HomeMy WebLinkAboutJanuary 11Finance and Investment Committee Special Meeting Town
of Los Altos Hills
Town Hall, Tuesday, January 11, 2016
The meeting was called to order at 4:40 pm by Chairman Epstein.
Members present: Allan Epstein, Kjell Karlsson, Susan Mason, Roddy Sloss and Chris
Welborn.
Member absent: Betty Kayton, Stan Mok and Bill Silver
Associate members present: Jim Lai and Frank Lloyd
Council present: John Harpootlian and Gary Waldeck
Staff present: Pak Lin, Finance & Administration Services Director and
Karen Hwang, Finance Manager
Public present: None
Guests present: From PFM Asset Management LLC, Monique Spyke, Director and
Charlie Cooke, Senior Analyst.
Approval of minutes
December 7, 2015 meeting minutes were approved as amended by members who attended the prior meeting.
Presentation of Fourth Quarter Investment Performance Report by PFM
Ms. Lin introduced the Town’s new PFM representatives: Ms. Spyke, who has been with PFM for thirteen
years and Mr. Cook, who has been with PFM for four years. (The Town’s long time prior representative,
Carlos Obiltes, has left the firm.) Ms. Spyke will be taking family leave in the next few months. Mr. Cook
presented a twenty page meeting handout reviewing fourth quarter 2015 Town investment performance and
both Ms. Spike and Mr. Cook responded to questions. The portfolio average maturity is three to four years
up from two to three years in response to rising interest rates. The $9.8 million portfolio has unrealized mark
to market losses in the fourth quarter of $55,870 attributable to rising interest rates. Other than average
maturity, the portfolio is substantially unchanged with AA quality securities of which 80% were issued by
the Federal Government, 19% were domestic based corporations and 1% is the CAMP money market fund.
Questions and discussion related to strategy, risk of realized losses, and credit quality.
Investment Portfolio Cash Flow Analysis by Monique Spyke
A seven page meeting handout was presented stratifying the portfolio between long term and short term
investments over the past five years. During the five year period, the portfolio has grown at an average rate
of two percent with balances fluctuating between approximately $11 million and $18 million and intra year
balances fluctuating from a December low to a June high an average of 16%. For short term cash
requirements, PFM requests two to four weeks advance notice. Ms. Lin is studying Town based cash flows
which she will present with a minimum balance requirement recommendation in the next few months. At
December 31, 2015, the Town’s balances are approximately $16 million with $3 million at Wells Fargo
Bank, $3 million in LAIF and the balance managed by PFM.
Final Minutes
DRAFT – January 11, 2016 FIC minutes, continued page 2.
Pension Prepayment Investment Opportunities – telephone presentation
Ms. Spyke introduced Ellen Clark with PFM who presented by telephone an eleven page meeting handout
describing PFM’s new Supplemental Pension Trust product. The FIC expressed interest in this subject when
CalPERS recently made it possible to prepay the Town’s pension liability as part of changes arising from
new accounting rules requiring unfunded pension liability balance sheet reporting. PFM is offering a
managed equity investment fund using a significant amount of index funds with five year average returns
expected to be in the six to seven percent range before deduction of PFM fees (greater of $10,000 per year or
45 basis points on average invested funds.) Fund withdrawals may only be used for CalPERS pension plan
costs. PFM also offers a more flexible Trust for OPEB plans similar to what the Town presently has with
CalPERS. Ms. Lin will gather more information from CalPERS on its related products before the Committee
further considers this subject.
Report on Council Activities of interest by Mayor Harpootlian
Mayor Harpootlian asked for suggestions on an initiative to provide a recurring source of funds to address
Town infrastructure projects such as private roads becoming public roads and undergrounding electrical
lines. For example, Mr. Harpootlian said ideas mentioned are an Air BnB hotel tax and an incremental utility
based tax. Mr. Harpootlian estimates the requirement is approximately $1 million per year.
Report on Finance Department activities of interest by Pak Lin
Ms. Lin introduced Karen Hwang, the town’s new Finance Manager and presented the November 2015
CalPERS annual pension plan report along with a summary of key figures. Ms. Lin also described work to
date on replacing the Bank of America as the town’s bank and handed out a summary noting attributes of
Wells Fargo and Bank of the West who currently appear to be the finalists. On site interviews, in depth
analysis of products and references will be completed before a recommendation is presented to the
Committee. In response to a question posed by the Committee in a prior meeting regarding changes to Tier 1
retiree health benefits, Ms. Lin cited the Town’s employee handbook which addresses the matter. Ms. Lin
reported that South San Francisco has announced it plans to leave ABAG (the Town’s insurance
broker/provider) which is a concern because ABAG’s administrative fees will have to be paid by a smaller
base. The Town will consider its alternatives including using a new brokerage/provider arrangement. Work
on a new permitting system and website improvements is proceeding. Finally, Ms Lin stated that the
midyear budget update will be an analysis of budget to actual as opposed to a complete re budgeting similar
to last year. This presentation is expected to be available for review by the Committee at its next meeting.
Presentations from the Floor
None.
Proposed topics and dates for future meetings
The next FIC meeting date is Monday, February 1, 2016 at 4:30 pm. Topics will be the selection of a new
bank and the midyear budget analysis. Other topics planned for future meetings are: Cash Flow Analysis;
New procedures for permitting and license fees; Prepayment of OPEB and Pension liabilities; Financial
policy and procedures review; and Review of FIC Monthly Project Summary Report.
Adjournment The meeting adjourned at 6:45 pm
Respectfully submitted by Roddy Sloss, Committee Secretary