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HomeMy WebLinkAbout2003-04-24 - Agendas - Final Special Police Pension And Relief Fund Agenda April 24, 2003 A special. meeting of the Fayetteville Policemen's Pension and Relief Fund Board was held on April 24, 2003, at 1 :30 p.m. in room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. 1 . Approval of the January 16, 2003 minutes 2. Approval of the revised minutes from October 17 and July 18, 2002 I/ 3. Election of Policemen's Pension And Relief Board Of Trustees 4. Other business Page 1 of 13 Police Pension Board of Trustees 1/16/03 minutes KWUTES OF A MEETING OF THE POLICE PENSION AND RELIEF FUND BOARD JANUARY 16, 2003 A meeting of the Fayetteville Police Pension and Relief Fund Board was held on January 16, 2003, at 1 :30 p.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. PRESENT Eldon Roberts, Randy Bradley, Mayor Coody, Ms. Longer,Kim Cooper, Kit Williams, City Attorney and Gina Roberts, Deputy City Clerk. MINUTES: There was no approval of the July 18, 2002 meeting due to lack of a quorum present. APPROVAL OF RETIREMENT: • Mayor Coody: Retirement for John R. Brown and Melvin W. Stanley. Any discussion on these two additions to retirement? Roberts: I think there's been a little controversy that they've had twenty years or a little over. So it's just voluntary retirement. They're ready to leave law enforcement, January 19'" is their last day on the city's payroll which is Sunday, I guess. . We have something, it's in your packet today on back. Williams: How many active members will it leave? Roberts: Four. Chief Hoyt, myself, Chief Helder and Capt.Thompson(?) That's all that is left. Everybody else is on LOFPI. Mayor Coody: Any other discussion on new additions to the retirement fund? All in favor. Members: Yes Mayor Coody: Opposed? (no response) The motion passes to approve these retirements. No. 3 review the pension list. APPROVAL OF PENSION LIST: Mayor Coody: Are there any changes to the pension list? Page 2 of 13 • Police Pension Board of Trustees 1/16/03 minutes No response: Mayor Coody: All in favor of approving this pension list please say aye. Members: Aye, Mayor Coody: Any opposed? (no response). The pension list is approved. We move to the investment report. ESVESTMENT REPORT: Longer: I have a lot to tell you today. I'll go quickly and then if you want me to move forward. Williams: I'm sorry you don't need me here for this so I going to go to my other meeting. Where were choosing bond counsel and all that kind of wonderful stuff. . Bradley: You were getting us an opinion on something.1 think. Williams: Well no, that was back in July. Roberts: Is that about the widow. Williams: Yeah Roberts: Have the attorney general's sent anything back? Williams: What I did some more research and I think we're doing it right on. Roberts: Okay. - Williams: I noticed that in July and was trying to remember. Roberts: You had gotten something back from the attorney general's office. Williams: I thought I had. Roberts: You sent us a copy of it. • Williams: Okay. That's. right, that's right. Page 3 of 13 • Police Pension Board of Trustees 1/16/03 minutes Ms. Longer: Okay of the first page of your report is the current portfolio, well its not current it's as of 12/31/02, and it shows that your current equity rating was about 27.3% at year end. The policy guidelines are for 35-50%. We just wanted, to wait until earlier in the year and got that decision approved through the committee. You're currently at about 30% equity and if you consider the common stock plus the neutral funds that we've worked and what we've been doing is really enhancing the number of stocks in the portfolio that have greater than a 2 %z%, because we think that there's some chance that President Bush's package, part of it will get past with elimenting double taxation . of dividends. What that is going to it will make the dividend streams from stock investments more valuable than it is now, it's expected to taxation at the federal and state level. He's proposed a complete elimination of the double taxation of dividends. I don't know if there's fallback to this is going to be 50%. Mayor Coody: So if your going to take it off, take it off the state's. Ms. Longer: It will probably be taken off the state's tax. • Mayor Coody: Yeah, that's great Roberts: It could be both of them by virtue of the federal government doing away with the state's Ms. Longer. Continues with the investment report. She goes over the portfolio yields and asks for any questions. Mayor Coody: It looks good. Ms. Longer: Continues report and goes over the policy. Mayor Coody: I have a question. On the back page there's a space for my signature. We need to go over and sign this today. Ms. Longer. No. We can do it later: Mayor Coody: It's something you present for discussion later? Ms. Longer: Yes. Mayor Coody: What we might do is get out of here and keep on working on this because I have n't got enough people here right now. • Page 4 of 13 . • Police Pension Board of Tnistees 1/16/03 minutes Ms. Longer: We just wanted to bring it and try to figure if anything had been decided, but it is changes that would bring your policy more in to line wants actually being done. Mayor Coody: Well, I'm going to make a number of people even fewer. Thank you for this too. Mayor Coody: Thanks you've done a good job. Roberts: We need to bring this up again when we have a lot more members present, I never thought of this. What do you think we need. It's not something that needs 'to be taken care of right away. Ms. Longer: No, because everything that's in hereis in your minutes prior that we've gotten approval to do this or do that. And so what we did we took your assets printed policy and just brought it up to where everything is. Roberts: It is about what you're doing anyway. • Bradley: Well okay. Ms. Longer. So the last page, page 5 is just under No. 2, Fixed Income being investment grade so that it will match with the prior corrections and then I don't know where they got the 15% because in Sections 2c(4)(b) its actually 11% so we just changed that to 11 too, that's not inconsistent with the earlier part of the policy. We also put in a sentence there that it does not apply to U.S. treasury or government. guaranteed or agency death securities because we are limited to a 5% of portfolio on corporate. So as far as treasuries, agencies, government guaranteed securities we don't lend them, so that should probably beset aside. And then we just X'ed out private placement are permissible because I can't imagine a private placement that would be a "good enough field to overcome the fiduciary nit as going into a private placement. It would be awfully difficult. Then we struck on page 6 E. payments can be made through directly commissioned which is an option that may be chosen. I just struck that because I don't' know how that would be accomplished or how you would do that. I .think that comes from along time ago and I don't know if it's ever been done. I wouldn't know how to do it if itis in there so we struck it out. But that's just for your review and as I said its not that we're doing out of line because everything that we've done like going to this type of change on rating your equities has all been approved from the beginning. And then the final report is just to update you on the actuary assumptions. Roberts: I watch it fall monthly. The last one I had was 10.300 something and yours is probably more up-to-date than those are. But you're about a month behind when I finally get them-and we're down to 10. 1 .million in your figures which are probably more on line then what I'm getting so yeah • we're going in the wrong direction but it can't be helped. Everybody else is to. Page 5 of 13 • Police Pension Board of Trustees 1/16/03 minutes Mr. Longer: The thing is, the only way to avoid flat years is having completely out of stock and 100% bond. Because the bond return in the last three years has averaged about 9% plus, of course that's been offset by self return. If you'll look at your actuarial assumptions and you look at the current interest rates available and the 10 year treasury at 4% on this type thing you can't advocate . leaving equities because then you can't ever get the funds. So we've increased equities a little bit judicially. Mostly because the yield differential between stocks and bonds has kind of come into balance where you know the scales have tipped over a little toward the equity side but there is still a long term political risks. I mean are we going to go to war with Iraq, will be short or will it be long and nasty, sSo until we really know more about that and more about the earnings table I can't really advocate that too much more aggressive. But you can't be too wise because of the fact that you know we have to minimize the damage and now what you want to do is position to protect it on the upside when its happening. So we're trying to just kind of jockey in thereto get position as much as possible. But you really can't advocate losing equity completely. Bradley: You've stated there's not been a full year period since 1929 thru 32 until now. • Ms. Longer: I don't know. I think its just, I try not to have any preconceive notions about what the market is going to do because then you put your ego in front of what's being told to you everyday. So we're kind of trying to stay as balanced keeping equalibribum as good as we can. We'll probably continue locking those yields again if the continuous plan comes through. I think if it comes through the way its proposed or even close it is going to be good for stock, at least for a ''/. or so. You could have a situation here in the first half of the year where benefits out performs the stock relative to bonds, it gives us the opportunity to do some more work on the bond side. It's just a balancing act. where you're trying to incorporate a prudent amount of risk but you have to recognize that at this point there's risk in the bonds too. If interest rates go up and you own a current ten year and interest rates go up by 1%, on that ten year treasury you can actually save the client 7% of the principle value. So you know if you look at the history of returns in 1994, that's on page 18, bonds actually . gave a negative 5.7% return. You still received on the. income of those bonds that the price defining the bonds more than offset the income that was generatedso that the total return when the bonds went off to market was minus 5.7. This could be a year or is actually weak on a modest return on stocks but could face raising interests and pressure on the bonds to give still another flat year. But the part of the portfolio that hasn't but may start working so you know that's the thing you can't put all your eggs in one basket no matter what you try to pick. Bradley: This 1991 isn't what we need. Ms. Longer: That's right. You know there was rumors out thereabout Saddem Hussein's going into • exile and things like that. If something like that happened or if it became very apparent quickly that Page 6 of 13 • Police Pension Board of Trustees 1/16/03 minutes we weren't going to be there long I think you could have that actuarility right back. Because a lot of people have sold down to the point they hold what they know they can go through war and uncertainty with. It feels every much like 1990. ????: They found warheads today. Roberts: They did. Ms. Longer; The market was up until that came across. Roberts: I've been trying to figure what President Bush, what he is going to use when it comes. I've seen so far that the UN inspectors arrived there late and found nothing. I didn't hear about today. We're getting ready to have this massive troop built up, what was he going to use if they do finally come with something. I guess this maybe the straw that broke the camel's back if they found _ some. Because Iraq says This war with Iraq does not have very many people behind it, as matter _ fact Pve seen many against it, actively against it as for it. I understand that guy has got be dealt with • and the longer we go the harder and tougher it is going to be to deal with so that's where I stand. I guess I'm saying I'm for this. I don't know what the world opinion was going to be and what the President was going to use to finally launch an attack on the guy if the inspectors didn't find anything but I hadn't heard about today's news. That's what he's been waiting for. Ms. Longer: The European's are really against it. From what the Wall Street Journal's reporting he's coming under a lot of political pressure in this country for so along with President Bush, Roberts: Great Britians about the only one we can count on. Ms. Longer: I think they can't go in without UN support and allied support. If they were to go in on their own I think that will be negative to the market. Roberts: Which would be a big push they've found chemical and biological weapons. Bush will say lets just destroy those. . Talk continues about war and market price. Roberts: I see this page where you were going to ask the City Clerk, are you talking about the money? The amount of money it takes to run the pension fund, or pay the pensioners a year. That's on page 4. Mr. Longer: Yes, if we could get some kind of idea . Page 7 of 13 • Police Pension Board of Trustees 1/16/03 minutes Roberts: Okay like right here. Today we had a pension list approval, this one is January 2003. But I saw the total per year. You know we've got two guys going off retirement this month so they can come up with that pretty close. Getting that at the first of the year helps you figure out what you need to pay. Ms. Longer: Because they have money coming in from other sources that go into the checking account and so looking at that we can't really tell if that's going to hit the portfolio because they only call us when they don't have money in the checking account. . So if we can have some idea what the net amount is and how it will fall through the year then we won't have to rush to have money. Roberts: Gina can you work on that? You can come up with something? You can just take this recent list, most recent list and multiply the gross-by 12 and this period with two new guys in there, that would be a pretty close figure when the rest of us retire as far as where its going to stay at. The " only time it is going to drop off is when someone passes away or some widow died or something like that. You can give us some kind,of.a number on that we can close the door on that right now. • ???: Total amount of money this is going to be out. Roberts: For 2003. Add those two new guys in there. Ms. Longer: But that would have to be netted against what comes into that checking account the amount that we don't see, because the money that comes from those various sources are paid out first from the checking account and they don't come to the portfolio until they run out of money. ???: Oh I see. Roberts: We passed that they would keep at least three months or the amount it takes to pay the pensioners on hand for three months at all times. ???: Have they called you before on the spare of the moment. Ms. Longer: She calls just about every month about three days before they need it. Roberts: That's not right, we passed it in the minutes. I don't have any idea where to look for it but just go back in the minutes. It was in the minutes that they were to keep three months supply on hand to pay the pensioners on time and my way of thinking was you use one months worth of that then you start, you have two months insurance still in the bank that they start coming to you and say • by such and such time we need number of dollar, or whatever. Page 8 of 13 • Police Pension Board of Trustees 1/16/03 minutes Ms. Longer. That would help a lot because when we get a call and we have to have money the day after, then you can't pick a time to sell the bonds and you know sometimes you're selling something else the next day. So if we could do that it would be really helpful. Roberts: Who does that Gina? Marsha? Gina. I'm thinking it's Marsha? Ms, Longer: Emma is the one who calls and requests it. Gina: Okay Emma Roberts: Well we need to try to figure out some way to remedy that. I don't like to see them put on the spot when they get a phone call in three days and have to have it. • Gina: Yeah. Roberts: Put $100,000 in the bank Bradley: And not have the market and have to sell out. Ms. Longer: The way the bonds are structured we always have some sort of security that we can seal off and sale if we have to come up with it really fast but if we have more time that only works to the benefit of account. Then we can pick and choose our time deadline. Roberts: Will you visit with Marsha about that and ask her if there is some way that they can give these people more notice than three days. Gina: Okay. You'd really like to have three months. Roberts: That's in the minutes of one of our meetings back down the road before you got to sitting in on them. That the decision was keep three months to pay the pensioners, a total of three months in an account somewhere that they could pay them out of on hand at all times. Ms. Longer: . And then if it drops down enough they can call us and tell us you've got a month to raise X amount money. That would be real helpful. • Roberts: I don't guess I knew that money that comes into the pension plan, I thought all money that Page 9 of 13 • Police Pension Board of Trustees 1/16/03 minutes comes into this pension plan came to you and that all the money that pays the pensioner's came from your place of business. That's not the case, huh? Kim: There hasn't been any contributions to it. There weren't any in 2002 at all. Roberts: What that's going to. Is that what they are using to pay pensioners with. Bradley: Insurance tum back check that comes in every August or, September has a hundred fifty, sixty thousand dollars. Roberts: You'll don't see that? , Longer: No. Roberts: I thought all the money came to you and you were to use that to the best, do what you saw best with but were to keep City Hall supplied with X number of dollars to keep the pension paid. And that would be in three months of that. Bradley: What are we keeping here? Well we were keeping a $100,000. Roberts: I think that was what that number was, .33,000 dollars per month to pay the pension people and $100,000 would be three months of that amount. I still thought all the money went to you and you invested it and did what you wanted to with it and then back to an account over here dud was to be equal to three months worth of pension payments. Ms. Longer. If you look at the distribution and contribution report on page 17. You can see that there is some money we don't get to call at all. Roberts: I saw that and it doesn't add up to 12 months. Ms. Longer: In May there was $75,000 that went out but then they wanted another seventy amount until October so June, July, August, September must of have been taken care of by.. Bradley: It must have been that tum back check. I thought the city was keeping money all long to give them what they need to make up. Ms. Longer: I think they just call us when the checks are due. • Roberts: That's how much ittook—I guess that's the total for the whole year though. That $429,000. Page 10 of 13 . Police Pension Board of Trustees 1/16/03 minutes We need more than that now for 2003. Bradley: We need make already that's just what ya'll gave them. Roberts: Yeah, that's right. We make considerably more than that These two guys going off-this one is $42,000 a month and the other one is $37,062 a month. So that's 4,5,6,7—that's $80,000 a month, $96,000 more a year. Probably another 100,000 just on these two guys. I just thought the turn back checks came straight to you all and you did what you wanted and do what you do with our money and then the contributions that we pay out of our paychecks I guess they go in that Ms. Longer: I guess they go into that account as well and are used to pay for benefits. Roberts: I guess what you might visit with Marsha about let's not run that checkbook down to the wire and then call these people today and say by Monday I need $50,000 or $60,000 to make it. It seems like Randy said they had to sell something that's really not crazy about selling. But we've got to have the money so we have to sell it We can give more • Bradley: We might need to take some kind of action to-uh, I don't that we need three months but I we need a minimum of two months. Roberts: Absolutely. Bradley: To fund it and pay the monthly retirement Ms. Longer: You know just say that we have to have one month's notice of the distribution. Bradley: Well two months which they are directed to do, keep two months, maintain two months and in that second month you have got time to do something. And it looks like we're going to have too. Ms. Longer: On an account that size they might just flunk the fat cat is just sitting around but, we really never have cash balances. Cash just doesn't stay that long. There's always something better in my opinion. In fact everyday I think we are covering an overdraft before three o'clock. Bradley: ( can't understand what he saying) Robert: ( can't undertstand him) Well anyway Gina you just need to mention something to Marsha. You see what the problem is so just try to do something that gives people more time. We don't have • a problem with calling these folks up telling them we need money because that's what the name of Page 11 of 13 • Police Pension Board of Trustees 1/16/03 minutes game is that where the money comes to pay the pensioners with besides what we give. Let's give them a little more time because they don't the don't have the cash funds just sitting around that they can just write a check out of to cover that They have to know to raking and scraping and hurrying and scurrying and trying to sell something to generate that need revenue and I'd just like to see them not get behind the 8 ball in that timeframe. Bradley: Do we need to do something to channel this along? Do we need pass this information. Ms. Longer: The other alternative is we can always block that doesn't even show on your trade. We just put in the restrictive account and it is always there. But then is turning—like that Roberts: No. There's no need to do that that way because it causes us to loose a little of money. We just need to get our business in row over here and it obvious we going to need the money every month to pay the pensioners. And whenever they write two checks worth, two months worth out that, its time to call the bank and say hey you know we'regoing to have to have some more money in there and that would give you 30 days if we do the duee months thing and tell them to give us some money. I don't like that—I don't want it sitting around in cash and that's probably what they think. I • don't know what the thought process is here at the city is that well you know every manager has cash accounts and they just call and all you have do is forward them a check. If you've got that money working for us then it's not that easy. I don't see a problem with the city notifying them ahead of time. It's something that the city knows they are going to have to have. Gina: Yeah. 'Roberts: We're going to have to have.it the bank before we write the checks so. Gina: Do you think Marsha needs something in writing saying that from y'all? Roberts: You see her all the time. Visit with her and tell her what our concern is and whatever she needs we'll get Gina: Okay. Roberts: We can get it But I don't see that she would have to have anything. It's just simple fact not letting it run right down to the wire before they notify Longer to re-supply the account Gina. I'll see if I can find out what the problem is. I don't know why. • Roberts: At least a minimum of 30 days. f Page 12 of 13 • Police Pension Board of Trustees 1/16/03 minutes Bradley: . . . . . . .our contributions ( can't understand what he is saying) Roberts: Can you imagine only four people working down there, in terms of confusion how that amounts to. Bradley: (can't understand what being said) Everyone talking OTHER BUSINESS: Roberts: I've got something—sometimes there's stuff that comes down to the police department in our mail: It's from Northern Trust Securities. To the Fayetteville Police Pension Fund, attention accounting department. Probably something you could look at in accounting first and then maybe something. • Gina: We send all that down to Shelly. Roberts: We've been getting it forever. It's got our address on it. I think that the address here, 113 West Mountain. But it comes in our mailbox every once in awhile. Gina, Yeah, some of them mailed them I guess. Roberts: We have a mailbox address instead of city hall. Roberts" Okay anything else we've got. Ms. Longer. No, thanks we appreciate you. Roberts: You too. You're doing a very good job: They visit a while. Roberts: The next meeting is third Thursday in April, whatever day that is, 16th or 17m I can tell you that. Hopefully more people on board here and the whether won't be so messy, Ms. Longer: We've got extra copies of that policy so if they want to see before we come back in • maybe they have questions and take for discussion. Page 13 of 13 • Police Pension Board of Trustees 1/16/03 minutes Roberts: What's going to happen with city clerk, Sondra.. Bradley: Are you interested? Gina: No. I live outside the city limits. They are going to take applicants until the 21" of this month at 5 o'clock. That's the deadline. The 27th they are going to have a special council meeting and appoint a city clerk. They interview. Roberts: A lot of responsibility and a lot of hours. Ms. Longer: I know so many times we've called for minutes to prior meeting to be able to read those before the meeting and she'd be working on them at home at night. And to still not have them when- -1.know that they are—it's a round the clock job, isn't it. Roberts: That's true. • Meeting adjourned at 2:50 PM. • Police Pension Minutes July 18, 2002 Page 1 of 4 • REVISED MINUTES OF A MEETING OF THE POLICE PENSION AND RELIEF FUND JULY 189 2002 A meeting of the Police Pension and Relief Fund Board was held on July 18, 2002 at 1 :30p.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. PRESENT: Mayor Coody, Eldon Roberts, Hollis Spencer, Jerry Friend, Randy Bradley, Heather Woodruff, Kit Williams and Marsha Farthing. MINUTES Mr. Bradley moved to approve the minutes. Mr. Roberts seconded. The motion carried unanimously. PENSION LIST Ms. Woodruff stated Chief Watson had been added to the retirement list. OTHER BUSINESS Mr. Roberts stated there had been some miscommunication on how the widows are being treated on the fund. In 1999 when they went for a benefit increase, they had opted to make the benefit increase a non-spousal benefit because of the cost. When the benefit increase was granted in 1999 they moved everyone to 90% of salary. They had all been under the assumption that the widows would revert back to 50% of salary. The actuaries had been counting the widows at the same benefit level that they were after the police officer passed away. The law had two parts to it. The actuaries were operating off the one premise of the law that says that a spouse that becomes a widow after the raise in benefits she would continue to draw the same amount. There was one person that they had not treated that way. The actuary was telling them that if her husband and been alive and received the 90% benefit, then she should receive that too. Mr. Williams stated he will ask the Attorney General for an opinion. Dr. Mashburn moved to have Mr. Williams ask the Attorney General for an opinion on 24- 11 -425. Mr. Roberts seconded. The motion carried unanimously. INVESTMENT REPORT Ms. Elaine Longer, Longer Investment, stated the S&P and the NASDQ was down and the Dow was off about fifty. She thought a lot of companies that were coming under increased scrutiny would be restating earnings. She had been concerned about some of the actuary assumption behind some the defined benefit plans, were reilly to high. During the ten years where the bull market was getting 20% the pension plans became • over funded based on their actuary assumption of 10%. The companies recaptured those overfunded pension gains back into their corporate earnings. Now that they were sitting Police Pension Minutes July 18, 2002 Page 2 of 4 • there with 9 to 10% return assumption and the market analysts are projecting 6% is a more reasonable return assumption. The corporations that did not adjust downward are going to be accused of not being honest with their shareholding public. She thought they were going to see the push to adjust these pension assumptions downward, so that would work in reverse on the earning side because of the unfunded pension liability. Mr. Friend asked how some retirements have become over funded. Ms. Longer stated they could recapture that back into their earnings because their liability is the discounted present value of their future obligations. When they were using a discount rate of 10% and the market was clicking along at 20% they can get over funded. They technically can bring that back in and recapture it in earning because their only liability was what they were obligated for. Conversely, when they get the 10% discount rate that gave them a lower present value. If they take the discount rate to 60/othen it really pushes up what their present value is under future liability. She had talked with Eldon earlier this month because they had dropped below the weighting range of equity. They had been holding at 35% to 33%, trying to hold that lower range. They had been using options and hedgings. They had a very strict sale discipline, which has really helped them to get through this bear market. Technically, they were under their policy guidelines at this time of 35-50% equities. They had the opportunity to sell right and they felt that the reserves are prudent at this time. As conditions improve they could go back up to policy range. It would take a motion by the • board to allow them to be in violation of the policy on the equity side until they feel that the condition is right. Their second option, if they wanted to stay within their policy range, would be to use the S&P Index Fund to get them back up into range. There was a lot of single issue stock risk out there right now, that she thought it was best to accomplish it through an index fund. Their equity range was 35% to 50%. They were currently at 20%. Approximately 15% under weighted. The money was currently mostly in bonds. They had 5% in cash reserves. They were earning about a 6.2% income rate of return. They felt that as long as they could keep putting it into bonds, they could always pull back out of bonds. She thought there would be a time to go back in and start rebuilding the equity side, but right now the equity markets were off 9% on the S&P and about 9% on the NASDQ, so they were not loosing anything by not being in there. Mr. Friend moved to allow Longer Investment to be in violation of their investment policy until Longer Investment felt that the environment was conducive to increasing the equity weighting. Mr. Roberts seconded. The motion carried unanimously. Ms. Longer stated looking at their account from where the bear market started, 12/31 /99 through June 30 of this year. During that time the S&P was down about 33%, the NASDAQ was off about 64%. Their stocks have gone down about as much as the S&P stocks about 36%, but the asset allocation has held the portfolio together. From that point through June 30, . 2002 their total portfolio was down 4.4%. When they look at their historical returns, in the good times they had 29%, 19.6%, 19.6%. A 4% decline in a • terrible market like this is not unrecoverable. When they get through this, they had every bit of flexibility in this portfolio to run again. At this point they had the defensive team Police Pension Minutes July 18, 2002 Page 3 of 4 • on the field. Their income that came in on just interest and dividends off bonds and stocks was their cash flow that comes in regardless of the market is about $481 ,000 on the total portfolio. That represented an income yield of 5%. That was on the whole account, including stocks, which was approximately $40,000 per month. That did not include the tumback and the matching funds etc. Mr. Roberts stated he doubted that they were bringing in what they were spending. Ms. Longer stated their distribution ran between $55,000 and $65,000 per month. Their income cash flow on their bond part of the portfolio was approximately $40,000 per month. To satisfy their actuary assumption they had to achieve a 6% rate of return. Their historical rate of return has run about 7.5%. Their combined portfolio was at 20% equities. Their corporate bonds represented about 15% of the portfolio and the yield on the corporate bonds was about 6.5%. They had been very cautious on the corporate bond market. They had seen an increase tide of corporate credit risk. Everything that was in the bond portfolio is high investment grade. Government bonds and government agencies. The treasuries represented about 15% of the portfolio with a 6.2% yield on treasuries. Government agencies which was a combination of federal home loans, federal national mortgage, represented about 42% of the portfolio with a yield of about 6%. They had a very good yield. The way that they had been able to manage that was by a ladder approach. The income yield on their bonds has not changed over the last three years. The stock portfolio, there was a lot of reserves • in there. they were yielding 6%, with very few exception all of their bonds that had been purchased are trading above the purchase price. So they had earned not just the fixed 6.2% coupons, but also a capital appreciation while they wait out the storm. Realized losses year to date, was at $81 ,000, net income was at $ 171 ,000. In the bond portfolio, in the fixed income side of the account their yield was at 6. 1 %. The weighted average maturity is 6.5 years, yield on cost was 6.2%. The average annual return has been about 9% on equities, and 7. 1% on fixed income and 7.5% on total portfolio. This three year period that they were going through was a once in a generation type of an event. The last time that they had three years back to back of negative market was in the 30's. The equity return year to date was -18%. That compares to the S&P of -14.5%. NASDQ was down 25%. Total was -2.3%. The stock part of the portfolio where they had allocated reserves to the actual stock component of the portfolio was down 8.5%. In response to questions, Ms Longer stated that a couple of years ago they had asked for an update on the cash flow analysis that lead to the increase of benefits, there were two way in which the fund can be evaluated. One was the actuary report, which is done by the State, it was more of a static picture. The other was a cash flow analysis which takes in more of the cash flows coming in from all the various sources and by that valuation model, they actually had 5 million dollar over funding. Mr. Roberts stated the actuary evaluation showed them to be in a sad state of affairs. Carrio had refigured all of figures using the cash flow method and Carrio had stated that they were alright. There was two different ways of doing this. • Police Pension Minutes July 18, 2002 Page 4 of 4 Ms. Farthing stated she would like to know if they would be making up the short fall. To her it looked like they were going to be taking out money than they were putting in. Ms. Longer stated she was not involved in their projections. She did not know all of the assumptions or projections. Meeting adjourned at 2: 15 • • REVISED MINUTES OF A MEETING OF THE POLICE PENSION AND RELIEF FUND BOARD OCTOBER 17, 2002 A meeting of the Fayetteville Police Pension and Relief Fund Board was held on October 17, 2002 at 1 :30 p.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. PRESENT: Eldon Roberts, Randy Bradley, City Clerk Heather Woodruff, and City Attorney Kit Williams. MINUTES There was no approval of the July 18, 2002 meeting due to lack of a quorum present. PENSION LIST STATE BENEFIT SUPPLEMENT INVESTMENT REPORT • The combined portfolio report as of September 30, 2002 has an 18-19% equity. The third quarter was down, it was the worst quarter since 1987, this caused a wash out at the end of September. It is good that we have bonds in treasuries and agencies. Last week Ford started to trade as junk bonds and General Motors bonds were downgraded this week. We got out of these bonds last year causing you to be unexposed to these corporate bonds. You have only about 11 % of corporate bonds and they are all investment grade bonds, with limited credit risk. The stock account is 43% invested in equities. All the bonds are trading above the price we paid for them so they are all convertible to cash which can he used to add to the stock side. We have flexibility to continue to switch from the fixed income to the equity and back. The top five holdings are high quality type stocks, it is a very blue chip equity portfolio. Realized gains and losses: This year we have had net losses over gains, we have never had a year like this before, we have always tried to keep it pretty much evened up. The net income has been enough to offset the gains so that net the book value of the portfolio has not gone down. Fixed income, securities and total portfolio: The yield on the book value as of September 30 was 5.9%, on June 30 it was6. l %. Rather than extending out into the longer maturities that did not offer much yield for the amount of risk that we were tasking we ended up investing about $450,000.00 in shorter maturities with about a 3% yield. So temporarily the yield dropped a little on the fixed income side. The total portfolio that includes your stock has an income yield of 5%. We target • trying to keep that income yield at 4% on the total portfolio. The weighted average maturity is 6.9 years and the weighted average duration is 5.2 years. The duration is the measure of price fluctuation • when interest rate increases. If interest rates go up the price value of your bonds will drop. Performance history summary: Annualized returns are holding together very well, because we have had returns on bonds that offset the losses on stocks. For the year 2002 your stocks alone are down 36% but with the bonds the total account is down 4.2% for the year. Holding the principle together is the most important part. This market through last week was the worst Bear market since the depression. Investment equity exposure is back to 25% or so equity weighting is moving toward the lower end of your policy guidelines and your return objective is still intact. Total portfolio is about $10 million. Meeting adjourned at 2: 15 pm • POA1ce LOCAL POLICE & FIRE PENSION & RELIEF FUNDS - - 24-11-405 ijuritr of qu a ,re .=i• CASE NOTES (5) .The question on the ballot shalt be as :followsi any election "` "FOR Police Officers Pension. . ... . . . . . . :. . . . . . . . . .. 0 lioawity of Levy. eon in thr; sty council had .Deed run five male tae author red by Ark. AGAINST Police Officer's.. Pension. . . :, . 0" TVat a e +]Ot: 13; q a, an attempted levy of additional tax voted by the (6) The tax so levied shall not exceed one (1) mill on 1 question` for the use of fimmene. and policemen's pension and relief the dollar upon the assessed value ,of the, real and - -v�oleied the constitutional limitation. Adamson v. City of Little personal , property of the city or town. arniectionwl t99Ark. 495. 134S.W.2d558 (1939). the: paasagvof Trustees Y. City of Little Rock, 295 Ark. 565, 750 (c) The. tax, once so approved,, shall be levied and .;Hoard failure to su 959f 19881; Nestend v. Erke, 227 Ark. 309, 298 S.W.2d 44119571. certified in the same manner as provided to this section :defeat the " and shall be collected and, turned over to the city or town for the ' sole se of 'snaking payment for ion,.;,;:.; . ,.�� - 1-.q04, Tax levy for pensions in cities of first pu board of el ' and class. coverage of employees under the Arkansas Local Police �t, ,.. and Fire Retirement System LO) days before` d);After being -once approved by a majority of (d)' A vote on the 'questioo of the tax provided for in reed by twenty ptin on theuestion at an aty •affetled g q y general or special this'aection shall be had in the Same manner Chet the 6 f: o'n,•(n any city of the first-or scored class, a tax not Constitution and laws of this state provide for the fficers':pensio" 'sed one (1) mill on the dollar upon the assessed initiation of measures irrmunicipalities: 1e county ',ref the real and personal property of the city shall (p) The funds .provided for in this :section shall'. be question upop ` d annually by the city for the purpose,of paying supplemental, and` in :addition to, any. funds provided "' e'`� eere' retirement.salaries.and pensions, as well for by any laws in effectat the time of passage of this on the questi tona,to the. surviving,spouses and .minor chi]- section and shall beceme .part:ofthe policemen's pen- upon in ithe yqL deceased police officers and the—surviving sion and relief fund of the city and be adii roistered by L937,-the queW*A... and minor children of deceased retired police the . board, of trustees, of .the ,policemene :pension and reneral . orts"V relief fund for the. same class of beneficiaries and in the mthis Secti 54evy shall be made by-;the: city, council., or same,manner as preatnbed,by law. . : 113 be as follow (f) In those cities which do not have a policemen's -, ° governing body of the city, on or before the time �• ::. : ,law for levying county taxes, and the city pension-and relief fund but which cover , their police ' icor other governing body, shall make out and officers under .the Arkansas Local, Police and Fire . Eo the eoktiitq clerk the`rate of taxation levied by Retirement System the funds shall, be, applied .to each ^ `iiiiinpal ' tiorporationonthe real and personal city's - account in that system to such manner and 4 9877;As A I amounts as determined by the board of trustees of that within the cit . s tem. . y y 'passage and ambunt so`certified shall be placed upon the sr ftri - ed-by tabCoverngl - -by the county clerk of the county and collected 1lfetory. Acts 1941; No. 16, 44 1,2 4, 1985, No, 900, 45'1, 3; A.SA. 30 lai,7. Emargs4d' :,Bame-mailnei that state and county taxes are 1947;45 MI707; 19•'1708, 19-1710; Aets 1969;No: 941:4 1. - tand shall be turned over to the board of Publisher's Notes. In reference to the term .+passage of this a a s!jof the policemen's pension and relief fund of s1Os 1941, No le was s gged by the Governor and took effect . January 30, 1941:' 1 4Et- • ' :Ades 1941, No. 16; 54 1 2 and 4; were also modified ai'4 24-11:603 de`ff) Yaill on ?In those cities which do not have a policemen's lmpealedl it fir towns on,and relief .fund but which .cover,their police - . + 4: under the:.Arkansas Local - Police and fire CASE NOTES - soned' and super a ment System, the tax. shall also be altowed when 8rtment for ( '. '- ^ ' ,byte majority of qualified electors Ofthe'citiea Cited: Boars of Trustees v. City of Little Ruek 295 Ark. -585, 760 an orae red Y 9 S.wza95oi196e1: "- Pe "pating in any- election on the question and held dice departmes)f time of any election in the city, whether state, 24 is; oC temporary ,} special, or federal, or at a special election for the "11 405. Board of trustees the .policem a of voting on the question: . . (a) The -board of trustees of the policemen a pension ollected as o04: e" The election may, be held in connection with the and relief fund shall consist bf,seven (7) members, as general diy...election,following March 6, 1989, but follows: overtothe boat] litre to submit at a city or other election shall not (1) The chief-executive officer of the city, who shall be red relieffund p t the right of submission at any subsequent elec- chairman of the -board; : (2) The.city treasurer, who shall be the treasurer of +c a spolicemeal -Upon the filing with the county board of election � the :fund; - mer .their,Pollitt is ooners,.noblater.than sixty (60) days before the .(3XAXi). Four: (4) active or retired ;members of the ?ghpe..and Fim ' of,the election of a petition signed by, twenty (20) pension fund:, < ; yved byre malop spore. ,qualified electors .of the city affected and (iiXa) The active pension fundmembers shall elect 1aR ,be collectall ng that the question of a policemen's pension be the active members by secret written,ballot:in May of d: and .shall 1* timitted, it shall be the duty of the county board of each year„with,the.member„or membera:to be chosen de 14 each city% on commissioners to place the question upon the in alternating years. i , and amomta (b) The retired member or members shall,,be>cho- of that system In the even t,that, for any reason, the question of sen; in May: of each.. year, ; by,.a method -to, be deter- :r '. policemen's pension is, not voted upon in. the next mined.bythe board,with the member or, members;to 9sss 'Aces1'sae, Nd 1.city.election after March 6, 1989, the question be chosen in alternating years. ABrA '1947:41a Ae„submitted . at any. other general or :special (d. All,.;member -trustees-.shall.. serve . two-year on. held in the city as provided in this subsection. terms: T== .r a. £Zk; Ittt k211406 RrUREMENT AND `PENSIONS ' L: 191 (iii) If there 'are no active members of the pension Iiletorr• Acta 1937, No. 250 $$ 3 4 Pope's Dig.. B 9eg9�.„ _ , 44HA) No .,benefit , fund, Allfour (4) employee members shall be'elected 1985 No. 390. § 1; A.SA 1947 if i9-loos is lag4a " ` benefi(s payable: f. + ., . : 40s § 2 1991, No. 365, § 1. - - "''� > from and by, the reared membership of the pension tis, _ 9dmintatration of 1 ". fund : ' !.. , : : �Amandmenta The 1991. amendment nivi (ax3xA)• ,. �' B) Should rite-1 (axsl n,. rf ts. to retlred`ine; (B) The- board shag select tine (1) of the police t,. members as. sefcr au lof the board to aerf+e fora cASgNtyT&8 out :muses period bf two(2)years br until hid successor is elected serve of the inactii ' ' , - ..:. Aauvsrs ' T o F „q; (C) ,No proratiik Pd quaii$ed inactive funds and (C) However if no retirant >s available to serve on Aenon against pension (ward. a ` lens•. the �oara al( four ( ); employee positions shall be Hem ng dWVinision alarm. ^ ` 5 g k hetd'b'y'active Thember }o s,of the pensii it and shall t is F , (D) If the retire Action Against Pension Board. ` p ,tphall become inade alt be elected by secret ballot liy the . . iye;members if the crndit.court's unappealed dismiemIll of ink on . ,.ole recipients, the of.te Pension t'uno for tx%o-year-;terms as; provided :based on aubeectron tat preciudmgiuditid;revrewpr " ' - s (oyer, and they ja e ti : - the dismuteel would not be res Judicata as:to the po `tx„.. .3- <. c; rights Suit in the federal i'_ its Hrmll v. 1Hemw atl�r- Oct COm}lUl (D) The board ahall• ;heve. the power to• make all E i ITU and,;regulationsimeedfW -for -its guidance to tsthCtr 198oR; �r :full benefits to y .;:pmplement�therprovisions'regarding board, composi.. HeartI g on Pension Clam. t ill}. ants. ' aiOn, -: ,x i ..,t,,. a. ;r, Police ofider'was entitled b have hie pension elemr m` SXAY, �re a futtlt (tient,retie a is cn :+ :(4) The:six,(fi) membere rovidt>d' for in subdivisionsy0fremtinabte arrd:fau•=iriinaedpe.sons'who wer€'a�'le; . w P to give the Asim fess conaidereGon ami togtant nifinen _ the employer may bet whe rsliall'be� Gtable • h' it ren and`wlro shall 90 rash Cv lseot t, fines, pt state in (IM-334f.ihis 'subae!'fi6fiiahirll Alert one (1) moremem- v. laemweathes 629 F2d 4 reP. P 3a ) enues a4 a represent thebdfird of teustees in;the examination of 24-11-1(16: - Administration of small fundi.. itiremAT& rogran ' Any member of the department upon a claim of disabil- kansas IrocalTolice andTire Retiremee'� , `(B) The revenue: tem is Ccount de14 0signated (5) The number of aEt Ve' members or retired mem- vrnr`(_ _ lig payments to, tZi+ Air to serve on the board ehsll`be'determmed by the :�(a) In those local ;police pension adrel� Cher Pude poi?aonate -number of actNe membere toetired which cover fewer than,four (4) active aoenilie{!t� " ggAj :A{l employer Flo, board of trustees may .1 longer east andthe' all made in su := be designated as inactive b the em o (A)' Mien the number of Active members ,+equals y -y' '. `, I - ;,and•frequena; seventy-five percent (75%) of the total of retried (b) ,Admnistrative, ;reaponsibility for � �m., pol members ,and actAvetmembers, .tkie board shaJI, be beassigned to. the Arkansas Iocali - ' .” r ' ll;reequire. :r . : • . , ,members (3) activermembeis and one tl) Retiremenk,System,.as allowed by-,i§§ ,2 1 R)-The penaioni <:!retired=member. rn : �:� ' ,� ,�- `. .' .^:.-� .' . '; 24-10-302 and As provided .in: the followingp',. er materials am (B) WhiSh'''the niin WiF of active' members ,equals '. . (1)(A)•The actuary-.under - contrail 4ofi board-,U admin 6fty ;percent.,(50%)_gf,the total•of.,retired ;member's shall compute the retirement reservefor v`"' ded,•W, the:iL o and active members; --the beard shall be cemprised:of active; members and,for eligibles t ne8&'ai ` m in such mar two (2) active members and two (2) retired members. inactive fund After receiving tlie ,re r¢. (C) When the mil Ne' df"f'etired members equalsmay. the employer ,glial} transfer she cc r3 Acts•1937 NoiZ ...seventy fivg .percent_ (75%), of the .total of. retired -serve to the system.' held'in members and sctive .uieiubers, the beaid.•shali be natedastheretiretirentreserve- comprised of one ( 1) active member and three (3) and,from which the system shall pare 7. Listpt,re retited`members. I cranes ' ` ' rr There shall be'] (b) The police officer Pmembers and the physician (B) The retirement reserve"ant? air})` by t}te aegrei representative'of the*bbaid shalt serve for a period'' of employer contributions shall mElud@.s�r police o$`icera} two?(2)lyears or until their successors are elected and as are necessary-to provide idrairiiatrat 9 Tl to book i,, "a qualified. for the system but aitch expenses BKaItco[3'o saEion o3 d('cPiThetboard shall have the "absblute control and "total' of gone half' uf' one perceht`'YO� and all pereona u management of the funds providedfoi in this subehap- member payroll, if"anPlica ohs perreii, -.1 1 record"efEial ter and ofal}•tiibneyi Atmated, paid,,or assessed for the annual reserve easels i ;' �epa`itm'ent date i relief or pension of disabled, superannuated and i'e` (2) Any 'ekeeas assets ofthe fu}id'ilijrem int „ e `. date And.'fii tiredmembeWdethepolioedepartment, theirsurviving retirement reserver i's createdshall 'befrarSA etionmadeof spouses .and minor children, or dependent"parents account designated by the 6 ployeF 'to t etired 'unilertti solely dependentvpon members for their support: for the' purputse of making payments io tIi (d*D The board shall'make all necessary rifles and employee coverage administered under'tlie -5 l [.� ,s , . : regulations for ile'governmentand the discharge of its for no other purposeActs 1937. No. 2r : bU. duties and shall hear and decide all applications for " (3) If a 'former member of the'laaB lies ,dWief or' pensiow tinder thissubchapter. returns to service in which the emptayee 4(IS Treasurer ) All decisionsupon applications shall be final and again become a member of the local fund , . conclusive and ret subjec4to review or reversal except service credit may be purchased by tlraetd The treasurer ai by the !ward. Pt'a record of all its shall employee amortised inthe seine mannt?e . + § d and shan' si I' dkd ,48) +floe board shall cause to be ke the funds in s# meetings and proceedings; credit urchases are'amortixed undertlie ' 'board. Boards and Committees April 10, 2003 Page 34 of 55 Policemen's Pension And Relief Board Of Trustees \ DESCRIPTION: The Policemen's Board of Trustees was established pursuant to the Arkansas State Code. The Board was created to provide for the disbursement of the Firemen's Relief and Pension Fund and shall designate its beneficiaries as directed in this act. The Board shall have the power to make all rules and regulations needful of its guidance to implement the provision regarding Board composition. TERMS: Two-year terns, ending April 30. MEMBERS: The Board shall be composed of seven members as follows: • The chief executive, who shall serve as chairman of the board ■ The city treasurer, who shall be the treasurer of the fund; ■ Four active or retired members of the pension fund; ■ One physician. APPOINTMENT: Active pension fund members shall elect the active members by secret written ballot in May of each year, with the member or members to be chosen in alternating years. The retired members shall be chosen in May of each year, by a method to be determined by the board, with the member or members to be chosen in alternating years. CONTACT: Sondra Smith, City Clerk, 575-8323. • PUBILIC NOTIFICATION: Meetings are published by the City Clerk on the weekly meetings list which is distributed to the media representatives with press boxes in the City Clerk's office and released via the Internet on the City's web site at: http://www.accessfayetteville.org MEETING TIMES: Regular meetings are held the third Thursday of each quarter at 1 :30 p.m. at the City Administration Building. 34 J Boards and Committees April 10, 2003 Page 35 of 55 Policemen's Pension And Relief Fund Board Of Trustees Chairman Physician. Mayor Dan Coody Dr James Mashburn 1418 E. Rodgers Drive 236 Oakwood Ave Fayetteville, AR 72701 Fayetteville**- k 72703 443-6758 — Home 442-8225 575-8330 — Work 07/17/97 t -0440/0,3 . 01/01/01 to indef. . Treasurer Sondra Smith Jerry A Surles P.O. Box 9211 3038 Sandra Fayetteville, AR 72703 Fayetteville, AR 72704 442-7838 — Home 443-2091 — Home 575-8323 — Work Replaced Hollis Spencer 02/03/03 to indef. Terni ;End_ 04/30/02 Randy B ndley el 1024 N'High,4:� 170 Fatinih n, AR 72730 846 3551=Home 263-,2604±'-'ted • Q7/17/97 to'04/30I03 Jerry Friend 4:640 Stewart Fayetteville. 72703 443.: ;Home 4441742�'VJork 05/01/96 to 04/30%02 Eldon Robe 1197 S Roberts Road Fayetteville, AR 72701 521-8050 07/17/97 064 35