HomeMy WebLinkAbout1994-07-21 Minutes•
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A meeting
2:30 p.m.
Mountain,
PRESENT:
ABSENT:
MINUTES OF A POLICE PENSION BOARD MEETING
of the Police Pension Board was held on July 21, 1994, at
in Room 326 of the City Administration Building, 113 W.
Fayetteville, Arkansas.
Eldon Roberts, Jerry Friend, Hollis Spencer, Clint
Hutchens, Dr. James Mashburn, Mayor Fred Hanna, Deputy
City Clerk Lois Day, City Treasurer Glyndon Bunton, and
Administrative Services Director Ben Mayes.
City Clerk Sherry Thomas
CALL TO ORDER
The meeting was called to order by Mayor Hanna.
MINUTES
Roberts stated the Mayor called the meeting to order and not him.
With this change, Roberts, seconded by Mashburn, made a motion to
approve the minutes. The motion passed unanimously.
OLD BUSINESS
ELECTIONS
Roberts stated Jerry Friend was reelected for a two year term, May
of 1996, to the Pension Board.
NEW BUSINESS
LONGER INVESTMENTS REPORT
Longer stated the interest rates
going up. Part of the reason is
tightening credit. This keeps
market on the favorable side of
on short term maturities have been
because the Federal Reserve keeps
applying pressure to the stock
the market.
With interest rates rising, we have been keeping cash reserves
be able to take advantage of that. We have added quite a bit
the income side of the portfolio, and have built in a lot
flexibility.
The overall income yield on the portfolio is about 4.6% on market
value and about 4.75% on book value. Government notes and bonds
make up about 40% of the portfolio.
The stock portfolio report shows about 73% of it is in equities.
We have purchased 2 and 3 year treasuries that are easily
convertible to cash. The overall market value of the stock part of
• the portfolio is $1.906 million with a yield of 3.4% on the market
value. The S&P yield for the same time was 2.4%.
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July 21, 1994
Longer stated the stock portfolio consists of 14.2% in large
capital growth stocks and 16.4% in small capital growth stocks.
Corporate bonds represent about 31% of the total bond portfolio.
Treasuries represent about 57%, and the average yield is 6.8% on
market value. The weighted average maturity of this bond portfolio
is about 6.8 years. The bond portfolio is down about 4.1%. But,
the interest is still coming in.
The stock account is down 6.7% year to date, and the bonds are down
4.1%. The combined account is off 5.6% on market value. The
income brought in during the rest of the year will help offset that
decline. The account is still having a positive return of 4.6%.
There are about $85,000 of realized gains. The S&P 500 is off
about 2.7%, and the over the counter index is down about 7.4%.
From inception to date, the equity account is 39.2%, with an
average annual return of 9.8%. The bonds have had an annual return
of about 9.9%. The total account is about a 32.2%, with an average
annual return of 8.0%. These figures are net of all expenses.
About 54% of the total portfolio on the equity side is small to
medium capitalization companies.
Bunton stated he had heard concrete was being rationed. He asked
if there were any investments in that market.
Longer stated she did not believe there were any in this portfolio.
The total portfolio annual income is $140,137, or 4.6%. The cash
flow for the account has improved.
The management fees year to date have been $15,519.36, custody fees
have been $2,818.50, commissions are $8,270.72 making a total
expense of $26,608.72. She stated earnings growth have been great
this year. Volatility will continue in the bond market until the
Federal Reserve tightening loosens. She stated the dollar decline
is inflationary.
Dr. Mashburn stated he understood as long as the fund was getting
a 5-6% return, the fund would be financially sound. So he feels
the fund is earning sufficiently.
Longer stated that was correct if you only want to meet your
expectations. However, if you want to try and get more money for
the retirees, investments need to be made to earn greater than that
required.
Ben Mayes stated the account was at 48% funded, and it is supposed
to be 55% as of December 31, 1993. The actuarial allowed 75% of
the market value to be used instead of cost.
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July 21, 1994
Friend asked if the law that stated the pension funds could not
invest in companies doing business in South African has been
changed.
Longer stated she was not aware of any change. However, this is
not causing any problems at this time.
Mayes stated there was a new Investment Advisor Agreement that
needs to be signed. Friend, seconded by Bunton, made a motion to
authorize the Mayor to sign this agreement. The motion passed
unanimously.
DEAN WITTER INVESTMENT REPORT
Mike Kirkland stated the cash account has $92,151 in the money
fund. There is $180,000 in CD's earning 8.025%.
The S&P 500 is down about 3.4% for the year. The portfolio is down
about 4%. So, it is doing about the same as the markets. He
stated there are a lot of good companies in the portfolio. Several
of them are more growth oriented companies The TCW account is
valued at $1,503,964.
Roberts asked Kirkland to check into the law regarding investments
in South African affiliated stocks.
Kirkland stated they feel short term interest rates will go higher.
They feel this will be a positive to the stock market.
Kirkland stated the Madison account is down 1.2% for the year.
There have been three consecutive down markets in the bond market.
This has not happened in quite a while. However, the other
comparable indices are down 2-3-4 times more. So, they feel
Madison's strategies have worked to keep the decline less than the
norm this quarter. Kirkland stated he feels they have done a
pretty good job holding the values. Regarding inflation, it is
thought interest rates going up will help this.
The longest maturity Madison has is 10 years. The average maturity
on the portfolio is about 3-4 years, so it is pretty conservative
duration wise.
ACTUARY REPORT
Mayes stated the actuary report states the fund is at 48% sound,
and it is supposed to be 55% sound.
Roberts stated the fund is actually losing ground because in 1991,
the fund was only 4% away from the required percentage. He asked
what has contributed to make the fund go down hill.
Mayes stated the active member contribution is declining. There
July 21, 1994
are more retirees. And third, the valuation of assets has
increased significantly over the last two years, but the fund's
actuarial liability has gone up.
Dr. Mashburn asked how many active people were contributing.
Roberts stated there are 16 active police employees on this plan.
Dr. Mashburn stated he feels the pension board should just continue
as is with the investments that it currently has and ride out the
storm.
Mayor Hanna stated if the pension funds get into a real jam, he
feels the citizens would vote to increase the millage allocation to
the police and fire pension funds. He feels the City has a place
in the tax structure, and the schools are asking for 4 mills at
this election. He feels this request by the school will set a
precedent by special interest groups to get a millage increase
election before the people.
ADJOURNMENT
The meeting adjourned at 4:27 p.m.