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.
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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.
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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.
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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.
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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.
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ADJOURNMENT
The meeting adjourned at 12:24 p.m.