Just in case there’s any confusion, this a story about money.
But to paraphrase a 1995 Western starring Tom Berenger and Barbara Hershey, “all the good stories start in the heart of a woman – or a man.”
Both the City and County of SLO are on the hunt for a new chief executive following SLO City Manager Katie Lichtig’s announcement in early Aug. that she’ll be headed back home to Santa Monica at the end of Sept.
Her departure will coincide, quite coincidentally, with the deadline for applications to the County top spot, vacated by Dan Buckshi in May. Both of their successors may end up being the agencies’ current deputies, as the “Number Ones’” in both organizations have expressed interest in replacing bosses headed for greener pastures.
As is the case of Arroyo Grande, the Police Chief position is set for an Aug. 22 City Council vote expected to officially place the job with their senior commander.
It’s a scenario being repeated across the Central Coast lately in municipalities and government agencies – Morro Bay and the South County Sanitation District come to mind, although not all have such clear lines of succession.
The hired investment consultants for the City of SLO’s managed money funds may have hit on the answer as to why it’s easier to change life course these days. While briefing the City’s Investment Oversight Committee (IOC) on Aug. 17, they explained that unemployment tipped to 4.4 percent in the last financial quarter, meaning that more jobs than workers are generally available for the moment.
But, said Izac Chyou, Senior Managing Consultant at PFM Asset Management LLC., it is puzzling as to why average hourly earnings overall are stagnant. Although their forecasts say, if the level drops towards 3.8 percent, wages will increase overall for the working stiffs.
It could be that SLO, with an higher educational base, great climate and growing attraction for tech industry is ahead of the curve, at least for top earners finding it time to jump ship.
The quarterly update presented by Chyou and PFM’s Monique Spike, said there would be a lag for the market to catch up. Derek Johnson, formerly both SLO’s interim finance director and assistant city manager – now just the assistant manager and only man to publicly announce desire for the top spot – had some questions for the consultants. In short how long is the lag between market movement and local results?
He referred mainly to movements in the Federal Reserve Bank’s interest rates and the Federal divestment of assists following the market crash of 2008. The answer was, “probably December or January of 2018.” Time enough to influence SLO’s investment strategy.
While lower unemployment means more immediate mobility for highly educated workers, possibly even better prospects for the working poor, PFM’s investment managers are looking to a coming “Bear Market,” similar to that which followed the seemingly never ending “Bull Market” that toppled fully in 2009.
The performance objective for the City’s PFM managed funds, which don’t touch saved liquid assets (checking), or City managed funds, is “to outperform Bank of America.”
To that end they focus on the premium paid for corporate and government agency bonds.
That led to an discussion, prompted by Lichtig, of whether or not it was wise to invest quite so much of the City’s substantial assets in financial sector bonds, given that it was that sector responsible for so much of the damage a decade ago.
Surprisingly, it seemed, to Lichtig and to the six public audience members gathered in the secondary Council hearing room at City Hall, Steve Barasch, the committee’s only public member agreed with her.
He also noted, in response to the PFM recommendation that the City expand into lower rated corporate bonds and consolidate under a single rating agency – for streamlining – that the scenario, “might not be best for a City of San Luis Obispo’s size.”
“And their risk adverse nature to boot,” was a clear subtext after five years that Barasch has spent fighting the IOC, first for a public position, then as the only publically appointed member. Around the time of said appointment, local critics of the City’s financial policies banded with the one-time mayoral candidate to get an public member onto the Committee which they felt was too insular and prone to stranglehold by unelected City officials.
At the time Lichtig had been with the City for two years and noted, defensively, that the committee meetings were not strictly her domain, as evidenced by the participation, and signatures of other attendees.
Nevertheless, following Barasch’s appointment as a public member to the committee – a move opposed by former Mayor Jan Marx – Lichtig, Barasch and Marx spent a lot of time together, years in fact, on the committee joined by a rotating cast of interim financial managers and a public auditor.
Marx is now retired from public life and to date, the new SLO Mayor, Heidi Harmon, has yet to appear to take her rightful seat at any of the IOC meetings. That’s something her critics (well represented among the Aug. 17 IOC meeting public attendees) classify as an unwillingness to engage in the City’s “nuts-and-bolts” policy decisions.
Lichtig , Barasch, Johnson, and Xenia Bradford (joining the cast as the new permanent finance director) seem to have an understanding for the moment though, with some of the key points they used to debate coming closer to resolution.
That is, from an outside respective.
Barasch and his public cohorts, specifically local business owner and property manager Leslie Hall, did appear at the last IOC meeting of Lichtig’s tenure to exhort the body to redefine their role as wealth preservation and financial planning tool.
However Barasch’s motion, a request that the full City Council be asked to consider adding another public appointee and to expand the IOC role to a more reactive short financial advisory force rather than a quarterly macro-level tool, was rejected.
As to a meeting of the minds however, after the public meeting, Lichtig admitted the influence that the public appointee has had in bringing about a more liberal investment strategy.
“Yes, we were more conservative than conservative,” she said, adding “there’s no doubting that,” referring to financial agency risk management and not politics.
Since PFM was brought aboard and Barasch rallied for greater investment returns regarding all the funds the City has tied up in bonds they’ve gone from a 0.47 percent return to 1.14 percent. Still less than some private savings accounts, it’s better than the City’s ever done, although PFM is quick to point out the temporary nature of such stats as they diversify for a long term strategy.
Barasch and his fellow financial hawks have also gone after the outgoing City Manager more for policy choices affecting an unsustainable California Public Employee Retirement System (CalPERS) debt.
With a characteristic wit, and hint of humor in her voice that does not often appear at City Council meetings but is recognizable over years of public appearances, Lichtig addressed the point directly.
“I jumped the gun earlier… responding to Leslie Hall about it being a Council decision [as to] the role this committee plays,” she said adding that the City has a “robust budget process with “many wonderful” qualities – that give the public a voice.
However, she said, she had, “not quite figured out how I’m responsible for all the evils of the spiraling costs associated with our CALPers obligations.”
While there will be “an educational process’ to come with the next budget , she said she was not in favor of expanding the IOC’s purview in the future.
As Bradford closed the meeting, she thanked her boss for years of service.
And, Barasch added, “No, Katie you are not responsible for all of our unfunded liabilities.”
To which Lichtig remarked, “Hey can you print that in the paper, Camas?”
Such informality is the nature of a small government meeting with more participants than attendees and a lone reporter in the corner, but she added on a serious note, “I just want people to understand that [CALPers] is a huge issue for the City that was not created by the people in this room. None of the people in this room were working for the City when those decisions were made in 2000.”
In case there’s any doubt she added, “I’m still focused on on my job here until I’m not here anymore.”
– By Camas Frank