>> supervisor cohen: thank you. next speaker. >> hi, my name is sarah rodriguez and i'm a small business owner of a manufacturing company here in san francisco, a cannibas manufacturing company. does this work? sfgov-tv, the overhead, please. the overhead, please. is your item on there? all right, one more time, sfgov. oh, turn it this way? oh, okay. so it needs -- i can just raise it up. i'm -- i'm responding specifically to the memorandum that was sent out last week regarding the predicted effect of the city tax on cannibas

businesses. oh, that's fine. i can just move it. on cannibas businesses. the memo did not contain references or specifically link to the data which it cites. so mainly this claimed that a percent of this tax could be absorbed by the consumer and this was asserted by the claim that the gross revenues have increased by 25% in the last year. and ignoring the fact that we just transitioned to recreation and so that 25% increase actually could be due to the number of purchases. the study goes on to say that some amount of this could be due to increase in price. however, we have had not seen any data to substantiate this. we'd like to advocate a data-driven strategy to best serve both the city of san francisco and the emerging cannibas industry.

if we represent the san francisco tax revenue by the multiplication of the tax with the price at which the good is sold and the number of purchases, -- >> supervisor cohen: thank you, i'm sorry but your time is up and maybe finish your last sentence. >> sure. my point is that demand is very high in dispensaries and lines are very long. so please go to the dispensaries. but the availability of legal goods is very, very low. >> supervisor cohen: thank you. >> thank you. >> presiden.>> supervisor cohent speaker. >> good morning, supervisors and my name is kenneth michael cohen and i'd like to thank you for the progress that you have made on this issue, including the amendments that you have offered. i'd just like to say that the taxes are killing me. i am a low-income retired person and using medical cannibas and

the taxes are killing me now already and i am just wondering how i'm going to be able to afford it with even additional taxes coming up soon with the gross receipts tax. i would ask you for parity in the cannibas industry with the gross receipts tax with other -- with other types of businesses in san francisco with what they're paying. and not simply to have a higher tax on cannibas simply because it's cannibas. thank you. >> supervisor cohen: thank you. next speaker, please. >> sfgov-tv could i have the overhead, please. hello president cohen, supervisor fewer and supervisor stefani. thank you again for hearing this issue. i'm appreciative from the bottom of my heart for all of the progress that we've made on this issue involving tax. delaying the implementation gives us a chance to have a

data-driven conversation and i'm dubious that the board of supervisors would ever choose to lower a tax. i don't know if that's going to happen or not so that's frightening for me. but for the interest of the public and everybody watching at home i'd like it talk about i.r.s. code 280e. this code denies the deduction for any expense in a business trafficking in a controlled substance. what this effectively means is that cannibas businesses can't write off their rent and electricity and they can't write off their employee cost. when you can't deduct those things you go from about 21% to a 49% tax rate. so that's just a broad conversation of what we're already facing at the federal level. and, believe me, if i could go to washington, d.c., and i had the funds and they wanted to listen to me about this i'd talk to them but i don't think they would. so you guys, thank you for listening to me. and then so that's the federal tax burden that we're under and we face state excise taxs and

we'll pay our payroll taxes and then we're now facing a gross receipts tax. and we're facing a gross receipts tax that is four to 50 times the rate of other businesseses and i really feel that the cannibas industry will be -- will have an additional tax but i would like that tax to feel fair to the industry. and i think that a double tax of the current payroll would be very fair. industry-wide that's kind of where we've all landed and we like the idea of a double tax. but the four x to the 50x, when you look at the data it's just frightening. okay. >> supervisor cohen: thank you. next speaker. >> hello, supervisors, thank you for listening to our comments. i appreciate you. and the headway that you've

already made, pushing it off really helps the equity applicants. i'm a equity partner and i hope to work on equity program in its early stages from a business standpoint. and just from a patient standpoint and an activist i want to remind you guys that alcohol and cigarettes kill people every day. cannibas doesn't kill people and there is no death toll for cannibas so there should be no death toll on cannibas because there's no death toll from can bass. so a lot of the reasons that we tax or have extra taxes on these industries is because they are, you know, they kill people and they're problematic. whereas this is the opposite, and we heal patients. i know personally of hundreds of patients that have been healed by cannibas through cancer, autism, child leukemia, a number of different diseases that modern medicine haven't been able to help with.

and then also if we want to bring in manufacturers and have distribution in san francisco, i mean, we won't be competitive if the tax is too high with other places which will force the retailer to look outside of san francisco which will squeeze out any taxes from manufacturing and distribution and so on and so forth. because of the real estate in general and how expensive it is to either find real estate, pay for real estate and do business in san francisco. and so if there is a tax i would say that it should go directly to the equity incubator program or something to help the equity applicants continue to flourish because there will be that tax so if the tax is put into a program to to help it could counter. >> supervisor cohen: thank you, next speaker, please. >> good morning, supervisors. jim lazarus, the san francisco chamber of commerce and i appreciate the amendments made

and what is pending before you today. i think that a deferral of any tax collections is the right thing to do. we have to go back to gross receipts generally and the ordinance from 2012 needs to be amended. you have heard me say we have a tale of a payroll tax next year of .5% and we base this on $410 million of business taxes in 2007 -- pardon me, 2011 and it's now $800 million of business taxes collected. based on that payroll growth. so you're getting a combination of gross receipts and payroll tax that t continues. our problem is with any disparaging rates that target businesses individually rather than as a whole. our problem with these rates is that as we found around the state of california that they're not collecting the revenue because high rates are continuing an underground cannibas economy.

and we need to get tax rates correct and we need to do that in conformity with the industry that you're trying to regulate. so we think that it's a step in the right direction. we believe that the rates should be closer to the rates paid of any retail, any wholesale, any manufacturerring, and that this industry shouldn't be unfairly targeted. thank you very much. >> supervisor cohen: thank you, next speaker. >> you know, this is an example of the board being underminded by statements like this. i made several demonstrations pertaining to taxes of twitter and five other high-tech companies. i have demonstrated where twitter has gotten free money pertaining to payroll taxes at a minimum of $217 billion. and this is a false narrative where you do not collect payroll taxes that you create jobs and that you making revenue for the city.

twitter and other high-tech companies is laughing at you. everybody is paying payroll taxes but them. the whole city employees are paying payroll taxes except them. so that's a false narrative. and again as far as taxing the cannibas and everything that is concerned, how come these type of rules and regulations is not being applied to twitter? you need to audit your tax business with twitter and i've already demonstrated a graph there earlier this week on taxes. it's showing that payroll taxes has trickled down on the graph and not creating revenue for the city. and i want to add to you off topic here that i had a demonstration last night before the police commission pertaining to sexual assault and when you get time i would like you to check out that demonstration. my main issue was to catch the rapist in these cold case files and not just get a bunch of rules and regulations to

administrate the treatment of the victims which is good too. but i want to catch the rapists who are floating in the city and county of san francisco and throughout the jurisdiction of the bay area. >> well, cigarettes are taxed heavily and alcohol is taxed heavily and so should marijuana be and, frankly, alcohol is not taxed enough. also, unfortunately, the legalization of marijuana appears to have encouraged market diversification with growers in mexico and turning to poppies and pharmaceuticals and turning towards mass manufacturer of opioids. so i had hope that the legalization of marijuana might push out prozac and valium but it doesn't look like that happened. so i -- also san francisco has

an interest in the lawsuit against pharmaceutical and i hope and assume that you do. >> supervisor cohen: any other members of the public that would like to speak on this item? all right, seeing none, public comment is closed. all right, colleagues, there's a couple actions that we need to take. first i'd like to make a motion to accept the amendment removing the 2020 tax implementation date. may i -- yes, all right, seconded by supervisor fewer. and i can take that without objection. thank you. and i'd like to make a motion to duplicate the file and i'll take that without objection. thank you. and i'd like to amend the new file with the wayfair amendment, okay, without objection, thank you. and then, colleagues, i don't know if you have any questions or comments before we take our final vote? supervisor stefani or fewer?

>> we are required to continue this item to the next meeting. >> supervisor cohen: i will make a motion to continue to july 26th so we can continue the conversation. okay. all right, well, then i'll make a motion to continue one week to july 26th so we can continue the discussion. >> clerk: would you like to consider both files? >> supervisor cohen: yes, continue both files and i'll take that without objection. thank you. madam clerk, any other business before us. >> clerk: no further business. >> supervisor cohen: okay, ladies and gentlemen, we are adjourned. thank you. (♪)

>> third thursdays at the commons is a monthly event series to really activate krisk centkrisk -- civic center, fulton mall, and other locations through social operation. >> in 2016, an initiative called the civic center progress initiative was launched, it was launched by a bunch of city agencies and community partners, so they really had to figure out how to

program these places on a more frequent basis. i'm with the civic center community benefit district, and i'm program manager for the civic center commons. also, third thursdays will have music. that was really important in the planning of these events. >> we wanted to have an artist that appeals to a wide range of tastes. >> i'm the venue manager. good music, good music systems, and real bands with guitar players and drummers. >> we turned uc center and fulton street into a place where people want to be to meet, to laugh, and it's just an amazing place to be. there's a number of different

exhibits. there's food, wine, cocktails, and the idea, again, is to give people an opportunity to enjoy what really is, you know, one of the great civic faces in america. when you look from the polk street steps, and you look all the way down the plaza, down market street, daniel burns' design, this was meant to be this way. it's really special. >> the city approached us off the grid to provide food and beverages at the event as kind of the core anchor to encourage people who leave a reason to stay. >> it's really vibrant. it's really great, just people walking around having a good time. >> this formula is great food, interesting music, and then, we wanted to have something a little more, so we partnered with noise pop, and they

brought in some really fun games. we have skeeball, we also have roller skating lessons, and we've got a roller skating rink. >> if you're a passion jail skeeball player like me, and you're deciding whether you're just going to roll the ball up the middle or take a bank shot. >> our goal is to come out and have fun with their neighbors, but our goal is to really see in the comments that it's a place where people want to hold their own public event. >> i think this is a perfect example of all these people working together. everybody's kind of come together to provide this support and services that they can to activate this area. >> there's no one agency or

organization that really can make this space come alive on its own, and it's really through the collective will, not just of the public sector, but both the public and our business partnerships, our nonprofits partnerships, you know, neighborhood activists. >> i really like it. it's, like, a great way to get people to find out about local things, cuisine, like, it's really great. >> it's a really good environment, really welcoming. like, we're having a great time. >> we want to inspire other people to do this, just using a part of the plaza, and it's also a good way to introduce people if they're having a large scale event or small scale event, we'll direct you to the right people at the commons so you can get your

event planned. >> being a san francisco based company, it was really important to connect and engage with san franciscans. >> how great is it to come out from city hall and enjoy great music, and be able to enjoy a comtail, maybe throw a bocci ball or skee ball. i find third thursdays to be really reinrig rat reinriggating for me. >> whether you're in the city hall or financial district or anywhere, just come on down on third thursdays and enjoy the music, enjoy an adult beverage,

enjoy the skee ball; enjoy an adult playground, if you. >> i just feel like this is what i was born to do when i was a little kid i would make up performances and daydream it was always performing and doing something i feel if i can't do that than i can't be e me. >> i just get excited and my nickname is x usher my mom calls

me i stuck out like a sore thumb for sure hey everybody i'm susan kitten on the keys from there, i working in vintage clothing and chris in the 30's and fosz and aesthetic. >> i think part of the what i did i could have put on my poa he focus on a lot of different musical eras. >> shirley temple is created as ahsha safai the nation with happens and light heartenness shirley temple my biggest influence i love david boo and el john and may i west coast their flamboyant and show people (singing)

can't be unhappy as a dr. murase and it is so fun it is a joyful instrument i learned more about music by playing the piano it was interesting the way i was brought up the youth taught me about music he picked up the a correspond that was so hard my first performing experience happened as 3-year-old an age i did executive services and also thanks to the lord and sank in youth groups people will be powering grave over their turk i'll be playing better and better back la i worked as places where men make more money than me i was in bands i was treated as other the next thing

i know i'm in grants performing for a huge protection with a few of my friends berry elect and new berry elect and can be ray was then and we kept getting invited back you are shows got better we made it to paris in 2005 a famous arc we ended up getting a months residencey other than an island and he came to our show and started writing a script based on our troop of 6 american burr elect performs in france we were woman of all this angels and shapes and sizes and it was very exciting to be part of the a few lettering elect scene at the

time he here he was bay area born and breed braces and with glossaries all of a sudden walking 9 red carpet in i walgreens pedestrian care. >> land for best director that was backpack in 2010 the french love this music i come back here and because of film was not released in the united states nobody gave a rats ass let's say the music and berry elect and performing doesn't pay very much i definitely feel into a huge depression especially, when it ended i didn't feel kemgd to france anymore he definitely didn't feel connected to the scene i almost feel like i have

to beg for tips i hey i'm from the bay area and an artist you don't make a living it changed my represent tar to appeal and the folks that are coming into the wars these days people are not listening they love the idea of having a live musician but don't really nurture it like having a potted plant if you don't warrant it it dizzy sort of feel like a potted plant (laughter) i'm going to give san francisco one more year i've been here since 1981 born and raised in the bay area i know that is not for me i'll keep on trying and if the struggle becomes too hard i'll have to move on i don't know where that will be but i love here so so much i used to

dab he will in substances i don't do that i'm sober and part of the being is an and sober and happy to be able to play music and perform and express myself if i make. >> few people happy of all ages i've gone my job so i have so stay is an i feel like the piano and music in general with my voice together i feel really powerful and strong >> i'm warren corn field and we are doing a series called stay safe, we are going to talk about staying in your home after an earthquake and taking care of your pet's needs.

♪ >> here we are at the spur urban ken center and we are in this little house that was built to show what it is like in san francisco after an earthquake. we are very pleased to have with us today, pat brown from the department of animal care and control and her friend oreo. >> hi. >> lauren. >> could you tell us what it would take after an earthquake or some other emergency when you are in your home and maybe no power or water for a little while. what it would take for you and oreo to be comfortable and safe at home. >> just as you would prepare for your own needs should an earthquake or a disaster event occur, you need to prepare for your pets. and i have brought with me today, some of the things that

i have put in my disaster kit to prepare for my animal's needs to make sure that i am ready should something happen and i need to shelter at home. >> what are some of the things that people should have in their home after an earthquake or other emergency to help take care of their tasks and take care of themselves. >> i took the liberty of bringing you some examples. it includes a first aid kit for your pet and you can also use it for yourself and extra meds for your pets. and water container that will not tip over. we have got both food, wet food and dry food for your pet. and disposable food container. and water, and your vet records. in addition, we have a collar and some toys. >> yeah. to keep oreo busy.

>> he needs toys and this is san francisco being a fruity city and come on oreo. this is your dinner, it is patte style chicken dinner with our foody seen here. >> what they say now is that you should have at least a gallon of water and i think that a gallon of water is small amount, i think that maybe more like two gallons of water would be good for you and your pet. >> does the city of animal control or any other agency help you with your pet after an emergency. >> there is a coalition of ngos, non-governmental organizations led by the department of animal care and control to do disaster planning for pets and that includes the san francisco spca. the paws group, the vet sos, pets unlimited. and we all have gotten together and have been getting together for over four or five years now

to talk about how we can educate the public about being prepared for a disaster as it involves your pets. >> a lot of services. i understand that if you have to leave your home, we are encouraging people to take their pets with them. >> absolutely. we think that that is a lesson that we concerned from karina, if you are being evacuated you should take your pet with you. i have a carrier, and you need to have a carrier that you can fit your pet in comfortably and you need to take your pet with you when you were evacuated. >> i am going to thank you very much for joining us and bringing oreo today. >> will everyone please rise and join us for 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: roll call, please. >> clerk: president? wouldn't that be an excuse rather than an absence because she's on the -- >> we knew that she would be gone and we'd normally mark it as fine but we knew that she would be gone. >> clerk: (indiscernible). >> present. >> clerk: (indiscernible). >> present. >> president stansbury: thank you so much. and we'll start off, we have to call our first item, item number 3 and start off with public comment. are there any members of the public that would like to address the commission with

regards to going into closed session. we'll close public comment okay, great. should we call the meeting back to order? we are coming out of closed session. is there a motion not to disclose? >> so moved. >> president stansbury: there's a motion. a second? >> second. >> president stansbury: there's a second by commissioner bridges. can we take that without objection. thank you. item passes. why don't we go on to item number 4. are there -- i do have one speaker card for mr. anderson. i thought this would be a chance for anyone to address the commission, now is the time to do so. mr. anderson, would you like to come up first? >> hello, hi, how is everybody doing today? my name is devon anderson and i'm an employee for sfmca. i sent -- originally sent an email to mr. stansbury on

july 13th as well as some of the board members as well. it's in reference to the contributions for employees that are military service members. i'm currently one year in the military and i have been employed with the city working for sfmta since august 17, 2015. since that time period i have taken 132 days of leave. and with the military rank and structure i'm an e8 or first sergeant and i am the top man in my unit, which requires me to be gone for an extended period of time. now i'm also -- i was also hurt while i was training, so right now i'm convalescing for my injury that i incurred in the line of duty. anyhow, when a service member is

re-employed at their -- into their previous position, the pension contributions are to be made as if the service member had been continuously employed. i have not gotten those contributions added to my pension fund as of yet. also since i'm one of the miscellaneous retirement plans, the latest one, and so my understanding is that whenever i retire that out of the past 36 months the highest three or the highest month leads. so this law, by the way, is united... united service members' employment and re-employment act. so basically the period of time

that i was gone for my annual compensation is supposed to be calculated as if i had been here. so the example is if i made $150,000 a year and i -- time worked when i was here and i made $75,000, with the time that i was on military leaving the $75,000 that is supposed to be calculated to that annual compensation and then the board is supposed to make contributions on my behalf. >> president stansbury: mr. anderson, you reached your time but i want to make sure that you get an answer to your question. it sounds like you have unanswered questions. >> yes. >> president stansbury: we'll get your contact information and we'll work to get you some answers. and they'll touch base with you before you leave here today. does that sound like a decent solution or at least a starting point? >> yes, yes. i haven't received an answer from anybody that i c.c.ed.

>> president stansbury: i think that you and i briefly exchanged over email -- why don't you -- she's out in the hallway and she'll get your contact information and they'll work to get you an answer. >> okay, thank you for your time. >> president stansbury: okay, thank you, mr. anderson. okay, are there any other members of the public that would like to address the commission under general public comment? seeing none, we will close general public comment. next item, please. >> clerk: the minutes of the july 10th, 2018, meeting. >> president stansbury: anyone from the public that would like to address the commission regarding the minutes? seeing none, we'll close general public comment. is there a motion? >> a motion to stop. i'm sorry -- >> president stansbury: there's a motion and a second to adopt the minutes from the july 10 -- >> the minutes, thank you. >> president stansbury: any discussion? we can take that without

objection item passes. >> clerk: item 6, the calendar. >> the adoption of item 6 for the consent calendar as written. minus under section 6b, the first sentence. >> at the request of the commissioner bridges, she's asked that we remove both travel requests from the consent calendar. so we'll adjust -- >> (indiscernible). >> yes, both -- yes, both travel requests, she's requested that they be withdrawn. >> president stansbury: we just have the matter of record. technically do we have to have an amendment to what was published? >> yes. >> president stansbury: so there's a motion and does that correctly amend what we need amended? >> as long as the commissioner casciato agrees that he's moving approval of consent calendar minus the two travel requests. >> yes. >> president stansbury: there's a motion and there's a second. why don't we call for general

public comment. any members of the public that would like to address the board regarding this? none, we'll close public comment. without objection? seeing none, item passes. thank you very much, next item. >> clerk: item number 7, july introduction to the standards of number 51 and 2018 reveal that this item was continued from the july 10, 2018, retirement board meeting. >> good afternoon, commissioners, bill hamark is here to discuss the new actual standard of practice that has impacted our actuary report and to give the reveal. >> thank you. so before i get into the new actuarial standard of practice and what -- just high level what it might mean to the system, i

wanted to touch just a few things on where we ended up with last year's valuation just at a real high level, to set the context before we get into that discussion of risk and then the economic assumptions. so in the last valuation things were pretty stable, but the contribution rates before cost-sharing went down slightly for the employer and the cost-sharing level remained the same. the funded status improved slightly. and the system is in pretty good shape going forward. and we looked at projections. every year we look at the different scenarios and this chart shows the range of the scenarios we looked at as well as the shaded area that represents the 5th to the 95%

percentile. that range is fairly wide. but all in all the general trend we had here was a slight uptick in contributions expected that then a long downward trend in contribution rates if our assumptions are met. i did want to point out that we'll be coming back on this, but that slight uptick is being driven by the way that we're amortizing the supplemental colas when they come in. and they're not being matched as well as we had anticipated with the asset gains and so we ended up with a slight uptick followed by a decline. so we're planning to come back later this fall with possibly ideas to that methodology to try to smooth that out. so that's the baseline that we're starting from when we look

at the economic assumptions this year. that wide range is also something that is typical in public pension plans and other pension plans. and it was a driver behind the actuarial standards board to decide that we needed a standard on the assessment and disclosure of risk. it's an entirely new topic area for the standards board to address, so there are going to be some requirements that will go into your val reports. it's not technically effective until november 1, 2018. we already do a lot of the required information and put it in your report but i think that you'll see it consolidated and organized a little differently and some additional commentary around it but it won't be a huge

change for us because we've been trying to provide you much of that information all along. just very quickly, the standard requires us to identify the risks to the plan and provide some level of assessment of those risks. it can be a very high level assessment. and then we are also to give a more detailed assessment if we think that it would be significantly beneficial. so there's a lot of discussion about what "significantly beneficial" means but we'll come back with that. and there's a lot of focus on maturity measures that we introduced to the board a couple years ago and the standard now will require us to disclose the maturity measures that we think are most relevant to the plan in understanding its risks. and not surprisingly the biggest

risk for most public plans is investments. the other end of that is also the sponsors' growth rate because where sponsors are growing they can withstand a lot more investment risk and sponsors that are not growing are the ones that are really suffering with some of those risks. and we just wanted to hit a couple of the maturity measures to give you an idea. this is from your valuation report. one of the measures that we call the support ratio is the number of inactive members for each active member. and so this bar shows the growth in your active membership compared to your inactive groups and you saw this black line that started to grow after the great recession. and for you it's leveled off and

actually started going down. that's not what we're seeing in most plans across the country and so it's a really good thing for this plan and it says that you have a much stronger support base to support your retirees than we're typically seeing. two of the other key ratios that we look at are the asset leverage ratio and the liability ratio. and it looked at your assets compared to your payroll. it's a kind of a proxy for the revenue. and the way to interpret it is if you had -- if you have a ratio of 7, which is about where yours is, and if we have a 10% investment loss that we're assuming 7.5% and if we had a minus 2.5% return and so that difference is 10%.

you'd multiply that by 7 and that's equivalent of losing 70% of our payroll in assets. we make up for those losses by increasing the contribution rate as a percent of payroll. so whatever we amortize it over is that 70% of payroll. for plans where it's 14%, that same investment loss would be 140%. so it is much more difficult for those plans to deal with that loss than it would be for a plan at 7%. if you look back historically a lot of our plans were at 2% or 3%. so we have definitely ramped up our sensitivity to investment risks. and the liability ratio shows a similar thing but related to most commonly related to assumption changes. when we change an assumption, if you have a high reliability

ratio it will have a big impact on your cost and if you have a low ratio we'll have much less of an impact. this is compared to the california plans and we're around the median on the asset leverage ratio and below the median on the liability leverage ratio. if you look at us compared to plans nationally, we're higher than the median. there's a lot of factors that go into why that is but some is the growth of the benefit and the length of the plans and how many retirees you have. >> a key thing to understand these charts is the lower the better? >> the lower the better. so in general we try to code --

hopefully you can see the differences between red and green. i apologize if you're red/green colour-blind but we try to code green meaning better and red as worse. >> okay, because the base case number on page 3 and then you look at that line, and the fact that our payroll has grown, that affects the contribution rate, correct? if the payroll drops, the contribution is going to go up -- so it's one of the factors. it has nothing to do with the investments and if it reverses the number of people hired, yes, the liability would drop a little bit but the contribution rates are going to still go up? >> yes. that's why i identified this sponsored growth rate on page 5. because that is a critical factor and it's one that is

working in your favor right now. >> for us, yeah, many variables. thank you. >> any other questions on that before i switch topics completely and go into the economic assumptions? all right. and so we've looked at the economic assumptions every year. and we only look at the demographic assumptions like retirement rates, mortality, every five years. and so that -- we won't look at that again until 2020. these assumptions will be used in the 2018 valuation which determines the contributions for the fiscal year-end 2020. and so we're just looking at the economic assumptions and those are price inflation, wage inflation, and the discount

rate. we'll go into them in more details. so i'm going to move on here. this provides the historical context, and it's very common for most public plans. but just to understand where we've come from, i'm going to start on the top chart in the gold line represents the yield on the 10-year treasury. and we've got it plotted every five years starting in 1987 through 2017. and you can see that it has dropped significantly from above 8% in 1987, down to around 2% in 2012 which kind of moved up. i think that today it's very close to 3%. but, still, a significant drop over time. that level of interest rates has had an impact on how we've

managed public plans. and so the bars on the top represent the assumptions that was used where the dark blue is the price inflation assumption, and then the real wage growth is the medium blue and the light blue is the difference that get you to our expected return. so back in 1987 we were saw.ing an 8% expected return which was about the same as the yield on the 10-year treasury. over time we went up to 8.25% and then we have come down, down to 7.5%. but that stretch between our expected return and the yield on the 10-year treasury is a real cursory look at the level of investment risk that we've had to take. you can think of it as an implied risk. the bottom chart does a real

simple version of an asset allocation, looking at public fixed income, public equities and everything else. and so back in 1987 when we were assuming 8%, we were doing that assuming that we'd have a portfolio that was 75% fixed income. and 25% equity. and then as we progressed, the fixed income has declined significantly to today that we're at about 6% of public fixed income. and the equity piece, the public equity piece, grew and then it's recently shrunk to 31% and we've brought in a lot of private assets and other -- other asset classes to try and fill it. but that's how we are making up that difference between the yield on the 10-year treasury

and the expected return. and why we didn't drop the expected return all the way to 2.5% or 3%. this slide gives more recent history on the changes that we have made in the last 10 years. i won't go true those. but they're for your reference. and then the other thing that i think is helpful to just keep in the back of your mind is that we've had over the past 10 years the unfunded liability has increased by about $5 billion. but that has three major sourc sources. and the largest source is our assumption changes. because when we reduced the discount rate or assume people live longer it raises our

measure of the liability. that's accounted for about $2.3 billion which is equivalent to 72% of the annual payroll in 2017. just to give you a scale slide. and investment losses during that period, that still covers the big investment loss. and investment losses during that period were about $1.9 billion compared to our assumptions. and then the supplemental colas are added another .9 billion. so those were the three big sources of changes to the system over the last 10 years. >> only $1.9 billion for investment losses? >> yes. we've had gains as well. >> okay, okay. so gains and losses? >> yeah. it's the net effect over the period. >> and the assumption changes are the mortality and that's the

rate of return? >> the discount rate and the retirement rates were another significant piece. >> that's the mortality study that we did with people who are essentially living longer? >> yes. and retiring earlier. >> okay. >> that was what, last year? >> that was a couple years ago. 2015. time flies. >> okay. >> every now and then if we're getting these articles and stuff regarding chicago and that there is a terrible positions and that the pensions are out in really bad positions and they circulate among our memberships and our retirees, what could we say to

our memberships, about the health of the plan in a simple version that -- and how concerned should we be about what's happening in other places and how that will effect us here if those pension systems collapse? >> so, yeah, illinois has always been brought up, whether it's chicago or any of the other funds. and kentucky is brought up a l lot. one of the most significant things in those places is that the employers have not made the contributions recommended by the actuary. i was just at a conference in san diego and the director of the illinois teachers system got up to note that this was the

80th consecutive year that they had not received the contribution recommended by the actuary. and so the plans out here in california, all of them except for calsters, i believe, are required to contribute the amount recommended by the actuary. and that has been a very significant factor in maintaining the health of these plans because it forces the contributions to come, even if, you know, not necessarily the most convenient time to contribute more -- more money to the plan. >> has calsters contributed? >> they've contributed but -- >> yeah, for years -- well, their contributions were just a fixed percent of pay in state statute. and so it did not -- it did not

adjust with their experience. when they didn't get the investment returns they were anticipating, the contributions did not increase. and so they were on a very perilous path until the reforms, what, two years ago? and so they've put in a ramp-up in state contributions and school district contributions to try and repair that. so they're on a much better schedule now but what got them into that situation was, you know, having that fixed contribution rate that didn't adjust with their experience and then they had a bad experience. >> president stansbury: how many calsters or teachers reciprocity over... >> we actually had our teachers had to make an election back in

1953 or something -- 1973 -- whether they wanted to continue with us or whether they wanted all of their service credit transferred to calster. last time we looked we had probably less than five or six teachers that were still employed and active members and had not retired. i haven't seen the latest file for the actuaries, but i wouldn't be surprised if they're all gone because they would have had to have worked another 40 years. so, i mean, how much teachers are in the school districts? i don't know if they're members of calster. >> president stansbury: i'm trying to figure how many of our members? >> very, very few because they had to make the choice and most of them i believe elected to go to cals telephonters at the tim. we had a few -- most of them long careers, at the time they had to make the election they wanted to stay with the stfers.

>> the other piece they would add to that to to show what san francisco has done significantly is back here on page 2. in the contribution graph, we have that light blue line that shows normal interest on the u.a.l. and you have to contribute that much to pay for the benefits that are being earned and the interest on the unfunded so it's not expected to grow. there were a lot of plans that got into trouble because they were persistently contributing less than that, year after year after year. you can go below it on a temporary basis to try and get time to adjust your contributions but if you're persistently below that, it's likely that unfunded is going to grow and become a larger and larger burden. and to a certain extent that is what calpers ran into and has

gotten them into their situation. they had a 30-year rolling ammortization period they were using on their unfunded which gets them persistently below that. so they recognize it and they're not doing that anymore, so they're climbing out, but that's part of what got them into the situation they were in. >> president stansbury: so our calpers members, workforce, what do we see for them in terms of anxiety levels? >> the only calpers members that are city employees at this point in time are deputy sheriffs and institutional police officers hired before 2012, or 2010 -- 2012. because the city and the pension reform basically brought all new hires from the -- in