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Home My WebLink About1998-02-26 - Agendas - Final• 1 AGENDA FIREMEN'S PENSION AND RELIEF BOARD February 26, 1998 11:00 a.m. City Hall Room 326 1. Approval of January 29, 1998 minutes. 2. Approval of Pension List for March 1998. 3. Investment report, Merrill Lynch OLD BUSINESS 1. Attorney General options NEW BUSINESS 1. Drop applications 2. Other business • • • • MINUTES OF THE FIRE PENSION BOARD A meeting of the Fayetteville Firemen's Pension and Relief Board was held on Thursday, January 29, 1998, at 11:00 a.m., in room 326 of the City Administration Building, 113 W. Mountain, Fayetteville, Arkansas. PRESENT: ABSENT: Marion Doss, Bill Morris, Darrell Judy, Ron Wood, Pete Reagan, and Deputy City Clerk Jane Heth. Mayor Fred Hanna CALL TO ORDER Marion Doss called the meeting to order. MINUTES Reagan, seconded by Wood, moved to approve the minutes of the December 11, 1997, meeting. The motion passed unanimously. PENSION LIST There were no changes to the pension list. Reagan, seconded by Wood, moved to approve the pension list for February, 1998. The motion passed unanimously. INVESTMENT REPORT Richard Yada and Curtis Williams of Merrill Lynch were present to review the portfolio performance. Yada reported that New Mexico Capital gave a return last year of 16.97%. It probably under -performed the market a little, but is not bad for a conservative portfolio. The income account was up 6.38%. Keeping money available will be even more critical now that the DROP program is in place. .The Keystone Account had a 30% return rate, which is excellent. Yada gave an update on the Select 10 Program. To try to get some diversification, we put some money into the Dow, United Kingdom, Japan, and Hong Kong high-quality stock funds. The Dow and United Kingdom are excellent. Hong Kong was excellent until about November. Japan never has done anything. We will not renew the Japan. Hong Kong will probably bounce back with a vengeance. We are down about $39,000. We have 46% of our assets in the stock market. Fixed Income has 47%. Cash is 6%. One percent is in the "other" category. We are almost right on our target. Keystone is managing 14% of our portfolio. New Mexico Capital Management has 420. Our income account is 44%. Yada reported the actuary will be run as of the end of 1997. It should be back by Augdst. He reviewed the last one done in 1995, before we approved the DROP and benefit increases. Then, we were sound in all categories. For the short-term test, we have to have $173,000 coming into the account, plus enough to reduce the unfunded liability of the plan. We are not supposed to be fully actualized until 2003. We have used up the cushion we had. The total liability of the plan is $9,045,983 and assets at the time were $8,897,000. The unfunded liability was only $148,000. He reviewed the insurance turn backs over the last three years and the local millage. The investment return for 1993 was 10.9%, 1994 was 6.9%, and 1995 was 13.4%. 1997 will probably have a 7% to 8% rate of return range. Yada explained that we try to diversify our investment styles as we do our investments. The two styles of investing are growth and value. Keystone is a growth style. New Mexico is a value style. Reagan asked about replacing Japan. Williams replied we have to have global diversification.• We need to find the most efficient and least troublesome way of doing it. OLD BUSINESS VOLUNTEER PAY Reagan reported he requested information from the Pension Review Board regarding what other cities pay their volunteers. He has not received an answer yet. OSBORN, CARREIRO & ASSOC., INC. LETTER Reagan suggested writing a letter to Cathyrn Hinshaw of the PRB about a letter dated October 3, 1997, from Osborn, Carreiro & Associates that was not received by the board until recently. This was regarding 1996 DROP Interest Rate Certification. Doss explained he'd been told by Cathyrn Hinshaw that a copy of this letter had been sent earlier and may have been misdirected. In the future, it should come addressed to the board. NEW BUSINESS ATTORNEY GENERAL OPINIONS Reagan stated that in the future he would like to see Attorney General opinions before the pension board meeting. It was decided the City Clerk would provide each board member with information like this in the agenda packet. These opinions will be discussed at the next meeting. LIST OF DROP PARTICIPANTS Doss reported that the finance department sends him a list. of DROP participants and their investments. He sends a copy of it to them. He suggested keeping the originals in the City Clerk's office. He turned the originals over to the Clerk. NCPERS Reagan stated he'd received information on the National Conference on. Public Employee Retirement Systems (NCPERS). Membership would be $100 annually. They send out a monthly monitor of what is happening on Capitol Hill. They have a conference once a year. Their mission statement states they were formed over 50 years ago to take a stand against mandatory social security coverage for public employees. He stated the annual conference would be held in Denver in April. Reagan moved to join NCPERS. Wood seconded. The motion carried unanimously. Reagan offered to be considered as a delegate to the Denver conference. It was thought this would be paid for by the pension fund. Judy moved to send Reagan to the conference. Reagan seconded. The motion carried unanimously. DROP FORM • Doss reported that Marilyn Crammer has prepared a form showing the formula used for the DROP, which is available for anyone who is interested in it. TWENTY-YEAR CERTIFICATE A twenty-year certificate was signed for Eddie Bachman. ADJOURNMENT The meeting adjourned at 12:06 p.m. FIREMEN'S RELIEF AND'PENSION FUND MARCH 1998 • THE FOLLOWING ARE THE OBUGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE MONTH OF MARCH 1998. YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE PAYEES, IN THE AMOUNTS SHOWN, AND FOR THE PURPOSE SO STATED. • EMP# NAME 43 BAIRD, RICHARD H. 2 BLACKARD, PAUL 63 BOLAIN, ANN 44 BOUDREY, BETTY MRS. 45 BOUDREY, HOWARD 49 BOUDREY, JACK 4 CARL, FLOYD JR 5 CASELMAN, ARTHUR 57 CATE, ROY 6 CHRISTIE, ARNOLD 8 COUNTS, WAYNE 61 DAVIS, BEULAH F. 10 DEARING, EMMA MRS. 11 FARRAR, ALONZO 38 FRALEY JOSEPH G. 33 HARRIS, BILL C. 34 HARRIS, JAMES E. 64 JORDAN, CHARLIE 47 JUDY, DARRELL 37 KING, ARNOLD D. 54 KING, ARVIL 12 LANE, HOPE MRS 13 LAYER, MERLIN 14 LEE, HAROLD 51 LEWIS, CHARLES 60 LEWIS, MARVIE 55 LEWIS, ROGER 40 LOGUE, PAUL D. 50 MASON, LARRY 39 MC ARTHUR, RONALD A. 35 MC CHRISTIAN, DWAYNE 15 MC WHORTER, CHARLES 29 MILLER, DONALD 42 MOORE, JAMES H. 17 MORRIS, WILKIE MRS. 16 MORRIS, WILLIAM H. 62 MORRISON, ELIENE 48 MULLENS, DENNIS W. 58 OSBURN, EDWARD 46 OSBURN, TROY 53 POAGE, LARRY 20 POLLY, GRACE A. MRS. 22 REED, JOE 30 SCHADER, EARVEL 41 SCHADER, TROY 23 SKELTON, BURL L. 24 SKELTON, LEE 56 SKELTON, ROY 36 SPRINGSTON, CARL 25 STOUT, ORVILLE 27 TUNE, MILDRED MRS. 26 TUNE, BILLIE SUE GROSS FED. TAX ST. TAX NET 1,191.06 100.00 55.00 55.00 1,641.57 180.00 1,383.66 1,088.98 287.68 55.00 75.00 1,182.35 55.00 55.00 377.50 55.00 707.84 1,171 39 100.00 55.00 55.00 1,525.81 1,088.98 1,008.97 100.00 1,131.00 130.00 55.00 417.50 55.00 1,088.98 570.91 570.92 50.00 1,902.69 175.00 1,078.16 78.16 1,159.11 100.00 55.00 30.00 886.19 80.00 863.01 125.00 55.00 55.00 70.00 80.00 1,448.31 1,646.01 160.00 1,255.55 65.81 1556.57 21000 55.00 55.00 923.01 1,007.92 20.00 692.50 42.50 390.00 1,626.02 126.02 609.88 50.00 590.36 50.00 80.00 80.00 1,091.06 55.00 55.00 1,461.57 1,383.66 50.00 751 30 55.00 75.00 1,182.35 55.00 55.00 377.50 55.00 707.84 10.00 1,061.39 55.00 55.00 1,525.81 1,088.98 10.00 898.97 1,001.00 55.00 41750 55.00 1,088.98 570.91 10.00 510.92 20.00 1,707.69 1,000.00 1,059.11 25.00 806.19 738.01 55.00 55.00 70.00 80.00 1,448.31 1,486.01 1,189.74 60.00 1,286.57 55.00 55.00 923.01 987.92 650.00 390.00 50.00 1,450.00 9.88 550.00 540 36 80.00 80.00 • 28 WATTS, DONALD 59 WATTS, WAYNE 52 WRIGHT, RANDALL DROP EMPLOYEES JOHNSON, ROBERT MILLER, KENNETH WARFORD, THOMAS BONADUCE, MICHAEL 400.00 1,191.51 1,128.98 96.17 150.00 400 00 1,095.34 978.98 37,713.20 2,506.34 21988 34,986.98 2,042.47 2,129.57 1,659.70 1,975.38 WE, THE UNDERSIGNED, DO SOLEMNLY SWEAR THAT THE ABOVE OBLIGATIONS ARE JUST AND CORRECT; THAT NO PART THEREOF HAS BEEN PREVIOUSLY PAID• THAT THE PENSION PAYMENTS SO CHARGED ARE IN ACCORDANCE WITH THE ACTIONS OF THE BOARD OF TRUSTEES OF THE FIREMEN'S RELIEF AND PENSION FUND; THAT THE SERVICES OR SUPPLIES FURNISHED, AS THE CASE MAY BE, WERE ACTUALLY RENDERED OR FURNISHED; AND THAT THE CHARGES MADE THEREFORE DO NOT EXCEED THE AMOUNT ALLOWED BY LAW OR THE CUSTOMARY CHARGE FOR SIMILAR SERVICES OR SUPPLIES. /z-egf.1 4, SECRETARY // CHAIRMAN A D PRESIDENT ACKNOWLEDGEMENT • STATE OF ARKANSAS ) COUNTY OF WASHINGTON) )SS // SWORN TO AND SUBSCRIBED BEFORE ME THIS /n/JpAY OF jylgp�7 , 1998. • Z-,te OS W NOT Y PUBLIC MY COMMISSION EXPIRES: ,3 —/-o? 0aS— • '```• vwuuuHIss,t i $OTAR Y 3.• �� ¢� s i PU BOC l3 r zoos • • • FIREMEN'S RELIEF AND PENSION FUND MARCH 1998 • THE FOLLOWING ARE THE OBLIGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE MONTH OF MARCH 1998. YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE PAYEES, IN THE AMOUNTS SHOWN, AND FOR THE PURPOSE SO STATED. • EMP# NAME 43 BAIRD, RICHARD H. 2 BLACKARD, PAUL 63 BOLAIN, ANN 44 BOUDREY, BETTY MRS. 45 BOUDREY, HOWARD 49 BOUDREY, JACK 4 CARL, FLOYD JR 5 CASELMAN, ARTHUR 57 CATE, ROY 6 CHRISTIE, ARNOLD 8 COUNTS, WAYNE 61 DAVIS, BEULAH F. 10 DEARING, EMMA MRS. 11 FARRAR, ALONZO 38 FRALEY JOSEPH G. 33 HARRIS, BILL C. 34 HARRIS, JAMES E. 64 JORDAN, CHARLIE 47 JUDY, DARRELL 37 KING, ARNOLD D. 54 KING, ARVIL 12 LANE, HOPE MRS 13 LAYER, MERLIN 14 LEE, HAROLD 51 LEWIS, CHARLES 60 LEWIS, MARVIE 55 LEWIS, ROGER 40 LOGUE, PAUL D. 50 MASON, LARRY 39 MC ARTHUR, RONALD A. 35 MC CHRISTIAN, DWAYNE 15 MC WHORTER, CHARLES 29 MILLER, DONALD 42 MOORE, JAMES H. 17 MORRIS, WILKIE MRS. 16 MORRIS, WILLIAM H. 62 MORRISON, ELIENE 48 MULLENS, DENNIS W. 58 OSBURN, EDWARD 46 OSBURN, TROY 53 POAGE, LARRY 20 POLLY, GRACE A. MRS. 22 REED, JOE 30 SCHADER, EARVEL 41 SCHADER, TROY 23 SKELTON, BURL L. 24 SKELTON, LEE 56 SKELTON, ROY 36 SPRINGSTON, CARL 25 STOUT, ORVILLE 27 TUNE, MILDRED MRS. 26 TUNE, BILLIE SUE GROSS FED. TAX ST. TAX NET 1,191.06 100.00 55.00 55.00 1,641.57 180.00 1,383.66 1,088.98 287.68 55.00 75.00 1,182.35 55.00 55.00 377.50 55.00 707.84 1,171.39 100.00 55.00 55.00 1,525.81 1,088.98 1,008.97 100.00 1,131.00 130.00 55.00 417.50 55.00 1,088.98 570.91 570.92 50.00 1,902.69 175.00 1,078.16 78.16 1,159.11 100.00 55.00 30.00 886.19 80.00 863.01 125.00 55.00 55.00 70.00 80.00 1,448.31 1,646.01 160.00 1,255.55 65.81 1556.57 210.00 55.00 55.00 923.01 1,007 92 20.00 692.50 42.50 390.00 1,626.02 126.02 609 88 50.00 590.36 50.00 80.00 80.00 1,091.06 55.00 55.00 1,461.57 1,383.66 50.00 751 30 55.00 75.00 1,182.35 55.00 55.00 377.50 55.00 707.84 10.00 1,061.39 55.00 55.00 1,525.81 1,088.98 10.00 898.97 1,001.00 55.00 417.50 55.00 1,088.98 570.91 10.00 510.92 20.00 1,707.69 1,000.00 1,059.11 25.00 806.19 738.01 55.00 55.00 70.00 80.00 1,4.48.31 1,486.01 1,189.74 60.00 1,286.57 55.00 55.00 923.01 987.92 650.00 390.00 50.00 1,450.00 9.88 550.00 540.36 80.00 80.00 • ` 28 WATTS, DONALD 59 WATTS, WAYNE 52 WRIGHT, RANDALL DROP EMPLOYEES JOHNSON, ROBERT MILLER, KENNETH WARFORD, THOMAS BONADUCE, MICHAEL 400.00 1,191.51 1,128.98 96.17 150.00 400.00 1,095.34 978.98 37,713.20 2,506.34 21988 34,986.98 2,042.47 2,129.57 1,659.70 1,975.38 WE, THE UNDERSIGNED, DO SOLEMNLY SWEAR THAT THE ABOVE OBLIGATIONS ARE JUST AND CORRECT; THAT NO PART THEREOF HAS BEEN PREVIOUSLY PAID; THAT THE PENSION PAYMENTS SO CHARGED ARE IN ACCORDANCE WITH THE ACTIONS OF THE BOARD OF TRUSTEES OF THE FIREMEN'S RELIEF AND PENSION FUND; THAT THE SERVICES OR SUPPLIES FURNISHED, AS THE CASE MAY BE, WERE ACTUALLY RENDERED OR FURNISHED; AND THAT THE CHARGES MADE THEREFORE DO NOT EXCEED THE AMOUNT ALLOWED BY LAW OR THE CUSTOMARY CHARGE FOR SIMILAR SERVICES OR SUPPLIES. 6724t27/./ :/7411,1 ECREY CHAIRMAN AN PRESID NT ACKNOWLEDGEMENT • STATE OF ARKANSAS ) COUNTY OF WASHINGTON) )SS SWORN TO AND SUBSCRIBED BEFORE ME THIS0W DAY OF mahc4 , 1998. • NOTAR YPUBUC MY COMMISSION EXPIRES: 3-1- 0700r FEB 26 '98 10:21AM MERRILL LYNCH L R FAYETTEVILLE FIRE DEPT PENSION AND RELIEF FUND PORTFOLIO PERFORMANCE 12/31/97 TO 1/31/98 NM CAPITAL MANAGEMENT • INCOME ACCOUNT KEYSTONE ASSET MGNT 3•MONTHS TREASURY BILLS DJIA W/DIV REINVESTED S & P 500 W/DIV REINVEST LONG TERM TREASURY BONDS HIGH GRADE CORP BONDS CPI {'oct} NM CAPITAL (time wtd} INCOME ACCOUNT 1.1 KEYSTONE ASSET MGNT • JANUARY 1996 Dow United Kingdom Japan Hong Kong MAY 1996 Dow United Kingdom Japan Hong Kong SEPT 1996 Dow United Kingdom Japan Hong Kong 12/31/97 $ 4,647,115 4,897,448 1.561.424 11,106,027 12/31/95 + 5.46 +35.53 +34,94 +27.63 +23.51 + 2.67 +15.68 +15.61 original inv. $75,000 75,000 75,000 75,000 575,000 75,000 75,000 75,000 $75,000 75,000 75,000 75,000 P.1 1/31/98 ;2[7:44 191 $4,612,909 eV, 730, aso 4,957,631 cif V7',0410 L513.830 /, G.26,1/39 11,084,370 6 5 33, Esse- L 12/31/96 12/31/97 1/31/98 + 5.31 +29.49 +22.98 - 1.21 + 1.61 + 3.32 +11.37 + 4.25 +17.91 + 5.33 +24.87 +33.36 . +15.38 +13.42 + 1.70 +16.97 + 6.38 +30.80 1/31/98 $ 106,114 88,463 36,186 55,134 $ 98,165 108,581 35,651 53,148 $ 100,974 97,090 41,132 50,929 +0.47 +0.12 +1.15 +2.00 +1.46 -0.60 +1.15 -3.04 ARKANSAS FIRE & POLICE PENSION REVIEW BOARD ®f c 75 7997 F WMCE OERI MEMORANDUM P.O. DRAWER 34164 LITTLE ROCK, ARKANSAS 72203 TELEPHONE (501) 682-1745 FAX: (501) 682.1751 TO: Local Fire and Police Pension Funds with the Deferred Retirement Option Plan (DROP) FROM: Arkansas Fire and Police Pension Review Board C% RE: Opinions of the Attorney General regarding DROP DATE: December 10, 1997 • Attached please -find copies of Opinion•No. 97-007 and No. 97-219 of the Arkansas Attorney General, regarding various aspects of administration of the Deferred Retirement Option Plan (DROP). The Arkansas Fire and Police Pension Review Board wanted your Pension Board of Trustees to be aware of these opinions. FROM uAR ATTORNEY GENERAL TO I Winston Bryant Attorney General 1997,07-23 09:50 #821 P.06/11 STATE OF ARKANSAS Office of the Attorney General Opinion No. 97-007 February 7, 1997 The Honorable Louis McJunkin State Representative P.O. Box 223 Springdale, Arkansas 72765-0223 Dear Representative McTunkin: Telephone; (501) 682-2007 This official Attorney General opinion is issued in response to your recent questions regarding the boards of trustees of firemen's pension and relief funds. You describe a scenario in which a city's Fire Chief retired and the mayor appointed one of two Assistant Fire Chiefs to serve as the Acting Fire Chief until a permanent Fire Chief is chosen by the Civil Service Commission. The Assistant Fire Chief who was appointed has less seniority than the other Assistant Fire Chief In light of the above-described scenario, you have presented the following questions: (1) Under the provisions of A.C.A. § 24-11-801, should the Assistant Fire Chief who has less seniority but who is serving as Acting Fire Chief serve on the pension fund's board of trustees in the place of the permanent Fire Chief or should the Assistant .Fire Chief who has more seniority serve on the board m the place of the permanent Fire Chief? (2) What is the definition of "the highest ranking member of the fire department," as that phrase is used • 200 Tower Building, 323 Center Street • Little Rock, Arkansas 72201.2610 FROM :AR ATTORNEY GENERAL TO The Honorable Louis Mchunkin State Representative Opinion No. 97-007 Page 2 RESPONSE 1997.07-23 09151 #021 P.07/11 in A.C.A. § 24-11-801(a)(3)? (For example, in the scenario described above, if the city hires a permanent fire chief who is not a member of the pension fund and therefore is not on the board, would the highest ranking member of the fire department be the Assistant Chief who has the most senionty, or would it be the Assistant Chief who previously served as Acting Fire Chief but who is now back in the rank of Assistant Fire Chief?) (3) For purposes of voting as active members or retired members pursuant to A.C.A. § 24 -1i -801(c) and (d), should employees who have elected to be on the Deferred Retirement Option Plan (DROP) vote as active members or as retired members during the five year period between their election of DROP and their actual retirement? Question .1 — Under the provisions of A.CA. a' 24-11-801, should the Assistant Fire Chief who has less seniority but who is serving as Acting Fire Chief serve on the pension fund's board of trustees in the place of the permanent Fire Chief or should the Assistant Fire Chief who hay more seniority serve on the board in the place of the permanent Fire Chief? It is my opinion that the Assistant Fire Chief who is serving as Acting Fire Chief should serve on the pension fund's board of trustees in place of the permanent Fire Chief during his tenure as Acting Fire Chief. The provisions of A.C.A. § 24-11-801 state the following with regard to who should serve on the board: (a) The board of trustees of every firemen's pension and relief fund established in a city, incorporated town, or duly qualified fire protection district pursuant to the provisions of this subchapter shall be composed of the following: FROM 1RR ATTORNEY GENERAL TO inc nuuurdDie LOWS MCJunlan State Representative Opinion No. 97-007 Page 3 • • 1997,07-23 09151 #821 P.09/11 (1) The chief executive, who shall serve as chairman of the board; (2) The city or district clerk or recorder, who shall serve as secretary of the board; (3) The fire chief or, if the fire chief is not a member of the fund the highest ranking member of the fire department who is a member and who is willing to serve; and (4) Four (4) active or retired members of the pension fund. A.C.A. § 24-11-801(a) (emphasis added). • The statutes governing firemen's pension funds do not provide any guidance in addressing the scenario that you have described. Nevertheless, the language of the above -quoted statute regarding the compositwn of the board is unambiguous. It is therefore appropriate to give that language its plain, commonly -understood meaning. Caplener v. Bluebonnet Milling Co., 322 Ark 751, 911 S.W.2d 586 (1995). It is therefore plain that if there is a fire chief, that fire chief is to serve on • the board. Resort to the highest ranking member of the fire department for service on the board is appropriate only in the event that the fire chief is not a member of the fund. Assuming that the Acting Fire Chief was appointed for the purpose of canying out the duties of the Fire Cluef and assuming that the appointment did not expressly limit the Acting Fire Chief's authority to do so,i it is clear that dung the Acting Fire Chiefs tenure in that position, he is the Fire Chief for all intents and purposes, including service on the pension fund's board of trustees under A.C.A. § 24-11- 801(a)(3). Therefore, a consideration of who is the highest ranking member of the fire department is unnecessary Such a consideration is appropriate only where the Fire Chief is not a member of the fund. In the situation you have described, the Fire Chief (who happens to be the Acting Fire Chief) is a member of the fund. It is ' if the appointment did limit the Acting Fire Chiefs authority to carry out the duties of Fire Chief, the impact of that limitation upon the Acting Fire Chiefs ability to serve on rhe board will depend upon the specific nature of the limitation. TO FROM 1AR ATTORNEY GENERAL a uo nvuurdnie LOUIS MCJun1Cin State Representative Opinion No. 97-007 Page 4 • • 1997,07-23 09152 N021 P.09/11 therefore unnecessary to determine the c ualifications of an alternate member, as provided for in A.C.A. § 24-11-801(ax3). For these reasons, I must conclude that given the commonly -understood meaning of the language of A.C.A. § 24-11-801(a), the Acting Fire Chief should serve on the board during his tenure as Acting Fire Chief. Question 2 — What is the definition of "the highest ranking member of the fire department," as that phrase is used in A.C.A. § 24-11--801(a)(3)? (For example, in the scenario described above, if the city hires a permanent fire chief who is not a member of the pension fund and therefore is not on the board would the highest ranking member of the frre department be the Assistant Chief who has the most seniority, or would it be the Assistant Chief who previously served as Acting Fire Chief but who is now back in the rank ofAssistant Fire Chief?) The statute (A.C.A. § 24-11-801) does not define the phrase "highest ranking member of the fire department," as used therein. However, in my opinion, the language does not contain an ambiguity and can therefore be mterpreted giving the words their commonly -understood meanings. Caplener v Bluebonnet Milling Co., 322 Ark 751, 911 S W.2d 586 (1995). The Merriam -Webster Dictionary defines the teem "rank" to mean "a grade of official standing" or "position in a group." The factors that are commonly understood to connote official standing or position are authority, responsibility, and benefits. Accordingly, I read the phrase "highest ranking member of the fire department" to refer to the person in the fire department whose position carnes the greatest authority, responsibility, and benefits. Applied to the specific situation about which you have inquired, it is my opinion that if the permanent fire chief who is chosen is not a member of the pension fiend, the highest ranking member of the fire department, who, pursuant to A.C.A. § 24- 11-801(3), should serve on the fund's board of trustees, would be the Assistant Fire Chief who officially has the most authority, responsibility, and is entitled to the greatest benefits. It is my opinion that the previous service by one of the Assistant Fire Chiefs as Actmg Fire Chief is not a factor to be considered. The statute makes no mention of considering previous rank or status. Assuming that at 2 It might be noted, however, that during the Acting Fire Chiefs tenure in that position, he is also the highest ranking member of the fire department. • FROM 1PR ATTORNEY GENERAL TO The Honorable Louis Mclunkin State Representative Opinion No. 97-007 Page 5 • 1997.07-23 09152 $1021 P.10/11 the relevant time, the two Assistant Fire Chiefs officially have the same authority and responsibility, I would conclude that the Assistant Fire Chief who has the most seniority would be entitled to the greatest benefits, and therefore would be the highest ranking of the two. Given these assumptions, the Assistant Fire Chief who has the most seniority should, in the absence of a fire chief who is a member of the fund, serve on the fund's board of trustees. Question 3 - For purposes of voting as active members or retired members pursuant to A.C.A. § 24-11-801(c) and (d), should employees who have elected to be on the Deferred Retirement Option Plan (DROP) vote as active members or as retired members during the five year period between their election of DROP and their actual retirement? It is my opinion that employees who have elected to participate m DROP, but who are still within the five-year period between their election of DROP and their actual retirement, should vote as retired members pursuant to A.C.A. § 24-11- 801(d), rather than as active members pursuant to ACA. § 24-11-801(c). My conclusion regarding this matter is based upon the fact that although these employees continue to be fully employed during the five-year period and have not actually retired in the sense of ceasing work, they nevertheless are not participants in the firemen's pension fund as described in ACA. § 24-11-816. That section describes the contributions that are to be made by and on behalf of members of the fiord. Employees who have elected to participate in DROP are no longer contributing to the firemen's pension fund as describedinA.C.A. § 24-11-816. Rather, the bulk of their contributions are segregated into a separate fund. For this reason, they do not hold the same level of interest in the administration of the firemen's pension fiord as do active members. Their interest is more akin to that of retired members. It follows that they should vote as retired members under A.C.A. § 24-11-801(d), rather than as active members under A.C.A. § 24-11- 801(c). FROM 1AR ATTORNEY GENERAL TO I auto rtonoraote Louis Mei unkin State Representative Opinion No. 97-007 Page 6 'J 1997,07-23 09763 p821 P.11/11 The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Suzanne Antley Sincerely, STON BRYANT Attorney General WB:SBA/cyh • • Opinion No. 97-219 August 24, 1997 The Honorable Louis McJunkin State Representative P.O. Box 223 Springdale, AR 72765-0223 Dear Representative McJunkin: This is in response to your request for an opinion on the following two questions concerning the Arkansas Fire Fighters' Deferred Retirement Option Plan ("DROP") codified at A.CA § 24-11-830 (Rept. 1996): 1. Pursuant to language in the answer to the third question posed in Attorney General Opinion No. 97- 007, when a person is still working but has elected to be a DROP participant, should the 6% deduction from the DROP participant go into a separate account or go into the regular pension fund and then taken out upon retirement? 2. If someone elects the DROP plan, is his eventual retirement subject to pay increases received while working for the City after signing up for DROP, or is he only to receive pension based on the salary amount he was earning at the time he signed up for the DROP? It is clear, in response to your first question, that the DROP participant's contribution continues to be paid into the firemen's pension and relief fund. See A.C.A. § 24-11-830(d)(1) and Arkansas Fire and Police Pension Review Board "Board Rule 10," Section 6. Section 6 of Board Rule 10 states: • • • SEP -10-97 WED 11:28 • P. 02 The Honorable Louis McJunkin State Representative Opinion No. 97.219 Page 2 The member continues to make employee contributions during the DROP period. These employee contributions are credited to the pension plan and not to the individual's DROP account. With regard to Attorney General Opinion 97-007, I assume that the language at issue is the statement therein that "(e]mployees who have elected to participate in DROP are no longer contributing to the firemen's pension fund as described in A C.A. § 24-11-816. Rather, the bulk of their contributions are segregated into a separate fund " Id. at 3. This statement was made in addressing the question of whether DROP participants should vote as active members or as retired members during the DROP period. A.C.A. § 24-11-801 (Repl. 1996). The emphasis in that Opinion was upon the distinction between DROP participants and active members whose contributions are governed by A.C.A. § 24-11-816. The point of the language quoted above was that DROP participants are not contributing to the pension fiord in the same sense as active members. This language followed the statement that DROP participants "are not participants in the firemen's pension fund as described in A C.A. § 24-11-816." Op. Att'y Gen. 97-007 at 3 Granted, their employee contributions continue to be credited to the pension fund. See Board Rule 10, § 6 above. But one-half of the employer matching contribution is credited to the DROP account. See A.C.A § 24-11-830(dx2). Compare A.C.A. § 24-11-816(a)(4). And the monthly retirement benefits that the DROP participant would have received had he or she elected a service retirement are being paid into the DROP account. The language in Opinion 97-007 concerning the DROP participants' contributions should thus not be construed to mean that such contributions are not paid into the pension fund. Clearly, as noted above, the pension fund is credited with these contributions. Opinion 97-007 is hereby modified to the extent it suggests otherwise. This does not, however, alter the conclusion reached in Opinion 97-007 with respect to DROP participants voting as retired members under A.C.A. § 24- 11-801(d). With regard to your second question concerning pay increases during the DROP period, I assume that you have received Attorney General Opinion 97-210, issued to you on July 9, 1997, subsequent to my receipt of the request at hand. I have nevertheless enclosed a copy of that opinion for your convenience. SEP -10-97 WED 11:28 • • The Honorable Louis Mc]unkin State Representative Opinion No. 97-219 Page 3 P. 03 The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Elisabeth A. Walker. Sincerely, WINSTON BRYANT Attorney General WB:EAW/cyh Enclosure Opinion No. 97-210 July 9, 1997 The Honorable Louis McJunkin State Representative P. O. Box 223 Springdale, AR 72765-0223 • Dear Representative McJunkin: This is in response to your request for an opinion on the following question: If someone elects the DROP plan, is his eventual retirement subject to pay increases received while working for the City after signing up for DROP, or is he only to receive pension based on the salary amount he was taming at the time he signed up for the DROP? This question was addressed in Attorney General Opinion 94-215, a copy of which is attached hereto. As concluded in that opinion, the monthly retirement benefit is calculated. at the date the member elects to participate in DROP (the "Arkansas Deferred Retirement Option Plan" codified at A.C.A. § 24-11-830 (Rept. 1996)). See Op. Att'y Gen. 94-215 at 2. The benefit does not change with salary increases or extra service. Id. The basis for this conclusion is set forth in the enclosed opinion. • • • The Honorable Louis McJunkin State Representative Opinion No. 97-210 Page 2 The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Elisabeth A. Walker Sincerely, WINSTON BRYANT Attomey General WB:EAW/cyh Enclosure • • Opinion No. 94-215 August 17, 1994 The Honorable Jimmie Don McKissack State Representative 3418 Highway 65 South Pine Bluff, AR 71601 Dear Representative McKissack: This is in response to your request for an opinion on the following questions concerning the Arkansas Deferred Retirement Option Nan ("DROP") for fire fighters and police officers. 1. Does the Board Rule #10 adopted by the Arkansas Fire and Police Pension Review Board follow the intent of the law? House Bill 1624 and Act 1004 of 1993? 2. Are firemen and police considered to be retired after signing the deferred retirement plan? 3. Do they lose all benefits that they gain the last five years of service on their pension? It is my Opinion that the answer to your first question is "yes " I do not perceive a conflict between Board Rule 10 and the statute. Board Rule 10 reflects the Pension Review Board's interpretation of Act 1004 of 1993 [A.C.A. § 24711-830 (Supp. 1993)], pertaining to fire fighters, and Act 757 of 1993 [A.C.A. § 24-11-434 (Supp. 1993)], pertaining to police officers.' The rule, in my opinion, reflects a reasonable construction of this law The Arkansas Fire and Police Pension Review Board's rulemaking authority is set forth m A.C.A. § 24-11-203 (Repl. 1992), wherein it • ' The substantive provisions of these acts are identical. The Honorable Jimmie Don McKissack State Representative Opinion No. 94-215 Page 2 states under subsection (j)(1) that the Board "shall have the power to make all rules and regulations necessary to enforce the laws governing funding standards and benefit levels...." It must be noted in this regard that an administrative agency's interpretation of a statute, while not conclusive, is highly persuasive. See Ramsey v. Department of Human Services, 301 Ark. 284, 783 S.W.2d 361 (1990); Arkansas Contractors Licensing Bd. v Butler, 295 Ark. 223, 748 S.W.2d 129 (1988). Rule 10 would, m my opinion, likely withstand scrutiny under this analysis. In response to your second question, I cannot provide a conclusive answer in the absence of a specific context for the inquiry. As a general matter, neither the acts establishing the deferred retirement plan nor Board Rule 10 states that those participating in the plan are to be treated for all purposes as though they "retired" when they elected to participate in DROP. As noted in Attomey General Opinion 94-094 (copy enclosed), the member has not yet terminated employment and is not receiving a monthly retirement benefit. Thus, in response to the specific question in that instance, it was concluded that the member who elects to begin participating in DROP has not "retired" for purposes of the,benefits limitation under A.C.A. § 24- 11-820(b)(5), which applies to "any retired fire fighter." As mmtially stated, however, the specific basis for the question should be considered. With regard to your third and final question involving "benefits" gained during the DROP period, I assume you are referring to any salary increases during the DROP period, as well as the extra service during that time. Board Rule 10 is clear in stating that the monthly retirement benefit is calculated at the date the member elects to participate in DROP. See Rule 10, Sec. 8.C. The benefit does not change with salary increases or extra service Id. This is based, presumably, upon subsection (ex1) of §§ 24-11434 (police) and 24-11-830 (fire), which states that "[t]he member's monthly retirement benefit shall not change, unless the plan receives a benefit increase." As reflected in Rule 10, the Board has construed this provision as refemng to both the benefit that is paid into the DROP account during the DROP period (subsection (d) of §§ 24-11434 and 24-11-830), and the benefit that would have been paid had the member elected a service retirement instead of enrolling in DROP. Thus, the answer to your specific question is "yes" with regard to benefits that would otherwise have been gained due to the extra service or any salary increases during the DROP period. It is my opinion that this result reasonably follows from an interpretation of the statutes. The plan, by its title and plain terms, defers the receipt • • The Honorable Jimmie Don McKissack State Representative Opinion No. 94-215 Page 3 of benefits. The term "defer" means "[d]elay; put off; ... postpone to a future time...." Black's Law Dictionary 379 (5th ed. 1979). Subsection (c) of §§ 24-11- 434 and 34-11-830 refers to the "member's accrued monthly retirement benefit.. " (Emphasis added.) "Accrued compensation" and "accrued income" are defined in Black's to mean amounts that are "due" or "earned" but not yet "paid" or "payable." Black's at 20. Thus, under DROP, the member's accrued monthly benefit, i.e., the benefit the member has eamed and is eligible to receive when he elects to participate m the plan, is deferred until he terminates employment and concludes his participation in DROP. It reasonably follows that the monthly benefit is calculated at the date the member, who is eligible at that point to receive a service retirement pension, elects to participate in DROP and thereby defer receiving the accrued benefit. The foregoing opinion, which I hereby approve, was prepared by Assistant Attomey General Elisabeth A. Walker. Sincerely, WINSTON BRYANT Attorney General WB:EAW/cyh Enclosure I N V'O I C E NM CAPITAL MANAGEMENT, INC. 6501 AMERICAS PARKWAY, SUITE 950 ALBUQUERQUE, NM 87110 January 22, 1998 Mr. Richard Yada Merrill Lynch 425 W. Capitol, Suite 200 Little Rock, AR 72201 NM CAPITAL MANAGEMENT, INC. INVESTMENT COUNSEL Re: City of Fayetteville Fire Pension & Relief Fund Account #563-96346 STATEMENT OF MANAGEMENT FEES: For the period from October 01, 1997 through December 31, 1997 CITY OF FAYETTEVILLE FIRE PENSION AND RELIEF FUND, Portfolio Valuation as of 12-31-97 $ 4,626,201.20 @ 0.5000% per annum Quarterly Management Fee TOTAL DUE AND PAYABLE COPY I • DO NOT FAY I'FROb1 THS INVOICE $ 4,626,201.20 S 5,782.75 $ 5,782.75 5,782.-75 ALL INVOICES ARE DUE UPON RECEIPT. TO INSURE PROPER CREDIT, PLEASE INDICATE ACCOUNT NAME ON CHECK. *Portfolio Valuation used for fee computation has. been reduced by accruals amounting to.$25,100.86. A copy of this invoice has been sent to the client for their review and record. Client is responsible to verity the information provided hereon. National. Conference on Public Employee Retirement Systems Application for Membership Name of Organization• F Vei i8U!« c /Qtf iiiiiiTeRs Auk; Ai )4 Rae /cat Address of Organization: 1 (3 ai• /' lotw rfr,>J T • S • City: / ✓y .eJYc/' iii �' State• Zip• if:9 X) Telephone. (So.) s7`j o 3L 3 Individual to whom mail should be sent: /'rr LletK Fax ate Rene \Address to which mail should be sent: 1/3 GJ. /Nvd.Jrn& .Sr 4- )390 AI. Adee,t1 Ass leo. Ay • /9R. ?$ 703 Telephone: (-pro/ )575.-83a3 Fax: (__) • S cV gQi0 2. Please check your appropriate classifications(s): ❑State ❑Local ❑Protective ❑Police ❑Education ❑County Wire 3.Please list the percentage.� your fund has in the following areas: `i7` e Indexed Fixed Income -I international y6% Active Equity ��jj Indexed Equity Real Estate <v Other 4. Type of Organization (Please check one) aRetirement system ❑Employee association ['Union representing active/retired employees 5: Number of trustees on your board: 4./ 6. Are your trustees elected or appointed'' Be N_ 7. Current market value of your fund: 11 DEO Ce 0 8 Number of members in your organization. 1 -s Organization Dues Structure: Organization Members 1-4,500 4,501-10,500 10,501-16,500 16,501 and over Legislative Retirement Commissions Amount due $100.00 $200.00 $300.00 $400.00 $200.00 Check appropriate amount Cr' 0 0 Application is hereby made for active membership in the name of the above organization, subject to the Constitution and By -Laws of th- .' atio • 1 Confnce on Public Emyloye Retirement Systems. Signature 1 Date r r Upon receipt of a signed application, NCPERS will send you an invoice in the amount of your annual dues. NCPERS 1620 Eye Street, N.W. • Suite 220 • Washington, D.C. 20006-4005 • Telephone (202)429-2230 • Fax (202)223-8323 • *KEYSTONE INVESTMENTS February 17, 1998 City Clerk of Fayetteville 113 West Mountain Street Fayetteville, AK 72701 Dear Sir or Madam: We are writing to inform you that effective April 1, 1998, the management of your account will be transferred from Keystone Investment Management Company to First Investment Advisors. The services you currently enjoy as a Keystone Investment Management Company client will continue uninterrupted under the management of Salvatore Tartaglione who, as a manager with First Investment Advisors, will manage your portfolio in line with your respective goals and objectives. First Investment Advisors, like Keystone Investment Management Company, is an investment advisory subsidiary of First Union Bank's Capital Management Group. First Investment Advisors was created to serve investors like you who require investment management expertise of the highest caliber. First Investment Advisors provides close personal attention to its clients and provides access to a powerful menu of advisory services. As a First Investment Advisors client, you will have access to a varied menu of advisory services, including innovative portfolio management strategies, personalized asset allocation programs, hedging strategies and single stock diversification. First Investment Advisors oversees more than $26 billion in personal assets under management with 125 portfolio management professionals. We look forward to serving you by delivering innovative and responsible investment management solutions. If you have any questions, please feel free to call your personal investment advisor or Salvatore Tartaglione at (203) 401-5779. Very truly yours, Albert H. Elfner, I 1 33 :.orah �. Rivos,, CF `, CFA President Senior Vi ' -siden Keystone Investment Management Company First Investment Advisors cc: Mr. Curtis Williams Mr. Richard Yada 200 Berkeley Street, Boston, Massachusetts 02116-5034 Phone: (617) 210-3200 1 1 r 1 1 1 1 1 V 1 1 1 1 1 1 1 1r NM Capital Management, Inc. Fourth Quarter Report 1997 Prepared for CITY OF FAYETTEVILLE FIRE PENSION AND RELIEF FUND Please find enclosed your quarterly report and our latest market commentary. In the event that your financial circumstances or objectives have recently changed, please contact your financial consultant or NM Capital directly. Should you need to contact us directly, please use our toll free number, 1- 800-869-1156 We appreciate your continued confidence in NM Capital Management and look forward to many more years to service. FAYETTPP--NTSC 1 1 1, 1 1 1 • Fourth Quarter `97 NM ;C.apitaI Management;`In.c. T Quarterly.Investment Comment FOURTH QUARTER & 1997 YEAR_ END REVIEW The fourth quarter- S&P 500 stock return was up 2.9%. The market was buffeted by Asian economic crisis and a growing concern about slowing U.S. -corporate' earnings growth. On the positive _side U.S.. Treasury interest rates declined sharply during :the quarter, reflecting continued low inflation . and- a flight by investors to the safety of the U.S.markets from the higher risk international markets.: The shift toward this perceivedsafety also benefitedthe performance of the :larger cap S&P index compared to the smaller company Russell 2000 index, which: was down 3.4% forthe fourth quarter. The year 1997 will go down in the record books as the third consecutive year of better than 20% returns for the S&P 500, which completed the year with a 33% return. ,In contrast, the' Dow Jones Industrial Average and the smaller cap Russell 2000 Index retumed 25% and 22%, respectively, for the year. The, decline in interest rates• during 1997 produced bond index returns of 8% to 10%: It has been an unprecedented bull market for stocks over the :last three years, reflecting the very positive • economic environment for U S companies.: ECONOMIC & INVESTMENT: OUTLOOK The U S..economic outlook for 1998;continues to be favorable. Some.slowing .in economic, growth with 'continued moderate inflation appears likely in the 'months ahead. One of the principal „forces stimulating the bull market, corporate eamrngs growth, is also. expected to slow in.1998 due to -Slower sales, higher employment. cost -•,pressures,, and lower productivity gains., Interest rates may drift somewhat: lower, but generally will not be as favorable a market force as was the significant decline in rates over the. last three years. In light of the financial turmoil in Asia, the strengthening dollar will make U.S..exports more expensive abroad while imports to the U.S. will be cheaper. This change will affectindustries differently and is expected to be - a : factor , slowing' economic growth world wide: - After three consecutive dramatic upyears, the stock inarket will be hard-pressed to . match . recent gains: Based on historic valuation. Measures,: the market appears fully: priced. The difference between stock • . and bond returns has so favored stocks in recent years - that we would expect Some shift back toward a more normal relationship during:1998. At current interest rate levels with a relativelyflat yield curve and the 30 year Treasury at -5.9% (a ten year low), returns of 6-8%d for :bonds and 8-12% for, stocks would • seem reasonable for the coming year. Since the -. U.S. stock market currently reflects high expectations, the inevitable negative surprises will I result- in continued volatile markets during 1998. The appreciation of large cap stocks has dominated the major market indices, (S&P 500 and Dow Jones) over the last three years. There. were signs of.a shift in this concentration during the second and third quarters of 1997 when medium- and small -cap •,-stocks outperformed: • This. market broadening was stymied in the fourthquarter; as the Asian crisis intensifiedwith the problems in South Korea. The quest for liquidity favored the Targe company stocks. At the same time, the U.S. interest . rate decline stimulated investor buying of 'utilities and :financial 'service stocks with high yielding' dividend payouts.: Also, the performance domination of larger companies' issues in recent years has tended to concentrate 1997 tax-loss-sellingin the medium-size and small companies, thus increasing the fourth quarter. performance disparity: This narrowing market leadership, of the end' of 1997 suggests significant opportunities for excellent -values among the medium- and small -cap issues. At some .- point . during 1998,.. when earnings disappointments arise, we expect investors will again favor undervalued stocks we now find very attractive. • EQUITY STRATEGY "Be greedy when others are fearful and fearful when others are greedy." -Warren Buffett , We at NMCM are disciplined value investors. We find value in stocks that are out of favor with Wall Street. The reasons for investor disdain differ but may be related to short-term business or industry problems, unexciting growth prospects, or a misunderstanding of a company's true earnings power. Tecumseh Products Company is a classic contrarian value play. It is the world's largest independent producer of compressors used in air conditioning and refrigeration products, and the second largest producer of small engines for lawn and garden applications. The stock is both under followed (only three analysts cover the company) and unloved by Wall Street because earnings are currently depressed. The major causes are a weak compressor market in Brazil (fueled by weak demand for home appliances) and in the U.S. (due to a soft air conditioning market caused by the cool summer of 1997). We believe these factors are temporary in nature and that Tecumseh's earnings will be significantly higher in the next three to five years. Management thinks so too, and has recently instituted a stock repurchase program. Downside risk is contained by the company's low valuation, strong balance sheet (over $10 per share in excess cash), leading market positions and conservative management style. Wall Street is also currently fearful of Tupperware Corporation. It is a dominant worldwide direct seller of food storage containers and related housewares and children's items. However, only one year ago, "greedy" investors Loved the stock at $55 because of the company's strong market position, excellent product line, and worldwide growth opportunities. Now, at half of the peak price, no one likes it. Why? With virtually all of its income derived from overseas markets, profits are down due to currency translation, combined with soft economies in Asia and Latin America. Has the long -tern picture changed? Management doesn't think so. They have been purchasing stock all year for their own accounts and for the company (through share repurchases). We don't think so, either. Our expectation is that earnings will be substantially higher in the next three to five years. We have been using the recent price weakness to establish or add to positions for our clients. "We are willing to look foolish as long as we don't feel we have acted foolish." -Warren Buffet As classic value investors, we sometimes buy stocks too early and may "look foolish" in the short run. Why don't we buy stocks right before they begin their ascent? We certainly try to buy on a timely basis, but we are not clairvoyant. We feel that if we can purchase a company cheaply enough, this serves to protect us against long-term loss of principal and also gives us a higher expected rate of return. However, this sometimes means that a stock will become even cheaper after we have bought it. This often allows us the opportunity to add to positions of good companies at lower prices. Although this activity may appear foolish in the short run, we believe our strategy will continue to build wealth with lower risk over multi- year periods. FIXED INCOME STRATEGY FLIGHT TO QUALITY Many bond market analysts use projections of the state of the economy to judge how interest rates may behave in the future. In the fourth quarter of 1997, knowledge of the economy was of little help in predicting or understanding interest rate movements. Based on the economic news that was announced, the economy continued on the path it has been on for some time moderate growth with low inflation. Yet interest rates fluctuated fairly dramatically with U.S. Treasury bonds the strongest market performer. The most likely explanation of this behavior was a change in investors' desired asset allocation. The developing problems in Asia, the announcement by several central banks that they were considering selling some of their gold and holding bonds instead, the mini crash in the U.S. stock market in late October, and an increased desire by global investors to hold more dollar-denominated securities combined to cause investors to lower the risk in their portfolios. Investors turned in large part to U.S. Treasury bonds which are generally considered to be one of the safest and most liquid assets. Investors bid up the price of bonds driving interest rates down. This flight to quality assets is understandable but extremely unpredictable. Going forward, the markets appear to be unsettled and, therefore, difficult to predict. A cautious attitude towards the markets is warranted as the impact from the Asian crisis is difficult to assess at this time. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1