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HomeMy WebLinkAboutMarch 5Finance and Investment Committee Special Meeting Town of Los Altos Hills Town Hall, Monday, March 5, 2012 The meeting was called to order at 4:00 pm by Chairman, Allan Epstein. Members present: Allan Epstein, Kjell Karlsson, Stan Mok, Jean Mordo, John Radford, Bill Silver and Roddy Sloss. Members absent: Jim Lai, Frank Lloyd, and Lalla Stark Staff present: Nick Pegueros, Finance Director Guests present: Steve Gedestad CLU, Executive Vice President and Peter McNamara Senior vice President, Keenan & Associates – employee benefit consultants, and Doug Pryor, Bartel & Associates – Town’s consulting actuary Public Present: Gary Waldeck (in audience) Approval of minutes: Minutes of the February 6, 2012 regular meeting were approved as submitted. Report by Jean Mordo on recent Council activities of interest: The Council is considering issues related to schools in the Town and the Ad Hoc Fire Committee will meet on Thursday, March 8, 2012. The Committee’s annual report to Council will be presented at the March 14, 2012 Council meeting by Vice Chairman, Bill Silver, who received inputs from committee members. Report by Nick Pegueros on Finance Department activities: Richard Lee, the newly hired Finance Manager for the Town, was introduced. Presentation by Keenan Associates on cost containment opportunities related to the Town’s OPEB plan. Powerpoint slides were distributed and Mr. Gedestad discussed an approach to offering a buyout to participants in the Town’s OPEB Plan calling for a plan similar to the one adopted by the City of Beverly Hills, California in which eligible employees received a one time offer to receive payments equal to the actuarial value of the benefits of which 20% is paid upfront in cash and 80% is deferred and paid into an HRA account. Presently, for the Town, the actuarial value of the subject benefits is approximately $2.7 million* (45% due to active employees and 55% due to retired employees) of which approximately $1.5 million* is unfunded. Making a fair buyout offer to participants is difficult because uncertainties such as: a) current employee participant benefits do not vest until retirement age, b) those receiving current benefits will have to make an independent evaluation of their future medical requirements and related costs which they are probably not well equipped to do, ; and c) lack of comparable examples because only the City of Beverly Hills has adopted such a plan to date. The advantages and disadvantages of the proposal were discussed and the Committee concluded it would defer further consideration until there was more experience of other agencies available for review. Discussion of OPEB actuarial report by Bartel & Associates for the two years ended June 30, 2011. Mr. Pryor handed out an updated copy of his report discussed by the Committee in its previous meeting. The primary change was the addition of a 6% discount rate noted on page 23 of the report. The Committee then discussed the prospective funding level of the Plan and investment options described on page 25 of the report. After discussion the Committee recommended to Council that the budget for the fiscal year ended June 30, 2013 include a $300,000 contribution to the Plan comprising an estimated $135,000 of direct payments for the period to plan beneficiaries and a Trust contribution of $165,000 (note: allocation of the $300,000 was calculated by staff subsequent to the meeting). The Committee also recommended that the funds in the Plan be invested pursuant to Option 1 (equity weighted option) on page 25 of the report and that the report be issued using the 6% discount rate noted on page 23 of the report. Presentations from the Floor: None. continued Draft March 5, 2012 FIC minutes page 2. Proposed topics and dates for future meetings: The next FIC regular meeting scheduled for 4 pm, Monday, April 2, 2012 is cancelled. The next meeting will be a special meeting on Thursday, April 26, 2012 at 4 pm to consider a draft of the fiscal year June 30, 2013 budget Adjournment: The meeting adjourned at 5:40 pm Respectfully submitted by Roddy Sloss, Committee Secretary *4/23/12 updated report changes discount assumption to 6% from 7.5% resulting in $3.2m liability of which $1.9m is unfunded.