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HomeMy WebLinkAboutDocumentation_Regular_Tab 04B_01/15/2004 r � � VILLAGE OF TEQUESTA .� a^ � Post Office Box 3273 • 250 Tequesta Drive, Suite 300 � �, a Tequesta, Flerida 33469-0273 • (561) 575-6200 � ; . ; � Fax: (561) 575-6203 � 4 M y TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND BOARD OF TRUSTEES MEETING SEPTEMBER 30, 2003 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 September 30, 2003. The meeting was called to order at 9:07 a.m. A roll call was taken by Betty Laur, Recording Secretary. Boardmembers in attendance at the meeting were: Vice Chair Jeff Newell, Vice Chair Carl Hansen, Boardmember Thomas Paterno, and Boardmember Greg Corbitt. Also in attendance were Dan Gallagher, Human Resources Department, and Attorney Bonni Jensen. II. APPROVAL OF AGENDA MOTION: Vice Chair Hansen a motion to approve the agenda as submitted. Boardmember Paterno seconded the motion, which carried by unanimous 4-0 vote. III. APPROVAL OF MIN�JTES MOTION: Vice Chair Hansen ma�le a motion to table approval of the minutes of September 10, 2003 to the next meeting in order to give members an opportunity to review them. Boardmember Corbitt seconded the motion, which carried by unanimous 4-0 vote. IV. PRESENTATION a) Consideration of Approval of Proposal from Northstar Capital Management Company to provide investment management services for the General Recycled Paper BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES September 30, 2003 PAGE 2 Employee's Pension Trust Fund. Chair Newell reported he and Mr. Gallagher had discussed Spider as an option for investing, and he liked some of the things he had read about it. Regarding Northstar, Chair Newell suggested reviewing other money management people and asked what qualifications they would need. Attorney Jensen responded that most boards had their investment monitor perform this function and an investment monitor was required under 175 and 185 and was recommended for a General Employee fund. A monitor under 175 and 185 was responsible to monitor investments, and when they went out to do a money manager search they would do so with certain criteria that had been discussed with the board members. This boaxd would have a minimum account issue. Lots of firms had a minimum of $5 million. Attorney Jensen explained that an investment monitor was an independent third party who tells you how you are doing. The investment manager search could be done, but it would be difficult without information that an investment monitor would have. Attorney Jensen commented Prudential might be able to provide a list of investment monitors or she could do that, and an investment monitor was not required for a General Employees' Board. Chair Newell commented he had just learned about Spider from Mr. Patracelli, a broker with Morgan Stanley, and asked if this board could solicit a proposal from him. Attorney Jensen explained he would have to be a money manager under federal investment laws, and the whole idea of having an investment manager was so that the boaxd would not have fiduciary responsibility or would share that responsibility with someone. Mr. Gallagher reported he talked to Fred Kinney at Prudential about investment managers and only one individual from a list provided by Mr. Kinney had indicated that he would be interested in working with this board, and his firm did statistical analyses, and would compare this fund against a sector. Attorney Jensen commented that would be an investment monitor. Mr. Gallagher explained the Village had gone to the outside when they recruited Northstar, which had been Loomis & Sayles at that time. Attorney Jensen commented there would be lots of people interested in investing money but she did not know what fees they would charge. Chair Newell commented it bothered him that only one had been considered—Northstax. Chair Newell commented he would like to open this up to other money managers. Boardmember Paterno commented he had contacted a company he had learned about which was in Boca Raton, and with the small amount of money in this fund if they would even do it they would charge 1.75%, so probably charges would range from 1% to 1.75%. Also, some might not be willing to come to quarterly meetings for such a small fund. Attorney Jensen commented with most public sector dollars depending on the size of the account the BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES September 30, 2003 PAGE 3 --------------------------------------------------------------------------------- charges ranged from 50 to 75 basis points—that was the average around the State of Florida.—and they would attend quarterly meeting for that fee. She had recommended looking to Northstar because with them the board could leverage their dollars with the Public Safety Fund and it also would give the board someone to come to the quarterly meetings. Attorney Jensen advised that as the fund grew it would have more buying power, and there was a lot of value to have someone come to the board to explain the returns. Chair Newell commented getting back to the Spider investments, he did not know Northstar's position if the board said they wanted to invest "x" amount of dollars in a certain investment, and asked if they were flexible. Attorney Jensen advised that Spider was a type of mutual fund and there would be mutual fund fees, and trading costs. .Mr. Gallagher commented who would do the investments, since there had to be an individual to do the trading. Attorney Jensen commented someone would have to manage it and asked the board to seriously consider that if they were making the investment decisions they would also bear the fiduciary responsibility for those decisions and would need to rethink fiduciary liability insurance. Chair Newell asked how rigid Northstar was. Mr. Paterno commented Northstar seemed very conservative and operated according to their own model and he would vote against Spiders because he was not going to take that responsibility and although you could make money, someone had to manage it constantly. Mr. Gallagher commented that was right and explained that someone had to be very keenly informed and had to deal as the market went up or down. The appeal was if the market went up you could make 10%, but he agreed with Mr. Paterno, and asked if Northstar could be more aggressive in trying to earn more money. Mr. Paterno commented the problem with Spiders was all the money could be lost just like that and this board could not do that, and it was close to day trading. Chair Newell commented what he was having a hard time with was Northstar being rigid. Mx. Gallagher asked if they had ever been challenged on that. Boardmember Paterno commented that Northstar had their own way of managing the fund with certain parameters and if the board wanted them to go another way that would require more time and they would then charge more. Mr. Paterno commented the board would pay more money with someone else. Mr. Newell asked what someone else would have to offer, the board had only heard from Northstar, and he was trying to find a comfort level. Attorney Jensen commented FPTTA had a number of investment managers on their board and they would be present at the October conference in Tampa, and they could be asked what they would charge for a fund with only $300,000. Vice Chair Hansen commented if there was a certain length of time the board would have to stay with Northstar, to which the response was, no. Attorney Jensen advised the Village had a 30-day out. Vice Chair Hansen stated he BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES September 30, 2oog PAGE 4 --------------------------------------------------------------------------------- would like to shop around more. Mr. Newell commented he believed it would be worth the time to talk to them. Mr. Gallagher reported the next conference would be in January in Jacksonville. Mr. Paterno advised he had a conflict and could not attend the October conference. Mr. Newell indicated he could go to talk to them. Boardmember Corbitt commented he thought one of the board's objectives was to move ahead and they were always taking two steps back. Hr Corbitt commented Public Safety used Northstar and was comfortable with them, and he personally did not like to drag things out. Chair Newell stated he respected that but he needed to find out what else there Was and if Northstar was still the best dea.l the Board might decide on them. Chair Newell was not comfortable with only one proposal to consider, but indicated it was up to the board. Boardmember Paterno commented Northstar's minimum charge was $2,000 and discussed what the charge would be if the board got out in six months. Mr. Gallagher responded the charge was $646 per quarter. A suggestion was made to move along and to investigate other options in the meantime. Attorney Jensen advised this would be a 4-6 month process if an RFP was put out. Chair Newell commented the money would have to be moved to Wachovia. Mr. Gallagher stated Prudential was now Wachovia. Chair Newell commented he did not have a problem going with Northstar since there was a 30-day out, and he wanted to question Mr. Van Beuren regarding their flexibility. Chair Newell commented if the board hired Northstar their investment policy had to be approved by the board, which was on the agenda. Mr. Paterno commented this would be a dead issue without the investment policy. Attorney Jensen advised the board did have an investment policy containing,investment guidelines in the ordinance itself, the investment guidelines being considered was just interpreting those. Attorney Jensen read a list of items that could be invested, and stated that those terms were now in effect, so the board did have a framework, it was just not fleshed out. Boardmember Corbitt asked if Northstar would improve the present position; the response from Attorney Jensen was that they should, but there were no guarantees. Attorney Jensen advised that the board had an opportunity to make more or an opportunity to lose more, but their goal was to make 8% and that could not be done leaving the money where it was. Boardmember Corbitt stated he would like to go with Northstar, that the board could get out in 30 days, and could casually shop around in the meantime. Mr. Paterno agreed and indicated he would like them to invest over 1-1 /2 months rather than' a11 at once, so as to get in at different levels. Mr. Corbitt asked if it was possible to lose every penny. Mr. Paterno commented that it was, or the money could also double. Attorney Jensen commented the board would be taking a gamble but would be investing in the same types of stocks as the other pension board had been investing in and Northstar was most prudent. Mr. Corbitt BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES September 30, 2003 PAGE 5 --------------------------------------------------------------------------------- stated he was conservative. Mr. Newell commented this plan should have a certain level of performance and if it failed then the Village Council had to make up the difference. What this board lost, the Village Council was responsible to put back. Boardmember Corbitt commented he would be most comfortable investing a little at a time. Mx. Paterno asked if some would be invested in bonds and some in stocks. Attorney Jensen explained that the ordinance stated 40% in bonds and 60% in stocks. Mr. Paterno sta.ted returns would have to be 10% a year to get an average of 8%. Mr. Gallagher explained that during the past period with the stock market down, Northstar had held cash rather than make poor investments. Mr. Paterno commented Northstar must be given enough flexibility to do their job, and they were doing the board a favor by charging cheap rates. Vice Chair Hansen indicated he was willing to go with Northstar and continue to shop around. Chair Newell commented the board must either accept or reject the proposal, and could still look around if they accepted. Mr. Gallagher indicated a checking account would need to be established. Attorney Jensen commented she would prepaxe a proposal for them to sign and then bring it to the board for approval. Mr. Paterno stated there would still be a delay until another meeting. Attorney Jensen commented, unless the board approved not seeing the agreement. Chair Newell stated he wanted to read the agreement. MOTION: Boardmember Paterno made a motion to accept the proposal from Northstar Capital Management Company to provide investment management services under the guidelines in the investment plan of 60% stock and 40% bonds, and authorize the attorney to make an agreement. Boardmember Corbitt seconded the motion, which carried by unanimous 4-0 vote. b) Review of the proposed Statement of Investment Policies and Objectives Attorney Bonni Jensen explained that Florida Statute 112.161 required investment policy guidelines and set forth 17 criteria to be followed, which the proposed guideline followed. Attorney Jensen provided copies of the investment guidelines to each mem.ber of the board and read fhe criteria aloud. Mr. Newell commented changes needed to be made as noted by Attorney Jensen, including adding Northstar Capital Management Company and removing the language of investment monitor. Attorney Jensen advised when she sent the copy of the contract to Mr. Van Beuren she would send a copy of this also for his suggestions, then she would make changes and bring it back to the board with the contract. Attorney Jensen reported Mr. Van Beuren had made a change to the Public Safety Board guidelines to change to an BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES September go, 2003 PAGE 6 --------------------------------------------------------------------------------- intermediate index. Mr. Gallagher asked if a monitor was required, to which Attorney Jensen responded this board was not required to have a monitor and having one must be measured against the cost, and having one might not be prudent right now. Mr. Gallagher asked if anyone had been designated to explore other potential investment firms. Chair Newell commented that would be discussed under agenda item 6(a). Boardmember Paterno recommended adding "or any employee" after "any regulatory action affecting its license or ability to do business". Attorney Jensen agreed. c) Comparison with the FRS Plan Mr. Gallagher asked if everyone had received the stunmary comparison of FRS sent out by Attorney Jensen. Copies were made so that everyone had a copy. Mr. Gallagher noted the FRS contribution was 18% per individual this year and it would be 22%-23% next year, and currently 7.47% was being contributed on total salaries. Discussion ensued regarding retirees in other communities. Mr. Newell asked how strong the prudent man theory was in court; Attorney Jensen indicated it depended on what was being talked about. Attorney Jensen indicated she would have the contract for Northstar ready by Friday. Chair Newell clarified that under the FRS system the employee did not contribute—the percentage came out of the gross salaries. Attorney Jensen corrunented the document provided was from the Division of Fire and Police Pension Funds office of the State of Florida, which had been prepared for their annual conference, but contained some of the information Mr. Corbitt had been looking for. General Employees were not included on the form, and would have a different multiplier, but annuity options were the same. 6-year vesting and a drop program had been included, which Attorney Jensen explained the Tequesta firefighters and police were moving to a1so. Attorney Jensen noted that an issue would be level of control; that FRS was managed in Tallahassee. Mr. Corbitt asked in layman's terms for his peace of mind to explain the advantages and disadvantages compared to FRS. Attorney Jensen responded advantages of a plan within the Village of Tequesta were: the ability to change it when you wanted to, the multiplier would be higher, the vesting would be the same, and the level of control. The biggest advantage of FRS was employees made no contribution, but there was more cost. You could also take your plan to another city if they had FRS. Attorney Jensen explained the drop program reduced the amount of money the individual would receive going forward. Examples were discussed using different multipliers. Attorney Jensen advised a drop program could be added to this plan and the multiplier could also be increased. FRS would let an individual purchase some time. BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES September 30, 2oog PAGE � --------------------------------------------------------------------------------- Vice Mayor Hansen asked if the employees would be more comforta.ble with FRS. Mr. Corbitt commented he thought the employees in the field might be more comfortable. Boardmember Paterno commented residents might not be willing to pay the added amounts FRS would require, and the employees' retirement was worth more here as long as they got six-year vesting. Discussion ensued. Attorney Jensen explained it was much easier to make changes at the local level. Mr. Corbitt commented he was convinced, but had wanted to hear a comparison, and he had always been comfortable with FRS because you knew what you would get. A worst case scenaxio was if this fund lost everything, but the Village would have to make it up, so retirement was guaranteed. It was noted that FRS could also lose everything; there was risk in everything. V. CONSENT AGENDA a. Payments to be reviewed and approved 1) Business Services Connection — $161.25 2) Hanson, Perry & Jensen, P.A. -$1,007.05 MOTION Vice Chair Hansen made a motion to approve the consent agenda as presented. Boardmember Corbitt seconded the motion, which carried by unanimous 4-0 vote. VI. NEW BUSINESS a) Consideration of sending Boardmember Paterno to the FPTTA Conference in October. Boardmember Paterno indicated he could not attend in October but could go in January. Chair Newell commented that he had attended the intermediate level and it had been very good, and he thought Mr. Paterno might go in the advanced level. Chair Newell noted it was a prerequisite for this board for members to attend. Mr. Newell indicated he was content to contact investment managers by phone who were attending the conference, and he did not need to go there. MOTION Boardmember Corbitt made a motion to approve sending Mr. Paterno to the SOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES September 30, 2003 PAGE 8 --------------------------------------------------------------------------------- FPTTA conference in January 2004. Vice Chair Hansen seconded the motion, which carried by unanimous 4-0 vote. Mr. Corbitt suggested the Board meet again during October to accept Mr. Van Beuren's proposal.. b) Discussion of Vacancy on the Board Attorney Jensen commented an election needed to be held for an employee to fill Christine Guison's position. Chair Newell reported the problem was that no employees were interested in serving on the boaxd. Boardmember Paterno asked if Mr. Corbitt could be voted as the employee representative, then the fifth member could be chosen from outside. Discussion ensued. Attorney Jensen advised if no one was interested and only Greg signed up as a candidate for election, he was automatically elected, then the board could proceed with picking a fifth member. Proper procedure would be to post a notice: The Board is looking for interested persons to sign up before -(a specific date) to run for election. Mr. Newell stated he would follow up with that. The person elected in the last election had refused to serve. It was decided that this time there must be a sign up sheet sta.ting anyone interested must sign up by a certain date and the election would be held one week following the sign-up deadline. Chair Newell was to post this notice throughout the departments, and if no one signed up except Mr. Corbitt, he would be automatically elected and an election did not have to be held. Chair Newell advised that the election would be done immediately so the candidate could be seated at the next meeting. Vice Chair Hansen commented he did not understand why employees were not interested. Chair Newell commented he would get with Mr. Gallagher to find out why they were not interested. VII. Any Other Matters Mr. Gallagher reported the annual premium for fiduciary insurance was going up. One policy covered both boards, and on a$2 million policy this board's fee would be approximately $500. Mr. Gallagher also reported on a$2.2 million policy. Attorney Jensen advised $2 million was sufficient for both boards but it should have an elimination clause so no one could come back against the individuals. Consensus was to go with the $2 million policy and Attorney Jensen advised she would review the policy. BOARD OF TRUSTEES TEQUESTA GENERAL EMPLOYEES' PENSION TRUST FUND MEETING MINUTES September 30, 2003 PAGE 9 -----------------------------------------�---------------------------------------- MOTION Mr. Paterno made a motion to forward to the Public Safety Officers' Pension Board a recommendation for a$2 million fiduciary insurance policy. Vice Chair Hansen sec�nded the motion, which carried by unanimous 4-0 vote. MOTION Boardmember Cmrbitt made a motion that the date of the next meeting be scheduled subject to a phone call from Attorney Jensen. Vice Chair Hansen seconded the motuon, which carried by unanimous 4-0 vote. VIII. Communication from Citizens There were no communications from citizens. IX. ADJOURNMENT Vice Chair Hansen made a motion to adjourn the meeting at 11:00 a.m. Boardmember Corbitt seconded the motion, which carried by unanimous 4-0 vote. Respectfully submitted, �`� �"i� �..� ;;?'�.(�� ;l_��:%�./ � �..�..x L � Betty Laur Recording Secretary DATE APPROVED: