HomeMy WebLinkAboutJanuary 9Finance and Investment Committee Special Meeting
Town of Los Altos Hills
Town Hall, Wednesday, January 9, 2017
The meeting was called to order at 4:00 pm by Chairman Sloss.
Members present: Allan Epstein, Kjell Karlsson, Susan Mason, Stan Mok, and Roddy Sloss.
Members absent: Betty Kayton, Chris Nam, Bill Silver, Chris Welborn
Associate members absent: Jim Lai; Frank Lloyd
Council absent: John Radford; Gary Waldeck
Staff present: Pak Lin, Administrative Services Director and Karen Huang, Finance Manager
Public present: None
Approval of minutes
November 7, 2016 meeting minutes were approved as presented by members who attended that meeting.
Report by Allan Epstein on recent Council activities of interest.
Mr. Epstein described the December Council meetings in which a new Mayor and Vice Mayor appointed and
deliberations leading to selection of new Pathway Committee members.
Report by Pak Lin on Finance Department activities of interest
Ms. Lin at the request of the Town’s auditors, Maze & Associates, asked the Committee to recommend the Town
Council a change to Section 10.0 Internal Control of the Town’s Investment Policy. The change clarifies that the
annual audit will be performed in accordance with State and GASB requirements and that investment transactions will
be tested as part of the audit. The revised section will now be consistent with past practice. After discussion, all
members present recommended the investment policy change be approved by Town Council.
Ms. Lin noted that the annual audit field work is scheduled earlier this year to allow more time for CAFR review. Ms.
Lin for the Town is seeking a legal opinion from outside council regarding the Town’s procedures and practices for
non employee Town contractors with regard to their entitlement to benefits. Also, a proposal from Willdan, the
consulting firm that performed the Town’s prior Cost Allocation Study, is being solicited for a review and update to
the prior study.
Report on Liability Insurance Coverage by Pak Lin and Roddy Sloss
Ms. Lin presented slides sent to the Committee prior to the meeting which highlighted non employee insurance
coverage’s, premium cost history, and the Town’s claims experience. Mr. Sloss presented supplementary information
related to the current financial health of ABAG PLAN compared to their recent history noting substantial
improvements attributable to actuarial revisions to the estimated costs of claims outstanding. Ms. Lin described
organizational changes occurring within ABAG where more work is being outsourced resulting in lower administrative
costs. The absence of earthquake coverage was noted and the Committee requested staff to 1) obtain a quote from
ABAG for earthquake coverage of the Town Hall; 2) if practical, obtain a quote to retrofit Town Hall to current new
building earthquake standards; 3) update the status of two long outstanding sewer related liability claims; and 4) report
on the Town’s claims settlement process. Regarding Workers Compensation insurance, Ms. Lin described
Continued
January 9, 2017 FIC minutes, continued page 2.
Report on Liability Insurance Coverage by Pak Lin and Roddy Sloss, continued
changes planned within ABAG. The Town is part of a five member Joint Powers Authority (“JPA”) for workers
compensation insurance. For cost savings, ABAG is considering a merger with a related organization which is
expected to result in its’ withdrawal from the JPA. The remaining members, acting as a group, are considering
alternatives including remaining with the current provider, Sharp, joining another JPA, and soliciting quotes directly
from insurers. There is no timetable for these actions however quotes are expected from interested insurers in the next
few months. For now, insurance will be provided as before. Rates have fluctuated over the years; however the overall
trend has been downward, with the 2016-17 premium prior to adjustment reflecting a 19% savings totaling $14,534.
Report on Town’s Wells Fargo relationship by Roddy Sloss
Mr. Sloss noted that the Town had recently changed from the Bank of America to Wells Fargo and that Wells Fargo
had received and accepted criticism of its retail cross selling practices. Regarding the agreement Wells Fargo requires
its customers to sign, there is a substantial effort to shift responsibility for fraud losses from the bank to the Town and
additional procedures are imposed on the Town which strengthen the Town’s related internal controls. The result, in
Mr. Sloss’s view, is that the Town is reliant on its insurance coverage for protection against fraud losses. Mr. Sloss
brought to the Committee’s attention that the governmental crime policy endorsement coverage had recently been
reduced from $2 million to $200,000 for fraudulent impersonation losses. The Committee requested staff to obtain
from ABAG additional quotes to bring fraudulent impersonation insurance coverage up from $200,000 (leaving a
$25,000 deductible in place), to $ $500,000. Mr. Sloss lead a discussion of public disclosures regarding Wells Fargo
past retail cross selling practices. After considering alternatives with the concurrence of staff, no changes were
recommended. Ms. Lin’s financial controls report was reviewed and bank balance practice was discussed noting that
Wells requires a $2.5 million compensating balance to offset any bank fees and that additional short term funds are
invested with LAIF with the excess funds transferred to PFM for longer duration investment.
Discussion of CalPERS December 21, 2016 announced pension cost increase by Pak Lin
CalPERS announced a three year schedule to reduce the investment income actuarial assumption from 7.5% to 7%.
The estimated impact on the Town will be to increase its pension liability by approximately $800,000 and increase
required annual contributions by approximately $125,000 to $160,000 a year until unfunded liabilities are eliminated.
The Committee expressed its continued interest in exploring alternative investment options including prefunding
CalPERS required contributions to lower Town costs and asked Ms. Lin to contact CalPERS and Bartel (the Town’s
actuaries) regarding alternatives now available.
Presentations from the Floor – None.
Proposed topics and dates for future meetings
The next FIC meeting will be a Special meeting on Monday, February 27, 2016 at 4 pm. The non recurring topics will
be a midyear budget update. Other future topics are: Workers Comp provider change, Review of long term capital
plans and policies; Prepayment of Pension liabilities; Financial policy and procedures review; Description of new
Planning and Building software; Review of FIC Monthly Project Summary Report; Review Finance Department
quarterly report on financial controls; Over/under absorption of Building and Planning fees; Audit of franchise fees
(assure annexed area fees are included and Purissima Water status); Sewer CIP status report comparing planned to
forecast spending and related cash management plan; Update cost allocation model for 1) internal service
programs and 2) improve recurring overhead allocation; Reserve Policy updates; Improve long term capital plan to
include vehicles, equipment and buildings.
Adjournment: The meeting adjourned at 6:03 pm
Respectfully submitted by Roddy Sloss, Committee Secretary