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APCM models show trade-offs from $2M or $5M draws; recommends modest split and changes to trust fund allocation
Summary
APCM presented modeled outcomes for $2 million and $5 million withdrawals from the city's investment accounts, recommended a $1.3M long / $0.7M medium split for a $2M draw to keep equity exposure near 36%, and proposed adding asset classes to the trust account to improve risk-adjusted returns. Council asked how transfers are authorized and scheduled a fall work session.
APCM, the city's investment adviser, told the Soldotna City Council work session that a planned $2,000,000 withdrawal could be sourced as $1,300,000 from the long-term account and $700,000 from the medium-term account to hold equity exposure near 36% and produce an estimated sustainable distribution of about $923,000.
"With that draw, we would still have a sustainable distribution rate of $923,000," APCM analyst Charlie Scott said, presenting modeled return and risk ranges. Scott added the average annual expected return for the portfolio was about 5.7% and that one-year outcomes from the model span roughly -7.2% to +18.6% in the 95% range.
The advisers presented two primary scenarios: a one-time $2 million draw and a larger $5 million draw that staff requested for planning around a forthcoming ice arena project. APCM said the $5 million scenario was modeled for information only and not as a recommendation. The simulations showed that a one-time $2 million draw with no further distributions brought the portfolio back to its starting expected wealth around 2027 at the median; multi-year or larger draws pushed recovery into the early 2030s under the firm's assumptions.
APCM also explained an "inflation-proof" approach that would lower a sustainable annual withdrawal to about $582,000, illustrating the trade-off between maintaining purchasing power and preserving a larger nominal distribution.
Council members pressed for clarity about who can move money between accounts. The city manager explained that transfers from the medium- and long-term investment accounts require council authorization by resolution, and that the short-term account can be drawn against without council action but currently has little available balance. The manager noted a February 2025 authorization for $2,000,000 remains in place, with $1,000,000 already transferred and used.
APCM recommended changes to the trust account's allocation to improve risk-adjusted returns and diversification. The advisers proposed adding asset classes the trust does not currently own (for example, high-yield fixed income, infrastructure and commodities via ETFs), shifting the portfolio mix slightly to lift expected returns while accepting modestly wider outcome ranges. APCM said the trust's historical average distributed about 3.6% over five years and showed a cumulative 5-year improvement of roughly 1.31% under the recommended allocation in their back-tests.
Vice Mayor Parker questioned whether the council should set a minimum balance (she suggested $15,000,000) and whether the city should rely on bonds instead of withdrawals. APCM and staff said those are policy decisions for the council; APCM recommended a follow-up strategic work session to refine targets, run additional allocations and stress scenarios, and align withdrawals with the city's capital-timing needs.
No formal recommendation or vote was taken during the work session. Staff and APCM said they expect to return later this fall with refined analyses and specific allocation options for formal council consideration.
