♪♪ ♪♪ ♪♪ ♪♪ The January 25th Budget and Finance Committee of the Urban County Council and our first order of business is to elect a chair of the standing committee, and then the chair will select a vice chair, and then we also have one item of business, which the newly elected chair, whoever that is, will go ahead and lead us through the report on the police department. I believe we do have a quorum, so we'll go ahead, and I ask first if there are any nominations for chair of the Budget and Finance Committee. Mr. Farmer. Thank you, Vice Mayor. My button wouldn't work. Now it is on. Thank you. Okay. As with all the committee chairmanship, we have tremendous potential within the committee itself, and a tremendous opportunity, and certainly as highlighted by the mayor's comments just now at the merge government address, this budget will be very challenging. The rest of this year will be very challenging, and I think that that type of challenge brings us to leaders that we know and are familiar with, and specifically this post. And at this time, given the background of chairmanship, I would like to place a nomination, named Ed Lane. Thank you. Do I hear a second? Mr. Myers has seconded. Are there now we will do this the way we've done it in all of our standing committees. If there are other nominations, we'll take all the nominations and hear from each candidate for chair, and then we'll voice vote. So are there other nominations? Council Member Lawless. Did you not want to speak? Oh, okay. Council Member Kaye. Yes. Yes, I agree with the sentiment that's been expressed, and I would like to place into nomination Chuck Allinger, who's been on council for eight years and has a reputation, as I just told him, of leading a really good meeting, which we're going to need in the budget committee. So I place his name in nomination. Do I hear a second? Second. Council Member Beard seconded. Are there any other nominations? If not, we have Council Member Ed Lane and Council Member Chuck Allinger, who've both been nominated to chair the Budget and Finance Committee. And so, as we've done at our past committee meetings, the initial meetings, we'll hear from each one. Council Member Lane, about why you would like to do this. Thank you, Madam Chairman. This will be my fourth term on the council, and I thought I would just run back a few of the things that I've done over the last six years on council. I think one of the first things was that I strongly have advocated in the very beginning of my first term that we needed to address the budget and police and firefighters pension fund and the financial issues that were facing that. And unfortunately, you know, we have not addressed that issue yet, and now this is somewhat of an out-of-control expense for the government that is of great serious financial liability, I feel, to the city and the future. So I was, you know, forward-looking in addressing that type of an issue. It's also a catalyst with Council Member Kevin Stennett and former Council Member David Stevens and enhancing the rainy day fund and making it more of a formal program. And although it's not funded to the amount that I would like to have seen it funded at, we do have money in that account, and it will be very helpful to us as we go through this downturn in the economy. I sponsored an ordinance which was not passed by council requiring the city council to ratify contracts with public safety unions. And my thinking on that is that the rank and file of the unions get to vote to approve the terms negotiated by their representatives, and I feel that the council should approve agreements between the mayor and the unions on behalf of the taxpayers. These contracts go for three years. Many of them are outside the term of the mayor that signs the agreement and can create substantial financial liability to the city. I also was in support of increasing the sanitary surf fee in order to pay for upgrading the cost of renovating our sanitary surf system. The fee that we're currently charging is pretty much comparable with what the adjacent communities are charging now, and it's not because we were charging too much, but rather we were charging too little because the, I think the council failed to increase the rates over an extended period of time, which allowed our systems to go into distress and not be properly maintained. And I guess the final point I would like to make that over the last six years, I've served as vice chair of the Budget and Finance Committee, so I'm very intimately familiar with the budgets, the economics of the government and our local community. Thank you. Thank you. Council Member Ellinger. Thank you, Vice Mayor, and thank you, Council Member Kaye, for nominating me. I am the second most senior member on this council. I've been through eight budget cycles. I have been a big proponent of doing the counseling, which I think needs to continue as an important aspect of the council. I think it gets us more involved. I think the issue with the rainy day fund was a good one. I was supportive of that. I think we need to get back to what we've done in the past with our retreats. I think that's important with administration. We need to work with administration. We need to set priorities. We don't need to wait until April when we receive the budget to be proactive. We need to be proactive. We don't have to be reactive. I think we need to get back to doing the retreat, setting our priorities, working with administration. One of my strengths, I believe, and I appreciate Council Member Kaye saying that, is running a professional, efficient meeting. I will continue to do that to the best of my ability. I have been a chair in the past of the Services Committee. I understand this is going to be a big challenge. It's a lot of responsibility. It's a big challenge. I know with the help of the team, with the Council, the Council staff, with Jerry, with Shannon, with Rebecca, I know I can do it. And working with the administration, with Ryan and the financial commissioner, I feel like I'm the person to do this job. I will work as hard as I can, and I'll make sure, one thing you can count on me, that I will be here. In the eight years I've been on this Council, I've missed two meetings. And one was a Council meeting, one was a work session. So I'm somebody who will show up and I will work hard and I will like to be the chair and I appreciate the nomination. Thank you. And just one further thing, if I don't receive this, I think we do have a good person in Mr. Lane and I appreciate it. I think it's always good to have competition because you get to talk about the issues and you get to find out about the candidates and he has been a good person on this Council too. But thank you all for this nomination. I would like to be the chair if that does suit this committee. Thank you. Thank you. Mr. Southers will call the roll of the committee members and we'll each make a voice vote. Oh, yes, we have a question. Council Member McCord. Well, I just wanted to make a comment. I'm not on the committee, but I wanted to wait to see if anyone on the committee had spoken or wanted to speak before. But I wanted to, I felt very strongly about this committee as it was said by both of these candidates, this is going to be the most challenging budget maybe this government's ever faced. This position is extremely important and I'm glad that there are two senior folks that have been nominated for this. And I agree with Council Member Kaye that, Council Member Ellinger, you run a very efficient meeting and that's one of your strengths. But I would speak on behalf of Council Member Lane and I would appeal to the members, the voting members of this body to consider Council Member Lane from this standpoint. For three terms, he has been the co-chairman of Budget and Finance. As a Council Member intimately acquainted with our budget, he has not only created, he created the Rainy Day Fund. I supported the Rainy Day Fund as did Council Member Ellinger, but Council Member Lane created the Rainy Day Fund. And I want to tell you why that is extremely important because everyone sitting in this audience and watching needs to understand. When we came in to government, Council Member Lane and myself, Stennett, Myers, we had approximately about $3 million, $4 million in our savings account as a city. Council Member Lane advocated strongly for a savings account and a plan. And he authored a plan to put any monies, 25 percent of any money that we had in a budget surplus into that plus $50,000 a month. That was passed by this council. And because of that, we had money in a terrible season last year. We were able to draw from the Rainy Day Fund because Council Member Lane saw a budget impact that was coming and worked as a legislator to make that happen. He, along with Council Member Stennett, also created the draft debt management plan. They created the bond workshop that we have done where we actually work through every bonding project and vote for those types of things. He changed the way that we reported to the council. So this is a person who is intimately acquainted with the budget side of what we do and has not just voted for things but also led. And so I would strongly appeal to council members on this committee that can vote to consider those things as to who you want to put in this role. And I think it sends a very strong message as to who we vote for. So I wanted to come down, Council Member Lane, and offer my support even though I can't vote for you in this. I believe that you have two very good candidates, but they're looking at a resume. I feel very strongly that you are the person for that job. Thank you, Vice Mayor. Council Member Lawless. Thank you. I think we are fortunate to have two really good people up for this position, and I think we're fortunate to have a really great, talented council of 15 members bringing all kinds of different things to the table. I'd like to speak on behalf of Council Member Ellinger. He and I don't always agree, but I have always known him to do what he believes is in the best interest of the community. And we'll stand by that. I have to say I haven't experienced that from Council Member Lane, but I don't have much experience with Council Member Lane. So I would urge people to, as the senior most council member, or second senior most council member, and council member at large, I think he, I was on the services committee with him. He runs a great meeting, and we are going to have to work extremely well with the administration. We are facing hard times, and I would urge people to please vote for Council Member Ellinger. Thank you. Thank you. Are there other council members who wish to speak? Council Member Stennett. Thank you, Vice Mayor. I wasn't going to say anything, but I think as outgoing chair of the Budget and Finance Committee, I think there are some things that need to be said and need to be put out there for the public to understand what's happened. First of all, I want to say I appreciate everyone's e-mails, phone calls, and especially my colleagues on the council who have lobbied for me to be on Budget and Finance. I appreciate the compliment, and I appreciate their willingness to support me. But Budget and Finance is not about one person. It's not about who's chair, actually, because actually in April it turns into all 15 council members, and all 15 have to pass and help the administration balance the budget. So last week I think Council Member Ellinger said economic development, budget, and finance are the most powerful committees. Well, being on council and probably the third most senior member behind Council Member Gordon and Ellinger, it's not the most powerful committees because under the new policy, all committees are equal. All committees start and discuss and debate, but they don't have the final say. Budget and Finance doesn't either. So it's important to understand the committee structure and understand who should be chair. And let me get to the chair point. I made this last week, and I'll make it again today. We should have the best people we can get as chairs of a committee. It shouldn't be about lobbying for voting and switching votes between committees, and that's what's gone the last couple of weeks, and that's what has divided this council. It's wrong. And forever, as a council, we're going to have a hope to get through this budget and to work together as a team. We've got to stop the politics. We've got to stop the stuff that makes us divisive, which has happened the last year. We've got to put it all behind us because this is an important day. It gets our last chair in place and allows us to get to work. For those of you who don't want to stop, we'll expose you. We'll make sure the public knows who's being divisive because there are those of us that want to work together and want to pass a budget and we want to do the right thing. Yeah, I could have been on Budget and Finance Committee. It would have been very easy. It would have been very selfish of me to do that, though, and I chose not to. I yielded to a better chair of another committee on purpose because it's the right thing to do, and I hope you all understand what the right thing to do is. I definitely support Councilman Lalanne. I don't see how you couldn't. He's been vice chair for six years. He helped co-author the emergency fund, which is saving our tail this year at $5.8 million worth. So there's a lot of opportunity and upside to what Councilman Lalanne offers. He has intimate knowledge of the budget. Now, I know some of you have already planned your votes. I'm not stupid. We all know who they are. I won't count you out, but we'll see when the vote's casted what's happened. And it's wrong, but we'll move on today, and I hope everyone's willing to move on after today with me because it's the right thing to do, and it takes leadership, and sometimes leadership is tough. Thank you, Vice Mayor. Thank you. Is there any other council member who wishes to speak? Council Member Lawless. I concur with Council Member Stennett. This, the last couple of years have been difficult on the council. I look forward to it being a more collegial body, and I guess I can't let this go without saying the Rainy Day Fund was started in 1996, and, yeah, it was. So, and I remember because I was working for a social service agency at the time, but it was started in 1996. So, thank you. Thank you. Is there anyone else who wishes to speak? I will simply say I think we have two excellent candidates. Thank you for running, both of you. And I ask Mr. Southers to take the vote. Gordon. Mr. Ellinger. Mr. Ellinger. Kay. Mr. Ellinger. Beard. Blues. Ellinger. Farmer. Mr. Lane. Lane. Lane. Lawless. Ellinger. Myers. I'm going with Lane. Congratulations to Mr. Ellinger. He's the new budget finance chair. Kay. Six to three. Thank you, Jerry. And I would ask Mr. Ellinger if he has selected or would like to select or ask a vice chair. I would ask Mr. Lane if he would like to be the vice chair. I would like to recommend him. Council Member Ellinger, it would be a pleasure to be your wingman. Thank you. I look forward to working hand in hand with you. Okay. Thank you all very much. And with that said, I'd like to go ahead and turn the meeting over to Mr. Ellinger to hear our issue. Thank you, Vice Mayor. We have one issue on the agenda. It's under Item Number 3, Report of the Policeman's and Firefighter's Retirement Fund. And I see we have some gentlemen out here that could give us an update on that. We have in your packet between page 1 and 25 that outlines this, if you would. Welcome. Thank you, Mr. Chair. Congratulations. Thank you very much. If you would give your name and your titles for the record, please. Yes, sir. My name is Tom Cavanaugh. I'm the Chief Executive Officer at Cavanaugh McDonald Consulting. We are the actuaries for the Police and Fire Pension Plan. With me, just so you know, is Todd Green, an associate of mine. To the extent you have any difficult questions, Todd will answer them. I'll handle the easy ones. I do have a couple of slides that I'll go through. We have not presented to the committee in the past, so I'm not exactly sure what your major points of interest are. I'm going to try to hit a couple of highlights, and we will be happy to answer any questions that you may have. If I've done this right, what I want to do is just explain to you a little bit that we perform what are called actuarial evaluations of the Police and Fire Plan. They're done every other year. We do them as of June 30th in even-numbered years, so we have one as of June 30th, 2010. I believe you all have a copy of that report. It was presented to the Police and Fire Board of Trustees two weeks ago at their meeting. We need these valuations to measure the liability for the promised benefits we have for the active and retired members of that system, and to calculate the contributions needed, both employees and employers, to meet the liabilities that are not being covered currently by the assets of the fund. In the next few slides, I'm just going to highlight a couple of those results. Again, be happy to answer any questions as we go along. This just compares the most recent valuation as of July 1st, 2010, with that two years previous. You can see the active membership really didn't change very much. The total annualized compensation went down a little bit, so the average pay is lower now than it was two years ago. Excuse me. Yes, sir. Mr. Chairman, could you have them make that larger on the screen so that we can see it in here better? It's in the packet, but for the public at home, could you expand that by chance? I don't know. If you're in PowerPoint, is there a way to finish that? It is on page five of the packet for the council, and we'll do our best. And if council members do have any questions as we go along, just hit your button and we will interrupt Mr. Kavanaugh. And we normally put a 15-minute on our presentations. All right, sir. I'll move it around. But I think we'll be a little more liberal with this since this is our only item and this is a very important item. So we'll try to keep it within somewhat of a time frame, but there's a lot of information. That's much better. Thank you. Thank you very much. So as I was saying, the number of active members has stayed about the same for the last two years, but the average pay has declined. The retired members, as you might expect in a typical ongoing retirement system, for many years the retired membership grows, and it's continued to do so. The benefits have gone up. The market value of assets improved from just under $400 million to $421 million over that two-year period of time. I'll have a couple of quick comments on that. Actuarial value, we do not use the market value of the assets in determining the contribution rates that are needed because the market value on any one given day is not a true indicator of the underlying value of the assets held. So we do a smoothing technique that recognizes the returns on the assets over a five-year period of time. The smooth value is $502 million. That's an $80 million difference. That $80 million of difference is going to get recognized in essence as a loss over the next four years, and should we not have returns above the 8% we are assuming, that loss will have a negative impact on the contribution rates required in the next four years. There's a matter called an unfunded accrued liability that we calculate that needs to be financed, and that translates into part of the contribution that's needed. You can see the total employer, the government fund contribution has gone down from 46.6% of pay to 44.7% of pay. The member contribution rate is set by statute at 11% of pay. If I go to the next slide, perhaps we can go back to the regular at this point. Great, thank you. Just to talk about asset returns, these are the market value returns of the last five years. You can see the negative return, particularly 2008-2009. It was experienced throughout the economy in that year. That really is what's generating that $80 million loss that will be reflected over the next four years. Again, our long-term assumption is 8% a year return on assets, and in the last 15 years or so, the funds have, in fact, earned more than 8% a year. The return assumption is set based on expectations in the future and not necessarily what's happened in the past. I just wanted to show you what's been going on in the last five years. The police fire board of trustees is currently starting to look at their asset allocation, and once that is set and completed, we will be recommending a review of the economic assumptions that we use, and we'll see if that 8% should be retained or if it should be changed at all. This is the change in the unfunded. Hopefully that's large enough. The unfunded has gone down a little bit. For some of you that have been here for a while, know that the --- Excuse me, Mr. Kavanaugh. Yes, sir. Could you tell us, refer to what page that is in the packet? Yes, sir, I can. That is on page 9 of the packet. And as you go through and you put a new slide up, if you would, just give the page number of the packet, if you don't mind. Okay. Thank you. I would be happy to. Actually, this is the last one, so it's not an issue. I just wanted to explain, we went from $250 million roughly to about $220 million in unfunded accrued liability. For those of you that have been around a while, you know that the employer made some large contributions in a couple of previous years. So just trying to understand what the pieces are that get us from one unfunded accrued liability to the next. The unfunded is not terribly different than your home mortgage. You're financing it by making contributions on an annual basis. So as with a mortgage, it grows by interest. We have an 8% interest assumption. So over two years, that would add $30 million to it. You had contributions of about $114 million in that two-year period of time reducing the unfunded. We had some asset losses in that period. And again, we've got another $80 million to recognize, but we did have $68 million that were recognized. There was a cost-of-living adjustment gain. We assume that the benefits are going to increase 3% a year for cost-of-living adjustments. In the last two years, the Board of Trustees has approved only 2% COLA increases. So there's been a gain from an actuarial standpoint in that. And then there's been some other liability changes, mainly the salaries not growing as we expected them to. That caused an additional gain from liabilities. So another reduction of $5.7 million. And that gets us the net change in the unfunded accrued liability. Finally, as far as these prepared slides, we were asked to look at, if you will, comparables. I call them potential changes. It's really just comparability of the police fire benefit structure with other police fire plans that we are familiar with. And the comments I would make are that the current benefit accrual rate and final average salary definition, which are two of the three pieces that determine the benefit that's provided to a retiring fireman or policeman, the other being the service, those are comparable to other police and fire plans. Retirement eligibility is a little more favorable. Police and fire here can retire at 20 years of service at any age. Most other police fire plans have an age connection or perhaps require 25 years of service before you can retire with any age. The COLA, the cost-of-living adjustment, has the potential to be more favorable. Again, as I just noted, the board has limited the increase over the last two years, which brings it back into comparable range. And the member contribution rate at 11 percent of pay is above average. It's higher than comparable police fire plans. So the policemen and firemen here are contributing more of their pay than a comparable police fire system that we work with elsewhere. Typically, that rate is somewhere in the 8 to 10 percent of payroll range. Mr. Chair, those are the prepared comments. Again, I didn't know how in-depth you wanted to go in terms of this. We would be happy to answer any questions you may have with regard to this valuation in particular. As I noted, the contribution rate required as a result of the valuation is a little less than it was two years ago, so we're kind of moving in the right direction. But we do have that upward pressure because of the losses that will get recognized over the next four years that could put some upward pressure on the rates in the future. And just in a nutshell, could you just give us a summary of where we stand, bottom line? Bottom line, the system is reasonably well funded. If the contributions are made as required, it is on schedule to improve its funding. And overall, I think compared to other clients we have, particularly clients that are not terribly far from us here in Lexington, you are in very good shape. Thank you. We have quite a few questions. The first one, Council Member Kaye. Yes. Could we go back to the last slide that you showed? If I can, sir. The previous, yeah. And I think some of the confusion up here in the council, I think the packet that you were using was a little different than what we had because there was a couple slides on there I don't think we had. I think we might need to get that to the council. I'd be happy to do that. I had thought that that would get distributed as well. Okay. Thank you. Yes, sir. Yes, I was interested in having you comment on these four items. Are they roughly equivalent in weight? Is there one or more of them that has a bigger impact? Just a few words along that line. If I were to do it by weight, I would say the COLA has a potential for the biggest impact in terms of cost. The cost of living adjustment may not sound like much between a 2% and a 3%, but if that's every year, that does compound into quite a difference in terms of the overall payment. So that has probably the largest impact on the cost of the plan. Retirement eligibility would be the next in terms of its impact. The earlier folks can retire, the younger they are, the longer they can collect the benefits. So that just increases the liability. The member contribution rate can have a significant impact, obviously. You get more bang for the buck from a dollar of employer contribution than you do from a dollar of member contribution because some members will terminate and there's some refund liabilities involved there. But for this system, that's fairly comparable. So, you know, a dollar that the member makes is a dollar contribution that the employer does not have to make. And then the benefit accrual rate and the final average salary can have some, but I would probably place that fourth. If I can follow up on that second item. It says more favorable by a lot, by a little. How does that compare? How does the? Well, a decent rule of thumb is that a 1% difference in cost of living adjustment changes the contribution by about 10%. So the liabilities are 10% higher or lower. I'm sorry. I wasn't clear. I wanted to go on to the retirement eligibility. Oh, I'm sorry. Okay. It's more favorable. That's a big category. I'm sorry. What's the range or scale of that favorability? It's more favorable to members. Is that me or? Okay. What I meant by that is that the retirement eligibility is more favorable to the membership compared to other police fire funds in that the members are able to retire at an earlier age than in comparable systems. So my question was if we were to compare the eligibility here with other places, is there a large gap, a small gap, slightly more favorable, a whole lot more favorable? I would say it's, oh, boy, it's not a huge gap. There is the ability for the members here to purchase service and have that service count for eligibility and benefit purposes. They can purchase up to four years. So you have a situation where folks can, in essence, work for 16 and then retire. That is more favorable than other systems. And if you're talking about most other systems where you're probably going to need 45 and 20 years of service, if you serve age 45 with 20 years of service or 25 years of service, you're probably seeing folks starting their benefit payments a good five, six, seven years earlier than in comparable systems, which is a significant difference. Thank you. Mr. Lane. Mr. Stennett. Mr. Lane, did you want to, you're on here next. Vice Chair, you're up. Thank you. All right. The first question I was going to ask is what is the cost to prepare this report on an every two-year basis? Could you give me a ballpark price on that? I can give you an exact price. We charge a fixed fee of $15,000. Okay. The reason I was asking, because this fund is so, it seems to be a little bit out of control as far as our effect on our urban county government and our finances. Would you suggest it would be appropriate if we had like a semiannual report and maybe update it every six months so that we could get sort of a trending overview? Two years from report to report seems like a long time, and when we have an issue this important to the community, I think we need to be updated more frequently. Sir, it's coincidental that we were talking with staff about that very thing this morning, and it obviously sounds self-serving because it generates higher fees for us, but we do an update for you every, in the off years, and we charge $5,000 for the update. Right. So we could do the valuations every year, and it would be an additional $10,000 every other year to do the valuations. That's probably, we don't have anybody that does valuations more frequently than annually, but at least that would give you a good hard update every year. Okay. Well, that would be something I hope the pension board would consider doing. I see a question about the 2% increase in COLA. I realize, you know, inflation is not running at 2% right now, so do you feel that our COLA increases should be tied to the rate of inflation or should it just be unilaterally, you know, set at 2% or 3% per year? If you're asking me personally, I would prefer to see something that was linked in some way to inflation, but not necessarily open-ended with inflation. Right. And in that regard, you've got the structure now. It's between 2% and 5%, but the board decides where to go with that. The history over the last 10, 12 years has averaged about 3%, and so we use 3% on a going forward basis to do our valuation. To the extent that we were to see a significant trend at the minimum of 2%, we would change our assumption going forward, and that would lower these contribution amounts as well. Okay. Another issue that's been brought up is the disability rate for the fund, and how does the percent of disability payout versus, you know, regular pension, retirement payout, compare maybe with other entities that you're auditing? Well, that's an interesting question. I would have to look. It's a different benefit structure, perhaps, than we see in other places in the sense that it's, basically on the occupational side anyway, it's a 60% of pay. We have a lot of police fire plans that are in that neighborhood. They may be 50% of pay, somewhere in there, on the duty disability, if you will. On the non-duty, just the general disability, it's really basically the accrued benefit, but with a minimum of 25%, which is not terribly out of whack with what we see on other plans from a disability standpoint. For those of us who have spent a lot of time in the private sector, most private employers, certainly reasonable-sized employers, heck, we're not reasonable-sized and we do it, so pretty much everybody provides long-term disability benefits for employees. And long-term disability programs tend to be in the 60% of pay, two-thirds of pay, as an overall benefit level. And in the public sector, it's very unusual for an employer to provide an LTD plan, because the retirement system tends to take over that responsibility. So a benefit level in this minimum of 25% is not an unreasonable number for disability. Okay. My last question has to do with the return on the money we have invested. Do you feel that our return on invested money over the last two or three years has been consistent with other organizations, pension funds, or did we do better or worse than average? What would be your gauge there? Okay. I do have some indication with regard to what the returns have been over the last couple of years, but I would want to preface my comments with this is the very reason I work on the liability side of the balance sheet and not the asset side of the liability. I'm not an investment expert or an investment consultant. In looking at this, obviously it is your returns are geared to your asset allocation, as we all, I think, would appreciate. In 2008, your calendar year, I believe, from this, your loss was about 27% of pay. That, in my experience, is a little bit higher than the losses we've seen with other clients, but again, it depends on the asset allocation. 2009, your return, 15% of pay. That's a little bit higher than we saw with some of our other clients. So it looks to me like your asset allocation may be getting you a little bit more in better times and a little bit less in the bad times. Well, the reason I was asking is it's very disconcerting that we put over 100 million in barred money into the pension funds to shore up the unfunded liability, and yet, you know, our unfunded liability as a percentage of the fund is just barely changed. And so it's, and I didn't know whether it was because the market had declined and sort of wiped out some of the investment we put in or if just the, you know, the cost of the fund had gone up quite a bit. It's not that the cost of the fund has gone up, and that gets back to that slide, I guess, whoops, this one. You know, we see that 114 million, which is that extra money, in essence, that got put in here because the portion of the regular contribution for unfunded accrued liability is not anywhere near that. So that reflects the extra money, but then in that two-year period, we lost $68 million in assets at the same time. And so you get this leveraging effect as a result, and we're, in essence, not moving a whole lot. Well, and we, the market did decline in the first part or the end of that fiscal year. or the end of that fiscal year, I suppose, and it's now been coming back up. So we might gain some of that back due to market improvements. Yes, we hopefully we have. We got some of it back in 09-10, but the problem year was 08-09. We got some of it back in 09-10, and so far, at least through now, we seem to be doing well for this fiscal year. All right. Thank you very much. I appreciate your comment. Thank you. Council Member Stinnon. Thank you, Chair. And again, congratulations to your chairmanship. Just a couple quick questions going back. I guess if we were Warren Buffett and took all of our money out in March of 08 or March 8th of 2009, we'd be sitting in cash, and then put it back in. We would gain 94% return since then. So we're not, so that's where we're at now. On your assumption, your 23-year period assumption, how do you get 23 years using that? Why do you use 23 years? Yes, let me try to explain that. The statute requires for the employer contribution, the statute requires that the employer contribute an amount equal to the interest on the unfunded agreed liability. So in essence, you're supposed to cover the interest and nothing else. No payment towards the principal of the unfunded. So when we calculate that number based on the statute, we then translate that into how many years if you contributed that as a level percent of the underlying payroll with an assumption that the payroll grows every year, how many years would it take to finance the unfunded? That's how the 23 years comes out. And we assume 3% growth in payroll each year? Yes, sir, exactly. As an average. So last year we put in 28.51% of contributions in terms of payroll and the government's contribution and employee contribution together was 28.5. And you're recommending we put in 44.7? Right. Okay. So just to be clear, 28.51 to 44.67. I guess my next question is not necessarily for you, but for the administration. What's the plan going forward to meet that obligation? Do we have anyone that can answer that or speak about how we're going to take this information and move forward? Because to me, that's the crux of it. How many people are coming into the plan this year? New people as well? Do we have all that information? Have we looked at that? Or Commissioner, can either of you all answer this question, please? And did you do the audit two years ago? Yes, sir. Yeah, that's what I thought. And did you do it the two years before then in 06? Yes, that was our first one. That's what I thought. Okay. Did you hear the question? Yes, I did. Thank you, Mr. Chair. I'm Jane Driscoll, for those of you who haven't met me, Commissioner of Finance. Yes, Councilman, it is obviously in my two weeks and two days, one of the issues we're looking at in terms of not evaluating this problem in a vacuum, but looking at all the other issues that we're wrestling with. I don't have specific recommendations for you today other than to talk about, to familiarize myself with the issues and to be able to bring back working with you as the Chair indicated in terms of the budget process, being very open and working with you on addressing these issues. So we don't have specific recommendations today, certainly. We do, we are looking forward to the asset allocation study, which is next up for us to help us to continue to analyze this issue. I mean, I see, you know, going from $17 million approximately a year in contributions to it's going to look like probably around $30, almost $30 million in contributions or $25 million is a big jump. Right, and I believe if you looked at the, I believe, and Ryan may have to help me with this last year, $17 million, $17 million was our contribution last year. And when I did the math looking at without some benefit calculations, it's about $27 million that would be required for the $44.6 million. So it's additional, it's an additional $16.4 million issue. So what's the next step for the administration after this meeting today? Are you going to come back to this committee? Are you going to create an action plan to address it with the folks in pension? Yes, I think working with the Board is a part of that plan as well as we address, and if you all heard the Mayor speak today, they addressed for the Merge government, working on both current year issues that we need to address as well as next year, bringing back a plan, working with you through a plan as we develop next year's budget. Because obviously it's not going to, I don't mean to put you on the spot and say it's going to happen overnight. I mean this fund opened up $500,000 in a hoe in 1974 when the Merge government came about. So we're not going to correct it overnight. It hadn't been corrected 37 years. But I think the sooner the better though. Of course, just for the retirees' sake alone, not to mention all the new people entering the plan. I don't know too many private companies anymore. I know the state's considering it now, not even keeping the private pension programs going to define contributions forward. So, I mean, those options have to be on the table because otherwise, you know, that $10 million could put us in the bankruptcy quick. And again, I think as the Mayor mentioned today, talking about putting a group together that could begin to address all of these issues, it's obviously top of his list as well. Good. Thank you. Thank you, Chair. Thank you. Ms. Lawless? Yes. Just for clarity's sake, Kentucky is one of the few states that cannot change the pension benefits after someone is hired on day one. But they can change the pension benefits for new hires. Are you familiar with that? Yes, ma'am, that's right. And you're not one of the few. The vast majority of the states are in that position. Well, so really the only thing that we can change for those that are in the system is the COLA I don't believe is in ordinance or in state law. Is that correct? I think the COLA is in statute here. But I haven't looked at the language recently. Okay. I don't believe COLA is in statute in the state. I don't know if we've done it. I see a lot of heads nodding. I believe it is. Does anybody want to? It is. So the COLA is something that is also in statute. So as we're moving forward, I mean, I think that all the police and firefighters and all our employees are aware that we're in a difficult situation and that our goal is to ensure that when they retire in 20 years we're not bankrupt and that they can have a pension to draw on. You know, and certainly municipalities across the country are struggling with this. So that was my question about the COLA. Was that in statute or not? But just to clarify that we can't change what benefits the current employees have, but we can change what incoming employees, whether it's fire or whatever, make. And so we're all in this together. The police, the fire, you know, all our employees, the state. So that was my comment and question. Thank you. Mr. Martin. Thank you, Mr. Chair. Thank you for joining us today. Yes, sir. I'm curious, who sets the, there's an 8%, I understand, assumed annual rate of return. Who sets that? That's a recommendation of the actuary that's adopted by the board. All of the assumptions that are used to value the liabilities are recommended by the actuary and adopted by the board. This last set, it appears, was done in 2004. And as I think I mentioned a little earlier, they're now looking at asset allocation and we would recommend once they finish that that we relook at least the economic assumptions to see if they are still good for the new asset allocation and asset classes that they decide to use. So this 8%, does that not come from you all? In essence, it does. It was there when we started in 2006. We saw no reason to change it. And so it is our assumption from that standpoint. Because it's referred to on page 8 and page 14 of the report. This assumes an asset growth of the fund of, I believe, 8% on an annualized basis over some period of time. Is that correct? Yes, sir. Over very long periods of time. Right. Jonathan, where are you? Are we, are we, I've got to, I passed out to the council. We're going to put it up on the screen so you can see. We've put together some numbers working with Mr. Driscoll, the administration, and trying to understand what the history of the fund is and what our returns are. Oops, sorry. Jonathan, go ahead and put it up. So this information was provided to us by the administration, and we tried to provide, these are the actual rates of return for the Police and Fire Pension Fund for each of the years that we could get information. For 2010, I guess these are on a calendar year. Mr. Driscoll, is that correct? These are on a calendar year. So we don't yet have numbers for 2010. The average rates of return were provided to us by the administration. For the last five years, we've had a rate of return of 1.82%. Obviously, we had a significant downturn in 2008. Last 10 years, it's 5.3%. Last 15 years, 7.97%. In 16 and a half years, it was 8.48%. Are you seeing, is your company seeing sort of reexamination of these rates of return across the country? Absolutely. It's one of the most frequently reviewed assumptions at this point in time. We're seeing some reduction in the assumption for a lot of our clients, many of whom the reduction is because they were at 8.25, 8.5, and they're coming down. Others are moving into the 7.5, 7.75 level. Again, based on the way that we prefer to do these analyses is to use the capital market assumptions that are used by the investment consultants for the client and develop expected real rates of return, add an inflationary component to that, and then get a range of acceptable return assumptions. And generally, that range puts 8% about in the middle, although now it's starting to drift where the 8% is a little bit above the midpoint, if you will. So obviously, we're experiencing a wide variety of rates of return for the year. The next one, this kind of is a sort of visual depiction of the volatility of the market during these periods of time, and these are just a graphing of the numbers. Does your 8% return, what kind of mixed investment mix does that assume? Because you have to make some sort of assumption with that. Well, the basic investment mix right now for the police fire fund is about a 65-35 equity fixed income mix, and that, again, as I said, has supported an 8% return from our other experience working with other clients and other investment consultants. We want to look at what this asset allocation that's going to be done in the next month or so produces, and then get back to the board with some recommendations. Are you finding that your clients, I guess understanding what you're saying is that this assumes a predominantly, what, 65% investment in the stock market, is that correct? In equity type investments, yes. Is that typical with police and fire pension funds across the country? Yes. That they're predominantly stock based? Yes. You can go to the next one. Mr. Martin, your five minutes has expired, but I will let you go ahead and take your second five minutes if you'd like here so we can finish your presentation. Is that okay, Mr. Myers? I've asked Mr. Myers, so we'll let you finish your presentation. Kavanaugh also acts as the actuarial for a number of other funds in Kentucky, is that correct? Mm-hmm. And so you also handle CERS? Yes, we do. And the Kentucky Retirement System, the State Police Retirement System, and the Kentucky Teachers Retirement System? Yes, sir. And I understand that you have actually different rates of return for these different clients, is that correct? We do, mm-hmm. Given that your report is so freshly given to us, literally weeks old, is there a reason why we're at 8% and Kentucky Teachers at 7.5? Several reasons. First of all, the assumptions are not changed every year, every valuation. We tend to do our experience investigations every four or five years. So for one thing, we're looking to do an experience investigation for the Police Fire Fund now, which would perhaps change the 8%. The second thing to keep in mind is that the asset allocations for all these funds are a little bit different. I don't work personally on Kentucky Teachers, so I'm not sure when their last experience study was done, but we did one for the other three systems just a year and a half, two years ago. So that's a fairly fresh look. And the final thing to keep in mind is this is not a science where you get a single number as the correct number. You get a range of acceptable rates of return. Typically that range, in our experience recently, has been working out something in the neighborhood of 7% to 9%. I don't think anybody would be comfortable going up to 9%. The higher you are in that range, the more risk you're taking that your actual results will not match your assumption, which then would put upward pressure on the contribution rate. So to the extent that you come out with a number and you're more risk-averse, you pick numbers that are a little bit lower in the range. The Police and Fire Board here hasn't had that opportunity yet, because we haven't done an experience investigation yet, to make that selection. Both the state system, all of the state systems you've got listed here have had that opportunity. So what's the effect of if the rate's too high? If the rate's too high, what you end up with is long-term returns that are not what you assumed, which generate what we call actuarial losses, and that will push the contribution rate higher than the calculated rate. If the rate is too high and it gets adjusted to a lower rate because you do the investigation and determine that you're not comfortable any longer at 8%, you'd rather be at 7.75% or 7.5%, that lower interest rate increases the liability because the discounting is not as heavy, and that increases the contribution rate. So either way, you get an increase in contribution as the ultimate result. Well, but it's underfunded, is that correct? Is that our assets don't grow what they've been projected to grow, and therefore we don't have enough money to meet our projected liabilities? Your contributions will, by force, increase to meet that obligation. It'll be a higher number. And if they don't, we're underfunded. Well, then, yes. We've missed the market if the 8% is an incorrect number, because the higher the number, the more the assets are projected to grow. The lower number, the less they're projected to grow. Right. So this is what our unfunded accrual liability, actuarial accrued liability, has been. And so from 2000 to 1997, we had a 21% increase in our outstanding accrual liability. 2002 to 2000, a 56%. 2004 to 2002, a 31%. 2006 to 2004, 143%. 2008 to 2006, an 11%. And 2010 to 2008, a 32%, which is what we just finished. I guess where I'm going with that is that Warren Buffett calls the 8%, which is an industry standard, accounting nonsense. And I think I agree with him. I don't think it has a basis in reality. I think cities across the country have been relying on these numbers to their detriment. And we are clearly in a hole. Your statement that we're in reasonably good shape, I find shocking. This is nowhere in good shape. We put $103, $105 million into the pension fund, and we only got a $24 million increase out of that. So thank you, Mr. Chair. Thank you, Mr. Myers. And thank you for that information. It was very helpful. Thank you, Mr. Chair. Some of the questions that I had are answered actually in the document that we just received. I guess the question I would ask right now, it seems to me that the council needs to look at the difference between what we can affect on our own, changing maybe our own statutes, as opposed to what needs to be, the effect has to take place in Frankfurt. So I don't know if Jerry would be the person to do that, but could you get with the administration and come up with a list of the things that are in this report that affect how we do with respect to becoming fully funded and look at what state statute, what's local ordinance, so that we can start to take a look at what our options are as a council and as an administration. I agree with Council Member Martin, this number of 8% makes no sense. And I was going to ask you if you could give us a list of your clients and what they have for that rate. It looks like he's already compiled a partial list. You may have more clients than that, though. So can you speak to that? Sure. Most of our clients are at 8 or under. I can't at the moment think of anybody that's above 8. So that's... I'm more interested in the folks that are below 8. Certainly you wouldn't have any bias above 8, I wouldn't think. But I'm interested in, as Council Member Martin is, getting our number from that 8 moved down to closer to that 7.5. Well, again, I'll just offer one more time that we are going to do an experience investigation in the next couple of months. I don't know how much more I can say to that than that. I would caution the council or the committee, excuse me, you know, there's a difference between accounting numbers and funding numbers. My feeling is the goal from a funding standpoint is that you put in sufficient dollars without overtaxing your taxpayers. If we make a calculation, however much you feel the number is a better number, that reflects as some would suggest a, say, a risk-free rate, and we were to use a 4 or 5 percent interest rate, yes, we'll get a much higher contribution required. You'll get a much higher measure of your unfunded accrued liability. The number is not going to go anywhere. Ms. Lawless was talking earlier about what your abilities are, and your abilities are to change benefits for future hires. The unfunded liability, however it's measured for the existing members, is not going to go away just by simply changing an assumption. So I think you need to keep that in mind. I think from an actuarial perspective, the job is to calculate a contribution rate that we feel over long periods of time will be sufficient to generate the dollars needed to pay the promised benefits without overtaxing any one particular generation of taxpayers. Having said that, what your long-term history has been here in terms of the contributions that have been made to this fund compared to what should have been made, I just am not aware of, but we were just talking about how much was contributed in the last year compared to what our calculations said should have been contributed, and there was a significant difference. If you're going to underfund the plan, you're going to end up with unfunded accrued liabilities. I think I'd go back again to what Warren Buffett said, and that 8 percent makes no sense. And no one here is talking about a 4 percent or a 4.5 percent. We're talking about getting to a more reasonable percent that makes sense, a percent that makes sense. I'd also say that we have more than just the option of looking at that number from that perspective, because as the mayor said in his speech this morning, he's looking at what they're doing in Atlanta to try to do some renegotiation. We also see the other end of that spectrum is what's happening in New Jersey where police and fire are getting laid off. So there are other options that we can look at as well, but what we're saying is the 8 percent doesn't seem to make sense. So what I'd like to see is just a list of what the rest of your clients have, and then that will give us some more information to go by. I'll be happy to try to put that together. I could suggest as well that the National Association of State Retirement Administrators has survey information on their website that surveys all of the statewide plans, and one of the items that they provide is the interest rate that's being used. But we'll be happy to provide the numbers we use for all our clients. Okay. Thank you. Thank you. I see the commissioner, Bill, Ryan, you're all back there huddling. Is there something you'd like to add to this? Because you all seem to be back there talking amongst yourselves. Commissioners, is there something you'd like to give us a FYI on? And also, if we could, as Councilmember Stindle had requested, try to get an action plan of what you're all going to do when you huddle together so we know where to go. Ryan? A couple of points, the nuances that I was picking up on is clearly this is, as we said, accounting-based numbers. I'm always thinking in terms of our budgetary perspective next year. So clearly driving down the interest rate assumption is going to widen our budgetary hole next year. So I was trying to think through in terms of scope. Clearly if we go, we have historically funded the minimum arc rate. On your sheet, it's been recalculated to be 17.5% next year. This year we funded 17% in. So if we move to the full assumption, as Jane said before, if we fund the 44.67%, we're talking about another $16, $17, $18 million in terms of operating cash for which we need to put into the fund. So clearly driving down that interest rate assumption is going to widen that gap. So to the extent, I'm not sure sitting here, but I think that is very germane in terms of our structural imbalance that we have. It's $15 million this year, at least was in the budget. It's going to grow next year. The other nuance that I picked up on, too, is that clearly this interest rate assumption, and again maybe this is me putting on my previous capital markets hat, is over the 23-year span. As Councilmember Martin, I really like that one sheet there that listed out the historical rates. And our actual return over 16.5 years was above that. So over the long term, and again I've, like many people, have lost money in the stock market, but I would caution to keep that in mind as well over the long term. We're talking a 23-year span. Historically, asset mixture of 60% equities have returned above that, at least in our experience. Again, my crystal ball doesn't work. If it did, I'd be on a beach right now, I guarantee that. But that is one thing I wanted to point out. At least that's what we were chatting about in the back. Thank you. Mr. Myers, did you have any follow-up? Okay. Mr. Lane? Yeah, I had another question for our budget director. Ryan. Do you, I know this is not your direct responsibility, but do you have information on the investment standards for the Policing and Firefighters Pension Fund, what types of funds we can invest in and what types we cannot? If we don't have that readily available, I think that would be really valuable information to present when we come back with a report on the pension fund. There's two pieces in general terms, based on my experience, that we have to adhere to. There's state law, there's investment guidelines on state law, and one of the policies for which we started to work through and look at was our investment policy or cash management policy. So we're actually in the process of gearing up to revise those. Basically, our investment policy, from my cursory view, is pretty much everything that the state law permits, absent commercial paper. And obviously, retirement funds are guided by the individuals that we retain. We take different structures. We'll take short-term and longer-term, and then we farm those out to various investment houses. And then, so not only do you have the complication of what they're allowed, they'll make the investments commensurate with the way we ladder them out as we need maturities for cash flow purposes on the backside. But we'll bring some of that information forward. Could I just ask one follow-up question on that? It's a different item, but just for the record, because I think this is important to get across, is that we're not talking about changing the pension fund for police and firefighters that currently are covered under the fund. If we made any future changes, it would only apply to new hires for the government. But at the same time, we're still going to be liable for the police and firefighters currently covered. So what would be the transition plan if you had a new plan for new hires and an old plan for the current employees? How would you package that together? Would you merge them into one fund or have two separate funds? Or do you have any idea how that could be structured? Clearly, I think there's a lot of policy associated with that answer. Clearly, the basic answer, I think, is we would have to separate and account for those differently, different defined benefits, different expenses out of the fund. But, again, I think there would be a need to do a lot of vetting around that answer. Okay. Thank you. And the scoreboard just lit up on that one, so we have a lot of Councilmembers have questions here. Councilmember Stinnon. Thank you, Chair. And going back to Mr. Barrow's comments, the important thing for the short term is the budget, of course. And I'll remind my colleagues, the State passed a mandate down to us last November that we need to increase our pension contribution for the other employees. And it means to us about a $1.2 million bump. So anything we do here, that will be in addition to the police and fire pension. So we've got our challenges ahead of us. And, ironically, the Fed is meeting right now, the Federal Reserve Bank, to release their numbers on the economy and the federal funds rate and all that. They're in their meeting right now. And at 2 o'clock tomorrow, they're going to announce the economic outlook. And everyone expects it to be up because Friday GDP is supposed to be up almost 4%. So there are some good things coming. As Councilmember Lane and Councilmember Martin has already pointed out, taking the impact of inflation, and we haven't even really looked at that on some of these numbers, and that's going to have a big, obviously, impact for the Board on the COLE. And how much they want to put out there on that, too. So we've got a lot of challenges. I just want to add some of those comments in there. But it's an important week in our economy with the meetings going on this week. News will be out soon. Did you have a question, per se, for him? Well, I was just helping him add to his shopping list of everything we have to balance in the budget. Don't forget about the other pension, too. Yes, we've run numbers on those as well. Thank you. Mr. Kaye. I'm going to go back to Mr. Cavanaugh and make a comment first, then I have a question. And the comment is that the assumptions we make about the rate of return, if they're unrealistic, simply push into the future the kind of obligation that we're acquiring. So it makes a difference in the short term, and I understand that. We don't want to put a bigger hole in this year's budget. But what the council, and I'm a new council member, so now I'm looking from the outside in past years, what the council has done has postponed making our decision about funding. And so now we have the extent of liability that we do. So I think one of the things we need to do is consider the short-term versus the long-term implications of the assumptions we're making about the rate of return. If they're not realistic, we want to look at that. The question has to do with the amount of debt and the way in which that relates to how sound a fund is. So in 1997, the debt was $36 million. Now it's $325 million. Are there industry standards for how much debt a pension fund can carry in relation to its obligations? There's not an industry standard. I think a number that many actuaries will use as a place where you're in good shape and moving forward is something in the neighborhood of 80 percent funded. You're at about 70 percent right now with the police-fire fund. But the more important thing is the direction of the funding and not necessarily the ultimate level, unless you're getting really low as some systems are, in which case you have problems from a pure financial standpoint. The difference between in real dollars, the difference between 70 percent funded and 80 percent funded? Well, for you, the total accrued liability is $724 million, so 10 percent would be another $70 million. Thank you. I just want to reject something here at this point. I think I asked that question early on about you said the bottom line and we're in pretty good shape, but then you just made the statement that we're at 70 percent of the industry standard and 80 is what we should be. So isn't that 10 percent short of what we should be then? You know, actuaries tend to be fairly conservative folks. I would prefer that you were 100 percent funded. So if we start with that as the mark, I would say, well, you're 30 percent short of where I'd like you to be right now. But in comparison to our other clients, in comparison to the other situations that we're aware of, you're in pretty good shape. I guess maybe I'm being drawn too much by the work we do with the Kentucky retirement systems and the shape that a number of those funds are in, but you are in much better shape than they are in the police-fire fund. So you're not in dire straits. You have some issues to the extent that on a long term, you can't meet these contribution levels. You can't afford more than that 17 percent of pay. Then, yeah, you're going to have to look at this and decide what to do about it. And it sounds like that's something that you're going to try to do. Thank you. Ms. Lawless? This is just a question, and I don't need an answer to it today. But I'm aware that the state, one of the first changes the state made, and that was for people who were existing employees, was changing the amount of contribution the state would make to their health insurance after they retired. It used to be full, and then it went to, I think, $10 per year or something like that. And I believe they also made a change to the pension, how long you had to work, et cetera, recently for new hires and didn't set up a separate fund. And I'm fuzzy on that. So if somebody could get that information for us, I think that would be really helpful. We'd be happy to give you the details of that, and I don't have them with me right now. But, yes, they set up what in essence you would call a new tier for folks hired September 1, 2008 and later. And the benefit structure was not as good as the prior one. The fund is all the fund. We do the valuation, and we just value each active member, and we value them for whatever benefit structure they're in and calculate the rate. So as we go through time and we get more and more people in that post-September 2008 bucket, the contribution rates are going to trend downward. And part of the work that we do for the state is 20-year projections of the contributions to see where those rates are going. They also have a problem with their COLA because they don't recognize the COLA in the calculation of the valuation. And as a result, every year that they grant a COLA, that's another loss that shows up on their unfunded accrued liability. But they didn't have to set up another separate pension fund. No. So it might be helpful if we got some of that information, and like I say, not today, but that could help in making some decisions. From a pure administrative perspective, if you will, with the current Governmental Accounting Standards Board requirements, if you were to close your fund, we would have to calculate your contributions as a level dollar amount instead of a level percent of payroll amount, which would tend to put upward pressure on that number anyway. So you'd probably be better off to leave everybody in the one fund and do the calculation that way. Yeah, that's what I was thinking. Thank you. Thank you. Are there any other questions for Mr. Cavanaugh or the Administration? And with the Administration, you have some questions that you will be getting back with hopefully sooner than later here on this. I see a yes shaking. I don't see any more on this issue. I think Vice Mayor Gorton had a question on an unrelated topic here. It's not really a question, Mr. Ellinger, but I wanted to make a comment about your comment about working with the Administration on the budget. I did have a meeting, was that last week, with CAO Richard Maloney and Commissioner Jane Driscoll, and we had a very good conversation about how the Council could be involved in collaborating up front with the budget, because I think that many of us have expressed over the years that it's not as helpful when we wait until April to receive a budget and then find out what's in it and then scramble for two or three months to pass a budget. So I just wanted to comment, since you had brought it up, I think that's a very good idea, and I know that the Administration is very receptive to doing that. So I especially look forward to what that will look like and how we can start working together as soon as possible on the budget. Thank you. I look forward to doing that. I think a retreat or something that we can do, and we've done that in the past, I think is very helpful. Now, the next item on the agenda were items in the agenda, and we have three items that were brought in from other committees. And the first one, Vice Mayor Gorton, was put in by a local vendor. And I guess at this point I'd just like to go through these three issues and just know where we are so we can put them on for the next agenda or see if they're ready. So the first one was a local vendor preference. Vice Mayor Gorton, what are you looking for in that? This was supposed to have been, I believe this went back to a work group to develop some ideas. I think purchasing was going to work with maybe budgeting and some different divisions to bring us back some sort of a recommendation. And I don't know. Gary, can you give me further? These are new items for me. Okay. We'll research it and come back. Okay. The second one was minority women business recruitment. Council Member Stinnon. That is actually being taken care of in the procurement task force that's looking at that. That should be addressed in there as the appropriate spot. Okay. And Council Member Crosby and I will get with her in the interim is on the purchasing procurement and professional services selection. That's it. Okay. So that will be Council Member Gorton. Okay. Ms. Gorton. Council Member Stinnon, do you know if the local vendor preference has been addressed in the procurement task force? Well, it probably should because right now we operate under a CAO policy that gives local preference, but no minority preference. So all those probably should be combined into that procurement process. If we could get that in there. Are you on that? No, ma'am. No? I'm not sure who's on it. Is anyone in the room on that? I don't think they've appointed it yet. Okay. Well, we'll find out in the interim and move that along. And I see Council Member Farmer. Mine is not on this topic. That's fine. I think we're done with these issues. Just a syntax question. Wouldn't the CAO and the commissioners be designated or acting because we have not confirmed them as yet? And I think that's true. Thank you. Acting Commissioner, we have an action plan that you're going to bring to us, correct? Thank you. With that, I see no more further business. I will have a motion to adjourn. Move adjourned. Second. We have a motion and a second. All those in favor say aye. Aye. I suppose we are adjourned. Thank you.