HomeMy WebLinkAbout2001-07-26 - Agendas - Final•
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AGENDA
FIRE PENSION AND RELIEF FUND
JULY 26, 2001
A meeting of the Fayetteville Fire Pension and Relief Fund Board will be held on July 26, 2001
at 11:00 a.m. in Room 326 of the City Administration Building located at 113 W. Mountain
Street, Fayetteville, Arkansas.
1. Approval of the Minutes
2. Approval of the Pension List
3. Investment Report
4. Other Business
MINUTES OF A MEETING
OF THE
FAYETTEVILLE FIRE PENSION AND RELIEF FUND BOARD
JUNE 28, 2001
A meeting of the Fayetteville Fire Pension and Relief Fund Board was held on June 28, 2001 at
11:00 a.m. in Room 326 of the City Administration Building located at 113 West Mountain Street,
Fayetteville, Arkansas.
PRESENT: Mayor Coody, Marion Doss, Pete Reagan, Danny Farrar, Ronnie Wood. Absent were
Robert, City Clerk Heather Woodruff. Also present was Clance Buffalohead-Pearman of the city
clerk's office
MINUTES:
Reagan moved to approve the minutes. Doss seconds. The motion earned unanimously.
PENSION LIST:
The mayor asks for any changes. Reagan states he believes it's the same amount of $47,591.61 and
moves to approve. Marion Doss seconds. The mayor states there's a motion and second to approve
the pension list. The motion passes unanimously.
• Reagan further states that Robert Johnson officially comes off DROP on July 1, 2001. He needs to
be removed and added to the retired list upon filling out the proper paperwork to do so. Reagan so
moves. Doss seconds. The motion passes unanimously.
Doss volunteers to get a hold of Robert Johnson today to get everything filled out
INVESTMENT REPORT:
Mr. Yada handed out copies of the investment report and made his report. Yada states okay real
quick. Now to turn a 20 minute meeting into 10 I'll go real fast. As you can see, heard or seen, the
market is down. Yesterday the Federal Reserve dropped the interest by a 1/4 point:I think what they
were looking for is for the tax refund or tax rebate to assist or help this economy get going. I think
it dropped it a half a point then they got the refund and raised the economy too high. Now they are
saying the word inflation. The thing they're looking at now, the loan rates are the same, 3 3/4.
Inflation is roughly 3%. So if the feds dropped that interest rate another quarter point then we'll be
looking at the index at being 3 1/2% and inflation at 3. If it ever gone down to where they were
even, inflation and the interest rate, everybody is going to put their money in the stock market. So
I think they're kind of looking at that that way. I think we're getting close, I don't think we're going
to see the 30%-40% increase in the market like we seen in the last three years. But I think once the
interest rates gets involved in the economy, the economy picks up we should see a positive move in
the market as the rates go. Until then and this maybe until probably sometime next year, for this to
come to fruition. This year its going to be choppy the rest of the year. I wouldn't make too much
of it. But with the investment policy that you all set up got us through last year and should this year
• Last year it was technology getting hit. This year everything is getting hit. The market is down
equally as much this year as last year with the technology. The investment you put in place pull
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Fire Pension Board Minutes
June 28, 2001
Page 2
through and is doing well for us this year. And as soon as the market turns around I think we can
see some positive results. This is doing exactly what we want it to do on a downed market, to
protect us on the downside. It did very well Last year. So that's what we have the diversification and
if you look at the portfolio, 5 year portfolio grove $2,366,000. They are down 8 ''/2% this year The
stock and some bonds, the long term treasuries are down this year. We have to keep mix of
securities in there. Not only short term but some long term. We have to have the short term to
provide equity that we need to pay the benefits. So we've been spending about 15, roughly 15-
20,000 dollars back into the checking account each month. We have to be prepared to cover the guy
coming off DROP next month. We've got to have the money to be able to pay him off. Those are
the kind of things we have to look at. So we have to keep some things short term. And short terms
rates are, we turned in a 1 year CD yesterday. 3.9%. So we've got to do better than that. And with
the benefit increase possibly going have go through -we're looking at an increase in distribution about
38% according to my calculations. How is this going to effect us? So we've got to be prepared to
send out probably $30-$35,000 each month. But Just roughly calculating with 12 million dollars with
a 6% growth and pay out what we are we can go on for a long time. We could go on forever. So that
all we need. That's our where we are, some where in the 6% to 7% range. So you guys are in great
shape. If we can do better than that then we can get the rest of the benefit increase Now keep in
mind you know that whatever rate of pay 75%-85% right now twenty years from now it's going to
be worth about half as far as buying power. So right now its in good shape. Those guys that retired
at $250 a month twenty years ago they thought they had it made, they thought they were going to go
fishing and have a good time but ten years later it barely pays your light bill. So just keep that in
mind and as long as you guys are doing what you're doing we should be going okay. I don't think
anything is broken. I shown you kind of an example, a comparison between you and the police
department here in just a moment. The Mercury Group, they're down 6%. Their growth portfolio,
the growth factor is down. The Income Account is about 5.96%. The Ashland again they are down
about 7%. So our stock portfolio is not performing well but our income portfolio is up 6% so that's
when an offset comes in. We have over close to 50% of our securities in fix income so half of our
account is fixed which is the good news. The Dow, this is as of May, was up 1.84, S&P is down
4.42%, the NASDQ was down 14.57. That's the environment we're having to deal with. The
portfolio managers are working hard to try to make you some money. I think they are going to have
struggle the rest of the year. A couple things, one thing, does anybody have any questions on that
before I go over this other.
Okay I was comparing, back in 1982 the Fire Department had 2.2 million dollars in assets. The
Police Department had 1,968,106 Almost 2 million dollars, right at 2 million. There was about
200,000 dollars difference in 1982. In the end of 1999, kind in mind the Police Department gets
about an extra 100-150,000 a year in turnback fines and forfeitures and things like that each year.
Over the nine year period, or ten year period, there's probably a million or million and a half dollars
extra they had received into their account. So looking at that 2.2 million for the fire dept. and 2
million for police dept in 1982, look at the figures at the end of 1999, this is on the actuary report,
the Fire Department had $12,352,000 and the Police Department had $10,572,000. So roughly a
difference of about 1.8 million dollars that the Fire Department has grown as compared to the Police
Department. Some people are saying that the performance on this account is not that good because
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Fire Pension Board Minutes
June 28, 2001
Page 3
they are looking the balances. They don't realize we're also paying out funds. At some point the
account is not going to grow that much and we're probably getting close to that. But if we can make
a enough money to generate the income plus some to pay the benefits, we should see an increase but
not at the magnitude that we have back in '95 or '97. If have those kind of years, we probably won't
have those type of years, but just wanted to let you know how the balances stood if you wanted to
make a comparison. Basically I guess I have to defend myself which I hate to do It should keep
everything on a positive flow in these meetings and I'd like to keep it that way. That's my report for
today.
BENEFIT INCREASE•
With the help of Wes and Marilyn Cramer we were able to put this together. We finalized it
yesterday. We used the old format when we went to 50%, with extra years of service at 50% salary,
90% plus the extra years. The second to last column is the new benefit total amount. Then if you
go over to the new minus current, that is the monthly benefit increase for those retirees. You will
notice, I think there is 4 of them that has zero beside them, those are receiving -those folks are
receiving in excess of 90% of their basis salary at the time of retirement. I would move, well Just
a minute before we do that. I met with Marilyn yesterday. She recommended that we do the benefit
on this next check and do it all in one check with a separate line item on the check stating this is the
amount of benefit increase that you are receiving and the number of months retroactive to January
1 to make it retroactive. If we don't do that then we will receive two checks, the second check with
the back pay will not be able to go out until mid to late July and there will be an additional expense
of state tax and federal tax corning out of that. If we do it one check those who have signed up and
ask for federal income tax and state income tax to be withheld from their pension will just get it the
one time But an information letter needs to go out with the pay checks this time. I'll be glad to help
write it, explaining the benefit increase. Everybody's numbers are different because of the time that
they retired. Explain the benefit increase and if they would so chose to increase their withholdings
then we have them contact the city clerk's office to do so. So with that explanation I would move
that we adopt the numbers as submitted with the increase to go out on one check, the July check, and
also a letter accompanying explaining the benefit increase to the retirees.
Doss seconds. The mayor states we have a motion and second to approve the pension benefit
increase. Any further discussion. The motion carries unanimously.
Reagan also moves that it be retroactive to January 1, 2001.
Doss says I'll call Catherine Hinshaw and ask about that, just to make sure, because of the date of
the letter and she said that's the normal thing to make it retroactive. We submitted, they got our
benefit increase request on January 5th and she said they had put the figures and they have figured
from that January 5th date so that's a usual thing to go ahead and go back to the date you make your
request. And make it retroactive to that date and they take that into consideration when they do it.
• The mayor asks so accounting and budgeting already figured all this in then?
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Fire Pension Board Minutes
June 28, 2001
Page 4
Reagan says yes, all they need to know is the number of months retroactive and they have a separate
column here. We're going to roughly fill the figures in and then we're going to take them finance.
The mayor says so you made a motion, was there a second?
Doss seconds.
The mayor states we have a motion and second. Is there any further discussion. The motion carries
unanimously.
Marion Doss says I've got one thing on a similar note In the letter from PRB but the letter from the
actuary people, Osborn, Carreiro & Associates they said although we didn't ask we could plan, it
said:
although not directly requested the plan also afford a similar percentage increase for retired
volunteers. I talked to Catherine about that too. That didn't go before PRB She said if the Board
wanted to and she couldn't until the Board did this, it wouldn't cost us any money if we wanted to
make an increase for the retired volunteers. We could do that, we just need to send her a simple one
sentence letter do that and it would just become a formality but that would be okay. What I'm just
wondering, so that's up to the Board so if anyone is interested in making a benefit increase, let's say
of $20 a month for the retired volunteers we could do something like that. They're currently getting
$55 a month for 20 years service plus their $5 a year additional for their extra over 20. But we could
make an increase for the volunteers that are retired if we want to. I wanted to throw that out to see
if anyone wanted to make a motion to that effect.
Farrar asks did he say $20?
Doss says currently we pay retired volunteers $55 a month for 20 years service. The law, by law the
minimum is $50 a month for 20 years service. We're paying $55. We could do either way. We
could give them a percentage or the last time we just gave them a dollar. That's what I'd suggest is
give them $75 for 20 year service.
The mayor asks how many people volunteers, how many people fit this category?
Doss responds well let's see here. Its more than four. It's on the back page of the agendas here.
Reagan states I would move that before we act on this that we come to the next meeting with the
figures on what its going to cost us
Everyone agrees.
Doss says that's fine, I Just wanted to get that out.
Reagan says lets leave that on the agenda for the next meeting.
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Fire Pension Board Minutes
June 28, 2001
Page 5
Doss says I didn't want to confuse that with this other issue. I want to get this taken care and get it
separate But I wanted to keep that alive so that would be.
Wood says I think that's something we need to iron out.
Farrar says lets have that when we all come back.
Doss states Catherine said they did take those figures into consideration but since we didn't ask
specifically for them.
The mayor asks for any other business. Seeing none the meeting adjourned at 11:21 a.m.
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Comments on Fire District Map
Background
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Rae
Act 1571 (1999) established the current formula for funding pension calculations. This
formula uses the two bases of (1) fire district population and (2) fire district area as
measured in square miles. Currently, funding is calculated using a 60% rate on the
Population base and a 40% rate on the Area base. The formula in the prior law was based
on the amount of fire insurance premiums written by fire district.
To implement the provisions of Act 1571, the Pension Review Board (PRB) has
contracted with the Arkansas Census State Data Center to digitize the square miles of
area served by the various fire districts around the state. Additionally, the PRB
contracted with the Osborne-Carreiro Actuarial firm to complete the amounts in the Fire
District Map. The square mileage in the area has been certified, as indicated by the
district's legal description, as accurate by either the Fire Chief or the Mayor of each city
represented. The a representative from the State Data Center indicated to me that
Fayetteville's city limits determined the square miles for our service area
Population figures were obtained from the most recent census.
7/26/2001