Government Performance and Finance Committee - Regular Meeting

All right. I'd like to call the order of the Joint Government Performance and Finance Committee and Audit Advisory Board meeting of 04/21/2026. Court, would

you please call the roll?

Board member Ball? Absent?

Here. Oh, he's here. K. Sorry. Thanks, Jeff. Also known as parents. Board

member Claus McGann? Here. And board member O'Laughlin?

Here.

Vice chair Bushnell?

Present.

Council member Ramov? Here. Council member Sjedalbe, Appsen,

and council member Wacha? Here. Chair Heinz?

Here. Alright. Well, thank you for being here, Jeff. Appreciate you joining us again. We you're off for the third agenda item, so we'll we'll quickly do the first two, and then we'll get to the audit advisory board piece. So let me know. Yes. I'm just recognizing our audit advisory board membership first before I went on to the rest of the agenda. We'll now move on to public comments. Clerk, will you please read?

Request to speak during public comment for items on the agenda. Please sign up in the current room if you have not done this already.

Alright. Clerk, has anyone signed up to speak virtually or in person? It's gonna be in person. So anybody sign up online?

Yep. We could. Online.

Alright. With that, we'll go ahead and close for the comment. Alright. So we have three briefing items with us today, the third of which is the part of the the audit advisory board agenda. So before we get to those two, we'll start first with briefing number one, which is Tacoma employees retirement system overview. I'd like to call him Catherine Marks from retirement. Catherine Marks morning, Catherine.

Good morning, everyone. As as mentioned, I'm Catherine Marks and the Tacoma employees retirement system, retirement department. Today, I'll work on the for opportunity to present today. It's my first year. We will be covering the overview of CHERS. So, fortunately, we don't need to make the board. It's the council. Doesn't need to make a decision, so this is for purely for informational information purposes. Next slide, please. So next slide.

So CHERS or Tacoma Employees Retirement System is a CHERS is a defined benefit plan, and there will be technical terms here. So I'm gonna explain some terminologies here. It may not be common. So define benefit plan or DB for short. That is very common, or that's what the type of benefits that we have.

And that provides a guaranteed lifetime benefit to its eligible members. And if the members elect to make it provide a lifetime benefit for survival too. It is based on a formula, so that's why we call it defined benefit. And, again, it's guaranteed for life. In comparison for a private sector, the common one is defined contribution.

So what is defined is the contribution. There is no guarantee return of your money, so when you retire, depending on how much you contribute. And base depending for us, it's the employer that take on the risk. So we promise our members that that is the benefits that you're gonna get when you retire, then it is the it is the responsibility of the employer to make sure that you have enough money to pay for that promised benefits. The our management, we have mostly the non uniform employees of the city.

So we have the general government. We have the TPU, and we also have about 8% from public member agencies, so Tacoma libraries. The Tacoma First County Health Department, they are our members, and also other employees. We also roughly 80 are members, public member agents. In terms of the our demographics, currently, we have about 3,400 active employees.

Majority of SCF are employed with the city or in conservatives, or we call them active employees. We also have retirees, and they could be former member former yeah. One of the I just one of the time. But retirees, it could be like like John used to be an employee, retired, and getting the attention now for people that remember that, unfortunately, they didn't get they enjoy enjoy retirement and and and that passing, and they provide a survivor benefit. So we have that as well.

And we also have a we call it preferred, and you will you will see that here. They used to work either in the city of Tacoma or other other agencies, but they left this they left employment, but they are entitled to a future benefit. So that's what call them for for members. So those are the types of members that we cater. Our funding sources, we, as employees, contribute.

Our employer contributes as well, but the biggest sources of our funding is actual investments. About 70% of our funds comes from investments. It will take about ten to twelve years to recoup both the employee and the employee contributions. After that, we're tapping into our investment. I have retirees that been retired for several decades, forty, forty five years.

Right? That that that's our sources of funding. And to give our council members some context, how rich of our benefits the tourist benefits is, so in Washington State, three first class cities, Seattle, and We have a we have our own retirement system. So Seattle, they already have two teams. In 2017, I believe, they they they offered that second year.

And for Spokane, they already have four. For Washington State, all the rest of counties and municipalities, they are under the Washington the umbrella of Washington State Retirement System. So our our equivalent is having employees retirement system. So they already have three tiers. First one, two, and three.

And for first one, which is equivalent to the benefits that we offered, they are they were closed in 1977. So we are the only one that has only one tier, and this is the reason why, and you show it later on, that it's not good position and wanna take us that way. So alright. Next slide, please. So this analogy, reservoir or water tank sometimes I have a hard time pronouncing reservoir.

It's a water tank analogy. Depicts how we find the the the truths. So we have inflows here. That's better color. So you will see there are different pipelines here.

So there's the blue dark blue on the left side, the upper left side, and the lighter blue on the lower left side. So those are those represent contributions to both the employee and both the employ the employee employee of contributors. And you will notice that there are valves on it. So it means that they can be turned out, could be turned out. So there is some sort of control by the city council with the recommendation of the tourist board administration.

The other pipe is the yellow one, and that represents the investment income. It's the our investment income, once the board you know, we select the managers to manage the money, we select what type of investment they handle, Pretty much, we will be in the waiting. We will just have to take what the market gives us. So that's why there is no valve on that yellow pipeline. It's a title because we will just be waiting what the market gives us.

And then the bottom line of the water tank, we have obligations. So the smaller pipeline, that represents our expenses. So that's our admin expenses, our management fees, And then the bigger one is our payments. So benefit payments and loans have refund to our re refund of contributions. That is the lion's share of our outflows.

So how this works is that it's a balancing act between contributions, between investment income, and our our outflows, expenses, and our benefit pays. Next slide, please. So on a yearly basis, we have actuaries. So Miller Mans is our actuary, our consultants. They do this we call it evaluation study.

And, really, it's it's like a financial checkup. They look at our assets, so our investments, how much we have, And then they looked at based on our numbers, based on different assumptions, how what is the the it's a lackability. So the the value of our future benefit payments, and then they compare it. They come up with one of the output that they produce is, we call it, funding ratio or funded ratio. And then there's a ranges here that kinda guides our board what to do when we reach to a certain level.

So our board, and we have one current board member here and former board member here, they use the benefits and funding policy, and that really serves serves them well throughout the years. It kinda help us decide they help them decide what to do when we reach the certain point. And so there are three ranges here. So we have above 120%. That's the green zone, and that is means that it's a strong we are in a strong position.

There are certain actions that the board can do once we reach that level. We're not there, obviously. One thing that they could do is reduce reduce risk, so change some of our investments, make less but less risky investments. So that's one thing they could do. And then or they can consider recommending reducing contribution rates.

And we've done that in the past, and you you you folks will be able to see that the changes of our contribution rates. Another thing too is benefit improvement. Consider enhancing our benefit benefits, and we've done that as well in the past. The middle range, it the 95 between 95% to 120%. So it's the yellow zone. It's for the most part, we call it no action zone. So that's the safe one. Still stable. And we may request raising contributions, but it's it's it really depends. There are other metrics to consider for.

But for the most part, the yellow zone is the no action zone. And then if it's below 95%, then this is something that the the the board will be recommending correcting actions. So the high so the funding ratio or the funding ratio, the higher, the better. If we have above 100%, it means we have enough more than enough assets to pay for our for future obligations that it's below 100, then there is a we call it unfunded liability or deficit.

Is this done

annually, establishing something? Correct. Yes. So every year, our board has engaged with an consultant to do this work. It's a very complicated process. Very, very detailed process. Alright. Next slide. So where are we at right now? So here, I'm providing two valuation data.

So the last one that was completed in 2025 and then the current one that's being wrapped up. So it's still an estimate because they're still working on it. The measurement is as of the end of the year. The values of our assets is is determining that, and our actuary is still working on wrapping up 2026. So that's why you can see that as an estimate.

Remember, this is an annual checkup that our actually, they do it every year for us. And the you will see another technical terms here, actuarial value and market value. So actuarial value is so remember, a market, they goes up and down. If you look at your assets, your investments every year, every month, or every day, pretty much, it goes up and down. And it's really hard to plan for our contribution rates.

It's hard to budget and things like that. So in practice, and this is very common, our actuary, they they call it smoothing. So it's like average, and and we they do it for us for four years. So it's to smooth out the fluctuations in the market, and that was we called that that basis is actuarial value funding ratio. So for 2025, our funding ratio for actuarial value is nine was 95.5%.

And in twenty twenty fifth, again, this is only an estimate, it's 95.3%. The other value is using the market value or the fair value. So it's a snapshot as of a given time as of the end of the year. So what we have at the end of that year? For 2025, it's nine was 93.9%, and the estimate for 2026 evaluation is twenty 96.6%.

So if you connect that to our funding ratio of the the earlier slide, we are in the no action zone. So ninety five percent of vaccine is the one that we're we're not the board is not recommending raising contributions and just but and I will explain that in the agency late at least later on, so why it's good to start initiating the council bills or our values or funding is declining, actually. But for now, it's it's we are still in that yellow zone. And for context, for our other retirement system, again, just focusing here in Washington State. So we have Spokane.

We have Seattle, and first one and two. So it ranges between 60 to roughly about 100 to 101%. So we are pretty much in good shape. Alright. Moving on. Slide number seven. So the last one is only for two years. This one is historical funding levels. So from 1985 to 2025, again, last completed one, given that we are still working on the 2026. You will see a comparison between so the the green bars that represents the fair value.

So that's the not smooth. You will see a lot of fluctuations here because that's based on the fair value of assets. And then the blue lines, that represents the smooth assets, that trial bound. And you could see there are still some fluctuations, but not not as much as the fair value. I just wanna point out, if you look at 2007, our funding ratio was above 120%.

Two years after our second valuation, it went down to just above 70%. And I just wanna point out and a board member mentioned it before. So before 2011, our annual checkup, our evaluation study, it was done every two weeks. But starting 2011, changed that frequency into yearly. So the board wants us to do it on a regular basis because if we do, we need to first correct.

We have, you know, that time or a time demand rather than to wait for two, three years to to do that. So that's the reason that we change we changed it. Another thing too that I wanna point out, starting in 02/2025, there is really a slight decline in the funding. So that's the reason why the getting the board message from the board is that they don't want to surprise the the committee, the council that we if and when you come back. It should not be an issue.

It's just a matter of when we come back to raise for our contributions. They're already having him. So alright. Next slide, please. So these are the contributions over time. It's starting 1980 to to present, there's has been a long standing practice. Employer contributes 54%. The employee contributes 46%. And currently, prevention of this, because we are contributing. It's a form. Maybe council number nine. The employee contributes 9.66%. Nope.

I'm contributing to that. I was contributing the same.

Yeah. So the entire system. Yep. And the employer contributes 11.34%. So that's the employer share.

And you would notice the changes in our contributions over time. So, like, in 1997, so from 19% to 16.7%, went down to 14% in 2001. And then starting 2009, it has been going up and up. The last time you raised the contributions was in 02/2018. And you may wonder why it's so expensive, and I already mentioned it's a very rich, generous benefits, coverage, audio retirement system, and vistro shops.

We we have to pay. We didn't use the merch, so you have to eat the broccoli to to get the benefits. And that's really the the reason why. But See the next question. To be honest, although we are contributing 21, compared that to other retirement system, except public for your retirement system, Other first class cities, they are actually contributing more than us.

But the reason for that, they have to pay for that deficit to unfunded liability. So that's why we are contributing one is contributing 22%. Seattle's actually contributing 26% because of that unfunded that deficit that we have to pay for that for a certain payment plan. Alright. Next slide, please.

This one is purely for illustration purposes. Again, we're not here requesting to raise contributions, but if we were to raise our contributions, most likely, it's gonna be a 1%. It's it will cost all our employers, the general government, TBU, and other public member agencies about $2.32400000. That is an additional cost. And for the general fund, it would be approximately 1,000,000. So this is using the twenty twenty seven rejected labor cost.

Because whenever I see a 2,000 million, I think I think it's 2,340,000,000, but what you mean is it's 2 that's million dollars. Yes. Addition Addition

period, not a comma there? Correct. Quick cash.

Yeah. Okay. It wasn't tax.

I was like, wow. $2,300,000,000? Salon's easy. Yeah.

It's good. Pretty fast.

I think my contacts are slow. Yeah. My search is so good. I can

see it that far

from here. Yes. So it's additional I just wanna emphasize that it's additional contributions coming from the employer. So it would cost general government roughly 1,000,000 for a general fund, roughly about 190,000. So if you're curious how much the city contributed last year's in 2025, about 20,000,000 for a general government.

How much contribute, and that's equate to 3,500,000. Last slide, please. So finally, long term challenges. So you've heard heard how expensive it is, and it's our main goal is making sure that it's sustained. It's it's it's and for it to make it work, the employee and the employer have to contribute the adequate contributions.

And then, again, our reliance to investments. So that that's 70% of our funding. So if the market does not provide, down the level that we have is to raise contributions, and we are already at a high 31%. Our employees already us employees are already close to 10% of our future. And then another thing I'm gonna mention is the intergenerational equity to make sure that our current cost is not gonna be shipped to our future employees and our tax lenders as well.

And then greater transparency in our current environment, pub public pension reserve, heavily scrutinized and make sure demand for, you know, transparency, reporting of communications. And, again, this is good for educational and informational purposes, but not not here. We need to get it from the board that we are going to ask for a contribution rate increase at least for 2027. Just to make make clear on that one. We don't know.

We don't have the first of all, what we're gonna have is the transition date and onward, but it's really most likely just a matter of when we raise the contributions, not when we're if we're going to raise the contributions. Cool. Alright. That pretty much that wraps up my presentation.

Alright. Thank you, Catherine. Let's go with the questions. Councilor Rommel.

Thank you, Cher. And thank you, Catherine. That was very interesting. I I didn't understand. It's it's interesting to understand the the percentages. I was unclear about the invest. Is that the full amount of retirement is invested, or is there a percentage that we pulled back? How do we decide? I mean, I I come from a fundraising world, and I was on a foundation board. And if we were gonna give money out, we made sure

that money stays one place, and

then there was money that we I would call gamble with. If it goes to the stock market, it's gambled in some way.

So I

was curious what that is

that all of the money for retirement? So all the money so right now, our our we call it net decision is 2,500,000,000. So that's the money we have. And everything is invested, and it is we have a different buckets that the board has done. We have two board members.

There's really. So we they there's a we we have a we call it investment policy. So we engage we hired we have 21 investment managers right now that that we contracted with, and we invested all the the diversified. So that's part of the fiduciary to make sure is that we invested in different things. And there are different measures and guidelines they follow to make sure that we have to invest it. We have to take on this to make money. Unfortunately, we can't just put it in the bank to make you know, it's not enough that

I guess my question is, not that it's invested, but it's what you just said is it's diversified investment.

It's not all it's not all

in the stock market.

So we have stocks. We have bonds and private equity. So it's a well diversified. It's part of our fiduciary duties, which

is one of our training.

It is part of the board's fiduciary duty to make sure that it's invested in a more diversified portfolio. Okay. Taking risk, if you look at into if this risk is worth depending on how much money or, you know, things like that. So, yes, it's in a more diversified portfolio. Okay.

That's fine. Appreciate that. Thank you for explaining that.

K. Alright. Sure. It's all ready. But there's more number that's here to let it go.

I have not heard me.

No. Correct.

So I just kind of a comment on that diagram that showed the contributions and investment income and then benefits and expense. Saying there's no valve on the con on the investment returns is ignores the whole concept of risk. So you can get you can go for more investment returns if you take on greater risks. And there are lots of pension systems across the country that have gotten into all kinds of trouble trying to hit home runs with their investments and not managing the contributions like sandwiches do. So I think that's something Tacoma has a long history of doing, serve the system.

Other comment is, you know, the the other systems that have two tiers, I'm so sure about the state, but the first class cities waited until they got into a lot of trouble, you know, being 60 something percent funded, and then they created a second tier. And whereas

if

Tacoma is looking at that option, you're doing it from a very different place in terms of it's an option not required. So that was just

Since you mentioned that, actually, I don't remember exactly, Andy, when was that The council, the mayor, they looked into this. It's a lot of work involved. What it would look like offering first. We buy in from the joint labor, city council has. So this is not the purview of the tourist board of administration's plan design. You based on the city that have to do that to the tourists with the board. You'll just have to understood that. So we were helping provide information like that. It also takes responsibility.

Okay. Nope. Thank you. Alright. What's that? Go for it. We're gonna.

That's part of our the role of diversification. There are certain managers that they are really good at doing this. They're really doing that that that. For our actually, for our 2,500,000,000, you compared it to other retirement system, not going far. I don't think have more managers than us.

So we limit how much money we we we we expand because we wanna make sure it's worth our time. We only have one investment manager. So we do have we have a CIO, and it's not investment. We have a chief investment officer, ours one of our staff, and then we engage with brochure. They are our consultants, help us, you know, help us divide our investment managers and, you know, things like that, process like that. But it is it is a very reasonable,

I don't think. It's it's it's

on my computer to other retirement system. And it's a process. When the board make a decision to hire new managers and other mandates or fire managers, because that's part of the process too, They go through a process. It's a rigorous process. It's very competitive. And so yes. Andy, happy to come in.

Yeah. Know. So sometimes what the board considers is even if we take a lot of money and decide to invest it in a type of investment, there's lots of different managers, lots of different approaches to the company decide to do that. So sometimes we'll pick one or two or three different managers to see, hey. What's your approach? What is your approach? Are you a quant firm? Are you doing heavy duty math? Figure something out. Are you more passive along an index line? Are you doing something different? So sometimes we hire managers just to see, did they provide an advantage again, meeting that kind of rate of return when it needs to earn? They compete against each other at times. After a good three, four, five year period, you can look. If the manager's performing, we can get more money than we can, like Gavin said, fire the ones that aren't performing.

A lot of it comes to diversification. You know, SSA wants to all your money from one manager, And if they mess something up or they have a lot of turnover in staff, then it's like, wow. Now we're in trouble. So, again, for the size of our investments, 21 different kind of folks is is a whole lot.

Yeah. And then on a quarterly basis, we have a consultant that they gather all the informations, and they look at, okay, how much money we have. And then we look at the performance of the managers. They present that to best board members, and then we send that letter to our council members as well letting them know that this is what we got and this is how much we paid. So the those managers are regularly. And if we need to tweak, yeah, they've finally passed. K.

I have just a few couple questions. I don't know if this is question. What is our target return rate? Did you say what our target

So our assumed rate of return rate right now is six seventy four. 16.

Is that okay?

And that is up middle of the ground. In the past, people are targeting 70%, but that has come down. So that's concern. Yeah.

I would say since it's I would I would think I hear seven a month. So it's it's

So we are in a in a good position given that our funding issue's kinda high. Yeah. So we don't wanna take on risk, unnecessary risk. So we're well, work has really done a great job. Yeah. Yeah.

I mean, I think the the risk appetite is also based on where you're at. Right? So I'm I'm you you need to be much more risky with your money if you're really desperate to cover your expenses. But if you don't have that, you

I wanna play safe.

Play safe.

Alright. That makes sense to me. And, you're talking about 2,500,000,000. I also think it's really good for us to talk about comparisons to other Chances. Other time systems to understand where we are.

So Spokane, they are roughly 300 to 400. So their membership is, like, less than half around half of ours, but they ask, like, 16% of ours. Seattle, their membership is three times more than us, but they ask only 2% more.

Yeah. It's good to know. I mean, I think there's a it's a it's actually prior to my I did have a separate comment to make, but I would say it is a really important thing to recognize. People hear about unfunded pension liabilities. And, you know, I was just reading about Chicago a little while ago, right, where they're, like, 20% of unfunded liability for their police, know, their police officers, and 25 for their firefighter.

It's just it's really scary. We have a great story that we're also funded, and we've been doing that. That's because the employees in the city have regularly contributed. Way these other ones have gotten into trouble is, as you probably can recognize, the cities have chosen not to make general fund contributions when times have gotten tough, and that has really backed Exactly. In that space. My one other question I had. When you say coming for an increase, my question was gonna be, so is that for the city to increase or the employees? But the answer is it would be both of them because we have this shared model of the percentage. So if we went to 2254% City.

City and 46%.

But it does that breakdown similar across the other cities or other rep or is that unique to us?

Spokane, they do 50. Seattle, their employee contributes more. So the employer employee contribution is capped, negotiated with the union.

I did.

And it's I believe their employee contributes 10 or something 16% or 16%. And the perks, they are 11%. Almost share 15%. We Yeah.

And and I'm a teacher academic system, and we have a a mix defined benefit of my contribution.

It's a

hybrid model where I pay a percentage of into a fund that's invested, and then also I get a percentage guaranteed at the end, which is when you think I I would imagine all these other Cielo's two tiers, Spokane's four tiers for they're all they're all a Correct.

A mix.

Their defined benefit plan is just a a light benefit. So let's Seattle, their church would be tier two. The tier one is 2%. That that is the factor

Per year

of service. Per year of service. Sure. Seattle tier two is 1.75.

And Catherine was not here. When I first joined and heard about the types of surgical, I was actually really surprised because I'm I am on TERS three for the state. And TERS one, which is roughly analogous to what this is, closed in 1978.

1977.

'77. So you were last year. Then TERS two closed in 2000.

Wow. Exactly.

I came in right on the edge. I couldn't believe. Yeah. It it is just an interesting I think that conversation, to John's point, is probably one we should think about having sooner rather than later, or at least we have to examine what that looks like, not because our current system is not meeting our needs, but more because you're gonna get we're getting closer and closer to where we're gonna be asking more and more for our employees and more and more for our city in order to get kind of guarantee a pension system that is very well, very is wonderful, very unique on broader scope and scale of what's available out there at this point. So I appreciate you bringing the board, Catherine.

Oh, there's further and I would also say I'm also the council's member on the firefighter retirement board. So that is a whole other what is that one? That one's presented rep funded at 250% at this point, left one for firefighters?

Left one is 160% the last one I checked with them, and I know there's conversation about that.

Well, they just they just swept the, you know, billion dollar.

So yeah. And it's yeah.

There are

I don't know why they haven't looked at it closely. But as you can see from jurors, our board follows that benefits and funding policy that really helps them, you know, what to do, what they wish, or some of things.

Yeah. Interesting stuff. Alright. Well, Kathy, thank you so much for being here for the presentation.

Alright. And anything you you provided to ask questions or refer to connect me through the the data phone, send me my way. And he's super he cannot jump through. Alright. Thank you.

Thank you. Alright. We're gonna now move on to item number two, which is the consideration and recommendations for a volunteer to serve on the for and against committees for Population One Connect Tacoma's Safe Streets and Sidewalk. I'd like to call on Deckersperian from the city attorney's office.

Thank you. Good morning, Deborah. Good morning.

My name is Deborah. I'm at the city attorney's office. We are here asking for your recommendation August 4. As you know, last week, you adopted resolution number four one eight four one eight nine zero for the city of Tacoma proposition number one, which is a levy liftlet for property taxes and an increase in utility taxes. And it's gonna go on the ballot on August 4.

You may know that a replacement resolution is coming to the council tonight to deal with, certain issues, but that doesn't, alter what we're asking you to do today. On after the resolution was passed by the full council last week, the next day, the city clerk's office enlisted volunteers to serve on the for and against committees for this resolution. They advertised to neighborhood councils, business groups on the website, social media, and press release. The deadline to submit your name for being a And the city received five letter of letters of interest from individuals. Three, to be on the for committee, and two, to be on the against.

And state law requires the jurisdiction to appoint the committee members, and that's done by the full council. State law also says that a committee cannot have more than three members. So three out of four, three on the advance. But the members can ask for input from anyone

else that they'd like to.

We are asking that this committee review the letters of interest that you received, all five of them, and recommend the individuals to favor the measure and recommend individuals to oppose the measure on those committees. And the full council will consider those appointments next week

at the twenty eighth meeting. And

just for your information, the deadline to submit the names is May 1 to the county. And then for some reason, this council doesn't appoint foreign committee members, the county would try to do so. But, generally, local jurisdictions do have foreign,

I guess, in this.

Happy to answer any questions.

Alright. And just so as a thank you, Deborah. So in our packet before you all today, we have our letters of interest from each one of the folks who would like us to serve on the board against committees, three for the board committee, and two against. And, again, no minimum. We could do one on each, but a maximum of three. Correct. Okay. And then the county has the ability to put some people in. So if we pick two, they could add a third person to the list if they chose to do so. I don't think I have

I don't think I have either. Let me just look at the state model while we are talking.

And the county doesn't always do that. I mean, if you're looking at the most recent ballot initiative that went forward for parks, right, they did not choose to add any against the committee. It's just. Not a major choice.

So The state law does say, council member, that if the local government fails to make such appointments by the deadline, then the county will try to do it. So I'm not sure if you appoint two for the third person. Oh. And then, of course, it says if no statements are produced, like I said, they have to say that there's no committee statements for or against. Alright.

Well, with that, questions or comments from the universe? Councilor Bushnell. Yeah. Thank you, chair. I just I just obviously, the state law dictates on how this kind of process is outlined. But is there any quality like, what what makes it

a qualified applicant? What what makes it not a qualified applicant?

The only thing in state law is that on the for committee, you have to resign within the city limits. And the against committees, they I can't hold it at the state law. They encourage you as much as possible to cleanse all within these the city limits. I don't understand that there is. But that's understate laws.

Interesting.

Mhmm.

Interesting. Well, that's for the walker.

So I would say I think it's very important that folks live in the city, and I think all of them do. I don't see I don't have any hesitation of any of these applicants, And I think they all have done this at some point in the past.

Maybe not, Laura, but I

I don't have any hesitation in supporting all of them for for.

My, yeah, my thought, just to keep it simple, is I just for all five games. Makes sense. I would if we I wouldn't feel comfortable moving forward three fours and one against or something more one against. I think I think it just makes more sense. We have five people. It's great that people wanna be engaged to the democratic process and share their opinions about what's on the ballot. So my my what are

you what you looking for?

My thought would be to just move forward on. So if there are no comments or questions about that, I would turn to one of my committee members to make motions. I move to recommend the appointment of Michael Cassie that they will log her in to the proposition one four committee. Second. Alright. It's been moved in second. All those in favor, signify by saying

aye. Aye. Opposed? K. Motion's adopted. I move

to recommend the appointment of Stephen Cook and Ben Lackage to the proposition one against. Second. Alright. It's been moved in second. All in favor signify by saying aye. Aye. Opposed. Just turns out that that was an easy one, Deborah. Thank you very much. Right.

Okay. Now on to our third agenda item, the state auditor's office twenty twenty four ex accountants, accountability audit. And, Sandra, are you with us here?

Yes. Hello. Good morning.

Alright. So with that, I'd like to call on Sandra Groshong, Judy Lai, and Jason Starr from the state auditor's office. And I think, Sandra, you're taken over taken from the top.

Great. Thank you. Good morning, everyone. Thank you for the opportunity to be here today to share the results of the city's most recent accountability audit. My name is Sandra Grochon.

I'm the audit manager of team Tacoma with the state auditor's office. And joining me today are Judy Lee, supervisor of the city's off audit, and Jason Starr, who is the lead of the city's audit. Before we get started, it's important to note that the presentation we prepared for you today represents an overall summary of our completed audit. And then to supplement this presentation, we've also provided a packet of information that includes copies of our audit reports that are, will be, issued after, we conclude the exit here and related audit recommendations. So we're gonna speak to everything.

Everything we're gonna talk about today, you'll also have in your packet. If we flip back to the next slide, one of the most important things about the audits is our their role in increasing trust in government. Our audits are able to do this because the public trusts the state auditor's office as an independent organization that provides transparent examinations of the operations of, both state and local governments. Another important role of audits is their ability to identify areas where efficiencies can be improved and you can be more effective in complying with, state laws and requirements. And audits can also tell you where, things are already working efficiently and effectively.

Our goal today is to make sure that you understand the results of your audit and to answer any questions that you might have. With that, if we go to the next slide, and I'm gonna pass to Jason, and he's going to share your results.

Yeah. Thank you. So, yep, we conducted an accountability audit. They covered the audit period from January 24, 01/01/2024 through 12/31/2024. And the purpose of the accountability audit is to ascertain whether the city complied with state laws, regulations, contracts, grant agreements, and its own policies and procedures.

And in addition, these audits also look at whether the in general, the city has adequate controls to, safeguard public funds. So under the heading results in brief, you can see that our audit found, the city's operations complied in all material respects with the applicable laws, regulations, and its own policies and provided adequate controls over the safeguarding of public resources. However, we also did identify issues, related to payroll, that we communicated in a in a management letter and which I'll go over that, shortly. And, also, for your reference, these rules are, results, like Sutter mentioned, are in the in the packet as well. And just as a note, we do not examine all transactions, activities, policies, controls, or contracts, so, there's no information provided in the areas that we that we did not examine.

Can you go to the next slide? Okay. Yeah. To select the areas and departments that were included in the audit, we performed planning procedures, including risk assessment inquiries, trend analyses, review of prior audit issues, other and other procedures. And we use a risk risk based approach to select, the areas of high risk, which we'll show you on the next slides, all the areas that were included in the accountability audit.

K. So, we have self insurance, property liability, health and welfare, unemployment, workers' compensation was one area. Software conversion for general ledger, the system. Then we have the Tacoma Public Utilities power department where we reviewed gross payroll wages and overtime, general disbursements and credit cards, timeliness and completeness of deposits, voids and adjustments, and the procurement of purchases and professional services. And just to note a little bit about the, the gross payroll wages and overtime testing, we perform testing as a follow-up to our prior year, management letter, actually, fiscal year twenty twenty two management letter.

And to do that, we reviewed batch scans to verify whether employees were on-site during the hours they were claimed to be working. So just as a follow-up to that that investigation that year, we noted no issues. That's great. And just as a note, payroll is a you know, is a process where is a area that we we're we're, like, looking especially at that one because we've identified that as a higher risk area. So you'll see that in in a lot of the departments as we go to the next couple of slides.

But, yeah, you can go to the next slide. Yeah. The other areas, we have Tacoma Public Utilities, the water department. We looked at gross pay gross payroll wages and overtime, general disbursements and credit cards, disposition and receipt of surplus, and compliance with interlocal agreement terms. In the environmental services department, we looked at gross payroll and wages.

In Tacoma police department, we reviewed gross payroll wages over time and final pay to departing employees, credit cards, and the tracking and monitoring of sensitive assets. In the finance department, we reviewed compliance with loan agreement terms and accounts receivable billing and adjustments in collections. Next slide. In the public works parking department, we reviewed gross payroll, wages, and overtime, general disbursements, and tracking and monitoring of theft sensitive assets. The Tacoma venues and events, we reviewed gross payroll wages and overtime, credit cards, in compliance with state grants for the Cheney Stadium.

In the human resources department, we reviewed gross payroll wages and overtime and credit cards. Then the last two areas we always look at are open public meetings and compliance with the OPMA, for minutes meetings and executive session requirements and, financial condition where we review for indications of financial distress. Alright. If you go to next page or next slide. K.

So I wanna just tell talk to you a little bit about the management letter. So we did have one recommendation that we communicated through the letter to management, regarding monitoring of payroll, timekeeping. In the prior audit, we communicated that the Tacoma Public Utilities and Public Works, departments did not have controls to actively monitor employee activity and ensure adequate supervisory review, and approval to verify employees worked during the time submitted for payment. We reported a management letter recommending the city strengthen internal controls over payroll. And during the current audit, the city said corrective action is in progress, and their policy to address the issue is being, currently being drafted.

And then in August 2025, the city notified our office of another potential loss of public funds at TPU, specifically the transmission and distribution division, which is in the construction and management section. The city performed an investigation and provided its files, for us to review. The city's investigation found that it paid five line clearance tree trimmers between October 2024 and December 2024 for hours they did not work. And we reviewed the city's investigation and determined, $2,004.00 $9 paid for hours not worked was misappropriated, and then $2,506 was questionable. So similar to last year, we have, we recommend the city, provide adequate training to supervisors to ensure proper review of employee activity before approving hours worked, update the payroll policy to include supervisory review, and approval process to verify employees are working during the times they documented on their time sheets, and provide supervisors the appropriate resources and procedures to review for time actually actually worked.

And I'm about to move on. Was there do you have any anything you wanna ask, or should we move on?

No. Thank you. Alexi, Jeff Ball. Go to Jeff.

Yeah. Hi. Yeah. I just had a question on the recommendation. So it had said that the recommendation was to update the payroll policy to include supervisory review and approval for employee time sheets. Is this specific to, like, groups of TPU employees, or in general, does the city not have employee time sheet review as a standard policy or procedure?

Oh, no. I would they there is a it's a standard procedure. It's more of, like, the we're seeing some you know, there were these investigations came in, to us. And, you know, after reviewing those, yeah, we confirmed that there were there was some employees that were being paid for time not worked. It's more of a recommendation to look at that again, and and maybe there's some areas where they can make some adjustments and improvements, to their policy. And like I said, they're they are, and the city, you know, told us as well that, they're in the process, and I think pretty soon they're gonna have a a new, draft, policy to to address it. But yeah.

Okay. And the current policy doesn't require supervisory approval of hourly employees before, payment. Is that right? Because I I guess I assumed it was kind of all workflow driven.

Oh, yeah. I would assume I would assume so that that's that's the case. It's it's, it's more of I think I I do have to look at what their their new, policy is going to be as we don't know yet, but, more of the the focus on monitoring and making sure that what what employees claim they work is actually you know, when the supervisor goes to review, that's that's correct. And, there's nothing that's, you know, out of line there.

Okay. So the I'm sorry. I need to keep drilling on this, and I don't know. Maybe staff wants to to to jump into. But for these employees that were identified, they had completed time sheets that were not reviewed or or they were reviewed, and this was in a case where after after a second look, maybe they didn't actually perform the work, and the reviewer was not you know, he was just rubber stamping, I guess. It's I'm kinda trying to understand what actually happened.

So Who do think?

Jeff. Hi. Well, go ahead. Thanks, I'm the assistant finance director of controllers.

So this was a concern item that came through this hotline as a concern for these tree tremors. I apologize. Just had to end this mental work, so I'm slurring a

little bit. Excuse me. So

time was submitted for the the tree tremors. Time was approved by the the supervisor. Actual work wasn't performed, and therefore, the cost questioned. So it was a matter of were they working? Did they perform work?

Supervisors did approve the time after the time was approved. The payroll policy is the citywide policy that's being updated currently, which will include how supervisors are supposed or kind of a process for employees entering their time, supervisors approving the time. Our payroll division will be providing also training to supervisors because as you know, we have supervisors that get promoted and may not have gone through the proper training or maybe went through the training twenty years ago and need to refresh your course. So this is more Mhmm. Here, this is what you should look look for when approving time.

In the transmission distribution division, they also have a procedure that they're awaiting to update as soon as the payroll policy has been updated to to ensure that it's in alignment with that.

Okay. Thank you for that. I I really appreciate the context. I I don't have anything else that I

wanted to ask about that. K. Thank you, Jeff. Here. Alright. Sandra and Jason, I'll let you guys go to continue.

Okay. Yeah. And with that, I'll I'll go we can go to the next slide, and I'll, I'll hand it over to Judy.

Oh, thank you, Jason. Thank you. Great work. So this slide is, a snapshot of our financial intelligence tool. We've referred to it as FIT.

This is a great tool that SAO provides. You'll find data from this tool that's helpful in making business decisions on, when you are working on improving your business or or wanting to find out what your financial position is. There's also information, on other cities in this tool. So on the website where this tool is at, you can compare yourself to other cities. So, we did share this information at the entrance conference, and we wanted to let you know that it's available to you on our website.

We also use this tool when we are looking at your financial condition as part of our audit. So the the information comes from your annual filing, and then we transform it into easy to understand measures that hopefully is helpful to you. Hopefully, you've had a chance to look at it. One of the ways that we look at the financial condition in this tool is it's like a starting point when we're planning our audit. So then we look at the tools.

If we see any indicators from the tools, then we'll ask your management about what it is because they'll have the information, and then we determine whether or not there's a concerning issue there. So there's a lot of factors, when you're looking at these tools. So, let me make sure I covered everything. There's a scan code on here. So if you scan the QR code, I recommend that for anyone.

When I was in the private industry, I used these tools, these calculations all the time. So it's a good way for your government to understand where you're standing in your financial condition. So I think we can go to the next slide and I'd kind of like to talk about the city of Tacoma specifically. This is not necessarily indicating the financial stability or stress, but it is an indicator to alert you of to potential financial health concerns by comparing the ratios to our recommended thresholds. To learn about the city of Tacoma specific financial indicator tool results, you can scan the QR code to explore the website, and there's a lot of drill downs with great information.

You can also contact our center for a personalized FIT demonstration. When you go into this tool, it's at sao.wa.gov, and you go into reports, and then then you go into financial the fit tool. And then it'll give you indicators on where your city is at. And I it does it by fund, and we generally look a lot at the general fund, and we do not identify any yellow flags for the general fund. So it's kind of a bit of information about the FIT tool.

Really recommend you go take a look at it at our website at sao.paw.gov. You can also contact the center. I believe there's a link and some more information on the website as well. So great tool. Wanted to share that with you before we close out our presentation.

But we'll go to the next slide and talk about our next audit, and the results have been shared with you. Our closing remarks are the cost of engagement that we shared with you at the beginning of the audit. We're going to remain within that. We thank the city for its timely responses to the audit request, which allowed our audit to to progress efficiently and remain within budget. Our next audit is here.

You can see it on the screen. We'll cover financial and federal programs as well as accountability for public resources for January 2025 through December 2025. We included the cost estimate in the packet that we shared with you. And if you go to the next slide. So this is about our report.

We expect the report to be published on our website in the next one to two weeks. You can sign up to receive email notifications on when our reports are released, as well as other news articles and alerts, including the resources that our office publishes. We used we used to email the report as a PDF, but to align with the cybersecurity best practices, we now just send the email that provides helpful instructions on how you can access your audit report on our website. We'll also be sending a customer service survey. We encourage you as well as anyone else that participated in the audit to complete the survey as all feedback is helpful in improving our services and knowing how we can better meet your needs.

Please forward the survey onto anyone that you believe might like to provide feedback on our services. It's important. Sandra and I review those after every audit, and we'd like to have any feedback that you can present to us. Next slide. K.

Before we wrap up our presentation today, we wanna thank city officials and staff for their timely communications throughout the audit process. Especially, we'd like to thank Susan and Polly for meeting with us each week and providing information that we ask for, working together to keep the audit moving forward. It's their support that helps us to perform the audits efficiently and effectively, and all the feedback that I received from the audit staff was excellent. So we appreciate that. We also want to mention that we found all the city staff that we were in contact with were very professional and efficient through the audit.

So, again, we wanted to express our appreciation. And next slide is our concluding slide where we open it up to any questions. We appreciate you having us here for the fiscal year twenty twenty four accountability audit, and look forward to working with everyone in the upcoming audit. Thank you for your time today, and I guess we could ask if anyone has questions.

Alright. So we have both staff here and the state op first of all, thank you for the presentation again. It was great you all. And kind of you're all you said you're almost doing right. We have staff here and state office here. So if you have questions for that at all, Jeff, it's it's the staff advisory board. I may kick to you first if there's a question you might have about.

No. No. That only the one from earlier, so I'm I'm good. Thank you.

Thank you, Jeff. Any other questions? I'm gonna ask questions. I heard it beforehand, and so I'll have Susan explain. So, Susan, I think the last audit advisory we had, we had another manage not a management letter. Do we have a manager letter Definitely. About reporting of time and incorrect reporting of time? But this what's what's reported here at this time is different in a categorical way from what we reported on Correct?

Correct. The management letter that the city received for the 2023, you know, that when they audit was related to public works, it was related to generations of different divisions. Those were more of people not performing work and morning hours reporting hours for not work. And so this was a incident where a resident or community member reported vehicles being at a specific spot for a long duration, and so HR looked into HR and the department for a division into it. Yeah.

They found that these individuals were paid for hours, not work. The other one was a little slightly different where individuals

The public works one was for individual

and a desk job, not before before. And the generation was

swipe swipe somebody else. Swiping.

That was pretty that was a transmission distribution was a swiping. Generation was also another swipe.

So that one's been there. Yeah. And so I think to Jeff's question, right, which I think is important. Right? We have procedures in place and policies in place so that when I submit my time, someone looks at it and verifies probably by looking at it.

Swiped in or I I clocked in that that those line up. What we're this is saying another step with our process looking at is this was not an issue of they didn't show up to work. It's a there was work that was performed that was not performed during the time they were working. Right. So it's I know it's an opportunity for us to refine our process to say when we have people out in the field, which we have people out in the field a lot who, most of the time, do always perform the work they're required to do, and we didn't have another layer of kind of management to say, yep. You were locked in. You were on the job, but did you complete the work that was you were supposed to complete your.

Correct. There's this gives us an opportunity for developing those additional railcars for individuals that are out in the field. What how do we follow-up to ensure that that body of work that you're supposed to do is getting done timely so that there's an opportunity for, like I mentioned, digital or dental guards for

them. So

Okay. Towards your whole Thank you. Just a little addition to that. So there's the whole kind of financial process part of it that the finance department is leading. Other thing is just really important to me personally with the asset management.

We get a working work management system, are there work orders written, estimates on the amount of time it's taken? I think that will track those efforts to a scale that will then be simpler for a supervisor to say, okay. I understand the number of trees they have to win or whatever and the amount of time that would take for that crew. They can do some more quality assurance more easily than it isn't in place today. Yeah. It's unfortunately, it isn't in place today, but we are where we are. We need to move forward. And I think that's another part of the solution there. Personally, I won't be pushing forward. I haven't.

Yes. Okay. And that is for our policy changes. Yeah.

K. Alright.

Any other questions for auditors or staff? Alright. Seeing none. Thank you all for us here today.

Great. Thank you for having us. Have a great rest of your day.

Yes. We will.

Alright. Thank you.

Thank you. Alright. We'll move on to topics for upcoming meetings. And prior prior to that, sir, I know she came in late. You wrote looks like you wrote something down to, like, public comment or something on the agenda today.

Here. Think if you'd like to probably look at it comes to a personal But

Yeah. Need to Yeah.

We usually give about two minutes, sir. So, I mean

Yeah. It was fine. Yeah. It was fine. I appreciate that. Yep. So yesterday, actually, last week, I had just seen that notice for people to come to present against Mhmm. Resolution. Yeah. I wanted to jump on it right away, and I'm really happy to just have overheard that two people out and then three out of, you know, had nominated themselves. The deadline was yesterday. If nobody had filed for that, I was real ready to say, hey. Can I, you know, please apply even though the deadline was yesterday at least at one four? I didn't want to cancel whatever. So I'm happy to hear that.

My main concern with this whole thing, and I see, you know, that the bond is gonna break about 200,000,000, is maybe some of that money be dedicated more toward our bridges? Because I just pulled up the graph for our bridges, and about 48%. That's a very sobering

thing. You know? I mean,

we talk about safe streets. We talk about sidewalks. We talk about stuff like that, but our bridges are vital. And I noticed in a graph also that they indicate the fishing bridge being, you know, selected. And it's it's never, in my opinion, ever gonna be perfectly resolved. It's over 300. So, anyway, I don't mean to get off on track on that last subject, but my concern was. And I didn't see anything in that.

No. So

but, anyway, I was gonna jump in if there were no against. So thank you for your time.

Thank you very much for being here.

Is Dawn, by the way. I've been a six year volunteer for a doctor spot Yeah. Right when COVID happened. I took care of the Dome District, and it got hampered with all the influx. I mean, it became kinda like the spot where it could hang out. I've collected only 40,000.

That's about 20.

And I'm still active. I just re reapplied. I worked in dental history. Uh-huh. So anytime you go through there, it's a bit of an illusion because if it weren't for me, you would be seeing this.

Thank you so much, John. I appreciate it. Thanks for coming in. You're welcome. Alright. And that is a good a good comment about the bridges and shape of our bridges and taking it off the package broader. We've been doing a lot of work with state level federal money fishing force, but I I think that's a good one to get me. Okay. With that, we'll now move on to topics for other needs. And, Angela, I'd love to call you, mister.

K. So May 5, the chair Hansen from the service board will be coming for information on May 5. That's the only item on that agenda. On May 19, we have public board interviews. The group will be running those as well as presentation from our purchasing folks on small works roster and job order contracting.

And we'll work on some stuff searching. Perfect. Just as a note, we had four applicants for a public for a vote position, including the current opener of the office or in the calendar. So just prepare for that update next on that day. And then Sharon Hansen will be here next week to talk with some of the service, so he may let me know. Alright. Any other questions or anything from the order? Alright. Who's a favor? Signify by saying

aye. Aye.

All opposed. We stand adjourned. Thank you.