16 June 2017

Mesa City Council Meeting Thu 15 June 2017 Part 1: PSPRS Pension Watch

PSPRS Pension Watch
Information and analysis of the Arizona Public Safety Personnel Retirement System (PSPRS) and issues that affect public defined benefit pensions.
PLEASE NOTE: There is usually about a two-month lag in PSPRS reporting its investment returns.
PSPRS had another 1%+ return for February 2017, and fiscal YTD has earned 8.78%.  However, the Russell 3000 has pulled more than 6% ahead of PSPRS.  For the fiscal YTD, PSPRS is earning 58.68% of the Russell 3000.  This fits the recent performance of PSPRS, which has usually earned 50-60% of the Russell 3000.
Here's the video upload from YouTube - Mesa City Manager Chris Brady, the chief executive officer here in the City of Mesa for more than ten years [shown below] apparently can't even see or act pro-actively when there's clear data from three years ago - and other high-paid bureaucrats inside City Hall are using the tired-old mantra "It's a Moving Target" ...these data from 3 years ago are clearly EASY-TO-SEE unless they're all in a fog of some kind  
 
Sunday, April 30, 2017
PSPRS investment returns through February 2017
The following table shows PSPRS' investment returns, gross of fees*, versus the Russell 3000 through February 2017, the eighth month of the current fiscal year (FY), with the FY end 2014, 2015, and 2016 returns included for comparison:

ReportPSPRSPSPRSRussell 3000Russell 3000
DateMonth EndFiscal YTDMonth EndFiscal YTD
6/30/20140.78%13.82%2.51%25.22%
6/30/2015-0.73%4.21%-1.67%7.29%
6/30/2016-0.32%1.06%0.21%2.14%





7/31/20161.62%1.62%3.97%3.97%
8/30/20161.76%3.40%0.26%4.23%
9/30/20160.71%4.14%0.16%4.40%
10/31/2016-0.27%3.86%-2.16%2.14%
11/30/20161.17%5.07%4.48%6.71%
12/31/20161.30%6.43%1.95%8.79%
1/31/20171.03%7.52%1.88%10.84%
2/28/20171.17%8.78%3.72%14.96%

There is usually about a two-month lag in PSPRS reporting its investment returns.
PSPRS had another 1%+ return for February 2017, and fiscal YTD has earned 8.78%. 
However, the Russell 3000 has pulled more than 6% ahead of PSPRS

For the fiscal YTD, PSPRS is earning 58.68% of the Russell 3000.  This fits the recent performance of PSPRS, which has usually earned 50-60% of the Russell 3000. 
Based on calendar date YTD returns, it looks as if the Russell 3000 had a small gain in March 2017, but it was up another 1.06% percent in April 2016. 
Looking at this month's returns, private equity returned only 0.11% and has earned 11.51%, gross of fees, for the fiscal YTD. 
This is funny timing, considering how much effort PSPRS just put into explaining how great their private equity returns have been.  One would expect private equity returns to show higher returns in a bull market, and PSPRS uses the Russell 3000 + 100 basis points as its benchmark.  The lag between PSPRS' private equity returns and the Russell 3000 gives us an indication of how unpredictable and risky private equity investments can be.

 * Returns, gross of fees, are used because PSPRS usually does not report returns, net of fees paid to outside agencies, except on the final report of the fiscal year.  Returns, gross of fees, are used in the table for consistency.  The past two years fees have reduced the final annual reported return by about a half percent.  Returns, net of fees, were 13.28% in FY 2014, 3.68% in FY 2015, and 0.63% in FY 2016.
 
 
 
 
This is the conversation that the City of Mesa is not having - it was happening in Prescott back on 20 Feb 2017
 
 
QUESTION: Why is the City of Mesa not considering a Property Sales Tax? Or some of the other questions asked in Prescott
 
An excerpt below  from this link shows a very different plan than the extended 30-year amortization period - adding over $500 Million is additional charges and interest fees to the City of Mesa's accumulating liabilities . . it will take 10 years to make it "manageable" in Prescott
 
 
How to solve the problem?
Acknowledging that the pension cost will never go away, the council is proposing paying it down to the point where the payments can be comfortably managed by monies in the general fund. The Strategic Planning committee estimates that it will take about 10 years to accomplish that goal. The current ideas being considered by Council include:
1. Using reserve funds (carefully) to pay down the principle of the unfunded liability.
2. Selling unneeded properties owned by the City, and using the funds to pay down the principle of the unfunded liability. (This isn’t as straightforward as it may seem. See: Councilwoman Orr on PSPRS: ‘This is a Solvable Problem’)
3. Adding a .75¢ sales tax for 10 years. 
4. Seeking legislative help at the state level.
These solutions are not exclusive of one another, it is expected that all the ideas will be used as part of a package to reduce the payments to the point where they are manageable
 
AND THIS "old news" from 18 March 2014
 
Judicial Watch Files Suit against Arizona Public Safety Personnel Retirement System for Grand Jury Subpoena on Possible Fraudulent Activity by Pension-Trust Managers
 
Washington, DC) Judicial Watch announced today on March 13, 2014, it filed a lawsuit in the Superior Court for the State of Arizona against the Arizona Public Safety Personnel Retirement System (PSPRS) for a grand jury subpoena seeking documents related to an investigation of possible fraudulent activity by PSPRS pension-trust managers (Judicial Watch v. PSPRS (CV2014-003027)).
According to a March 7 report by the Arizona Republic, PSPRS is now under federal scrutiny into “whether pension-fund managers inflated certain real-estate investment values to trigger staff bonuses.”  PSPRS had initially refused to release a copy of the subpoena to the Arizona Republic.
On March 11, 2014, Judicial Watch requested that PSPRS provide it with a copy of the PSPRS federal grand-jury subpoena pursuant to the Arizona Public Records Law. On March 13, PSPRS refused to comply with the request by asserting that the subpoena was not a public record. In filing its lawsuit to compel compliance, Judicial Watch argued, “Defendant has violated Arizona Public Records Law by improperly withholding information and failing to provide access to the requested record in its entirety.”
The Arizona PSPRS manages a $7.7 billion trust to pay for the retirement benefits of 53,000 of the state’s police officers, firefighters, elected officials, and correctional officers. The Arizona Republic reported in its March 7 article that the U.S. Attorney’s Office began investigating PSPRS after its in-house counsel and three high-level investment analysts quit in protest last year over concerns about the way real-estate values were being recorded. According to the Republic article, the federal investigation centers on whether PSPRS inflated real-estate values in order to award substantial bonuses to top staffers.
In an August 1, 2013, article, the Republic had reported that PSPRS “gave performance and retention bonuses to its highest-paid staff along with guaranteed pay raises and additional compensation the past five years … The five- and six-figure bonuses and additional pay were awarded to managers and investment staff even when the pension trust posted financial losses in 2008, 2009 and 2012
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THIS WAS VERY CLEAR 3 YEARS AGO:
From 2014 Actuarial Outpost 
 
 
 
 

 

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