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HomeMy WebLinkAboutDocumentation_Regular_Tab 06G_09/16/2004 �C�> TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND BOARD OF TRUSTEES MEETING JULY 1, 2004 I. CALL TO ORDER AND ROLL CALL The Tequesta Public Safety Officers Pension Trust Fund Board of Trustees held a regular meeting at the Tequesta Recreation Center, 399 Seabrook Road, Tequesta, Florida, on July 1, 2004. The meeting was called to order at 8.00 a.m. A roll call was taken by Beriy Laur, Recording Secretary. Boardmembers in attendance at the meeting were: Chair James Weinand, Vice Chair Geraldine Genco, Boardmember Edward Sabin, and Secretary Peter B. Lucia.. Boardmember Joe Petrick was absent from the meeting. Also in attendance were Dan Gallagher and Attorney Bonni Jensen. II. APPROVAL OF AGENDA Vice Chair Genco requested addition of discussion of dual office holding as item V(B). Chair Weinand requested addition of V(C) regarding the RFP's for auditors and actuarial services. MOTION: Boardmember Sabin made a motion to approve the agenda as amended. Vice Chair Geraldine Genco seconded the motion, which carried by unanimous 4-0 vote. III. APPROVAL OF MINUTES MOTION Vice Chair Genco made a motion to approve the minutes of the May 11, 2004 meeting subject to correction of scrivener's error which was to add the last line of page 3. Boardmember Lucia seconded the motion, which carried by unanimous 4-0 vote. BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES July 1, 2004 PAGE 2 -------------------------------------------------------------------------------- IV. PAYMENTS MOTION Vice Chair Genco made a motion to approve payment of $225.58 to Business Services Connection; $995.35 to Hanson, Perry & Jensen, P.A.; $613.65 to Peter Lucia for traveUseminar expenses; and $845.25 to Edward Sabin for traveUseminar expenses. Boardmember Lucia seconded the motion, which carried by unanimous 4-0 vote. MOTION Vice Chair Genco made a motion to approve ratification of withdrawals made since the last meeting on two-signature basis (under $100): Federal Express $28.78; Palm Beach Newspapers, Inc. -$67.50 for advertising for actuarial RFP; and Palm Beach . Newspapers, Inc. -$67.50 for advertising for auditing RFP. Boardmember Sabin seconded the motion. Vice Chair Genco noted the last actuarial statement she had was dated February 4, 2003. Chair Weinand commented that was for plan year ending 2002 and right now it was done every two years, and the goal was to get it moved to October when it was supposed to be done because when the study was late the Village had to adjust their books mid-year, and it needed to coincide with the budget. Vice Chair Genco asked if the people who did the last actuarial study had received the RFP, which was confirmed. Motion carried by unanimous 4-0 vote. V. PRESENTATION BY BOGDAHN CONSULTING, LLC Joe Bogdahn announced he would first review the investment policy statement, then the previous performance of the fund. Mr. Bogdahn indicated he would review the items that were different from the current investment policy, and that the primary changes had been made in order to put it into their format. The first page of the investment policy statement covered diversification, and within parameters to allow the manager full discretion of managing the portfolio. On page 2, the manager had used the S&P 500 as equity index and Lehman Brothers Intermediate Bond Index for bonds, for which the proper name was Lehman Brothers Intermediate Government Credit Index. Mr. Bogdahn explained that Mobius was the lazgest data gathering program, taking data from the largest number of managers across the country, and the appropriate peer group would be used to compare our fund. We would want to be in the top 40% of our peer group for both equity and fixed investments. On page 3, Mr. Bogdahn noted fixed income must be investment grade, and that the standard deviation on the last page was 120%, a measure of volatility to keep from BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES July 1, 2004 PAGE 3 having all bonds at purchase or whenever, the lowest grade, or having all stocks in one particular area. T`his was basically a 20% deviation. Discussion ensued. Worst case scenario on our current status of bond ratings allowed would be that we could have a triple B, and it could still be held below that but the manager could not add to it or buy it again. Vice Chair Genco noted that in our current policy the manager was given the opportunity to hold for only a certain period of time. Mr. Bogdahn read from the State statute regarding downgraded investments. Vice Chair Genco commented the board could do more than the State statute; Mr. Bogdahn commented it would be depending on the Village's ordinance. An example of Xerox being downgraded but being held was given. Another example discussed was a case where an investment was held after being downgraded and then sold at a loss, where the manager wrote a check to the fund for the loss. Attorney Jensen commented it was fairly common in governmental sector markets for losses to be paid like that. Vice Chair Genco was adverse to maintaining speculative grade bonds in a qualified plan, especially when she was fiduciary. Boardmember Sabin commented two different things were being discussed, the investment criteria getting into an investment, and then a situation that changes or deteriorates and the remedy for that. Mr. Bogdahn stated the current plan allowed no more than 20% deviation at purchase and there was really no difference in the new wording. Vice Chair Genco apologized, stating it had been her understanding that downgraded bonds could be held indefinitely. Mr. Bogdahn noted the language for that item needed to be clarified. Chair Weinand questioned item 4(a) which stated the investment manager would provide immediate written and telephone notification to trustees, and asked if he could do that under the sunshine law. Mr. Bogdahn explained there would be a designated person to be called, which was the Chairman, but that he could call every boardmember and tell them something—but he could not say to one member what another member said and that he agreed. Attorney Jensen clarified it was okay just to provide notification of what was happening. Mr. Bogdahn commented he and Attorney Jensen and the investment manager could make decisions; Attorney Jensen advised that the Board could decide they wanted a meeting. Mr. Bogdahn commented that item 3A ii, regarding equities, prevented the manager from putting all equities in small cap grade stocks or all in a category such as technology. Items B and C were straight from the State statutes. Under absolute restrictions, the only thing different was repurchase agreements—the old guidelines had a specific restriction against real estate, which he had not included. Private placement in real estate was prohibited. Communications language was from the BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES July 1, 2004 PAGE 4 --------------------------------------------------------------------------------- State statutes. On the next page, item SC, an addition had been made that it was highly suggested participating in continuing education process begin during a member's first term. The last page showed criteria for investment manager review, which Mr. Bogdahn read aloud. Mr. Bogdahn explained that the manager would be reviewed on a regular basis and if the manager thought there was anything in this policy too restrictive for them they could provide written notification and it would be listed on the agenda, and could be changed if the board wanted to do so. Both the manager and board would sign the investment guidelines. As to the question regarding whether this policy was in compliance with the ordinance, Attorney Jensen advised she believed there was nothing in the ordinance regarding real estate, which would need to be added. Mr. Bogdahn explained that the State statute limited those investments to a certain percentage, and that was a little higher than he recommended. He was recommending the addition to allow investment in public traded REIT's. Mr. Bogdahn asked if the board wanted to add back in that 25% of bonds at purchase could not be in the lowest level of investment grade, or let the manager make the decision. Chair Weinand requested time to allow the members to review this document against the existing investment guidelines and the ordinance, and recommended it be placed on the next agenda for some action. Vice Chair Genco requested a copy of the current investment poiicy statement for comparison. Chair Weinand requested that Attorney Jensen check the guidelines against the current ordinance. Mr. Bogdahn provided as a handout a report booklet dated March 2004, which he advised in the future the Board would receive about ten days ahead of their meetings. 8 copies would be sent to Mr. Gallagher for distribution. The Executive Summary on page 2 showed every transaction of the portfolio from 10/31 /2000 through 3/31 /04, for which Mr. Bogdahn provided a review. Returns included cash and earnings on that cash. After General Employees' fund was split off, their money was placed in a money market fund and were segregated. Mr. Bogdahn explained that a.fter that point the money shown in these returns was this fund's money; and when it had been included if the earnings were 10% then both had earned 10%. Mr. Bogdahn commented we would like to see more returns in up markets and less in down markets in the future. Vice Chair Genco concluded the manager had been more conservative than they should have been. Mr. Bogdahn explained the universe comparisons on page 5 and 6, and that over a 3-yeaz period our fund had been below average. On page 7, returns on fixed income were reviewed. The ratio of up to down rnarkets was the type that we would like to see for the BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES July 1, 2004 PAGE 5 --------------------------------------------------------------------------------- total portfolio. Peer relativity was shown on pages 8 and 9. The Equity summary was shown on page 10, where returns and the ratio of up to down markets was an issue, capturing 55.1 % of the up market since inception but giving up 87.8°/u on the downside, which was flip-flopped from what was desirable. Pages 11 and 12 showed peer comparisons for equity, which was in pure large cap core, and showed this fund was low except for one quarter. Comparing to S&P 500, which was a blended index, was not as good as when compared to strictly a growth sector. Mr. Bogdahn indicated this fund needed a blended portfolio. The rest of the report showed items already discussed, and that our fund was not correlated to the benchtnark. Mr. Bogdahn provided a handout titled "Tequesta PSO Equity", and reviewed the type of stocks. 85% of the fund's portfolio was in large cap stocks; however, 73% of the portfolio was in the growth side. This was exactly consistent with Northstar's management of money—they were a large growth manager. Mr. Bogdahn explained that one of the reasons our fund underperformed the S&P was we were not diversified. This fund's investment policy stated the fund was going to be diversified. Northstar had not done anything particularly wrong. Chair Weinand stated he agreed with Mr. Bogdahn, and Northstar had reminded the board many times over the years that they were a lazge cap investment manager. Mr. Bogdahn indicated the manufacturing industry was doing well, but we were not investing there. Mr. Bogdahn provided a list of managers that would be interested in managing Tequesta's public safety pension fund; and indicated this fund's $2.2 million was not a lot in the institutional arena, so that would limit the managers who might be interested in handling our portfolio. He was having discussions about restrictions in the investment policy and having them give us parameters on how to invest money. Northstar Capital Management was on the list. Mr. Bogdahn reviewed each company on the list and their performance for over the past five years for calendar period returns, index relative risk statistics, market capture ratios, return vs. risk, risk analysis, and trailing period returns. The Mobius universe was discussed. Mr. Bogdahn explained that Northstar had reported to Mobius for the last ten years, and recommended looking at Northstar. Each of the companies listed were discussed, and Mr. Bogdahn asked if there were companies on the list anyone would like to see interviewed. Vice Chair Genco suggested Dana Investment Advisars, Contravisory (Rockwood), ICC, and Northstar Capital Management. Discussion ensued. Consensus was to select those four companies to be interviewed. After a short break, the meeting reconvened at 10:12 a.m. Mr. Bogdahn handed out new information which included ICC, and reviewed their performance. August 9 at 8:30 a.m. BOARD OF TRUSTEES TEQUESTA PUBLIC 5AFETY OFFICERS PENSION TRUST FUND MEETING MINUTES Ju1y �, 2004 PAGE 6 --------------------------------------------------------------------------------- was set for interviews. Attorney Jensen indicated she would not be able to attend. Mr. Gallagher was to coordinate with the General Employees' Pension Board since they had picked Dana and Contravisory and Northstar to be interviewed. Boardmember Sabin left the meeting at this point at 10:30 a.m. Mr. Bogdahn explained recapture fees, and that the board might want to hire a recapture broker, which would be the board's broker. A recapture agreement would not cost the boazd anything, and he would bring an agreement to be considered. A questionnaire would be used as a guide to be sure each firm was asked the same questions. Chair Weinand requested that the spreadsheet be provided to the board ahead of time. A snapshot page would be prepazed for each firm as well. Chair Weinand confirmed with Mr. Bogdahn that this fund and the General Employees' fund did not have to hire the same manager. Mr. Bogdahn described the proposed format for the August 9 meeting, which would begin at 8:30. Approximately 15 minutes would be spent going over and discussing materials the board had received ahead of time. The managers would be told they did not have to focus on performance numbers—Mr. Bogdahn would already have those—but should focus on their philosophy, style and how they got to that, and the risk and volatility curves they have in place, etc. Each firm would be allowed 30 minutes to make a presentation, then there would be 10 minutes for questions. The 30-minute presentation time would be strictly enforced—they would be given a 5-minute warning; but if the board ran over their 10-minute question period that would be fine. The firms would be scheduled and each firtn would know when their time was. After all presentations, the board could have a general discussion, and individual boards could vote for the manager they wanted. Northstar woutd be the last presenter. Mr. Bogdahn indicated he would contact the presenters that day and send the questionnaire, and would request them to provide their information to the Village the week of July 26. V. b. DISCUSSION OF DUAL OFFICE HOLDING Attorney Jensen commented it was her understanding that the board needed to create a resolution indicating the issues and the proposed resolution. Vice Chair Genco responded that would work really well, and also a summary, which Attorney Jensen had already provided, but assurance was needed as to what this board wanted before it was moved to Council. Vice Chair Genco commented that it was supposed to be done by resolution because the resolution would resolve that the board wanted to see whatever it was, as far BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES July 1, 2004 PAGE 7 --------------------------------------------------------------------------------- as what this board was as a composite, and once the board made a recommendation that this be the composite of the pension board, then the Council would act on that and either decide that is what they want or don't want. Attorney Jensen commented there were two Council appointees--two people on this board were appointed by the Village Council; so the Council could designate how they wanted to fill those positions. Attorney Jensen recommended it be someplace else because those were their appointees, so they could decide if they wanted a position filled by a person who was a Village Council person or not. Vice Chair Genco commented this discussion here was whether this board wanted to maintain two Village Council appointees. Attorney Jensen advised there must be two Village Council appointees, whether from the Village Council members or not was the Council's decision; but this Board was mandated by law to have two people that are appointed by the Village and two members elected from the membership, and a fifth member elected by the members of the board. Chair Weinand recommended that this board put the Village Council on notice that the Charter is not set up properly to do it because of the dual holding of office, and let them move forward. Vice Chair Genco agreed, and to make a recommendation to Council from this board with the board's attorney present, and she would hopefully be there, and if there were any questions they could be answered. Vice Chair Genco stated that was why this was set up the way that it was, and so far, she had been the dual person, and what ended up happening was she was usually the person who had to explain things to everyone else, and that was the reason she would like to keep that format if it was the wish of the board, unless the boazd said they did not want a Council member on the board necessarily, or if it was the wish of the Council. Attorney Jensen clarified it really was the wish of the Council, and she wanted that to be clear. Vice Chair Genco stated the board had to delineate it for posterity because the Council positions changed, and she did not think the board positions would be changing as frequently as the Council positions, and that was the reason it was very important to delineate for the Council what the composition of this board was and explain to them that having a Council member on this board was a benefit, and asked if that should be stated. Attorney Jensen stated from a legal perspective she was concerned because it is the Village Council's opportunity to appoint and they may appoint anyone they want. Vice Chair Genco responded she understood that and that was why the board needed to make a recommendation to say either the Council appoints two people one of which shall be a Councilmember, or you may appoint any two people. Attorney Jensen stated this board did not have that authority. Vice Chair Genco responded this board did have the authority to make any kind of a resolution to send to the Council, but then it was up to the Council to decide if they wanted to take action to do that. Attorney Jensen stated she understood, but her legal opinion to this boazd was not to take that step. Her advice was to say to the Council that there was an issue with their current appointment and if they BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MTNUTES July 1, 2004 PAGE 8 -------------------------------------------------------------------------------- want to continue with a Village Council person on this board they needed to make some change in their documentation. Vice Chair Genco commented they would not understand that and the Village Attorney would say the exact same thing as Attorney Jensen and that did not ma.ke the consistency, which was what she was concerned about. Chair Weinand commented from an employee standpoint, he liked having Vice Mayor Genco on the board because of her knowledge in this area, and it was easier to explain pension changes to the Council, but he understood what Attorney Jensen was saying that the board really could not do that. Vice Chair Genco commented she did not understand why the board could not do that. Attorney Jensen advised it was because it was the Village Council's appointrnent they may appoint whoever they wanted to this board, and the board could not be more restrictive than the legislation because the board's marching papers from the State, which were pretty strict, said who belonged to this board; and the Village Council should be given its freedom to say who they wanted for this board of trustees. Vice Chair Genco commented she might not be involved in this in another year or five yeazs, but the first thing she saw when she joined this boazd was all the problems in the plan and trust documents. She had ended up selling the Village Council on a lot of the changes that had been made and literally had to beat some people up to get some things changed, and had she not been on the Village Council some of the changes would not have been made as quickly or as easily as they were. Attorney Jensen advised if the board wanted to preserve this position as a Village Council position, her legal concern was overstepping the bounds of the board as to who they appointed, because they could appoint anyone they wanted, just as the members could elect anyone who was a member of the fund. Vice Mayor Genco responded, so what Attorney Jensen was saying was this board could not make a recommendation. Attorney Jensen responded the board could explain to the Council how a Council member could be kept on this board. Chair Weinand commented Attorney Jensen could write that out for the Council so it would be clear, because it was confusing, but it could be explained that it was the Council's obligation to appoint two members to this board and if they wished to continue with a Council member on the board how it could be done. Attorney Jensen advised if the Village Council wanted to continue with a Council member on the board, they needed to do was establish some rule (other than just a motion) that they will have a Council Member on this board. Vice Chair Genco asked if it would be a violation if the Council passed a resolution recommending or stating that. Attorney Jensen responded that it was their responsibility to state if they wanted a Council member on this board. Chair Weinand asked if Attorney Jensen had checked on his position, if he could remain as a member of the board and as Fire Chief, to which the attorney responded his position was fine. Discussion ensued whether the board should make a resolution of how to do it or authorize Attorney Jensen to write a letter. BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES July 1, 2004 PAGE 9 -------------------------------------------------------------------------------- Attorney Jensen recommended the board make a motion to notify the Village Council that there was an issue with dual office holding that they needed to resolve at their level and make a determination whether they were including as an ex officio duty the responsibility for a Council member to be on this board, which was essentially the AGO's opinion. The Attorney General had issued an opinion that in order to have a Council person on the board of trustees, one of the ex-officio duties of the members of the Village Council had to be, to be a member of the board. Attorney Jensen advised there would be no change to the trust document itself. MOTION: Vice Chair Genco made a motion stating that the pension board is advising the Village Council that it will have to make a change to its charter or ordinance to address the appointment of seats on the pension board and that the Council shall have to appoint two members of each pension board and it will have to amend the charter or ordinances to deal with dual office holding. During discussion of the motion, Boardmember Lucia commented he was unclear about the whole situation if the Council had already stated that they did not want dual office. Attorney Jensen explained it was a state law that prohibited dual office holding. Boardmember Lucia asked why it was originally established, if it was a conflict of interest. Attorney Jensen explained that there were cases in the 1980's and the Attorney General had found it was not a dual office holding issue as long as it was provided that these people could be on these boards, and the Council had already appointed people. It was not until earlier this year when the Attorney General came up with an opinion that basically said it was not enough that the Village Council just appoint people, they must actually have some sort of a provision that said it is our plan that we have a Village Council member on the board of trustees. This had resulted in issues in other municipalities and municipalities had to make sure this was included as an ez officio duty. Attorney Jensen explained she was recommending at this point that the Village Council make a determination about its dual appointment to the board, and if they wanted to continue with dual appointment they had to have somewhere in their ordinance or charter information that said, we have two seats and we have decided that one of those should be filled by a Village Council member as an ex officio duty, or none of those will be filled by a Council member, or both of those will be filled by a Village Council member. EssenNally, it would protect the person—Vice Chair Genco at this point from dual office holding issues. Members of this board could not sit on another board because that would be dual office holding—the only exception was for Village Council members to have ex officio duties. Vice Chair Genco commented that when one looked at it in the long run, if there were significant underperformance and investments were aot BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES July 1, 2004 PAGE 10 ------------------------------------------------------------------------------- achieving the 8% from the actuarial study, the Village was the entity that would have to raise its taxes in order to fund any deficiency in the pension plan; and by maintaining a Council person who was already involved in things she was hoping that person would be able to keep the Village's interest first and foremost, in addition to the responsibility of dual capacity as a pension member to keep first and foremost as a pension member to protect the people who were participaNng in this plan. Vice Chair Genco advised at one point the Village Council had been the pension board but laws had been passed to prevent that because that was a conflict, and what �nded up happening was the beneficiaries of the plan were no longer being taken care of the way they should be. Boardmember Lucia responded that was his point, whether originally this dual office prohibition was created because it would be a conflict. Attorney Jensen advised she did not know the reason for the origination but guessed that it was difficult for people to hold two offices and have their loyalty completely with one or the other. Attorney Jensen stated her recommendation at this point was to let the Village Council know about the issue and that they had an issue within their ordinance or charter that they needed to take care of. Vice Member Genco suggested that once a year the board do a presentation to the Council on the status of the pension. Attorney Jensen responded that was required by law. Chair Weinand suggested that be done after the actuarial return was received. Chair Genco noted the last actuarial return was buried 'tn the consent agenda and no one really understood what it meant, and the board did not want to do that. Attorney Jensen clarified that essentially the motion was to notify the Village Council they had two appointments on this board and they needed to make a decision and take action, but it was not sufficient for them to just have it in a motion. Boardmember Lucia seconded the motion, which carried by 3-0 vote. Chair Weinand confirmed with Attorney Jensen that she would write the letter as discussed. V. c. Chair Weinand commented the board needed to discuss the results of the actuarial services and auditing services RFP's. Consensus was to place this item on the August 10 agenda. It was confirmed that the August 10 meeting would begin at 8:00 a.m. VII. ADJOURNMENT Upon motion by Vice Chair Genco, seconded by Boardmember Lucia, and unanimously carried, the meeting was adjourned at 11:05 a.m. ; BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES July 1, 2004 PAGE 11 -------------------------------------------------------------------------------- Respectfully submitted, �, ' . . - ..,� `.=; , Betty Laur Recording Secretary