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MOTION: It was m/s by Narum/Olson to waive full reading and adopt Resolution No. 18-1026 accepting the FY 2018/19 Mid-Term Capital Improvement Program Budget. Motion passed by the following vote: Ayes: Councilmembers Narum, Olson, Pentin, Mayor Thorne Noes: None Absent: Councilmember Brown 12. Consider approval of Investment Strategies and Withdrawal Policy Guidelines for the City's Section 115 PARS Pension Trust Fund and allocate the initial $28 million investment Director of Finance Tina Olson presented the report and displayed a PowerPoint presentation addressing the City's $160 million unfunded pension liability and CaIPERS adopted policies increasing pension contributions. She reported pension contributions will level off in 14 years and will be fully funded by 2046. She addressed the timeline of Council direction and actions to date, a description of Section 115 Pension Trust Fund, Section 115 Proposed Initial Allocation, Section 115 Investment Strategy and Rationale noting 7.5% of the City's investment portfolio would be in equities and the remaining 92.5% would be in fixed income. Ms. Olson presented Comparable Investment Returns, 10-year Possible Investment Returns, Proposed Withdrawal Guidelines, and Section 115 Trust Fund Next Steps. Councilmember Narum referenced the PERS Pension Rate Stabilization Fund and inquired whether it has been spent for budget surpluses and whether the fund will go to zero, pending adoption. Ms. Olson responded affirmatively adding it is included in the $21.3 million. Councilmember Pentin referenced the $6.7 million FY 2018/19 PERS contribution and inquired as to the alternative if the funds are not invested in a Section 115 Trust. Ms. Olson stated it would be part of the City's $200 million investment portfolio. Councilmember Olson expressed support for a quarterly report to the City Council relative to return on investments and for rebalancing investments. He expressed concerned about additional fees for the quarterly rebalancing of the various investment portfolios that may be generated. Ms. Olson confirmed it would be reported net of fees, and there will be no additional fees generated for the quarterly rebalancing of the various investment portfolios as the cost for those services are included in the on-going fees that the City will pay. Mayor Thorne stated the actuarial for CaIPERS should be 6.25%, not 7%, and felt the amount of unfunded liabilities will increase. Ms. Olson reported it is included at 6.25%. Councilmember Narum supported putting a plan in place for future City Councils to generate funds without cutting services and amenities. She attributed the City's current positive fiscal condition to consistent best financial management practices. Councilmember Pentin expressed agreement with the strategy and believed it continues to allow City staff and City Council, in the future, to have continued local control of funds. MOTION: It was m/s by Narum/Olson to approve the investment strategy to invest the City's annual normal PERS contribution ($6.7 million in FY 2018/19) in the PARS Conservative passive portfolio and then investing the $21.3 million initial long-term investment in a custom active portfolio that comprises 70 percent equities and 30 percent fixed income; allocate $28 million to the PARS Trust and to adopt the PARS Trust Withdrawal Policy Guidelines. Motion passed by the following vote: City Council Minutes Page 4 of 5 June 5. 2018