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HomeMy WebLinkAboutDocumentation_Pension Public Safety_Tab 03A_11/09/2004• Synopsis of Public Safety Officers' Pension Board meeting 8/10/04: 1. Approved minutes of July 1, 2004 meeting. 2. Heard presentation from Peter Van Beuren of Northstar Capital Management for quarter ended 6/30/04 3. Postponed to next meeting acceptance of new investment guidelines prepared by Mr. Bogdahn to allow time for Attorney Jensen to work with Mr. Bogdahn on changes. 4. Reviewed financial reports. 5. Voted to have a budget prepared for FY2005, 10/1/2004 through 9/30/2005. Chair Weinand to put together a preliminary budget based on last year. 6. Discussed supplemental funds benefits and to request Mr. Palmquist provide a breakdown in the next actuarial study showing the base and amount designated for benefits and ask him about segregating this from the other fund monies. Attorney Jensen requested that the spreadsheet be changed to show the fixed amount and how it changed. • 7. Approved the following payments: Business Services Connection $225.80 Hanson, Perry & Jensen, PA $1,613.45 Northstar Capital Management, Inc. $4,591.00 8. Discussed selection of investment manager. Consensus was to table this item to the next meeting, to contact Mr. Bogdahn for more information regarding fees in connection with retaining two investment managers or an individual investment manager; incremental differences that would be incurred by having a blended fund with two managers instead of one; and pros and cons of one versus the other. 9. Voted to enter into a contract with Rachlin Cohen to perform auditing services, with the contract allowing fora 30-day out which would give the board the opportunity to decide each year to have this firm perform the audit, and to accept the 3-year period of fees as stated in their proposal. 10. Voted to hire Gabriel Roeder Smith and Company to do an actuarial evaluation for the period beginning October 1, 2004. 11. Voted to approve one attendee for the trustee school in October. 12. Discussed actuarial study considerations in regard to supplemental funds. Requested that the actuary look at 25 years service with increased insurance • benefits for retired individuals, look at the multiplier, and run statements. VILLAGE OF TEQUESTA Post Office Box 3273 250 Tequesta Drive, Suite 300 Tequesta, Florida 33469-0273 (561) 575-6200 Fax: (561) 575-6203 TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND BOARD OF TRUSTEES MEETING AUGUST 10, 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 Emergency Operations Center (EOC) of the Public Safety Facility, 357 Tequesta Drive, Tequesta, Florida, on August 10 , 2004. The meeting was called to order at 8.07 a.m. A roll call was taken by Betty Laur, Recording Secretary. Boardmembers in attendance at the meeting were: Chair James Weinand, Vice Chair Geraldine Genco, Boardmember Edward Sabin, Secretary Peter B. Lucia, and Boardmember Joe Petrick Also in attendance was Attorney Bonni Jensen. II APPROVAL OF AGENDA MOTION: Boardmember Lucia made a motion to approve the agenda as submitted. Boardmember Sabin seconded the motion, which carried by unanimous 5-0 vote. III. APPROVAL OF MINUTES MOTION: Boardmember Sabin made a motion to approve the minutes of the July 1, 2004 meeting as submitted. Boardmember Lucia seconded the motion, which carried by unanimous 5-0 vote. • Recycled Paper • BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES August io, 2004 PAGE 2 IV NORTHSTAR CAPITAL MANAGEMENT -INVESTMENT MANAGER'S REPORT AS OF JUNE 30, 2004 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. Companies selected were growing faster than the benchmark. The energy area had been under weighted, 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. Attractive fixed income items were U.S. Government Service Agencies such as Federal Home Loan Banks, and Freddie Mac with call provisions. That pricing and • duration brought the duration down. Mr. Van Buren commented they had no problem buying AAA rated bonds with call provisions. Mr. Van Buren explained that average maturities were longer than the index but the yield was lower because in the index there were bonds inappropriate for this fund because of size and types of bonds not allowed to be purchased. Northstar was trying to emulate a large index but that did not always work because in the large indexes they were dealing in million dollar pieces and would not even look at a $50,000 purchase. 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 good performance for the year, and reported July had been one of the worst months in many years in the market. 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 was expected to raise the rate by 1/4%. Northstar would continue to look for quality and high yields. Section 4-2 indicated the economy had slowed, but their belief was the economy was still in an extending mode unless there was a tragic event that took the wind out of the market. Mr. Van Buren reported corporate America was doing fine; however, lack of job creation affected the market because of the uncertainty. On balance, Northstar was optimistic that the presidential election would not cause a lot of disruption. There was a lot of concern and fear with oil prices at a 17-year high, and if that continued to go up it would affect the economy and consumers would buy less. Mr. Van Buren predicted a tough year but indicated • they were cautiously optimistic. Vice Chair Genco asked what Mr. Van Buren thought of using only government and agencies on fixed income. Mr. Van Buren responded he did not think it was necessary to do that; agencies had been a source of really high BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES August io, 2004 PAGE 3 quality flexible securities and one got incremental performance by maturity. He indicated he would really have to think about it for an account like this one, and thought the fund should stay in the corporate area to some degree. Vice Chair Genco indicated she did not necessarily feel it should be done but wanted Mr. Van Buren's opinion. 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 Discussion of the proposed changes took place. This put some restrictions on equity investments where the previous policy had none. Boardmember Sabin pointed out there should be clarification whether the 20% was because there was not a ranking yet, possibly a new issue, or if 20% could truly be below the three ranking. He was not as concerned about a new issue but was concerned about the second point. Vice Chair Genco agreed. Boardmember Sabin suggested the following language: except that 20% may be invested in securities without a ranking, but that would be more for new issues. Vice Mayor Genco recommended going back to Mr. Bogdahn for new language since she was very uncomfortable leaving a value line safety ranking of 1, 2 or 3 and leaving it not meeting the requirements-it left a very open field for whoever was managing the fund. 5% of equities that could be lost. Boardmember Sabin commented the • board should think of this as 20% of the fund not having a ranking. Chair Weinand indicated he was not sure he wanted the manager to take a chance with 20% of the money. Boardmember Sabin indicated that could be 20% of money • BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES August io, 2004 PAGE 4 going in. Vice Chair Genco agreed, and asked that the 20% be changed to a different number and in the event that a rating was downgraded that no more than 20% be invested in such securities. Section 4 covered workout provisions. The intent had been that was for workout provisions so they did not have to immediately sell, but that was not what the language said. Boardmember Sabin was concerned with item ii on equities because it gave the manager ability to use new money and put 20% of equities into rankings lower than average. It could be corrected by not giving the manager any flexibility as to percentage or allow if it was unranked to give the manager latitude to invest for two years if they felt it was an appropriate investment. Vice Chair Genco suggested 10% for one year to work out. Boardmember Sabin commented the manager should decide the appropriate work out time. Chair Weinand commented Section 4 gave the manager the ability to work out of situations, and Section 3 was for new investments. Boardmember Sabin commented he could not think of a reason for • new money to go into an investment with a safety risk of 4. Boardmember Lucia noted it could be to capture a yield. Attorney Jensen summarized her understanding of the conversation to be that they were interested in a value line ranking for safety of 1, 2, or 3, or an equivalent safety ranking by another agency; and that they wanted to reduce the 20% restriction down to a 10% restriction, Vice Chair Genco requested the following language: purchases of new securities shall have a minimum value line ranking for safety of 1, 2, or 3 except that 10% of the fund's assets may be invested in securities not meeting this requirement, so that if something dropped below after purchase 10% could be held that did not have a value line ranking. Attorney Jensen clarified the board wanted to leave the 20% in the work out section. Boardmember Sabin requested to see the revised language. Attorney Jensen indicated she would send the revised language to all boardmembers after she had consulted with Joe Bogdahn. Boardmember Lucia asked the reason for 5% equity maximum and 10% fixed income maximum. Attorney Jensen advised 5% was a statutory requirement and the 10% was Mr. Bogdahn's recommendation. Discussion ensued. That was a pretty big holding on a single corporation, and Boardmember Lucia recommended 5% on both. The other comment from Boardmember Lucia concerned absolute restrictions and he felt new issues were very risky and recommended adding new issues to absolute restrictions. Vice Chair Genco agreed with him on equity but not on corporate bonds. Attorney Jensen was to ask Mr. Bogdahn to suggest new issue criteria. Chair Weinand announced this matter would be moved to another meeting to • allow time for Attorney Jensen to work with Mr. Bogdahn. • BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES August 10, 2004 PAGE 5 VI. STANDING REPORTS There were no items to report. VII. FINANCIAL REPORTS a) Statement of Accounts (April-June 2004) b) Progress Report by Finance Department -Cash Flow Report for quarter ended June 30, 2004 Chair Weinand announced if there were any questions regarding the financial reports he would contact Mr. Gallagher for answers. Vice Chair Genco commented she was getting concerned about all the fees since the fund used to have only Northstar's fee and now had attorney fees also and there would be another manager's fee. Chair Weinand commented current yield on investments was approximately $55,000 and expenses were about • $45,000 a year now, so he hoped the new investment manager could do a little better; and he would talk with Mr. Gallagher about the FedEx charges. Vice Chair Genco questioned why last month there were three charges for advertising. Recording Secretary Betty Laur indicated that two ads had been in connection with the two recent RFP's. Boardmember Sabin questioned if the board had thought about having an annual budget for this fund, and if that should be done. Boardmember Sabin commented in business he was used to knowing where things were heading and he would like to have an FY 2005 budget to anticipate costs. Chair Weinand advised he could put together a preliminary budget based on last year. Vice Chair Genco indicated it was a great idea. MOTION: Boardmember Sabin made a motion to have a budget prepared for the plan's fiscal year 2005, the period October 1, 2004 through September 30, 2005. Vice Chair Genco seconded the motion. Attorney Jensen advised the contributions from the Village and the State dollars would be known and administrative assumptions could be made. Motion carried by unanimous 4-0 vote with Boardmember Petrick being out of the room. c) Supplemental Funds available for extra benefits Chair Weinand reported Attorney Jensen had provided information on this item before the meeting started, that checks for 2003 had been drafted by the State but not yet mailed. The supplemental funds that would be received were $67,950.10 for police officers and $56,535.86 for firefighters. Attorney Jensen commented the firefighters pool was • BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES August 10, 2004 PAGE 6 generally less, plus they had a restriction of 6% of payroll. Every year the amount of payroll was designated in the annual report. Chair Weinand commented, we are looking at over $100,000 for police and $50,000 for firefighters for supplemental benefits, and have to start spending that. Boardmember Sabin commented he thought there had been some extra benefits. Vice Chair Genco commented the actuary would tell the board if the amount being received would support extra benefits already in place. Chair Weinand explained there was a base amount the municipality used from this fund to fund the pension system and as benefits were added on, the actuarial report would state how much it would cost per year to provide that benefit forever, so the base amount each year would increase. Once a benefit was put in it was figured out for the life of the actuarial. Attorney Jensen commented this spreadsheet should show that-what the fixed amount is and how it changed--show what the base is. Chair Weinand advised that this time when Mr. Palmquist did the actuarial study he could break that down for the board, and that he had done an actuarial impact statement when the benefits went on to show how much it would cost. Attorney Jensen commented it was difficult to tell the base amount from the • spreadsheet provided. Chair Weinand responded he could tell her that the base level for police officers was the 1998 level, anything above that base level had to go to supplemental. This year it was $67,000 with $42,000 for extra benefits. For firefighters it was the 1998 level so this year there would be $20,000 additional for extra benefits. Vice Chair Genco commented that might have to besegregated-now it was commingled with the assets of the fund. Boardmember Sabin suggested it could commingled for investment purposes but this portion allocated. Vice Mayor Genco expressed concern if that portion was used to get the 8% required by the actuary. Attorney Jensen advised that the municipality had to make up the difference to get 8%. Boardmember Sabin noted the fund itself should have a cushion to cover extra benefits. Chair Weinand commented the actuary figured that in his report. Boardmember Sabin indicated he was very interested in the dialog in the actuarial report. Vice Chair Genco commented there was not enough money to segregate this portion in the past and the board should ask the actuary's advice again. VIII. PAYMENTS TO BE REVIEWED AND APPROVED MOTION: Vice Chair Genco made a motion to approve the following payments: Business Services Connection $225.80; Hanson, Perry & Jensen, PA. $1,613.45; and Northstar Capital Management, Inc. $4,591.00. Boardmember Sabin seconded the • motion, which carried by unanimous 5-0 vote. IX. NEW BUSINESS • BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES August io, 2004 PAGE ~ a) Discussion and Consideration of Selection of Investment Manager Information on Contravisory/Rockwell and Dana which had been received from Mr. Bogdahn was distributed. Vice Chair noted the board had discussed splitting the equity between the two companies. She was seeing that Contravisory took more risk but did slightly better in an up market and slightly worse in a down market. Discussion ensued regarding both firms. Boardmember Sabin suggested attendance by the investment manager of every other quarterly meeting and the others to be attended by conference call-this might reduce fees. Chair Weinand commented he did not think they needed to come to every meeting since Mr. Bogdahn would be attending every meeting. Chair Weinand liked the concept of having two investment managers. Vice Chair Genco expressed concern that both might be interested in the same position which could cause the 5% overall to be exceeded. Attorney Jensen • advised that Mr. Bogdahn would monitor that. Boardmember Sabin noted each would have a smaller fund. Vice Chair Genco indicated if the board worked better with one of the managers they could eventually switch to them completely; fees might be higher if there were two managers. Mr. Bogdahn's fee was based on one manager; if there were two it would be an additional $2,500 according to his fee schedule. Discussion ensued. Consensus was to have Mr. Bogdahn's fee clarified and if there would be no additional fee from Mr. Bogdahn the board was leaning toward blending two managers. Vice Chair Genco commented ifthere was going to be an additional fee then she wanted only one manager. Boardmember Lucia commented he was comfortable with the process shown by Dana; Vice Chair Genco commented they were sector neutral so it was easy to understand. Chair Weinand commented Contravisory's presentation had not been good but they had good results, and today at 10:45 a.m. they would be making a conference call to the General Employees' Board to explain their process if anyone wanted to stay for that. There was discussion that Mr. Bogdahn must see a benefit with blending managers since he had pointed the board in that direction. Chair Weinand was comfortable going with Mr. Bogdahn's recommendation providing fees were not an issue with him. Vice Chair Genco commented she liked the idea if there was an out clause in each contract so if the board wanted to get out of one and switch everything to the other they could do so. Consensus was to contact Mr. Bogdahn for more information on the contract, fees, • and surrender. Attorney Jensen advised the board would have a 30-day out; the issue would be transaction costs. Vice Chair Genco requested that the investment manager confirm there would not be a wholesale selling out of assets, but that they would take • BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES August io, 2004 PAGE 8 time changing composition of the portfolio. Boardmember Sabin commented there would be two presentations and two reports every time the board looked at something. Vice Chair Genco responded that Mr. Bogdahn would do comparisons for the board. Consensus was to table this item for more information from Mr. Bogdahn-an estimate of all costs associated with a mix or with an individual manager; incremental differences that would be incurred by having a blended fund with two managers instead of one; and pros and cons of one versus the other. It was clarified that the selection process was a possible mix on the equity side but an individual manager of the income, and the concept with Dana was they used flexible, variable rate bonds. MOTION: • Boardmember Lucia made a motion to table this item IX(a) to the next meeting for more information. Vice Chair Genco seconded the motion, which carried by unanimous 5-0 vote. b) Report of Results on Auditing Services RFP and Consideration of Possible Action Vice Chair Genco indicated she had missed the meeting when the decision had been made for the RFP's, and questioned why this was being done. Chair Weinand explained that the auditing service must work for the board under Section 175 and 185, and must have a contract with the board, which had never been done. The Village's auditors had given the board the best rate and the board had felt they should get other auditing firms to compete to check competitive rates. Chair Weinand explained this board had never received a copy of the audit when done in conjunction with the Village's audit, and it was a requirement to have a stand alone audit. Fees presented by each auditing firm were reviewed by Attorney Jensen. Rachlin Cohen proposed $4,500 in 2004; $5,000 in 2005; and $5750 in 2006-the other firm's fee was $7,500 each year. During ensuing discussion, it was noted that nothing bad was known about either firm, and the Village had been happy using Rachlin Cohen in the past. • MOTION: Boardmember Sabin moved that this fund enter into a contract with Rachlin Cohen to perform auditing services, with the contract allowing fora 30-day out • BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES August io, 2004 PAGE 9 which would give the board the opportunity to decide each year to have this firm to perform the audit, and to accept the three year period of fees as stated in their proposal. Vice Chair Genco seconded the motion, which carried by unanimous 5-0 vote. c) Report of Results on Actuarial Services RFP and Consideration of Possible Action Chair Weinand reported two responses had been received, one from the present actuary, Gabriel Roeder Smith, for $6,000 and another from Stanley Holcomb & Associates for $8,500. Gabriel Roeder Smith had provided the best proposal for services. Chair Weinand explained that the $2,000 for the other year was only for annual employee benefit statements. Vice Chair Genco indicated she thought the Finance Department would provide statements annually of contributions to date. • Chair Weinand explained they were not doing it. Boardmember Petrick commented he had had questions from police officers regarding annual statements; they had gone to the Finance Department and learned they could not provide them. Chair Weinand noted there had not been many requests from firefighters. Boardmember Petrick indicated he would check to see if employees wanted them every year. Attorney Jensen clarified that the proposal from Gabriel Roeder Smith was a fee of $6,000 in the year they prepared the report and $3,000 ($2,000 for the information to be included in the annual report; $1,000 for benefit statements) for the other year. Boardmember Petrick indicated he did not think the cost justified having annual statements. Attorney Jensen advised there was a page in the plan which stated how to figure the benefits, so the employees could do it themselves. The employees would get a statement this year. MOTION: Vice Chair Genco made a motion to hire Gabriel Roeder Smith and Company to do an actuarial evaluation for the period beginning October 1, 2004. Boardmember Sabin seconded the motion, which carried by unanimous 5-0 vote. c) Consideration of sending members to attend conference/trustees' school • It was announced that the next FPTTA trustees' school was scheduled for October 6 and the State school was October 25-27 in Orlando. The State school was free from the Division of Retirement, which Boardmember Petrick indicated he was interested • BOARD OF TRUSTEES TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES August io, 2004 PAGE io in attending. Boardmember Lucia was also interested in attending the State school depending on the dates he had available. Vice Chair Genco indicated she might attend the state school. Attorney Jensen advised the dates were on the Internet. Vice Chair Genco commented this item should be in the budget. It was decided that Mr. Petrick should attend if possible, since he was a new trustee. One person who attended could provide an update to the rest of the board. MOTION: Vice Chair Genco made a motion to approve one attendee for the trustee school in October. Boardmember Sabin seconded the motion, which carried by unanimous 5-0 vote. e) Actuarial Study considerations in regard to Supplemental Funds • Chair Weinand provided a preliminary report with vesting changed to six years and the multiplier changed. The multiplier being changed had an adverse effect on firefighters where their benefits were actually reduced. Chair Weinand commented these people were young and would have more than 25 years before they could retire; and proposed to take years 16-20 and increase the multiplier to 3%. No one could retire until age 55-one had to work 32 years to retire at 55. This only affected people working over 25 years. An employee who worked 25 years was not affected. Boardmember Sabin commented if the issue was after 25 years, just change the calculation after 25 years to go to 3%. Chair Weinand commented he did not know if the fund could afford that. An incremental change would not make a big hit. Boardmember Sabin asked if this could be grandfathered, to which the response was yes. Attorney Jensen indicated just change the benefit now-it would be for every retirement from this point forward. Chair Weinand commented it might be cheaper to give 25 years and out Discussion ensued. Consensus was to have the actuary look at this before making any decision; when engaging the actuarial services ask him to look at this and give the cost. Boardmember Sabin cautioned to be sure no one was giving up a benefit, and suggested there might be another way to look at this. After further discussion, Chair Weinand reported some of the employees would be willing to contribute more money to have less insurance premium to pay after retirement, and this was the time of year to ask the actuary those types of questions. Vice Chair Genco summarized that the board wanted the actuary to look at 25 years and increasing insurance benefits for retired individuals, look at the multiplier, and • have Mr. Palmquist run those statements. X. ANY OTHER MATTERS BOARD OF TRUSTEES • TEQUESTA PUBLIC SAFETY OFFICERS PENSION TRUST FUND MEETING MINUTES August io, 2004 PAGE 11 There were no other matters to come before the board. XI. COMMUNICATIONS FROM CITIZENS There were no communications from citizens. XIL ADJOURNMENT Upon motion by Vice Chair Genco, seconded by Boardmember Sabin, and unanimously carried, the meeting was adjourned at 10:29 a.m. • Respectfully submitted, ~,y~~% Betty Laur Recording Secretary •