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>> Hi, I'm going to go ahead and call the meeting to order.
It is 12:33 and what we'll do is,
we'll do the regular business afterward.
But how do you pronounce your last name Jeff?
>> Just Jeff.
>> Just Jeff.
Okay. So if it would be possible, and Dan,
I mean and Jeff is the actuarial
who did the GASB 45 [assumed spelling] study for us in order
to help us understand that?
So would it be possible for you to first to just give us,
you know, more of the layman's concept
of what the actuarial does?
>> Sure. Essentially the idea behind this [inaudible]
retirement benefits are a deferred compensation
and in the accrual basis of accounting, what's supposed
to happen is that benefits are accrued
for deferred compensation while people are working.
That is that the benefits are recognition of service
to the district and therefore they should be accrued while
they occur as opposed to what they're paid.
So the whole idea here that is to pretty much account
for returning benefits.
The same way pensions have been accounted for many, many years.
Which is that you accrue the expenses while people
are working.
You accumulate a liability and then the benefits are paid
by going down that liability.
Okay? Then now under the GASB accounting standard there are 43
or 45 that tell you how to do this.
They don't have the authority nor do they mandate
that you have to have assets to offset or any special account
of assets to offset the liability.
Whereas the pension world typically there are often laws
that require that, you know, pension benefits be funded
in certain funding standards so that
in [inaudible] is not the case.
So the idea is that you have to book the expense
but you don't necessarily have to fund it.
If you do fund those obligations
through a trust there are separate, there are accounting,
parts of the accounting standard
that address how you calculate the assets
and liabilities based on that funding.
So this evaluation is written to help comply
with those accounting standards.
These would apply to your accrual basis accounting
standards but all would apply to your [inaudible] basis
of accounting to the specific fund of benefits.
For accrual basis accounting statements are of course going
to be used by accreditation review bodies
when they do their accreditation reviews.
for example if you wanted an issue,
if you're a bond issue typically the bond rating agencies will
look into your accrual basis,
financial statements incorporating these items.
So these, you know, these are required, you know,
you're required to have statements done on this basis.
So this report is intended to assist you
in complying with that.
Now coming up with the numbers here what we do first is
determine what is called the normal cost.
If the normal cost is how much you would need to set aside
for benefits, depending on how much you need
to accrue each year while people are working so that
when you retire you have enough money
that with interest would be sufficient
to pay all the benefits.
And that's called a normal cost.
So we do, we calculate the normal cost
and then we calculate another piece of information
which is the actual accrued liability that's has been
accruing the cost and the, you know,
based on these standards all along,
how much would you be expected to have booked
as a liability at this point?
And that's called the actual approved liability.
So from an accounting standpoint based
on their current accounting standards you're accrual basis
expense is going to be composed of a couple of different pieces.
One is, in fact, here we have three pieces.
The first one is the normal cost
which is your ongoing firm valued benefit.
The second one is the --
the other two are amortization components.
The first one is what we call the initial UAAI amortization
and this basic amortization was first adopted the standard,
we established this series of accruals
to accrue the value of that liability.
And that series of accruals is set
and so once we set it we leave that alone.
It's kind of like if you bought a house and you took
out the first mortgage and you left it in place,
you'd have a series of payments on that mortgage and then
in any given point in time
on that mortgage there would be a payoff, that is the amount
of the principal that still has not been paid.
And that's the life in the study that we have we show
that amount, it's called the upfront the initial [inaudible]
get to that in a minute.
Then the second amortization is called any
of the liability that's over and above
that initial liability that remain.
Its residual liability for the liability is being [inaudible]
for a couple different reasons.
One is simply [inaudible].
It is as the liability increases,
as the cost of health care increases, liability increases.
As people approach retirement you're discounting the value
of their benefit less as the value
of their benefit value increases.
Each year they have earned another year worth
so the actual liability increases for them.
The actual accrual liability also changes due
to actual gains and losses.
The fact that [inaudible] is that group of being
so we assume they are not going to retire exactly
when we assume they are going to etc. So their [inaudible] occur
and accumulate over time.
And finally if you have an unfunded program my evaluation,
I've got a [inaudible] standards to reflect the fact
that you've already accrued this liability on [inaudible].
And so part of it is what I call the [inaudible] is the amount
that is accrued which [inaudible]
so you basically have three components of the accrual basis.
The normal cost which is just the ongoing value
of the benefit earned people for one year
of employment per active employees plus the amount
of the first mortgage or the payment on the accrual
for the additional unfunded liability.
And then this, you know, home equity line of credit,
that's sort of like which is once you implemented the
standard amortizing the value of that.
So you look at their evaluation or there is a table
of [inaudible] 12 that gives the amount of each
of those components and the rest
of the [inaudible] cost [inaudible] you know,
where that comes from.
There is the actual accrued liability goes down on page 11,
there is a table that shows there what the total amount
of the liability is, what the payoff amount is
or the remaining unamortized balance
of their additional liability.
What's left in the amortization required to accrue
that residual liability.
>> Okay. So Jeff, in general terms,
how much money should we have set aside in order
to fund the ongoing liability?
Now of course we've set aside the money,
we have not put it into a trust.
>> Well, the amount that you would have would probably be
measured more by your audit report than by this report.
The audit report did [inaudible] something called [inaudible]
of obligation and I should have a copy of that here.
And the [inaudible] obligation is accumulative difference
between the accrual amount and what you've actually made as,
quote, contributions to the plan.
And the contributions to the plan
in your case would be the amounts that you've paid
for the retirement premiums.
The amounts that you've paid for retirement premiums
that you've paid count as contributions to the plan.
And what I show is that on your June 30,
2011 [inaudible] the net total of obligation is just
about 2.2 million dollars.
So you can see that it pretty much equals that residual AAL
which means that the residuals pretty much entirely comprised
of your accrued but unfunded liability.
Your accrued but unfunded expense.
>> So the liability that we've already accrued is how many
million dollars?
>> 2.2 million.
>> That's unfunded?
>> It is unfunded, correct.
>> And when people retire what occurs to your numbers
as people actually do retire?
>> Well, what happens when people retire it's the --
on the top or page 12
of the annual employee contribution number,
what that assumes is that you're putting that money in to a fund
but you would be taking out what you need to pay
for your current retirees.
So for retirees the retiring costs are included as part
of my numbers and when people retire the value
of their benefit draws down the liability.
And so the long liability is reduced by payments to retirees
but then it's going to be increased by new approvals
that is normal plus interest on the existing liability.
>> So what happens when we hire a new person?
>> When you hire a new person theoretically
that person has no [inaudible] liability
because they are just standards so what happens
from a daily day, you hire them,
you would start accruing a liability for them
on an ongoing basis and if you were able to do
that it just accrued normal cost or fund the normal cost,
that would be all you need to do.
There would be no end service
or no prior liability for that person.
>> Does anybody have any questions?
Okay.
>> Yeah. You stated that as we get older the liability
is increased?
I thought it would be the other way
around because what [inaudible] 65 or benefits are paid for
but after 65 we just get a 1440.
So that, I'm not understanding that one.
>> Well, there was [inaudible] to say that if, for example,
you have somebody who is average,
let's say if somebody retired.
They just retired and let's just, you know,
to put an easy number on it.
Let's just say, for that person.
I mean, $50,000.00 in order
to pay their benefit when they reach 65.
Now if I have somebody who is a year
from retirement I don't need $50,000.00, I need just,
I expect that the money I have to [inaudible] interest.
So if interest is five percent
and the year before somebody retires I just need $47,500.00.
I don't need $50,000.00 because I would include
if on the calculations we do we are assuming
that the money is going to accrue interest at five percent
and so I only need $47,500.00 two years before they retire I
don't need that.
I just need $45,000.00 because I have two years to make up,
you know, to reach that level.
And I even need less than that
because if you haven't retired yet, not only do I get
to earn interest on the value of the liability but you're going
to continue with normal cost paying for you as well.
So if the normal cost is, you know, in this instance, okay,
the numbers we're calculation the normal cost in rough numbers
about $2000.00 per person per year, if you're two years
from retiring not only do I need the full $50,000.00
because I can earn interest but I also don't need
to pull $50,000.00 because I'm going to accrue $2000.00 a year
for that so that's another $4000.00 below that.
So two years before you retire I don't need $50,000.00,
I don't need $45,000.00 I need like $41,000.00
because I'm going to have two years
of accrual plus interest on that money.
So that's where, that's the contents of which I was saying
that as after the employees age the liability increases by more
than just the interest, it increases by interest
and it increases by the initial accrual amount for people
as they approach retirement.
Now for retirees, and I think your point
for retirees is retirees approach age 65, you're right,
their liability decreases by the amount
of the benefits they are paid.
So what happens to your liability over time depends
on the relationship between --
basically depends on your demographics partially
that is how much it's increased by interest and [inaudible] cost
versus how much is being reduced by making the payout
of retirement benefits, but all costs of things being equal
as time goes on you're going to expect your liability
to increase because the cost of health care continues
to increase from year to year.
So, you know, there will be a little bit of fluctuation,
it's not going to increase, in, you know, in a level way
but generally speaking, even for a plan that ends
at 65 you can expect that your liability is going to grow
at a fairly healthy clip unless
or until you terminate the program and even then it would,
you know, for future hires,
and even then the liability would continue to grow
for maybe 10 or 12 years before it finally started to come down.
>> Danny?
>> Two things.
One is, when they retire after 65,
it's a set amount that they get.
1440 right?
It doesn't go up?
It's not based on some premium or some insurance,
so that's a flat rate that there would be no need to adjust it
for inflation or anything because they get 1440,
they have for, I don't know how many years.
20, I don't know how long that's been in place.
But that's a set amount.
It's not based on insurance premiums or anything like that.
So my other question is, and I apologize
but I didn't quite follow, I followed the interest part
where you don't need the $50,000.00 you only need the
$47,500.00 because you got five percent interest
for that last year, but the accrual part.
Could you re-explain that accrual part?
I didn't quite follow that.
>> Okay, sure.
Let's just say [inaudible] just the accrual part
and then I'll answer the other, your first part in a second.
The -- let's say that you need $50,000
to accumulate my retirement and let's simplify this by,
you know, ignoring mortality and turnover
and so let's just say that you
have a new employee and that new employee is going
to work 25 years and then retire and then
in retirement we're going to need $50,000.00
and accrue no interest from then and you would need
to accrue $2000.00 a year for that person every year
between now at the time they're hired to the time they retire
in order to accumulate the liability you need
to pay their benefit.
And so what happens in these calculations is the day
[inaudible] you have a [inaudible] liability
because you haven't earned anything,
but each year you earn $2000.00 of it and so, you know,
a year before retirement you've accrued $48,000.00 of that
but not the full $50,000.00 I mean your last year
of employment you would accrue the other $2000.00.
So what I'm saying is that the increase in the liability
for active employees consists not only
of the interest increase but it also involves the accrual amount
as well that will accrual for every year that they're working
and in for individuals therefore the individual liability is
going to increase, you know, at a fairly rapid clip.
Now the comment you made about 1440 dollars
in this valuation we are not valuating that post 65 benefit.
The reason that we're not -- we are not valuating that is
because the district
as we understand it is not requiring retirees to receive
that benefit to provide proof that it's being used
to pay for health benefits.
So as long as that benefit is not being paid explicitly
to reimburse people for health benefits it's not covered
under [inaudible] it is covered under GASB 25 or 27
as a pension benefit and, you know,
the requirement would be there a separate study
that covers those liabilities of cost.
>> Okay. And one other question.
When you talk about the 2.2 million that's unfunded.
Okay. Could you just explain that?
Are you saying that we're not budgeting enough money for this?
>> Well, I have no idea what the budget is like
or where the budget is, you know,
what's being included in the budget.
Somebody else would have to address that.
Generally, you know, just first of all let me clarify one thing
which is that, you know, earlier we talked
about the actuary liability
and on page 11 I believe the actual liability shows up as
about 15.7 million dollars and I said
that the retro accrued liability is your unfunded liability right
now is 2.2 million which is a lot less than the 15.7.
The reason is because for accounting purposes this
accounting standard only went
into effect quite a few years ago and they allowed you
to start with zero accounting liability and build
that liability up over a --
up to the [inaudible] over the year.
So the 2.2 is reflective of the fact that for, you know,
[inaudible] this accounting was only implemented maybe three
or four years ago.
And so that 2.2 million is only about three or four years
of the accumulated, you know, the ramp up of that liability
of which is about 25 or 26 years to go
to reach the full liability.
>> Okay.
>> Now in terms of that 2.2 million, does that mean --
what does that mean about budgeting?
It doesn't necessarily mean anything about budgeting per se
because the only way that money counts on an offset,
any assets count to offset that liability is if you have
and irrevocable trust that is explicitly and solely
for the purpose to pay retirement health benefits.
Somebody for example had a [inaudible] would buy in it,
that's not reflected here but that would certainly be a way,
you know, of funding the benefit.
Whether there is money in the budget that's been included to,
you know, [inaudible] or something
like that I have no idea.
All I can say is that the information that I have is
that there is no trust that had assets in it.
There is no irrevocable trust
that had assets for this purpose.
>> Bob?
>> Okay, so I'm trying to sort out all
of what I'm hearing here.
Our overall liability is 15 million plus.
We apparently have set aside 2.2 million of that now.
Or we set or we paid 13 million or 15 million.
What are we doing now?
>> We're talking two different things.
We have 15.5 million dollars, something like that
so we have 15.5 million dollars set aside in a separate fund
that is not an irrevocable trust.
The actual liability that we understand is something
on the order of 15 million dollars.
>> 50?
>> 15.
>> 15.
>> And we set aside how much?
>> 15.5. So that in simple layman, 12, 13 budget language
that might be we don't have set anything aside for next year?
>> That's what the idea is yes.
>> Okay. And so and for what Jeff is saying
and I am understanding about 15 percent of what he said.
What Jeff is saying is that we're
in a comfortable position relative to our GASB set aside
in the post retirement set and then we might be able
to slide next year and be fine, right?
>> Right. We slid this past year and the deal here for us is
that we would slide again this year
and not make an additional contribution.
>> Right. And still have a healthy contribution
in this fund.
>> Well, now healthy, but by law right now we only have
to have 2.2 million set aside.
>> That's not really by [inaudible]
>> Well, by --
>> [Inaudible] accounting standpoint
where the [inaudible] that's the liability [inaudible] but it has
to do with [inaudible]
>> But we have a long time to build up to the 15.7 million
but we're basically already there.
I mean, I know that it's not in an irrevocable trust
but we have a GASB fund that has 15.5 million
so we have pretty much funded our full liability.
>> [Inaudible]
>> Yeah.
>> Now the other, the ramp part was caused
because most public entities do not have the kind of cash
to set aside to cover their liability and then
in our case the board of trustees elected to set aside
that as quickly as possible in order
to keep the balance sheet healthy.
Because otherwise we really do have a 15 million dollar
liability against a, well in our case,
a 15.5 million dollar asset.
Which is how we've managed to neutralize our balance sheet
without going into an irrevocable trust.
Plus then we're making interest on that 15.5 million.
>> Which fortunately [inaudible]
>> [Inaudible] ***?
>> Yeah, your liability is that assuming that everybody
that retires at age 55 takes advantage of it?
Is that what that's based on or have there been any studies
on how many people actually took advantage
of that 55 to 65 benefit?
>> That's a good question.
Let me just consult [inaudible] basically,
first of all, you know,
I just want to clarify, we're not assuming
that everybody retire at 55 or nearly,
basically we use retirement tables that we did [inaudible]
that inform us about, you know,
what the reasonable probabilities are that somebody
at a given age with a given length
of service will retire in a given year.
So the computer models we used, you know,
take each individual participant and apply those percentages
to determine, you know, what percentage of each person,
you know, retires each year.
In this case based on your benefits, we have assumed
that all the eligible retirees will take the benefit.
>> At what age?
>> Whenever they retire.
>> Okay.
>> Yeah, I mean basically in our world this may not make sense
to anybody but actuaries, we don't assume, you know,
that a person retires at age 60.
We assume that maybe three percent of them, you know maybe
of a classified employee maybe we'll see two percent
of that person retires at age 50, two percent of them retire
at age 51 and by the same token we don't assume
that people die at a certain age.
We assume that they die slowly, year by year.
Some people suggest that that is a very realistic assumption.
You know, because of that it's a little bit difficult, you know,
for the lay person to envision how that works out.
The retirement schedules particularly
in community college will tend to result in an average age
of retirement for classified staff
around 60 maybe a little bit lower.
For faculty it's going to be more like closer to 61 primarily
because the retirement rates for faculty, you know,
that we get for faculty, you know, gender specific
in a typical community college district is more
than 50 50 split between males and females.
The male faculty, what CalSTERS tells us, retires, you know,
on average later than the women do.
>> Any other questions?
>> Well, there was something in --
some report that you said you could, okay, yeah,
on page three there was a --
it's dark in here so I'm having a hard time reading,
but there is some report
that you said you could provide it in a --
>> [Inaudible]
>> I don't know.
>> There's a test for inadequacy and I think
that may be what you're referring to.
The cash flow average test that we do that show that kind
of count how the liability builds based
on the calculations we've made.
Comparing it with what our projection of the cash needs are
for the retiree benefits.
And sometimes that can be [inaudible] in terms
of seeing the better idea of the dynamics
of the model that's used, you know, that we have [inaudible].
That spread sheet is an output, it's not an input.
So at the very end it summarizes the output
of the valuation model.
But we can definitely make that available and send it
to the college and make available if desired.
>> Yeah, that would be great.
I'd like to see that.
Thanks.
>> Okay. Any other questions?
No? Anything else Jeff?
>> Not that I can think
of unless you have any other questions about, you know,
funding or anything like that.
>> So if we have 15.5 million in this GASB fund,
I realize it's not an irrevocable trust but if we have
that amount in there we are pretty much covered
for almost all of our liability?
>> Right. And what happens then is that if they have been able
to reflect that in the study then what would happen is the
amortization pieces would go away.
And so on page 12 with the table [inaudible] your sole funding,
you know, responsibility would be that normal cost
which is a million three.
Now, right now I'm not sure what's budgeted
for retiree benefits but we were showing that for you know,
kind of the calendar year 2012 we were looking at maybe,
you know, $900,000.00 or $950,000.00 or so.
I don't know what your best estimate now is but if you were
to fund that, let's say that you had retiree premiums
of a million dollars and we're set at a million three,
in order to keep up you would actually need to put
in that difference between those two numbers
to keep fully funded.
Then in addition to keep fully funded
that reserve money would have to earn interest
and [inaudible] five percent
which we know right now is not going to happen if it's sitting
in the account treasury.
So year by year if you keep the 15
and a half million while you're full funded down,
each year you would start to fall behind to the extent
of maybe $300,000.00 difference between the normal cost
for that pay bill for current retirees and the difference
between five percent on your 15 million
and whatever you are actually earning on.
And so, you know, in the next couple of years you will start
to fall a little bit behind on that.
>> So this report then doesn't reflect current benefits being
paid to faculty staff?
>> No it does.
Yes it does.
>> Okay. So this amount, because in our budget we have,
as best I understood it, we have money set aside
in each individual division for benefits.
So this GASB fund is on top of all that.
So whatever we need to be funding
for benefits we've got it fully funded over here
and then we're budgeting it into our budget as well.
So we've got --
>> Yeah, but you're not budgeting --
your actuarial doesn't assume
that current employees health benefits are being paid
out of this GASB 43.
>> No, not for employees, absolutely no.
>> Right. It's not current employees.
It's the current cost of retirees.
>> Right. Correct.
It's only for current employees,
not current [inaudible] Sorry you misunderstood that.
>> I have a question.
>> Okay.
>> Could you just go back to where the obligation increases
with the, as the employee ages from year to year because,
number one, the health benefits that they get only start
if they stay here for 20 years and they stop
as soon as they hit age 65.
So as the person ages the number
of years you are obligated are going to get shorter.
Wouldn't that offset the expected increases
in health benefits as time goes on?
>> Well, for individual employees the number is we're
starting with zero liability so when you come in the door
and we're saying you have no liability
because you haven't earned any of your benefits.
And after you know, when we do the calculations
that we're saying at this stage you need
to recruit $2000.00 a year say, in order to accumulate enough
that when you retire there is enough to pay your benefit.
Well, certainly if we just take, regardless of the age,
from the time you join, from the time you come to the college,
you're hired and you have a zero liability
until the day you retire
and let's say you need $50,000.00 the liability has
to grow from zero to $50,000.00 over that period of time.
The time you're hired until the time you retire.
Then once you retire the liability starts dropping
as it gets paid off.
It goes to zero at age 65.
So it's not a bell curve but it's a curve, gradual curve
that goes up as you work and then it peaks
at the time you retire and then it falls off rapidly
as you get to, as you retire until you get to age 65.
Each individual has a curve like that,
the shape of the exact shape of the curve depends on the age
that you're hired and a number of other factors
but your liability for the district as a whole is the sum
of all those curves and at any given point
in time some people are going to be at the beginning
of the curve, some people are going to be in the middle.
Some people are going to be at the peak and some people
or retirees are going to be on the down side.
What I'm saying is that if you add all those together
and let's say if you have 1000 people
who every year have exactly the same demographic
characteristics, your liability is going to grow
if for no other reason
that health care costs are going to go up.
And for the individuals
that curve will increase while you're working
and then will decrease when you retire.
Does that make sense?
>> Yeah, kind of, yeah.
So okay, so for a brand new employee,
somebody that was just hired last year.
This 15.7 liability basically says there is no liability
because they are brand new.
>> Right. If they have been there
for a year there might be $2000.00.
>> So and that is if somebody is 58 years old,
we're only responsible for seven years instead of 10 years
if they retired at 58 of their full benefits
so it takes that into account.
So it would be reducing then the liability
at that point, once they reach 55.
>> No necessarily because the probability of retirement,
you know, up to age 58 is really,
really tight, it's pretty tiny.
And so because we're assuming the average retirement age
around 60 or 61 is not going to peak
until that part even though we are assuming some probability
of a person, you know, might retire at 50 or 55 or 57
or whatever, you know, whatever you're allowed to do.
All that does at that point is the problem is we're so small
that it only slows down the increase
but it doesn't start to cause a decrease.
Yeah. It doesn't cause a decrease
until basically you reach the point where you're more
than likely to retire.
The probability of retirement is more than 50 percent.
At that point then the liability starts to come down.
>> Okay. I guess I'm just a little slow
because if the person reaches 58 you now know
that there is three years at one point that you have a liability
for them, for their full benefits
if they had retired right at 55.
So if they now retire at 58 you now know
that there is three years that you're not responsible, I mean,
they're 58 now, they're not 55.
So you're not going to have to pay their full benefits for --
we got a 10 year period where we have to pay full benefits
if they retire at 55 to 65.
So if they reach 58 you now know that you don't have
to pay while they were 55, 56, 57.
So you've lost three years of liability
for their full benefits which is a much larger amount
than after 65 when it's only 1440 a year.
>> Well, [inaudible] after 65 that has nothing to do
with our study [inaudible]
but let me address your thing about 58.
Perhaps it is only right
when somebody is 58 we would pay benefits
for a brief fewer years,
but remember we're not assuming that.
We're [inaudible] liability based on the assumption
that everybody retires at 55.
We're generating liability based on the assumption
that maybe two percent of the people retire at 55
so the liability isn't.
So let's say the cost of health care is $10,000.00.
We're not reserving $10,000.00 at age 55,
we're accruing two percent of $10,000.00 or $200.00 for that.
So when somebody does retire
at 55 we're not reducing their liability
on $10,000.00 we're reducing it by maybe $200.00
which is only the probability that they would retire
at that age multiplied by the benefit.
So that's why say, if they, you know,
those early [inaudible] the probability of return is so low
that the reduction in the liability is less
than the increase in the liability due to interest
and normal costs and but it does slow down the increase
in the liability and so the liability won't actually peak
until somewhere around age 60 or 61.
The probability of retiring base on --
the probability of retirement is higher enough that the reduction
in the liability due to their not retiring exceeds the
interest of the normal costs.
And so I understand what you're saying but you got
to remember it's a probability based thing.
We're not reserving that entire hundred percent
of the liability at age 55.
>> Okay, and the analysis though does take
into consideration the actual ages of our faculty, correct?
>> Correct.
>> I didn't understand everything you said.
>> Each individual with their gender, their date of birth,
their date of hire,
and of course their [inaudible] classification
so that we know exactly what the benefit entitlement is
and we know what the -- we can take the age and length
of service and enter the tables
to determine the probability based on those two items
that they would retire.
So for a given person at you're age 55 you're going
to be more likely to retire if you have 25 years of service
than if you are 10 years of service under the tables.
By the same token somebody at age 60 with 20 years
of service is more likely to retire than somebody
who is age 55 with 20 years of service.
and the tables are provided to us by CalPERS and CalSTERS
so they are based on actual retirement incidents overall
but not solely for Pasadena.
We don't have their stock
and Pasadena is not a big enough group and even
if we had several years
of information it wouldn't be possible
to generate retirement tables based
on your experience by itself.
>> Okay.
>> Yeah. Are you saying like a new person coming
in has zero liability and that person stays here
for like 10 years and they put $2000.00 a year in for them
and then he quits, what happens to that money?
>> Good question.
I mean that's where anything that was accumulated
for that person, the $20,000.00 plus the interest
on it then becomes available to provide benefits for those
who stay to retirement.
And that being the case it means that amount
that we need per person because we know
that some people will be leaving,
there will be forfeitures, you know, you'll have forfeiture
of the accumulated accruals for that person
which will help reduce the cost for everybody else.
For that means that if you were to look at our overall cost
and projected form of interest you'd find
that it would be enough for the individual to pay their benefit.
The reason is because we assume that some people will die,
or people will terminate employment prior to retirement
and those accruals will be available to help pay
for benefits for those who retire.
Again, this is exactly the same as what started pension funding
with the difference being that the pension benefits,
if you leave in 10 years you will have a vested benefit
and so part of the accrual for you is going to be needed
to pay that vested benefit.
[Inaudible] benefit if you leave in 10 years
and you are age 45 the top amount
of your accrual was now available
and not paying the cost for everybody that remains.
>> Anybody else?
Well thank you Jeff, we appreciate your time.
>> No problem.
Any time and if anybody has any other questions --
who should I send the GASB to?
>> You can send it to me.
Or do you have Cindy's?
>> [Inaudible]
>> Okay. Can you send it to Marie Descalso?
>> Sure, no problem.
>> Okay. All right.
Thank you.
>> You're very welcome.
Bye.
>> Thank you.
>> Okay, can you [inaudible]?
>> One of our [inaudible] discussions.
>> He makes me feel very stupid, I'll be honest with you.
>> Here is the other deal.
You've got to be thankful that there are people in the world
who will do that for a living.
>> Laughter.
>> I'd shoot myself if I had to do that all day.
>> Wow. [Inaudible]
>> And when you read the report it just truly gives you
a headache.
>> I know.
>> All right.
Let's go back to the agenda.
Approval of the minutes.
Is there a motion to approve the minutes?
Dave? [inaudible] Is there a second?
>> I second.
>> Okay, Alex.
All right, are there any changes or amendments to the minutes?
No? Okay. All those in favor of approving the minutes say aye.
>> Aye.
>> All those opposed say no and any abstentions?
Okay. Minutes are approved.
Public comments.
Any comments from the public?
>> [Inaudible]
>> They are all [inaudible]?
>> [Inaudible]
>> Congratulations.
>> You don't have anything to add?
>> No.
>> Okay. No public comment.
Why don't you update?
Okay, let me distribute this.
This next stuff.
Do you guys have one?
This is the report that will go into the board packet
and basically this is essentially a recap
of what we've talked about for the past few weeks.
I can give you a minute to go through that.
The one thing that you have not seen is on top of page two
and I'm working on this
and I unfortunately didn't have quite enough time to wrap
up the next chart which I will have for next week.
But basically what this does is I went through and tried
to norm this up for inflation.
So I went through an inflation calculator
or I guess more a deflation calculator in order to put it
into standard dollars because from one year
to the next the value of a dollar changes and so I norm
that out to take inflation out as a variable.
So what you will see is that we are very significantly
under 2002, 2003 in the current year
when you norm it for inflation.
We also see that the peak years of 2006, 2007-2008,
2008-2009 if you were to take those
out you would see a far flatter curve.
But what I'll do for next week is I will split it
down by major object codes
so that these numbers will be fully normed.
And then what I'm going to do is to do a calculation per section.
So the number of sections offered per year has obviously
changed and then I will divide it
into the unrestricted general fund budget in order to come
up with a cost per section.
Now if you were to imaging 100 million dollars in 5000 sections
that would mean $20,000.00 per section.
Okay. So that's what the calculation is going to show.
Obviously it won't be 5000 sections
and it won't be 100 million dollars
but that's the calculation that will occur
from the year 2002 2003 through the current.
So like I said, I split it up by major objects
but I didn't quite have enough time to wrap that up
and to put it into presentable form before I came over here.
but I will be able to do that.
Okay, so we talked about the November election.
The cash flow and Marie was working on that again.
Last night and again this morning and because of the delay
in the apportionment payment, aside from the deferral,
now my understanding is they can only do that for 30 days
and then they have to --
and I think it was 2.3 million dollars they held?
>> For May.
>> Additional to the 23 million supposedly.
>> Right so on top
of the apportionment deferral then they delayed 2.3 million
dollars and they did that based on the idea
of the redevelopment agency proceeds.
They didn't want to pay us ahead of those proceeds,
conceivably coming to us.
Chances of those proceeds coming
to us I think are slim in any event.
Okay. So if there are any questions on this report?
I tried to make basically to summarize our activity here.
What I will do is distribute this to the campus probably
and maybe in an email but certainly on the Website as well
so that everybody can get the latest information.
>> This is a suggestion.
On this chart on page two you might label what the green
line is.
I think what it is is the current plan for next year.
>> Yeah I just put it across that current [inaudible].
>> Okay.
>> All right.
Any other questions or comments?
Now what I would also propose, and well we can move
on to the guiding principals.
What I would suggest that we work on is guiding principal
to not contribute to GASB funds in the current,
in the following year based
on the information that we've received.
Now when that goes to the board of trustees then there is going
to be another arcane discussion I'm sure.
Because this stuff is extraordinarily
dense mathematics.
And I don't know of a simple way of explaining any of it.
You know, when you have a person who does it all day long
and after he is done talking you still don't understand fully
what he's talking about.
But so somehow or other, and part of the challenge is
in trying to do a report that is simple enough
for a lay person to understand it.
Because it is just so arcane.
But I think that, you know, the conclusion that we probably,
certainly that I came to is that we're in good shape in terms
of GASB 43 45 and there is no need in the coming year
to put additional funding aside.
Bob and then Dan.
>> So reading in between the lines
of my colleagues questions, and excuse me
if I'm misinterpreting what you're saying here.
we have, we're very well funded.
Almost 15 million we're funded and there is that 2.2 million
and so theoretically this 13 million dollars
in the GASB account, that could be,
some of it could be reallocated
to help the budget situation next year.
And that's where I want to go.
You made a comment, you explained why
that wasn't possible or why you didn't think
that would be a wise thing to do?
Could you repeat that?
>> We're about $500,000.00 conceivably over-funded.
The challenge is and as Jeff said,
we're not earning five percent and the costs are increasing
and therefore what's -- what I think will occur,
and I think we have to do every three years we have
to do another actuarial study and I think that what needs
to occur is that for the next two years
that we can ride off the current actuarial study,
and then not contribute.
Then what will occur is, in two more years
when we do another actuarial study then it needs to come back
to this group for another conversation
about what we should be doing.
>> If they've done the study on top of,
it looks like page three, where we talk about deferral
and the possible or likely need to do inner-fund borrowing
to 10 million dollars.
A big chunk of that would come out of the GASB 45 account.
>> Yeah, and Marie and I were talking about this this morning.
Her, the board, we can only take
out 75 percent of the fund balance.
Okay. Now because of the --
so when we're dealing with 15 million dollars we could take
out three quarters of it for a loan.
>> Right. So not only is that money,
that money is there for cash purposes.
It always has everything else.
So it would be hard to spend it
on one time getting certain next year type things
because not only is it gone we've got to pay it back
at some point in terms of change but it's also not available
for borrowing against it.
In fact this situation continues.
>> Right. Now the state is on hook
to actually pay us our money, that is state law.
>> Right.
>> So they don't have a choice but to do it.
The issue is if they don't have it they're not going
to give it to us.
So that's why the deferral on the apportionment.
So and Marie, this week again did another more detailed study
for cash flow.
And your current projection is 7.9 million?
>> [Inaudible]
>> That will be short.
>> Right. In July.
>> In early July we will be something like 7 to 7
to 8 million dollars short so we would, what we're proposing is,
and we've got the paperwork to the county.
All we have to do is pull the trigger
to move 10 million dollars out of GASB which is fund 64
into fund one and then July the 18th we would notify the board
that we did it.
And then hopefully we'll have some of that cash coming back
in in order to refund fund 64.
>> So the really good news is that we don't have
to contribute next year or perhaps the year after
and the money is there to pay payroll.
>> Most districts are doing a TRAN.
Tax and revenue anticipation note.
But then it's going to cost you several hundred thousand dollars
to do it.
In our case we get to borrow it from ourselves interest free.
[Inaudible] Dan and then --
>> A few questions.
Number one, you said you proposed not taking any
of the end of your balanced money and putting it
into GASB because we're okay.
Are you saying for next year or forever?
>> No, what I'm saying is, and this will be clear,
I'm not talking about the ending moving ending balance money
in any event.
What we have done in the past is actually budgeted.
So we've worked it into the budget
and we have contributed typically a million four
in our budget equation which basically did come
from the unrestricted general fund revenue and we're put it
into fund 64 in order to build that up.
Okay. So what I'm proposing, based on the actuarial
that is currently in existence, is that this year based
on the information that we have there is no necessity
to move any of that money from fund one to 64
and while I'm not developing
or proposing next years budget it seems unlikely
that we would have to do it next year either.
Until there is another study done and it shows
that we're short again, or whatever it shows,
then this group at that point would make a recommendation
to the board.
>> The other question that I have is,
you said that the interest we're getting
for the GASB fund is less than one percent.
Is the reason that you can't just buy a bunch of two
or three year CDs because you need that money to transfer
to cover withdrawals or why?
>> Now, the problem we have is
that when Orange County went bankrupt X number of years ago,
there were very, very stringent regulations put into effect.
Basically what we have to do is put the money
in the county treasury.
And the county treasury invests it.
And, you know, they do similar pooling type deal,
I don't know how many billion dollars they have
and they are pooling all the money and as we come and go in
and out of the fund it's a pooled number.
But the interest rates are so low currently
that it probably is one percent or a little less.
>> [Inaudible] higher than your individual CDs.
>> Yeah, that's also true.
Because, I mean they're swinging a lot of money around there
in accounting and treasury.
>> But you say it's higher than individual CDs.
>> Well I have individual cds
that are getting one and a half percent.
How come this isn't paying more than that?
>> Well, how long do you have to keep it in?
>> Two years.
>> I see. With the county it's different types.
Different types of maturity they call it [inaudible]
and you have forms of instrument because these are counted
on a day to day basis so it's a pool
that they can [inaudible] hopefully for two
and a half years so they have a series of maturity.
So that's the average interest rate.
>> Okay. So you're saying that by law we're required
to put it in with them?
>> It has to be completely zero [inaudible].
>> So, and I don't recall and I don't have my notebook with me,
would be appropriate if we were maybe to take this action
to actually add to our budget principals for next year
that we will not fund GASB based on this?
So I guess I would move that and that would be one of our,
you know, based upon the report we got from our actuary.
>> Okay. Questions Dave?
>> Yeah. I realize that [inaudible]
>> Oh, I'm sorry.
>> The motion was that we add as one of our guiding principals
that we would not fund GASB 45 next year based upon report we
receive from actuary.
Okay, so we have a motion and a second.
Any discussion?
Gary? Is there any discussion.
All in favor say aye.
>> Aye.
>> Opposed?
We have assented.
Were you voting or?
>> I wanted to make sure you saw me.
>> Dave, your question.
>> Yeah, you're saying that all this paperwork is done
on actually what's being happened throughout the state
and [inaudible] and all that and we have to have a study
of what actually takes place here at PCC?
I know the last two years it would be crazy
because of the early retirement but maybe a couple years prior
to that and see what the trend is.
>> The problem that you have is that one year we had close
to 100 retireants, this year we have two
and then the year before we probably had five.
Nickels and dimes and then all of a sudden.
>> Well it depends
on the retirement is probably why we had so much.
>> Which is why we did the actuarial again is
to check how we're doing.
>> But how many, even with the early retirements how many were
actually taking, are we paying for medical on?
Not 1440 but between 55 and 65.
Because you only need it five years if I'm not mistaken
and taking your own retirement system.
>> You had to be here for five years.
>> Right. So that wouldn't even have kicked
in the medical health.
>> See, what they're doing is using these monster tables.
The actuarial tables to try to sort it out.
And as he pointed out it is all probability based
so it's not specific to PCC in terms of the tables.
What is specific to PCC is each individual person is factored in
and then plugged in at the table.
>>
>> So I mean it's, I keep saying that it's so arcane and it is.
the way that it's established is extraordinarily complex
and then what you do is you hire an actuarial
to figure it all out.
>> Overall it's probably a conservative number
because very few faculty retire by 61 around here.
We have people well over 65.
>> Again, you'd have to do a study to look at it but it's,
I don't see that the average is 61.
>> That's what I like to see.
What the trend was after [inaudible] you know,
what the stats say that people do retire at 61
or 62 or 65 whichever.
>> Did he point out that even if we did do a study
like the [inaudible] small to [inaudible].
>> Well, he [inaudible] wild fluctuations in market.
>> Even if we did it for most years before the retirement
sets in.
The [inaudible] is just way too small for this.
>> That's why they were using the [inaudible].
>> Okay. Anything else on that?
Okay. Let's see here.
>> Are we going to talk
about the [inaudible] principal that I read about?
>> I have a copy of it here where [inaudible]
and I'm still working on the concept which was
that the ongoing money would not go
to projects basically is what it was.
>> For one time.
>> For one time expenses.
>> What I'm trying to wrap my head around still is
that typically the way that one time projects are funded is
through unspent budget dollars.
Which are theoretically budgeted as ongoing expenses.
See what I'm saying?
Did I say that or [inaudible]?
>> Say that again.
>> Okay. When typically what we do is at the end
of the year we reallocate unspent budget dollars.
typically what occurs is that those funds go
into one time projects.
So often into fund 41 or fund 43.
Capital outlined scheduled maintenance.
Okay. Those are budgeted as ongoing expenses
but they weren't expended.
And then what happens is that they get reallocated
and that's the sole source of money for the one time budgets.
Therefore it's difficult to come from me to wrap my head
around a rule that says that you can't have ongoing revenues
being applied to one time expenses.
Okay. So that's on the macro sense
and on the micro sense you have a bunch of onetime expenses
that occur even within operational budgets.
>> Okay. Well first of all it's a guiding principal
so I'm not saying that if there was a situation you couldn't
use ongoing.
But the principal would be
because we have all the budgeted amounts, I don't have it right
in front of me, but there is still 100 thousand dollars
in a fund for parking lot A.
>> Well, it's actually for the field.
>> For the field.
There is not going to be a field built there.
I mean, I don't know why we have $100,000.00 sitting in there
for a field that's probably never going to be built.
But if it is at some point
when things get better we can decide we want to fund that
but to have $100,000.00 so that's just one small example
but there's all these little pockets of money
that has been taken from ongoing money and been put
into one time money and it sits in these accounts
and so my thinking is, when one time expense comes up,
you got that $100,000.00 for a field,
we know the field isn't going to be built for at least five years
because we just built, put portables up there
until the U building is built they won't be removed.
So you could take that money, it's one time money and use
if for just one time expense.
Rather than taking from ongoing funds
and letting the one time money sit in there
and that's just a small example of the one time money.
>> The trouble is that the one time, and even in the case
of the field, the field replacement,
and it has a ten year life cycle on the athletic field.
Okay. So what happens is
that when you take the current athletic field we should be
setting aside $50,000.00 a year in order -- .
>> Well that fund is on parking lot A. It's not talking --
that's not for -- .
>> I don't know, and I didn't bring my budget down.
>> So you're telling me that money is
for replacing our athletic field?
Because that's not the way it seems to be titled.
>> No, but the issue is what I'm trying to point
out is those funds are always under-budgeted and so
when we're talking about the AIS, the new computer system.
The new computer system is likely to cost us,
pushing 14 million dollars.
Okay, the grand total of what we have set aside is seven.
Okay, now that puts us into an unusual position
of approving a project without sufficient funding
or to identify other funds.
So what always happens is you end up reprioritizing.
In this case, you know, we're going to work on options
of borrowing money, we'll try
to operationalize some of the money.
I mean the fact is that it's a massive project that is right
around the corner and we don't have money for it.
>> Well, we don't have money for it because of the way
that things are budgeted.
For this year alone, I'm trying to find it right now,
but there was 2 million for campus remodeling
and I'm not saying we don't need to do some of these things,
but some of these things are things that didn't need
to be done this year necessarily.
The multi-purpose year there is 100, there's still 4.4 million
in the property acquisition.
There is $100,000.00 sorry; there was 3.2 million
for asbestos removement which again, we didn't spend.
>> [Inaudible] just to be clear.
Capital outlay funds are not year to year funds.
There is no expectation that those would be paid
and expended in a year.
Those are funds that continue over one year to the next.
That's how you actually save up money in order to do a project.
However, where you are absolutely correct is
that if the board decided to reprioritize
and for instance say that we,
let's draw down our property acquisition in order
to fund the AIS that is absolutely true,
they can do that.
>> Right. Well they're not going to do
that unless we make that recommendation.
>> No.
>> I mean, they don't do anything unless they get
a recommendation.
I mean there are very few things that originate from the board.
I mean there are 10 priorities.
Are you telling me that those 10 priorities this year came
directly from the board?
They came from input from [inaudible] which I understand,
that's the way it works.
The administration goes to the board, because they are not here
on a day to day basis.
So they are not going to make a recommendation unless somebody
who is here on a day to day basis suggests
that we make these moves.
So to think that they would suddenly make that move with out
of the blue, they probably don't even know there is 4.4 million
dollars in the property acquisition fund right now.
I'm not trying to say it's being kept a secret from them,
I'm just saying if I'm a board member
and I come here once a month and I'm not looking
at these numbers all the time.
I worked here for 17 years
and didn't realize it until the last year.
>> Longer than a year, I have been doing the budget reports
for a while and each project
in the capital outlay fund has been specifically highlighted
as the board approves the budget.
So guaranteed the board does understand where those funds are
and the board can reprioritize funds.
The point is, it's not like we're washing cash
in the capital outlying fund.
>> Yeah, no, I'm not trying to suggest that.
For instance when you say, you know,
VIS we approve that's not really funded.
If there was an emergency tomorrow, that is the --
as we all have said, the AIS system is critical,
it has to be redone.
We could find 14 million dollars from these funds, we don't need
to buy property tomorrow, we could move
that whole 4.4 million plus you've already got the seven
here and the 11.5 and he said,
when you said 14 million Duane said
that he couldn't even spend more than, I wrote the numbers
down at the time, but he couldn't even spend,
I think it was six million in the first year
and then three million and then three million.
So over a three year period you would need that.
So you would have opportunity to fund more money into those.
So that was as fast as he could spend it.
>> I think it was a little faster than that.
>> Maybe a little faster.
>> But your point is absolutely true.
The issue however, is that it is difficult to sign a contract
with a commitment without some guarantee
that the funds are available so normally we will not sign off
on a project without identifying the money
in order to complete it.
However I absolutely agree with your point
that capital outlay fund which should never by the way go
to zero, and for instance the asbestos abatement,
if there is an earthquake tonight,
by day after tomorrow we will have committed 2.3 million
dollars in order to reopen the college again.
Because that amount of money can go just
into the R building alone.
>> And I'm not suggesting
that you zero these accounts by any means.
>> Point taken.
Let's see.
Is there anything else?
On any list?
No?
>> I mean like what are we going to do with, there was 3 million
for technology upgrades and I'm not -- ?
>> Most of that is gone.
And the rest of it soon will be.
>> you know, the idea of creating smart classrooms,
technology fund needs to play into that in terms
of redoing faculty computers, that's another source
of those, that project.
So what you're going to find is that technology
and the 3 million dollars that was originally established,
I have a sense that there is less than a million dollars left
in that and that's probably been spoken for three times over.
>> Again, some of these things, I mean it would be nice
to have a laptop, I'd love to have a laptop but I can live
without a laptop for a couple more years.
>> [Inaudible]
>> Laughter.
>> I couldn't help it.
[Inaudible]
>> Well if you're going to spend the money I'm going to take it
but if we could use it for some
of these other priorities, anyway.
>> I thought I was going to get an iPad?
>> [Inaudible]
>> Dan makes a good point though.
I've looked at smart [inaudible] and you know, I agree with parts
of it and I agree we need to move along with technology
but the scope of the project seems
to be an overreach given the budget situation.
I would hate to see, you know, people reading in the Star News
that we were turning away students
but every faculty member is getting a new laptop.
>> [Inaudible] smart teams are a classroom
in technology upgrades.
>> Okay. All right.
Some aspects need to be cut back.
I'm sorry, budget is really tight
and we need to scale back here.
>> I think we have to because as you pointed out,
technology upgrade money has
in some cases been committed three times over.
>> [Inaudible] so many less sessions they are going
to need less classrooms.
>> So you know, as far as making all these smart classrooms,
which again, I'm not saying stop it all and spend all the money
on this but I just think that it seems to be a little bit
out of balance and we're so worried about the AIS,
which I think we should be but if we don't have the money
in there then why are we spending 3 million over here
for upgrades here and 3 million over here, let's move the money,
put the money in there and say, hey,
we're ready to go we can sign contracts and get on with it.
>> [Inaudible]
>> Laughter.
>> That was so funny.
[Inaudible]
>> Okay, what would you guys [inaudible]?
>> My betting principal?
>> Your personal.
>> My suggestion is that we only use one time funds
for one time expenses rather than using them
out of the ongoing funds because there are certain things
that they won't do because, well, that's one time money
but if we have more available ongoing money you can do things
with ongoing money that you can't with one time.
Okay? So I'm trying to keep as much ongoing money available
and so if there is a one time expense
and there is money budgeted in these different areas
that we know we're not going to spend
in the next few years then use it out of there
and at some point if we see upcoming that we're going
to need to buy a piece of property we can say, hey,
well next year we're going to have
to put one million dollars back into that fund because probably
within the next year or two we want to do this or that.
>> What's really scary to me is that [inaudible] making sense.
>> Laughter.
>> I'm wondering if [inaudible]
>> I can't believe you actually said that.
[laughing]
>> If there can be a -- without going to a lot of extra work,
a list of what the one time plans are and what may be able
to be borrowed for a period of time to put into some
of the operation for next year.
I mean for example.
if in fact there is $100,000.00 sitting for the lot 5A
and that's sitting there for that we need to make a decision
that we're going to put
that into the athletic field replacement
because I don't think that field is [inaudible] I was there a
couple of Saturdays ago
and it actually looks pretty tuckered out.
Your football players are actually doing a lot
to that field.
>> Laughter.
>> Are you sure that was [inaudible]?
>> But I guess it's worth looking
at because we're getting close to where the rubber is going
to meet the road here and making some decisions and want
to [inaudible] answer these things.
>> Right now as we go on down the road
or we solve the problem [inaudible] today,
that's always the question.
>> I know.
>> And the fact is that with one time money,
when it's gone, it's gone.
If you just look, and by the way, if you look at this chart
and that's, just one second, as I refine these numbers
because Marie provided me with a more refined set of numbers
that I had even yesterday and I'm trying to think
but I believe that the high water mark in 2007.
2008 was, in real dollars, 2012 dollars,
136 million dollars is the update.
And 136 million versus 105 is a 31 million dollar hit per year.
What is it next year, assuming we stay flat,
is another 31 million dollars off of that.
So when you start to imagine what we've just gone
through in the last few years,
we've basically taken a 20 percent hair cut
or a little better than that which is unbelievable
when you realize that 90 percent is salaries and benefits.
We're at a fraction of what we were before.
We're at, you know, 78 percent or whatever it is
of what we were just a few years ago.
So the fact is that, you know, we have to come up with a way
of being sustainable economically.
Sorry Dan.
>> No, that's all right, I interrupted you.
So I'm not kicking the can down the road because I'm not saying
to use one time money for ongoing expenses.
>> I wasn't talking about that.
[Inaudible]
>> Okay. Because he thought that he was agreeing with you guys.
But my suggestion is -- .
>> It's so much easier to pay in [inaudible]
>> My suggestion is not kicking the can
because I'm not saying let's pull out this one time money
and pull up the ongoing problem that we have.
Okay? I'm saying to keep more ongoing available
because we are going to get less ongoing,
let's use one time money for one time expenses.
So it doesn't -- I'm not saying take the one time money
and use it for ongoing things because you're right,
next year it won't be there, I understand it.
That's why I came up with the principal.
I said, well how can we get around that?
Well we've got one time expenses
and we've got one time money sitting in accounts, and again,
I'm not saying to go and zero them all out but there is lots
of little pockets in there we could come up with,
a fair amount of money.
I don't want to say how much.
>> [Inaudible] as I understand what you're saying.
And I understand, let me ask [inaudible], so one time money,
for one time expenses, which I kind
of thought we were doing anyway,
if we look at this pie chart here
which I know we won't have anything left over this year,
but let's just assume that we did.
We're saying that 50 percent of that would go into technology,
scheduled maintenance and non [inaudible] projects
and non-[inaudible] projects are those one time, you know,
fix up the [inaudible] or whatever it is.
So in essence we're budgeting
that this is how we replenish our one time money fund,
pop, if you will.
So but that [inaudible] it comes from.
>> Right but that's what I'm saying, you could go into a lot
of these places and you could pull out a fair amount of money
without zeroing out and leaving enough
that we could cover a situation if it came
up it's [inaudible] whatever it was, but and every year
because we now voted, I didn't vote for it, but it got voted.
That 50 percent of that extra is going to replenish
that so you can refill them up with that money.
So it would work because there would be opportunities
and again you could change your priorities.
One year you could say, hey, we want to put all that money
into -- because we want to buy this property
over here we're going to put most of it
into the property fund.
So I'm just saying, there's lots of money sitting in lots
of pockets that could be used and if you take ongoing money
for that then it says that you're basically saying well,
we can't do other things that are --
it's necessary to have ongoing because that's going
to be an ongoing expense and that's all I'm saying.
>> I accept the language to do that
and I'm still wrestling with that.
Dave?
>> Yeah. Are we still thinking about going out for a bond?
>> Yeah. Because like the athletic field and some
of the specialty removal can actually be part
of the bond is that not correct?
There is no way the B building gone and W building?
>> No, I think that what you're finding is the facilities master
plan evolves, the R building has to be gutted
and all the asbestos needs to be taken out once and for all.
Because that, aside from the U building, and by the way,
the U building is probably a two million dollar expenditure just
to remove asbestos.
So before we even contemplate knocking the building
over we have to take out all the asbestos first
and we don't have the money to do that either.
So the U building is likely to just stand as a nice albatross
for a while with a fence around it.
>> [Inaudible] move it I just walked into it this morning
to go to the union office.
[Inaudible] the interesting part is the only office is
to be left in the building.
>> Laughter.
>> And it's Roger's office.
>> [Inaudible]
>> Well Roger is [inaudible] and he will have
that whole building to himself.
But anyway the R building has to be gutted
and all the asbestos taken out and completely redone.
And the W building, yeah.
so there are all these projects that are being queued
up in the facilities master plan, however the funding source
for that will end up to the extent that we fund them,
will end up being the bond in all likelihood.
And you're right, the athletic field because if it was
up to me we would put cisterns underneath it before we
re-carpet it in order to capture rain water.
But that would also be funded out of the bond venture.
>> But, I know at one time we were buying a [inaudible] would
that be a possibility also?
>> It's conceivable.
That's also.
There are any number of different things that we can do.
>> Are we going to tear it up?
I mean the, I mean if the bond issue passed?
>> In the meantime we're not going to predict that.
But the facility management line should be done
by the end of the calendar year.
>> So when are we thinking of going?
>> Well, then it comes down to a series of judgments
because you have to determine what the political climate is to
and is it such that you must go out in an election where,
you know, right now a function one appointment is
like 15 percent in the country so it's not a great time
to be asking people for additional money.
So, you know, there are some economic indicators that have
to be going up in order for us to be able to go
out for a bond as well.
>> [Inaudible]
>> Actually major elections can be good.
It depends on what other issues are on the ballot.
That if there are highly controversial issues then
sometimes it's good and sometimes it's bad,
it depends on which way they're polling.
>> The bond issue is just strictly in the Pasadena area?
Is that correct?
>> [inaudible] Pasadena Community College District.
>> Right and the bulk of that bond would be
to rebuild the U building I take it?
>> No, in all likelihood that would consume
about as quarter of the project.
>> So what size bond are you talking about?
>> 300, well, it could be -- the number that I told the board
that we could float without changing the rate
of borrowing per $100,000.00 of assessed value of property
in the district would allow us a 250 million dollar bond.
So to explain how that works is currently we have
in measure P a commitment
that we will not exceed $25.00 per year per $100,000.00
of assessed value.
Which means that it would be $100.00 for a property owner
of a $400,000.00 piece of property.
What's happening is those numbers,
because we're fully borrowed the 150 million dollars now, is,
and we're paying that back and we have been
for the last 10 years, is that those numbers are falling
as the money has been amortized.
What that does is that the $25.00 per $100,000.00
of assessed value, we're creating a gap now.
If we borrowed against that gap we could borrow
up to 250 million dollars without raising the rate
at which property owners are contributing.
Now, I hate to say it that way because first you come
up with a project, first you don't come up with a price tag.
All I'm saying is that's the capacity
of borrowing that we could get to.
Okay? Anything else?
I do want to talk about the rotational schedule
because as we're coming down to the end of the year one
of the challenges is that this is a time when officers
and whatnot realize that Alex isn't going
to come back next year just so he could be here.
but part of the challenge is that if too many people rotate
out over the summer time we've actually gone
through several months now of actually prepping for this
and if we have to rotate too many members out I think
that we're going to lose a lot of momentum in the process
of actually developing a bunch of self.
What I would propose, if it's possible,
to go to the constituent groups and ask
if we can have a rotational schedule that is more
like about October the first.
So that each October the first new group rotates in so
that we don't go three quarters of the way through the process
and then the last month or two we have to start all over again.
So if it's possible to do that,
I think I would find that very helpful.
Okay? Anything else?
The next meeting is --
>> Next Friday.
>> Okay. So I will have some more of this detail
for the cost reception and what not.
Okay. Anything else?
Is there a motion to adjourn?
>> I motion.
>> Okay, Dave and John?
>> Seconded [inaudible]
>> I assume nobody is going to object
so we are adjourned at 1:58.