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HomeMy WebLinkAbout1993-03-25 Minutesis MINUTES OF A MEETING OF THE FIRE PENSION BOARD A meeting of the Fayetteville Firemen's Pension and Relief Board was held on Thursday, March 25, 1993, at 11:00 a.m. in Room 326 of the City Administration Building, 113 W. Mountain, Fayetteville, Arkansas. PRESENT: Marion Doss, Pete Reagan, Retiree Richard Baird, Mayor Fred Hanna, City Clerk Sherry Thomas, and Administrative Services Director Ben Mayes. ABSENT: Danny Farrar and Retiree Darrell Judy CALL TO ORDER Mayor Hanna called the meeting to order. MINUTES Doss stated paragraph 8 and line 2 of paragraph 11 on page 2 should be deleted. Reagan, seconded by Baird, made a motion to approve the minutes as corrected. The motion passed unanimously. PENSION LIST Thomas stated three widows had passed away and have been deleted from the pension list -- Mrs. Gladys Cole, Mrs. Madge Murphy, and Mrs. Letha Brown. Doss, seconded by Baird, made a motion to approve the pension list. The motion passed unanimously. OLD BUSINESS MEDICAL BILLS FOR ARVIL KING Thomas stated she has received a bill for $40.00 from Dr. David Davis of the Neurological Associates and a bill for $856.00 from Springdale Memorial Hospital for an MRI. These are the result of the requirement for Arvil King to have a medical examination because of his medical retirement. Doss asked if the Pension Board would be responsible for the MRI.. Reagan stated King had tried to get in to see his regular doctor from Fort Smith, but the doctor kept canceling the appointments. King told Reagan Dr. Davis was requiring an MRI. Mayor Hanna asked if a retiring employee can keep his health insurance through the City. • • • • Baird stated he could for 18 months to 2 years, but the rates and the deductible go way up from those paid while employed. Reagan stated the fire fighters had brought this before the legislature, but the Municipal League fought this issue. Mayor Hanna stated he felt a retiree should still be able to be a member of the group and take advantage of the city rates. City Attorney Rose stated the Board might want to write a letter to Ring stating they will not pay any continuing medical bills. Mayor Hanna stated if the Board is satisfied as to the condition of Ring, they may decide to take no further action and incur no additional expenses. Rose stated the Board would be obligated to pay for the MRI since it was used as a part of the diagnosis. Thomas suggested next time a medical examination was requested, the Board should specifically outline what they want and what they will pay for. Reagan, seconded by Baird, made a motion to approve payment of the medical bills. The motion passed by a unanimous vote. SURVIVING SPOUSE AND "RELIEF" OUESTIONS Mayor Hanna stated the memo from City Attorney Jerry Rose answers the questions asked of him by the Board at their last meeting. Rose stated the "relief" portion of the pension fund does not give the Board any powers broader than what are in the statutes. Baird asked when a wife is designated the beneficiary, is that the wife the fire fighter has at the time of retirement. In other words, if a retiree remarries after retirement, there will be no payments to the new wife. Rose stated this was the way he understood the statute. ROY SKELTON CASE Reagan asked if there had been any new developments regarding the Roy Skelton case. Rose stated he has not received anything from the Circuit Court as of this date. • • • NEW BUSINESS March 25, 1993 M+IERRILL LYNCH INVESTMENT REPORT Curtis Williams, with Merrill Lynch (ML), stated New Mexico Capital had shown an increase of 19.7% in 1991, about 9.87% in 1992, and was up almost 4% this year. Roxbury was up about 40% in 1991, about .25% in 1992, and is down 1.53% for this year. He stated ML would be closely watching the performance of Roxbury. The income account was up 12.7% in 1991, 5.5% in 1992, and is up 3.4% this year. Reagan stated he was concerned about the year end report on Roxbury. He stated it was ML's job to advise the Board about what is going on with the money managers. William stated 1992 was not a good year for growth stocks. Many of the large money managers ended 1992 in the negative. However, Roxbury continues to underperform compared to the market. They would like to see them become more consistent. Williams explained to the Pension Board why ML sometimes sells an investment before maturity. For instance, ML sold a CD that had two more years to maturity. If they had kept the CD to maturity, the income would have been $8,763.75. On the day of the sale, the CD sold for $3,463.00. The difference between the two amounts, $5,299.25, is the yield. They took the money received from the sale of the CD and purchased City Corp. at a 9% rate for 5 years. In the long run, this move will make more money for the fund. Williams explained the historof interest rates in this country. The interest rates peaked in 1981 because (1) the baby boomers entered the spending market, which increased the cost of money, and (2) there was a real estate boom during the 1960-1980's. Now, the tax laws have been changed so that investing in commercial property is no longer a tax benefit --no more passive losses. So, there is now plenty of existing office space in this country. The average yield in this country has been lower than it is now 90% of the time. Inflation is now at about 3%. We are experiencing a slow growth economy and unemployment will be a problem for a long time to come. The demand for fixed income investments will grow. ML feels interest rates will go up some for a short period of time, about 18-36 months. The pension fund's portfolio value will then go down. ML is trying to keep a position in the market to best deal with this type of changing environment. Baird asked what about the fiduciary responsibility for the pension fund. He asked who is liable for decisions on investments. Williams stated everyone involved with the pension board is responsible. You can't transfer that responsibility to someone else. He stated the Board has been very responsible in dealing March 25, 1993 • with the pension fund. Eight years ago they established investment guidelines. You attend the meetings to keep current on the investments, and you ask questions. By doing these things, you are doing everything you can to do what is best for the fund. Williams stated there was no way to legally get rid of the fiduciary responsibility. The pension board is ultimately responsible for the smooth operation of the fund. He stated ML has a fiduciary responsibility to monitor the money managers, and the Board has the responsibility to listen to ML. • • Baird stated he had been told a different story about responsibility. Williams stated the only way to get rid of the responsibility is to terminate the fund. Baird stated the seminars several of them attended did not say that. fiduciary fiduciary Williams stated the seminar discussion was telling you to do what you have already done --like setting goals and objectives, following them out, and getting qualified people to assist the pension board. Baird stated he would like to see something in writing. He sees the loss in the account Williams just went over as wrong if the Board lets it go on and does not do anything to try and correct it. Williams stated that is only a short term money manager every time they have a loss, constantly. loss. You can't fire a or you would be changing Baird stated he could understand not making much, but losing money is a different story. The money would earn 2 1/2% by just putting it in a bank savings account. He has seen no earnings over 10% in all the records he has been reviewing. Williams stated the 10% was an average that was established before the market crash in 1987. Baird stated he had nothing on paper that says ML is assuming any fiduciary responsibility. Williams stated ML does have fiduciary responsibility, but not all of it. Ultimately, it comes back to the pension board to decide if ML is doing right or wrong with the money. Williams stated legally everyone who deals with the plan is fiduciarily responsible. Baird stated he had asked Richard Yada about this and asked if ML went bankrupt, what would become of the pension fund. Yada told him ML would be gone and out of the picture. • • • March 25, 1993 Williams stated ML does not control a dime of the pension fund's money. If ML goes under, none of the money goes to ML. The pension board would just have to transfer the money to a new custodian. You are insured up to $25 million per account to cover your investment. Williams stated ML would not tell the pension board what to do, but they will give you information, and you will be the ones who makes the ultimate decision. ML is trying to balance the fund through diversification. Doss stated Boeing is losing, but it looks like the stock will go back up. Williams stated he personally does not like the Boeing stock, but he would be taking on the fiduciary responsibility and removing it from New Mexico Capital by telling them to sell that individual stock. Williams stated the pension board could not just blame someone if this does not work. It would be great, but it does not work that way. Reagan stated Roxbury has made more money for the fund than would have been made by simply investing in CD's. Baird stated John Lewis and Bob Hall have been doing some figuring for him, and he would like for the Board to hear what they have to say. Reagan asked Baird if he was unhappy with ML or just did not want to listen to them or what. Baird stated he would just like to hear from them. Reagan stated the Board heard from them earlier and has gone through several money manager hunts when they had every local firm making presentations. Williams stated every money manager has a program they offer. By firing the lowest producing money manager every two years, the Board could be doing more harm than good. He stated the Board does have two equity managers now. The Board chose to have only two when ML suggested listening to a third manager. Doss stated the members on the pension board change, and there is nothing wrong with hearing another point of view. But, there are a lot of companies, and they would all be interested in this account. Doss stated he felt the Arvest seminar they attended started out as a "let us do it" sales pitch seminar. March 25, 1993 • Williams stated ML has always told the Board they have a service to sell. They feel they do it better than anyone else. • • ADJOURNMENT The meeting adjourned at 12:24 p.m.