HomeMy WebLinkAboutDecember 7F&I committee notes_final
Dec 7, 2020
Finance and Investment Committee Meeting, Dec 7 2020
Members Present Allan Epstein, Medha Rishi, Roddy Sloss, Susan Mason, Chris Welborn, Cheryl Evans, Nathan
Blair, Chris Nam, Stan Mok.
Members Absent None.
Associate Members Present Kjell Karllson, Jim Lai Associate Member Absent Frank Lloyd.
Council Present None.
Staff Present Sarina Revillar, Administrative Services Dir.
Guests Present Doug Pryor, Bartel and Associates.
Public Present: None.
NOTE: This meeting was held via a Zoom online meeting session on Dec 7, 2020. Meeting Recording:
https://us02web.zoom.us/rec/share/IiG2eDfsDCWcqwwCfBkwFiOczR7QkpXpJj7IGIsmFAXW2cNFAtrGdjxt
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Ms. Mason, Chairperson, called the meeting to order at 4:10 pm. Minutes for Nov 12, 2020 were reviewed. Ms.
Mason requested minutes’ date to be clarified.
Agenda Items
1.Sewer Allocation Overheads Adjustment: Allan Epstein
a.Mr. Epstein provided background on FIC suspicion that excess overhead was charged to the Sewer
Fund over the last four years. Cost allocation study was requested in 2015 but due to turnover and
priorities completion was delayed until 2019. Completed study supports supposition the SewerFund
was overcharged in the past. Agenda attachment provided prior to the meeting was reviewed..
b.2021 Budget utilizing new CAP study supports approx $176k Sewer Fund overhead/direct cost
allocation vs. the approx $303K charged in FY’20.
c.While CAP study was delayed, Staff and Council had indicated willingness to reimburse Sewer
Fund, if study indicated Sewer Fund was overcharged. Based on analysis, the Committee is being
asked to recommend the Council give direction to Staff to confirm Epstein Analysis or determine
the amount and reimburse Sewer Fund for excess charge.
i.Mr. Epstein recommended that if the Sewer Fund be reimbursed approx $438K via a
4-year pro-rated credit.
d.Allocation of common direct cost, Town Center, Yard, Vehicle and EE Benefits were also
discussed, were not covered by the recent Matrix study and need to be studied and determined.
e.Staff expressed no position on the amounts proposed in Mr. Epstein’s analysis and advised that the
FIC should make its recommendation to the Council. However, Ms. Revillar expressed concern
about the precedent that might be set by retroactively changing the results of prior studies and the
impact it might have in the future.
f.Discussion ensued and additional questions asked and answered.
g.Chair Mason suggested that there appeared to be extenuating circumstances justifying a new study
shortly after Wildan study was completed in 2014, a new study was directed by the Council and
was delayed until MS. Revilar’s team completed the study. Chair Mason suggested reconciling the
concern by agreeing that going forward we would not look back.
Town of Los Altos Hills
FIC Committee, Remote Zoom meeting, Oct 5, 2020
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h.Mr. Epstein proposed a motion to request the Council to direct staff to determine if the Sewer Fund
was overcharged during the period FY’17-20, to confirm with the FIC on their findings, and
recommend that the Council instruct staff to return any excess amount so determined to the Sewer
Fund.:
i.Ms. Revillar recommended that to avoid the back and forth if the FIC votes on this it should
present it to Council with Mr. Epstein’s analysis. Let the Council decide.
j.Chair Mason stated she did not hear objection from staff to the amounts proposed and that staff
would prefer the FIC present its findings directly to the Council. Mr. Mok asked if there was a
compromise. Mr. Blair stated that it appeared the compromise was to wait until the new study was
completed, there is general agreement on the number and it should go to Council. Ms. Evans
suggested the number has been quantified and a compromise might be the time period over which
the funds are paid back. There is no controversy on the current CAP Study.
k.Chair proposed motion to present analysis to Town Council for their decision to reimburse and
when and confirmed with Ms. Revilar that staff was comfortable with the analysis.
i.All members with the exception of Mr. Mok voted. yes; Mr. Mok abstained.
l.On a separate sewer related matter. Mr. Sloss raised the issue of Town payments for past use of the
sewer system.. Ms. Revillar confirmed that a transfer was made for three prior years charges in
FY’20 and going forward the Town would be transferring its share to the Sewer Fund. Ms. Revillar
confirmed that the transfer was not done but will be done when NBS provides the billing.
2.CalPERS Pension Review: Doug Pryor, Bartel and Associates
a.Mr. Sloss introduced the matter, explained how CalPER accounts for pension and the history of
Town prepayments for unfunded liability. Town has approx $2.5M in unfunded actuarial liability,
and discussions ensued as to whether a recommendation to Council should be made to make
additional prepayments, and if so, how much and to which custodian, CalPERS or PARS. A
presentation he prepared was provided prior to the meeting and was attached to the agenda.
b.Mr. Pryor explained that the $2.6 M liability was predicated on CalPERS’ assumed 7% return. A
6.5% rate of return would result in an additional approximate $1 million. Financial advisors believe
a 7% percent return to be optimistic. It is unlikely the liability will be eliminated by a substantially
higher earning rate and therefore a higher future unfunded liability is likely..
i.Disadvantages of a prepayment to CalPERS: Reduces future annually required “payoff”
amounts, which postpones reduction in liability; CAlPERS requires annual Nornal
payment, even if one were to be overfunded; and concentrated investment risk with one
advisor.
ii.Advantage of separate 115 trust: More control and investment options, no risk of
overfunding since funds can be used to pay normal costs, investment diversification..
However, trust amounts are not sown as reducing pension liabilities on the balance sheet.
iii.Without providing specific investment advice, Town will likely need to pay more in time,
if funds are available it makes sense to prepay, almost assuredly will earn more with
PARS or CalPERS, than other restricted investment options available to Town.
Town of Los Altos Hills
FIC Committee, Remote Zoom meeting, Oct 5, 2020
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c.Discussions ensued around potential future returns, CalPERS risk mitigation policy, flexibility,
overpayment risk.relative returns at CalPERS vs PARS, support for the proposed $1 million
prepayment amount and how to allocate the funds.
d.Chair Mason requested the decision be taken in three votes.
i.Mr. Sloss moved that Town make a pre-payment on the unfunded actuarial liability:
Second Mr. Blair
1.All members with the exception of Mr. Mok voted yes; Mr. Mok abstained.
ii.Mr. Sloss moved that the prepayment amount be $1M: Second Ms. Evans
1.All members with the exception of Mr. Mok voted yes; Mr. Mok abstained.
iii.Mr. Epstein moved 50/50 split into PARS and CalPERS
1.All members with the exception of Mr. Mok voted yes. Mr. Mok abstained. Mr.
Lai would prever 100% to PARS..
Council and Staff Reports on Recent Activity:
3.Report on Finance matters: Ms. Revillar
a.Unresolved deposits project has been completed. Revenue total expected at approx $192k.
b.The town received the GFOA Budget Award for its 2021 budget.
Future Meeting Topics
a.Next meeting scheduled for Feb 8, 2021
i.Agenda: Insurance reviews and TBD on the Mid-Year review.
Adjournment At approximately 6:02 pm, there being no further matters to be discussed the meeting adjourned.
Respectfully submitted: Medha Nicky Rishi, Committee Secretary