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YES, LET'S GO AHEAD.

[00:00:01]

OKAY.

GOOD MORNING.

[CALL TO ORDER]

ATX ANY READY? GOOD MORNING.

MY NAME IS ALISON ALTER AND I'M CHAIR OF THE AUDIT AND FINANCE COMMITTEE.

UM, UM, ALONE ON THE DAYAS HERE IN CITY HALL AND JOINED BY THREE OF MY COLLEAGUES, VIRTUALLY COUNCIL MEMBER POOL KELLY, AND TAVO.

UM, THE MAYOR HAS LET US KNOW THAT HE WILL NOT BE JOINING US.

I WOULD LIKE TO CONVENE THE AUDIT AND FINANCE COMMITTEE.

IT IS 9 34 ON DECEMBER 15TH.

SO I WILL CALL THIS MEETING TO ORDER, UM, THIS MORNING, WE'RE GOING TO TAKE UP EACH ITEM AS POSTED IN ORDER FOR A CHANGE.

UM, AND I BELIEVE THAT WE SHOULD HAVE MORE THAN ENOUGH TIME TO COVER ALL OF OUR ITEMS THIS MORNING.

HOPEFULLY WE'LL BE ABLE TO GIVE YOU BACK A LITTLE BIT OF OF TIME.

UM, WE HAVE A DRILL IN THE BACKGROUND, SO, AND NO, ONE'S UP HERE ON THE DIASTAL.

I HAVE TAKEN MY MASK OFF SO YOU CAN HEAR ME.

UM, IT'S A LITTLE BIT CHALLENGING AND, UH, HOPE EVERYONE WILL BEAR WITH US IF YOU'RE HEARING THAT NOISE AS WELL.

UM, WE HAVE, UH, I HAVE DOWN FOR SPEAKERS FOR CITIZENS COMMUNICATION.

UM, I THINK WHAT I'D LIKE TO DO IS TAKE UP THE SPEAKERS WITH THE ITEM BECAUSE I THINK THAT'LL MAKE IT MORE COHERENT AND LESS PEOPLE HAVE TO LEAVE.

IS THAT OKAY WITH THE FOUR OF YOU? OKAY.

UM, SO PLEASE REMIND ME TO DO THAT IF I FORGET.

SO FIRST ITEM

[1. Approve the minutes of the Audit and Finance Committee meetmg of November 10, 2021.]

OF BUSINESS IS TO APPROVE OUR MINUTES.

UM, DO I HAVE A MOTION TO APPROVE THE MINUTES? COUNCIL MEMBER POOL MAKES THAT MOTION SECONDED BY COUNCIL MEMBER KELLY, ALL THOSE IN FAVOR UNANIMOUS ON THE DIAS COUNCIL MEMBER.

TOVO DO YOU VOTE IN FAVOR OF THE MINUTES? ARE YOU OFF THE DIOCESE? SO FOR NOW WE WILL HAVE, UM, COUNCIL MEMBER TOVO CONSIDERED OFF THE DYESS FOR THAT VOTE.

UM,

[2. Briefing on City Pension Systems.]

THE NEXT ITEM THAT WE ARE TAKING UP IS A BRIEFING ON THE CITY PENSIONS.

THIS IS OUR ANNUAL BRIEFING ON THE THREE PENSION SYSTEMS PROVIDED BY STAFF AT THE END OF EACH CALENDAR YEAR.

IT COVERS OUR ACTUARIAL ASSUMPTIONS, OUR INVESTMENT RETURNS AND THE IMPACTS OF RECENT LEGISLATIVE CHANGES.

I'M HAPPY.

WE WERE ABLE TO MAKE THOSE ADJUSTMENTS FOR THE LONGTERM HEALTH OF APRS THAT WILL BE, UM, DISCUSSED DURING THIS, UH, PRESENTATION.

UM, COUNCIL MEMBER TOVO HAS JOINED ME ON THE DIOCESE, UM, COUNCIL MEMBER.

TOVA WE JUST VOTED ON THE AMENDMENT AMENDMENT MINUTES.

WOULD YOU LIKE US TO RECORD YOU AS VOTING? YES, PLEASE DO.

THANK YOU.

OKAY.

SO FOR THE MINUTES WE WILL NOTE COUNCIL MEMBER TOVO AS VOTING.

YES.

UM, AND WE ARE NOW ON ITEM TWO, BRINGING UP THE PENSIONS.

UM, IF IT IS TOO LOUD ON YOUR END, FEEL FREE TO MOVE OVER HERE.

THEY COULDN'T HEAR ME TOO WELL WITH THE DRILLS.

I HAVE MY MASK OFF.

IF IT BOTHERS YOU, LET ME, LET ME KNOW.

UM, OKAY.

SO DO WE HAVE NOT SURE WHO'S PRESENTING BELINDA.

GOOD MORNING CHAIR AND COMMITTEE MEMBERS.

UM, I HAVE A PRESENTATION YOU GET THAT PULLED UP.

WHAT'S THE NAME OF YOUR PRESENTATION? UM, IT IS VERSION TWO OF THE, UM, THE PENSION UPDATE.

GIVE US ONE SECOND.

SURE.

SHARE.

I MIGHT RECOMMEND MOVING ONTO ANOTHER ITEM IF YOU'D LIKE WHILE THEY GET THAT PRESENTATION READY FOR ME.

SURE.

EXCEPT THE NEXT ITEM ALSO HAS A PRESENTATION, I BELIEVE.

UM, FOR ITEM THREE IS THE ABEL SHE'S TRYING TO BE QUICK AND ME A SECOND.

I SAW IT ON OUR AGENDA DOCUMENTS THIS MORNING, IF THAT'S HELPFUL.

[00:05:04]

GREAT.

THANK YOU.

OKAY, MS. BELINDA WAVER.

SORRY FOR THE DELAY.

THANK YOU.

UM, GREAT.

OKAY.

SO GOOD MORNING, UH, CHAIR AND COMMITTEE MEMBERS AGAIN FOR CITY TREASURER AND I AM HERE TODAY TO PRESENT THE ANNUAL UPDATE FOR THE CITY OF AUSTIN'S PENSION PLANS FIRST, UM, AS I ALWAYS DO, I'LL PROVIDE A BRIEF OVERVIEW OF THE THREE PLANS AND THEN WE'LL PROVIDE AN UPDATE TO THE FINANCIAL AND ACTUARIAL METRICS FOR EACH OF THE PLANS.

AND, UM, WE'LL END THE PRESENTATION WITH A BRIEF OVERVIEW OF THE RECENT LEGISLATION PASSED IN THE 87TH LEGISLATURE FOR THE CITY OF AUSTIN'S POLICE RETIREMENT SYSTEM.

NEXT SLIDE PLEASE.

SO THE CITY OF AUSTIN HAS THREE EMPLOYEE BASED PENSION PLANS.

ALL THREE OF THE PLANS ARE DEFINED BENEFIT PLANS AND ALL THREE PLANS WERE CREATED BY STATE LAW.

SO STATUTE DOES GOVERN THE BENEFIT AND CONTRIBUTION PROVISIONS AMONG OTHER THINGS, AND ANY AMENDMENTS TO THE LAW CAN ONLY BE MADE BY THE LEGISLATURE.

EACH OF THE PENSION SYSTEMS HAVE AN INDEPENDENT BOARD OF TRUSTEES AND EACH BOARD HAS A DIFFERENT COMPOSITION OF ELECTED OFFICIALS, MANAGEMENT, APPOINTEES, EMPLOYEES, AND RETIREES.

IN ADDITION, UM, EMPLOYEES, RETIREMENT SYSTEM AND, AND THE POLICE RETIREMENT SYSTEM, EACH HALF CITIZEN AT LARGE TRUSTEES, UM, REGARDING CITY REPRESENTATION ON THE BOARDS FOR THE EMPLOYEES RETIREMENT SYSTEM.

IT IS COUNCIL MEMBER POOL, ALONG WITH DEPUTY CFO, DIANA THOMAS FOR POLICE.

IT IS, UH, COUNCIL MEMBER TOVO ALONG WITH DEPUTY CFO, DIANA THOMAS AND MYSELF AND FIRE BY STATUTE HAS THE MAYOR AS THE CHAIR AND, UH, THE CITY TREASURER.

SO MYSELF IS ON THAT BOARD AS WELL.

NEXT SLIDE PLEASE.

SO THIS JUST LISTS THE PENSION SYSTEM ELIGIBILITY FOR THE THREE SYSTEMS FOR THE EMPLOYEES RETIREMENT SYSTEM.

IT'S ALL REGULAR FULL-TIME EMPLOYEES, EXCLUDING CIVIL SERVICE POLICE AND FIRE, BUT IT DOES INCLUDE EMS EMPLOYEES.

THERE ARE TWO GROUPS ASSOCIATED WITH THE EMPLOYEES RETIREMENT SYSTEM GROUP, A ARE EMPLOYEES HIRED BEFORE JANUARY 1ST, 2012 AND GROUP B AS EMPLOYEES HIRED ON FOR AFTER THAT DATE FOR THE AUSTIN POLICE RETIREMENT SYSTEM.

IT IS ALL COMMISSIONED LAW ENFORCEMENT OFFICERS AND CADETS UPON ENROLLMENT IN AUSTIN'S POLICE ACADEMY.

I DO WANT TO NOTE THAT THERE WILL BE TWO GROUPS ASSOCIATED WITH THE AUSTIN POLICE RETIREMENT SYSTEM EFFECTIVE JANUARY 1ST, 2022.

AND WE'LL GET INTO THAT A LITTLE BIT LATER WHEN WE DISCUSS THE LEGISLATION FOR THE FIRE SYSTEM, IT'S ALL COMMISSIONED CIVIL SERVICE IN TEXAS STATE CERTIFIED FIREFIGHTERS WITH AT LEAST SIX MONTHS OF SERVICE EMPLOYED BY THE AUSTIN FIRE DEPARTMENT.

NEXT SLIDE PLEASE.

SO THIS JUST DETAILS THE CONTRIBUTION RATES FOR THE THREE SYSTEMS. I DO WANT TO NOTE THAT THIS IS AS OF SEPTEMBER 30TH, 2020, UM, AND IT IS INFORMATION THAT'S PROVIDED BY THE CITY'S ANNUAL COMPREHENSIVE FINANCIAL REPORT SAID FOR THE EMPLOYEE SYSTEM, THERE IS A TOTAL CONTRIBUTION OF 26%, AGAIN, AS OF SEPTEMBER 30TH, 2020, BUT I DO WANT TO MENTION THAT AS OF JANUARY 1ST, 2021 CITY CONTRIBUTIONS DID INCREASE BY 1%.

SO THOSE ARE CURRENTLY AT 19% FOR A OF 27% FOR THE EMPLOYEES RETIREMENT SYSTEM.

UM, THE POLICE TOTAL CONTRIBUTION IS, UH, RIGHT AT 34% WITH 13% FROM EMPLOYEE CONTRIBUTION AND A LITTLE OVER 21% FROM THE CITY.

UM, THERE WERE CONTRIBUTION CHANGES AS PART OF THE RECENT LEGISLATIVE CHANGES.

AND WE'LL DISCUSS THAT A LITTLE BIT LATER AS WELL.

UM, FOR FIRE, THE TOTAL CONTRIBUTION IS RIGHT AT 40.75% WITH EMPLOYEE CONTRIBUTION AT 18.7 AND THE CITY CONTRIBUTION A LITTLE OVER 22%.

UM, I DO ALWAYS MENTION THAT FIREFIGHTERS ARE THE ONLY SYSTEM WITH THE CITY THAT DO NOT PARTICIPATE IN SOCIAL SECURITY AND LISTED HERE ON THE BOTTOM ROW ARE CITY CONTRIBUTIONS EXPRESSED IN DOLLARS.

NEXT SLIDE, PLEASE, FOR PLAN MEMBERSHIP, AS YOU CAN SEE HERE, THE EMPLOYEE'S RETIREMENT, THAT SIM IS BY FAR THE LARGEST OF THE THREE SYSTEMS WITH OVER 20,000 MEMBERS POLICES ALMOST AT 3000 AND FIRE AS THE SMALLEST OF THE PLANS WITH A LITTLE OVER 2000 MEMBERS.

AND THIS IS ALL AS

[00:10:01]

OF DECEMBER 31ST, 2020 NEXT POINT FOR RETIREMENT ELIGIBILITY FOR THE THREE SYSTEMS. AGAIN, THIS IS AS OF DECEMBER 31ST, 2020 EMPLOYEES.

UM, AS I MENTIONED EARLIER, HAVE, UH, TWO GROUPS GROUP AND GROUP B, THEY HAVE DIFFERENT RETIREMENT ELIGIBILITY IS ASSOCIATED WITH THOSE TWO GROUPS FOR GREEN BAY.

IT'S 20 YEARS OF SERVICE AT AGE 55, 23 YEARS OF SERVICE AT ANY AGE AND ANY NUMBER OF YEARS AT AGE 62 AND FOR GROUP B, UM, IT IS 30 YEARS OF SERVICE AT AGE 62 AND FIVE YEARS OF SERVICE AT AGE 65 FOR POLICE.

UM, AS OF DECEMBER 31ST, THEY ARE RETIREMENT ELIGIBILITY AND MIRRORS BRIEF A OF EMPLOYEES.

BUT AS I STATED EARLIER, THERE WILL BE TWO TIERS, UM, EFFECTIVE JANUARY 1ST, 2022, AND IT WILL BE REFLECTED NEXT YEAR.

AND WE'LL DISCUSS IT A LITTLE BIT LATER FOR FIRE.

THE RETIREMENT ELIGIBILITY IS 10 YEARS OF SERVICE AT AGE 50 AND 25 YEARS OF SERVICE AT ANY AGE.

NEXT SLIDE PLEASE.

SO THIS SLIDE SHOWS CERTAIN KEY ACTUARIAL ASSUMPTIONS YOU USE IN THE CITY'S PENSION PLANS, MOST RECENT ACTUARIAL VALUATIONS, AND WHAT THIS IS ACTUARIES ACTUALLY USE THIS, THESE ASSUMPTIONS TO ESTIMATE THE OFFENDING AMOUNT THAT WILL BE NEEDED TO PAY FUTURE BENEFITS FOR EACH OF THESE SYSTEMS. YOU CAN SEE LISTED HERE.

I HAVE INFLATION RATE, PAYROLL GROWTH AND INVESTMENT RETURN.

THOSE ARE THREE MAJOR ASSUMPTIONS.

THE INFLATION RATE IS GENERAL UNDERLYING ANNUAL INFLATION.

AND THIS RATE IS A COMPONENT OF SEVERAL OTHER ACTUARIAL ASSUMPTIONS.

THE PAYROLL GROWTH RATE, THIS VARIES BY PENSION FUND AND IT'S ACTUALLY CALCULATED BY HISTORICAL EXPERIENCE AND ALSO PROJECTED FUTURE GROWTH.

AND THE INVESTMENT RETURN RATES IS THE INVESTMENT RETURNS EXPECTED ON THE ASSETS OF EACH SYSTEM.

AND THIS DIRECTLY IMPACTS THE PLANS, LIABILITY, CALCULATION, AND CONTRIBUTION REQUIREMENT.

THE INVESTMENT RETURN RATE IS AN ASSUMED RATE THAT REFLECTS A FIVE-YEAR PERIOD OF SMOOTHING, AND THAT SMOOTHING IS USED IN ORDER TO REDUCE VOLATILITY IN THE ACTUARIAL CALCULATION.

SO AS YOU CAN SEE HERE, THE INFLATION RATE IS CONSISTENT AMONG THE THREE FUNDS.

THEY'RE ALL A 2.5% PAYROLL GROWTH VARIES FROM 2.5 TO 3.5% OF MINE.

THE FUNDS AND INVESTMENT RETURN IS 7% TO 7.3%.

I'M GOING TO THREE FUNDS.

NEXT SLIDE PLEASE.

SO FOLLOWING UP ON THE ACTUARIAL ASSUMPTIONS, WE JUST DISCUSSED THIS, UH, THIS SLIDE DETAILS, THE ACTUARIAL CALCULATIONS FROM THE MOST RECENT ACTUARIAL EVALUATION FOR EACH OF THE PENSION FUNDS, AND WE'RE NOT GONNA GO OVER ALL OF THEM, BUT THE KEY ONES IN MY OPINION TO FOCUS IN ON ARE, UM, THE UNFUNDED ACCRUED LIABILITY.

AND THIS IS THE DIFFERENCE BETWEEN THE PENSION PLANS, LIABILITIES, LESS THEIR ASSETS.

SO IN OTHER WORDS, IT'S THE AMOUNT OF BENEFITS ACCRUED IN WHICH NO FUNDING HAS BEEN SET ASIDE AND HAND IN HAND WITH THAT.

UM, WHEN AN UNFUNDED LIABILITY DOES EXIST IN ACTUARY, UM, DETERMINES THE NUMBER OF YEARS OR THE AMORTIZATION PERIOD, IT WILL TAKE TO FUND THAT INVENTED LIABILITY.

SO FOR EXAMPLE, IN FIRES CASE, IT HAS AN INFINITE ACCRUED LIABILITY OF 154.5 MILLION AND AN AMORTIZATION PERIOD OF 23.3 YEARS.

SO THE ACTUARIES HAVE CALCULATED THAT IT WILL TAKE THE 23.3 YEARS TO FULLY FUND THAT UNFUNDED LIABILITY OF 154.5 MILLION SHERIFF GOT A QUESTION FOR MS. REED SWEEPER.

YES.

BELINDA, CAN YOU, ARE YOU ALSO GOING TO TALK ABOUT ACTIONS THAT THE CITY OF AUSTIN AS A PLAN SPONSOR FOR, FOR THE, UH, CO-CHAIRS AND APRS SPECIFICALLY TOOK LAST YEAR IN ORDER TO IMPROVE SOME OF THESE, THE AMATORIZATION PERIOD AND THE FUNDED RATIO? YES.

AND WE'LL DISCUSS THAT AND THEY, AT THE END OF THE PRESENTATION, I'M GOING TO GO THROUGH THOSE LEGISLATIVE CHANGES.

SO THAT'S GREAT.

THANK YOU.

THANKS.

UM, AND THEN FINALLY, JUST THE FUNDED RATIO, UM, THIS IS JUST A STANDARD PENSION BENCHMARK, AND THAT IS THE RATIO OF ASSETS TO LIABILITIES.

THIS RATIO INDICATES THE EXTENT TO WHICH EACH OF THE PLANS HAS ENOUGH ASSETS SET ASIDE TO PAY FOR THOSE ACCRUED BENEFITS.

AND IT'S SIMPLY JUST A MATHEMATICAL COMPUTATION WHERE THE ACTUARIAL VALUE OF ASSETS ARE DIVIDED BY THE ACTUARIAL ACCRUED LIABILITY LIABILITY.

NEXT SLIDE PLEASE.

SO HERE WE HAVE DETAILED THE PENSION SYSTEMS, UM, INVESTMENT RETURNS AS OF DECEMBER 31ST, 2020.

AND AS YOU CAN SEE, ALL THREE SYSTEMS, UM, HAD GREAT RETURNS AND EMPLOYEES, UH, WAS AT 10.7, 8% FOR 2020 POLICE AT 11.44 AND FIRE AT 12.9%.

UM, ALSO LISTED ARE THE THREE-YEAR OR, AND TEN-YEAR RETURNS.

AND THESE ARE WEIGHTED AVERAGE RETURNS, AS WELL AS THE SAME ACTUARIAL INVESTMENT RETURN RATE FOR EACH OF THE SYSTEM.

JUST AS A REFERENCE POINT, UM,

[00:15:01]

REGARDING EVERYTHING LISTED ON THIS SLIDE, THERE'S REALLY TWO TAKEAWAYS FROM THIS FIRST IS JUST KNOWING IT IS PRUDENT TO MONITOR PORTFOLIOS ON THE SHORT TERM, BUT NOT LOSE SIGHT OF THE FACT THAT THESE PENSION FUNDS ARE LONG-TERM INVESTORS.

AND THEN ALSO KNOWING THAT ALL PORTFOLIOS DO GO THROUGH CYCLES WHERE THEY PERFORM REALLY WELL AT TIMES, I THINK 2020 IS A GREAT EXAMPLE.

ALL THREE OF THE FUNDS PERFORMS REALLY WELL FROM AN INVESTMENT PERSPECTIVE, BUT THERE ARE OTHER TIMES WHERE THEY'RE GOING TO LAG THEIR PEERS AND OR BENCHMARKS NEXT FLIGHT.

SO FINALLY, I WANTED TO TOUCH ON RECENTLY PASSED LEGISLATION FOR OUR POLICE RETIREMENT SYSTEM.

PRIOR TO THIS YEAR, THIS SYSTEM HAD SIGNIFICANT FUNDING DEFICIENCIES, INCLUDING AN INFINITE FENDING PERIOD.

AND AS YOU SAW IN THE PREVIOUS SLIDE, AND IT'S CURRENTLY AT A 30 YEAR AMORTIZATION PERIOD NOW DUE TO THESE RECENT LEGISLATIVE CHANGES AND THE CITY AND POLICE RETIREMENT SYSTEM DID WORK TOGETHER TOWARDS A SOLUTION TO ENSURE THE LONG-TERM SUSTAINABILITY OF THE SYSTEM.

AND I HAVE LISTED HERE A HIGH LEVEL AND DETAILS OF THAT APPROVED LEGISLATION.

SO FIRST, UM, THERE WAS CREATION OF A NEW ROUTE VA REAP THE BENEFITS HERE, AND THIS IS FOR POLICE OFFICERS AND CADETS HIRED ON OR AFTER JANUARY 1ST, 2022.

THE MULTIPLIER WAS LOWERED FOR THIS BENEFIT TIER, UM, FROM 3.2% TO 2.5%, THE RETIREMENT ELIGIBILITY WAS CHANGED AS WELL.

SO, UM, IT MOVED FROM 2023 YEARS OF SERVICE AT ANY AGE TO 25 YEARS OF SERVICE AT AGE 50.

AND THEN ALSO THE AVERAGE FINAL COMPENSATION FOR BENEFIT CALCULATIONS ARE NOW BASED ON THE HIGHEST 60 MONTHS OF SALARY INSTEAD OF 36 MONTHS.

IN ADDITION MEMBER CONTRIBUTIONS DID INCREASE.

UM, THEY INCREASED FROM 13 TO 15% OF EARNINGS AND MEMBER CONTRIBUTIONS CAN ALSO INCREASE BY AN ADDITIONAL 2%, WHICH WOULD TOTAL 17% OF EARNINGS.

IF THE ADA CORRIDOR MAXIMUM IS REACHED AND I'LL GET INTO THAT RIGHT NOW, UM, REGARDING WHAT THE ADA IS AND THIS FOUR-DOOR NEXT SLIDE, PLEASE.

SO ONE HUGE COMPONENT OF THIS LEGISLATIVE CHANGE IS MOVING APRS FROM A FIXED RATE CONTRIBUTION MODEL TO AN ACTUARIALLY DETERMINED CONTRIBUTION MODEL, WHICH WE REFER TO AS THE DECK MUCH EASIER TO SAY.

UM, SO WITH THE FIXED RATE CONTRIBUTION MODEL, AND IT'S WHAT OUR EMPLOYEE SYSTEM IS UNDER.

IT'S WHAT FIRE IS CURRENTLY UNDER A MULTITUDE OF OTHER FUNDS THROUGHOUT THE STATE ARE UNDER THIS FIXED RATE CONTRIBUTION, REALLY CONTRIBUTIONS ARE STATIC.

THEY'RE FIXED AT A CERTAIN PERCENTAGE OF EARNINGS AND THEY DON'T CHANGE AS FUNDING REQUIREMENTS FOR THE SYSTEMS CHANGE.

HOWEVER, THIS EIGHT F MODEL, UM, CONTRIBUTIONS DO CHANGE, THEY DO HAVE THE ABILITY TO CHANGE, AND IT'S BASED ON ACTUARIAL ANALYSIS, THAT'S DONE BY THE SYSTEM'S ACTUARIES AT THE END OF EACH YEAR TO DETERMINE FUNDING REQUIREMENTS FOR THE SYSTEM.

AND BECAUSE OF THAT AND TO PROVIDE SOME VOLATILITY CONSTRAINTS, THE CITY, UM, FOR CITY CONTRIBUTIONS, THERE IS A COURT OR BUILT INTO LEGISLATION REGARDING, UM, THE ABILITY OF THE, UM, CONTRIBUTIONS TO GO NO HIGHER THAN 5% OF A COURT OR MID POINT AND NO LOWER THAN 5% OF A PORT OR MID POINT.

NOW THIS PORT OR MIDPOINT IS ACTUALLY ESTABLISHED, UM, BY THE SYSTEM ACTUARY.

AND IT'S DONE THROUGH ACTUARIAL ANALYSIS THAT WAS BASED ON DECEMBER 31, UM, NUMBERS FOR 2020.

UM, AND IN ADDITION, IN RELATION TO THIS ACT, THERE WAS ALSO, UM, A LEGACY LIABILITY CARVE-OUT.

AND WHAT THAT IS IS ESSENTIALLY, UM, W WE, THE CITY CARVED OUT THE UNFUNDED ACTUARIAL APPROVED LIABILITY AS OF DECEMBER 31ST, 2020, AND PUT IT ON A PAYMENT PLAN FOR PAYOFF IN A 30 YEAR PERIOD.

SO I KIND OF EQUATE IT TO A MORTGAGE.

THE UNFUNDED ACCRUED LIABILITY WAS CALCULATED.

THOSE FUNDS WERE THEN SEPARATED FROM THIS ADA CALCULATION AND PUT ON A 30 YEAR AMORTIZATION TO BE PAID OFF WITHIN THAT 30 YEAR PERIOD.

AND THIS IS PAID FOR FULLY FROM CITY CONTRIBUTIONS AND THEN CITY INVOLVEMENT.

AND THE EXPERIENCED STUDY PROCESS FOR APRS IS A HUGE COMPONENT OF THIS LEGISLATION.

SO EXPERIENCED STUDIES ARE PERFORMED AT LEAST EVERY FIVE YEARS BY THE PENSION SYSTEMS, IS THIS DICTATED BY STATE LAW.

AND THESE STUDIES DETERMINE IF ANY CHANGES NEED TO BE MADE TO ACTUARIAL ASSUMPTIONS THAT ARE CURRENTLY BEING USED BY THE SYSTEM.

AND AS DISCUSSED EARLIER, THESE ACTUARIAL ASSUMPTIONS HAVE A DIRECT IMPACT ON THE SPENDING STATUS OF THE PENSION SYSTEM.

SO IN THE APRS LEGISLATION, THE CITY DOES HAVE INVOLVEMENT IN THAT EXPERIENCE STUDY PROCESS.

AND THIS INCLUDES REVIEW OF THE EXPERIENCE STUDY CONDUCTED BY THE

[00:20:01]

SYSTEM, THE ABILITY TO, UM, HIRE A SEPARATE ACTUARY FOR THE CITY TO CONDUCT ITS OWN EXPERIENCE STUDY, AND ALSO REQUEST THAT A THIRD PARTY ACTUARY COME IN.

IF THERE ARE MAJOR DISCREPANCIES BETWEEN THE TWO EXPERIENCE STUDIES THAT ARE CONDUCTED, AND FINALLY THE INCREASED CITY CONTRIBUTIONS ARE BEING PHASED IN OVER THREE YEAR PERIOD.

THIS IS INCORPORATED FOR BUDGETARY PURPOSES.

AND, UM, THAT IS KIND OF IN A NUTSHELL, THE MAJOR COMPONENTS OF THE EIGHT ACT, UM, THAT ACTUARIAL DETERMINED CONTRIBUTION MODEL AND MOVING ON TO GOVERNANCE, THERE WAS A ONE ACTIVE MEMBER SEAT THAT WAS REPLACED WITH ONE CITIZEN SEAT APPOINTED BY CITY COUNCIL.

THIS WAS APPROVED BY CITY COUNCIL IN NOVEMBER AND MICHAEL TRADE-OFF WILL BE STARTING HIS TERM ON THE APRS APRS BOARD IN JANUARY.

AND THEN FINALLY I'M BENEFIT ENHANCEMENTS AND MEMBER ELIGIBILITY AT PREVIOUSLY, THE BOARD OF TRUSTEES HAVE THE ABILITY TO PROVIDE BENEFIT ENHANCEMENTS, COST OF LIVING ADJUSTMENTS, AS WELL AS MODIFIED MEMBER ELIGIBILITY REQUIREMENTS.

THIS HAS BEEN REMOVED AS PART OF THIS LEGISLATION.

SO ANY OF THOSE TYPES OF CHANGES WILL NOW NEED TO GO THROUGH THE LEGISLATURE FOR APPROVAL.

ABSOLUTELY.

SO THIS CONCLUDES MY PRESENTATION.

I'M HAPPY TO ANSWER ANY QUESTIONS YOU MAY HAVE.

OKAY.

THANK YOU.

UM, MS. WEAVER, IF YOU COULD, UM, CLARIFY, UM, SO YOU MENTIONED THAT THE MORE DESERTION RATE FOR APRS AFTER THE CHANGES WAS WHAT WAS ON THE LIST FOR THE CHART THAT LISTED IT, UM, AS 32 ON SLIDE EIGHT, UM, WAS THAT ACCURATE OR BECAUSE THE SLIDE SAYS ALL OF THE OTHER SLIDES WERE AS OF 12, SO IT'S 12 30, 1, 20 20.

SO THAT ACTUARIAL CALCULATION, UM, IT DOES CARVE OUT THE UNFUNDED ACTUARIAL ACCRUED LIABILITY AS OF 12 30, 1 20 20.

THE CAMERA PERIOD IS THE AMOUNT OF TIME IT TAKES TO FUND THAT UNFUNDED LIABILITY AS OF THAT DATE.

AND AS OF THAT DATE, THE LEGACY LIABILITY IS BEING PARKED OUT AND PUT ON THAT 30 YEAR AMORTIZATION PERIOD.

SO, YES.

OKAY.

SO THE 32 YEAR AMATORIZATION PERIOD THAT'S ON SLIDE EIGHT IS NOT THE ONE THAT IS OPERATIONAL NOW BECAUSE WE MADE THE CHANGES.

SO THE 32 YEARS IS FOR THE EMPLOYEE SYSTEM.

THE 30 METERS IS FOR THE, I GUESS WHAT I THOUGHT WAS IT WAS INFINITE AT THE TIME THAT WE WENT INTO THIS.

AND SO THAT'S WHAT I'M TRYING TO UNDERSTAND.

THAT'S CORRECT.

SO, UM, THE REASONING BEHIND THIS IS, AGAIN, THAT, UM, AS PART OF THE LEGISLATION, THE ORGANIZATION, OR I'M SORRY, THE UNFUNDED ACCRUED LIABILITY THAT WAS PARKED OUT AS PART OF THIS LEGACY LIABILITY CARVED OUT WHAT ALL DEFENDED ACCRUED LIABILITY AS OF DECEMBER 31ST, 2020, WHICH IS THE DATE OF THIS ACTUARIAL VALUATION.

SO THAT UNFUNDED ACCRUED LIABILITY HAS BEEN HARMED OUT AND IS PUT ON A 30 YEAR AMORTIZATION PERIOD, WHICH IS SO IN THE CALCULATIONS FOR THE 12 31, 20 20, IT IS ALREADY PACKED.

I JUST CONFUSING BECAUSE YOU'RE PRESENTING IT BEFORE THE CHANGES, AND THEN YOU'RE PRESENTING IT AFTER THE CHANGES.

AND I, AND I'M NOT UNDERSTANDING WHICH ONE HAS THE CHANGES IN WHICH ONE DOESN'T GIVEN THE WAY THAT YOU'RE PRESENTING GIVEN THE WAY THAT YOU ARE PRESENTING IT.

SO, AND I, I APOLOGIZE FOR THAT CONFUSION.

SO YES, AND THE 30 YEAR AMORTIZATION PERIOD IS REFLECTIVE OF THE LEGISLATIVE CHANGES AND WAS PART OF THAT ACTUARIAL EVALUATION THAT WAS DONE BY SOME ACTUARY FOR THE PERIOD THAT ENDED DECEMBER 31ST, 20, 20.

OKAY.

SO EVERYTHING, BUT THE, UM, CONTRIBUTION STUFF THAT YOU PRESENTED IS WHAT IT IS MOVING FORWARD, NOT WHAT IT WAS PRIOR TO THE CHANGES.

RIGHT.

OKAY.

THANK YOU.

AND THEN, UM, WE HAVE TALKED A LOT ABOUT THE RETURN OVER THE YEARS AND WHAT THOSE ASSUMPTIONS ARE.

UM, SO ONE QUESTION IS, DID WE CHANGE THE RETURN? UM, I THOUGHT WE HAD ALSO CHANGED THE RETURN ASSUMPTIONS THROUGH THE LEGISLATION FOR APRS.

DID WE DO THAT OR WAS THAT THOSE ACTUARIAL ASSUMPTIONS ARE SET BY THE BOARD OF TRUSTEES? IT'S NOT.

OKAY.

OKAY.

SO THEN, UM, RELATED TO THAT, WE'VE TALKED A LOT ABOUT THE ASSUME DOCTOR OR RETURN, BUT NOT A LOT ABOUT HOW THE INFLATION RATE MIGHT IMPACT THE PENSIONS.

AND NOW THAT WE ARE EXPERIENCING, UM, SOME INFLATION THAT WE HAVEN'T EXPERIENCED RECENTLY, UM, CAN YOU EXPLAIN HOW THAT WILL IMPACT RETURNS?

[00:25:01]

SO, UH, REGARDING THE INVESTMENT RETURNS IN AND OF THEMSELVES.

SO AS FAR AS THE INVESTMENT RETURN RATE, FROM AN ACTUARIAL PERSPECTIVE, IT IS A COMPONENT OF THAT INVESTMENT RETURN RATE.

SO THERE IS ACTUALLY THE INFLATION COMPONENT ALONG WITH THE REAL RETURN RATE.

SO LOOKING FORWARD AND THE IMPACT FROM AN ACTUARIAL PERSPECTIVE THAT WILL BE FACTORED IN, IN ANY SORT OF, UM, INVESTMENT RETURN ASSUMPTION RATE, MOVING FORWARD IN THE FUTURE.

OKAY.

BUT IF INFLATION GOES UP, THAT IMPACTS IT, HOW WITH ALL I DIDN'T HAVE TO, BECAUSE IT IS A SEPARATE COMPONENT.

SO AGAIN, THE INVESTMENT RETURN RATES, I MEAN, MAYBE I'M NOT STATING THIS CORRECTLY OR CLEARLY THAT THE INVESTMENT RETURN RATE THAT IS USED AS AN ACTUARIAL ASSUMPTION, IT HAS TWO COMPONENTS.

IT HAS THE ASIAN RATES, AND THEN IT HAS THE REAL RETURN RATES.

SO IT, IT DOES FACTOR IN BOTH COMPONENTS.

UM, SO THE 7%, FOR EXAMPLE, FOR EMPLOYEES, IT HAS A 2.5% INFLATION RATE COMPONENT, AND THEN A 4.5% REAL RATE.

SO WHICH COMBINED MAKES THAT INVESTMENT RETURN RATE OF 7% FOR THE ACTUARIAL ASSUMPTION.

AND I GUESS I'M ASKING IT IS HIGHER.

HOW IS THAT IMPACTING? SO I THINK HIGHER THAN THE ASSUMPTION, HOW DOES THAT IMPACT HOW WE NEED TO THINK ABOUT THE RETURNS FROM, ARE YOU TALKING ABOUT THE ACTUAL REALIZED RETURNS FOR, FOR THE SYSTEM? YES.

SO WE HAVE A CHANGE IN OUR ECONOMIC CONDITIONS THAT WE HAVE RISING INFLATION, AND I'M ASKING HOW DOES THAT RISING INFLATION IMPACT HOW WE NEED TO BE UNDERSTANDING OUR PREJUDICES AND THEIR STATUS? SO FROM AN INVESTMENT RETURN RATE PERSPECTIVE, THOSE INVESTMENT RETURNS ARE REVIEWED MONTHLY BY, OR EXCUSE ME, QUARTERLY BY THE INVESTMENT, OR EXCUSE ME, BY THE PENSION SYSTEMS. UM, HAVING THE INFLATIONARY RATE HIGHER AT A SPECIFIC POINT IN TIME, I DON'T THINK IS GOING TO IMPACT THE SYSTEM IMMEDIATELY.

BUT WHEN LOOKING, I MEAN, I'M LOOKING AT THIS MORE FROM AN ACTUARIAL PERSPECTIVE BECAUSE IF IT'S SUSTAINED INFLATION, AND WHEN WE'RE LOOKING AT OUR EXPERIENCE STUDIES THAT ARE CONDUCTED EVERY FIVE YEARS, WE'RE LOOKING AT HISTORICAL INFLATION, WE'RE LOOKING AT WHAT WE PROJECT IN THE FUTURE.

AND THAT ASSUMED ACTUARIAL RATE IS GOING TO BE A COMPONENT OF THAT INVESTMENT RETURN RATE, MOVING FORWARD FOR THE SYSTEM AND USED IN THE CALCULATIONS FOR THE FUNDING STATUS OF THE SYSTEM IN THE FUTURE.

SO I UNDERSTAND HOW IT PLAYS IN THE CALCULATIONS.

WHAT I'M TRYING TO UNDERSTAND IS IF THERE ARE RISKS THAT WE NEED TO BE CONCERNED ABOUT IN A, IN A PERIOD OF HIGHER INFLATION, YOU KNOW, I THINK IT GOES BACK TO, UM, AS I STATED EARLIER, RISKS, I'M JUST ASKING WHETHER I NEED TO BE CONCERNED ABOUT THAT.

I THINK AS IT STANDS RIGHT NOW, IT'S NOT, IT'S NOT A CONCERN.

UM, IT IT'S SOMETHING THAT I THINK, THINK THAT IS BEING MONITORED BY ALL OF THE, UM, THE PENSION SYSTEMS, AS WELL AS THE INVESTMENT CONSULTANTS.

UM, SORRY, COUNCIL MEMBER POOL.

DID YOU WANT TO, WELL, I WAS JUST GOING TO OFFER THAT BECAUSE OF THE SMOOTHING, THE SEVEN-YEAR SMOOTHING THAT DOES MITIGATE ANY IMPACTS, WE'RE IN A UNIQUE ECONOMIC ENVIRONMENT COMING OUT OF THE PANDEMIC AND EVERYTHING.

SO THAT EVEN IF WE WERE TO SAY, WELL, LOOK BACK AT HYPERINFLATION AND ITS IMPACTS ON PENSION FUNDS SAY TWO DECADES AGO THAT STILL WOULDN'T APPLY.

I DON'T THINK, UH, TO WHAT'S GOING ON HERE.

AND THAT'S WHY WE HAVE THE ACTIVE AND THE PASSIVE MONITORING BY EACH OF THE THREE PENSION BOARD TRUSTEES AND THEIR EXCELLENT STAFF TO KIND OF KEEP.

AND WE ALSO HAVE A PRETTY HIGH POWERED CONSULTANTS WHO ARE HELPING ADVISE US FINANCIALLY ON, ON OUR STATUS AND OUR CHOICES OF PURCHASES.

WHENEVER WE, WE, UM, WHENEVER WE EXPAND OUR INVESTMENTS, THE OTHER THING I WAS GOING TO SUGGEST BELINDA, UM, BASED ON, UH, COUNCIL MEMBER ALTER'S QUESTIONS WERE ON THE CHANGES TO THE, UM, CRITERIA FOR THE THREE PENSION PLANS.

MAYBE IF YOU HAD A SLIDE THAT SHOWED WHAT THEY WERE A YEAR AGO, LIKE TAKE THAT SLIDE FROM THE PRESENTATION A YEAR AGO, AND THEN YOU CAN SHOW THE SHIFT AFTER THE, THIS LEGISLATIVE SESSION AND WHERE THE CONTRIBUTIONS CHANGED BASED ON WHAT THEY WERE LAST YEAR, RATHER THAN SIMPLY SHOWING US WHAT THEY ARE GOING FORWARD.

YES, I CAN, I CAN DEFINITELY DO THAT IN NEXT YEAR'S PRESENTATION, OR MAYBE SEND US THAT, THAT SLIDE FROM LAST YEAR AND THEN

[00:30:01]

WE COULD LINE IT UP OURSELVES.

AND I THINK THAT THAT WOULD HELP, UM, EXPLAIN WHERE WE WERE A YEAR AGO.

THANKS COLLEAGUES, OTHER QUESTIONS.

UM, SO MS. WEAVER FOR THE COERCE INCREASED TO 19%, AGAIN, THE WAY THIS IS PRESENTED MAKES IT REALLY CHALLENGING TO, TO FOLLOW BECAUSE YOU HAVE SOME THINGS WHEN IT'S ELIGIBLE AT THIS POINT, AND THEN YOU'RE CHANGING IT BACK AND FORTH, AND THEN YOU HAVE THE CHANGES.

UM, SO YOU MENTIONED, UM, LET ME JUST FIGURE OUT WHERE IT IS.

SO ON SLIDE FOUR, YOU HAVE THE OLD CONTRIBUTION RATES BECAUSE NOW WE WERE LOOKING BACK AT SEPTEMBER, BUT THEN THE DECEMBER CALCULATIONS ARE BASED ON, I MEAN, THERE'S SOMETHING WEIRD ABOUT HOW THIS IS PRESENTED IN TERMS OF HOW THINGS ARE GOING, BUT YOU SAID THAT THE COLORS WENT UP TO 19%.

CAN YOU DID JANUARY 1ST, 2021, THE CITY CONTRIBUTION RATE DID GO UP TO 19%.

OKAY.

THAT IS A PART OF THE CALCULATIONS, UM, AS OF, UH, DECEMBER 31ST, 20, 20 FORWARD, UM, THE, WHEN THE ACTUARIES ARE REVIEWING AND DOING THEIR CALCULATIONS FOR THE, UM, FOR THEIR EVALUATIONS, THEY DO PROJECT.

UM, AND THAT 19% IS FACTORED IN FOR THE EMPLOYEES RETIREMENT SYSTEM.

SO I DID WANT TO MENTION IT, BUT SO THAT'S FACTORED IN, WHEN WE'RE LOOKING AT IT, THE STATUS AS OF DECEMBER 31ST, 2020 IN TERMS OF WHAT'S GOING TO HAPPEN AFTER THAT GOES INTO EFFECT INTO THE CALCULATIONS.

EXACTLY.

OKAY.

BUT AT THAT TIME IT WAS NOT THESE NUMBERS, THESE WERE THE PERCENTAGES, BUT NOW WE'RE LOOKING BACK AT 12 30, 1 20 AND PROJECTING IT BASED ON THE NEW, WELL, IT'S PROJECTING IT FORWARD.

RIGHT.

IT'S PROJECTING IT.

SO WE'RE, YOU'RE PRESENTING US OUR PENSION RESULTS A YEAR, A YEAR AGO, BUT THEY ARE BASED ON PROJECTIONS FROM THE CHANGES THAT WE'VE MADE.

EXACTLY.

OKAY.

THAT'S CORRECT.

UM, SO IF THERE ARE NO OTHER QUESTIONS, BUT I THINK, UM, MS. WEAVER FOR, FOR BEING HERE, UM, YOU KNOW, THE, THE APRS CHANGES THAT MAY GET REALLY COMPLICATED REALLY QUICKLY.

UM, AND YOU KNOW, EVERYONE ON THIS COMMITTEE WAS INVOLVED IN THE PENSION WORKING GROUP AND WAS VERY INVOLVED IN SUPPORTING EFFORTS, UM, TO MAKE THESE CHANGES AT THE LEGISLATURE.

I WANT TO, UM, GIVE A SHOUT OUT TO REPRESENTATIVE RODRIGUEZ WHO REALLY HELPED US, UM, MOVE THIS LEGISLATION THROUGH AND HELPED US, UM, IN WORKING WITH APRS TO COME TO A MUTUALLY AGREEABLE SOLUTION THAT IS REALLY IMPORTANT FOR THE FISCAL HEALTH.

IT GETS TECHNICAL REALLY QUICKLY.

UM, BUT IT, BUT IT, UM, HELPS US ADJUST THE RISK AND HELPS US TO MAKE SURE THAT WE ARE PROVIDING THE BENEFITS PROMISED, UM, TO OUR POLICE OFFICERS.

SO, UM, THANK YOU TO STAFF FOR, FOR WORKING ON THAT.

UH, COUNCILMAN W YEAH.

I, UM, UH, AGREE WITH YOU WITH, WITH WHAT YOU'RE SAYING ABOUT THE ROLE THAT REPRESENTATIVE RODRIGUEZ PLAYED.

UH, HE REALLY MADE IT POSSIBLE FOR THE LEGISLATION TO PASS AND THE REFORMS WERE IMPERATIVE, UM, AND, UH, IT ALLOWED THE CITY OF AUSTIN AND APRS TO CONTINUE TO CONTROL, UH, ITS DESTINY, UH, WITH REGARD TO THIS PARTICULAR PENSION FUND, AS OPPOSED TO SHIFTING INTO, UM, YOU KNOW, IN, INTO ANY OTHER HANDS.

SO, UH, I THINK THAT ALSO WAS CLEARLY NECESSARY.

I'M HOPEFUL THAT WE HAVE, UM, GOOD RESULTS FROM OUR WORK ON CONTINUING THE REFORMS AT CO-CHAIRS, UH, UH, IN THE NEXT COUPLE OF YEARS AS WELL.

YEP.

AND ALSO WANT TO THANK THE APRS LEADERSHIP AND BOARD, UM, FOR JOINING US IN THESE EFFORTS, UM, TO MAKE EVERYTHING, UH, FISCALLY SOUND IT'S, IT'S IMPORTANT AND WE'RE PARTNERS IN ENSURING, UM, THAT WE HAVE THE APPROPRIATE RETURNS TO PROVIDE, UM, THE RETIREMENT TO THOSE WHO SERVED OUR CITY.

SO THANK YOU.

UM, THE NEXT ITEM

[3. Briefing on Austin-Bergstrom Landhost Enterprises, Inc. (ABLE) and the operations and financial information of the Hilton Hotel at Austin-Bergstorm International Airport.]

IS ITEM THREE, A BRIEFING ON ABEL AND THE OPERATIONS AND FINANCIAL INFORMATION OF THE HILTON HOTEL AT AUSTIN BERGSTROM INTERNATIONAL AIRPORT.

WHO'S MAKING THEIR PRESENTATION.

[00:35:37]

PRESENTATION THREADY, WHENEVER OTHER PRESENTERS YOU'LL HEAR ME.

MY NAME IS, CAN YOU SPEAK UP A LITTLE, IT'S A LITTLE BIT HARD TO HEAR YOU SO WE CAN HEAR YOU.

IT'S JUST A LITTLE, UH, QUIET.

UM, I KNOW TRACY THOMPSON IS ALSO SUPPOSE TO, IF YOU JUST SPEAK UP JUST SLIGHTLY LOUDER, WE CAN, WE CAN HEAR YOU.

YOU HAVE, WE HAVE SOUNDS JUST NOT SUPER LOUD.

OKAY.

ALL RIGHT.

UM, I'M SORRY, I'M WAITING FOR MY COLLEAGUE TRACY THOMPSON TO, I CAN GO AHEAD AND ADD TRACY FOR YOU.

OKAY.

TRACY THOMPSON, GIVE ME ONE SECOND.

THANK YOU, MORNING.

GOOD MORNING.

AND WHEN YOU'RE READY.

THANK YOU, MS. THOMPSON.

THANK YOU VERY MUCH.

GOOD MORNING, EVERYONE.

MY NAME IS TRACY THOMPSON, AND AS WE PROMISED YOU LAST MAY, WE WERE, UH, COMING TO BRING YOU AN UPDATE ON OUR WONDERFUL HILTON HOTEL AT THE AUSTIN BERGSTROM INTERNATIONAL AIRPORT.

UM, IF YOU'LL GO TO THE NEXT SLIDE, PLEASE.

SO BRIEF INTRODUCTIONS AGAIN, I AM TRACY THOMPSON.

I'M WEARING A COUPLE OF HATS AS TODAY.

I AM THE CHIEF OFFICER AT THE AIRPORT FOR ADMINISTRATIVE AND EXTERNAL AFFAIRS.

I'M ALSO THE INTERIM AIRPORT, CHIEF OFFICER FOR OUR CAPITAL DEVELOPMENT PROGRAM AND ALSO THE VICE PRESIDENT OF AUSTIN BERGSTROM LANTOS ENTERPRISES.

THE ACRONYM IS ABEL JOINING ME TODAY IS MY COLLEAGUE, UH, RAJEEV THOMAS HE'S THE AIRPORT, DEPUTY CHIEF OF FINANCE, AND ALSO JOINING US TODAY IS OUR, IS JACKIE AFT, OUR DIRECTOR OF THE DEPARTMENT OF AVIATION AND THE CEO FOR AUSTIN BERTRAM INTERNATIONAL AIRPORT.

SO THANK YOU SO MUCH FOR INVITING US BACK TO GIVE YOU THIS UPDATE.

NEXT SLIDE PLEASE.

SO WHAT WE'RE GOING TO GIVE TO YOU TODAY IS A VERY, UM, SHORT UPDATE.

AND WE'RE WELCOME TO TAKE ANY QUESTIONS.

IF YOU HAVE ANY QUESTIONS ABOUT THE HOTEL OR WE'RE GOING TO GIVE YOU A FINANCIAL UPDATE, UH, AS WE PROMISED THAT WE WOULD ON A QUARTERLY BASIS REGARDING THE, UH, PROGRESS OF THE HILTON HOTEL, AS IT TRANSITIONS OUT OF THE PANDEMIC AS THE AIRPORT IS TRANSITIONING OUT.

AND THEN WE'LL ALSO GIVE YOU A COUPLE OF SLIDES ON THE COMPARATIVE ANALYSIS TO OTHER AIRPORT HOTELS.

SO AS INDUSTRY HAVE ANY QUESTIONS WE'LL GO AHEAD AND GET STARTED AND REGIVE WILL PRESENT THE FINANCIAL UPDATE.

UH, GOOD MORNING CHAIR AND COUNCIL MEMBERS.

MY NAME IS RICHARD THOMAS, DEPUTY CHIEF OF FINANCE DEVIATION DEPARTMENT.

UH, NEXT SLIDE PLEASE.

UM, LIKE EXPLAIN PLEASE.

OKAY.

SO, UM, JUST TO GIVE A LITTLE BACKGROUND, YOU KNOW, BACK IN MAY, YOU KNOW, WE CAME TO THE COUNCIL TO ASK FOR AN APPROVAL OF THE OPERATING LOAN, AND, UH, WE HAD STATED AT THAT TIME THAT WE WILL COME BACK AND GIVE YOU A PRESENTATION ON THE FINANCIAL PERFORMANCE OF THE HOTEL AND HOW IT IS PROGRESSING, UM, YEAR TO DATE.

SO WHAT THIS, WHAT THESE RESULTS PRESENT IS FROM JANUARY THROUGH SEPTEMBER, HOW THE HOTEL HAS BEEN PERFORMING.

AND I'VE INDICATED ABOUT THREE COLUMNS HERE, WHICH IS JANUARY, JUNE, AND SEPTEMBER TO KIND OF GIVE YOU AN IDEA ABOUT HOW THE PERFORMANCE OF THE HOTEL HAS PROBABLY PROGRESSED THROUGHOUT THE YEAR.

UM, YOU KNOW, UH, YOU KNOW, INITIALLY BACK IN JANUARY, FEBRUARY, YOU CAN SEE OUR OCCUPANCY RATES WERE VERY LOW AND, UH, YOU KNOW, EVEN BEGINNING OF, OUT-STATE SORRY, SINCE THE BEGINNING OF THE PANDEMIC, YOU KNOW, WE, OUR OCCUPANCY RATES THROUGH JANUARY, FEBRUARY, IT WAS AROUND 20 TO 30%.

AND, UH, YOU KNOW, WE WERE IN THE RED ALL THOSE MONTHS.

AND, UH, UH, YOU KNOW, WE HAD ASKED FOR THE OPERATING LOAN TO PAY BACK ALL THOSE, UH, PAST THE PAYABLES THAT WE HAD ACCUMULATED.

SO AS YOU CAN SEE FROM THESE CHARTS, UM, STARTING IN MARCH AS THE VACCINATIONS BECAME MORE AVAILABLE TO THE GENERAL PUBLIC, UM, THE, THE TRAVEL INDUSTRY STARTED TO RECOVER AND YOU CAN SEE THAT THE OCCUPANCY RATES IMPROVED,

[00:40:01]

UH, FROM, YOU KNOW, 20 TO 30% TO 51% AND STAYED AT ABOUT 50% TILL JUNE.

IT TOOK ANOTHER LEAP UP TO ABOUT 60 TO 70% AND CONTINUED THROUGH SEPTEMBER.

SO THE PERFORMANCE REALLY IMPROVED OUR AVERAGE DAILY RATES.

ALSO, AS YOU CAN SEE, UH, STEADILY MADE A CLIMB UP TO, ALONG WITH THAT SAME TIMEFRAME.

AND, YOU KNOW, WE STARTED TO REALIZE ABOUT $130, $240 IN AVERAGE DAILY RATES FROM JUNE TO SEPTEMBER AND OUR OPERATING REVENUES, YOU KNOW, UH, FOLLOWED THAT I'M NOT TRYING TO, AND YOU CAN SEE IN SEPTEMBER, UH, WE ACTUALLY EXCEEDED $1 MILLION IN OPERATING REVENUES.

UM, WELL THAT MONTH AND OUR EBITDA ALSO RECOVERED, UM, IN JANUARY AND FEBRUARY, WE WERE IN THE RED, AS YOU CAN SEE.

AND THEN MARCH, APRIL, MAY, WE STARTED TO GET SOME EXCESS REVENUES THAT STARTED FLOWING AFTER PAYING ALL THE, UM, THE OPERATING OBLIGATIONS FOR THOSE CURRENT MONTHS.

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

AND ALSO IN THIS TIMEFRAME, WE ALSO GOT FORGIVENESS FOR OUR PPP ONE LOAN, WHICH WAS 907,555.

WE GOT A HUNDRED PERCENT FORGIVENESS ON THE WHOLE LOAN A MONTH.

NO, MR. THOMAS, BEFORE YOU GO TO THE NEXT SLIDE, CAN YOU JUST EXPLAIN FOR THOSE ARE WATCHING SINCE IT'S NOT ON THE SLIDE, WHAT THE EBI TDA STANDS? OH, YES.

IT'S EARNINGS BEFORE INTEREST TAXES, DEPRECIATION AND AMORTIZATION.

SORRY, CAN YOU REPEAT THAT EARNINGS BEFORE INTEREST TAXES, DEPRECIATION AND AMORTIZATION.

THANK YOU.

THANK YOU.

NEXT SLIDE PLEASE.

SO THIS IS, THIS SLIDE SHOWS HOW THE HOTEL HAS BEEN PERFORMING VERSUS THE OVERALL AUSTIN MARKET.

AND ALSO OUR COMPETITIVE SET.

OUR COMPOSITE COMPETITIVE SET IS A LIST OF HOTELS THAT HAVE THE SAME CHARACTERISTICS, UM, AS THE, THE AIRPORT HILTON.

AND, UH, THIS, THESE COMPETITIVE SET WAS CHOSEN BACK IN 2017 WHEN WE DID THE BOND RESTRUCTURING.

SO AS YOU CAN SEE, UH, THE, YOU KNOW, THE OCCUPANCY RATES FOR THE HILTON AUSTIN WAS 55%.

OUR AVERAGE DAILY RATE YEAR TO DATE IS A HUNDRED AND TWENTY SIX NINETY FOUR.

AND OUR REVENUE PER AVAILABLE ROOM IS 69, 84 COMPARED TO THE OVERALL AUSTIN MARKET.

IT, UH, YOU KNOW, THE OCCUPANCY RATE, AS YOU CAN SEE A SLIGHTLY BELOW, BUT AVERAGE DAILY RATE IS A LITTLE BIT HIGHER BECAUSE THEY, WHEN WE LOOK AT THE OVERALL AUSTIN MARKET, THIS INCLUDES ALL CLASSES OF HOTELS.

SO, UM, YOU'RE TALKING ABOUT, YOU KNOW, LOWER RATE HOTELS, YOU KNOW, TWO STAR, THREE STAR HOTELS, ET CETERA.

AND, UH, AND THE, THE, THE REVENUE PER AVAILABLE ROOM ALSO UNDERPERFORMED A LITTLE BIT, BUT VERSUS THE COMPANY THAT'S COMPETITIVE SET, WE OVER-PERFORMED, UM, YOU KNOW, THE OCCUPANCY RATES WERE BETTER AT 55% VERSUS 49.4.

OUR AVERAGE DAILY RATE WAS $127 VERSUS ABOUT $117 AND HOUR, YOU KNOW, ROUGH POWER OR THE ROOMS PER AVAILABLE, UH, REVENUE PER AVAILABLE ROOM WAS $69 AND 84 CENTS VERSUS 57 62.

SO IN THE COMPETITIVE SET, WE HAVE, UH, FIVE HOTELS IN THE COMPETITIVE SIDE.

UH, ONE IS THE DOUBLETREE AT TWO 90, UH, THE MARRIOTT SOUTH, THE AUSTIN SOUTH PARK HOTEL IN THE RADISSON HOTEL.

THERE WAS ALSO THE, UM, ONE OF THE HOTELS THAT CLOSED IN MAY.

THAT WAS ALSO A PART OF THIS COMPETITIVE SET, BUT, UH, THAT WAS THE, I BELIEVE THE CROWN, UH, PLAZA HOTEL THAT WE'VE, UH, NO, I'M SORRY.

THE WYNDHAM, THE WYNDHAM HOTEL CLOSED IN MAY.

THAT USED TO BE PART OF THIS COMPETITIVE SECTOR, BUT THE TRAVEL TREE, AS YOU CAN SEE, UH, DURING THIS TIME PERIOD DURING COVID WAS HOUSING, THE TEXAS DEPARTMENT OF EMERGENCY MANAGEMENT, AND, UH, THE SOUTH PARK, THE AUSTIN SOUTH PARK HOTEL USED TO BE KNOWN AS THE OMNI HOTEL, AND THEY REBRANDED AT AUSTIN SOUTH PARK, SOUTH PARK HOTEL IN AUGUST, AND THE RADISSON HOTEL WAS PREVIOUSLY THE CROWN PLAZA.

SO THAT IS OUR COMPETITIVE SET.

AND AS I MENTIONED BEFORE, THE WYNDHAM CLUBS, NEXT SLIDE, PLEASE, PLEASE FEEL, FEEL FREE TO STOP ME IF YOU HAVE ANY QUESTIONS AS WE GO THROUGH.

NEXT SLIDE, PLEASE.

OKAY.

SO REGARDING THE LOAN, UM, THIS LOAN WAS STRUCTURED

[00:45:01]

IN TWO WAYS.

ONE WAS, THERE WAS A BASE LOAN, WHICH WAS THE 1.35 MILLION, WHICH WAS THE INITIAL DRAW THAT WE WERE GOING TO USE TO PAY ALL THE PAST FEW INVOICES.

AND THEN THERE WAS A CONTINGENCY LINE OF CREDIT FOR 1.2, 5 MILLION THAT WE WOULD DRAW ON IN CASE.

UM, YOU KNOW, WE DIDN'T SEE THE ECONOMIC RECOVERY, UH, UH, COME SOONER AND, YOU KNOW, THE HOTEL WAS STILL IN THE RED, UH, IN THE COMING MONTHS.

UH, THE CITY COUNCIL APPROVED THIS, THIS, UH, OPERATING LOAN ON JUNE 3RD, 2021, UH, NEXT YPO.

AND TH THE LOAN WAS FUNDED ON AUGUST 9TH, 2021.

SO THAT IS WHEN ABEL RE RECEIVED THE FUNDS AND HAVE TO BE APPROVED.

WELL, UH, WE HAD TO GO THROUGH, UH, THE, THE APRIL BOARD APPROVAL.

IN THE MEANTIME, WE HAD TO GO THROUGH THE PURCHASING DEPARTMENT TO SET UP A MASTER AGREEMENT, ET CETERA, UH, ONCE WE HAD THE FINAL OPERATING AGREEMENT.

SO THE LOAN WAS FUNDED AS OF AUGUST 9TH, 2021 FOR 1.3, 5 MILLION.

SO OUT OF THAT LOAN AMOUNT, WE USE ALMOST 800 AND I MEAN, $825,000, UH, TO PAY ALL THE PAST DUE INVOICES.

AND WE HAVE ABOUT $525,000 FROM THAT INITIAL DRAWS STILL LEFT.

UM, BASED ON WHAT WE ARE SEEING IN THE PERFORMANCE OF THE HOTEL, WE REALLY DON'T THINK, UM, THAT WE WOULD NEED ANY MORE OF THAT OPERATING LOAN TO MEET ANY OBLIGATIONS GOING FORWARD, AT LEAST NOT THE OPERATING OBLIGATIONS, SO GOING FORWARD.

SO OUR INTENT RIGHT NOW IS TO TAKE THOSE UNUSED LOAN PROCEEDS AND TRANSFER IT BACK TO THE DEPARTMENT OF AVIATION.

UM, AND, UH, YOU KNOW, THERE IS ALWAYS THE 1.2, 5 MILLION LINE OF CREDIT THAT IS AVAILABLE TO THE HOTEL IF IT NEEDS TO DRAW THROUGH DECEMBER, 2022.

UH, SO THAT IS RIGHT NOW THE PLANS, UH, WITH THE LOAN PROCEEDS AND, UH, UH, THAT, THAT WAS THE STATUS OF THE LOAN THAT THE COUNCIL APPROVED.

SO IF YOU HAVE ANY QUESTIONS, PLEASE FEEL FREE TO ASK ME IF, UH, IF THERE IS NOT, I WOULD LIKE TO HAND IT OVER TO TRACY, UH, TO, TO PRESENT, UH, THE, THE COMPARISONS OF HILTON HOTEL TO OTHER FEAR, AIRPORT HOTELS, UH, THAT WAS REQUESTED MY COUNCIL MEMBER, UH, CATHEDRAL, THE NEXT SLIDE, PLEASE.

AND THEN THE ONE AFTER THAT, AS WELL AT SEE, YES, NEXT SLIDE PLEASE.

SO, UM, IN ADDITION TO COMPARING, UH, THE HILTON PERFORMANCE AT THE AIRPORT AGAINST OTHER AUSTIN-BASED COMPETITIVE SET AIRPORTS, WE ALSO LOOK AT OTHER AIRPORT HOTELS, HOTELS THAT ARE LOCATED ON AIRPORT PROPERTIES, AND THAT COMPETITIVE SET THAT WE LIKE AND THE HILTON HOTEL AT THE AUSTIN BERGSTROM INTERNATIONAL AIRPORT TOO, IS THIS LIST OF HOTELS ON THE LEFT, PLEASE, PITTSBURGH ST.

LOUIS, UH, NEW ORLEANS AND OUR PERFORMANCE, UH, FOR OCCUPANCY AVAILABLE, UM, AVAILABLE DAILY RATE AND REV PAR REVENUE PER AVAILABLE ROOM, THE AVERAGE DAILY RATE AND REVENUE PER AVAILABLE ROOM, OR IN THE CHARTS ABOVE AND AUSTIN HILTON AIRPORT IS, UM, HOTEL IS REFLECTED IN THE ORANGE LINE.

AND SO YOU CAN SEE, AND, UM, THAT WE ARE CONSISTENT WITH AND OUTPERFORMING SOME OF OUR COMPETITIVE SET AIRPORTS THROUGHOUT THE COUNTRY.

SO WE CONTINUE AS NOT ONLY THE DEPARTMENT OF AVIATION, BUT ALSO THE BOARD OF DIRECTORS FOR THE ABL CORPORATION, CONTINUE TO FOLLOW THESE METRICS AND, UH, ADDRESS ANY ISSUES TO MAKE SURE THAT WE ARE NOT ONLY PROVIDING THE BEST SERVICES FOR THE LOCAL COMMUNITY, BUT MAKING SURE AND OUR VISITORS AND GUESTS THAT COME TO AUSTIN, BUT ALSO TO MAKE SURE THAT WE ARE PERFORMING RELATIVE TO OTHER AIRPORT HOTELS, UM, JUST ANECDOTALLY, AND I BELIEVE THIS IS OUR LAST SLIDE, BUT JUST ANECDOTALLY A LOT OF THE, UH, THE ABILITY OF THE AIRPORT HOTEL TO PERFORM WELL IS BASED UPON HOW WELL YOUR AIRPORT PERFORMS. IT'S THE CITY OF AUSTIN AIRPORT PERFORMS THAT GET A LOT OF TRAFFIC BASED UPON THE PERFORMANCE AND THE, UM, OF THE AIRPORT.

THERE'S A LOT OF CREW CONTRACTS FOR OUR AIRLINES THAT, UM, OPERATE HERE AND AS THEIR FLIGHTS INCREASE, THEIR CREW NUMBERS INCREASE, WHICH ALSO HELPED SUPPORT THE, UM, THE HOTEL.

SO THE BEST WAY TO SUPPORT THIS HOTEL IS TO SUPPORT THE AIRPORT.

IT ALL IS LINKED TOGETHER.

AND WE THANK YOU IN THE PAST AND IN THE FUTURE FOR YOUR SUPPORT OF BOTH OF THESE ENTERPRISES, UH, RAJEEV AND JACKIE AND I ARE HERE TO ANSWER ANY QUESTIONS OR TO TAKE DOWN NOTES FOR ADDITIONAL INFORMATION THAT YOU WOULD LIKE ABOUT THE HOTEL MOVING FORWARD.

SO I THINK THAT'S THE END OF OUR PRESENTATION.

THANK YOU.

THANK YOU.

YEAH, IF YOU CAN TAKE THE PRESENTATION DOWN, THAT'D BE GREAT.

APPRECIATE ALL OF YOUR JOINING US TODAY TO PROVIDE THIS INFORMATION.

COLLEAGUES, DO YOU HAVE ANY QUESTIONS, UM,

[00:50:01]

CUSTOMER TYPICAL? I DO.

THANK YOU.

THIS IS REALLY USEFUL AND INTERESTING INFORMATION.

I LIKELY WILL HAVE MORE QUESTIONS BEYOND TODAY, BUT I HAVE A COUPLE OF QUICK ONES.

UM, COULD WE GO BACK TO SLIDE FOUR AND YOU DON'T NEED TO PULL IT UP NECESSARILY, BUT I WANT TO TALK A LITTLE BIT ABOUT WHAT WE'RE SEEING ON HERE.

UM, AND WHEN EMPLOYEES STARTED TO BE HIRED BACK, JUST TO MAKE SURE I'M UNDERSTANDING HOW THAT, UM, WHEN AND HOW THAT HAPPENED, UM, WHEN THAT HAPPENED AND WHAT ITS IMPACT WAS IN TERMS OF THE REVENUES AND OPERATING EXPENSES.

SURE.

SO, UM, YOU KNOW, WHEN WE LOOK BACK, THE EMPLOYEES REALLY STARTED TO, YOU KNOW, WE, WE STARTED TO SEE THE OCCUPANCY RATES INCREASE, YOU KNOW, MARCH, APRIL, MAY, AND WE HAD SOME CHALLENGES INITIALLY IN GETTING EMPLOYEES BACK AND HIRING.

UM, AND, UH, WE HAD TO GO THROUGH CONTRACT LABOR TO SUPPLEMENT A LOT OF THE HOUSEKEEPING STAFF.

UM, IF YOU GO BACK TO LIKE THE MAY ACTUAL PERFORMANCE, YOU KNOW, FOR THAT PARTICULAR MONTH, UM, COMPARED TO HOW THE AIRPORT DID, UM, WE HAD CHALLENGES IN GETTING HOUSEKEEPING STAFF AND MAKING THE ROOMS AVAILABLE AND READY FOR THE, THE, THE NEXT MORNING.

UM, SO THIS, THIS HOTEL IS VERY DEPENDENT ON WHAT WE CALL THE OVERNIGHT STAY, UM, PASSENGERS THAT, YOU KNOW, TAKE EARLY MORNING FLIGHTS.

SO THE, THE TURNOVER IN ROOMS IS JUST LIKE USUALLY JUST ONE DAY, YOU KNOW, MOST THE AVERAGE, UM, THE CUSTOMER STAYS THERE JUST A LITTLE OVER ONE DAY.

I THINK IT'S LIKE 1.2 DAYS OR SOMETHING IS WHAT WAS GOING TO, UM, UH, MENTIONED TO ME.

SO WE HAVE A NEED TO HAVE A LOT MORE HOUSEKEEPING STAFF THAN OTHER TYPICAL HOTELS WHERE THE AVERAGE DAY MIGHT BE TWO TO THREE DAYS.

SO, YOU KNOW, WHEN YOU HAVE CHALLENGES, HIRING STAFF THAT AFFECTS THE ROOMS THAT WE CAN HAVE READY FOR BOOKINGS.

SO THAT AFFECTED JUST THE MONTH OF MAY, BUT, YOU KNOW, WE, WE DID A GREAT JOB OF GETTING CONTRACT LABOR AND HIRING UP FOR THE MONTH OF JUNE GOING FORWARD.

AND, UH, WE ALSO, UH, INCREASE THE HOURLY WAGE TO $14 AN HOUR.

AND, UH, YOU KNOW, DEPENDING ON THE LEVEL OF EXPERIENCE, UH, THAT GOES HIGHER FROM $14 AN HOUR FOR HOUSEKEEPING STAFF, UH, BUT STILL, YOU KNOW, TALKING TO THE GENERAL MANAGER THERE, WE STILL HAVE CHALLENGES, YOU KNOW, AS MOST BUSINESSES ARE FACING, UM, IN HIRING UP.

UM, BUT YOU KNOW, THEY ARE DOING A GREAT JOB.

AND DURING THAT EARLY PERIOD, THE HOTEL MANAGEMENT WAS, UH, MENTIONED THAT THEY WERE GOING AND CLEANING THE ROOMS AND, YOU KNOW, UH, CHANGING THE BED SHEETS ON GETTING THE HOTEL ROOMS READY.

UH, SO, YOU KNOW, THEY'RE JUST, IT'S A TEAM EFFORT AND THEY'RE TRYING TO MAKE AS MANY ROOMS AVAILABLE.

DO YOU HAVE ANY SENSE? THANK YOU.

THAT IS REALLY VERY INTERESTING.

AND YOU'VE HIGHLIGHTED A FEW ELEMENTS OF, OF, UM, WHAT IS DIFFERENT ABOUT THE HILTON THAN SOME OTHER HOTELS.

I THANK YOU FOR THAT ADDITIONAL INFORMATION.

DO YOU HAVE ANY SENSE OF HOW MANY EMPLOYEES RETURN TO THEIR JOBS VERSUS OUR NEW HIRES? OR COULD YOU MAYBE GET THAT INFORMATION TO US? WE WOULD HAVE TO GET THAT IN.

OKAY.

THANK YOU.

I MAY HAVE SOME MORE QUESTIONS, BUT THAT'S, THAT'S WHAT I'VE GOT FOR NOW.

THANK YOU.

OKAY.

THANK YOU.

UM, COLLEAGUES, I DID WANT TO JUST TOUCH BASE IF WE WANT TO CONTINUE TO HAVE THESE PRESENTATIONS, UM, IN PERSON DURING THE MEETING, OR IF WE THINK THAT MEMOS MIGHT BE APPROPRIATE, UH VICE-CHAIR POOL.

I THINK YOU HAD REQUESTED THESE BRIEFINGS IN THE FIRST PLACE.

I THINK, UM, WE WERE LOOKING TO CATCH EVERYBODY UP AND MAKE US MUCH MORE CONVERSANT WITH, UM, ACTIVITY GOING ON WITH THE VARIOUS ASSOCIATED ENTITIES WITH THE CITY.

SO I'M, I'M GRATEFUL TO HAVE THESE OPPORTUNITIES TO HAVE STAFF IN PERSON AND, AND HAVE THEM, UM, HAVE THEM PERIODICALLY THROUGHOUT THE YEAR.

I THINK, UM, I THINK IT'S USEFUL AS OPPOSED TO SIMPLY A MEMO.

OF COURSE, WE GET THE INFORMATION ALSO IN PAPER FORM AS PART OF OUR BACKUP, AND I APPRECIATE THE CHAIR MAKING ROOM FOR, UM, THESE UPDATES A FEW TIMES A YEAR.

OKAY, WELL THEN WE WILL, UM, WE WILL CONTINUE, UM, TO INVITE YOU TO JOIN US.

UM, THERE IS NOT A, UH, BODY MORE BROADLY THAT DOES OVERSIGHT OVER THE AIRPORT FROM COUNCIL.

SO I WOULD JUST, UM, INVITE MISS YAPHET IF THERE'S SOMETHING ELSE THAT YOU THINK THAT THIS COMMITTEE, UM, OUGHT TO BE MORE CONVERSANT IN, UM, OR KNOW ABOUT, THAT WOULD BE HELPFUL TO HAVE, UM, FURTHER

[00:55:01]

COUNCIL ENGAGEMENT TO PLEASE REACH OUT TO I OFFICE, UM, THAT IS NOT NECESSARY, BUT IT IS AN OFFER IF IT WOULD BE, UM, USEFUL, UM, TO YOUR WORK LEADING OUR AIRPORT, WHICH IS A WONDERFUL AIRPORT.

SO THANK YOU FOR BEING HERE.

WE APPRECIATE YOUR TIME AND THE INFORMATION, AND I'M GLAD TO SEE THAT YOU WON'T NEED ALL THE LOAN AND THAT THINGS ARE MOVING IN THE RIGHT DIRECTION.

THANK YOU SO MUCH.

THANK YOU.

THANK YOU.

HAPPY HOLIDAYS.

HAPPY HOLIDAYS TO YOU TOO.

THANK YOU.

THANK YOU VERY MUCH.

SO

[4. Briefing on the Fiscal Year 2021 City Auditor's Integrity Unit Report]

THE NEXT ITEM THAT WE WILL TAKE UP IS THE INTEGRITY UNIT REPORT.

GOOD MORNING.

GOTCHA.

THANK YOU.

WHILE WE'RE WAITING WHILE WE'RE WAITING FOR OUR NEXT PRESENTATION, I JUST WANT TO, I DO HAVE ONE MORE QUESTION FOR THE AIRPORT THAT I'M GOING TO GET TO THEM AFTER I'M TRYING TO HOW THAT $14 AN HOUR COMPARES TO OUR WAGE FLOOR THAT WE HAVE FOR OTHER CITY JOBS FOR REGULAR CITY OF AUSTIN JOBS.

UM, SO JUST COLLEAGUES, WE MAY HAVE FOLLOW UP ON THAT, ON THAT POINT.

THANK YOU VERY MUCH.

UH, IT'S A PLEASURE TO BE HERE AND PRESENT BEFORE THE COMMITTEE TODAY.

MY NAME IS BRIAN MILLER.

I AM THE CHIEF OF INVESTIGATIONS OF THE INTEGRITY UNIT AT THE OFFICE OF THE CITY AUDITOR.

THE INTEGRITY UNIT IS MADE OF FOUR, UH, MADE UP OF FOUR INVESTIGATORS.

AND, UM, IF YOU GO TO THE NEXT SLIDE AND HERE'S A QUICK AGENDA OF WHAT I'M GOING TO TALK ABOUT IN THIS PRESENTATION, WE'RE GOING TO GO OVER SOME ALLEGATION TRENDS FROM FISCAL YEAR 21, UH, TALKED ABOUT THE INVESTIGATIONS WE COMPLETED IN THIS FISCAL YEAR, AND THEN BRIEFLY TOUCH ON WHAT INVESTIGATIONS ARE ONGOING.

NEXT SLIDE.

ALRIGHT.

UH, LARGE SCALE INFORMATION HERE.

THERE WERE 242 ALLEGATIONS THAT CAME INTO MY TEAM OVER THE COURSE OF THE FISCAL YEAR.

THAT IS A DECREASE FROM THE YEAR BEFORE, AND WE'RE ON ABOUT A TWO YEAR TREND OF DECREASES, BUT THAT DOES LINE UP PRETTY WELL, UH, WITH THE COVID PANDEMIC IN A LARGE, UM, SWATH OF EMPLOYEES MOVING TO WORKING FROM HOME.

AND THAT JUST TENDS TO DIMINISH THE AMOUNT OF RED FLAGS THE EMPLOYEES CAN SEE THAT WOULD THEN LEAD TO ALLEGATIONS REPORTED TO OUR OFFICE.

WE DON'T ACTUALLY THINK FRAUD, WASTE AND ABUSE IS DECREASING BY THOSE NUMBERS.

WE'RE JUST HEARING ABOUT IT A LITTLE BIT LESS BECAUSE OF THE WORKING ENVIRONMENT.

UM, EVEN THOUGH WE'RE GETTING FEWER ALLEGATIONS IN, IT IS WORTH NOTING THAT A LARGER PERCENTAGE OF THOSE ALLEGATIONS ACTUALLY FIT WITHIN THE FRAUD WASTE AND ABUSE FRAMEWORK THAT IS WITHIN OUR JURISDICTION.

SO MY TEAM ACTUALLY HAD MORE ALLEGATIONS WITHIN OUR JURISDICTION THAT WE HAD TO TAKE INVESTIGATIVE STEPS FOR THIS YEAR THAN THE PREVIOUS YEAR.

SO OVERALL FEWER ALLEGATIONS, BUT AN INCREASE IN THE ONES THAT ARE WITHIN OUR JURISDICTION.

NEXT SLIDE.

UM, SO JUST SOME HIGHLIGHTS ABOUT WHAT WE'RE SEEING YEAR OVER YEAR CHANGES IN THE ALLEGATIONS THAT ARE COMING IN ON THE LEFT SIDE.

THERE, WE HAVE THE MOST COMMON OUTSIDE JURISDICTION ALLEGATIONS AND, UH, THE BIGGEST HUNK OF THAT GROUP IS HR RELATED CONCERNS THAT REPRESENTED 30%.

UM, NOW THAT WAS, IT LOOKS LIKE A BIG INCREASE OVER FISCAL YEAR 20 WHEN THEY WERE 19%.

UH, BUT A LOT OF THAT WAS DRIVEN BY COVID RELATED CONCERNS THAT WE JUST HAVEN'T HAD IN PREVIOUS YEARS, ESPECIALLY AS EMPLOYEES START TRANSITIONING BACK INTO WORKING CONDITIONS, WE SAW A LARGE UPTAKE IN ALLEGATIONS THAT WE HAD JUST NEVER SEEN BEFORE ABOUT A PLACE CONCERNED ABOUT HEALTH AND SAFETY, HOW, HOW THEIR NEW WORK ENVIRONMENTS CAN BE SET UP, HOW, UM, POTENTIAL EXPOSURE ISSUES ARE REPORTED AND HANDLED.

AND I THINK THAT COVERS A LOT OF THE INCREASE YOU'RE GOING TO SEE THERE.

THE OTHER LARGEST AREA WAS DEPARTMENT OPERATIONAL ISSUES, UM, THAT ACTUALLY DECREASED, UM, BUT NOT IN A WAY THAT, UM, B CAN EXPLAIN BY JUST YEAR OVER YEAR FLUCTUATION, THOSE OPERATIONAL ISSUES GO TO THE VARIOUS DEPARTMENTS TO HANDLE, UM, MOVING OVER TO THE ITEMS THAT ARE WITHIN OUR JURISDICTION OF FRAUD, WASTE AND ABUSE.

WE DID SEE A BIG UPTAKE IN CONFLICT OF INTEREST.

I THINK THAT'S MOSTLY TIED TO THE FACT THAT WE HAD THREE CONFLICT OF INTEREST CASES LAST YEAR.

UM, WHENEVER WE HAVE HAVE A CASE THAT PRODUCES A PUBLIC REPORT, IT GENERATES SOME, UM, UH, ATTENTION OR INCREASED ATTENTION TO THAT TYPE OF ISSUE.

AND SOMETIMES WE HEAR ABOUT A SIMILAR ISSUES A LITTLE BIT MORE BECAUSE EMPLOYERS ARE NOW MORE AWARE OF IT.

ADDITIONALLY, WE WORK WITH THE LAW DEPARTMENT IN THEIR ANNUAL ETHICS TRAINING AND, UH, THE ISSUES WE SEE IN A GIVEN YEAR GET FACTORED INTO THE TRAINING THEY GIVE THE NEXT YEAR.

SO THE MOST RECENT ETHICS TRAINING HAD AN EMPHASIS ON CONFLICT OF INTEREST.

AND I THINK THAT CAN HELP EXPLAIN WHY WE SEEING MORE CONFLICT OF INTEREST ALLEGATIONS.

UH, MISUSE ALLEGATIONS ALSO WENT UP, UH, ABUSE ALLEGATIONS WENT UP A LITTLE BIT

[01:00:01]

AND THEN OUR THEFT AND WASTE ALLEGATIONS BOTH WENT DOWN.

UM, BUT AGAIN, MOST OF THIS IS EXPLAINED BY JUST YEAR TO YEAR FLUCTUATION, NEXT SLIDE, UH, MOVING ON TO HOW PEOPLE REPORT TO OUR OFFICE, UH, IT'S BEST PRACTICE TO LET PEOPLE REPORT ANONYMOUSLY.

YOU'RE JUST NOT GOING TO HEAR ABOUT ALL THE CONCERNS THAT ARE OUT THERE IF THEY DON'T.

SO WE REALLY PRIORITIZE EASY WAYS TO REPORT TO OUR OFFICE ANONYMOUSLY.

WE HAVE AN ONLINE REPORTING FORM.

THAT'S ANONYMOUS.

WE HAVE, UH, EMAIL THAT PEOPLE CAN USE ANONYMOUSLY.

WE ALSO HAVE A PHONE LINE.

WHISTLEBLOWER HOTLINE IS WHAT THEY USUALLY CALL IT IN THE INDUSTRY WHERE PEOPLE CAN REPORT TO US ANONYMOUS ANONYMOUSLY IF THEY CHOOSE.

AND 64% OF ALL OF OUR REPORTERS CHOSE TO BE ANONYMOUS.

THAT'S AN UPTICK FROM THE PREVIOUS YEAR, AND IT JUST MATCHES EXACTLY WHAT WE READ ABOUT IN BEST PRACTICES THAT PEOPLE WANT TO BE ANONYMOUS.

AND IF YOU WANT TO HEAR ABOUT THINGS, YOU GOT TO LET THEM BE ANONYMOUS.

THE MOST COMMON REPORTING METHODS WERE THE ONLINE REPORTING FORM.

62% OF OUR REPORTERS USE THAT NEXT.

THE MOST COMMON WAS, UH, THE WHISTLEBLOWER HOTLINE AT 13.

AND I JUST THREW IN THAT LAST ONE THERE, THAT 5% OF OUR ALLEGATIONS CAME FROM DIRECT CONTACT TO THE INVESTIGATORS.

AND I THINK THAT GOES TO SHOW THAT PEOPLE HAVE HAD POSITIVE EXPERIENCES WITH MY INVESTIGATORS AND, UH, THEY THEY'VE LEARNED TO TRUST THEM.

THEY LEARNED THAT THEY ACTUALLY DON'T NEED TO BE ANONYMOUS, THAT THEY CAN JUST CALL THE INVESTIGATOR DIRECTLY AND REPORT A CONCERN THEY HAVE.

UM, SO I'M PROUD THAT AT LEAST 5% OF OUR REPORTERS FELT THAT WAY AND REACHED OUT TO THE INVESTIGATORS DIRECTLY.

NEXT SLIDE.

ALL RIGHT.

AS FAR, UH, THIS SLIDE IS MOSTLY JUST TO SHOW YOU WHAT SORT OF INFORMATION WE HAVE AVAILABLE TO TRACK.

I DON'T THINK ANY OF THESE, UH, BETTER TRENDING UP OR TRENDING DOWN ARE, ARE NECESSARILY ANY, ANY CONCERNS JUST YEAR OVER YEAR FLUCTUATION, BUT IT IS DATA THAT WE KEEP IN, IN CASE WE DO SEE A TREND THAT BECOMES CONCERNING.

SO WE HAD THREE DEPARTMENTS WHERE THEIR, UH, UM, THEIR PERCENTAGE OF THE ALLEGATIONS WE RECEIVE, UM, MOVED UP, UH, IN A REPORTABLE FASHION, OR THESE WERE THE THREE LARGEST.

ANYWAY, IT'S AUSTIN WATER, AUSTIN CODE AND CITY OFFICIALS ALL HAD MOVED UP TO 8% OF OUR INVESTIGATIONS, WHICH WAS AN INCREASE FROM THE PREVIOUS FISCAL YEAR.

UM, AND THEN THREE, JUST SHOWING YOU, WE HAVE THREE THAT MOVED DOWN.

UH, AUSTIN ENERGY ACTUALLY WENT DOWN FROM 17% IN FISCAL YEAR 20 TO 10% OF OUR ALLEGATIONS.

UH, CTM ALSO DROPPED AND DEVELOPMENT SERVICES DROPPED AGAIN.

I JUST THINK IT'S YEAR OVER YEAR FLUCTUATION, BUT IT IS SOMETHING WE CAN TRACK OVER THE LARGE SCOPE TO SEE IF ANYTHING IS ACTUALLY CONCERNING NEXT SLIDE.

ALL RIGHT, MOVING ONTO THE INVESTIGATIONS THAT WE FULLY COMPLETED THIS YEAR, AND EITHER PRODUCED A PUBLIC REPORT, OR IF IT DIDN'T HAVE A SUBSTANTIATED VIOLATION, JUST, UH, PRODUCED A CLOSE-UP MEMO THAT WE SHARED WITH THE RELEVANT DEPARTMENT IN THE CENTER.

THERE ARE THE ONES THAT GET THE MOST ATTENTION.

THOSE ARE OUR SEVEN SUBSTANTIATED CITY CODE VIOLATIONS.

UM, BUT WE ALSO HAD FOUR CASES THAT HAD AN UNSUBSTANTIATED RESULT, MEANING WE COLLECTED ENOUGH EVIDENCE TO SAY, WHAT WAS ALLEGED, DEFINITIVELY DID NOT HAPPEN.

AND THEN THERE WAS ONE CASE WHERE WE HAD EVIDENCE IN BOTH DIRECTIONS.

WE HAD HAVE AN INCONCLUSIVE RESULT.

UM, WE DON'T, WE DON'T LIKE THOSE, BUT THEY HAPPEN FROM TIME TO TIME.

BUT, UH, LUCKILY DUE TO THE, UM, INVESTIGATORS, UH, WORKING VERY HARD AND BEING DEDICATED, WE WERE ABLE TO SUBSTANTIATE HER ON SUBSTANTIATE 11 OF THE 12 NEXT SLIDE.

AND HERE'S A QUICK SUMMARY OF THOSE SEVEN INVESTIGATIONS THAT TURNED INTO PUBLIC REPORTS, UH, OF NOTE HERE.

UH, THEY SPAN FIVE DIFFERENT DEPARTMENTS.

AUSTIN ENERGY DID POP UP THREE TIMES.

UH, I DON'T THINK THAT'S PARTICULARLY CONCERNING.

THEY ARE ONE OF THE LARGEST DEPARTMENTS IN THE CITY AND NONE OF THE THREE CASES WERE RELATED TO THE OTHER.

SO THEY INVOLVE THREE DIFFERENT EMPLOYEES IN DIFFERENT JOBS, DOING VERY DIFFERENT THINGS.

SO, UM, NO INDICATION OF ANYTHING SYSTEMIC GOING ON.

THE OTHER THING WORTH NOTING HERE IS THAT THE DEPARTMENTS, UH, ALL TOOK CORRECTIVE DISCIPLINARY ACTION.

IN THESE CASES, THEY, THEY TOOK OUR RESULTS.

THEY THOUGHT THEY WERE, THEY WERE WELL SUBSTANTIATED AND, UM, THE VIOLATIONS WERE SERIOUS ENOUGH.

AND IN A MAJORITY OF THE CASES, SIX OUT OF SEVEN, IT ACTUALLY RESULTED IN EMPLOYEE SEPARATION.

NEXT SLIDE.

ALL RIGHT, MOVING ONTO THE ONGOING INVESTIGATIONS.

MY TEAM'S STILL LOOKING AT RIGHT NOW.

WE CURRENTLY HAVE EIGHT OPEN INVESTIGATIONS, THEY'RE ACROSS SEVEN DEPARTMENTS.

SO IT'S KIND OF DISPERSED ACROSS THE CITY AND THEY INVOLVE A LOT OF THE SIMILAR ISSUES THAT WE'VE SEEN OVER THE LAST COUPLE OF