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HomeMy WebLinkAboutDocumentation_Regular_Tab 05E_12/09/2004 , r� � �� ���� TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND BOARD OF TRUSTEES MEETING AUGUST 10, 2004 I. CALL TO ORDER AND ROLL CALL The Tequesta General Employees' Pension Trust Fund Board of Trustees held a meeting in the Emergency Operations Center (EOC) of the Tequesta Public Safety Facility, 357 Tequesta Drive, Tequesta, Florida, on August 10, 2004. The meeting was called to order at 11:16 a.m. A roll call was taken by Betty Laur, Recording Secretary. Boardmembers in attendance at the meeting were: Chair 7eff Newell, Vice Chair Carl Hansen, Boardmexnber Thomas Paterno, and Boardmember Bob Garlo. Boardmember Greg Corbitt was absent from the meeting. Also in attendance were Dan Gallagher and Attorney Bonni Jensen. II. APPROVAL OF AGENDA MOTION: Vice Chair Hansen made a motion to approve the agenda with addition to t6e consent agenda of disbursement to Tresha Thomas. Boardmember Garlo seconded the motion, which carried by unanimous 4-0 vote. III. APPROVAL OF MINUTES MOTION: Vice Chair Hansen made a motion to approve the minutes of June 22, 2004 as submitted. Boardmember Garlo seconded the motion, which carried by unanimous 4-0 vote. IV. NORTHSTAR CAPITAL MANAGEMENT INVESTMENT MANAGER'S REPORT AS OF JUNE 30, 2004 BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES August 10, 2004 PAGE 2 --------------------------------------------------------------------------------- Peter Van Buren indicated the asset mix was within investment guidelines with no violations, and his company's belief was that high earnings companies were the type most attractive and would deliver above-average performance. The energy area had been underweighted, but now was delivering very good earnings with strong demand, so they were bringing that sector up. Because of political pressure on the large pharmaceutical companies plus Medicare/Medicaid requirements, they were backing off that group a little. The fixed income portion of the account was compared with Lehman Brothers Intermediate Index. Mr. Van Buren explained that their duration was lower than the index and average maturity was a little longer because they were buying government agency notes with a longer duration with call provisions. They stayed with the best quality because they could not afford to have one credit in this account downgraded. It was impossible for bonds to beat the benchmark in this size account. The only way to do that was to participate in large commingled funds. Page 3-3 covered the characteristics of companies in the portfolio and gave the portfolio average and S&P Index. The amount of growth relative to the S&P was quite significant, with improvements during the last couple of years. Page 3-4 showed pie charts of areas of diversification. Page 3-5 reported performance for the quarter and since inception, which was January 7, 2004. From February on, the market began to slide and weaken. Their record to date had been quite favorable to the fund; Mr. Van Buren explained that being as good as the benchmark was good performance for the fund. Page 3-6 showed cash contributions and withdrawals. In reviewing Section 4, Mr. Van Buren explained that interest rates had been very unpredictable since April. That day the Federal Reserve was meeting and expected to raise the rate by 1/4%. It would be difficult to maintain this fiznd's position in fixed income, but they would continue to look for quality and high yields. Section 4-1 showed stocks had fluctuated during this period and bonds were now going down. 4-2 indicated the economy had slowed, but their long-term goal was to position this fund in the best quality companies and best fixed income investments. Manufacturing was up in the past nine months; job creation had been weak; and hurting most was oil and gas prices. A new 17-year high price on oil had been announced that morning. Mr. Van Buren explained that consumers would draw back with uncertain oil prices, the war on terror, a political campaign, and the economy weakening, but after the election things should be better. Mr. Paterno commented the fluctuation in the benchmark only affected the fund if investments were sold. Mr. Van Buren explained it was not a big deal unless a bond was called and the money had to be invested at lower rates. That was not very relevant for accounts in perpetuity such as this fund. It would even out over time plus the type of bond - portfolio was constricted into what fit into the investment guidelines. Mr. Van Buren commented they had not bought any risky bonds so he did not expect problems, and BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES August 10, 2004 PAGE g --------------------------------------------------------------------------------- they were laddered in terms of maturity and pulls. Vice Chair Hansen asked Mr. Van Buren's opinion as to whether the strategies of the Village should be different than perhaps West Palm Beach, which had been in the business longer, or different than the Public Safety Officers' fund. Mr. Van Buren indicated he did not think it should be different than the Public Safety Officers' fund since the goals and objectives of both funds were the same. He did not think the mix of assets should be any different than 60/40. His company believed the style of assets should be larger cap quality companies to give the fund more consistent benefit of potential future growth, and he did not think in terms of doing much more in the area of different styles. Looking at the City of West Palm Beach or the Town of Palm Beach, they had the benefit of different styles because of their size, and these types of assets could lend themselves to lowering risk to some degree by having different styles. With each of the classifications came greater risk, so he did not think it appropriate at this stage for this fund to become involved in different styles. Getting returns for the fund at less risk was what he would expect the board to be looking for, and he would recommend keeping the same ratios and same types of companies. Mr. Van Buren explained that this size fund could not afford to lose one bond—they only had five at $25,000 each; and if the Town of Palm Beach lost $25,000 in an $8 million fund they would not even feel it. V. UNFINISHED BUSINESS a. Report by Attorney Jensen on Results of Comparing New Investment Guidelines with Ordinance Attorney Jensen reported the investment guidelines as drafted by Joe Bogdahn met all legal requirements, and reviewed proposed changes in financial substance found in Section 3A(3)(a)(i) and (ii). In the current guidelines there was specific language in regard to fixed income, while the new guidelines only stated investment grade. The new guidelines for equities stated value line ranking for safety 1, 2 or 3, except that 20% of the funds assets may be invested in securities not meeting this requirement; the current guidelines had a 25% limitation in any fixed income that was rated BAA/Baa at time of purchase. The attorney announced those were the only changes. b. Consideration of acceptance of new investment guidelines prepared by Mr. � Bogdahn. BOARD OF TRUSTEES TEQUESTA GENERAI. EMPLOYEES' PENSION TRUST FUND MEETING MINUTES August 10, 2004 PAGE 4 --------------------------------------------------------------------------------- MOTION Boardmember Garlo made a motion to approve the new investment policy guidelines. Vice Chair Hansen seconded the motion, which carried by unanimous 4-0 vote. c. Discussion and consideration of selection of Investment Manager Chair Newell indicated a preference for Contravisory/Rockwell, since he felt the fund needed to grow and must take some risk in order to do so. Mr. Bogdahn advised when assets reached $1-$1.5 million then the fund could consider using two investment managers. Vice Chair Hansen reported he had attended the Public Safety Officers' fund board meeting, and their feeling had been if there were additional fees for having two companies then they would not do that. Vice Chair Hansen commented apparently Northstar had not done too badly for the fund and asked what had started the process of seeking another manager. Chair Newell responded both he and Chair Weinand of the Public Safety Officers' fund board had been concerned with Northstar's performance; and he had not been happy with their service because he did not get direct answers. Mr. Newell explained that this process had been going on for about a year. Mr. Van Buren had indicated if the board did not like their style of investment then they should find someone else, which was saying they would not change, and Chair Newell felt they had underperformed. Employee contributions had been greater than the returns. Vice Chair Hansen responded it had been his feeling the day before during the presentations that Northstar had not been underperforming, but perhaps underservicing. Mr. Newell felt there had been missed opportunities because of their methodology. Vice Chair Hansen reported it looked like the Public Safety Board was going to delay making a selection to November 9. Boardmember Paterno commented this board did not have to make a decision, Northstar had only been the manager since January for this fund, and the fund was not falling behind, so delaying until November would not make a difference. Mr. Paterno commented the board must be comfortable with the investment strategy and decide if they wanted to be in large caps the way Northstar did it, or the way Dana or Contravisory/Rockwell did it. Dana was similar to Northstar except they had rigid methodology, while Contravisory/Rockwell moved with the action and that would add some but miss some. Their strategy was to sell. Northstar was doing okay this year, but some of the boardmembers were not comfortable being in large , caps. It would be preferable to later move to midcaps plus large caps, but the fund did not have enough money to do that now. Mr. Paterno commented Mr. Van BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES August io, 2004 PAGE 5 --------------------------------------------------------------------------------- Buren could not say growth strategy was better because that would take him out, but this fund was young and no one was retiring and that was the time to move along, so he agreed with Mr. Newell. Boardmember Garlo commented Northstar's investment strategy was ultra conservative and they would not change. Mr. Garlo favored Dana for adding money with lowest risk over Contravisory/ Rockwell's strategy of sector betting. The board discussed waiting to make the decision; Mr. Paterno commented the only reason to wait would be to get additional information and he thought a change was needed. Attorney 3ensen reported the Public Safety Officers' board was looking at a 50/50 split but were concerned about fees. MOTION Vice Chair Hansen made a motion to hire Dana as investment manager for the General Employees' pension trust fund. Boardmember Garlo seconded the motion. The vote was a 2-2 tie, with Mr. Hansen and Mr. Garlo in favor and Mr. Newell and Mr. Paterno opposed. Discussion ensued. Chair Newell expressed concern that Dana was so rigid. Boardmember Paterno commented Dana found companies within the sectors, which was why they did better than the S&P; but he favored Contravisory/Rockwell because it was an opportunity to get with someone that was advising multi-million dollar companies. Mr. Paterno stated he would be happy with either Dana or Contravisory/Rockwell. Mr. Newell agreed, stating he wanted what was best for the fund. Mr. Paterno noted Northstar beat Dana this year. Chair Newell suggested hiring Contravisory/Rockwell for two years. Mr. Paterno commented he had thought Dana was safer, but looking at the charts Contravisory/Rockwell was no worse. Vice Chair Hansen commented he thought he could be happy with Contravisory/Rockwell also; he had stated his opinion, but the board must come to agreement and a unanimous vote would be nice. Mr. Garlo commented there was no potential for a crash when you were absolutely neutral on the entire sector. Chair Newell commented he did not want to get risky, but if the fund did not grow there was going to be a cash flow problem and it needed to get to $1 million as soon as possible, then it could be more conservative, and he believed there was an opportunity with Contravisory/ Rockwell to move faster. When the goal was reached, the board could discuss this again. Vice Chair Hansen asked if Mr. Corbitt would be unhappy the board - was making this decision without him, and if so, the decision could be delayed until the November meeting. Response was the members present must make this BOARD OF TRUSTEES TEQUESTA GENERAI� EMPLOYEES' PENSION TRUST FUND MEETING MINUTES August io, 2004 PAGE 6 -------------------------------------------------------------------------------- decision because Mr. Corbitt had not attended the previous day's meeting so was not informed on this issue. Mr. Newell suggested hiring Contravisory/Rockwell for six months or a year; Attorney Jensen commented Mr. Bogdahn was going to advise the board to enter into a 3-year contract because there were costs associated with making changes. Attorney Jensen advised that Mr. Bogdahn had brought these people to the board, so he thought either one would do a good job. Vice Chair Hansen asked if this board should try to get the same manager as the Public Safety Officers' board. Mr. Newell responded the boards were separate entities. Mr. Paterno commented if the boards voted for different managers it showed they were doing what they each thought best for their fund. It was stated that if Contravisory/Rockwell was chosen, then Mr. Chappel was not wanted as the representative, but to have someone better informed. MOTION Boardmember Paterno made a motion to accept Contravisory/Rockwell as investment manager with the contract to stipulate that Hal Chappel would not represent the firm with this trust fund. Motion failed for lack of a second. Attorney Jensen advised that if Chair Newell wished to second the motion he could do so if�he passed the gavel. Chair Newell passed the gavel to Vice Chair Hansen. MOTION Boardmember Paterno made a motion to enter into a Contravisory/Rockwellct with Contravisory/Rockwell as investment manager with the contract to stipulate that Hal Chappel would not represent the firm with this trust fund. Chair Newell seconded the motion, which carried by unanimous 4-0 vote. The gavel was returned to Chair Newell. MOTION Boardmember Garlo made a motion that if Contravisory/Rockwell did not comply with the stipulation not to have Hal Chappel as the representative that Attorney Jensen should immediately contract with Dana to be the � investment manager. Boardmember Paterno seconded the motion, which carried by unanimous 4-0 vote. BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES August lo, 2004 PAGE � --------------------------------------------------------------------------------- d. Presentation of Operating Rules and Procedures for compliance with Continuing Education Policy to be verified by Independent Certified Accountants. Attorney Jensen presented as a sample the administrative rules policy used by North Palm Beach. Chair Newell commented everyone should study starting on page 12--duties of the secretary. He liked the administrative rules except for those duties. Boazdmember Paterno commented these items seemed like Betty's responsibility and he would just sign off. Chair Newell agreed, but stated this ' board had not defined what they wanted a secretary to do. Mr. Garlo brought up another point, that Dan had taken on the duties of administrator of this board, and who would do that if he were no longer doing it. The Village Manager had directed Mr. Garlo to be the administrator but he couldn't do it since he was a board member. The secretary's duties were basically if there was a problem with documents someone would consult the secretary. Mr. Paterno commented if Dan or Betty were not there he had a problem. Mr. Gallagher commented the Village Manager kept saying his salary would be cut and the pension board should pay for his work, and he had had to resign as administrator of the Public Safety Officers' board. Attorney Jensen explained that ultimately the Village paid for the administrator, whether reimbursed by the fund or done internally. If the fund paid it, it was just amortized. Boardmember Paterno commented it would be better if the Village paid it instead of it coming from the fund, which would leave less money to be invested. Mr. Gallagher indicated the manager had told him the day before to remain as administrator for this fund, but it kept changing. Mr. Paterno suggested he speak to the Village Manager about it to keep Mr. Garlo and Mr. Gallagher out of it so they vwould not be caught between their obligation to the Village Manager and their abligation to the board, and Mr. Newell was probably in the same position. Boardmember Garlo expressed his opinion that a member of the Finance Department should be the plan administrator, but that was not happening. Attorney Jensen advised there were actual third party administrators that could be hired, and some funds were administered internally by employees-- which was more common for General Employees plans than Public Safety. Chair Newell suggested Wendy Harrison as administrator. Boardmember Garlo asked if the Village would ultimately pay for an administrator's salary. The attorney responded they would pay for administrative costs. Chair Newell commented it - was the Village's decision; when the actuarial report came out it would show up. Boardmember Paterno's offer to speak to the Village Manager was discussed and BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES August �o, 2004 PAGE 8 --------------------------------------------------------------------------------- it would not hurt anything. The only two choices for the Public Safety Board were to hire someone or have the Finance Director, but she would not do it. Mr. Paterno commented it would be presented to the Village Manager as a choice— which way would he rather pay for it. Boardmember Garlo commented the Village Manager might not be aware that a board member could not be administrator. Attorney Jensen explained a board member could work for the fund and do administrative work for the fund but had to be up on the plan information because they had to communicate clearly to participants, and they could not be paid by the board for performing this function. Dan could be paid because he was not a trustee, but a trustee could not be paid for performing this function. The board could go outside and hire an administrator, but the Village would have to make up any deficiency in the fund, so would still ultimately pay for the administrator. Boardmember Paterno did not realize there was a problem with an administrator or a possible conflict, and that was what he was more worried about, not the rules. No matter who the secretary was, there would still be a potential problem. Chair Newell commented hiring an administrator was something that should be done together with the Public Safety Officers board, and Dan was no longer their administrator. Mr. Paterno asked who did all the paperwork—the response from Mr. Gallagher was it was Betty. It was decided to table this issue to discuss the duties of the secretary and a future administrator. MOTION • Vice Chair Hansen made a motion to table this item, V(d) until the next meeting on November 9, for discussion. Boardmember Garlo seconded the motion, which carried by unanimous 4-0 vote. e. Consideration of sending Member(s) to attend Conference – Upcoming Trustee School Dates and Locations Provided MOTION Boardmember Paterno made a motion to send Boardmember Garlo to the October Trustees School to be held October 3-6 in St. Petersburg, Florida. Vice Chair Hansen seconded the motion, which carried by unanimous 4-0 vote. MOTION � Boardmember Paterno made a motion that if Boardmember Garlo was unavailable to attend the Trustees School in October, Chair Newell would be BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES August 10, 2004 PAGE 9 --------------------------------------------------------------------------------- his replacement. Vice Chair Hansen seconded the motion, which carried by unanimous 4-0 vote. Vice Chair Hansen commented the Public Safety Officers board discussed sending two people to the school but decided to only have one person attend because of the expense. f. Discussion of Option of holding Meetings on a Different Day than the Public Safety Officers Pension Board in order to start meetings early Mr. Paterno and Mr. Newell both preferred holding the meetings in the morning. Attorney Jensen advised there would be no extra cost for her to come on a different day than the other board meeting. Discussion ensued. Consensus was to hold the next meeting on Wednesday, November 10 at 8:30 a.m. MOTION Boardmember Paterno made a motion to change the next meeting date to Wednesday November 10, 2004 at 8:30 a.m. and any tabled business that was to be conducted on November 9, 2004 would be addressed November 10, 2004; in the future quarterly meetings would be held on the second Wednesday, to commence at 8:30 a.m. Motion carried by unanimous 3-0 vote, with Mr. Garlo being out of the room. VI. CONSENT AGENDA MOTION Boardmember Paterno made a motion to approve the consent agenda with Tresha Thomas included under ratification of withdrawal of contributions. Vice Chair Hansen seconded the motion, which carried by unanimous 4-0 vote. The following items were approved on the consent agenda: a) Payments to be reviewed and approved 1) Business Services Connection -$ 158.06 2) Hanson, Perry & Jensen, PA -$1,101.16 3) Northstar Management, Inc. -$ 856.00 � b) Approval of New Applicants for Quarter Ending June 30, 2004 BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES August lo, 2004 PAGE io --------------------------------------------------------------------------------- Rosemarie Cannuscio — Dispatcher — Date of Hire 6/7/04 c) Approval of Beneficiary Changes for Quarter Ending June 30, 2004 None d) Ratification of Withdrawal of Contributions (Employees terminating employment with Village of Tequesta for Quarter ending 3une 30, 2004 1) Kevin Laino June 25, 2004 $1,767.83 ($1,414.26 paid; $353.57 withheld taxes) 2) Terri Katz June 30, 2004 $1,418.16 (Rollover) 3) Tresha Thomas July 23, 2004 $1,638.40 (Rollover) e) Ratification of withdrawals made since the last meeting on two signature basis (under $100) None VII. FINANCIAL REPORTS a) Statement of accounts (April-June 2004) b) Progress Report by Finance Department — Cash Flow Report for the quarter ended June 30, 2004 Dan Gallagher reviewed the statements and cash flow report. Mr. Paterno asked what would be done about an administrator. Chair Newell noted that discussion of an administrator had been tabled to November 10, but that was something the board must decide how to handle. Boardmember Garlo indicated he could be prepared to present the facts regarding present administration and available options if Mr. Gallagher needed to be replaced. The unaudited financial reports were received and filed. BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINVTES August �to, 2004 PAGE �1 --------------------------------------------------------------------------------- VIII. NEW BUSINESS There was no new business to come before the board. IX. ANY OTHER MATTERS MOTION Vice Chair Hansen made a motion to approve the new policy for trustee expenses. Boardmember Garlo seconded the motion, which carried by unanimous 4-0 vote. Mr. Gallagher discussed the fiduciary insurance, which covered $2 million in assets. Attorney Jensen advised that most funds only insured 25%. Mr. Gallagher indicated he would find out the premium for both coverage options. Mr. Garlo announced that before the next meeting he would be leaving FRS and entering this plan and asked if that would affect his being a member of the board, to which the attorney advised it would not. Vice Chair Hansen asked if it would be a problem for the financial consultants if the two boards had meetings on different dates. Chair Newell responded it was no problem for Mr. Bogdahn, and at this time it was not known if the investment manager would be the same for both funds. X. COMMUNICATIONS FROM CITIZENS There were no communications from citizens. BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES August 10, 2004 PAGE �2 --------------------------------------------------------------------------------- XI. ADJOURNMENT Vice Chair Hansen made a motion to adjourn, seconded by Boardmember Garlo , and unanimously approved. Therefore, the meeting was adjourned at 1:25 p.m. Respectfully submitted, -�-�-�:�� Betty Laur Recording Secretary