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