Music Thank you. All right, good morning, everyone. It's nine o'clock. So I'd like to go ahead and call to order the Lexington Fayette Urban County Government Police and Fire Retirement Fund Board. Surely there's a shorter way to say that. It's August 12, 2026, and we'll start with our items for action. and first on our agenda is our quarterly report from John Jackson and Jim O'Connor who are here with us today. And I just might say at 9.40, Chief Weathers will take over the chair. Welcome. Good morning, everyone. Nice to see you all. I'm happy to be here. We had a little weather in Chicago and then you've got it today. So happy to see you in person. Let me advance this. There we go. We're going to spend a few minutes today talking about the capital markets and the performance as of June 30th. As you look at this page two, this is a summary, a lot of numbers here. but let me just set out some of the themes that took place in the second quarter. We saw that U.S. equity staged a historic comeback in the second quarter. You may recall that the S&P 500 was down about 4% in the first quarter, and in the second quarter bouncing to a 15.2% return, erasing the first quarter losses. This rebound was driven primarily by cooling oil prices, easing of Middle East tensions, and massive AI, that's artificial intelligence, prices. Unfortunately, what we're going to see from the Middle East and the negotiations that are going on with these geopolitical conflicts is a whole lot of volatility. as things are a little more optimistic. You're going to see the markets bounce favorably, and when there are stalls, there is a reticence to embrace some of the riskier assets. Inflation stayed stubborn, prompting a more hawkish stance from the Fed. And then what we saw from Kevin Warsh, who is the new Fed chair, had his first meeting in June, held rates steady. In July, there was also a meeting where rates were held steady. However, we saw amongst the voting participants, three dissenters of the 12 were looking for an increase in rates to stave off inflation. Unemployment hovered around 4.2%, so status there. As we said, the CPI came in at 3.5%. This is over the 2% target. However, it was as high as 4.2% in the prior month. So again, some, and again, this is driven largely by oil prices, energy prices with respect to the inflation metric. Oil, we saw that it peaked at about $112 in the second quarter. and ended up at $69 a barrel. So again, what we saw was for the, when we take a look at the equity markets, we're going to see energy was the one declining sector of the market. Other things that I would highlight here, if you look at the S&P 500 at 15.2%, small cap stocks at 21.49%. So again, over the last year, small caps are up about 41%. And the idea here is that they're benefiting from the AI trade from the hardware perspective. And again, you may recall small cap stocks have been beaten down by large cap stocks for an extended period of time. If you look over the last five years, large cap stocks is measured by the S&P 500 up about 13.4% annualized, and small cap stocks at about 7%. So in other words, they were beating down and rebounding with the positive returns in the market. Fixed income, again, we see that holding steady 0.7 at about 3.8% over the last year. Let's spend a moment talking about non-U.S. stocks. The MSCI World X U.S., so this is your international equities index. It was up about 10%, up about 21%, so in line with U.S. equities over the last year, year-to-date, outperforming. Emerging markets, so here's an area where we saw it was up 24% for the quarter and up almost 44% for the one-year period. What's driving that? It is a handful of stocks, like the U.S. market, that is fairly narrow. Taiwan Semiconductor represents 10%. That one stock represents 10% of the Emerging Markets Index, and that was up 35% for the quarter. So that kind of tells the story. So goes AI stocks, so go the index. Real estate, again, we saw for the quarter, the Encreef property up 1.24. That's up about 5% for the year. The NAE REIT, these are REIT stocks, so they're more highly correlated with U.S. equities or U.S. small caps. We see they were up 12% for the quarter, up almost 21%, 22% for the one-year period. So again, markets are strong, shedding off certainly huge geopolitical concerns, but the earnings have been strong. And narrow market, AI stocks have really driven. So those are the themes. As we turn to the next slide here, this is a chart that just shows why you diversify. This is the Callan quilt, and you can see the annual periods, the different asset classes that you see in some periods. Small caps will do well, large caps will do well, real estate will do well. the leadership and the reason why we diversify the portfolio is that you can't say with certainty what's going to be the leader in any particular market environment. We see 2025 emerging markets were up 33.7% and year-to-date up about 23.8%. So again, you can see if you look back to the early 20s, 21, 22, you'll see that this was kind of a lagging equity position. So again, we stay the course with the asset allocation, small cap equity leading the charge on U.S. stocks, followed by large cap equity and then real estate. Fixed income, again, is our ballast to windward, and high yield at 1.96%. You'll see that year to date. In a period where investors are concerned, they're going to gravitate towards treasuries. In a period where they're feeling a more favorable environment, they're going to go to high-yield stocks. Call them junk bonds, if you will, but they're not investment-grade stocks. Your high-yield manager is investing in the higher-quality tier of high-yield, so offers better downside protection than many high-yield investors. So again, in a period like this, we're going to see for the quarter, high-yield stocks outperforming treasuries. This is the Fed's dot plot, and this is just a survey that's issued and, again, kind of gives the perspective in terms of the members, the voting members of the Federal Open Market Committee, what they see going forward. This is a chart. Not only did the new Fed Chair Kevin Warsh not vote in this particular or release his vote in this particular survey, but the idea here is that he's opposed to any forecasting, wants to do press conferences afterwards, but doesn't feel that it's necessary for the Fed to market their position in advance or even fill out these type surveys. But the takeaway here is that elevated overnight rate from these folks. And again, as we said, when we look at the July outcome or minutes from the July meeting, that there were three of the 12 investors that were proponents of raising rates. Next slide. This is our equity slide. And again, what you'll see is just how strong the market was. If you look towards the quarterly at the bottom, the Russell 2000 growth up almost 26%. Growth stocks outperforming value stocks. And again, a growth stock is one that contains a higher level of information technology stocks, whereas value, it's a greater level of financials. So in a period where information technology is leading the market, you're going to see the growth indexes perform better. If you look to the bottom, you'll see of the sectors, utilities were down modestly at 0.5% or 50 basis points, but it was energy down 13.4%. And again, that oil prices are volatile and kind of swinging pretty drastically depending on what the perspective of the negotiations taking place with Iran are. Information technology up 32%. So again, that really tells the story from a sector standpoint. Next slide. Again, here we have the non-U.S. equities, and you can see that the overall, the all-country world index, ex-U.S., was up about 14.5%. Emerging markets up considerably, up 24%. And as I said, Taiwan's semiconductor made up a big portion of that. Turning to fixed income, reinforcing that theme. If you look to the second bar from the bottom on the first table, you'll see that that is the Bloomberg high-yield corporate, up 2.5%. And if you compare that with the Bloomberg Treasury, which was basically flat at 0.3%, so the idea here is that in the second quarter, first quarter, investors gravitated towards treasuries. Second quarter, a little more exuberant. Things had appeared to be going well in negotiations. Therefore, treasuries are underperforming relative to not only high yield, but investment-grade corporates as well. Over the last year, high yield up about 5.9%, and compare that with the Bloomberg Treasury at 2.7%. So you can see over the one-year period the benefit and investors were a little less risk-averse. Turning to real estate, the idea here is what we see from the markets certainly have bottomed to a great degree, but going to be generating the return largely from the income component. There are two components in the real estate return. One is the depreciation or depreciation in the holdings. The other is the income component. So you can see over the last quarter, the property index was up about 1.3%. The Odyssey, which is a collection of open real estate managers, fund managers, was up 1.5%. If you look to the bottom, you'll see that office, that blue bar indicates the depreciation of about 4.7%, and the green bars represent the income component. And when you look at senior housing, you can see this is a particularly attractive portion of the real estate market that did well, not only generating a 1.4% return from income, but 2.5% in appreciation. So that concludes my prepared remarks. Happy to take any questions that you might have regarding the capital markets. Are there any questions, members? Hearing none, I will turn it over to my colleague, Jim O'Connor, to review the fund performance. Thank you very much. And we'll welcome Mr. O'Connor. Hi, good morning, everyone. Nice to see you all. I'm going to keep things moving along here and move right into the performance of the fund. But before we get there, I just want to give an update on the asset allocation at the end of the quarter. So you can see here on slide 10, we have our pie charts. On the left is the actual asset allocation of your fund at the end of the quarter versus what the target asset allocation is for the fund going forward. And what you can see here is domestic equity and international equity were both overweight relative to their targets. and then you had corresponding underweights to domestic fixed income, real estate, and a little bit in real assets. Domestic equity, as John alluded to in his capital markets update, has been one of the strongest performing asset classes for quite some time now. It feels like every quarter we talk about that. But the part there is we'll continue to use cash flows to reduce that overweight and get you closer to your long-term target. So benefit payments that go out on a monthly or quarterly basis, that is where those proceeds are being funded from. So continue to pull from the overweight asset classes and bring you more in line with your long-term target. Any questions there? Pretty straightforward. Slide 11 gives you a peek inside of what occurred within the fund during the quarter. so working kind of bottom right to left. I know the text is pretty small, and I actually have to zoom in myself here, but the fund was over $1 billion at the end of March, $1 billion, call it $49 million. We had a really strong capital markets return, investment returns, so on an aggregate basis the fund was up almost $88 million, driven primarily by the performance within domestic and international equity. That net new investment column that captures the cash flows going in and out of the plan. And on a net basis, you saw about $7.8 million come out of the plan, and that was to, again, pay benefits. So on a net basis, you began the quarter, or end of the quarter, rather, $80 million higher than you started the quarter. I know it's been about a year now, but I wanted to just refresh everyone that in August of last year, we performed an asset allocation study, asset liability study, and the long-term target was altered just a little bit. And so domestic fixed income target was increased from 23% to 27%. Within that bucket, 20% is dedicated to U.S. core fixed income, so investment-grade, high-quality fixed income. And the remaining 7% is going to be in high yield. And then also, there was a modest decrease in the international equity target from 23% to 19%. There were a couple of fund changes in the international equity composite, which we covered, and then also one strategy change within that same composite. On slide 12 here, I just want to highlight some of the performance within the asset class composites. So I mentioned domestic equity and international equity were strong drivers of performance this quarter, both up about 13%. Domestic fixed income had more muted returns, up about 1.2%. real estate was up just over 1.3%. As John mentioned, real estate, we're seeing property values appreciate, so kind of out of that rut that they were in, that cycle that they were in. So we're seeing a healthier environment within real estate, and hopefully those properties' appreciation will contribute more to the total return, whereas right now a lot of the income generated within those properties are generating the bulk of that return. Real assets was also a nice diversifier and additive to the portfolio this quarter of just over 3.2%. We'll get into that just a little bit more, and then cash was yielding just under 1%. So I didn't want to bury the lead here, but the quarterly performance for the total fund on a gross-a-fee basis was up about 8.5% this quarter. On slide 13, we give you a sense of how did that rank relative to other public funds. And during the quarter, I mentioned 8.5% underperforming its policy target, but ranking above the peer group median in the 48th percentile. So ranking ahead of, you know, in the top half of other public fund, our public fund sponsor database. We show more longer term performance over annualized periods, as you can see kind of working your way down the chart there. So really strong absolute results over the one and three year periods of 13 and 11 and a half percent respectively. Did trail the policy target, so peer ranking was in the third quartile over both of those periods. Over the five and ten year periods, up about 5.7 and 9.4 percent respectively. The ten year number ranked in the 34th percentile, so near the top third of other public funds. And then this is an extremely long period of time, but we have performance going back over the last 25 years, and you've averaged over 7.5% on a gross-of-fee basis, ranking in the top quartile over that time period. Looking at the calendar year results, these don't change quarter to quarter, of course, but the batting average for the fund over the last nine calendar years is pretty strong. So the fund outperformed its target six of the nine calendar years. Year to date, it is lagging a little bit, up about 7.2 percent. That's the far left column that you see there. That's through the second quarter, whereas the policy target is up about 9.5 percent. Despite the underperformance relative to the policy target, the fund did rank in the 52nd percentile year to date. So this is now looking at the underlying managers. I will keep my comments brief here, but in domestic equity, again, strong absolute return up over 13%. We did see a little bit of underperformance within two of the strategies and outperformance within one of the strategies. Jenison outperformed, whereas Dodge & Cox and Neuberger-Berman underperformed. Dodge & Cox, primarily due to their stock selection, their underweighting of information technology within the sector, has been a headwind for them this quarter and year to date. And Neuberger-Berman, up again, higher quality portfolio, rallied in this second quarter, but was unable to keep up with the index, which was up over 21%. Again, not unusual given their approach and their philosophy. But certainly with the performance of small cap over the last year, it's been a challenging area to keep up within the market. You could see last year the Russell 2000 Index was up about 41%, whereas your portfolio within Neuberger-Burman was up about 15%. Again, this is going to be a strategy that's going to invest in higher quality names and will not invest in what they consider non-earners, which makes up a large part of the Russell 2000 Index. So in their minds, a lot of speculative momentum chasing going on within the small cap space. And what we've observed over periods of time when the market is running extremely hot is there is a pullback, and we just don't know when, but they tend to benefit when there is a pullback within equity markets. So not going to participate so much on the upside, but on the downside should show a lot of good downside protection. International equity, again, composite up about 13.5%. We saw continued strong performance from Acadian outperforming its benchmark. We did see some underperformance within DFA and Chautauqua, which are two of the newer managers coming out of the gate this quarter. This is their first full quarter. Those portfolios were funded in the first quarter. So DFA up about 8.3%. Again, this is going to be a portfolio that is certainly value-oriented in nature, but also going to have a little bit of an underweight to some of the largest cap names within that space. And what we saw this quarter is large cap names drastically outperformed any of the mid-cap and smaller cap names. And they are going to have a little bit of a tilt in their portfolio more towards those mid-cap names. So that was the headwind for them this quarter. and Chautauqua, again, this has to do with their stock selection and their approach to building portfolios up about 7.4%. They were underweight, some of the memory chip names that were performing extremely well, some in the triple digits. And again, a lot of speculation, retail participation going on with some of those names. And again, those names are not going to fit their criteria. So they are not going to own them or at least underweight them within their portfolio. So those are some of the headwinds within the non-U.S. portfolio. Fixed income, again, more muted returns, but generally all the portfolios performing as we would expect. You did get a little bit of a bump from Makai Shields going up just over 2% to the domestic fixed income composite, whereas the more core portfolios I think performed in line with the benchmark. Siegel outperformed and Optum did underperform slightly. I do want to give the board an update on the fixed income transition in just a moment, but I'll just wrap up with performance within real estate. Again, most of the underlying performance is coming from the income generated from those properties, but we have seen a little bit of appreciation within some of the properties. So hopefully going forward, that will be a bigger contributor of the total return. And then lastly, the Diversified Real Assets Fund managed by PIMCO was up over 3%. REITs this quarter was one of the strongest performing real assets. So I think that's largely to do supported by some of the healthy property fundamentals and healthy leasing activity that we've seen. So, you know, certainly not a forward indicator, but nice to see that, you know, there's some recovery going on within the real estate market. Yes. Oh, I'm sorry. I was talking on this slide, 16. I was going a little too fast there, so apologies. Any questions on the underlying managers? Any questions at all? I don't see any. So I just want to give two updates. The first being an update on the fixed income search that we discussed at our last meeting here. One of the takeaways was for Callen to come forward with a recommendation on the vehicle in which the board should pursue. If you recall, MFS, Core Plus, fixed income is going to be replacing Optum. and the ask for Callen was to, you know, the search has been completed, they've been identified, but the ask says, you know, what vehicle should they pursue? We profiled a collective investment trust, so that's an institutional investment vehicle for other investors like yourself, and then there's also a separately managed account, and what we did is we went back and we looked at a couple different things. we looked at the performance of the underlying strategies relative to their composite. We also benchmarked their fees and how they stack up relative to other like vehicles. And what our recommendation is, is for the board to pursue the collective investment trust for the MFS Core Plus fixed income. So again, this is an institutional quality pooled investment vehicle. It's managed by the same team, head PM Josh Marston, which you all met with. It utilizes the same investment philosophy process, approaches the other Core Plus portfolios, and it's competitively priced at 13 basis points, which ranks in the top quartile of fees within that Core Plus universe. So we think the CIT is the correct vehicle to pursue, but just want to pause there to see if there's any questions before we take any action. All right. Let's hear the questions. Yes, Mr. Puckett. All right. Is there a second? All right. Now we'll have some discussion. Is there any discussion? All right. I hear none, so all those in favor say aye. Aye. Is anyone opposed? Well, that was quick. Thank you. That motion passed. Yes, I have one question. Cash, we've got over $9 million. Is that just, that seems a little high, but is that due to the changing of the managers and so forth that we're doing right now? Yeah, so the higher than usual cash allocation has to do with the proceeds that have been coming in from the J.P. Morgan Strategic Property Fund. And so as proceeds come in from that strategy, and this is a good segue, Tommy, thank you for that. As proceeds from J.P. Morgan come in, they're essentially going to be placed in cash or parked there. And then as capital calls come on board for LaSalle, your new real estate manager, we're going to deploy that capital as quickly as possible. And that's usually on a quarterly basis are those capital calls. So slowly going to be depleting that cash to a more, I would say, normalized level. But that will take a little bit of time. Are there other questions? One more update, if you don't mind. And this has to do with real estate. So J.P. Morgan's Strategic Property Fund, if you recall, has been offering what they call a fee credit program. And so this was to help kind of curtail some of the redemption requests that have been going on within that fund. And so the decision to move on from that strategy has been made. A new manager, LaSalle, has been identified. But as proceeds come in from that fund, what is occurring is we were keeping the redemption at a certain level to take advantage of the fee credit program to get lower fees while we were waiting to get the capital back. The fee credit program has expired at the end of this past quarter, so June 30th. So working with staff, working with our research team, we feel that it's a good opportunity to now put a full redemption request in to then start drawing down or getting those assets back and deploying those within LaSalle. So right now, Chad's going to give an update of the market values, but it's roughly $44 million. So we would recommend putting in a full redemption for that remaining balance within the strategic property fund now that that fee credit program has expired. Okay. And I would think this would require a motion from the board. So moved. All right. Is there a second? Second. Thank you. Is there any more discussion about this? I really appreciate how you have done that to take advantage of the credits. So thank you. I have one question. How long do you think this process is going to take? I mean, I know it's going to be a, it's not something short term. Are we talking years? Potentially a couple years. Yeah, at least. So that's eight quarters. So that's eight opportunities for them to sell property and raise assets for their redemption pool. I don't have the redemption pool number on the top of my head, so it's hard to say how big that Q is. But they've been paying down the Q, I think, at a pretty healthy rate. And now that, again, we're in a partial redemption mode for some time, now that we have a full one, it hopefully is going to be drawn down faster. But it's really hard to tell what the real estate market is going to look like going forward. I think one last thing is I think the holdup, at least initially, is when we've had a pullback in the real estate market kind of coming out of COVID. Transactions were locked up. Price discovery was hard to find. So there wasn't a lot of transacting going on. So they couldn't sell properties and raise assets to pay down the queue, right? So we think fundamentals are a little bit stronger now going forward. actually much stronger going forward. So this is all to say I don't know exactly how long it's going to take, but hopefully it will be faster than what we would otherwise see in a market where real estate wasn't traded. I was expecting further out than two. Two or three, I would say, yes. Okay, thank you. Are there any other questions about the motion? All right, all those in favor, please say aye. Aye. Okay. Is anyone opposed? All right. Thank you. That passes. Anything else? That's it. Thank you all. All right. Thank you so much. We appreciate your reports. And next is our treasurer's report and the letter of transfer. We have the, got your information, Chad. Thank you. Yes. Good morning. We don't have a transfer letter. We still do not have the July number. but I want to point to real quick the fund reconciliation. The June amount is a credit balance, so when we do get the July number, we will apply that credit towards it to reduce that balance, and I would like to point out, I went back and looked. Last year, it was the same situation where we're working at a fiscal year end with accruals and then getting into the new year. It was September before we had a July and an August number as well. Okay, we do have a treasurer's report. Yes, you do have all the other financial reports in your packet and the managers mix. With the balance, this month at $1,136,609,738.12 compared to last month of $1,135,263,660.09. All right, do I hear a motion? Mayor, I'll make a motion to accept the manager mix, but we don't have a transfer letter, and we only made a million, so some heads have to roll. We do have a treasurer's report. True. Yes. But we only made a million. Okay, Rocky, I'm going to tell you this. Let's be calm. This number is based on Monday because these reports are run for the prior day. I went and looked this morning and yesterday, and it's at $1,142,000,000. Okay, so I will not ask for your scalp. Okay, thank you. Is there a second to the motion? Second. Thank you, Commissioner. Any further discussion? All those in favor, say aye. Aye. Is anyone opposed? All right, that motion passes. Thank you very much, Chad. We have minutes for July. Could I have a motion to approve? I'll move it. All right, thank you. Are there any corrections, additions, anything anyone noted? Excuse me, Mayor, who seconded the motion? Chief Weathers. Okay, thank you. I barely heard it, so I got mad. Thank you. Any questions? Anything you noted that needed corrected? All right. All those in favor, please say aye. Aye. Is anyone opposed? Thank you very much. That passes. And I will turn new business over to Susan Combs and I think probably the chair to Chief Weathers. Thank you very much. Thank you, Mayor. New business item number one is ghost time purchase for Casey Hogue and John Robinson. I need a motion to approve. So moved. Second. Okay. All in favor. Any opposed? The second is Derek Desimone. We need to schedule a rehearing for September 9, 2026. I need a motion to set that date. So moved. Second. Any discussion? All in favor? Aye. Any opposed? Item number three, we're going to move that to the end of the agenda. Erin is delayed at the moment, so if she makes it back before we're done, we'll have her present the financial reports. If not, we'll move it to the next month. So item number four is disbursements for August. They are listed on your agenda. I need a motion to approve. So moved. Second. Any discussion? All in favor? Aye. Any opposed? Next on the agenda are going to be service retirements. I'm going to lump the next four since they're all with the police department. I've got Officer Roman Pachowski, Division of Police, Service Retirement Effect of July 18, 2026. Officer Ryan Holland, Division of Police, Service Retirement Effect of July 24, 2026. Sergeant Matthew Silver, Division of Police, Service Retirement Effect of July 25, 2026. And Officer Jarrell Strong, Division of Police, Service Retirement Effect of July 25, 2026. I need a motion, please. Motion to approve and set at the appropriate rates. Rate. The service. Let me amend my motion. Motion to approve. Up here. Second. Do we have any discussion or comments? If it's appropriate, I'll make a comment. Absolutely. For all these officers are 20 years or more, officers and sergeants. So they will be missed, and I want to wish them luck in their future endeavors and let them know that they always have a home at the police department. So thank you. Any other comments? All in favor? No. I'm sorry. Thank you, Chief. Of those four, the only one I actually know is Ryan Holland, and he has done an unbelievable job, and it appears, whatever task he had at the Division of Police. I would like to comment that his father is retired from the Division of Fire, and both his sons went to the police department. But Ryan has done a tremendous job at the Division of Police, and sad to see him go. Any other comments or discussion? Yeah. Mr. Puckett. Knowing that I'm elderly, I guess, these guys were at least rookies when I retired. Puck, of course, everybody knew Puck. He was great. Holland, I worked with some. Strong, I worked with some. Silver, I think, was on the opposite side of town, so I didn't work with him that much. But they were on a year or two before I retired, so that was good to see. It makes me feel a lot older than I really am, I guess. Thank you. I just want to thank them for their service because they were fine, upstanding officers. Any other comments? All right. All in favor? Aye. Any opposed? All right. Next on the agenda are disabilities. We have Randall Combs, Division of Police, application to convert an existing service retirement to a total and permanent occupational disability. I need a motion to send to appropriate doctors. So moved. Second. Any discussion? All in favor? Aye. Any opposed? Next is Timothy Dawson, Division of Police, application to convert an existing service retirement to a total and permanent occupational disability. I need a motion to send to appropriate doctors. So we've seconded. Any discussion? All in favor? Aye. Any opposed? Next is Dean Hammond, Division of Police, Application to Convert an Existing Service Retirement to Total and Permanent Occupational Disability. I need a motion to send to appropriate doctors. Upon review of the information provided, it appears that the box, or the column rather, for ABLE was checked in every instance for Mr. Hammond. Therefore, I move that we return it to the physician for clarification on his report. Second. Any discussion? All in favor of returning it to the position for clarification? Aye. Aye. Any opposed? Okay. Next on the agenda is John McMinima. Medical reports are completed and distributed. I need a motion, please. Motion to approve and set the appropriate rate. Second. Any discussion? All in favor? Aye. Any opposed? Next on the agenda is Jonathan Cole. Medical reports are completed and distributed. I need a motion, please. Based on the recommendation from one of the physicians, I move that we send Mr. Coyle to a functional capacity evaluation for further testing. Second. Any discussion? can i clarify that once we get that functional capacity test that i can send those results back to dr mceldening for his review for his decision to complete his ime report yes thank you thank you all in favor oh i'm sorry i'm sorry i have a question about that after the functional exam will he have to return to the doctor for additional exam or is that kind of up to him up to the doctor i'm sorry i didn't quite hear all that so after the functional exam will he have to return to that physician for an additional exam or i will check with mackle downey to see what he prefers i think he just wants to see the functional capacity report to finish his report his ime report but i'll double check with him okay any other discussion All in favor? Aye. Any opposed? Next on the agenda is Scott Marshall. Medical reports are completed and distributed. I need a motion, please. Make a motion to approve and set the appropriate rate. Second. Any discussion? Seconded. All in favor? Aye. Any opposed? Next on the agenda are tributes. Police passed away on July 23rd, 2026. Any discussion? Mark. You know, I just, you know, every month it seems like we're having more and more of our retirees or we're losing them. I knew Bill Burgess and David Lawrence was just an exceptional lieutenant on the police department. And unfortunately, I didn't know their spouse as well. But having to put up with us, they deserved whatever they could. But it's always sad to see this many people lost in such a short time. Any other discussion or comments? Yes, sir. I would like to mention that while I never knew David Lawrence, I do work with his grandson, Dave Collins, who actually has a picture of him posted up at his desk. He actually sits beside me now in financial crimes at the police department. So I just want to note that the Collins family and the Lawrence family are in our prayers during this time. Thank you. I didn't know Assistant Chief Riley. I do know his son. So I would like to wish the family the best, and also the family of Julian Tackett. It's always hard to lose a loved one. So thank you. Chief, I was taught by and taught with Joe Riley. Couldn't ask for a nicer fellow, and sorry to see him go. Anybody else? I just want to express my condolences to our fire family side and our police. You know, we always say that we're all a family and this shows, you know, the dedication of not just the men and women who actually work, but their families who sacrificed too. So my condolence to everybody. Next. Next on the agenda is the subcommittee updates. Continuation of benefits and the legislative subcommittee is both Tommy Puckett. Do you have any updates? The good thing is no updates until we get done. Fabulous. Yeah. Organizational and subcommittee, Trey's not here, but I talked with him yesterday and there was no updates. We will move back up to item number three. Aaron for the financial reports training and I think we handed did we get any feedback from Todd Green about a timeline no it's too soon we just sent him all the data for the actuary so he has to complete the actuary before he can do the experience study I'm thinking towards the end of the year now we have Aaron And everybody has the packet as well, and we're going to put it on the screen. Greatly appreciate your all's accommodation. Sorry to miss you all. Wouldn't be the first day of school without a little bit of hiccup. So we put this on the agenda last month just to provide. It's been a little while, and we have some new members, but we also have some new retirees since the last training. and wanted to provide an updated training since the last time we did this, which has been a little while, on the information that is received in the packet, the relationship to the Police and Fire Retirement Fund proper, which is 5003 on LFUCG's books, the general fund, which is 1101 on our books, and then Callen's kind of world of our investments, which we hold with Northern Trust. Part of that is the cash management side. Part of that is kind of how the funds flow from one to another. And then the information that we receive in our packets every month. We just wanted to kind of explain how that works and what we're seeing just for the good of the whole. So this is what I'm calling a symbiotic system of inputs and outputs because all of these things have to work together in balance and in coordination in order for it to be accommodating to the members, the retirees, and with the assistance of the LFUCG as an input. So the inputs to the fund are employer contributions, employee contributions, the market returns, both realized and unrealized, our service credit purchases that are approved through the board, if we have them, our benefit pool contributions, and our Medicare supplement Part B contributions. Those are the things that come into the fund. The outputs are the things that come out of the fund, the retiree and beneficiary payments, our market losses, both realized and unrealized, the retiree benefits. So if you've signed up for vision or any other benefits, those are coming out of the fund, the taxes and garnishments related to those payments, the staff costs for our two ladies that help us out oh so very much, And then our operational costs, any kind of postage, our storage of data, the doctors that we send our folks to, all of those costs are the outputs of the fund. So those are the three main pieces that we are talking about. So as you can see, the arrows don't all go every direction. The general fund sends funds to the police and fire retirement fund. They don't come back the other direction. Funds go from the 5003 Police and Fire Fund to Northern Trust and sometimes back the other direction. But Northern Trust and the 1101 General Fund don't go back and forth. So there's only certain directions that those funds flow. And that's really important to remember because the primary drivers of the revenues in this fund are the employee contributions, employer contributions, and our investments. So as you all are well aware of sitting board members, our employee and employer contributions do not meet the needs of the money that's going out. And so the vast majority of what we will see on a daily basis and is reported to you all in the financials is actually additional funds needed from the investments that we're making, which is why those investment decisions are so important as board members. on a monthly basis this happens in a kind of a timed cycle we have our first active payroll that happens closer to the beginning of the month then we have our police and fire pension board meeting you all get your reports for the prior month that's why we're reporting the prior month because we don't have this one happening yet we have a second retiree payroll or we have i'm sorry we have a retiree payroll that happens around the 15th of the month. Sometimes we process a little earlier, but we just took a vote to get that paid on the 15th of the month. Then we have our second active employee payroll. Sometimes we will have a third active employee payroll, depending on how long the month is. Sometimes we'll have a third one of those that come in, and then we'll do a cash reconciliation to determine how much we need from the investment accounts in order to make the fund the 5003 fund whole. How much have we paid out versus how much have we brought in? And so then if we need a cash transfer from Northern Trust, we will make that adjustment there at the end with that reconciliation. And then you will see it the next month after we've completed that cycle. So you can see in each one of those items what are the inputs and what are the outputs. What it looks like on the financial statement that we provide every month, this is actually this month. It was a really great example because it provided you an opportunity to see a month where inputs exceeded outputs and a month where outputs exceeded inputs. So this is the left side. This is May in your packet for this month. So I'm going to skip the top half and we'll get to that in the next one. But you can see for the May payroll, we had $7.7 million of overall payroll for the month of May. We start with our inputs, which is our employee contributions calculated at 12%. We have our employer contributions calculated at the 50.06%. That rate will change when the board sets a new rate. based on the actuarial calculation. So starting in the new year, when we've adopted a new rate, that rate will change, and the calculation will change. But you can see those every single month based on the calculated payroll that's above. Then you'll also see if we've approved any service credits. Those are in there where we've been paid for service credit and approved that by the board. That's also in there. The next section is the retiree payroll and benefits. So the next little grouping right there, the $6.4 million, is outputs. Those are the payments made to the retirees and beneficiaries. But then against that is the LFUCG benefit pool and Medicare supplement Part B. So the outputs are the negatives and the inputs are the positives. The next section of that are the taxes and benefit payments. those come straight from the bills that we get. So the dental bill that we receive, the anthem bill that we receive, the vision bill that we receive, the IRS payment, those are straight from those bills. And as we're paying those bills, those are the charges that are in there. That was, I think, $1.3 million. It's hard to see there. But that whole section of those relates and pertains to that retiree payroll that's above. The next little grouping there is our UPS postage and printer fees. So as we're paying, you know, click charges for Konica and costs that are associated to the running of the office, that's that next section. Our personnel for the board secretary and the ladies that are in the office, that's that next section. And so for the month of May, our outputs exceeded our inputs. So our money that we sent in from employee and employer contributions was not more than what cost we had for the retirees. So how do we pay for that? The very next month will tell you where that came from. So at the very top, the prior month's draw of resources, we were advised by Callen that that would come from, well, we were advised by Callen, but also as they go through and they tell us where we need adjustments based on our investment strategy, where they'll talk to us about overweight and underweight and where we want to be from our investment strategy, they'll tell us where we need to target to take funds from. So we took it from Northern Trust 500 to balance our investment priorities for the prior month. So that's that cash reconciliation piece. So that's how we balance the prior month to make our obligations whole. And then we start the process over again. Now the process we were doing for this month was for June. So you can see that the payroll is much higher than in May. Now that could be because it would be a three payroll month. So you would see a really high number if that was a three payroll month. But this actually happened because it's the month of June. And in June, we close our fiscal year, which means we go ahead and look at all of the payrolls that were paid into July, and if they were four June days worked, we will go and book them back. So if the pay actually hit the books in July, we will move those expenses back so that payroll gets larger. So the expense is larger in June, and July actually happened to be a three-payroll month. So we'll have two big ones that hit side by side. And so if you work that same process all the way down through this reconciliation, when you get to the very bottom there, you'll see that for the month of June, our inputs exceeded our outputs. So as opposed to having to go back to our investments and say, we'll need to pull funds out, we were covered. So what we will do is hold those funds in the 5003 account, the police and fire account, until we get to the next month when we'll have these bills all over again. And we do that month after month after month. And this is the reconciliation that we bring to the board to show you where the funds are going. At the very top, it shows you that balancing of accounts of all of the different funds and where we're taking it from. and then as our folks from Calen come and bring you our investment statements, that shows you how our different funds are doing as they're earning money. And so this is just kind of an overview that we wanted to bring. This is what it looks like in your packet side by side, so you can see what you actually have received and what you receive every month. But that's just kind of to walk through what you're looking at and what our members are looking at on a monthly basis. I know it's a lot of numbers, but it's just to give kind of a snapshot of how the flow of funds works month to month as we kind of go through this process of receiving funds from contributions and investments and paying funds out to our retirees. Does anybody have any questions? I know that was a lot. Yes, sir. Under retiree beneficiary tax and benefit payments, what is prudential? Insurance. It's a supplemental insurance. It's the life insurance that the retirees elected at retirement. Thank you. Yes, sir. Where is the check and balance that's on this? I mean, all the numbers are here. And we've had our discussion. And I'm constantly being asked by retirees, how do we know this is occurring? because of the past, there has been numbers of mistakes. In the last, what, four or five years, we had almost a $4 million mistake. And then shortly after that, there was a $250,000 mistake. And, in fact, a previous administration lied to this board. about the funding. I see this, but I think there needs to be some kind of a check or balance. Now, whether that would be to put it in a different account or something or have an audit, an annual audit, which I have tried to get for years and have not been able to do that, because, you know, as a board member, I hope this is right. But nobody here is more reluctant to believe than me. Well, as you and I have discussed, I'm more than open to an audit. We are audited annually. I'm happy to have a completely separate audit, if that would make everyone feel more comfortable. I think that we have a few different checks and balances. It is in a separate account. The 5003 fund is a separate fund. It has its own financial statements in our audit that run for that fund itself. That is the entire principle of fund accounting is that you can see it by itself. But I do understand where you're coming from, And if it would make the board more comfortable to have its own separate and independent audit, I have no objection to that. We have really tried to make this as transparent as possible. And actually, this format came from a former board member. Lieutenant Kennard was really involved in creating this. And I think it went through many, many iterations before we got here. So I know that there has been a lot of work towards transparency and towards the effort to make this what it is. It's still very complicated. So I'm not going to say it is ever without error. No accounting is ever without error or without the possibility of an issue. That would be impossible. It's still humans processing it. And even if we didn't have humans, even if we had AI processing it, I would not tell you it is possible to be without error. But if that would make the board more comfortable, I have no objection to that whatsoever. What I can tell you is that I feel very comfortable with this information. I've been able to trace back this information, and I do not have any concerns about it. But I realize that I sit in a different seat than you do, and if that makes you in a more confident manner, I have no objection. I mean, we discussed money-wise, what are we talking about about an audit? $10,000? I think you're looking, yeah, probably anywhere between $7,000 to $15,000, depending on what kind of level of an audit that you would like to have. Well, that's not that much. Not for this kind of fund. Yeah. I think that would be very wise to do that. And in that way, we can alleviate all the guesses and all that and make me more comfortable. Yes. Okay. Would you like to make a motion? Do I hear a motion? I have a question. I have a question before we do that. Is this something that would need to be put in a committee first so we can decide what exactly we want in this audit? I mean, is that something we could set up in legislative and say, you know, we just do this biannually. That way we never really have to have this conversation again. and it's just automatically done every two years. An audit? Yeah. Sure. I think the best location would be the organizational subcommittee, not the legislative. I think that would be a better fit for this particular. And then you can actually decide on what things you want audited and how detailed, because that's not my realm at all. I would have to lean on Aaron and Chad and those things to see how detailed audit we have to have and get a scope and things of that nature. So I guess we need to form a motion. I can make a motion to put it into the organizational committees here. organizational subcommittee to review and set up standards and so forth. Do I have a second? Second. Any discussion? All in favor? Any opposed? Again, thank you so much for your accommodation. I apologize for the inconvenience. I have one thing for you. I really appreciate this, so thank you for doing this. Is this, Tanya and Susan, is this something we can kind of snip out of this meeting so that we could, you know, make available just this portion to our members? Yeah, we can just send you the PDF. I mean, it's. No, I mean the actual presentation. Okay. Yeah, we'll figure something out. Okay. Do we have anything else for the board? Thank you, Aaron. Yes, sir. Nothing else? I don't. I'm sorry. Are you going to end the meeting? I am. I was saving something for Alaska. I might have problems with this. We had Lieutenant McMinima retire. I served a lot of years with him. He was always very happy, very good-natured. I appreciate all his work. Chief Scott Marshall, he was a district chief. You know, he's had a lot of health problems recently. And, you know, I served with him for a long time. You know, I think he retired with like 22 years on, so he's only a couple years ahead of me. But I wish him and his family the best. And my thoughts and prayers are with him. Well, thank you, sir. Anything else? Do I have a motion to adjourn? Do I need a second? All in favor. Thank you all. Thank you. Halo Halo Halo Oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh, oh Halo, Halo, Halo Halo, Halo, Halo Halo, Halo, Halo Halo, Halo, Halo Halo, Halo, Halo Halo, Halo, Halo The End Just a little bit. And all I'm asking in my time, honey, is to give me my promise when you get home. Just a little bit. Yeah, baby. Just a little bit. Just a little bit. Just a little bit. Oh, your kisses, sweeter than honey And guess what, so is my money All I want you to do for me Is give it to me when you get home Yeah, baby, whip it to me When you get home Now, just a little bit R-E-S-B-E-C-T But not what it means to me I-E-S-P-E-C-T Take F-T-C-C I'll get tired Keep on trying You're running out of food And I ain't lying Just a little bit When you come home Or you might walk in it I gotta go I gotta go Thank you. Thank you. Breaking my memory Was when it was all very right So very nice So very nice Here, darling Stands another bandit Born in you In a natural light The camembert of the grave Days and nights like a wheel There's a trance Bending on a secret part of you Deep inside your heart And nobody knows me When you say company To anyone who approaches Chalking up your hair We live in your love Well, we both We grow enough to know That we say it all right now For just one minute of real love Real love Hey, baby Real love I need to believe in real love Real love, baby. Real love, darling. When you say comfort me To anyone who approaches Chalking up the hurt The living we learned But we've been Live long enough to know That we've seen it all right now For just one minute I feel loved on you Real love, real love Real love, real love Thank you. I don't think I could hide what I'm feeling inside. Another day, knowing I love you And I, I'm getting too close again I don't want to see you then If I tell you tonight, would you turn on the lights Walk away Knowing I love you I'm gonna take you by surprise And make you realize, Amanda I'm gonna tell you right away I can't wait another day, Amanda I'm gonna say it like a man And make you understand, Amanda I love you And I feel like today's the day I'm looking for the words to say Do you want to be free? Are you ready for me To feel this way I don't want to lose you So It may be too soon I know The feeling takes a block To grow