Fiscal Sustainability Ad Hoc Committee - Regular Meeting

K. Can we get started? The city clerk is on her way. She's gonna up yes. I think we have a. With three. There's five members.

Yes? There's five public members. Five public members. And one's vacant.

Well, there are no decisions being made today. Just

approve the minutes. Okay. And we do that

Yeah.

I think you're good.

Okay. Okay. Yeah. Start. Call to Okay.

I'll I'll call the order then. I called the 07/17/2025 meeting to order. I'm gonna take a roll call vote really quickly. Committee member Han.

Present.

Council member Charles?

That is mayor pro tem Charles.

I'm here.

I'm so sorry.

That's okay. Thank you.

Committee member Park? Committee member Golombic?

Present.

And then committee member Kim? Thank you.

So

we were talking about that before we started, before you walked in, and they thought three would work. But you're saying four. And I I take your expertise. Absolutely.

Okay.

So we can just go through the presentation, sir. That's it. Yeah. Well, let me Okay. Then can you go to the key elements of the investment policy?

Yes.

Let me get to that for you.

You follow me? Yes. All right.

Let me get to the slide for him.

Okay. Good evening, community members. We're gonna skip around. We'll skip the orientation, the city clerk's advice. When we have a full quorum, then she can come back and go through that. But we're just going to go through our presentation. And we have today I'm here. I'm the Interim Director of Financial Administrative Services for the City of Fullerton. And we also have the Deputy Director here, Tony Smart. And our administrative guru here, Noah, with us.

We also have the consultants from Public Trust. They have some presentations for you tonight. And we as well have some consultants from Perth that will also share some performance information with you tonight. For my company, I just wanted to share with you the Citi's investment policy that is part of your package, I believe, tonight. And I wanted to just point out some key elements of that policy because everything that we do from the Citi perspective or from the Citi standpoint, it's all based on this policy.

In terms of how, you know, we invest, what we invest in and how long we can invest in all of this is derived from this policy. And I also believe, you know, that's the policy that guides functions and activities of the committee as well. So I'm just going to pick several elements of it just to go through. Number one is the purpose of the investment policy. Again, like I said, it's there to guide the prudent investment of the city idle cash.

And we call it idle cash. It doesn't necessarily mean idle, idle. It's just that the cash that we are not using for that point in time. And so instead of leaving it in a regular savings or checking account where it doesn't earn anything, we put it in, you know, some investment where at least it ends citizen money. The other component of element of the investment policy that I want to highlight, and perhaps this is, you know, the most important, it's, you know, the objective of the policy.

You invest in Citi funds, you know, there's really three key objectives. Number one is safety of the principal, safety of the funds. We are not investing to go make the most money. Safety of the principal is paramount, followed by liquidity. And by liquidity, mean that we should be able to assess those funds to be able to pay salaries or meet city obligations as they come due without having to liquidate anything at a discount or pay penalties to liquidate anything. And then yield, which is what you make out of your investments. And for me, you take it in that order. Safety is number one. Liquidity and then yield. We do not chase yield.

You know, somebody walks into my office and says we can make 20%, I tell them, close the door behind you. Safety of principle is critical. And then we added another dimension, their diversification. That's also a good element in your investment. Asset allocation, diversification, all of that enables safety and liquidity and yield. And bottom line is we know who we are. We are the city of Garden Grove. I mean, you were? City both parties never die. Sorry. Sorry. We are the city of Fullerton. Probably better. So

Can I can I pause you there actually? And since this is less formal, right, if you can just talk about all the slides on the screen. And I see we're obviously doing highlights, there might be sections here that say this and aren't on the slide. But do we also have any kind of principles of social equity or any of those things? Know for example that Cal States have the principles by law that they're not allowed to invest in oil companies and other kinds of that kind or do we have any of those restrictions?

We do not have any of those currently incorporated in our policy.

Okay. So I find that really interesting and honestly from my perspective if at some point maybe the next meeting or when you can put this together I would love to know how much of what we have if we had a policy in place that matched maybe what CalPERS has or CSU has, would affected by those policies, if that makes sense.

Yeah. Okay. We can look into that and we'll work with our consultants to

come Thank you.

Up with So the next section there that I want to highlight as a key element is prohibited investments. The policy strictly prohibits us from making any investments in any kind of inverse floaters. And this is like, for instance, where bonds you have inverse relationship between the coupon rate and some underlying benchmark. And all of that, if it smells like a derivative, stuff like that, that where volatility can get out of hand, we are prohibited from investing in this kind of securities. And any security that could result in zero interest accrual at the end of the maturity.

So we stay away from those. And the policy is very clear that we cannot invest in those type of security things. And then Section eight actually goes in a positive way to tell you this is what type of investments that we can participate in. And it goes from A to O there, ranging from A is the United States Treasury Securities. That's really the benchmark.

That's really the where you can invest 100% of your idle cash. And all those restrictions in terms of how long you can invest stays five years, but you can put all that money in U. S. Securities because that's really assumed to be the most secure investment out there. Some people might debate otherwise, but it is the benchmark. And that goes along also with U. S. Government agencies or some federal U. S. Government fully backed instrumentalities.

So we can invest all of our funds in those categories, 100% allocation and we don't have to look at elsewhere. But with government securities and agencies, the issuer, depending on that particular agency or instrumentality, we can only go 40% of our investment in those. So if you go down the line, you could see if you're investing in, say, number E, the asset backed commercial paper, The quality has to be prime. You cannot go more than two seventy days out. And you can only allocate a maximum of 25% of the portfolio to it.

And in terms of a particular issue of that instrument, you cannot allocate more than 5% to any one issuer. So this is all the authorized investment with all the restrictions and how much you can invest in one particular investment vehicle, what kind of quality they have to be for you to invest in them. So this policy outlines it and we follow it. And we also have our consultants follow that. So that's very, very

I have a question also on this.

Yeah, please.

And this actually comes from a constituent at one of my office hours who mentioned this and it's the only reason I bring it up because I think it is not something we want to do. I am not endorsing this in any way shape or form. But can you discuss whether we are also prohibited from investing in cryptocurrency or bitcoin that kind of thing?

I would say if it's not on that list, yes. We it's not an authorized investment. So I would assume we can invest in it. Even though it's not specifically prohibited in the previous section there, nine. But I would treat it as a non permitted investment. And you can explain.

By law, by the state code, the California government code section fifty three six hundred and specifically fifty three six zero one is what allows each of these individual investment types and crypto, Bitcoin, stocks, equities not allowed. So really only thick like very high quality A rated and above fixed income securities, treasuries agencies, high quality corporates are what is allowed by code. It's very limited. That's great. And thank you for saying that. And next time this question comes up with a constituent, I will have a great answer for them right away. Okay. Thank

All right. Next slide, please. Moving along. Okay. The next element there, Section 13, investment maturity. That's also critical here because we cannot invest in anything that goes beyond five years in terms of maturity. So that's our duration right there. All of our investment has to be within that band of five year maturity. And that's critical in looking at all of our investment. And then Section 19, of course, is your presence here.

You know, our policy dictates that we have this City Council Ad Hoc Committee that takes a look at investments and that we are participating in. And, here's the presentations from our investment consultants. I think I don't know how often the committee meets, maybe as often as necessary to every quarter at least.

Each quarter, four times a year.

Yes. Each quarter, four times a year to look at the quarterly earnings, quarterly reports of our investments. I just wanted to point out those elements of the investment policy because I think that's the overriding guidance that we have in terms of how we handle city investments. And with that, I'm going to turn it over to public trust consultants to continue with the report.

Good evening. And I know since it is more formal, usually the folks from PARs present first, so I didn't know how they were listed on the agenda. Are they I wanted to are they first? Would you like me to go through this and Okay. Then turn So we'll jump. Well, good evening. John Grady with Public Trust Advisors. It's great to see you, Mayor Pro Tem Charles, again, and new members. Congratulations on your role. I'm here with my colleague, Sarah, and we're fortunate to be the advisors to serve the city, and we invest your operating funds.

So you'll hear from us this evening, myself and Sarah, and then you'll also hear from the folks from PARS who I'll let them introduce themselves, but they manage your retirement OPEB type funds, which is a completely different strategy from what you just heard for your operating funds. And that's purely by the way that they're designed to be invested. So the idea with this particular next few slides, and there's several, I don't want to be too long winded, but I wanted to just reiterate a little bit of what Kingly just mentioned. So the role of the IAC and your role on this next slide really is that, Mayor Pro Tem, Charles, you just mentioned this. It's the second bullet point on the bottom. One of your roles is to make recommendations to modify the investment policy.

Mr. John, excuse me. Is your last name Gray?

Gray D, I'm sorry. Gray D, G R A D Y. Yes, sir. And we'll leave you business cards as well.

Thank you.

Yes, sir. Your role is to review the city's investment program. Just know that we work closely with the city, not just quarterly, but very frequently to carry out your investment program for these operating funds. And then we meet formally each quarter to review your investment program and I'll talk about that in just a moment. The review, make recommendations, Mayor Pro Tem Charles, one thing that we could do, well there's a couple of options when it comes to ESG type investments.

One is to formally document it into the policy. The other way that you could also do it is to make that decision or recommendation to us as your investment advisor and we put we do what we call code our rules to prevent any investments in certain sectors, for instance. So it didn't if you're going to update your policy, can add that. But if you weren't necessarily going to update the policy, whether it's that or some other strategy that you would want us to put into place, we can implement those strategies and that's one of the rules that we follow. Just wanted to let you know about that.

Thank you. And I just want to say, you know, I'm opening the discussion for it, you know, and hopefully for a meeting like that we might have a fuller committee to be able to look at it. But I do think that it's important that financially we live our values. Sure. And so I'm I'm hoping we can get some movement on that.

Absolutely. And you you wouldn't be the only public entity to put that rule into place just so you know. So we have various rules that we put in place. So it's certainly worth the discussion and we can add that if that's the determination of the IAC. Great.

And so then just looking forward, the next few slides I just wanted to take a few minutes if you allow me to and that's introduce you to Public Trust and who we are and what we do. And so Public Trust Advisors were based in Colorado and we have offices all over the country, including here in Southern California. And our role is to provide investment advisory services to public entities. That's all we do. So the monies that we invest on your behalf is how we invest all the funds for our public entity clients here in California and again around the country.

We always implement just right along your investment objectives as safety first and that's very common of course for public entities no matter where we are. It's safety first. These are taxpayer dollars. And so the first rule is to make sure that we protect those funds. We want to make sure that you have the liquidity.

So what we do, we work closely with the city to make sure that you have the ongoing liquidity you need, whether it's daily, monthly, but then even long term. And we make recommendations and work with you on the IAC to establish balances that are appropriate in your liquidity balances as well as your longer term investment programs, which we'll review for you tonight. So that's important to make sure you have the liquidity you need, again, term and then longer term. And fortunately, I've been fortunate to be in this industry my entire career. I think Sarah has been as well.

We've known each other for over twenty years and now we work together, so I'm very grateful for that. So we're two of your primary relationship managers. You also have your portfolio management team and Mark Kreger is one of the members of that team. He's one of our senior portfolio managers and he will normally join us as well. So you'll get to meet him in the future.

Mark has been managing California Public Funds for almost thirty years now. So you have a very well seasoned team to support the city and we're very appreciative for that partnership. So we move along just a couple of our partnership with you, I think I've covered a lot of these, I'm not going to read these, but our partnership with you is again very communicative. It's to provide reports, it's to make sure that you have the information you need. It's also really to make sure that we call it the sleep factor that you can sleep at night knowing that your investments are managed in accordance with your investment policy in California Code and that these funds are safe.

And that's our role through communicating with you to make sure of that. So there's a lot of other information on here, but that's really what it comes down to is communicating our strategy with you, reporting those to you and making sure we're all on the same page and taking your recommendations and implementing those. The next slide, I've mentioned our team. Our firm is structured where we have individual roles, of course, based on our role within the company, but we all work together. And the team that you see here, again, very seasoned team.

We are one of those firms that we're not all firms do this, but we have a separate credit research team. We put a lot of value in that. So when you think about investing outside of a S. Treasury or a government sponsored enterprise, Fannie Mae, Freddie Mac, it's our recommendation that a public fund dollars not be invested outside of those sectors unless someone's doing credit research on that. We believe that's very important and we put that in place at our firm.

And so we have a fully independent credit research team. And what that means is that when the portfolio team goes to buy an issue for you on your behalf, whether it's a John Deere corporate note or Amazon or Colgate Palmolive, a few names that we invest in, that the portfolio manager cannot buy that security until it's been fully vetted and approved by a separate credit research team and credit committee. And that prevents a portfolio manager, for instance, from just buying a name that may be permitted by rating and maturity, but it may not be a good name and you wouldn't know that if you hadn't done the credit research on that. So even though we're fixed income, very high quality, A rated or better, we still put a lot of value in researching the names that we invest for our public funds clients. Our Chief Compliance Officer, Jen Welsh, has been with us for a number of years now.

She has over two decades of experience as well. I bring her up specifically because we were very fortunate to bring her on board a few years ago as she came directly from the SEC. And so as a Chief Compliance Officer in public fund space from an SEC registered company, it's nice to have expertise on board with our team as well. So just a few folks there. And then this next one is just to give us a little historical perspective, a little background for you.

I'm sorry, jumped over to the public trust resources. This is just a slide to illustrate how we're structured and that it's not just we're showing up from portfolio management and reporting that, but just know there's a variety of resources we bring to the table for you. These are all very integral for maintaining compliance. We also do support with operations and accounting. What that means is, for instance, each month we're reconciling your custody statements to ensure that all the assets, income payments and all the transactions are reported accurately in your custody statement.

And then those are reflected in your public trust statements as well. So reconciliation is very important. And then I've mentioned portfolio management, investment advisory and credit research. So we all work together within this circle, and all of these team members are very integral, again, in supporting the City of Fullerton. Let me pause here and I'll just spend a couple minutes on the strategy.

Any questions from the IAC? All right, thank you. Just a couple more minutes. So just to give you some perspective, a little over ten years ago now, the city was at that time prior to that investing internally. And they made the decision at the time the staff to seek an external investment manager, a public trust advisors was fortunate to be selected for this role through that RFP competitive process.

And really since that time, it's been a very dynamic investment program. It started off where we inherited some securities that were purchased. We then built that out to what we call our one to three year strategy. And through your role here, these will make more sense and these the terminology will make a little bit more sense for you. But that one to three year strategy just means it's a portfolio of fixed income investments that have an average maturity of about 1.8 in general.

And over time, we built that out and added a secondary strategy to a one to five year, which has an average 2.6, so we call it a two point five year average maturity strategy. The reason for that was as we became more familiar with the investment the investments and cash flows of the city and working with Finance Director, Director of Administrative Services, we determined and with along with the IAC members at the time that there was a portion that actually they were comfortable investing out a little bit further because they were more considered even longer term type reserve funds and that further diversified the city's overall investment program. And so what you currently have in place today is that daily liquidity investment program, which provides you daily liquidity through local government investment pools, which are much like money market fund strategies, one to three and then one to five year strategies as well. You also see an enhanced gas strategy. That's one we've used in the past and that really just is a strategy where we're investing out, call it six months to a year, six months to a year and a half and then those securities mature and roll off.

The idea though and the message I wanted to share with you is dynamic program and the balances sometimes shift based on your cash flow needs, of course based on the risk tolerances of the IAC and the Director of Administrative Services. And we follow that those recommendations and we make adjustments in your portfolios, again based really on cash flows and sticking with the investment policy parameters. And then just looking at the characteristics, which I've mentioned a lot of this, so just quickly and Sarah mentioned about the government code, but your policy is very much reflective of California code, 3,600, and that is by design. Now as was mentioned, you have these maximum permitted investments within in each of these sectors. Those are simply put in place to mean that you can that's the maximum of each pipe.

It is not meant to suggest that we're loading up on any particular asset class at any particular time, but what it does allow is for flexibility within the various asset classes as markets change, treasuries become more attractive, for instance, or maybe corporate notes become more attractive in certain markets and allows flexibility to change your investment style and still be within the desired target.

I have a big picture question because we were just talking about our city's annual budget and the fact that we have a deficit and we're pulling from our reserves now. And if nothing is done within the next two years, we're going to be completely in the red and have a actual operating deficit and our reserves are gone. If in those situations, what have is this fund at zero negative balance? What or are these completely separate and how how does that inter intersect with each other?

Well, we have a pooled investment and this includes the general fund money, water money, sewer money and all the individual funds. And when we presented the budget and we're talking about the deficit, we're focusing on the general fund. So yes, the general fund claim to cash will be negative. So most of the money that will be in the portfolio that is being invested, if the general fund were to, you know, be in that position that you just described, you wouldn't have any idle cash to invest, generally So but there will still be some cash flow like sewer, water or redevelopment I mean successor agency and all the other individual funds of the city with idle cash for operations that will still be available for investment. But that's the worst case scenario where you get to the point where general fund is bankrupt.

And again, when you say bankrupt, you're basically saying, you know, you're putting out a whole lot more than you're bringing in. That means you can't pay your bills.

That is what we're looking at two years from now is my understanding.

Yes.

So it is getting close to that. Okay. Thank you.

It's a great question. And that is one of the most important reasons why committees like this in our communication with the city is so important because as I so if your cash flows are changing, we can adjust balances within each of these portfolio strategies. So for instance, if it's determined we need to allocate funds from the one to three or one to five and allow those to mature at some point and move into daily liquidity assets to provide more liquidity, we can do that. We've done the city has been in a very good position over the last several years and you've actually seen your balances grow. And so you'll see that here in a moment on your portfolio strategies why we went from one to three and one to five.

But that is very dynamic and that's important to note that we have the ability to adjust those balances to meet any future needs. Yes, great question. We'll jump over to the next slide and just wrap it. So just quickly on this yield curve, this just shows really the primary investment strategies for public funds on the operating side, again, a little different from our friends who will be presenting from PARs. And generally speaking, and of course by California Code, public entities not only do we stay in very high quality fixed income securities, but we generally stay in a pretty short space.

So when we talk about the long end of the curve in our world, we're meaning five years. Some clients in other states maybe ought to go out a little bit longer, but we're talking five years and less in our world. And that's for a couple of reasons. One is you have shorter time to maturity if you need to hold those securities for future needs. The other reason is you have less volatility, market volatility with these strategies. Of course, the bonds along with the duration, the more volatility you have with those. And so those are a couple of reasons why generally speaking, fixed income operating dollars for public funds are fixed income. And, Sarah, as we're working through this and getting closer, do you have any other thoughts? Have I left anything out from our prior conversations in the introduction? No.

All right. I just wanted to make sure I'm that I'm covering what we've talked. And then so this is really the crux. When we're talking strategy and we're sharing our portfolio strategy with you, these are our primary decision factors for our fixed income programs. I mentioned duration on the prior slide, so that's the top left.

The duration is never really going to move more than, call it, 10%, 15% at the most from the target, that one point eight year and two point six year for your two strategies. We are certainly not trying to time the market. These portfolios are put into place with discipline. And the goal is that the portfolio management team, they're going to make slight adjustments based on trends, not based on a prediction of where rates are going to go. We all know that that never works out.

But duration does play a slight role and but a minimal one. And so I wanted to point that out. When we go to the top right, we see the yield curve. So that's another thing that we want to take advantage of just depending on what's happening with the shape of Interestingly enough, whether it's from us or maybe the PARS folks, we've been in one of the longest, if not the longest period of an inverted curve. We're kind of flat to positive now, but certainly to the Fed funds rate, we're still inverted.

But the shape of the curve plays into how our portfolio team is investing and whether they're investing maybe slightly shorter or slightly longer. But again, the idea is to stay within that targeted duration for that and again, not trying to be too short or too long. Sector rotation really plays into when we're getting outside of treasuries and agencies. Are we looking at particular municipal issues at the time or are we looking at various sectors in the corporate note space? But again, still a very narrow universe within the corporate note space that we're looking into, but that's really what that sector rotation is taking into account.

And then sector selection is not only picking the sector, whether it's consumer or technology, but trying to identify the most valuable name within those different sectors. That finding the sector and then finding the company that we find is most valuable, if you will, or adds the best relative value in that particular sector to keep that diversification. Keeping in mind, it's not all about having the highest yield in that security, it's about being the most appropriate based on our credit research and then portfolio management. So I know that was a lot. I hope that was a good background, not only on public trust, but also on our approach and working closely with you all and with the city.

We've been fortunate to have a long term partnership and through that again being dynamic. And this last slide will tie in, I think we're going to present after the PARS team, but on your two strategies, I wanted to just give you a little bit of a historical perspective where we can see on the bottom right, the market values you can see back in November 2014 was around $50,000,000 and it went higher. You can see it drop back in 2017. That's simply because we allocated some of those funds from the blue line to the green line when we created the one to five year back in 2017. It's hard to believe that was eight years ago.

And then since that time, we've basically adjusted the allocation between those two portfolios again just based on cash flow needs and cash flow balances. And so as you can see, as of quarter end June 30, you're fifty-fifty. These are perfectly split. Prior to that, they were 7525% and then we went with a more balanced approach and then on the bottom right, just to give you an idea of what that looks like historically. So you can see these duration, they don't fluctuate very much once the strategy is in place and that's by design.

So thank you for again, give me a few minutes, maybe a few more minutes, sorry to keep you all, but to tell you a little bit about us and your investment program. As we have this dialogue, by the way, we're not just going through this, but we're doing more of the formal report. We encourage this to be very conversational. So we'll hope you'll ask us questions like you have in the approach. Charles, thank you for that. But that will help us to better frame our message to you for our presentations for your investment program. And so with that, let me turn it over to my colleagues and thank you for the time.

Hello, good evening. My name is Ashley Byrus and I'm with PARS and we also have Keith Stribling from here today to go over investments. Pleasure to be here. Good to see you, Mayor Pro Tem. I was your former student at Cal State Fullerton, so good to see you again. All right. So if we go on to page two, we can see our contact information. Usually Jennifer Mesa will be here with me. She is still on leave, so hopefully meeting will be she'll be here. And here's our contact information if you ever need to reach us.

And if we move forward to page three, here we can see the different parties involved in the one fifteen trust. So PARS is the company that Jennifer and I work for. We are the record keeper, we coordinate all agency services. We are really the first point of contact for the city in regards to this PARS plan. Then we also have the trustee US Bank. They are the custodian of assets. They safeguard all of the money. And then we have PFM Asset Management. They are the investors of the money, and we have Keith here to talk more about that in a few slides. So slide four, this shows our combination one hundred fifteen trust.

So the city is utilizing both the OPEB prefunding bucket and the pension prefunding bucket. Now this is considered a combination 115 trust. However, if you see those assets in the OPEB bucket, the 86,000, those can only be used for OPEB liabilities and same for pension. So pension assets can be used for pension liabilities. You can reimburse the city or pay the retirement system directly with that pension money, or for OPEB you can take a reimbursement again or pay benefits directly to the provider.

And with that, we'll get into the pension side. So page six just goes into some points at, you know, why you want to pre fund these pension obligations. So it allows for complete local control over assets. The city has the ability to decide the timing, the amount, when contributions come in, the disbursement or reimbursement. It's all up to the city on what you want to do with this one fifteen trust.

It also allows for pension rate stabilization and can be used to reduce or eliminate large fluctuations with employer contribution amounts. And it's also a rainy day fund, and I know that you mentioned that the city may be in need of some funds later, in about two years or so. This one fifteen trust can be used as an emergency fund. So you can reimburse your pension employer contribution amount from this fund here. So it does allow for some rainy day opportunities.

And diversification. So the assets in this trust, they are not the same not held to the same standard as your general fund. It is you're able to invest a little differently and use different investments. And Keith will go ahead and talk more about that in a few slides. So page seven goes into this summary of the pension plan.

So it started with us back in 2015, but we didn't see that first contribution come into the January until 2020. Total contributions into the trust is 487,000. No disbursements yet. The net investment earnings, and this is as of May 31, is a $194,000, and that is invested in the balanced strategic blend strategy, which leaves an account balance of $681,000. And we can see a graphical representation on page eight here.

So this shows the contributions. There was one contribution made in 2021, plan year ending 2021. Of that 487,000, no contribution since, but no disbursements. Disbursements. So we can see the growth of the plan ending at $681,000.

Alright. And here on page nine, we can see the CalPERS pension plan funding status. And so the latest valuation that we have available is from 2023. The 2024 valuation should be published in a few weeks, so we're just shy of getting that report. But what we went ahead and did is compare the 2022 numbers with 2023, and we do see some change here.

So what I want to show you is your actual liability did increase about 2.7%, and your assets increased about the same, 2.4% with an unfunded liability at $321,000,000. Funded ratio from that last report was 65.6%. Now what I really want to focus on is the employer contribution amount for the 2023 valuation. So $31,300,000, which was an increase from 2022, about 10%. These reports actually allow for a projection.

So at that last row, you see that in fiscal year three thousand thirty one, it's projected to increase 35.7% at $42,500,000. So that is why agencies utilize this trust is to build and save so that you can stabilize these increased rates. Technically, you are able to take out of the trust, so you can reimburse yourself. That $31,300,000 is technically what you can take as a reimbursement. You don't have that much money in the trust. You don't have 31,300,000.0, but you, in essence, can liquidate the trust if needed to take a reimbursement of that employer contribution amount.

Do you mind if I pause you here and ask a big picture question over here And I apologize if these sound kind of basic, but I'm just trying to wrap my mind around all of this. And I'm

pretty new

to this committee too actually. This is only my second meeting. So I'm really glad all three of us are getting brought up to speed here. So when we look at this unfunded liability of $321,000,000 and we know that our annual city budget is $270,000,000 for this upcoming year. So the unfunded liability is greater than that. How worried should we be about the size of those two comparable things? Are they really not comparable and it's not something we should necessarily put in the it's not an apples to apples comparison?

It's not an apples to apples comparison. I would say that. Because when you look at the numbers, if you take any row there, the actual liability, it's, a number that is actually determined, you know, all the obligations to the employees, present and future projections. It is a going concern. That's, you know, as of that particular date, that's a number.

It varies. Once July 1, it's a different number. And then the asset, it's all the contributions and all your earnings, everything that you have in the market. The market could go up or down. It's potentially even though they projected this down there to fiscal year 'thirty, 'thirty one, we could potentially see the market go way up.

We've had historically in situations where these funds become super funded. I'm not I don't have a crystal ball. That could potentially happen again. But given the way things are going right now, you're basically taking the difference between that liability and assets and saying this is your unfunded liability, okay? But the expectation is not that you're going to fund it 100% today.

So long as you're meeting your employee employer contribution amount, okay, that's really the key. And the whole design with this Section 115 Trust is for any particular year that general fund has some surplus money, you could throw some money into this fund.

So something that we could address if, for example, a half cent sales tax were to give us more flexibility, another $15,000,000, then we could deposit another 1,000,000 into this one fifteen and let that grow and Exactly. Keep Okay. And so that's how we could kind of attack this over time.

Yeah. That's how we can it's it's almost like buying yourself some insurance that if you have a spike in your know, Carpers is saying, City of Fullerton, you need to contribute. In this particular case, say June 30 was $31,300,000 All of a sudden, they say you contribute you need to contribute 35, and there's a jump. You could draw from that fund rather than tasking general fund in that current year and say, okay, I'm going to bridge this gap. Or I could take half of it from here and have the other half.

So it allows you that flexibility in your financials overall financial strategy. But I wouldn't look at that number and say our budget is 200,000,000 this is $300,000,000 It's not apples to apples. Yes. I don't know if that explained.

I was just going to add to that. Difference between this $31,000,000 and this $42,000,000 is sort of where your contribution amount annual amount is moving towards. A lot of people are to put money in this account so that as that moves up, if the money isn't, you know, if you have a tight budget year, can pull some of that difference out over

the Yes, next to bridge that gap. Okay.

No, think that thank you. That was very clear. That helps.

All right.

Great. And we'll see what that 2024 report brings, but that's what we have in the meantime. But if we look here at page 10, this is the pension plan total returns. So we have the year by year returns for the plan. Inception to date annualized at 8.03%, and I went ahead and did pull the June 30 returns.

We weren't able to provide that in the presentation, but that was 8.6. So some pretty significant returns. And then for 2025, that returned 10.91 for a full twelve months. So some excellent returns there. And then I will go through the OPEB side and then I'll hand it over to Keith to go over the specifics.

I'd like

to go

back that one slide. I don't see the 10% you spoke about.

Right. So that is June 30 numbers. June 30,

not on here.

Not on here.

Thank you. Yeah.

All right. So now we're going to transition to OPEB. So if we go to page 12, we can see here some bullet points on why you're prefunding OPEB. So reduced cost, this allows diversification that can result in greater rate of return. The diversification here, options for investing are different than your general fund, which does allow for increased, increased, increased returns.

Improvement to your discount rate. This is really important when looking at the total OPEB liability, and we'll be able to look at that in a few slides. You are also able to list the assets for the OPEB side on your balance sheet. So that kind of offsets your total OPEB liability and creates a more holistic picture in the long run when you're looking at your balance sheets and and can improve credit ratings. So on page 13, this is the latest actual evaluation report.

It was prepared by GovInvest with a measurement date of 06/30/2023. So it's not the most current. These reports are produced every two years, so the city should be working on the 2025 report. But the 2023 is the one that we have, and so we can compare that to that 2022 report, and we can see here that there's really not much difference. In the 2022 report, that actuary did not calculate the inactive employees.

If they did, those numbers would be identical. So not too much change there. On page 14, this shows the total OPEB liability. And again, we went ahead and compared those last two actuarial valuations. What I want you to notice right off the bat is that increased discount rate, So 3.86 at the very top right for that 06/30/2023.

So the actuary did give you a higher discount rate, which is great, and that did decrease your liability slightly. So we see for that 2023 year, 26,200,000.0 versus that 26,500,000.0. Fiduciary net position or your assets is at 70,000 and the net or the difference of those two is 26,100,000.0. Now your funded ratio for that 06/30/2023 date was point two seven. But what I went ahead and did is calculated the assets that you have in the trust as of 05/31/2025 at the way bottom there, and so we can see approximately point 33% funded.

Not large difference here, but everything counts, so I wanted to point that out. Your actuary did determine and actually determine contribution, which is what they recommend that the city puts into the trust every year in order to be fully funded. That number is 1,800,000.0. So the city has not been putting that into the trust, but that is the recommendation of the actuary.

Thank you for providing that number. That is gonna be incredibly helpful.

Yeah.

This is something that our residents are really concerned about. Honestly, it has come up that they're worried that we're gonna go bankrupt because of the pension system. And so being able to say, well, we have a number 1,800,000.0. If we could do that, we would be in a very good position. That's gonna be helpful. Thank

Yeah, exactly. And you know that 2025 report might have a slightly different number, but at least that gives you something to go off of. And then lastly, the annual benefit payments at 971,000, and this is what the city pays for OPEB in a given year for current retirees. So this is you're paying as you go, not prefunding, but just paying the bill as it's due as as one would say. This is what the city can take as a reimbursement from the trust if ever needed.

Alright. And on page 15, very similar to the pension slide, we see total contributions 50,000, no disbursements, and net investment earnings 36,000, and that account balance at $86,000. Same investment strategy as a pension. And we can see here, made that first contribution in 2018, that first and only contribution, no activity for future contributions or disbursements resulting in that total assets at 86,000. And then my last slide before I hand it over to Keith here, so this is the OPEB plan total returns.

So we can see inception to date annualized, 07/1963. As of June 30, that number is 8.02, and again, that's not in this slide. I just went ahead and did that calculation. And then the full twelve months returns for the portfolio for June 2025 at over 10%, and that, again, that's not in the current presentation.

All right.

Any questions for me?

No, but I'm going to apologize to Keith. This is not anything about you. It just happens to be the time I need to head out and good stopping point. Two more minutes?

Two more minutes. I'll go back to page 14 real quick.

I really actually am finding this very interesting and I wish Just I could stay

a couple of quick things I want to mention on here. So the discount rate, the higher the discount rate, the lower your liability. So when you have, know, not much funding in it, then it's gonna have a very low discount rate, which is gonna inflate your liabilities. If you can start to put money into the trust, you'll have two things going on. One, your assets will go up, which lowers your liability.

Two, you'll have it invested in a way that the actuary will start to raise that discount rate. So you get almost like a there's a I don't know where that inflection point is, but there's an inflection point where you really see this liability come down quickly if you can start to get a funding strategy to do that. And the other thing I would mention is is the OPEB shows up on your balance sheet. And this, trust does actually offset it on your balance sheet. Whereas in the pension side, this trust, you know, for whatever reason, the people that decided not to, it doesn't offset on your balance sheet.

So, you know, and so, of course, if you have stronger balance sheet, your financing costs are lower. So that can also be helpful for the city. So I just want to mention that before you take off.

I'm it's my first meeting. You say a funding strategy. Who comes up with that? We do.

It's saving is a habit. I don't know another way to say it but it's true for your own 04/2001 or your retirement. It's no different here. It's not an easy thing to do. Comes down to making choices and but, you know, to the whether you can get a quarter cent sales tax and yeah. Yeah.

Of course. Yeah. Been advocating for need

to work with mister Grady on that funding strategy. What do you think?

Yeah. Well, if I can just clarify, I mean, the committee can certainly make recommendations to the city council. And if the city council deems it appropriate at a time they can decide to allocate more money to put into this trust. And I believe Uh-huh.

I believe Fountain Valley passed some type of sales, partial small sales tax and they used that money to fund these both of these plans and there's a lot of different things

we We're can

talking about putting two measures on the ballot. It will be up to this committee to be able to steer money at least advise the city council to steer money to this investment. So thank you.

Yeah. All right. I'm not going to go through all of my slides but if you'll go down to slide 3.1 we can start there. I think there are number 3.1. Keep going.

I'll just start with the performance slide. So this performance is through March. The timing of this meeting is just a little bit too early to have the June report. So I'm not gonna spend a bunch of time on it because it's already a bit obsolete. I will tell you that I did get a glimpse into the numbers. And for the quarter, the balance strategy was up about 6%. Year to date, the balance strategy is up about 5.5% and for the one year period, was up about 10%. So it had a pretty good period. The year started off kinda slow. Interest rates went up.

That affected, everything. So our interest rates actually came down a bit in the quarter, but then they spiked back up. So it's it's been a bit volatile. Just, you know, if we go back two slides, we'll talk about, some of the portfolio positioning and and the economy real quick. Just one more.

So we call these our our heat maps or, you know, so obviously, you're on the red side, that's a danger zone. If you're on the green side, that's good. In terms of the economy, fiscal policy has been very stimulative. Deficit spending for some time has been as high as 6% of GDP, which is just to give you some point of reference, that's sort of the type of spending you would expect during a recession or during wartime. And although there are wars going on, we're not technically involved in any of them.

So it would be if we were in a real ground war. So spending has been very high relative to GDP and that has been supporting growth, but it's also inflationary. Monetary policy has been restrictive ever since the Fed raised rates five twenty five basis points. They've backed off a little bit last year with a 50 basis point cut in September and another one twenty five basis point cut later on in the year, maybe it was November. But then we had an election and Trump was the won the election.

And he basically ran on the principles of tax cuts, deregulation, immigration, and tariffs. Those are kinda his four economic pillars if you wanna for whatever you wanna call them. Tax cuts and deregulation are both, stimulative to the economy. You get more money in people's pockets. They spend it. That's just the way it is. Immigration, depending on what that means. If it's closing the border, that's one thing. If it's sending people back, that's another thing. So far, it's it's become a bigger issue, but in the beginning it didn't look like much.

That can be inflationary. Tariffs of course are inflationary. You know, there's no getting around that. Since we've really been this year in a policy driven market. So, tariffs have certainly took the center stage at the beginning of the year. First, they were based on fentanyl. We wanted to control fentanyl coming in. Then they were, to bring back manufacturing jobs. Then they were reciprocal tariffs. So you tariff me 10%, I'll tariff you 10%.

And then they ended up on Liberation Day, which was I think April 2 being based on trade deficits, which was quite different than, what had been expected. This caused a bit of concern in the market because they were going to be much higher than expected. That would be quite inflationary. Subsequently, this has all been modified and softened, and the market has taken note of that. And then we had our big beautiful bill that got passed, is a tax and spending bill.

Should be growth oriented, but it also could be inflationary. You know, anytime government spending a lot of money, it's just the fact that it's you know, the economy is gonna run hotter and that's gonna cause inflation. And then we got to the ICE deportations, and, that's gotten to be more expansive than probably most people thought it would be in the beginning. I think, the idea of closing down the border and knowing who's coming into the country, I think most people agree, is a good policy. Also think, sending back criminals is a, you know, pretty popular policy, but sending back everybody for any reason, maybe that's, not as popular.

So, you know, think they're gonna find their way on this and some balance in that. But all of these things, really the tariff policy, the spending bill, the the strength of the economy, the unemployment is low, and, you know, it's trended a little higher, but it's basically pretty strong. The economy on its own is pretty strong. That's kept the Fed on hold. So the Fed wasn't an easing bias, and, then they backed off on that, and they've been on hold since this year.

There has, also been some notable tension between the president and the Fed chairman, and, and I'm not sure that it's fair particularly to the Fed chairman. He's it's a committee that makes that decision. It's not a a person. I mean, he's certainly influential in that decision making process, but it's a a group of people that are making the decision. And you can see the dot plots and where people are, and, they're not all it's not like chair piles up here and everybody else is saying cut rates.

It's it's more balanced than that. Through it all, the stock market has remained undeterred. You know, I think they've decided that Trump shouts first and starts high and then moderates his position. And so they're just kind of trying to ignore it and looking at the economy growing and the economy is still doing well. And so the stock market has done pretty well.

Bond yields have the yield curve was inverted for a long time, probably a couple of years, which I think is longer than it normally is inverted. Inverted yield curve usually implies a recession is coming, but recession never came because we, you know, government spending just pushed right through it. Now the yield curve is steepening with longer rates going up, shorter rates have come down a bit. There's an expectation that the Fed will at least cut two more times this year, but, that's not for sure, but that that's kind of where the market believes and so they believe that the yield curve will be steepening as that occurs. You don't have any questions there?

I'll move to the positioning of the portfolio. Okay. So this is a oh, one more back. This one I call, I'm a golfer, so this is a fairway slide. And as you can see, all the golf balls are right down the middle of the fairway.

We are currently positioned neutral to our strategic asset allocation. And if you think that we're just sort of balancing tight financial conditions created by higher interest rates and, policy uncertainty, you know, those would be kind of the risks with, fiscal stimulus that supports, soft landing and eventual rate cuts from the Fed. You know, I I think most people believe the Fed will cut rates, it's just a matter of when, whether it's this year or next year, it's coming. So that's all I have. Thank you so much.

Thank you.

Alright.

So I have a a quick question. I don't know if this is for mister Grady or mister Kingsley, is it? So you work with other municipalities around Orange County. How is our health financial health compared to other or similar municipalities with the similar demographics?

That's a good question. From the investment advisory side, and I'll ask my colleague to answer it, that's probably more for Mr. Okureki. From an investment program perspective, we believe you're in very good shape. And we don't say that just as your manager, as your advisor.

I say that from the perspective of having been fortunate to work with you for so long to see your balances grow, to see this very diversified investment program that you have in place, and this is kind of getting into some of my comments. But really, you have nearly half of your assets in liquidity funds and then the other half invested between one and five years. That's a very balanced approach for a couple of reasons. One, it addresses Mayor Pro Tem Charles concern if there is of any need to withdraw some of these funds for annual expenses. The other thing that it does, and this is what we are big believers in, it's really our philosophy at Public Trust, is finding that balance that allows you to potentially earn higher earnings over time through these various interest rate cycles, but also making sure that you have those funds available when you need them.

And so utilizing your liquidity in this one to three and one to five, we believe, is a great approach. Many public entities use that. Maybe not always have a one to three and a one to five. Some have a one to three or some have a one to five. You use both of those buckets.

The other thing that it does and, Claire, please jump in. But it's when we look at these various interest rate environments, when we went from zero to 5.5, the most aggressive monetary policy in generations, your liquidity funds really benefited from that. If you had a majority of your assets long term, even if you didn't really need them, those I'm going to be careful with my word, but they got punished, right? We know the fixed income markets got punished in that time. And so your liquidity funds were immediately reflecting those higher rates and taking advantage of that.

And that's a great thing. Now your longer term portfolio, which we'll talk about, you continue to reinvest. I I know I'm getting a little long winded, mister Golomik, but it it kinda ties in. The longer term portfolios have benefited greatly. It's just taking a little longer.

Now where that will start to make sense is when the Fed when they do, we don't know when or by how much, but eventually they'll likely have to cut rates. Your liquidity funds are going to feel that immediately. And these portfolios, which have a great majority of them of the assets invested at 3.5% to four percent to 4.5% are going to hold on to those yields for, call it, two to four years on average. And so that is where we believe when you look at what is a healthy program, in my opinion, in my experience, a healthy program is one that, as Mr. O'Korecke started with, making sure it's safe, but making sure you have liquidity, but also having this balance and so you're not caught off guard in any type of market.

I hope that was and that is one we recommend. When we compare let me pause, you're going to ask a follow-up. I'll pause.

Okay. Thank you. Appreciate that.

So did I Yeah.

Was yeah. My I, you know, my I I understand her concern, you know, mayor pro tem Charles. We're looking at a train wreck basically in in in two years. What she's saying is that is that what I'm hearing? Well,

let me just put that in context a little bit. We just adopted a city budget. And if you look at the general fund budget, our general fund budget was balanced and adopted based on our best estimate of revenues coming in, but with a little bit of withdrawal from reserves to close the gap. So we don't have a deficit budget. But beyond that, before we get to the reserves that we drew down to balance the budget, the city was able to meet the reserve requirement of 17 within the general fund.

And part of the money that is invested here is that 17% of general fund money that is set aside. Also we are saying, you know, when the budget was adopted is that you cannot continue to eat into your reserves, which is your savings account, because it can only last you for a couple of years. And then you're in that position where you're truly naked. You know, you don't have any more savings, you don't have any more reserves, and you're not bringing in as much money as required to perform services for the citizens of Fullerton. We don't sell gadgets.

All we do is provide services. So that's really where we're saying that, you know, something needs to be done in those intervening years, you know, between now and a couple of years that some decision needs to be made, whether it's a sales tax measure that addresses infrastructure because everybody complains about the, condition of the streets. That's a big concern. But as currently constituted in our financial situation, there's not a whole lot more that we can Citi can do in terms of allocating money to streets beyond what it's already doing with the infrastructure ordinance that was passed a few years back. So with all of those things, that's when we're saying, look, we're headed for a disaster if you don't do something between within the next couple of years.

And we can continue next year, you can have a balanced budget, but you're to draw down a bigger chunk from your reserve. And then the following year, you're exhausted. But that's really where the trend is headed.

So does this committee and and we may not have the answer. Are we gonna be looking at spending as well?

No. Well, this committee is strictly looking at the investments.

Okay. Understood. I got that part of it, but there's two components to this. Yeah. And what we know, where you keep, you know, you keep raising taxes and whatever trying to get this from the people, but, you know, where is all this money actually being spent to cause us to to tap into these reserves? So Oh, yeah. I know it's another conversation from probably another committee, but that's where my mind went right away.

Right.

So I understand we're in investments, and I I get it a 100%. Yeah. But, you know, it's gotta come from somewhere. Is it going out the back door? We need to figure that out too, I think. Right. And I don't know, I guess I don't know who that would be, to be honest with you.

Well, we did have a committee, a separate a different committee, a finance committee that looked at all of that. And part of the recommendations of that committee was, you know, what was brought forward to counsel in terms of the sales tax measure to go and exploit. So that committee met for six months during the whole budget development process to make those recommendations. This committee basically is saying all the idle cash we have, which is includes the reserves for general fund, reserves for the other funds and some of the idle cash all the funds we have that you look at how it's being invested. We are not remember, safety is number one here.

We are not looking to balance the budget with money from investments. Yield is number three on that list. How much money you make out of this is just to make sure that the investments here are consistent with the investment policy. That is safe, number one. And then number two, that we provide for the adequate liquidity, which means if we have to pay salaries to police officers and firefighters, we don't owe them, that we can make those payments.

If we have contractual obligations that we can make them without going selling investments at auction or whatever, that it's orderly and that we have the cash we need to make all these payments as they become due. And then yield, how much we make, it's important, but it's not the overriding goal of the investment strategy here or the committee.

Thank you so much. I appreciate that.

Noah,

is there like an official adjournment too or how is this process?

So usually

capital, does that help? I mean

Yes, sir. Yeah. You don't know you want me to You a summary. Yeah. So and this is thank you, mister Okereke. So we're gonna skip through the eco update. What we'll share is one of my jokes, you know, so when we have the PARS folks here, we've been working together as two managers for a while. So what we learned is we're not going to both give you an eco update. It's very similar even though they're more equity driven. But what I'll just mention is over time through our presentations, we'll look to you for guidance on how much we cover, what indicators we cover.

They're very simple inflation, GDP, yield curves, that sort of thing. So what we'll do so we can be respectful of your time is just do a quick summary of your investment portfolio. So I'll be quick. As I mentioned, you have two long term portfolios that we manage, one to three year. This is a summary page on your one to three year portfolio.

Again, they're both equally balanced with assets of just over $58,000,000 This portfolio, if you look at the characteristics on the top left, you can see the duration as right there, that one point eight year target we mentioned. Again, that's not going to deviate too far from there. A couple of others that we'll point out, if you go down the right column of the June 30, you can see book yield, for instance, 4.296, so just slightly lower than last quarter. The other one though is market yield. And so book yield is going to trend higher or lower just based on trends and reinvestments.

The market yield is going to be much more volatile because it's what's going on in the market. And then your benchmarks, so each of these portfolios has a benchmark that we're measured against and our goal is to meet and of course exceed the benchmark, but you're never going to really see huge moves hopefully either way because if that's the case then you're likely not managing it to the appropriate benchmark. And so what we'll highlight as we meet with you is, for instance, I'll just go through, we reinvested $7,300,000 or 13% of this portfolio during the quarter. Generally speaking, we'll invest reinvest between 815%. It's all going to be fixed income.

This particular quarter, we actually just reinvested in all treasuries. We were looking at the longer part of the curve just based on the duration of the portfolio, the existing holdings. So we focused in this portfolio between two point five and two point nine years is where we reinvested. Yields were between 3.73.9%. We'll also point out income is important as we've been talking about that.

These portfolios are not designed to just seek as much income as possible as we've repeatedly said. But the good news is as rates have risen and we've reinvested in these higher yields and lower yielding securities from a few years ago we're rolling out, the quarterly income was $625,000 If we talk year to year since this was your end of your fiscal year, I've got great news. The portfolio earned about $2,400,000 for fiscal year '25. It was $1,600,000 the year before, so a 50% increase. We'd like to take all the credit as your manager.

We'll take a little bit, but we're fortunate that lower rates were offset by much higher rates as we reinvested. But I say that that's very helpful for income and great. And by the way, that goes right to my comment I mentioned about having these diversified strategies can really help. So great news on income front. And then the next page is just your total return, the benchmark. We've met and outperformed the benchmark for quarter to date out since inception, which is at the bottom there. I won't go through too much detail. And I'm not trying to rush through it. I just wanna be respectful. But as you have a chance to review these, we'll look forward to having a conversation that focuses really more on what you want to hear from us.

But total return is how we're measured and how the portfolios are doing versus our benchmark. And this one has done well over time and again, meeting that desired benchmark rate of return. And the next page is just showing you this portfolio. I mentioned one to three. It's one to three. All the assets are typically invested between one and three years. Generally when they roll lower below a year when they get closer to maturity, we're selling those securities and reinvesting between one and three years, generally between two to three years to keep that disciplined duration strategy I mentioned. You're well diversified in this portfolio. There's a top 10 holdings on the left hand side. We've been really focused.

This is for both portfolios, one to three and one to five. And we've been disciplined with treasuries mainly because if you look and I'll look forward to getting to know you all more and know your backgrounds. But from fixed income space, corporate notes in the safest, highest rated, the yields have been extremely narrow. There's just so much demand for high quality corporate notes. It continues to drive up the price and down the yields, supply and demand. And so we've been very selective. And we like corporate notes. We think they're great diversification. We like municipals. But when we don't see what we believe is enough of that relative value, we'd rather buy a treasury than buy the lowest yielding corporate note because when that does widen, that gives us a chance to then get out of treasuries and get into corporate notes.

So just a high level analysis. The next page, we normally spend very little time, but it's good for your record. You're very highly rated. One comment I'll make is during the quarter, you may remember Moody's finally downgraded the US treasury several years after S and P and Fitch had done that. S and P, I think, 2011, So it did there was no market impact. You may remember the day they did that on a Friday. Monday morning, the markets were moved a little bit negative, but by the end of the day, they were neutral. The the joke I my personal joke is S and P downgraded them at at when we were at 10,000,000,000,000 in debt. Moody's decided to do it at 35,000,000,000,000. So what's the rhyme or reason?

I I don't know. But so that's a little background there. And again, just portfolio focused on treasury, but we like corporates when we can find. That's a quick review of your one to three. Your one to five year, very similar story except you've got a duration on this one of two point five years as we mentioned, but again same balance.

When we look at that, we reinvested about 9% of the portfolio. So what you'll normally hear with this strategy because it's got a longer duration, we generally reinvest a little bit less on a percentage basis because it's slower to move higher, but then in a declining rate, it's slower to move down. So we reinvested $5,000,000 again really focused on treasuries. And on this one, we reinvested as far out as four point nine or five years for this portfolio. The average of the investments we did of that $5,000,000 was actually close to four years.

So again, both portfolios really liking that longer term, holding on some of those rates. And again, a significant part of these portfolios invested at 3.5% a lot over 4% to hold on to that. Similar story, the income on this portfolio for the quarter increased from $148,000 to $512,000 just on a quarterly basis. On an annual basis for fiscal year end, 1,900,000.0. And the year before, it was 6 and $39,000 so significant increase there.

So overall, nice increases in income. This portfolio also performed in line and has outperformed its respective benchmark both in the near term and if we go out long term. And so then the primary difference between this and the one to three, you can see they complement each other with that one and two and two to three year area, but we then diversify a little bit with close to 40%, 39% in the three to five year area. And so when we look at that, Tony, Ms. Smart, if you wouldn't mind, we'll jump to the aggregate, and I'll give you just a couple of statistics on your aggregate statement that you have.

And what that does is that it also includes, your LAEF and your liquidity balances. So when you see your portfolio, generally like to finish off to let you see what it looks program looks like overall with liquidity. Overall, you're to have a one point five year duration. So again, that balance of liquidity and longer term is very balanced at 1.5. You see going from March to June, you go from 192,000,000 to $222,000,000 That's a pretty big jump, $30,000,000 or so that has everything to do with your tax revenues collected during the period, and then you'll spend those down, and then you'll collect additional tax revenues in the late winter, late fall, early winter.

You can see overall, this is where it's interesting, the net income $2,200,000 or so, just right there on that bottom right. It was actually the same the last fiscal year. And so why is that? Well, we've seen your long term portfolios continue to increase in income. Your liquidity funds actually came down a bit because the Fed lowered the rate from 5.5% to 4.5%. And when I was looking at that, had to do a double take just to make sure the numbers were working. And that's just essentially what it was. You still have great income. You've just you had lower income from liquidity, higher income from your core portfolios designed to do what it's supposed to do. Again, very diversified overall in your asset allocation.

And you can see that one more slide, I think. We go to the there we go. And so just to share with you what your overall program looks like, that dark blue bar there, 48% or just shy of that liquidity balanced out by that one to five year area of the curve as we started our conversation with all very high quality investments. We have great conversations again with Mr. Okuricki and Ms.

Smart, and we meet with them before our meetings with you all to make sure that everything's in line and with regard to your liquidity and cash flow needs. Quick summary on that, I hope that was helpful. As you have a chance to review, we'll certainly again kind of hone in on what you all like to see. And Sarah is not going to get off the hook next time. She's going to join me and I'm not going to do all the talking, but we're as we always say, we're grateful for our partnership with you with you and all, and again, forward to working with you in your role in the IAC.

Thank you. You. Ask all the questions. Quick would you mind just a quick background on on what what you do? Oh, okay. Great. Great. Okay. Great. Nice. Alright. Okay. Great. Great. Mister Hahn.

I've run five different businesses for thirty years. The last one was a tree trimming business.

Oh, yeah.

My body broke down. So I went back to college, and I'm an educational psychologist for the past fifteen years. It's my second career.

That's awesome. It's nice to meet you both.

Pleasure is mine to meet both you Mr. Grady and Ms. Meacham. Thank you for coming tonight and certainly bribe the blue bar going to the right. It helps me to keep up where you are. So know, years of your talking has paid off with your experience. I'm able to follow. So I appreciate your description because it is helpful.

Great. My pleasure.

And then as I warm up here it will be I still expect that but I'll be more up to tune and up to speed.

You so much. Thank you.

Yeah. Thank you so much and I want to add too if you guys have any specific questions between meetings, our staff is available. If you direct any questions you have to us and we could get your answers. And I'm looking forward to the next meeting. They'll probably go through this again and, you will have opportunity to ask a lot of questions.

But, seriously, if you have any specific questions or anything that you want us to explain, between now and the next meeting, you could reach out to the administrative services department, either to the director directly or the deputy director or to administrative assistant, Noah. And we'll get you answers to whatever questions that you have.

All right, thank you Mr. Kinsley.

Kinsley.

Yes. And Ms. Short both. Two things that I have. First off to Mr. Noah. When is the agenda first available for a Thursday meeting?

So agenda needs to be posted at least seventy two hours before the meeting. So I think it was posted Monday, Monday afternoon.

And you generally email me. Right?

I email it and then I post it on the on

the website as well for

Thank you so much. Mhmm. And then I heard Mr. Grady say he met with Ms. Short before the meeting. Are you available, Ms. Short? I attend to arrive about four each quarter. Can I meet with are you guys available at four And how do I where's your office?

We are on the 3rd Floor.

3rd? Okay. Are you administrative? Yeah. Okay.

But I to be full disclosure here, I'm in Terum, as you know.

I know you are. I remember that when I first introduced

We're to in the process of recruiting a permanent person. So, yeah, 3rd Floor, director for administrative services, and you can certainly, you know, reach out to us and we can schedule a time with you.

Thank you so kindly. Appreciate that. That answers all my questions. Thanks for all being here. Thank you. And congratulations to David for his appointment. I appreciate you being here.

Thank you. I said I got the gavel over

here. We

are adjourned.

Yeah. We I think we're adjourned. Yes. Is adjourned. Because we don't have a chair usually. We don't have a chair courtroom's that would adjourn the meeting. But we were supposed to vote on the chair and vice chair today. But since there's no quorum, we'll save it for the next meeting at October 16, which is Thursday.

Okay. Thank you so much, everybody.

Thank you.

I can do this for you. The meeting of the Investment Advisory Committee is adjourned. Our next meeting is scheduled for Thursday, 10/16/2025, at 05:30 in Council Chamber.