HomeMy WebLinkAboutDocumentation_Regular_Tab 06B_06/10/2004 TEQUESTA GENERAL EMPLOYEES' PENSION
TRUST FUND
BOARD OF TRUSTEES MEETING
FEBRUARY 10, 2004
I. CALL TO ORDER AND ROLL CALL
The Tequesta General Employees' Pension Trust Fund Board of Trustees held a regular
meeting at the Tequesta Recreation Center, 399 Seabrook Road, Tequesta, Florida, on
February 10, 2004. The meeting was called to order at 8:34 a.m. A roll call was taken
by Betty Laur, Recording Secretary. Boardmembers in attendance at the meeting were:
Chair Jeff Newell, Vice Chair Carl Hansen, Boardmember Thomas Paterno, and
Boardmember Greg Corbitt. Also in attendance were Dan Gallagher and Attorney Bonni
Jensen. Assistant Village Manager Bob Garlo attended and was seated in the audience.
II. APPROVAL OF AGENDA
MOTION:
Boardmember Corbitt made a motion to approve the agenda as submitted.
Boardmember Paterno 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 December 10, 2003 and
September 10, 2003 as submitted. Boardmember Corbitt seconded the motion,
� which carried by unanimous 4-0 vote.
IV. ELECTION OF NEW EMPLOYEE REPRESENTATIVE
Chair Newell announced that Assistant Village Manager Bob Garlo had been elected by
the employees, however, since Mr. Garlo was not a member of the General Employees'
Pension Plan, being in the Florida Retirement System plan, he was not eligible to serve as
a member representative. Discussion ensued. Attorney Jensen advised that since there
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was a member currently serving as the fifth member, Mr. Corbitt, he could be elected to
fill the vacant position and Mr. Garlo could then be appointed as the fifth member, since
the fifth member was not required to be a participant in the plan. Attorney Jensen
explained that Mr. Corbitt would need to resign after this meeting in order to run for
election by the General Employees. If no one elected to run against him, Mr. Corbitt
would be elected by default. It would not be necessary to go through the election process
if a notice were posted that applications were being taken from anyone interested in being
the employee trustee and if only Mr. Corbitt signed up he would automatically be elected.
At the next meeting Mr. Garlo could be appointed to the fifth member position. Mr.
Corbitt could submit a written resignation after this meeting, which could be received and
filed at the next meeting. Boardmember Paterno suggested that Mr. Corbitt not resign
until it was known that no one else wanted to run against him, so he could remain on the
board. Attorney Jensen advised there were no resign to run laws for this Board. Chair
Newell reported Mr. Garlo was willing to serve and the one item that disqualified him,
that he was in the FRS, had only been realized the previous day. Vice Chair Hansen
expressed his opinion that Mr. Garlo would be a good addition to this board.
V. ELECTION OF SECRETARY TO THE BOARD
Vice Chair Hansen asked what being secretary would involve. Attorney Jensen
advised the secretary could sign checks and minutes; there was no ongoing
responsibility because staff was available to handle minutes, etc. The secretary could
run the meeting in the absence of chairpersons. Chair Newell requested that election
of a secretary be deferred until the next meeting when there would be a full board.
MOTION
Boardmember Corbitt made a motion to defer election of a secretary to the board
to the next scheduled meeting. Vice Chair Hansen seconded the motion, which
carried by unanimous 4-0 vote.
VI. PRESENTATIONS
a) Presentation by Oppenheimer Representative
This item had been deferred to the next meeting at the request of the Oppenheimer
representative. Chair Newell commented that he and Mr. Gallagher had had a lot of
discussions on NorthStar and how they managed the fund's investments. Chair
Newell reported that his brother was in this business and he had asked him to look at
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this. Mr. Newell's brother felt the investments that had been made were below
average, and because of this, Mr. Gallagher had through an RFP been in contact with
other firms. Mr. Gallagher commented there was some discontent when he sent out
the listing of investments that Mr. Van Beuren had made after the funds were
transferred from the bank. Mr. Gallagher reported he had received two responses
from the RFP, for monitoring only. The thought had been that the current money
manager would be monitored, then an intelligent decision could be made if they were
doing a good job or not. Jeff Swanson of Merrill Lynch, which monitored 90
municipalities in Florida, and David West of Burgess Chambers & Associates, had
been the two who had responded to date. Mr. West had been at the FPTTA
convention, and that company also had extensive background in monitoring. Mr.
Gallagher reported he had sent out 15 RFP's with a February 20, 2004 deadline.
After that time the board could review the list of those who responded and consult
with Attorney Jensen, and make selections. If Northstar did not get a good rating or
if the board was not happy with them, then they could get someone else. Mr.
Gallagher advised it might be the board's problem if Northstar Capital Management
was too limited by the policy, and that could be changed. Mr. Gallagher advised he
had two financial management companies he had been talking to, but he thought
monitoring was more important at the present time. Vice Chair Hansen asked how
the monitoring would be done. Mr. Gallagher responded that the companies would
submit proposals then come for interviews, then the Board could make a decision.
Attorney Jensen clarified that at the point the Board selected someone they would
provide reports as often as the Board wanted, probably quarterly., on analysis of the
fund's return. The monitor could review the investment policy guidelines and if
another money manager was needed would help the Board select an investment
manager. As time went on they would tell the Board how well the manager was
doing and would provide the Board with a report card on a quarterly basis. Attorney
Jensen advised that monitoring service charges varied—some companies charged a
flat fee, some soft dollars, and some a hard dollar conversion, and some on a
percentage of capital, but that would be shown in their proposal.
Chair Newell introduced Bob Garlo to the Board.
Mr. Gallagher advised that he had information from A. G. Edwards defining soft and
hard dollars and would provide that to the Board.
Chair Newell requested that Attorney Jensen explain ex-parte communication.
Attorney Jensen explained with an RFP process the Board should refrain from
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speaking to anyone making a proposal under that process, or bring the information
forward at a meeting if they had an individual conversation. Chair Newell
commented his brother was in the business and asked what he should do if his
brother became part of the process. Attorney Jensen responded if Chair Newell's
brother became part of the RFP process, Chair Newell might have to recuse himself
from all votes in the process, but his brother was not in the current RFP process.
MOTION
Vice Chair Hansen made a motion to move forward with the RFP process and
the interviewing stage when that became appropriate. Mr. Gatlagher requested
clarification whether the board was instructing him to get a list together of the
interested parties to submit to the Board for their selection of 2 or 3 or how
many they wanted, or suggesting that he interview and designate the companies
that were 1, 2, and 3. Chair Newell indicated this was just getting a consensus to
continue with the RFP process. Boardmember Paterno seconded the motion,
which carried by unanimous 4-0 vote.
b) Presentation of materials from Elias Asset Management
This item was not considered at this meeting.
VII. CONSENT AGENDA
Boardmember Paterno requested that Consent Agenda Item b) Approval of new
applicants, be pulled for discussion. Discussion ensued as follows: Boardmember
Paterno commented when someone got hired there was an application form for the
pension and it was someone's responsibility to get that form to the Board by the next
meeting; however, one of the forms presented today was eight months old. Mr.
Gallagher responded that the process was a new employee was immediately put on the
pension rolls and deductions were made starting with the first paycheck. At that time a
copy should be made available to Mr. Gallagher so that he could include it as part of the
next meeting. Mr. Gallagher advised he was not offering excuses, but there had been a
breakdown in that area, and in the future there should be no delay. Chair Newell advised
that Mr. Garlo was recently appointed HR Director. Mr., Garlo explained that all
mechanisms were now in place to expedite forms for the next meeting. Boardmember
Paterno asked if any employees were determined, by their duties or classification, to
participate in the fund, and if there were any exempt from this pension fund who were
doing duties as a General Employee. Mr. Garlo responded that was driven by their job
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description—that all General Employees were in the fund. Boardmember Paterno asked
if anyone was being paid or doing duties, that was not in the fund. Chair Newell
responded there were only two plans—General Employees, Public Safety Officers; and
Florida Retirement System—that when the Village made the change from FRS some
err�ployees had remained in FRS. Mr. Garlo advised that everyone who had been in FRS
stayed there. Chair Newell commented anyone in FRS could not be in the General
Employees Pension. Mr. Gallagher commented there were certain part-time contract
employees such as himself and he did not participate in either pension fund. Attorney
Jensen clarified that all full-time employees had to participate in General or Public Safety
as a c�ndition of employment, but some General Employees could be FRS if they were in
FRS previous to these plans being established and had stayed in FRS. Attorney Jensen
advised there would be a date after which it was mandatory that all employees be in
General or Public Safety. Mr. Paterno requested a list of all employees and which plan
they were in. Boardmember Paterno commented he had become concerned after going
to the conference where cases had come up in reference to this subject and gave an
example of an employee who had been performing duties of a policeman but was not in
that pension fund and had sued. Mr. Paterno expressed concern for the fund if something
like this happened. Attorney Jensen advised it was a good idea to clear up things like this
now before anyone retired. It was clarified that the list Mr. Paterno was asking for was to
include all employees and the plan each was in, plus anyone not participating.
Boardmember Paterno advised there could be a problem of an ernployee opting to get out
of the plan. Chair Newell reported that had come up, with several employees of the
General Pension wanting to get out, but that had now quieted down possibly due to more
confidence in the way the Board was operating more aggressively, but the Board was
being watched. Chair Newell explained that under the Village ordinance, membership
was mandatory for full-time employees and they could not opt out. Attorney Jensen
clarified that Boardmember Paterno should be provided with a list of current employees
and all participants in the plans so that he could know the status of each one, and any
employees not in any plan. Mr. Paterno commented the members of the Board could be
sued personally. Mr. Gallagher indicated there was $2 million liability insurance
coverage. Mr. Gallagher indicated he had a census report from which he could cull out
General Employees. Boardmember Paterno expressed concern if someone got hurt who
was not paying in, the fund might not have enough to pay disability.
Chair Newell advised that Boardmember Paterno had recently attended the Florida Public
Trustees seminar, and he would like every Board member to attend because of the
knowledge they brought back. Boardmember Paterno reported a lot of different issues
had been covered, and he had four pages of items brought to his attention. He had
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attended 18 classes and there were a lot of things that meant nothing now but could be a
crisis if they happened. Mr. Paterno read items from his list, highlighting things
discussed and two that he particularly felt should be discussed—whether there was a
waiver of recourse in the insurance policy, because the insurance company could pay out
then come back to each individual member to recoup their money. The other item was
whether the Village indemnified the trustees against losses, because the Village could sue
the trustees if they thought the trustees had not invested properly. Mr. Gallagher advised
this fund had piggybacked with Public Safety and split the cost of a surety bond. Mr.
Gallagher provided a current statement from Wachovia Securities showing the fund was
up to $2.5 million and suggested insuring for that amount. Attorney Jensen advised that
the pension plan document had a provision with regard to liability, that the Board was not
liable for sufficiency of the fund to meet payment of benefits, and the municipality was
responsible for making the fund whole. Attorney Jensen explained there were no specific
provisions that indemnified the Board of Trustees, mainly because governmental entities
could not indemnify, but they could provide fiduciary liability insurance which covered
: the trustees. The law provided that a Board could not legislate itself out of responsibility
for acting outside its fiduciary responsibilities, and the Village had done what it could
through its ordinance to protect the trustees. Attorney Jensen indicated she would get a
copy of the insurance binder to find out if there was a waiver of recourse and that would
be sent out to all the trustees.
Boardmember Corbitt expressed his opinion that the Board was spending a lot of time
and money holding meetings, etc., and if the pension was changed to FRS a lot of these
problems would be avoided such as being sued, money being spent on meetings,
insurance, recording, training at seminars, employee time and Village money, legal fees,
monitoring fees, getting employees to serve on the Board, and according to Mr. Paterno
there was a lot of work involved and the Board was really behind, Chair Newell
commented that FRS was expensive, and the Village Council had made this decision
because of the cost. FRS was currently at 18% and going up to 23% next year for Public
Safety, but was less for General—the multiplier was less for General. Vice Chair Hansen
commented he was on the Village Council at the time this pension plan was set up, and
they were told then there were many municipalities leaving FRS and going to do it
themselves and at that time it had been a no brainer to leave. Mr. Corbitt commented he
did not like the possibility he could be sued and that might deter a lot of employees from
serving on the Board. Chair Newell responded he understood because when he went to
the seminar he had come back horrified that he had liability, but there was insurance in
place to cover that and as long as the Board was doing what they were supposed to do
they were okay. Mr. Corbitt commented he did not have a comfort zone yet.
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Boardmember Paterno advised Boardmember Corbitt just to ask about anything he was
not sure about that was his duty to the fund, and that everybody had to go to education
within the law, and he felt it might cost a lot but to do their job everyone should go yearly
to protect the fund, and if the fund was a little under funded indirectly the Village was
going to pay for the trustees to go, so he should not worry about that because the fund
would be intact, and education would be good for them.
There being no further comments, Chair Newell called for a motion on the Consent
Agenda, which included the following items:
a) Payments to be reviewed and approved
1) Hanson, Perry & Jensen P.A. -$877.84
b) Approval of New Applicants for l Quarter (October — December 2003)
Terri Katz Hire Date 6-4-03 (Not previously approved)
Tresha Thomas Hire Date 10-1-03
c) Approval of Beneficiary Changes for l Quarter (October — December 2003)
None
d) Request for Withdrawal of Contributions (Employees terminating
employment with Village of Tequesta) for l Quarter (October — December
2003)
None
e) Ratification of withdrawals made since the last meeting on two signature
basis
Business Services Connection — Recording Meeting 12/9/03 -$33.87;
Minutes of 12/9/03 - $90.32
Business Services Connection - Reimbursement of bank charge for deposited item
returhed - $7.00
(Check for payment of 9/30/03 minutes was returned account closed)
MOTION
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Vice Chair Hansen made a motion to approve the Consent Agenda. Boardmember
Paterno seconded the motion, which carried by unanimous 4-0 vote.
VIII. FINANCIAL REPORTS
a) Statement of Accounts (October – December 2003) and
b) Progress Report by Finance Department – Cash Flow Report for the First
Quarter (October – December 2003
Mr. Gallagher advised he had just distributed the current report from Wachovia
which covered the month of January, in addition to the end of the year statements
and cash flow statements provided in the packets. Mr. Gallagher advised he was
in the process of doing a report taking the cash flow information for years 2000,
2041, and 2002 to see how successful the investments had been and when finished
he would distribute that report broken down to show how General had done and
how Public Safety had done. Mr. Gallagher advised in evaluating Northstar's
performance to keep in mind that the money for this fund was in a bank money
market account for a year while the market was doing well, and the return would
have been much better if that money had been in equities. Chair Newell
commented that the fund had been diversified but it was too early to discuss the
investments that had been made. Vice Chair Hansen commented the 1.9% at the
bank was far below the 8%. Attorney Jensen explained that the 8% was an
assumed rate calculated by the actuary as a goal over the long haul—typically a
generation of workers—to determine how much the municipality needed to
contribute. Attorney Jensen commented the longest amortization was 40 year and
she would look at the investment policy to see what length of amortization the
actuary was using. Vice Chair Hansen asked what if the benchmark was
unrealistic, to which Chair Newell responded the board was looking into that now.
Mr. Gallagher commented that was why the board was going through the exercise
of obtaining a monitor to see if they should be doing better or why they did not do
better. A monitor could evaluate Northstar and relate to the economic factors
outside and whether they took advantage of those factors. Mr. Gallagher indicated
things he would like considered was Northstar buying stock and selling it perhaps
onlythree months later, and also the yield from the companies in which they were
investing and if their could have been a better yield with another company. The
key factor was how to get closer to the 8% goal. Vice Chair Hansen commented
as trustees for a pension fund, they were working within a very conservative
framework and should question if 8% was realistic. Discussion ensued. Mr.
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Corbitt commented if the fund was only returning 1% he would like to take his
money out. Chair Newell advised the return was not yet known since the money
had just been invested, which was why a monitor was needed to make an
evaluation. Mr. Gallagher commented the low returns had been going on about
two years as a result of being in a low interest money market account only making
.7% and then transferring to another bank that paid 1.9%. Chair Newell
commented that investing was another step in the process and should be an
improvement. Mr. Gallagher advised that Northstar, formerly Loomis Sayles,
had been with the Village a long time and it would behoove the trustees to look at
them over the last ten years. In 1999 it was dictated that General must split from
Public Safety and it was accomplished in October 2000, and General only had
$105,000 at that time and pay their own costs and make their own investments.
Mr. Paterno asked why Mr. Van Beuren was not present because he had wanted to
ask him some questions. Chair Newell explained he had not invited Mr. Van
Beuren to do a presentation at this meeting, because he had felt there were things
the board needed to discuss without Mr. Van Beuren present, but he would invited
to the next meeting. Mr. Paterno commented the board had come a long way in
the 8 months he had been on the board, going from .7% to 1.9% to 2%. Mr.
Paterno advised that the even pages of the cash flow statement were missing so he
could not evaluate it, but it showed $108,000 sitting in cash uninvested and he had
wanted to Mr. Van Beuren about that, and that was 1/3 of the fund's money
getting less return than before it was given to Northstar; but on the positive side,
some of the stocks purchased were providing a dividend and that was moving in
the right direction. Mr. Paterno felt that 8% or more would be reached this year,
but, and over a few years the low returns would probably be made up, but he
would like to speak to Mr. Van Beuren at some point. Attorney Jensen verified
that Mr. Paterno could contact Mr. Van Beuren on his own. Mr. Paterno wanted
to know the duration of bonds and would like more information and not to be over
conservative. Mr. Paterno commented Mr. Van Beuren might not be the best for
this fund but was better than what they had, with which Chair Newell agreed.
Attorney Jensen advised that the actuarial valuation for year ended 9-30-03
showed the fund's average return was 9%. Mr. Paterno commented the idea was
to average above 8% and this fund needed to be invested with someone who took
a little less risk—not high risk, and that might mean a little less interest
sometimes which could be taken up another time.
IX. NEW BUSINESS
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a) Clarification on difference between what was approved by Village Council for
Public Safety and for General Employees
Attorney Jensen provided a spreadsheet comparison showing the differences and
discussed those differences. The spreadsheet is attachzd to lhese minutes as "Exhil�it
"A". Age of retirement in this fund is 30 years service regardless of age or age 65
regardless of years of service. The Public Safety officers can retire at age 55 with 6
years service or age 62 with 25 years of service. Both plans allow prior military
service to be purchased. The amount of the benefit is 2% per year of service for
General; the Public Safety officers have a tiered benefit so they get 3% if they stay 6
years or 18%, 3.5% for the next 4 years which is 14%, 4% for the next S years which
is 20%, 2.5% for the next 6 years or 16%, then 2% for the next year—so if they stay
25 years it is 75%, which is equivalent to 3% for 25 years, which was what their
benefit was before. That was using their dollars from the 175 and 185 funds and their
average final compensation was the same as General, which was the best five of the
last 10 years of service. There was a difference in salaries—for General Employees it
is base which includes regular pay, vacation pay, sick pay, and tax deferred items of
income, and excluding lump sum payments, overtime, bonuses, and longevity
bonuses; but for Public Safety officers it is total cash compensation. The normal
form ofpayment is ten years certain for General; Public Safety is the same. Optional
forms of payment are the same as Public Safety. General's early retirement is age 50
with 6 years service with a 5% per year retire early deduction; The Public Safety has
a 3% per year. Attorney Jensen explained these were both subsidized early
retirements meaning that the fund bears some cost of people leaving early under both
scenarios. Public Safety has a minimum benefit requirement under Chapters 175 and
185 pf the 3% and they are required to use their 175 and 185 money to buy that
down. The General Employees were receiving a subsidized early retirement, just not
as subsidized because they did not have the 175 and 185 money available to them.
General does not have a drop program, which the Public 5afety has—this is a benefit
allowing a member to retire early and continue to work with benefits not paid to the
member but accruing in a separate account and invested with the assets of the
pension fund. Mr. Corbitt commented FRS has a drop program for all employees.
Attorney Jensen clarified the Public Safety's COLA is a part of their normal benefit
and is not the drop, and FRS has a cost of living adjustment. Attorney Jensen
explained both funds have day one coverage for both in-line-of-duty and non-line-of-
duty disability benefits. The General Employees benefit from being unable to
perform as a General Employee is a more stringent standard than not being able to
perform as a police officer or firefighter. Both have a 42% minimum benefit or the
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accrued benefit if that is greater. Non-duty disability benefit is a 25% minimum for
both funds. Death benefits are different for General and Public Safety. Before
retirement in-line-of-duty, General Employees receive the accrued benefit that was
paid at what would have been retirement date; Public Safety 50% of average final
compensation to the spouse for life. Non-line-of-duty is the same which is the
accrued benefit paid at what would have been retirement date. After retirement, the
benefit is paid at whatever you selected at retirement. There is no cost of living
increase for either plan. General does not have a monthly supplemental benefit;
Public Safety just added that which is $5.00 per year of service per month, capped at
$150 per month. They pay for that out of their 175 and 185 money. General could
ask for that benefit, but it would have to come out of their fund. Termination
benefit—if less than 6 years service you get a refund of your contributions, and
participants in both plans contribute 5%. If General wanted a drop-deferred
retirement option plan—they could request it from Village Council, but it would have
to come out of their fund. Boardmember Paterno explained there was a tax on
homeowners insurance that every homeowner in the Village paid, and that was the
source of the Public Safety 185 and 175 dollars, which they could use for additional
benefits, since they were in high risk jobs. Attorney Jensen advised that because
retirement for General Employees was age 65 or 30 years service, one would have to
work until age 70 or have 35 years of service to get the benefit of a drop plan, and at
some point it lost its value. Attorney Jensen advised that when Mr. Palmquist did his
next actuarial evaluation, there were back drops, which if you work all the way to
retirement you could pretend you retired 5 years ago, and get a lump sum. General
also has a provision in their plan that says they can offer other types of benefits. A
member could say give me $50,000 in cash, leveraging my future benefits, which was
an option this fund has. Mr. Corbitt asked what a General employee would receive
after 25 years, and the answer was 50%. Mr. Corbitt asked why there was such a
difference since Public Safety got 75% after working 25 years. Mr. Garlo
commented it was because their jobs were high risk. Attorney Jensen advised that
the FRS was less than 2% per year for General Employees. Mr. Corbitt commented
he was trying to compare apples to apples and was not seeing that. Attorney Jensen
responded that unfortunately it was not apples to apples---everyone was an employee
of the Village, but Police and Fire got extra money that did not impact the Village
paying benefits at all—it is a rebate from the State. Mr. Paterno commented the extra
money received from the insurance tax had to be used for extra benefits, which was
because of the high risk. Mr. Gallagher commented Public Safety got around
$75,000 a year extra.
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b) Consideration of setting a schedule for quarterly meetings
Mr. Gallagher commented he thought it would be appropriate to follow the Public
Safety schedule to minimize costs to the attorney by having the meetings the same
day. This would make the quarterly meetings in February, May, August, and
November, which would work out well since the fiscal year end was 9-30 and the
figures would be ready for the November meeting. Chair Newell commented no
problem but this board needed a good 2-hour window for their meeting. Discussion
ensued regarding having 2 hours and starting at 8:30 a.m. Vice Chair Hansen asked
if four meetings a year was enough at this point since members needed to be
appointed to have a full board and monitoring firms were being discussed., and it
could be November until this Board got to where they wanted to be. Chair Newell
pointed out there could always be a special meeting. Mr. Paterno asked if there was
anyone in the Village who could spend more time on this board's business so at the
meetings they could be more streamlined and take less time. Mr. Gallagher
responded he was addressing that with the Village Manager at the present time. Mr.
Paterno asked if the Board should address the Village Manager to ask for help for Mr.
Gallagher. Chair Newell commented when the Board elected a secretary that person
possibly could assist Mr. Gallagher. Mr. Garlo commented he had just been talking
with Fire Chief Weinand about having a pension administrator, and in the past it had
always been the Finance Director. Mr. Garlo reported he had had this conversation
with the Finance Director, and his idea was to have her or her staff as administrator to
assist in these responsibilities, and he was willing to talk to the Village Manager
about that. Attorney Jensen advised no motion was necessary to establish the
quarterly meeting schedule.
c) Discussion of payment of invoices
Mr. Gallagher indicated he had been concerned with so much time between receipt of
invoices and payment, but he believed this problem was now resolved since
everything was current as of today and would now be on a quarterly schedule. Mr.
Corbitt requested that signatures be streamlined for checks so that he was not being
called every other day to sign. Attorney 3ensen advised that a facsimile signature
stamp could be used—the process just needed to be set up. Chair Newell commented
if Mr. Garlo became a boardmember he could sign since he was in the same building
as Mr. Newell. Mr. Paterno indicated he would be happy to come by one day a week
on a certain day to sign checks, if needed.