By: Pamela Arends-King, City of Tustin
A Rewarding Experience
The Annual Conference we planned for the past year is over and done in the blink of an eye—but what a rewarding experience! I had the opportunity to work with a dedicated and hard-working group of individuals on my Host Committee.
A very special thank you to:
- John Adams, City of Thousand Oaks
- Mark Alvarado, City of Monrovia
- Terrence Beaman, City of Gardena
- David Cain, City of San Bernardino
- Nancy Klukan, City of Palm Springs
- Jennifer Leisz, City of Tustin
- Margaret Moggia, West Basin Municipal Water District
- Laura Nomura, Riverside Public Utilities
- Chu Thai, City of Monterey Park
- Danielle Wood, NBS
- Elena Zaretsky, FirstSouthwest
In addition, I’d also like to highlight the Program Committee, who worked tirelessly to put together another top-notch education program for this year’s conference:
- Viki Copeland, City of Hermosa Beach
- Ronnie Campbell, City of Camarillo
- Mary Bradley, Retired
- John Adams, City of Thousand Oaks
- Harriet Commons, Retired
- Carole Wilson, Retired
Thank you so much to each and every one of you…this conference would not have come together without you.
Those of you who attended the conference may have noticed that I was absent Thursday and Friday. I had a family emergency that required my attention back east, and regret that I wasn’t able to see the conference through to the end. I am, though, beyond grateful to President-Elect Jesse Takahashi and Past Presidents Laura Nomura and Pauline Marx, who stepped in to emcee the conference in my stead. Because of your support, I knew I could let go and focus on my family. Thank you.
The conference itself was a wonderful success, with 878 registered attendees, 91 exhibitors and 23.5 hours of continuing education credit. This year we held the preconference session on Tuesday, allowing for a longer, more in-depth discussion. It also freed up Wednesday morning for us to offer a new “Early Bird” session (before the opening luncheon)—this seemed to go over very well, as the session was standing-room only!
I could say more about the conference, but I’ll let the pictures speak for me. CSMFO volunteer conference photographer Chu Thai posted over 100 pictures to the CSMFO Facebook page…’Like’ us, browse the photos and tag your friends. Looks like I missed a fun party Thursday night!
Executive Director’s Message
By: Melissa Dixon, CAE
Welcome back to the ‘real world’ after a fantastic conference in Palm Springs! Even though it’s an awful lot of work and I come back beyond exhausted, I look forward to the CSMFO conference every year. This organization never ceases to amaze me—it’s a group of bright, dedicated professionals who focus on bettering CSMFO and the profession. It’s a rare thing, indeed.
But enough gushing. Things never stay dull for long here at CSMFO, and now is no exception. The next project? The CSMFO Membership Directory! You have until Friday, March 7 to ensure your information in our database is up to date, and then we’ll be pulling all the membership data to go into the directory. The information we have in our database was included on your 2014 membership dues notice, or you can log in to double-check that everything is accurate.
To log in, go to the CSMFO website (www.csmfo.org) and click the “Login” link in the top left corner. Your login name is typically your first initial, followed by your last name, with no spaces. If you don’t know your password, look for the link in red text “NEED YOUR PASSWORD? Click here”. This will allow you to reset your password via email.
2014 CSMFO Innovation Awards
By: Ken Brown, Acting Director of Administrative Services
Last year the CSMFO Board of Directors developed a special “Innovation” award with the purpose of recognizing innovation in the areas of accounting, budgeting, treasury, debt administration and issuance, procurement, risk management and technology within the field of public sector finance. A team of two Board members and three members of CSMFO’s Professional Standards and Recognition Committee evaluate each year’s submissions. The number of submissions increased from five last year to eleven this year, the second year of program. This year’s applications were interesting and informative, however the Committee is limited to granting no more than three Innovation awards each year and so they had a difficult decision to make. In 2014, the Committee chose to award two awards, both of which were announced at the CSMFO Annual Conference in Palm Springs.
The first award was given to Huntington Beach for its Unfunded Liability Plan. Huntington Beach developed an innovative marketing plan to communicate the benefits of their strategy to pay-down its long-term retirement, health and other unfunded liabilities. The City developed impactful names for each tactical option, including the “One Equals Five Plan,” conveying the benefit of paying one dollar now to save five dollars in the future. This made it easy for citizens, elected officials, employees and the media to see how short-term sacrifice resulted in a bigger long-term win. The local newspaper ultimately recognized Huntington Beach’s plan. Lori Ann Farrell, Director of Finance for Huntington Beach, was present at the Conference to accept the 2014 Innovation Award on behalf of her City.
The second award was given to the Riverside County Transportation Commission for the development of an innovative rating presentation to accompany the largest debt financing in their history. Their presentation was designed to convey the value of its infrastructure project in a colorful, informative and concise way. The presentation included a commute video on YouTube, which allowed employees of Fitch rating agency to avoid the expense and time of having to travel from New York to California, helping to keep the bond issuance on schedule. Chief Financial Officer Theresia Trevino was present at the Conference to accept the 2014 Innovation Award on behalf of the Riverside County Transportation Commission.
The applications and supporting materials for both of the award winners have been posted on CMSFO’s website so that others can learn from the ideas advanced by Huntington Beach and the Riverside County Transportation Commission. Congratulations to both of our award winners! Thank you also to our Committee members and to all who submitted an application this year. CSMFO will begin accepting applications for next year’s award program near the end of the year. There is no cost to submit an award application.
Rolling Down the Curve
By David Schiffman – Senior Financial Strategist, First Empire Securities
Within the past few months fixed income investors have experienced volatile market conditions as a number of factors have caused fluctuations in rates. However, the recent move upward in rates (see Figure below), albeit not dramatic, could present a number of opportunities.
A strategy known as “rolling down the curve” could help fixed income investors add incremental yield and income to their investment portfolios, while mitigating some of the risks associated with a rising rate environment. With the current steepness in the yield curve (see Figure left), investors can pick up additional yield without extending out very much in maturity.
For example, an investment in a US Treasury maturing in five years, could earn almost 1.50% or 120bps more in yield compared to buying a 2-year US Treasury note yielding 0.30%. On a $1 million investment, that would equate to an additional $12,000 a year in annual income for a 3-year
In addition to the extra yield and income an investor might earn on a five year investment, the bondholder could also benefit from this bond rolling down the curve. In 12 months from now, the original 5-year bond would have a maturity of four years, and if all things remain constant (including rates), the market yield on this investment should be about 1.00%. This decline from the original 1.49% on the 5-year investment creates some appreciation in the value of the asset, since bond prices move higher as yields fall. If we combine the appreciation in price due to the roll down the curve, along with the coupon interest we earn on the bond, this equates to an annual “total return” of about 3.4%.
With the roll down the curve creating an absolute positive total return in a “flat rate” scenario, this gives a fixed income investor some cushion against higher rates, which could help bond holders mitigate some of the interest rate risk associated with a rising rate environment.
With the Federal Reserve indicating it will be an extended period of time before Fed Funds begin to rise, short term rates should remain firmly anchored near current levels for the foreseeable future.
Hence, the steepness in the curve we are currently experiencing should allow investors to take
advantage of the roll down the curve for a number of years before this strategy becomes less effective.
For investors who may not have liquidity to put new funds to work in a steeper part of the curve, many have taken advantage of the “roll down the curve” which some of their investments have
already experienced. Specifically, an investment which was made a number of years ago that now only has one or two years before maturing, has already rolled down the steepest part of the curve. Therefore, these investments could be sold at a potential gain and reinvested into a steeper part of the yield curve. This is more of a total return strategy, but even “buy and hold” investors should be flexible enough to take advantage of certain opportunities to improve income and portfolio yield.
Some investors have been fearful of the near-term impact that the current tapering has had on longer term rates, however, a number of factors are creating support for bonds near current levels. Although the Fed has decided to initiate a reduction of $20 billion in their bond buying program during the past two months, they continue to place $65 billion in new funds into the market each month, buying both US Treasuries and Agency Mortgage-backed Securities. In addition, the Fed’s existing balance sheet creates monthly cash flow of almost $20 billion each month from principal and interest payments they receive on their MBS investments, which is also reinvested back into the market. Hence, the Fed is
actually purchasing a total of about $50 billion in Agency Mortgage-backed Securities each month.
With monthly production of new MBS bonds declining in recent months due to the lack of residential loan demand (think housing sector weakness), the percentage of MBS the Fed continues to purchase on a monthly basis remains at about 100% of new production even with their tapering program in full swing.
Therefore, these technical factors create an environment which continues to support a theme of
historically low interest rates across the yield curve for longer than many investors might have imagined.
(This is an opinion piece, and does not necessarily reflect the opinions of CSMFO. Part 1: Underfunded Pensions – The Warning Signs)
Pension Reform – The Sacrifices Needed
(Part Two of Two-Part Report)
By: Corey Lee Wilson
Make no mistake about it—pension reform is coming because the pension system as we know it is unsustainable. For years most of our state and local politicians have been ignoring this problem. But eventually the day comes when you simply cannot ignore it any longer. So when will the math catch up with the union, city, county, state, or federal agencies where you are living? Most likely sooner than later!
In California, the Democratic mayors of four Californian cities and one Republican unveiled a reform they hope to place later this year on the November 2014 ballot. It’s titled the Pension Reform Act of 2014, and if approved by California voters, public employers will be able to change the pension arrangements of employees for future work. Benefits already earned will not be touched.
The reform measure is a response to the growing unfunded pension nightmare that is haunting public pension funds throughout the nation. And it’s only going to get worse if nothing is done about it. Surging retirement costs have hobbled California cities since the recession, contributing to municipal bankruptcies in Vallejo, San Bernardino, Stockton, and now Desert Hot Springs. The runaway costs stem from decisions made by elected officials when stock markets were soaring and retirement funds were running surpluses. Benefits were boosted to retain skilled positions and recruit new workers.
The ballot initiative is being led by Chuck Reed, mayor of San Jose. Mr. Reed has become a standard-bearer for pension reform in California after winning 69% support for a measure he placed before his city’s voters in 2012. That reform, which gave city workers a choice between higher contributions or lower benefits, is snarled up in the courts—a situation Mr. Reed hopes his measure will enable other municipalities to avoid.
The mayor makes a straightforward progressive argument that pensions are eating into government budgets, and residents are losing out with more than one-fifth of San Jose’s general fund going to retirement costs. “Many of California’s public-employee retirement plans are simply unsustainable and it’s in everyone’s interest to provide the tools to fix the problem now before even tougher actions are necessary,” said Mr. Reed.
Most pension reform efforts, like Governor Brown’s 12-point pension plan deals with new hires only and therefore will take years before the changes yield any cost savings. The Governor’s state initiated plan will raise the retirement age and reduce benefits to new employees and also eliminate some practices that led to exorbitant pensions for a relative handful of workers. It caps pensions, tames practices such as pension “spiking” that lead to higher payouts, and requires new public sector workers to split payments to their pension accounts at least evenly with employers so that current employees would be responsible for half of their contributions. Savings to the state from its employees paying more toward their pensions will be used to reduce its unfunded pension liability.
By contrast, Mr. Reed’s plan leaves reform in the hands of local governments. All five of the politicians who submitted the measure to the state attorney general are mayors of cities that have struggled with ballooning pension costs. Despite its merits, the Pension Reform Act of 2014 will also face determined opposition. The measure must first attract over 800,000 signatures to reach the ballot. Assuming it gets that far, California’s deep-pocketed public-employee unions will dig in to stop it becoming law. And if it does pass, says Steven Maviglio of Californians for Retirement Security, a lobby group, “You can bet these folks will use any means necessary to make sure it’s not implemented.” Unions think a modest statewide pension reform, applying only to new recruits that passed last year, is change enough.
The key portion of the initiative would amend the state Constitution “to give government agencies clear authority to negotiate changes to existing employees’ pension or retiree health-care benefits on a strictly going-forward basis,” according to a statement filed by initiative supporters. They note that federal law and laws in 18 states allow such changes–but that a series of California court cases have tied the hands of municipalities. And the initiative states that a “voter sponsored measure is necessary because attempts to reform the system through legislation and other initiatives have been inadequate.”
Two years ago, a campaign to overhaul public pensions in 2012 was short circuited when Attorney General Harris’s office issued a “title and summary” that was slanted against the proposed ballot measure. So far this year, that has not happened. If the reformers win in California—the reverberations will be felt throughout the nation where dozens of states and hundreds of local governments are facing pension shortfalls, cost-of-living adjustments applied to pension benefits, and the effect of municipal bankruptcies on pensioners.
Join the discussion with Corey Lee Wilson at email@example.com or provide your own comments for his upcoming book titled Pension Madness!
Conference Pictures are Up!
Pictures of you and your colleagues at the CSMFO Annual Conference in beautiful Palm Springs have been posted to our Facebook page. Take a look!
My Journey to Becoming a Finance Director
By: Drew Corbett, Finance Director, City of Menlo Park & CSMFO Board member
In early 2005, I was looking for a change professionally. By that point in my career, I had spent time as an elementary school teacher, earned a graduate degree and worked for a successful high-tech company in the Silicon Valley. While all of those experiences were fulfilling and educational, I was still trying figure out exactly what I wanted to do professionally. On a suggestion from my wife, who was (and still is) a public sector employee, I applied for a job with the Department of Finance in the City of Sunnyvale.
Assigned as an analyst in the budget office, I quickly came to the conclusion that public sector finance was the right career for me, and I set my sights on becoming a finance director at some point in the future. With the guidance and support of the department director and the assistant department director, I began down the career development path that led me to achieving my goal. This path included a significant amount of on-the-job development, as well as the utilization of the great resources that CSMFO has to offer.
My first experience with CSMFO was attending the annual weekend training, which was an incredible learning opportunity. Not only was the course content wonderful, but I also got the opportunity to meet a number of people involved in the leadership of the organization who subsequently became mentors to me. From there, I got more involved in the organization by joining the Career Development Committee, speaking at a number of annual conferences on a variety of topics and being elected to the Board of Directors in 2012.
One of my favorite experiences with CSMFO was getting the opportunity to do a live “interview” for a finance director position at the 2012 Annual Conference. It was a great experience, as I was able to gain a better understanding of the types of competencies being sought from a finance director, as well as get feedback on my performance (both the good and bad aspects of it), from a finance director, a city manager and an executive recruiter. It was an invaluable opportunity, and one that I feel was essential to my preparation for becoming a finance director. Further, this experience underscores the value that CSMFO provides its members, and it goes well beyond the incredible training opportunities the organization offers. While the trainings themselves have been great learning tools, where I have gotten just as much, if not more, out of the organization is through the great individuals throughout this organization. I can’t begin to name all of the people I have met through my affiliation through CSMFO who have positively impacted my career and helped me get to where I am today.
If you are an aspiring finance director, I would highly encourage you to get involved with the organization. Take the trainings, attend the chapter meetings, go to the annual conference and, most importantly, utilize the incredible knowledge and experience of your fellow CSMFO members. As you can see from my experience, there are tremendous resources available to you through CSMFO to help you on your journey to becoming a finance director.
CSMFO MiniNews Committee Member Feature
Name: Ernie Reyna
Agency: Western Riverside Council of Governments (WRCOG)
Committee Chair of: Administration
Q: How long have you been in the municipal finance profession? Why did you choose this profession? I started my municipal finance career in 2005 when I took a position with the Morongo Band of Mission Indians as their Accounting Manager. The Tribe operated exactly like a city and followed governmental accounting procedures. Not to mention it gave me a unique perspective on Tribal Government. Prior to 2005, I was still employed with the Tribe but worked in the casino in their accounting department. When the Accounting Manager position opened, it was an easy transition into the world of municipal finance.
Q: How long have you been a CSMFO member? Served on a CSMFO committee? This is my second year as a member of CSMFO and also my second year of serving on the Administration Committee as well as a Chapter Chair for the Inland Empire.
Q: What committee are you a part of now? Why did you become involved with CSMFO’s committee(s)? As of now, I am only involved with the Administration Committee, but I wanted to become a part of CSMFO because I loved the structure it provided with so many opportunities to enhance your career as a municipal government employee. I especially liked the way the Inland Empire Chapter meetings were conducted and all the wonderful opportunities to network with my fellow municipal employees.
Q: How did you come to be involved in the leadership of CSMFO? Prior to becoming the Chair of the Administration Committee, I become Chair of the Inland Empire Chapter and that really opened my eyes to the municipal employees that were seeking guidance from the information given at the meetings. From there, that made me want to get more involved in some sort of leadership capacity so I could make a difference. That same year, I joined the Administration Committee and learned all I could from the past Chair, Steve Heide.
Q: What are your goals for the committee for the coming year, and how do they relate to the overall organization’s goals? My goal for the upcoming year is to increase the number of committee members in Administration and the level of involvement with the Board. With an increased attendance in the committee, this will help provide a unique perspective with so many bright minds working together towards CSMFO’s goals.
“Expanded CSMFO Webinar Schedule Begins – Register Now”
Learn best practices for boosting revenues. Invite others in your organization to join you for the webinar.
“Effective Ways to Increase Revenues” (cosponsored with Cal-ICMA)
1-2:30 p.m., Wed., March 19
1. What are successful ways for local governments to gain more revenues from existing sources (e.g. recovery of service costs, marketing expertise to others, etc.)?
2. How can economic growth help revenues and what’s working best now?
3. What are voters willing to support in new revenue measures and why?
Presenters: Michael Coleman, Fiscal Policy Advisor, League of California Cities and other national experts
“Successfully Navigating a CalPERS Audit”
2-3:30 p.m., Wed., April 23
1. What are the critical issues that CalPERS looks at in an audit?
2. What are effective ways to address them?
3. How can you learn from the experience of others?
Presenter: Margaret Junker, Chief, Auditing Services, CalPERS
Commentator: Scott Catlett, Asst. Finance Director, Riverside
“Latest Accounting Updates–What You Need to Know”
10-11:30 a.m., Wed., May 22
1. What do you need to know about latest accounting changes for your agency’s reporting?
2. How can you address these before your year-end close?
3. What are useful resources to learn more?
Presenter: Eric Berman, CPA, CGMA, author “2014 Governmental GAAP Guide”
Are you a member of CSMFO and want to earn CPE credit for participation in a webinar? Note the requirements at registration.
Do you have suggested topics for future webinars? Send them to CSMFO@DonMaruska.com. Thank you.
Don Maruska, Master Certified Coach
Director, CSMFO Coaching Program
See “Coaching Corner” at www.csmfo.org/coaching
Welcome New CSMFO Members!
- Janet Lockhart, Senior Analyst, Huntington Beach, Central Los Angeles Chapter
- Doug Bradley, Finance Director, Imperial Beach, San Diego County Chapter
- Erik Mezack, Finance Manager, Chula Vista, San Diego County Chapter
- Debra Cavaletto, Fiscal Manager, Ventura, Channel Chapter
- Jeffrey Altshuler, Partner, McGladrey, Orange County Chapter
- Suzy Burns, Management Analyst, Costa Mesa, Orange County Chapter
- Victoria Danganan, Senior Accountant, El Cajon, San Diego County Chapter
- Roy Duplessis, President & CEO, Glendale, South Bay Chapter
- Adela Gonzalez, City Manager, City of Soledad, Monterey Bay Chapter
- Gloria Adkins, Accounting Manager, Ventura Port District, Channel Chapter
- Jeannette Amavisca, Supervising Accountant, Santa Rosa, North Coast Chapter
- Emely Dacara, Accounting Technician, Riverside, Inland Empire Chapter
- Cheryl Doran-Girard, Administrator, Camp Meeker Recreation & Park District, North Coast Chapter
- Rena Romanini, Assistant Vice President, Wells Fargo Bank – Government Banking, Peninsula Chapter
- Melissa Shirah, Professor, California State University, San Marcos, Orange County Chapter
- Fauzia Nawaz, Student, California State University East Bay, Hayward, Central Valley Chapter
- Kimberlie Gladden, Banking Operations Manager, Sacramento, Sacramento Valley Chapter
- Dana D’Angelo, Administrative, Livermore, East Bay Chapter
- DeAnn Hailey, Controller, Fresno Irrigation District, South San Joaquin Valley Chapter
- Angelica Zepeda, Account Clerk, Eastvale, Inland Empire Chapter
- Dan Dillon, Accountant, Seal Beach, Orange County Chapter
- Stefanie Turner, Finance Director, Rancho Santa Margarita, Orange County Chapter
- Teresa Simmons, Accounting Coordinator, Calimesa, Inland Empire Chapter
- Sharon Cisneros, Senior Accountant, Yucca Valley, Coachella Valley Chapter
Monterey Bay Chapter Meeting – March 6
– Contact: Tori Hannah, Director of Finance – Capitola
Inland Empire & CMTA Div 8 Chapter Meeting – March 13
– Speaker: The Honorable Bill Lockyer
Orange County & CMTA Division 9 Meeting – April 10
– Speakers: Paula Cone & Andy Nickerson with HdL Companies
CSMFO provides government finance professionals with numerous resources for enhancing and advancing their careers. Visit the job opportunities page of the CSMFO website for a list of current job openings.