HomeMy WebLinkAboutApril 3
Finance and Investment Committee Special Meeting
Town of Los Altos Hills
Town Hall, Monday, April 3, 2017
The meeting was called to order at 4:00 pm by Chairman Sloss.
All members present: Allan Epstein, Kjell Karlsson, Betty Kayton, Susan Mason, Stan Mok, Chris Nam,
Bill Silver, Roddy Sloss and Chris Welborn.
Associate members: Jim Lai, present; Frank Lloyd, absent
Council: Gary Waldeck, present; John Radford absent
Staff present: Pak Lin, Administrative Services Director and Karen Huang, Finance Manager
Public present: None
Guests present: PFM: Isac Chyou, Senior Managing Consultant; Ellen Clark, Multi-Asset Class
Specialist; Vince Xiao, Analyst PARS: Mitch Barker, Executive Vice President;
High Mark Capital Management: Andrew Brown, Senior Portfolio Manager
Approval of minutes
February 27, 2017 meeting minutes were approved as presented by members who attended that meeting.
Presentation by Isac Chyou on PFM managed asset performance for the December 31, 2016 ending period and
outlook for 2017.
Mr. Chiu introduced himself and Mr. Xiao who are assigned to the Town’s account along with Monique Spype who
was unable to attend. Mr. Chiu discussed a presentation distributed to members before the meeting covering the
subject matter. He characterized 2016 as a strong market and highlighted 2017 uncertainties such as European Union
organizational matters, FED rate increases, and Presidential FED appointments. The Town’s fixed interest investment
portfolio managed by PFM is compliant with State requirements and Town investment policy. The 1.09% gross return
slightly exceeded the benchmark in 2016. Ninety seven percent of the portfolio matures in three years or less
comprising 88% Federal government and related agencies issued securities and twelve percent corporate notes. The
committee asked Mr. Chyou to look describe the extent of opportunities to invest in Commercial Paper allowed by law
and Town policy and compare those returns to Corporate Notes. Mr. Chyou stated better returns are now available in
commercial paper, and that Town policy does not allow investments in commercial paper. Some members felt that
was in congruous since the policy allowed buying longer term notes from the same companies and the Town should
review its commercial paper investment policy decision.
Presentation by Ellen Clark on PFM Managed Trusts used to fund future pension plan requirements.
Ms. Clark presented a seven page introduction to PFM’s products for the purpose of prepaying pension obligations
distributed to the committee before the meeting. PFM utilizes its existing internal resources used primarily for client
long term capital management (mentioned above) to provide some products for their Pension Trust offerings while the
Multi-Asset Class investments are managed separately. PFM specialists work with Town management to design and
implement a medium term (minimum 3-5 year investment strategy) and then implement the strategy along with
reporting, similar what PFM currently provides. A range of actual returns was presented for several different Multi-
Asset Class investments PFM offers. Base trust fees begin at $6,000 per year and PFM charges an additional 0.45%
annual fee for the first $10MM, which in the Town’s case will be a minimum $10,000 fee, since the Town has other
assets under management with PFM. A standard Trust Agreement is presented to the Town for modification as
April 3, 2017 FIC minutes,
continued page 2.
necessary. It is possible to combine OPEB and Pension Trust management which may result in fee savings and more
choices, however funds are kept separate and must be used for their designated purpose.
Presentation by Mitch Barker and Andrew Brown on PARS pension prepayment trust products
Messrs. Barker and Brown referred to a twenty one page presentation distributed to the Committee before the meeting
describing their services, fees and clientele. PARS believes it is the industry leader serving 71 clients including several
in the Bay Area. Mr. Barker believes PARS performance is better and fees are lower than its competition. The PARS
approach enables clients to choose actively managed portfolios (mutual funds) and/or passive portfolios (index funds).
Mr. Brown’s comments focused on the range of their products, fees, historical returns, and their personalized
approach.
At this point, it was 6 pm and Committee members began to excuse themselves while those remaining discussed
information described below.
Discussion of Bartel & Associates proposal to Provide Pension Actuarial Services
Mr. Sloss referred members to a proposal letter distributed before the meeting describing the subject matter and stated
the deliverables did not appear to include a presentation enabling the Committee to fully understand CalPER’s
prepayment option or to compare any advantages and disadvantages with it the 115 trust products offered by PFM OR
PARS. Ms. Lin commented that a Bartel presentation on the CalPERS pension prefunding option would be included
and she described a number of related issues that would also be covered. Other committee members described
deliverables they would like to see included in the proposal. Ms. Lin suggested asking Mr. Pryor of Bartel to attend a
future FIC meeting in order to describe his proposal in more detail and answer questions. Committee members agreed
with Ms. Lin’s suggestion and she will attempt to schedule Mr. Pryor for a Committee meeting in July.
Report on Council activities of interest – Gary Waldeck
Mr. Waldeck described the Management Associates Town organization assessment project underway noting that no
results would be available until May. Two annexations, Mora Glen and Encinal Court, are under Council
consideration potentially affecting 86 and 5 homes, respectively.
Report on Finance Department activities of interest – Pak Lin
In the interest of time, Ms. Lin’s report on the subject matter included in the most recent Town Manager’s weekly
report was attached to the meeting Agenda and no oral report was presented.
Review of future meeting calendar and topics:
The next FIC meeting will be a Regular Meeting on Monday May 1, 2016 at 4 pm to discuss the fiscal 2018 base
budget (full budget without capital plans and non recurring items “enhancements.’) A joint Council-FIC fiscal 2018
budget meeting will be held on Monday May 15, 2017 at 4:00 PM, to discuss the entire budget with a focus on capital
expenditures and program enhancements.
Presentations from the floor – none.
Adjournment:
At approximately 6:45 pm there were no further matters to be discussed and the meeting adjourned.
Respectfully submitted by Roddy Sloss, Committee Secretary
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