>> welcome to our land use committee meeting of may 21, 2018. i'm katy tang, to my right, jane kim, to my left supervisor safai

and we're joined by supervisor peskin. madame clerk, any announcements before us? >> clerk: please make sure to silence all cell phones and electronic devices. speaker cards should be submitted to the clark. items acted upon today will appear on the may 29 board of supervisors agenda unless otherwise stated. >> item number 1 is ordinance amending the planning code to increase the transportation sustainability fee by $5 for projects larger than 99,999 gross feet except in the central south of market area plan. >> supervisor tang: thank you very much. >> supervisor peskin: thank you, madame chair and colleagues, and thank you for the chair for

scheduling this item and hearing it after the unfortunate scheduling snafu at planning, that was heard by the planning commission, though the 90 days had lapsed and you're all in receipt of a letter dated friday, may 18, which indicates the unanimous recommendation for this legislation by the planning commission. as a matter of fact if you watch the planning commission hearing, commissioners representing a range of perspectives on the commission actually pushed back on the discussion around whether or not the $2 fee in the central soma should be higher. but we're overall in agreement that the $2 in the central soma plan was probably still too low. but recommended the tsf legislation that is before you

today. the new protections put out by the planning department based on what is pepping in the pipeline, shows a significant compromise in the desire. in the desire to accommodate concerns by the planning staff, even though their own study showed that a $5 increase was not only feasible, but actually a drop in the bucket. we've taken the projected revenue down from 23 million dollars to $12 million with this compromise, but we know that the numbers don't really give us an accurate prediction of the future, which is of course volatile. what is before us is a policy decision that i think we should have made some time ago before for instance, the sales force tower went up and the building that continues to be at a fever pitch throughout the city.

today, we have the opportunity to really plan for the future and not make that same mistake again. we have the opportunity to create a transportation fee baseline now that can be reevaluated later and from time to time, and i think we should redo the feasibility study from 2015, because i think we'll find there are other tiers that can be explored in this current hot market. and the vacancy and rental assumptions made by planning three years ago are out of date. but most importantly the lack of public outcry reinforces what the planning commission knows and said last thursday, these projects are absolutely feasible. that increase to transportation structure benefits these large commercial projects. and again, we heard this two weeks ago, we have a lot of public support, we did not hear

any words of opposition. nor did the planning commission and a publicly noticed meeting last thursday, and with that, colleagues, i commend this piece of legislation to you and i would like to thank all of the supporters we heard from at the last meeting. and hope that we can send this to the full board with recommendation. >> supervisor tang: thank you, supervisor peskin. colleagues, which other further comments, questions? all right. and do any of the department staff want to say anything? >> the san francisco planning department, i want to reiterate on may 17, the planning commission voted unanimously to support the proposed increase in the tsf, $2 in central soma and $5 elsewhere.

that concludes the presentation, i'm here for questions. >> supervisor tang: thank you for that. at this time, i'll open it up to public comment then for item number 1. >> my demonstration is not only going to give information pertaining to the topic, but also the 30-day rule where agenda is going to take place pertaining to business and tax of the planning code of south market. in order for that tax code to be put into effect, i want to highlight this information should be taken under consideration. for the year, 2017, there is a total of $873,923,572 of uncollected taxes from twitter and nine other high-tech companies. this came out in 2017. the year before that, there was a total of $1,357,216,777 of

uncollected taxes. that's a total of 2,271,171,143,of uncollected taxes. that is proof how the high tech companies are getting preferential treatment and it's putting a bind on all the departments and all the people that are economically disadvantaged and vulnerable and have a combination of mental and physical disabilities in our veterans and homeless people. you're wasting money on shelters when the truth of the matter is, this should be spent on low-income families to stop the homeless problem. safai asks how can you finance the homeless problem? i showed him $2 billion that has

been wasted not collected from twitter and five other high tech companies. now it's nine high tech companies that is taking advantage of these tax breaks. these multibillion dollars companies don't need a break, the people that are economically -- [bell ringing] -- and homeless on the street need a break. >> supervisor tang: thank you very much, next speaker please. >> good afternoon, supervisors, jeremy polak, speaking on my lunch break, thank you for considering this. i would like to echo supervisor peskin's comments. i think in general i urge you to support this, at least as proposed here. it's clear to me that the central soma plan could stomach that $5 increase as well. i commend the planning staff on their work on the fiscal feasibility analysis. i think that's really helpful to have those numbers broken down, but that analysis is only as accurate as the data and

assumptions that go into it. and seeing analysis based on $74 per square foot price when we saw facebook leasing part towers and that is over $100 square foot, is such a dramatic increase, it shows what incredible demand and profitability there are in the large office towers and we know how much transportation and housing impacts those have. and we need to do a better job of capturing that value. that uncertainty in the cost and the assumptions in these analysis is what drives a lot of the problems we have in coming to an agreement on issues like this fee and inclusionary housing fee and i urge you to get more certainty and transparency in the numbers. and i think some way to look at the pro forma of the development projects to get a real idea of what the numbers are would go a long way to building trust in

these debates we have. [bell ringing] and i think projects that receive public subsidies, you should look at the pro forma to make sure we're all on the same page in debating the fees they pay. i urge you to support this as it's written and reconsider this fee along with the jobs housing fee based on the profitability of office space in the current economic climate. thank you. >> clerk: next speaker, please. >> good afternoon, so we wrote you a letter supporting this fee increase and it's very good and i would repeat supervisor peskin's words that's it's really just a drop in the bucket, much more is necessary. but i would like to think about feasibility. when i see, when you have these fees, what you're doing is reducing the price of the land under any of those projects. and lord knows, that landowners, including myself have had great

windfall over the last 40 years in the price of land under the buildings or vacant land. so when you increase the fees, it's not a really big deal as long as the developer has notice and the owner has notice, you should do them in advance, give everybody notice is going to happen, so they negotiate the price of the land, knowing that these fees are going to be in place. and then the fees can be much higher and we can do a better job. because none of those projects are feasible without transit. they need the transit as much all the people who ride it do. you're doing the right thing. >> supervisor tang: any other members of the public who wish to comment on item 1. >> good afternoon, i'm sharon, we're one of the key development sites in central soma. wanted to say we appreciate the

board's consideration as well as the planning department analysis on this. we certainly agree that transportation and infrastructure investment in the neighborhood is very important, which is why the planning process over 16 separate planning commission hearings have created a very comprehensive community benefits package for central soma. $500 million out of the $2 billion anticipated will go toward transportation infrastructure. and we just urge the board to consider that as you move forward into your tsf recommendations as well as the future central soma plans impact fees on your decision today. >> supervisor tang: thank you very much. any other members of the public, please come on up. >> matt field, tmg partners, thank you again for your work. i'm a resident and native and appreciate focusing on transit

sustainability and acknowledge the $5 and $2 in central soma, we appreciate that in respect to project feasibility. and would echo sharon's comments, in the context when you take the greater central soma plan, if you can consider all these fees in context, we would greatly appreciate it, thank you. >> good afternoon, supervisors, mike russo from kill roy corporation. i wanted to give the message we're in support of transportation in the region. would like to respectfully ask you when you consider central soma to consider the total fee package, including the context of this transportation sustainability fee. if you do adopt it. central soma plan as mentioned already has a very robust fee

package. it's been many years in the making and as was also mentioned is generating $500 million for transportation improvements. so we're certainly in agreement that is important funding and would like to keep that context in mind when the central soma plan comes in front of you, thank you very much. >> supervisor tang: any other comments? seeing no other members of the public who wish to comment, i'm going to close public comment for item 1. supervisor kim, i think you want to speak after public comment. >> supervisor kim: yes, thank you, chair tang, i want to thank supervisor peskin for bringing back the transportation sustainable fee for large nonresidential projects. this was a debate when we were -- when supervisor john okay lis reintroduced the iteration of our impact fees and

how the large commercial developers pay into the fee, understanding as we create jobs, there is burden on sfmta and we need to make sure we have a transportation system is able to absorb new workers and residents in our growing city. i just want to say that then i did support a larger increase to our transportation sustainability fee for large nonresidential projects. and support the fee increase outside of the central soma plan area. actually, a few weeks ago, when i talked to supervisor peskin, i asked to hold back the central soma fees as we are currently looking at all the fees as a whole in the central soma plan in late june. however, the planning commission has now heard the central soma plan and has heard the tsf increase and they have recommended the $2 increase for the central soma plan. so understanding that this is now been supported by the

planning commission, i'm happy to support this today. we will have an overall conversation on all of the fees as the central soma plan moves forward to the full board through june and the beginning of july. i'm certainly happy to continue this conversation, but i think given the strong recommendation from the planning commission, i'm ready to support this today. >> supervisor tang: thank you. supervisor safai? >> supervisor safai: i just had a couple of questions for maybe staff? you can come back up. can you just reiterate, i know supervisor peskin was telling us, but how does this generate inside central soma and outside. >> the $2 is about $12 million. let me get that. >> supervisor safai: either one of you is fine, maybe ms. jones from sfmta.

>> yeah, the $2 increase in central soma and the $5 elsewhere would generate under our estimates $11.4 million. >> supervisor safai: how much inside of central soma? >> 8.2. >> and then 3 outside of central soma. >> supervisor safai: is that attached to the actual feasibility. i know the last time the feasibility said it did not compute for central soma. >> the department analysis was that it did not compute, however the planning commission is feeling strong, it probably could. >> supervisor safai: what was some of the reasoning behind that? >> they didn't hear anybody via e-mail, via public testimony -- >> supervisor safai: there was no financial analysis, it was based on the response from the community? >> yeah. >> supervisor safai: is there a component in here that talks

about redoing the feasibility. >> supervisor peskin: the answer is yes and i spoke to that in my remarks and planning is intending to do that in the coming year. but i also wanted to hark back to something i said a couple of weeks ago, which is that in our other incarnation as the san francisco county transportation authority and saying this remembering that the sales tax tanked and that we have the collective responsibility as part of the transportation task force, 2045 endeavor to find $100 million a year. and as i was clear in the last meeting, this $10-12 million would actually come out of whatever instrument we bring forward, hopefully in november, in order to do our collective part. i also wanted to say that -- >> supervisor safai: i had another -- >> supervisor peskin: sure i

just want to add one thing. there are six major sites in the central soma. you have representatives from half of them here today who have stated what they've stated for the record. but i have to say this. which is every single one of these six property owners and developers or companies under contract to buy property, are extremely sophisticated. each and every one of them pay lobbyists and consultants to read our agendas, week in and week out. this tsf is not a secret. in fact, it was written about publicly, you didn't need a lobbyist or someone who reads the board agenda or legislation introduced, it was the subject of a hearing at this committee. it was the subject of a planning commission hearing. and i do want to state, because

i'm mildly annoyed by it, that were it not for an unsolicited e-mail communication from a city official who was actually defying what the planning commission, the oversight body appointed four members by the mayor and three members by the president of the board of supervisors, acted upon last thursday, had that e-mail not gone out on friday, they would not be here. but i am certain that their lobbyists and consultants knew this legislation is pending. so this is a mildly manufactured thing and i had to get that off my chest because the individual who did that knows i'm less than pleased about it. >> supervisor safai: so back to my question, through the chair, it was about the feasibility. and i appreciate that, supervisor, i'm not trying to mine myself that. what i want to -- minimize that.

can we put into the legislation that we have a process for the review? >> supervisor peskin: we do. you can see mr. sanchez is nodding his head. we have that, we are the board of supervisors, we take anything up, simple answer i'm not comfortable inserting that. >> supervisor safai: not for central soma, for the transportation sustainability fee so we can see how this plays out. i'm fine with what you're proposing today, but what i mean is have the opportunity to look at the fee itself and what impact it has on nonresidential overall, so we can have a report back and see how the impact is. >> supervisor tang: if i can jump in, and correct me if i'm wrong, department staff, but the controller's office is supposed to do analysis of the impact fees every five year and the next time they would do it is

next year. this feeds into my comments from the last committee meeting, but i would have liked us to be considering increases to any fees, whether in central soma or elsewhere after the analysis or future analysis would have been done. that would have been my preference. i also shared for about $12 million, you know, it's a small amount, for a lot of the pains they're going through, but i also understand the responsibility that supervisor peskin has and feels with his role as the t.a. and the chair there. in any case -- ok -- those are my thoughts. but to answer your question, the controller office will have analysis on the impact fees next year. >> supervisor safai: on the tsf?

>> supervisor tang: these are impact fees in general. maybe the staff can answer that. >> supervisor safai: i was referring to the idea of this new fee that is going be added to nonresidential. and then having the opportunity to come back and look at the feasibility and what impact that has on incentivizing or disincentivizing. i think it's going to be a positive report based on the passionate feelings of the planning commission. >> supervisor tang: why don't we turn it over to ms. jones? >> yes, sfmta planning director, sarah jones. there is a review of all city-wide fees every five years, but the board of supervisors also included analysis on a three-year cycle of economic feasibility. >> supervisor safai: is that currently in this ordinance or

is that company wide policy? >> yes, we've incorporated into our budget supporting the planning department in conducting that feasibility study. >> supervisor safai: if we pass this today, how much time will pass before we have understanding of the fiscal impact and feasibility of this, three years? >> no. for this upcoming year, the study is going to be undertaken in the next few months. >> supervisor safai: so a year from now, this will be studied? >> within the upcoming year. >> supervisor safai: got it. ok. that sounds good. thank you, madame chair. >> supervisor tang: ok, so hearing that, i could have gone both ways, right? i would have again preferred that regardless if it was a controller analysis of the city-wide impact fees or the tsf feasibility analysis coming up in the upcoming year, i would have loved the increase to be

associated with those studies, but you know, i will defer to our district supervisor where much of the impact is, as well as the planning commission that supported it. so it is what it is today. supervisor safai, still comments? >> supervisor safai: one more through the chair to supervisor peskin, when i heard the comments, i think we talked about this for a second, the idea that there is $500 million in fees that are being generated by central soma. there is a lot of conversation about transportation and overall fees. we're going to be taking that up in the next two months. so the idea of taking this and putting it into the consideration of that and potentially having that -- >> supervisor peskin: why don't we have ms. jones attempt to address that who will be more articulate than i ever will be. >> this is just scratching the surface of the issue, but there is a distinction between what

the fees that come off of development projects pay related specifically to an area plan, or to a community benefit district, and what we are able to spend our transportation sustainability fees on. the money that is levied onto development projects in the context of an area plan, some of it goes to that invisible stuff that nobody really wants to think about or pay for. but most of it does go to something that is clearly tied to and supporting a development project like a complete streets project right there. or you know, transit. or transportation infrastructure that is within the area and enhancing the area and the development projects overall. in contrast, transportation sustainability fee is a funding

source that helps us put money into the transportation system in ways that improves it in sort of a more invisible basic kind of way, so for example, you can use transportation sustainability fee to pay for a new engine for a bus that extends the life of that bus, deals with state of good repair, that kind of thing. so it's not a directly comparable funding source that you can just swap out indiscriminately. so there is a certain value to mta of tsf that doesn't come from the projects. which are also very important improvements as well. >> supervisor safai: i get that. that makes sense. thank you for the explains. through the chair, i would say that in the context of all the fees considered in this larger package coming up at central soma, there is a point by which

we cannot go past, otherwise some of the projects become unsustainable. so i it's important to consider that in the larger context since we're to the end of the road on that debate. we want to consider this fee as part of the larger package that is coming in front of us, but thank you for the distinction, one seems to be more local to the area and one can have impact on the area, but impact in other areas of the city as well. i appreciate that distinction. thank you, madame dam char x. >> supervisor kim: we are currently working with our key site developers and other soma developers and the community on developing a cohesive plan with all of the fees. it's not to discourage what is happening today, but i feel very confident that when we make a

final vote, it will be a comprehensive look at everything together. i feel comfortable supporting the $2 fee and it will be known to everyone that transportation is important. we're not try to prevent development in central soma. we want ta thank to happen. -- we want that to happen. i do feel comfortable moving forward with this today. it's not that we get another bite at the apple, but again, the whole plan is coming before the land use committee on june 25th. >> supervisor tang: thank you. appreciate your comments. with that, colleagues, do we want to have a motion? any further debate? >> supervisor kim: i'll move for recommendation to the full board. >> supervisor tang: we'll do that without objection.

any other items today? >> clerk: there is no further business. >> supervisor tang: thank you, we are adjourned. everyone ready? would everyone please rise to the pledge of allegiance? i pledge allegiance to the flag of the united states of america, and to the republic, for which it stands, one nation, under god, indivisible, with liberty and justice for all. >> president stansbury: mr. secretary, roll call.

bridges present. casciato present. cohen is expected. driscoll present. quorum is present. >> president stansbury: great, we're going to be going into closed session, but before that, why don't we call for public comment. is there any members of the public that would like this address the commission? seeing none, we will go into closed session. anyone who doesn't need to be here, would you please leave the room. >> ok, we're coming back into open session. is there a motion not to disclose? there is a motion. there is a second. can we -- discussion? can we take it without objection?

great, item passes. mr. secretary, next item. >> general public comment. >> president stansbury: for general public comment, just for clarity for the public, you have the opportunity to comment on anything not already agendaized for the board. if you want to comment on hedge funds and they're on the agenda, it wouldn't be appropriate to comment here, but under the specific item. that being said, is there anyone who would like to talk to the board under general public comment? >> good afternoon, rrcaa. just to explain the little green sheets that i left for you. we apologize that our annual installation and luncheon is on the same day as your board meetings, which why we changed our meetings to go at 10.

if any of you are able to stop by just to say hello to our members, we would be most grateful. we realize you wouldn't stay for lunch, but we have to send out the invitations anyway. >> president stansbury: thank you. i have a speaker card for you for general public comment. >> so i sent an e-mail on this comment which is that i would like to suggest that you add two 1-page reports to the monthly report on the strategic asset allocation and investment risks. for the strategic asset allocation, i sent a table. here's the table. right now, you have 60% in equities.

in september of last year, you had 62-63, so you're down 2-3%. your strategic asset allocation has 49%, that's 11% lower. and the adjusted mix that was proposed by the cio had 56%. so you're still 4% above that. and that was the one that had the 42% funded status. so there is a huge amount of changes going on in this strategic asset allocation and it's really hard to keep track of all the moving parts. so i think that a summary table of those moving parts with a brief description should be provided once a quarter, along with the investment risk report. regarding the investment risk report, alan ber nell is leaving on the 29th. this is a huge opportunity to

bring in someone with -- >> 30 seconds. >> -- financial market savvy and global economic savvy who can put together and see or hopefully foresee the next financial economic down turn and crisis. nobody in sfers staff has that capability right now. >> president stansbury: thank you, any other members of the public that would like to address the commission? seeing none, we close general public comment. next item. >> 5, approval of the minutes of the april 11, 2018, retirement board meeting. >> president stansbury: why don't we call for a general public comment. are there any members of the public that want to address the commission regarding the minutes? seeing none, we close the comment. there is a motion, a board. any discussion on the item?

commissioner driscoll? >> commissioner driscoll: board members may want to consider to amend that motion to the minutes approved if they're edited. sometimes it takes a moment. the two points i would like to see added to the minutes is that it would have been item 7 under the minutes. which related to the department strategy, in the area of divesting from fossil fuels. at the 40-minute mark of the meeting, mr. coaker said there was no other strategy in the marketplace like this one in the sense that the low fee, low tracking, reconstituted index using robust data. subsequent to that and i could not find what mark, he also answered a question of commissioner cohen saying this was the only strategy. i think the minutes should

reflect and capture that word, only. it's a very material statement based on the way this hiring was done. so i think that word is a fact. that is true. what that word means, i do not know what it means, because i do not believe it's true. i'm working on that and will try to confirm whether that statement is true or not. as a material issue, based on how this firm manager was hired and funded. so, i wish i could get the sense. i would give the report to mr. nickens, a point where they can look for the phrase to amend the minutes to capture that. part two, the end of the minutes, i understand the secretary tries to capture long discussions into one or two sentences. phrase reflecting that this proposal, goldman sachs, this

proposal was presented to the board. minutes are a reflection of what happened as opposed to rediscussion. i did not consider anything goldman sachs to us was a proposal to hire and fund them. >> president stansbury: do you want to speak to that, or do you want an opportunity to take a look at what was said to amend the minutes? >> i believe this is a discussion, we'll add the two comments, direct quotes that commissioner driscoll requests as long as the maker of the motion, the seconder is amenable to us making those changes. >> president stansbury: do you want to -- >> i don't think it's appropriate to have a discussion, but certainly we can reflect the -- have the minutes reflect the two statements he's requesting. >> president stansbury: there is two options, one we get the minutes cleaned up, and bring it back next month so we're all on

the same page, two, we could just approve it and hope we capture what is said correctly. i would prefer to push it to next month so everyone can see it. are you amenable? ok. great. so if you could go back and take a look at what was said and try to capture the essence of commissioner driscoll was talking about. great. next item. >> item 6, action item, approval of the minutes of the april 262018 special retirement board meeting. >> president stansbury: any members of the public that would like to address the minutes from the april retirement board meeting?

seeing none, we will close general public discussion. any comments amongst the board? there is a motion, there is a second. any discussion? take this item without objection? great, item passes. next item, please. >> item 7, the consent calendar. >> actually, first of all, i want to note and ask the passing of dr. tal image is impacting us in the retirement applications and also the h.r. medicals. >> we have been able to find doctors with the same qualificatio qualifications, so it has not impacted us. it was a surprise, but nothing

was delayed. >> i was very smoked at his pass -- shocked at his passing. i would ask that we adjourn in his memory today. number two, in looking at these -- is this the same thing about the summaries that we have in the investment calendar. i'd like to see and ask that if we could do in the matter of the applications, some of them are very clear, but if we could put the name, department, years of service and a clear distinction whether they're industrial or ordinary disabilities, i would just say to those who have the packet, you can look at the second retirement, which is 002 at the end, in the header. it's an application for disability retirement. it does not state whether it's ordinary or service. then it's only in factual

findings, number one, is it mentioned? and in the actual order, the application for disability and retirement is granted, but it's not -- it doesn't make a distinction whether it's industrial or ordinary. so i think it would be -- if we could keep them consistent up there, with the applicant name, that would help. and the only other thing i would ask, at some point in time, it would be really good to have a chart that shows the flow or how an application both industrial service or ordinary flows through the system. so that we can -- the reason i say that, there is one application in the packet today where it fell out for about a year, because of a name issue. and we weren't tracking it, so we had to bring it back. and i think that would be important to have a flow chart showing how these things move

and where they're at, just to prevent things. with that, i would move to adopt the consent calendar. >> commissioner, the suggestions you're making, we can provide a flow chart, but that's simple and we'd be happy to do that. you're asking us to change the way the hearing officers draft their decisions and we don't really have control over that. i mean, the information that you're requesting is actually in there, but there is no particular format. it would be difficult for us to go to the judges and ask them to have a different format. we can certainly try, but i can't make any guarantees that the judges would comply and we don't really have any ability to do that. >> i think if just fill in the box, checking at the top, that's what i'm talking about.

is that at the top, which is applicant name, name, department, years of service, industrial or disability or ordinary. because here on this one, it says ordinary disability retirement which is clear. the one behind it doesn't say it until in the packet in the statement of facts and doesn't even reference it in the finding at the end. >> commissioner paskin-jordan: i understand, we can ask they be more specific in the captions. we can certainly ask. >> president stansbury: if not, can we just get a stamp? >> cross referenced. >> president stansbury: can we just get a rubber stamp and stamp it copy for the board, industrial, something like that? >> commissioner paskin-jordan: sure. thank you. >> president stansbury: any other comments? discussion on the consent calendar? great. i lost track. public comment. any members of the public that

would like to address the commission on the consent calendar? seeing none, we'll close public comment. is there a motion? what is that? there is a motion, a second. any discussion on the item? can we take this item without objection? great, item passes, next item. >> item 8, discussion item, the investment committee report, commissioner driscoll? >> commissioner driscoll: five items that were related to planning. strategic plans for executing the asset allocation decision that we made late last year. this was only part one, so if you missed the meeting you're going to get part two possibly on june 20th. we may have to reschedule that meeting because there has been

significant staff change. but you'll get advance notice on that. again, we talked to staff, meaning managing director public equities, the senior investment officer, senior investment officer or liquid credit. but again, going back to the total asset allocation and the general plan that the cio, discussed their expectations what they're trying to do, focusing on the key issues of a very good total return, a very good risk adjusted rate of return, as well as focusing on trying to minimize significant drawdowns, which means very large losses that do effect the contribution rate as well as the total funded status, funded ratio of the pension fund. i think we had very good audio on it, we did not videotape that meeting, so you missed it and want to catch up with the

documents, is there are basically five working documents, plans, in the next four or five to complete the package. includes the whole risk management plan that will tie everything back together. it took staff many, many weeks to prepare that to again show us basic plans like we've been hearing for real estate and private equity for all the other asset classes, how they see their ability to plan the work flow to achieve the asset allocation mix, if the board adopted, which is our first major risk management tool that we use. so that meeting lasted just over two hours. a lot of words. some good graphs. we're going to review it. not every year, but again, it's the plan for executing the asset allocation mix. the board decided on about eight months ago, a tri-annual event. >> president stansbury: thank

you. why don't we call for general public comment for the investment committee report? any members of the public that would like to address the report? >> i thought it was a great meeting. i will reiterate what i said, there a tremendous amount of moving parts going on, you're moving billions of dollars right now and trying to do it in a way that you're trying to balance two things at the same time, which is your long-term strategic asset allocation and also using that strategic asset allocation to de-risk the portfolio. it's a very difficult task to do. i'm not longer going to suggest these risk mitigation strategies because you're not going to do it. but repeat my earlier suggestion, create a table that shows all of the major asset classes and show where you are

now compared to the strategic asset allocation, the adjusted mix and where you were in september of 2017, when you passed it. if you do that, your equities are 60%. in 2017, they were 63%, so you're down 3%. in the strategic asset allocation, you're 11% above that right now. so there is a glide path and you have to balance the two things, which is you want to maintain all of these key fund manager relationships on the one hand, but you want to de-risk the portfolio on the other hand. so very, very difficult thing to do. bill has said in the meeting on the questioning from commissioner driscoll that some aspect of tactical decision making there, which i'm glad you have he said. you have that difficult balance. i think that table should be in

a report once a quarter explaining all the moving parts, because you're moving billions of dollars around very quickly. and you're changing managers quickly and it's hard to keep track of them all. >> president stansbury: thank you. are there any other members of the public that would like to address the commission regarding the investment committee report? seeing none, we close public comment. any discussion from the board? great, next item. item 9, discussion item, chief investment officer report, mr. coaker. >> start by looking at the second page, if you look to the column titled, allocation, alloc, i want draw the progress we've made. you see private equity right now is 16.5. that was under 12, slightly under 12 four years ago.

so even in a bull market, we've come a long ways there. the next is that liquid -- well, let's take private debt. only 1.8%, but i'm going to come back to that because we made $600 million worth of commitments that are waiting to go called. when it does, that will be over 4%. the next progress is in real assets. that's at 14.2. that number was slightly under 9 four years ago. so we've come a long way there. and absolute return, that's 9.6, and that number has been built from the ground up, in the past year and a half. we've come a long ways, what is still to be completed is the remaining build-out of 5% in absolute return. i think we're going to be more than halfway of that 5 in about year end. private credit, we've talked to you, that's going to take time.

that could take five years. that's cambridge's estimate. it really is dependent on capital being called. that number will be taken primarily from liquid credit, which right now we're overweight by 5%. so there is a lateral move from liquid credit to private credit and we've talked about the tradeoff of less liquidity for much higher yield and much higher expected return. and then private equity, the remaining 1.5 and 3%, to get to policy targets, that's really now -- we've made the commitments, i'm going to point to the lower left here in a moment. that remaining almost 5% between the two, that will come from public equity when capital is called. so, another thing that i want to let you know is in the lower left. and you see that in private equity, in real assets combined,

we have about $5 billion. in commitments that we've made, that will be called over time. that number was a little less than $2 billion four plus years ago. so we've made the commitments. we're now waiting for capital to be called by our business partners. i wanted to give that summary on asset allocation. the next i want to turn to is the narrative document. called memorandum. basically our return year to date. we had another fine month, up almost 0.4%. year to date, up 9.6. on a fiscal year to date basis, most everything is working. you'll see that public equity, both u.s. and international, are up more than 10%.

as are private equity and real assets are also up more than 10%. bonds have struggled. we are down slightly in our public fixed income market. the worst asset class to date so far this year is the 10-year treasury. down about 3% or so. turning onto economic conditions, the next several pages, there is 11 metrics here indicating that economic conditions are quite solid. we have a 91st straight month of job growth. you see when unemployment now, at very, very low levels of 3.9%. usually economic theory would say that when unemployment is this low, you have a major uptick in inflation and we haven't seen that. and i think the powerful forces of globalization and technology are the reasons why. corporate profits you'll see in the chart have been very strong.

there is a number of metrics at the bottom of page 3 that indicate that there is a lot of data to suggest that the economy is in a nice strike zone. in the lower left on page 4, there is a lot of talk about valuations and how high they are. according to j.p. morgan here, the forward looking ratio is 16.4. the "wall street journal" today says it's 17.1. that is high, but not terribly high. i point to one number here that is high on this chart. it's in the table on the lower left. that is the schiller pe ratio of 32.8 is high. i would point to three things about that. one, it is based on the normalization over 10-year earnings period. we had an earnings catastrophe in 2008 and 2009. and there is two important sectors within that schiller

ratio, that we were in earnings depression and that is energy and financials that combined well over 20 -- a little over 20%. you see on the right side, based on where valuations are, if you were to do regression analysis, our forward-looking five-year returns would be about 7.5-8%. next real estate. i want to give you a word picture about how expensive san francisco real estate is. it's more than nine times median priced home is more than nine times median price home income. so rivalling hong kong, excuse me, hong kong is easily the most expensive market in the world. it has a high population and super, super small in terms of

geographical space, and san francisco as well. next, you need to get some closing items out of the way. benjamin fuchs asset management, we asked for $125 million, the board approved. we received $100 million. bgh, we asked for $50 million, we received $45 million in australian dollars. sbcvc, we asked for $25 million and we did receive $25 million. on the right side of page 7, you see the absolute return numbers. doing fine. you see again the bond market has really struggled since the inception of this program. we have reduced our bond exposure from 20% down to whatever the number was, it's really quite low.

personnel. two big positives and one sad piece of news. andrew collins joined us as director of esg, we introduced him to the board a few weeks ago. andrew has nine plus years experience in the esg space, most recently at state street and with the accounting standards board, we welcome bo williamson, he has more than 12 years of private equity experience, we're thrilled to have both them join the team. >> are they here in the audience? >> they are, we did introduce them, but you weren't here. andrew? do you want them to speak. bo to our left and andrew to your right. bo, andrew?

act one, scene one, take two. >> i'm bo williamson joined last week, working with art and cynthia. i was with the private equity funds group. >> welcome. >> thank you. >> andrew? >> nice to meet you, andrew collins, delighted to have joined as the director of esg. coming from global advisors, where i was esg strategist working with institutional clients around the world. prior to that was in a research role with sustainability accounting standards board, a nonprofit based here in san

francisco that works between corporates and investors on better data and disclosure. delighted to be here and look forward to working with you. >> president stansbury: thank you, andrew, bo. >> we're sad so say that ellen is leaving sfers. she has been the directing manager of asset allocation, risk and innovative solutions. this is decision from a mix of a couple of things. second to last born daughter is leaving, graduated right now and heading off to college in england to join her sister, who is already there. and that, plus how housing prices, she and her husband have decided to relocate to the midwest to trade lower housing prices and much larger land in exchange for cold weather. [laughter] >> much colder. >>