Okay.
Welcome, everyone, to the April 27th Finance Committee meeting.
I think to call the meeting to order at 4:00.
I haven't heard from Lindsay, so she may join us,
but if we could start with
a roll call,
just go around, indicate whether you're from the administration,
a citizen advisor, or a school board member.
I'll start.
Terry Singer, School Board.
Joe McFarland Superintendent
Greg Hummel, Director of Food Service.
Kathy Sick Seger School Board.
Kip Shore School Board.
Regis Baldwin Administration
Citizen Darby.
L.A. Citizen.
My Friends Administration.
Brad Remick from PFM.
Bryan Singer from PFM.
Tom Henry Administration.
Sorry.
Tyler.
Okay.
It looks like everyone
that somebody else just joined.
We do have a person,
Mark Moseley, from the community with us.
Okay, Welcome. Our
next item on the agenda
is the approval of the minutes they were attached to the agenda.
Anyone has any questions or comments?
I can make them now.
Otherwise I'll take a motion to approve the minutes.
So, hello.
What's.
What's happening there?
I'm sharing my screen so that.
Okay, I might have. I might.
I might be misreading this, but I think there's a typo in the minutes.
The minutes are from the February 24th meeting, Correct.
Okay.
Yeah, We didn't have a meeting in March.
Right.
So under three, it's his approval minutes.
It says February 24th minutes were approved.
And I think what that should read is the January 27th
minutes were approved at the February meeting.
Yes, that would be correct.
We did. We didn't meet. We didn't meet March.
Right. Right.
And I so I just I think. Yeah.
So I think that's just a typo.
The date of the meeting
was placed in in that approval slot.
Okay, I'll, I'll, I'll fix that.
Thank you.
Otherwise.
Otherwise, I thought they were excellent.
Anybody else?
I have a picture up on my screen.
Not on the agenda.
Is that what should be up there?
Joe? It's a great family picture.
Oh, you like my family picture?
I like it.
How about that?
I'm looking at my screen, which is the the minutes and the agenda.
How do you know
that better to make that bigger.
Yeah. Okay.
I'm okay with that.
With keeps.
Note of changing the date of the approval of the
of the minutes.
Anybody else? Any comments?
Can I have a motion for approval please.
L moved
all in favor.
I, i. Okay. Thank you.
Okay.
Next item.
Now, as everyone knows,
we had my mike
reached out to plug it and PFM to
to take a look at the Hershey Trust management
over the past several years and do some analysis and benchmarking and
the presentation is attached.
And Mike, I'll let you introduce Brad and his colleagues
and just go ahead with the presentation.
Thank you.
Thank you, Terry.
As you noted, this is a look that
Brian Singer, Tyler, Brian and Brad
rhyming with PFM are with us to present.
They took a look at the fund, believes that
as of December 31st of 2019
and provided a couple of pieces of information for them to go through.
So I'm just going to turn it over to Brian
and have him walk through the presentation
that he would like and then open it up for four questions afterwards.
I would ask that you hold any questions you have until the end
of the presentation.
Thanks, Mike.
I'm unmuted. That's good.
So thanks for having us here today.
We we had planned to do this, I think in person a month ago or so.
So I'm glad we're still able to do this now.
And just to
maybe make things a little clearer, you know, Brad Redding, Brad
is your financial advisor when it comes to debt
transactions and things like that.
The overall debt profile of the school district and things like that.
PFM has another side of our business
that works in terms of managing funds.
And so that could be short term operating funds, like it could be longer
term funds like Pension, OPEB or endowment and foundation funds like that.
Altogether, as of December 31st, 2019,
we manage 153 billion in assets like that all across the country
just for school districts and other municipalities, local governments.
And so
public sector is really our only focus.
And I think that gives us a good perspective on,
you know, why we should be here to talk to you today
between Tyler and myself, we're both
seasoned people with within PFM.
We have about 30 years experience between us, give or take.
And so I asked him to join me.
Tyler is the manager of our portfolio
analytics group, so he works
primarily with pension foundation endowment assets that we we manage.
And so I think it is a good is a good resource to have
and someone who will be chiming in as we go through this this presentation.
Last thing I'll say is I'm a school board
member myself in Mechanicsburg, right where I live.
So of that has too much relevance to this type of presentation
other than, you know, it's a great trust fund that you all have.
And I'm trying to entice any wealthy chocolatiers to come to Mechanicsburg
and leave their legacy to to our school district.
So with that, let's move into
page four, which is up on
your screen now, should be the summary portfolio observations.
The goal of our report today, this this kind of summary level,
I think really captures what we want to talk about today
and we'll get into some more detail with it.
But just to
tell you how we broke up the
the review of your fund
into these different categories, we looked at the investment policy.
We think that the the policy itself is
is well situated to achieve
a long term return, which is what you want for a fund like this.
But we do think there's some tweaks there to try and improve
the ranges that are there and help any investment manager.
But in this case Fulton be more nimble in terms of trying to
move within the policy constraints.
So make some tweaks.
There would be our recommendation.
We also have some discussion
in terms of liquid alternatives.
These are primarily hedge funds.
Another word for some of those terminology.
So some allocation there that we're looking at maybe
reducing make making some changes to
parts of the Amazon policy, which I'll discuss
next area of focus in there.
I'm sorry, just stay on this page for a minute, if you would.
The number of managers and holdings, one area
that we definitely took a look at and thought was interesting and
maybe in comparison to other funds that we we do see and this is and you know,
we do consulting types of engagements like this where it isn't just, well, funds
we manage look like this and funds that you have don't look like that.
So that's bad. We look at a lot of different
types of
funds and work in a consulting capacity like this.
We see a lot of other peers like you and it isn't that
our approach is different than the approach here.
We we think, though, based on what we see across
the different types of foundations like this, that your portfolio
has a lot of diversification but perhaps is over diversified
or may have some managers and perhaps too many managers.
So a lot of duplication of effort involved there.
When you have multiple managers working toward somewhat similar goals.
And then on top of those, managers usually manage a fund.
There's individual securities as well.
So usually there's investments in mutual funds to try and gain
some economies of scale overall diversification in a broad fund.
But then we also saw that the trust fund itself
holds individual securities, both stock and bond.
So primarily fixed income, though.
So some recommendation there to perhaps replace those individual securities
and just use funds doesn't necessarily have to be index funds.
But where you find some active management that can be additive to
to the overall return.
Next, we looked at performance
you manage your lineup includes a lot of funds that have underperformed
not just those alternatives, but alternatives are the main
one that we focused on.
But a lot of your a lot of the managers in there are not quite doing very well.
And this was as of December 31st, 2019.
So, you know, those that performance has likely continued
as the market has has turned downward in 2020.
You know, our recommendation is to,
you know, take a look at those active managers and again, try and figure out if
if you want to have a manager that's trying to
you know, you pay for an active approach, it's trying to beat an index,
but there are also index funds and there might be a better use of
of your
funds in terms of being in a more passive strategy
that that is a lower cost but might
track with the market a little bit better.
Lastly, we looked at reporting that was available to us.
There's some inconsistency that we found between the policy
and really what what the benchmark is, what what
you as a group have
tasked Fulton with with
beating or, you know, doing better than.
And what those individual managers have are what they're
benchmarking against for different asset classes and different returns. So
one of our recommendations is that we think a more
appropriate benchmark could be selected,
could be customized and defined, and said this is what our investment policy says.
We can build a benchmark that basically matches what that policy looks like and
can give more clarity to both you
and Fulton in terms of
what the expectation is for return.
So that's the summary of things I would say.
In general, you can move to the next page, but I would say in general
that things are are basically fine in terms of the fund itself.
I'm not trying to say this is, you know, a you know, it's done very well.
It has performed quite well.
So I think this is but there's definitely some some room for improvement.
And so I think that that's more what we'll talk about here.
Tyler, do you have anything you'd like to add before we move into the
specific sections here?
No, not at the moment.
Okay.
By the way, this this PDF goes to page 85.
We don't plan to get to page 85 today, but did want to support
a lot of the information that we provided in here.
Our goal is to get to about page 26.
So mindful of time and just kind of moving through here. So
this here are your investment policy guidelines.
This is based on the policy that was given to us.
You know, essentially think of it as a 65, 35
general
way of thinking of it.
You can see the portfolio benchmark.
There is a 6535.
That's another way of just kind of the shorthand for it.
The way that this that these sections are set up,
we kind of show you what what's there
and then have some recommendations on the following page.
So moving to the next page here and just talk about some of our
observations with that.
As I said,
we think the policy statement is fine in terms of a long term broad
policy that, you know, is based on this 4.4%
spending guideline and a six and a half percent required
return to try and be trying to maintain that 4% spending.
But for instance, some of the ranges could be changed
to give a better, broader
flexibility to your investment advisor.
And you can see in that sub bullet there,
for instance, you can overweight fixed income,
you can add to your fixed income allocation, but
you can't underweight fixed income so that when there's times that you want to
your manager may want to be below 25% in fixed income, you can't really do that.
So difficult to to really be nimble one way or the other.
That's that's one area that we thought would
be, you know, an easy fix, something to be a little bit broader.
You kind of set a target and then you give a range on both sides.
So another area
that we thought would be, you know, worth tweaking,
we usually the equity discussions in the reports that we see
and in the investment policy statement talk about just equities.
But there's certainly a difference between U.S.
equities and international equities.
And usually those two areas are are defined separately
in investment policies and then reported separately and returns
and benchmarks are all thought of separately.
And then there's further
slicing and dicing of the international markets
between developed markets
and emerging markets, things like that, that could could be helpful
in terms of picking other managers and and and coming up with
different strategies
that aren't just well, we have this allocation to equities.
And if we've you know, hit that that big bucket we're kind of good this is a
you know a more strategic look at saying we want to be more diversified
and not just all in say, you know, 65% U.S.
equities. Maybe that's okay.
But if that choice ended up being 65% international, that might be
an area where you'd say, wait, I thought we'd want to be more diversified
among all the stocks we are in.
So setting an allocation between those two would be helpful.
There's some additional information in it down below
the last two bullets deal with the credit quality
and trying to be, again, more diversified
within the fixed income universe.
You want to perhaps allow average credit quality to be investment grade
to improve diversification.
There's there's a discussion right now with the fact that
the fixed income markets are, you know,
like the rest of the markets are quite volatile
and there might be a lot of downgrades happening over the next couple of months.
And so what what might be higher credit quality right now?
It might be trending lower over the next couple of months.
And we'd rather you still have the advantage of
being allocated to some of that or having your manager pick and choose
some of those not be so stringent on credit quality.
That's, you know, a double or higher is great if you're
if you're a school district or if you're investing in really short term
funds.
But for long term investment, Horizon might want to have more opportunity
with some perhaps lower credit quality or
your average credit quality
might be the way to say it, as it says there.
Tyler, anything I'm missing here relevant?
No. I think the one thing I'll just add one word, managing portfolios.
And this is.
This shows up in study after study is that asset
allocation is really the driver of returns.
From a strategic standpoint, you're setting the investment policy.
And so the comments that we have here about
us versus international equity,
those things are going to have some of the biggest impact on your return.
Second is tactical asset allocation.
So the comment we have here about, you know, broadening those ranges
a little bit
so you can overweight and underweight asset classes in both directions.
We'll also have a big impact on your returns over time.
And then third is the manager selection piece.
So this is why we have this section up front.
We feel this this really.
Drives returns more than anything.
Is how you're setting up the portfolio and then allowing it to to be diversified
and make some of these tactical changes.
And that's a great point.
And that's exactly right.
Just before you move on, there's kind of
this is still part of the investment policy. Yep.
Okay.
Because I was going to suggest, my goodness, you don't think it'll work
is there's kind of four sections to the report.
Maybe after each section, if somebody has some questions,
we could maybe ask them and then move on to the next section.
I think that could work.
That's
okay. All right. Go ahead, Bryan. Sorry.
No, let's stop here, if there any.
I mean, any other comments, anything we're missing in this section?
Okay.
We'll move forward into asset allocation.
And you can see there,
page nine shows your current asset allocation.
Again, this is as of December 31st.
Overall total 45 million
equity piece is that is just above 65%.
There are 66 fixed income.
You get to your your 6535 mix between them.
You have about four and a half percent allocation to alternatives.
And then 2.6% is is in cash.
We'll move to that next page and talk about the
this the operations here.
We do think that, you know, you are well-diversified diversified
across the different sections, if I could say that clearly
there are folks who are, you know, despite being a long term mandate,
there are some that you find that are very heavily weighted toward,
you know, one asset class or another for whatever reason.
And we think this is is already you're doing very well in terms of where you are.
We think that it's very close to the targets.
You know, that could be just a point in time
view of things could be a lot different if we were looking at it
based on you know, if we looked at March 31st information,
I would say that, you know, we we think that now
the third bullet point down in our our section here is
our capital market assumptions.
How we we see the market might be performing
over the next the next five years and then the next 30 years.
We think your allocations
is sufficient to reach your target return over that period.
I guess I'd zoom to the last bullet point there
and just say that
what can help that asset, what could help you reach that target
might be minimizing allocations to some of your underperforming managers.
And we'll talk about that in another section.
We'll move forward in another page.
So I'll talk about what we see.
This is your another view of your fund
that's the the pie chart and expected returns
based on our capital market assumptions over the five year period.
And our longer term periods, the 30 year period.
This is
based on our our estimates.
You could have a whole different set of, you know, economists
come in and kind of view where they think those projections are going to be.
But we think running our model over and over again that we think,
you know, this is a pretty
good mix to reach those returns.
Tyler,
anything to.
Know?
Just so the probability of achieving six and a half percent.
So we got that from the 4%
spending policy plus two and a half percent for inflation.
And as Brian said, we we expect the portfolio
to achieve that over the long term with a 7% return.
So overall, big picture.
The portfolio is well diversified and the patient
is in line with what you would want for a target return.
And go to the next slide.
This is a view of what's called the efficient frontier.
It's a, you know, rate of
return over a period of time.
And the
standard deviation is sort of the risk of being able to achieve that return.
So you see a core fixed income,
you know, treasury bonds, those sort of safer
kinds of investments are on the the left side of the the the chart.
And you go all the way out to the right side, you see emerging markets equity.
That's the M equity that's that's on the far right side is as kind of a riskier
the riskiest asset class in this group here,
but also with perhaps the the highest potential for average return.
You could see that the kind of green triangle shows
the school districts current mix of funds pretty close to,
you know an efficient mix of.
Of. All of the asset classes that are shown here in terms of
return and risk.
Tyler, anything to add here?
No, I think this
it might it might come up on the next slide, but
I think too, so this shows one of them.
I think there's two main areas that could be adjusted to bring that
that green triangle up a little bit onto the efficient frontier.
You know, one that we mentioned earlier was with the allocation
in fixed income, having the minimum credit quality being double a.
If that were.
To be lowered down to just investment grade.
So triple B and above as an average,
that would improve diversification there.
And then the other one,
which you can see on this slide, looking at the allocation to U.S.
equity and international equity,
you can see that the fund is almost
in the top decile of other endowments
and foundations in terms of the equity, the US equity allocation,
but it's in the bottom quartile
for international equity.
So just truing that up a little bit.
You know, increase in the.
International equity a little bit, pulling back on the U.S.
equity.
May increase.
Diversification and and move that portfolio a little closer
to the efficient frontier.
And I think that kind of speaks also to our discussion
earlier on the investment policy statement and the
delineation between U.S.
equity and international managers and having a specific allocation there
to the international side might might might have been more
might have helped in terms of having a focus on, okay, well,
we have this much to play with in the international equity space.
So how are we choosing our managers within their.
All right,
move to the next section manager lineup.
And you can see we are kind of stepping through from that top
category of investment policy down
to the asset allocation and the managers that that invest in those assets.
So move on to the next. Page.
And see the manager lineup.
This is a busy page.
We're not going to hit each one here at all,
but we did want to talk about and answer a question.
I come in on fees ahead of time here,
so this shows the manager fees
by my manager.
From the information that we have.
And in general,
you know, the the estimated fees for the the managers themselves are not, you know,
necessarily way out of line with what we see for
institutional investors.
So this is, you know, an overall average
mutual fund fee of 30 basis points, 0.30%.
But you can see our bullet the bottom here to answer that question,
kind of turning that into dollar figures was, you know, 30 basis
points is about 137,000 that's netted out before you get to returns.
That's that's manager fees plus what
we estimate to be a 34 basis points
or $158,000 in annual expenses from Fulton.
We think those are our trading fees
primarily for the individual securities we talked about,
but not necessarily all of the expenses you get
when you're buying and trading in individual security.
That would take your your overall fee somewhere in the ballpark of 64
basis points or $295,000.
And I can see it's not what's shown on your screen there.
I'm sorry, I'm reading from the one that I sent late on Friday to you, Mike,
so we can follow up with that to the group.
But essentially, just to stay with this
overall manager lineup and fees,
we we estimated to be about 64 basis points or about 295,000.
Some of those are explicit fees that are paid.
There are netted out of I'm sorry, that are paid out of your account.
And some of those are
coming out of an expense ratio from a mutual fund
that you don't actually see in terms of a out of pocket expense.
I wanted to be clear on that.
I'll move to the next page.
Some of our observations that we have here in terms of actual managers, you know,
it has to do with the actual allocation with within there.
So you can see nearly 50% or half of your domestic equity
allocation, half of your fund is in domestic equities
and half of that allocation essentially is invested in large cap stocks
and then nearly a third is invested of the of the fixed
income allocation in individual securities, individual bonds.
So there's there's a lot there.
And you can see the estimated manager fees of 30 basis points
exclude the cost to transact those individual securities.
So some additional costs in there just to move securities back and forth.
And also the pricing that we're not exactly sure what
what kind of pricing you get on a security,
whether it's bought from Fulton's inventory or bought out on the open market
with with three different bids at least something like that,
you get some other manager comments there.
I think what what I wanted to highlight is about halfway down the page,
the majority of your alternative managers have lagged the benchmarks,
you know, on a pretty consistent basis all the way out into the five year area.
So that's, you know, one quarter, one year underperformance.
That's that's something to to be looking at.
But one year or three or five year now, it's
something that
more problematic and this is something we see with hedge funds in general.
It's not not necessarily just the ones that your managers chosen for you.
Hedge funds just have been
consistently underperforming
their
index funds in other parts of the market.
So our overall recommendations, kind of the last part of that
is managers that have been consistently underperforming their benchmark should be
replaced.
Either choose another active manager or perhaps a lower cost index fund to
to handle the investment of that sector for you.
Tyler,
stop and see if you know anything to add, please.
So I think actually on the prior
slide where it shows the manager lineup
and just looking at this, you know, Brian, you had mentioned
over diversification at the beginning of this.
And I think just looking at this. Lineup is.
A pretty good illustration.
There's there's 25 different mutual funds,
plus the individual.
Securities. Managed by Fulton,
especially. US equity.
There's a lot of overlap.
There was a lot of different index.
Funds and those securities.
Managed by Fulton fixed income, you know, there's there's two high yield funds.
That are both managed by. Federated.
So just a lot of overlap.
That we felt could be condensed into a smaller universe of managers.
Know it could be easier to monitor and have higher
conviction on versus such a broad set of managers.
Is this the newest report that we're looking at
that was sent this morning, or is this the one?
What would you imagine the number was wrong on?
This is is this correct or not?
We added we added a bullet point to the bottom of this.
So the information you see is correct.
But this is probably not the the most current version.
So I've tried to pull that one up and it look the same to me.
So I don't see the difference.
There was a. Via email this morning.
I don't see the difference.
Yeah, we just added a footnote to the bottom.
Oh, estimated fees, Total fees. Okay.
What else is different in this presentation?
Anything else?
Yeah, there were two other minor changes we made.
We can.
They're on upcoming. Slides.
If you want to just speak to it when we get there.
Unless, Joe, you want to pull up the newer version.
So when you see what's happening, when you say active manager,
you mean each one of these funds has a separate
individual managing it.
That would just.
Go ahead, timer.
So so there's there's 25 mutual funds in here
that are each managed by a team at at these.
Firms, Vanguard principal. Etc.
So they're all managed outside and the fund owns shares in these mutual funds,
whereas the individual securities
are managed in-house by some,
but some of, some of the managers are.
Active.
So they're they're buying.
The securities that they think are going to beat the benchmark.
But a lot of them, especially in U.S.
equity, are just passive index funds that are tracking the benchmark.
Okay, Thank you. It
and I would just want to make sure we get the newer report put on this agenda.
So in the in the future, when we pull it up again, it's the updated ones here know.
Why don't we follow through this, the one that's on the screen.
Just in the interest of time, we'll try and be
mindful of your time frame here and we'll make sure that
we have the will note.
We'll note the changes on the upcoming slides here
and we'll have the right one in the in the agenda after after this.
Okay.
So we touch on this page show, if you don't mind going
to the next slide.
Next, just stay there.
But say the next three slides, kind of show manager performance
grouped up by sector.
So we have domestic equity managers here, international equities
alternatives, fixed income coming up.
What what I think you're we can look at them
one we don't need to look at each page one by one
nor do we need to look at each manager.
But I would say that and we've noted areas where you have
overperform outperformance of the benchmark
by at least half a percent or better, and those are in green.
And then we have underperformance for by that same
half percent or more listed in a in a kind of salmon color.
There you can just see those as we go through there.
But and this is the most updated the one you're looking at right now.
So I will attach that to the agenda when we're finished.
And thank you. Thank you. Welcome.
Tyler, any highlights out of this?
And at least four pages.
To the not too much on this one, obviously The one that stands out is the.
Vanguard dividend growth.
Which has lagged its benchmark pretty significantly
for all the trailing periods.
So that's just something
like Bryan said, if underperforming for a quarter or a couple.
Of quarters is.
Fine, but when it when it continues. For.
Multiple years of trailing returns,
it's obviously an issue and it should be addressed
and replaced with either an index fund
or an active manager that
you feel is going to outperform.
Go to the next page.
See the same thing there for that.
Joe Hambro International Select Fund.
And kind of the opposite side to not trying
to just pick on underperformance, but you've you've had a good performance
from the emerging markets the Harding Loughner Emerging markets
fund only 2% of the overall portfolio but still.
Good.
Move to the next slide, please.
Here's one where we we wanted to highlight that, you know, all of these
are alternative managers overall have been less than less than great.
You know Diamond Ill maybe the only one that had had
some good
or a good track record relative to the others there.
So it's it's, you know, less than 5% of your overall portfolio.
But it is an area that you do pay in terms of fees for it.
And, you know, if you're going to pay in additional fees
for more active management, you'll want to see
better performance.
And you see from this group here, I think.
Yeah, I think actually one thing
I'll add on that with alternatives
are our view on alternatives in general is that.
If if they're going to add. Value to the portfolio,
then obviously you should include them.
But where were hesitant
to add alternatives just for the sake of having alternatives?
A lot of times
people think I want alternatives because they're going to help me get diversified.
This is what all the big funds are doing.
But you have to be cautious with that because there's
there's a lot of alternatives out there that are geared more towards
retail investors. And, you know, our.
Aren't the best. Managers, but they provide.
Access for retail investors.
And I think a fund of this size.
If if you want to invest in.
Alternative and you can handle the liquidity
of some of the private alternatives, that might be something worth looking at.
We've we've tended to steer clients.
More in that direction, assuming they have the size
and the ability to withstand the illiquidity of those types of funds.
But that's
where you get a lot of the better managers than in the mutual fund space.
And just for clarity,
we're talking about retail investors Are are,
you know, a high net worth individual, an individual more
so than than an institutional level investor, which is what we would consider
anyone with $1,000,000 or more is usually considered institutional level
and so has a different different access, higher investment
acumen, that sort of thing separates a retail from an institutional investor.
Now that you're this, this fund is an institutional level
size should have access to
better types of investments
than than this group that we're talking about here.
I just interrupt for a second,
Mike, Could you let me know how you think we're doing on time?
We have a couple of more agenda items.
And I know people are going to have some questions
I know we don't have a 5:00 meeting, so I guess we could go over. But
you are
okay with the progress we're making so far.
I think this is you know, this is the most important thing
we have on the agenda today.
So the need and we'll deal with the others as they come.
Okay. Thank you.
Yeah.
Thank you.
Mindful of that
time, though, overall, why don't we will hit the last page on fixed income.
Jeff, you could move forward there it's see there.
You know, this is perhaps a better section just looking
if I'm looking green versus
salmon, that's great.
However, you know, back to that over duplication of effort.
We have these funds and we also have fixed income
securities that are held by the fund.
So it's it's a lot of effort to get to
perhaps a result that could be done better through just these funds instead of not.
I'm not seeing green and salmon.
Am I supposed to be seeing that on the screen?
Yeah, maybe it's just
an issue with with it coming through Zoom.
And I can also see it good now.
Okay better performance on this page
than on some of the other sectors is the is is what Green would tell you
and that's what that's showing on this on this page.
So just to give you that that picture.
All right.
When we move to the next section, our last
big section here, portfolio performance.
So that is sort of the the bottom line number out of putting all this together,
investment policy, asset allocation, choosing managers,
hopefully you get to an end result of portfolio performance.
Our observation shows that, you know, we've we've seen the performance lag
for that one, two, three, four and five year period that have been reported.
Again, that's through December.
I don't know what it looks like up through March.
The the report itself and there was a question that came in on, you know,
what is the benchmark that's used to how do we tell if we're ahead or behind?
Fulton calls it a growth taxable index, but they don't define it.
It's not footnoted anywhere.
So not exactly sure what what's in that benchmark.
So that's something
could get more information from from them or just have a better constructed
benchmark might might be helpful in terms of
knowing what exactly our performance is.
So we we have a
we kind of we took a blended benchmark based on your overall policy,
and we still found that it did underperform a blended benchmark
that we we would recommend for a 6535 portfolio like this. So,
you know, it also
falls below the median for the five years when you compare it to a universe
of other endowments and foundations with assets below $100 million.
So just to compare yourself against a peer group,
also below the median line for that,
and we think that that big detractor has been in the alternative area.
There you can see a trailing five year
return of, you know, -0.47% versus 373
for fixed income and 7.48% for equities.
Now, we've had a really great run
in really great bull market in on the equity side.
So it's hard to,
you know, No, it was
it would have been hard to know that, you know, when that would have ended.
But over that period of time, still,
you know, below the median line still kind of shows that there's
there's some room for improvement in terms of performance.
Tyler,
nothing else to add here.
I think if if you go to the next slide
with more more details with the returns
is as Bryan said that the growth taxable
index of the portfolio has done reasonably well versus that looking back
since inception, it's it's beat it
by by a good amount.
But again, we don't.
We don't know. What that is. Exactly.
And we're not we don't.
Know how appropriate it is for this portfolio.
So the simple benchmark that's outlined in the policy of of the.
MSCI Acwi and the Barclays.
And the portfolio is has unfortunately lagged
that for all of these trailing periods shown it.
Thanks, Tyler and Bryan, Thanks is a great report.
This is the page I think this is this is the main page of the entire deck.
My opinion
and board wanted
to needed to know was how would they done against the benchmark.
And I guess first off, we don't know what their benchmark is.
Then if we're looking at this page, either way you slice it,
they've underperformed across the board.
So, you know, and that's Bolton's job picking the managers.
That's what that's what they're paid to do.
Correct.
So regardless of how which managers underperform or outperform,
that's their job.
And they've underperformed against whichever benchmark
you pick across the board.
Is that an accurate
description?
Yes. Yeah.
So this is KIPP.
And I just first of all, many thanks to to Bryan and Tyler for the presentation
and to Brad for your ongoing work on behalf of the district.
And especially, I think we owe great thanks to Todd
for encouraging us to get this review.
I have many concerns and we don't have enough time
remaining to address all of mine, but I think dealing with in addition
to the glaring underperformance, I mean, individual stock risk,
how are they trading the stocks, individual risk in in bonds,
being able to underweight bonds at a crucial time like now?
I mean, mutual fund fees, which are in excess of 1%
and are not being rebated rebated and also underperformance in those funds?
I mean, I think the
bottom line is that an RFP is an RFP is warranted
in this in this instance for for a trustee.
I would agree it is funny, Brian Tyler,
you guys can back into what their benchmark was either.
Now it's just a line item in the report.
And we can we can see the trailing performance.
But that's it.
And that was my what prompted me to make this recommendation is because
I looked at their benchmark and I can back into what their benchmark was.
So the world to know how did they perform.
Well I can couldn't even back into their benchmark.
So without knowing what they're reporting to the board, it's
difficult to say whether they're doing a good job or a bad job.
So again,
normally in the report, you know, in the appendix.
Or something in the back, there'll be a description of.
What that blended.
Benchmark is and what it consists of over time.
But we didn't see that anywhere.
Have you ever seen anything like that before?
An undisclosed benchmark?
Yes. Not not very frequently, but yeah, we have.
Seen that.
There's there's a lot of firms out there with with poor performance reporting.
Yeah.
To me, it seemed like it was a
it was a report that would come from a from a
a different part of the bank might be,
you know that you get slotted in with, with grandma's, you know,
rollover IRA or something like that and it's not as important, you know,
in terms of the reporting that getting into the weeds on it.
Notwithstanding the the noted underperformance is
if I want to make sure I heard you correctly in the beginning,
it it sounded like your projection over the next 30 years,
you said you could use a lot of different models showed it meeting the investment
policy that that they were provided with is that I understand that accurately.
Yes. Yes. Yeah.
So from a high level asset allocation standpoint,
you know, there weren't really any big issues.
You know, we've mentioned potentially increasing international versus U.S.
a little bit and.
And broadening out fixed income to allow.
For a little more below investment grade.
But those are relatively small tweaks.
So in the.
Grand scheme of things, the asset allocation.
Itself is in decent shape.
I'm sorry, I thought you were talking about it
meeting its its income projections over the next X number of years,
not the asset allocation.
So that that those comments had to do with asset allocation.
Yes. So the asset allocation based on our.
Projection is for. Each asset class
and using the asset allocation that's in.
Place, we expect the.
Portfolio to achieve its target return over the long term.
Okay.
Assuming they don't underperform, trying
to hit that benchmark, which they've consistently done.
Correct.
And there's a difference
between your your spending policy or what you, you know, the
the returns that that the policy wants versus the returns that you're getting.
And you could see it on the page, it's there that that underperformance can
can translate into into dollars you know just money left on the table carrier
you're meeting your you're able to meet a 4% spend each year but wouldn't
it be better to have even more assets available to have a bigger base to spend.
Like anybody else have any more questions?
I don't know that that we
were necessarily going to talk today
about what actions we
could or should take going from here, but we can
if I think
just a comment on this page, because again, this is the main page,
that last bullet point there
forms underperform by one and a half million over the past five years.
And to keep in mind, that's not compounded that's just purchase in right guys
so if you're actually so
in reality it's a lot more
and that is against
what they took from their policy which was 6535.
Now the way PFM is looking at 6535, which I think is pretty standard,
they underperform by 1.17%, which is call
it round up to $3 million over the past five years that they've underperformed.
And that's that's the bottom line.
Now, you can take a look at the fees
and how the underlying managers are perform, but that's important job.
That's not your job.
So in reality, this report, you know, the board needs
to know how it's performing, but Fulton's the one who should report these.
The answer on this
noted,
if I if I heard
this is KIPP again, if I heard correctly, that one quarter,
one quarter of the value of the trust is in individual equities.
That correct?
Approximately. Okay.
So were you able to see a list
of the current holdings and frequency with which they trade?
And then also the the individual issues of bonds
that are that are being held?
So we we did have that information on the statement.
We didn't we didn't dig that deep into how frequently they trade.
I know on
the the equity side it was mainly large cap stocks.
So there is a.
Little bit of a bias there, which is that you expect that from a bank
that's buying individual securities
that they typically focus more on the big names.
Oh, oh sure.
I would just be I would just be concerned if we had 50% of Carnival
Cruise Line and Boing Boing Air Lines
and no Amazon or Apple.
Yeah, right.
You get you get the idea.
Or even still,
is it typical to see individual securities
being held like this versus just tossing an ETF in there?
Yeah.
See, you see this a lot when when the bank is is the investment
advisor, they tend to manage a small sum amount of the
portfolio in-house.
But typically. You know, for most.
Investment advisors like PFM and other other firms like that,
they're going to put it in an ETF rather than buying individual secret.
It's a lot more efficient.
And apparently they haven't been very good
at buying individual securities.
Right?
Yeah.
Know, I was just looking over
my notes from our previous Finance Committee meetings.
We started talking about this in November of 2018 where we got
some information on how we ever got the arrangement with Fulton Financial.
We signed the original resolution with them June 2012, and it looks like
we got with at that point we had gone to an RFP and got five
different trustees sign up.
It looks like we got we went with Fulton because they were the lowest, see,
but all the other ones were banks as well.
PNC, Mid-penn,
Wilmington Trust.
I'm just curious.
I mean, I agree with Terry,
Maybe this isn't the right time to go into this conversation.
This I appreciate the information we've gotten because
it's very enlightening.
I mean, the fact that we could have possibly lost money over
the last five years is beyond disheartening.
And It needs to we need to take corrective action.
In my mind, I agree with Cap and Todd.
We do have two more finance meetings.
We have one in May and one in June so we can continue this discussion further.
It does seem like there is a process to go through this
that we should probably talk to Mike more about.
Right, Right.
Can I provide some information?
I have a couple of ideas of how we should move forward.
So what I'd like to do is use
this information.
This information has been sent to to Fulton Financial,
and I had a discussion with them, short discussion on Friday
of last week about the report and the information in it.
And of course, they would like the opportunity to respond to what's in here.
So what I would like to do is, is work with Fulton in conjunction
with PFM to continue to work through and possibly fill in some of the holes
that that Brian and Tyler have been talking about at this point.
Some of the information that was the information that I had at the point
and Fulton through conversation on Friday and let me know that
there's various changes that they've gone through in the last two or three months
that they haven't been keeping us up to date on.
And so we didn't have any of that information.
So I'd like the opportunity to go back and cover this with them,
get some information and see if there is
you know, I have great concerns.
They they report to us on a quarterly basis and they report they be they be
or are near their benchmarks over that period of time.
I trust this information is probably more accurate.
But I still I still have that question and I'm not going to leave it go as to how
they calculated what they calculated and what's what's there,
and then have our financial advisors take a look at that
and advise us on what could be you know, what could be improved or worse.
I think that whole time that the the
the committee can determine, you know, what our fee
or what other things that we'd like to go for forward from there.
But this process brought
just as many questions up for me as it gave me answers.
So I would like to continue to work to try to find those answers
rather than just kind of throw it out and move on
wholeheartedly.
I'm not saying that's not where we probably don't end up, but
I think the first step should be engaging Fulton with this information
from that standpoint.
And Mike, when you when you contact Fulton, could you please get a list
of the individual equity holdings at the end of calendar year 19
and a list for them of all their stock trading for calendar year 19?
This we can take a look at one year of their. Trading.
Kip. I'll definitely work with them through that.
I'm not committing to providing any data or information at this point in time.
No, no, I'm not asking
that. I'm not asking you for a commitment.
I'm just asking you to ask them because that's all.
So, Mike,
can you just clarify that what you're recommending is,
you know, this information going to Fulton and giving them the opportunity
to respond to and address and provide either
additional information or corrective measures?
Is that what you're saying?
Not necessarily corrective measures.
But, you know,
I wholeheartedly do not believe that they just pull a benchmark out of nowhere.
It's calculated.
Well, something can go back to
we may not have that information, but I'm interested now in what that is.
And that was that something that was being manipulated over the years?
We were being reporting?
Or is it a different way of looking at that?
And if that's provided to to Tyler and Brian, does it change or does it not?
I don't know.
Like I said, I have just as many questions
as the way that things were operating and what we were seeing,
albeit coming from Fulton and then having a couple of eyes
to take a different look at it. So
that's just my first take is to go to them,
to have that conversation, to get that understanding
so that we can be better educated because, you know, obviously
anything moving forward from here
may me, you know, need to know what those answers are
so that we're looking for that difference or something better.
You know, if we do look at other places to this,
the other thing that is, you know, part of this is we have to build
a case that we provide to the attorney general.
We this is not just a bank RFP, and we get to determine
who goes where the attorney general makes this decision.
I think we provide you know, we have a great deal of information here,
but I would be more apt to start to build that case
of what that
would look like versus just saying, let's go do this or do that.
So that's the next couple of steps that I would like to see
you over the next couple of months.
Okay.
Gary, if gender Teri, can you just make sure we stay updated
in May and, June on this with the Finance Committee
agenda,
like let's keep this on the agenda.
It looks I just.
Wanted Gary may have gotten kicked off.
Oh, okay. Go ahead Lindsey. I'm sorry.
That's okay.
I just don't want to see the going through all of this and seeing all these things.
And if there are things that they haven't been keeping us up to date on,
you know, I don't want us to,
to, to sit too much and keep things on the back burner if if
perhaps Fulton has taken advantage
of maybe
we haven't been as actively involved in looking at this
and that there was some, you know, implied level
of confidence or trust.
I think that, you know, we have an obligation to ensure that
that we're doing everything we can to
to manage this fund and and
achieve the greatest level of return.
And I know, you know,
while I have not looked at this in depth
and don't have the full comprehensive understanding from the market perspective,
I can say that when Fulton since have been on the board,
the one time that they've been before us to talk about this,
I was really disappointed in the way that they spoke to the board
and were somewhat defensive and evasive with with answering questions.
And so
I think
it's important that we keep a finger on the pulse of this and,
you know, appreciate
this committee's work.
And Todd bringing this
up as a, you know,
important action item because
we can't lose sight of it
now that we have this information.
I think if we lost Teri,
then Lindsey and Kemp, are there any other
discussion?
I don't
I don't think I don't have anything about this, about this topic.
No, I don't either.
And I'll just look forward to our next steps for our next
meeting to circle back and see where we go from here.
Yeah, we definitely need to keep it on the agenda for finding its next
and then get any updates, Mike, that you're going to have from Fulton
and then we'll have more time to discuss as we can continue.
I know it's 5:00.
We can continue because there is no services meeting
and so everyone's okay with
continuing on.
And then
Mike Well, we need PFM to come next meeting
or should we wait to see what kind of update you have?
But what I'd like to do is just talk with them as I'm updating.
They're going to work with me in talking with Fulton.
So we'll we'll work out those details of who will be at the next meeting
as soon as we figure out some more details about this.
Okay.
Yeah, I do think Fulton has some answers to give us.
Yeah, they were.
They've sent me questions or will be sending me questions and responses.
And so I think that process will
naturally lead itself
into our next update at the next Finance Committee meeting on what their responses
were officially to those maybe things that we're looking at.
I'm that I'm giving you things.
Here's the things that are going to improve on.
My hope is that's a quick and easy way
for them to kind of understand what's been going on.
And they have a very small window to,
I would say, rectify it.
But but but to do something about it moving forward, if we get more of this.
Well, I don't believe or I don't think that's it, then,
you know, we'll be reporting that as well and talking about an RFP,
if you know, if they believe what been doing is the best job
they could have been doing, could have been doing for the whole time.
I also have to note, though, that
part of that, you know, this
we do have to go back to what this fund is there for. And
we would always want it to be
as large as possible, but it also has to remain permanent.
And so, you know, I have some concerns when I see, well, maybe we should
maybe, you know, opening up to different
investment grades lower than Double-A is a good idea with public funds.
That's something that scares me, scares me greatly.
So one definitely talk about what
you know, what our expectations are moving forward as a district
because there are certain things that just won't, you know,
we have to to ensure that we're keeping that as permanent a permanent trust
and not putting any of those dollars at unnecessary risk for,
you know, for greater return.
Obviously,
in my $0.02 for the board here, don't get,
you know, bogged down in the details in the weeds with this stuff,
you know, as far as what asset classes are being invested in and such,
you know, whether it's Fulton, PFM or whomever it is, they'll provide
you guys with the recommendations as far as asset allocation.
But it's the administrator whether
they need to go ahead and at least meet
their benchmark.
And in this case, they haven't.
As far as asset allocation, if that's a good you know,
there could be some improvements there, but that's pretty typical of most,
you know, funds, especially a so-called permanent fund.
So I won't get bogged down in the details with this
focus on Slide 23
and wait to see what
what Fulton comes back with.
So what did I miss?
I'm sorry I got booted off somehow.
While Terry Mikes was going to get some answers from Fulton on this
and then bring us back information at the next finance meeting.
Okay.
But we definitely want to keep it on the agenda and keep it alive
until we make a decision, until we either hear answers to our questions
or explanations or, you know, use this data appropriately.
Yeah.
Thank you, Brad and Brian and Tyler for your work on this.
Yeah. Thank you.
Nice report.
Thank you.
Very much.
Thank you all very much. In the next
you will move in on do
we want to continue then.
Yeah we can continue if it's okay because we don't have a 5:00.
Okay.
We have a member of the
public here. I didn't know.
I know that that comes at the end, but since we're going past
5:00, is the member of the public still here?
Yes, he is, Terry, but he's not indicating that
he was okay at all.
Okay.
All right,
Mike, why don't we move on then to I think this is a relatively short one,
an update on what we're doing with the food service program.
Yeah.
And this is this is really a result of of,
you know, what, COVID 19, the challenges
it's presented over the last two months essentially at this point
and specifically for us,
you know, we're driven our our budget is driven by our local economy.
And parts of that local economy could really be suffering,
you know, our
taxes on admission and those types of things.
So one of the things we're looking at from
the general fund budget is is ways to reduce expenses.
And so to the fact that Mr.
Hummel had presented some information about going back on to the high school
food service program and noted some capital dollars that he was in need of to
to make the transition for that to work as well as going into the process.
There was no known of of
reduced number of sales
which could end up in reduced revenue
and at this point, you know, wouldn't be prepared
to plan to move any more expenses or cover any more expenses in the food service
fund with the general fund than we're already committed to in the current year.
So that being noted, the finance
Committee is, is where we provided that update.
And I think Gregg actually received approval
to move on to that and presented to the full board.
So we're circling back at this time to say, I think we need to put that on hold
from a commitment standpoint just because it has
some financial unknowns and we're walking into a
large unknown in our finances for next year.
Well, Mike, from our last discussion on this, I heard that there was going
to be around $81,000 in new equipment that we did not budget for.
So you're saying that we can't move forward because of that?
I would defer to Gregg if that was all.
If 81,000 was all the
the amount that was there.
Good question, Cathy. It's
there's a couple different points of concern here.
The budgeted money and unbudgeted money
and then purchasing the equipment.
So finding the funds to purchase the equipment with
what has happened in the past six weeks,
what the equipment even be available.
And then there's so much uncertainty
with food availability.
We have a large inventory of some items
that we would have anticipated using over the next couple of months
that we really shouldn't use Once we're back on the program.
And then
just the uncertainty of what the fall is going to look like
and how that's going to impact how we serve
and, how we might have to adapt.
And I hate to say that we did all this work
to prep for this, and it seemed to be that there wasn't
going to be much of an expenditure of a revenue loss with the sale of things,
and we're already doing it
in the middle school and it was a transition
to make the high schoolers have a healthier meal.
That is, it wasn't significant dollars like in the hundreds of thousands.
But if it's small, I don't know that's but but you're saying that we have food
that when the kids come back you can use but it won't qualify.
They get all
the food you might serve in September.
It couldn't possibly not qualify.
And then if we offered it, then switched over
to what we should serve could cause some confusion.
We have made some good strides, and I think we need to continue
making strides and then reevaluate it.
We're into new territory here and change is inevitable.
And every day right now with some families.
So maybe if we had to make the change
at another time,
it might be more acceptable.
Was everything. Else.
Once we know what we're going to be faced with
and once we know we can get the equipment
and you can find the funds, remember we were looking towards the board
to find the funds for us.
Well, weren't weren't those items in the capital plan that
were not Mike?
They were not.
Okay.
There were some, Terry, But then I thought there was about $81,000.
That was not that we were going to have to find if we went on in the fall.
Cathy Those things that are in the capital plan didn't
necessarily have to do anything with going back on the program.
They were Gregg's normal purchases that,
that he goes through this process.
So the 81,000 would have been
additional things that that Gregg thinks he needs for that.
And a lot of this is the uncertainty to make the commitment to say
we're going to commit to make this change with the uncertainties that we have,
I think would be a mistake for us at this point.
Gregg can still work towards
making some changes and doing those things,
but without making it official for us and kind of painting us in that corner.
And that's my concern is we've
talked about this in in February, as you
noted, Terry, there was some dollars that had to be found.
We weren't quite sure.
We didn't have those things together.
And, Wolf, what has transpired in the last
60 days,
it'd be foolhardy, since we still have the ability
to find those dollars, as we talked about before, we may be looking
at receiving less dollars overall.
And so we have to start looking at our expenses that way.
And this would
be one of those natural commitments that we haven't done anything for yet.
And so our recommendation to the administration
would be to hold pat and not change anything
going into this kind of unknown school year.
But that also means you're asking the board to vote, to not
stay with the national.
We will have to vote on that to not go with that program.
That's up to you, Kathy.
We're already off the program.
So I don't the the process we go through on a yearly
basis was to make sure everybody is informed.
There's no requirement that it happens.
And so it was always
a process that we wanted to make sure because we're one of the very few schools
that is off the program that we visited on a yearly basis
so that people didn't get used to that being being a norm.
So whether or not the school board
of would want to vote or not,
if we're not changing, I don't see a vote as necessary.
But even the votes before were purely for the administration
to move forward and have the confidence that there wouldn't
be any changes throughout the year.
So that's why it was revisited on a yearly basis.
Well, I think that the votes always been important, though, because I think
from a transparency perspective, we're making the public statement
that given the structure for whatever reason that we're off the program,
that we are off the program and not participating in in it.
Would you agree with that?
I mean, if we suddenly just stop
voting and publicly stating that we were not participating
in the program and receiving federal money for that,
I think that that would be more misleading than
if we were to still vote on it.
You know, I just want to play devil's advocate for a second,
because another big component to this is that,
you know, we've always looked at the factor of
if we were to go back on the program, we were unsure of what the revenue impact
would be by the consumer purchase part of it.
And I'm not you know, I don't have a crystal ball,
but I would think that, you know, after having some extended time off,
if it was always more of a consumer preference for the students
and what they were purchasing, that this would be the time
to roll into some of those changes and receive those funds
for reimbursement that we're currently foregoing at the high school.
Can the change only
be made at the beginning of the school year?
They're going to be made later in the school year.
It's a good question.
We could we could go back on the program,
say, at any point of the year what's involved.
There's a lot of price structuring involved
with the meals.
There's a lot of
a lot of moving pieces, but we could do it
at some point in the school year.
Wouldn't be the best approach
because of confusion
as a citizen observer here, Lindsay, thanks.
I think a vote would be appreciated from somebody like me.
From my perspective.
I agree
I'd have to look back over
the old agendas, but we do do that in May or June.
I think that is correct.
We know that that's what started this whole conversation.
Right? Right.
But I've never seen it as an option.
I didn't never perceive it to be an optional thing.
We were.
Doing.
And while, Greg,
you made one thing that's sticking out to me that you said is you
I know you had wanted to buy some cold carts and things like that.
Are you saying that you don't even know if you can get them in the summer
because of COVID 19, wherever they're coming from,
You're not sure if they could be shipped.
Correct?
I would have. To do I would have to look into that more.
Everything was put on hold
once we were dismissed and staff left.
Yeah, well, I.
I don't want to be insensitive
to the things that you have to deal with because we are in a global pandemic.
So if you're looking for something to
be shipped, you know, and everything's stopped, shut down,
I'm disappointed because I want to see us go on the program and we seem to be fast
tracking it faster than you thought.
At first it was going to be like
two years of investigation and then you started rolling things in.
So I'm going to take your
recommendation with the hope that things could be different.
You know, it's a month or two.
You find out you can get the items this summer
and maybe we get some federal stimulus money or something that comes in.
I mean, maybe we can talk about this again.
Okay.
We have two more meetings in
May and June.
So if you wanted to
look into some of those things, Greg, and then maybe come back and.
It's also an oven purchase, right?
Correct.
Oven some cold serving long tables,
cold refrigeration for beverages,
other items for the the set up as a food court.
I'll work with Mike and.
And with the vendors to.
See if they are available and then see if we can find the funds.
And that is the problem.
We're not in a place that we can find, find dollars.
I think that's one of the things that's missing here is is there is an unknown.
If we're going to make this commitment, then we're going to spend those dollars.
And I don't know that I'm comfortable
recommending that commitment.
Even the financial uncertainty
which lies ahead for the next year,
I think that the Prime directive
needs to be to conserve
cash or conserve dollars
and don't know that we should consider this as wasted or be discouraged.
I mean, we're reacting to something that is well beyond our control.
And if we have to wait six months or even a year before,
we before we implement the change, it will then that,
you know, that's that's the way it is.
It's not exactly maybe what we wanted, but it'll happen.
And and I think I think overriding has to be
has to be the conservation of of all of all monies
because I mean that that if there's a there's a bill winding its way
through the legislature that we might not be able to raise taxes
and who knows they might decide they're going to say
that the school district can't raise taxes next year either.
So you just there's just too many unknowns.
And I think that every discussion needs to have, as its foundation,
as its bedrock, how can we conserve dollars?
And just to add on to that, Kathy, I think to your point, yeah,
we were looking at two years down the road and we were fast tracking it,
but this doesn't take it off the table forever. It's
delaying it.
A year or two, we get a better handle on what the impacts of this
pandemic are going to be to our short term
and our long term budget.
So we will be looking at it.
I don't disagree with Kent from the cash conservation perspective.
And as we're assessing and seeing what,
you know, how the blanks are filled in on a lot of the unknowns,
I think that that's a really good point and something that we have to be
really mindful and responsible of.
I just don't want to see this fall off the table and go to the wayside
and be something that doesn't continually stay at the front of our mind
so that when we're in a position to be able to make that expenditure,
that we're able to do it.
Because I think that for this particular situation, there's also the
the flip side of it is the fact that we forgo
federal reimbursement and subsidies for by not being on the program.
So it just happens to be that.
It's all happening right now where as to become compliant
with the program and participate and receive those federal dollars,
we have to spend money in order to do that.
And so I just want to make sure that we don't lose sight of
all of the reasons behind what that end goal is,
so that we can get there eventually, because I think that that is from
a health perspective, what is best for our students and from a
fiscally responsible perspective,
you know, what we should be doing,
you know, as as stewards of this taxpayer dollars.
And how long is the August the high school been off the plan
Since 2014.
Okay.
So that's like $600,000 of federal subsidies
we've missed out on ballpark and a dozen year more or less close.
To a million, isn't it, Greg, by guess, right, Because it's all it's
ultimately based on consumption and purchase of the actual meals.
Using the $97,000 as a benchmark figure.
And also, keep in mind that our
our card sales are generating funds to cover that.
The unknown is how much of a loss of our.
Cart would. We see.
And again, vendors have come a long way since 2014.
So There's more acceptable items that are available to sell,
so it's not real straight
cut with just the loss of federal money.
They could also say the loss of olive cart would have increased.
Just the typical lunch sales right now would be correct.
So and just as a point of reference, if we when we go when we go back on,
we would have a decrease in our tier meal plan.
Our one price point right now is $5.
That would decrease
somewhat
better value.
But we've also we're receiving federal money to make up the difference as well.
So I have one one question.
We've been off since 14.
Have we had a vote each
each of those successive years regarding the fact that we were going to snack?
Yes, we have.
Okay, then.
So I'm here and two things that we we don't want it to fall off the table, so
we don't want to be redundant about it,
but maybe it should be an old business item that we keep on the agenda and.
As you said, you'll maybe look into some of the equipment and just,
you know, keep examining things as as everything continues to evolve and.
We'll have an opportunity at each meeting to either hear
any update or not hear any update based on the progress you make.
And then
I don't know whether we take a vote here where we we're going to take a vote
at the full board meeting,
I would imagine, and I could recommend that as a report out tonight.
Or how do you how do you think we should handle that?
It's I have to look at the old agenda.
I, I think we do it in June, but we have time, so
I know we have to do it probably before July 1st when that makes sense, right?
Yeah.
So I think if you look back, Cathy,
it was either late April or May that we did it other years.
Okay. All right.
Well, let's we'll keep it as an unfinished item for May, and
we'll we'll
have a conversation and see if anything's new.
And if not, we can make a recommendation for the full board.
Yeah, and you could.
And you could make the motion in the vote to return to this national school
lunch program for the 2122 school year. So.
So it's not doesn't fall off the radar.
It's already there.
Something we're going to do.
At that's actually a good idea because then
obviously if things were different and you know, our our ability was limited
at that time, we could reassess.
But at least it puts us on that path.
I also just wanted to mention
quickly, it's
not directly related to this, but while we had Greg on the line, Greg,
I just want to extend a thank you for everything
you've been doing over these last number of weeks.
You have been at the heart of what we're doing for students for cocoa packs.
And I want you to know that those efforts and that commitment
that you have to our students is does not go unnoticed.
And I am just incredibly grateful
for the dedication and passion that you have to what you do.
Thank you.
And I appreciate what you are looking at tonight
for us to actually expand out in the next two months.
So thank you.
All right. Thank you very much, Greg.
The last item
is the new business discussion about
real estate taxes and waivers, I guess.
Yeah, this is just something that
so with the recent change in the state legislature,
the township and the county,
I guess we're already forced to essentially approve this or have approved
that they will not charge a penalty period
from November 1st till December
31st, essentially just making December 31st the
the time period for, you know, if any if it's not paid,
it would be turned for collection at that point.
The that law was
was silent in terms of what school districts had to do in that.
And so I wanted to bring this up
our our I know specifically from
from the tax collection agency.
Wendy, Mel Horne
has noted that she would like to see consistency.
And since the county and the township
are already not going to be
charging the penalty, she would like to see us do the same.
One of my major concerns with this is cash flow.
And I stuck a
an Excel spreadsheet on here.
I really don't think as I
look at this and really come to terms with, you know,
how people pay their real estate taxes here for our district,
almost 90% of our taxpayers pay their their bill
within the 2% discount period.
We have another couple of percent
that do pay within in the face period.
My concern because of our local
revenue is if my only concern would be
if people don't take advantage of the the discount period and would wait
worst case scenario
until December 31st to make that payment,
that would create a very large cash
flow issue for our district.
Most of the money we receive, we receive about $37
million each year from real estate taxes.
That's a little more than just half of our entire revenue.
And what's very helpful for us is we get that all or most of that money
we get by September 1st of the discount period,
the penalty.
If there were not a penalty, we would be foregoing about $65,000.
That's about what taxpayers with the amount
that's left that we collect over that that penalty period.
So not a large amount of money.
For me, it would be more the cash flow issue that could arise
if people did not pay within the 2% discount period.
So I think
this is something we need to consider as a finance committee
that this may be something we recommend to the full board
in conjunction with the
the approval of of next year's budget.
And I wouldn't my deadline would be to make this decision
at the same time we're approving the final budget.
But I don't think that there's a need to do that any time before that.
I think Joe shared with you that actually an R has reached out to us
in a letter and asked the board to act on
not charging them
a penalty, period.
Obviously, we cannot do that it's it would be illegal
for us to treat any one tax payer different from the other.
But we do obviously have the ability to make that a universal item
when it's there.
So I need to get a little bit more understanding of really
whether or not in some of this driving from the standpoint of mortgage companies
and whether or not people would have or that mortgage company has the ability
to wait to pay that,
my mortgage company, I use you,
they always pay within the two count 2% discount period.
But I know the banks that I first bought my home with did not operate that way.
They paid it on October 31st every year
right before the penalty period went into into faith, into account.
So I need to gather a little bit more information
to really get a better idea overall with this effect.
Could be but wanted to start put this on your radar at this point
as this will be something you'll be asked to contemplate moving forward.
And if everybody pays in the normal standpoint,
like I say, we we would stand to lose about $70,000
in penalties that we wouldn't collect, which is minimal,
you know, given 37 million in real estate taxes.
So what is the date
that we which meeting are we approving the budget?
Because I thought that there was some part of it that they were looking
for a response sooner because they needed to prepare for this.
I believe they probably are looking for a response sooner.
I don't think it's our responsibility to provide that necessarily.
You Know what they were getting relief on was taxes that were issued right away.
You know, specifically, H&R doesn't owe
us a cent right now for real estate taxes.
They're paid up to until July 1st and we issue new bills.
This doesn't affect them.
I'm talking more for the actual administrative logistics
of the tax Office, preparing the tax bills and getting them sent out.
Sure, sure. So
that obviously would have to
and I haven't even touched base with Wendy
to that standpoint because to see what that means,
because she had already put the county and the township bills
would have already been out by the time this got approved
and essentially waived the penalty period.
So I would need to get in touch with her to have an understanding
of how soon, if we were making changes to that,
she would need, although as I noted, she would share it would helpful
for all the collections to be consistent.
And so for that to happen, we would have to waive our penalty period
because the township and the county have already done that.
And why does she think we had to be consistent
when their bills were in February and ours are in July and August,
just because people might ask questions?
And wouldn't it be specified on the bill that we're not the same?
That is not very clear to to most taxpayers,
or at least those that correspond.
I shouldn't say most taxpayers.
It should be those that correspond with Wendy.
No, it's not very clear to people when they're paying the school
district tax versus the I will get I'll get I get calls all the time
this time of the year, people wanting adjustments to their real estate tax bill.
Did you explain to them they didn't come for me, so I can't help you?
I think some of that as well is
is the county's period extends into that time.
So you could have a taxpayer that says, okay, this Bill,
I paid at face and I don't know that and now this bill I do.
And yeah, that could get confusing.
Not something we couldn't
couldn't work through necessary relief.
And I do see the benefit in the time that we're in,
you know, kind of waiving that penalty because it's not something
I look at that more as is the hammer to make people pay their taxes on time
as people are already paying the penalty, period.
You know, it's usually smaller taxpayers or those that
that are trying to do it on a budget purpose
for some more.
Well, it sounds like you have cash flow concerns,
not so much not collecting penalties for late, late payments.
Right.
Well, what's going to ameliorate that for you?
I mean, that's not if we you're saying if we we go along with what
the county and the township has done that you're going to have cash flow problems.
One of the things that I'm looking at doing, Terry, is so, you know,
contacting the five, the five largest mortgage companies that pay us
and figuring out what their policy is in terms of paying,
you know,
paying the tax bills for those that they hold in escrow.
And so if I get a lot of them saying, hey, we don't have a policy
and we plan on holding it till the 31st, I think I would
probably not recommend doing this because it could create issues.
But once again, that's a limited amount of data that I have.
And this is a tough one because,
you know, we we want to be cognizant
that taxpayers are going through financial issues,
but we have a financial institution we need to run.
That's by tax dollars.
And if those aren't coming in, that greatly hampers what we're able to do.
So it's a tough decision to make.
And really the intent today was just to put it on your radar
and continue to provide
some updates and some information for that.
But like I said before,
my would would be that this would be a decision
that you would make at the end of June when approving the the overall budget.
But but to Lindsey's point is, does that does
that create a problem with timing in the billing?
No. No.
Any of those changes, as long as we're understanding
get those I mean, they could could create issues but.
But wouldn't they have to
wouldn't they have to modify the tax bills?
Yeah, that's. What I'm talking about. Is it.
If they're getting that out July 1st, then they would need a lot more time
to be able to prepare the tax bills
and update them from what they currently are to remove the penalty period.
So like
I said, I don't have the detail or the answer to that
and I'll have to discuss that with Wendy.
Having done tax bills at other districts, it's it's a template.
And so it's not like the bills are already done.
So we change that template and it can go forward from there.
So I don't see that as a heavy lift,
but it could create, you know,
delays in in what
we're doing in terms of sending out bills, I don't know, by days or months.
And, you know, I apologize, but some of the questions are being asked.
I just don't I won't have that.
Those answers until our next meeting.
So I thought that was an email or letter from Wendy that had already come through
now. All right.
So, Mike, you'll you'll look into this a little bit further
and and come back in in May
at our May meeting with
additional insights and maybe a recommendation for us.
Yeah.
I don't want to
mess Wendy up if she needs to know by the first June 8th or something.
We have two meetings in June for the full board, June 8th and June 22nd.
If she needs something
before she prints bells.
I mean, I think we could give her an answer before and not hold her up fast.
And she's not going to print our bills until we approve our budget,
which isn't going to be after the last board meeting in June.
So we're starting from that date. No. What?
Okay.
She just has a modify a template and print them after June 22nd and then.
Sends them to a printer.
So she'd be working with somebody.
And if it was,
my thought is if it's if it's up in the air,
we kind of work on both templates and then just whichever one
we want to use, that's one.
She'll do whatever is approved by the board.
But once again, I need to get better.
You know, I probably shouldn't even be answering that now.
So I'm just guessing at this point.
So like information I'm going to report out tonight
then that this is that we've taken this under consideration.
You're looking at additional information and we'll discuss it further.
May Yeah.
Okay.
Lindsay The only critical issue we got from Wendy
was that asked saying that the township and county had.
What paying and that it would make it easier.
If we backed. Well yeah
very basically everything on
this agenda gets rolled over to the next agenda.
Okay that's what I'll say.
I mean that's, that's what you have to remember
when you set the agenda for the next meeting.
Yeah. Okay.
Well, thank, thank you, Mike.
And, and we, I don't know if we still have somebody
from the public here, Joe,
if they have any.
We do, But he is not indicating
that he has any comments at this point.
Okay.
For the representative of the public that's here, if you
if you want to say something like what did they do?
Raise their hand. Raise their hand. Yeah.
All he raised hand.
He has raised his hand. Hold on.
Okay, Mr.
Mosley, you have
you can unmute yourself.
There you go. You have the ability to talk.
Okay? No, I don't have anything.
I was just listening then, and it sounds good.
It sounds you guys are
getting everything straightened out and trying to move forward.
So that's a.
Good thank you for coming to our meeting pending.
The problem.
Yes. That he needs to put his information for the record for minutes.
I can get attendance.
I can put a report on attendance.
Lindsay So I do that at the I.
Mean, like name and address.
Lindsay Oh, yes. You do have the state. You're. I'm sorry. Thank you.
Your name and your address.
Mr. Mosley. Oh, okay.
Okay. Okay.
State your and where you live.
Okay.
So I'm. I'm Mark Mosley.
I actually live in Lancaster County, but I'm
building so.
So I was just listening in. Oh, okay.
Thank you.
All righty. Well, thank you all.
And if I could have a motion for adjournment.
So moved second on favor. I
see you also saying 20 minutes.
Thank you.