time
I
think
the
the
best
recognition
that
I
that
I've
had
is.
S
But
I
also
think-
and
I
appreciate
drew
for
saying
it-
that
the
you
know
the
collaboration
has
to
be
there
right
and,
and
especially
once
we
we've
had
that
already,
but
when
and
if
we
we
make
this
decision
to
to
issue
a
pob,
I
think
it
has
to
be
right
even
more
closely
connected
in
regards
to
those
discussions,
what's
happening
with
the
dollars.
Much,
like
you
know,
an
individual
like
myself,
you
know,
would
potentially
be
investing
my
future
or
my
pension
with
someone
and
really
having
to
be.
B
Thank
you,
councilmember,
I'm
not
as
a
gut
gun
hoe
or
on
board
with
the
concept
yet,
and
so
my
question
and
I'm
gonna
address
this
to
julio
or
wing
c.
Since
we
have
you
what
type
of
even
framework
should
we
be
looking
at
in
terms
of
even
being
able
to
make
this
decision.
The
only
thing
that
I
I'm
landing
on
now
is
just
each
individual
council
member's
risk
tolerance.
I
At
the
end
of
the
day,
you
asked
a
really
good
question.
I
think,
frankly,
you
distilled
it
to
some
point.
It
really
does
depend
on
your
outlook
and
your
perspective
towards
risk
you're,
making
an
investment
decision.
But
if
you're
asking
the
most
direct
question,
no
one
here
says
they
know
what
the
future
will
look
like,
and
it
really
does
depend
somewhat
on
your
perspective.
I
But
I
think
it's
important
to
note,
maybe
to
take
a
step
back
and
say
our
whole
process,
and
I
thought
today
we
were
looking
at
looking
at
an
amortization
policy
and
I
think
we
agreed
with
the
actuary
that
being
able
to
match
the
terms,
allows
you
to
shape
cash
flows.
We
thought
that
made
sense,
and
I'm
going
to
step
back
before
that
when
we
worked
with
staff
for
a
number
of
months
and
looked
at
every
other
solution
under
the
under
the
sun
and
said
what
else
can
we
do
to
make
a
meaningful
impact?
I
So
we
look
at
the
objectives,
but
then
you're
saying
do
we
have
a
set
determination
as
to
the
risk
or
timing?
I
think
part
of
it
is
if
you
issued
last
year,
it
would
have
been
a
great
idea
and
I
want
to
say
this
was
great.
You
look
great,
but
we
all
know
we
don't
have
a
crystal
ball.
So
I
think
some
of
it
is
looking
at
saying
not
just
this
risk.
Is
it
going
to
be
a
positive
outcome,
but
what
is
the
true
operating
confines
that
you
work
in
council
members?
I
The
truth
is
having
been
in
government
shoes,
this
idea
of
theoretically
thinking
of
things
doesn't
solve
payroll.
It
doesn't
solve
all
the
budgetary
concerns
and
all
the
other
things
you
have
to
do
as
a
council
to
meet
all
the
other
objectives.
So
they
have
to
be
balanced
within
your
policy
context
and
then
truly
you.
I
think
you
distilled
it
within
a
collective
objective
of
what
your
risk
tolerances
are
and
your
outlook.
I
I
don't
know
if
anyone
would
disagree.
I
I
can't
give
you
I
can
give
you
ratios
and
it's
great
and
interesting
to
look
at
those
p
ratios
and
people
will
tell
you
that
clearly
the
market
looks.
You
know
that
it's
performed
well
in
your
sentiment
might
be
that
maybe
it
makes
sense
to
have
some
some
timing
or
to
hedge
a
portion
of
that,
but
I
think
that's
a
co.
It
is
that
kind
of
collective
decision
is
where
you
all
come
in.
I
O
You
know
we
know
what
pitfalls
happened
in
the
past.
In
terms
of
you
know
the
the
risks
that
we're
taking
on
the
borrowing
side
that
we
could
put
parameters
around
with
the
pension
funding
policy,
but
I
think
right
now
we're
at
the
point
of
do.
We
want
to
add
this
to
the
toolbox,
we're
not
really
near
the
point
of
we're
going
to
be
issuing
this
next
month,
but
just
looking
at
this
outstanding
bill
and
figuring
out,
okay,
we've
got
multiple
strategies.
O
Do
we
want
to
add
pov
as
part
of
that
strategy
in
the
toolbox,
and
and
when
would
we?
What
would
we
do?
What
are
the
scenarios,
and
I
think
same
for
the
boards
right
policy
around
what
would
happen
if
we
did
if
the
boards
did
receive
pov
proceeds
in
terms
of
how
to
credit
that
how
to
invest
that?
So
I
think
we
really
are
looking
at
policy
development
at
this
point.
Q
God
I
feel,
like
I'm
monopolizing
this
I
don't
mean
to
so.
I
think
that's
exactly
the
right
question,
mr
vice
mayor,
is
how
do
we
get
at
this
risk?
So
already
I've
told
you
how
to
bifurcate
it
right.
So
if
the
future
is
like
the
past,
this
is
an
absolute
no-brainer.
In
every
scenario,
this
is
a
genius
move,
so
we
can
get
rid
of
that
that
that's
gone
now
right
and
I
urge
you
guys
to
do
all
that
homework
yourself.
Q
You
can
do
it
in
five
minutes
on
excel
spreadsheet,
so
the
question
becomes
right:
the
risk
of
the
unknown
future
god.
How
do
you
deal
with
risk
of
the
unknown?
Well,
we
got
this
black
box,
this
pension
system
and
we're
not
quite
sure,
what's
going
on
in
the
world
around
it,
but
we
know
bloody
well,
what's
happening
inside
that
black
box
and
there
are
only
10
variables
of
interest
and
we've
talked
about
all
the
mere
today
right
interest
rate.
You
know
in
the
markets,
I'm
looking
at
my
screen,
I've
gotten
earlier
inflation.
Q
You
know,
you
know
you
want
to
talk
about
an
interesting
risk.
Mr
vice
mayor,
we
can
analyze
what
happens
if,
five
years
from
now
somebody
cures
cancer,
that's
going
to
cost
us
money,
good,
our
our
policemen,
our
firemen,
our
federated
folks,
they're,
going
to
live
longer,
they're
good,
we're
happy
for
them.
That's
more
money
right!
We
can
analyze
that
right
I
mean
the
the
future
is
uncertain,
but
it's
not
unknown.
Q
It's
variability
is
knowable
right
now
you
know
world
war,
three
we're
all
screwed
right.
There
are
black
swan
events,
but
I
don't
think
with.
I
think
we
have
to
look
and
say
well,
should
we
have
seen
this
weird
dip
in
inflation
coming.
I
can
tell
you:
we've
analyzed
that
police
and
fire
and
we
reacted.
I
think
you
guys
reacted
to
right
about
the
time
you
would
have
noticed
gee,
it's
not
doing
what
it
did
before
right
around
that
time.
We
reacted
to
that.
Q
H
So
I
want
to
really
probe
under
what
scenarios
will
the
general
fund
be
on
the
hook
for
a
higher
amount
than
we
expected
it
if
than
if
we
had
not
done
povs?
If
we
do
the
pobs,
then
if
we
had
not
done
and
I'm
sorry,
this
is
very,
it's
a
seems
like
a
very
confusing
question,
but
I'm
trying
to
get
a
sense
of
the
risk
in
a
different
way
the
risk
to
the
general
fund,
especially
in
frankly
what
I
think
I
and
my
colleagues
are
probably
most
concerned
about.
H
H
That's
the
thing
that's
giving
me
pause
here,
because,
if
they're
less
than
we
expect,
then
that
sounds
to
me
like
that's
a
bigger
outlay
in
our
general
fund,
because
we
will
not
make
our
expected
returns.
It'll
add
to
the
unfunded
liability,
even
though
we've
just
paid
it
off
in
our
minds,
it'll
add
to
it
and
we
could
have
to
pay
more
out
of
the
general
fund.
So
I'd
like
kind
of
confirmation
that
I'm
thinking
about
this
in
the
in
the
right
way.
I
I
think
there's
this
is
probably
one
of
the
more
confusing
points
that
people
should
understand.
One.
There
are
a
number
of
factors
that
are
going
to
happen,
regardless
of
what
you
issue:
pension
obligation,
bonds
or
not
we're
only
talking
about
the
investment
side.
So,
let's
be
clear,
any
kind
of
impact
on
disability
raises
any
other
kind
of
factors
of
mortality
are
going
to
happen
regardless
I
bill.
These
are
things
that
he's
going
to
say
this
impacts
your
liability.
I
Your
payments
will
go
up
because
of
those
but
have
no
impact,
whether
you
do
whether
you
do
pobs
or
give
them
an
extra
ten
dollars
anything
that
changes
your
liability,
you
can't,
let's
take
povs
out
of
the
equation.
Let's
just
say
you
gave
10
million
from
your
reserves.
Would
that
have
somehow
changed
the
outlook?
No
that's
an
important
thing,
because
a
lot
of
the
time
it
does
not
do
that.
I
Now
on
the
investment
side,
as
we
said,
if
you
leverage
and
you
give
more
money
and
that
money
now
gets
lost,
you're
now
going
to
lose
and
have
some
impact,
is
it
likely
going
to
eliminate
the
cash
flow
savings
that
we're
projecting?
Because
the
cash
flow
savings
that
we
did
in
some
of
these
projections
are
from
8
to
fifty
million
dollars.
What
kind
of
impact
will
an
additional
loss
have
remember?
I
The
loss
is
only
on
the
200
million
dollars
of
the
pension
obligation
months
that
you
issued
the
other
portion
for
the
other
eight
billion
that
prabhu
was
talking
about,
are
going
to
happen.
Nonetheless,
the
leverage
component
is
on
that
200
million.
It
is
very
unlikely,
so
you'd
have
to
lose
a
significant
amount
for
you
to
really
lose
it
all.
I
That
typically
doesn't
happen.
It
has
happened
for
every
pension
fund.
I
will
tell
you
this
throughout
the
country
and
they
may
have
issued
pension
obligation
amounts
or
not,
but
in
most
cases
other
entities
next
door
were
in
the
same
situation
due
to
some
investment
losses
due
to
additional
benefits
due
to
changes
and
assumptions,
all
those
things,
the
changes
and
assumptions
the
the
increase
in
mortality,
all
those
type
of
things
we're
gonna
happen.
I
Nonetheless,
so
that's
a
very
important
thing
for
people
to
have
in
the
back
of
their
mind,
because
we
have
a
number
of
clients
who
are
issued
pension
bonds
back
then,
but
there
are
changes
that
happen.
That's
why
I
use
that
credit
card.
You
pay
off
your
entire
credit
card.
The
next
month
you
go
out
you're
like
why
I
paid
off
my
credit
card.
Well,
yes,
that
was
just
your
pass-through
bill
for
them.
So
I
think
that's
an
important
thing
that
the
rating
agencies
want
you
to
know.
You
paid
off
your
pass-through
bill.
I
What's
your
plan
going
forward
because
we
know
it's
not
static,
we
simplify
things,
but
we
know
it's
going
to
go
up
and
down,
and
only
a
small
portion
will
be
attributable
to
the
fact
that
you
made
an
initial
investment
or
additional
investment
with
pension
obligation
bonds,
the
majority
of
which,
as
you're
eighty-five
percent
funded.
Eighty-Five
percent
of
that
gain
or
loss
will
be
attributed
to
the
assets
already
in
the
account.
N
Yeah,
I
just
wanted
to
add
once
you
have
some
more
specifics
about
the
parameters
of
the
pob
you're
looking
at
then
we
could
run
some
stress
tests,
both
with
the
pov
and
without
the
pob,
so
under
different
economic
scenarios.
So
you
can
see
what
it
would
take
for
that
to
happen.
Julio's
absolutely
right.
You
know
changes
in
mortality,
disability!
N
O
Yes,
I
just
I
heard
the
concern
around
sort
of
the
near-term
crunch
on
the
general
fund
and
just
wanted
to
highlight-
and
I
don't
know
bill
would
want
to
add
to
that
that
luckily
right
they're
we're
paying
it
they're
paying
attention
to
the
immediate
impact
of
the
general
fund.
So
when
there
is
a
loss-
or
there
is
a
credit,
it
is
amortized
over
time
so
that
it's
not
so
volatile
to
the
general
fund
year
by
year.
Based
on
that
particular
year's
return,.
E
Hi,
thank
you
vice
chair
vice
mayor.
I
wanted
to
ask,
I
think,
the
advisors
or
the
city,
perhaps
if
you
could
help
me
understand
or
articulate
what
a
successful
pob
issuance
and
experience
would
be,
because
my
guess
is
that
not
all
of
us
will
be
around
when
it's
time
to
be
accountable
as
to
whether
this
was
truly
a
success
or
even
a
middling
success.
I
That's
a
really
great
question.
I
think
the
analysis
that
the
staff
asked
us
to
do
remember
once
again
that
refinancing
part,
but
what,
if
you
gave
the
funds
500
million
dollars?
What
would
it
would
it
be
better
off
to
give
them
the
500
million
or
make
the
regularly
scheduled
payments?
That's
kind
of
the
analysis,
but
I
actually
think
this
is
already
part
of
a
success
and
very
different
from
what
was
done
before,
and
this
is
why
we
talked
about
povs
2.0.
We
learned
from
the
past
and
are
doing
things
very
differently.
I
So
all
the
things
that
people
did
in
the
past
and
didn't
have
these
kind
of
one.
They
didn't
have
this
huge
break
on
screen
with
everyone
that
you
could
see
at
once.
But
the
point
is
you
didn't
do
these
study
sessions?
All
these
things
were
not
done
in
the
past
and
all
the
structure
and
considerations
have
been
avoided.
So
I
think
you've
set
yourself
in
the
right
position,
you're
going
to
draft
a
policy,
and
this
is
really
thoughtful
thinking.
That's
the
most
important
thing.
I
We
as
financial
advisors
often
believe
that
the
key
strategic
decisions
are
often
made
during
the
planning
phase
in
this
discussion
part.
So
I'm
going
to
say,
I
think,
we're
setting
up
in
the
right
foot
and
now
we're
asking
the
most
fundamental
question
when's
the
right
time.
What's
it
going
to
be
like
in
the
future?
How
much
and
when
do
you
issue
those
aren't
yet
to
be
answered,
but
you're
asking
the
right
questions
and
you
may
not
have
the
right
answer,
but
I
think
most
people
at
least
through
my
training,
most
people-
think
about
it.
I
If
you
think
intently,
if
you
think
strategically
about
your
decisions
and
feel
comfortable
about
that,
that's
going
to
tell
you
did
the
best.
You
could
given
an
uncertain
outcome
and
we
all
agree
that
it
is
a
somewhat
uncertain
outcome.
So
I
do
think
our
process
is
very
well
refined
and
getting
better
and
helping
us
to
that
right
solution.
Winxy,
do
you
want
to
add.
O
Oh
just
to
answer
christie
orr's
question
about
how
you
would
know
what
you
know
in
15
years
or
20
years,
and
some
of
the
case
studies
that
we
brought
to
the
april
study
session.
We'll
look
back
right
if
it's
easy
once
the
it's,
the
povs
have
matured
and
you
kind
of
look
back
and
compare
as
julio
said
what
would
have
happened
at
the
end
if
you
hadn't
issued
and
you
just
stuck
with
the
payments
versus
what
happened
with
the
povs
and
hindsight,
is
2020.
Looking
back
and
doing
the
analysis
is
easy.
O
It's
more
difficult,
looking
forward,
and
so
the
intent
of
when
we
do
the
risk
analysis
is
yes,
we
can
do
stress
testing
what
happens
if
it's
this
percentage
next
year
of
earnings,
the
net
fall
near
this
percentage
following
your
that
percentage
and
do
the
stress
testing,
but
the
the
key
part
of
the
analysis
and
why
we
do
the
monte
carlo
is
like
okay.
Let's
look
at
10
000
scenarios
based
on
a
volatility
at
the
end
of
the
day.
O
E
E
None
of
them
were
viable,
so
I
I
do
appreciate
the
term
that
this
is
kind
of
the
last
tool
in
the
toolbox,
but
that
also
somewhat
implies
that
it.
You
know
it
wasn't
our
first
choice,
which
is
probably
why
we're
all
wrestling
with
all
of
this
to
a
great
degree,
but
I
guess
I'm
just
oversimplifying
the
fact
is:
you
know:
we've
got
a
big,
a
big
debt
to
to
pay
off
and
by
doing
some
additional
leverage,
that's
the
choice
that
the
city
will
make
and
from
the
board
side.
E
As
that
those
funds,
those
total
dollar
amounts,
become
more
transparent
or
even
some
proposed
scenarios.
We
can
certainly
do
the
heavy
lifting
and
work
as
prabhu
had
said.
You
know
we
and
the
city.
Everyone
has
that
experience
of
already
receiving
400
million
dollars,
floods
of
assets
on
a
periodic
basis,
so
I'll
leave
it
there.
Thank
you.
Q
Yeah
you're
asking
all
the
right
questions.
Jeff,
I'm
gonna
give
you
one
tiny
piece
of
data
that
we
covered
on
the
last
board
meeting,
which
is
kind
of
relevant
right.
You
say
well
all
right,
so
I
don't
put
in
pob
or
remodeled
a
250
million
dollar
pob
for
police
and
fire,
and
you
can
say
in
a
typical
market
drawdown
which
we
model
all
the
time
is
how
we
pick
our
discount
rate.
Am
I
better
off
having
done
the
pob
or
not?
Q
Our
reference
drawdown
is
a
25
decrease
in
the
market
and
the
answer
is
you're,
always
better
off
having
done
the
pob,
because,
even
though
the
bigger
pot
went
down
right,
the
forecast
will
say
well,
it'll
come
back
again
if
the
future's
like
the
past,
and
so
the
amount
of
money
you
will
have
to
put
in
is
less
if
the
market
goes
down.
When
you
have
a
pob,
I
know
it's
not
really
clear,
but
again
we
keep
going
back
to
sing
again,
which
is
if
the
future
is
like
the
past.
Q
B
J
Okay,
perfect.
Thank
you.
I
think
this
was
a
good,
a
good
conversation
today,
and
I
appreciate
everybody.
You
know
focus
on
spending
the
time
so
on
the
next
slide.
You
know,
I
think
what
we
I
think,
what
we've
shown
during
this
is.
We
do
have
some
goals
that
are
aligned.
We,
you
know
reducing
that
ual
and
improving
our
funding
plans,
also
mitigating
the
future
volatility
for
the
city
related
to
the
annual
ual
payments
and
using
those
savings
to
you,
know
potentially
amortize
the
unfunded
liability
and
accelerate
that
and
then
also
easing
current
budget
pressure.
J
So
we
have
more
resources
available
to
to
the
community
and
the
retirement
plan
in
terms
of
their
positive
impacts.
Obviously,
a
large
infusion
of
cash
makes
new
investment
opportunities
available
for
them.
We
talked
about
doing
that
once
or
over
time
and
then
also
increasing
the
funding
levels
for
both
retirement
plans
and
reducing
the
reliance
on
city
contributions
going
forward
and,
as
we
mentioned
before,
we
can
do
anything
we
have
to
get
a
validation,
a
positive
validation,
favorable
judgment
from
the
courts.
J
J
So
we
expect
to
file
that
action
after
the
council
takes
assuming
the
council
approves
our
recommendation
on
tuesday.
We
have
60
days
from
the
time
that
the
council
takes
an
action
for
us
to
file
in
court.
We
plan
to
meet
with
the
various
bargaining
groups
before
we
actually
file
in
court,
so
they
understand
and
get
some
of
this
background
information
that
we
have
presented
both
to
the
council,
the
boards
and
through
this
study
session.
J
So
so
as
an
ongoing
conversation,
as
we
mentioned
beginning,
this
isn't
the
first
isn't
the
last
conversation
it's
just
the
first.
We
really
do
having
gone
through
the
stakeholders
group
and
looking
back
over
the
last
10
or
20
years,
see.
Pobs
is
really
the
final
option.
We
have
to
get
to
a
better
funding
status.
J
Obviously,
we've
had
lots
of
conversation
today
about
a
need
for
mutual
understandings,
and
I
think
over
the
last
you
know.
I
think
we
had
a
joint
study
session
back
in
october
of
last
year,
where
we
started
to
talk
about
some
of
these
things,
and
so
I
think,
over
the
last
year
we
have
gotten
better
aligned
in
terms
of
understanding
our
shared
policy
goals
and
objectives.
B
Thank
you,
julia
and
thank
you
to
all
the
presenters
and
all
the
participants,
lots
of
good
information
and
data
and
questions,
and,
as
julia
said,
this
is
going
to
be
a
ongoing
dialogue
and
there's
a
lot
more
steps
that
we
have
to
take
and
before
we
do
anything,
and
this
is
a
good
good
step
in
the
process.
So
thank
you.
Everyone
for
participating-
and
this
meeting
is
adjourned.