HomeMy WebLinkAbout2006-04-13 MinutesPolicemen's Pension & Relief Fund
Board of Trustees Meeting Minutes
April 13, 2006
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Policemen's Pension and Relief Fund Board of Trustees
Meeting Minutes
April 13, 2006
A meeting of the Fayetteville Policemen's Pension and Relief Fund Board was held on April 13,
2006 at 1:30 p.m. in Room 326 of the City Administration Building located at 113 West
Mountain Street, Fayetteville, Arkansas.
Mayor Coody called the meeting to order.
Present: Mayor Coody, Eldon Roberts, Jerry Friend, Tim Helder, Dr Mashburn, Jerry
Surles, Sondra Smith, Kit Williams, Trish Leach, Accounting, Steve Davis, Finance &
Internal Services Director, Lisa Branson, City Clerk's office and Tina Lamb, Longer
Investments.
Approval of the January 18, 2006 Meeting Minutes.
Eldon Roberts moved to approve the minutes. Dr. Mashburn seconded the motion. Upon
roll call the motion carried unanimously.
Approval of February, March and April, 2006 Pension List
Sondra Smith: We did not get the affidavit back from Dennis Warren. We have sent him
several notices and I have tried to call him and have had no response. His pension payment
stopped in April. The difference between the March Pension List and the April Pension List is
the amount that he would have received.
Tim Helder: He just did not respond?
Sondra Smith: He has not responded by mail and I left him three telephone messages and he
has not responded to my calls.
Tim Helder: I know he was in really bad health.
Eldon Roberts: The last I heard he and his wife both may be in a nursing home. I know they
are still living.
Jerry Friend: Does he have children?
Eldon Roberts: Yes he does. One of them lives out of state and one of them lives here. Let me
do a little work on that and I will get back to you. He has not received a check since when?
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Board of Trustees Meeting Minutes
April 13, 2006
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Sondra Smith: We did not send out his April check so he has just missed one check. We voted
last year that if we did not receive the affidavit back to stop their check. When we receive the
affidavit we will back pay him This is the way we keep up with deceased pensioners.
Trish Leach: We would request that when we have stopped a check and someone does turn in
their affidavit that we are allowed to cut their check at the next regular check run instead of
making a special check run.
Kit Williams: That is what we are going to do once we get his affidavit we will issue his check
and back pay at the next payment time.
Sondra Smith: I don't think they understand the time involved in trying to get in touch with
them when they don't turn in the affidavit.
Mayor Coody: Yes, I understand. Is there any other modification to the Pension List?
Sondra Smith: No.
Jerry Friend moved to approve the February, March and April, 2006 Pension Lists. Tim
Helder seconded the motion. Upon roll call the motion carried unanimously.
Longer Investments Investment Report
Tina Lamb, Longer Investments Client Services Manager: Mrs. Longer is out of town today
as is Kim Cooper so you have me presenting. At the end of the quarter, March 31, 2006 we were
above the 50% on the equity side so we do need to ask for you to approve the 5% variance which
you have approved in your investment policy in April, 2005. The equities are at 55% at the end
of the last quarter.
Tim Helder moved to approve the equity overage of 5%. Jerry Friend seconded the motion.
Upon roll call the motion carried unanimously.
Tina Lamb: The next report is an update through April 7, 2006. On this report you will see that
Elaine has taken the equities down just a little bit, that begins on page 5. We wanted to update
you with what has been going on since the end of the quarter. We had a pretty good rise in
equities the first quarter but there are several things that have happened since the end of the
quarter that have put Elaine in a little bit more of a cautious stance. There are three major things,
one of the most important is interest rates particularly on the 30 year bond have gone over 5%,
we are seeing oil now at over $70.00 a barrel and gold has gone to over $600.00 an ounce.
Those three things are a sign of caution for her that made her want to pull back on the equity side
just a little bit so we have backed off on that. Those caution flags aren't too bad she is still
seeing some good things in the future. She just decided to be a little bit more cautious and to
take some of the chips off the table and book a little profit. That is where we are through right
now.
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Board of Trustees Meeting Minutes
April 13, 2006
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On page 9 is the summary of the realized gains and losses so far this year, the portfolio has taken
in $167,000 in gains and net income, which includes all of the expenses of $45,000. That is
through the end of the first quarter.
On page 10 we have the Fixed Income page, the important things to note on this is Elaine has
brought in the maturity, we had some 30 year treasury bonds at the end of December and she
also had a 20 year treasury fund in the account which we sold and took in about $32,000. We
sold those in February, we actually sold those at a very good time because since that time the 30
year bond has decreased in price about 8% and the treasury fund has gone down in price at about
7%. Because of those sales the average maturity on the bond side of the portfolio the holdings
have come in to be much shorter and there is about 54% of the portfolio that will mature in three
years or less. We have really taken in the maturity and that will lower the risk on the portfolio.
The average yield has gone up from 5.2% to 5.3% on the overall portfolio. So we have
shortened the maturity and the yield has gone up. So the bond side of the portfolio is looking
pretty good.
One thing that Elaine wanted me to point out is that we might go into some longer dated
maturities later on in the year but she will look at that as a trading vehicle and we probably will
not hold those to maturity. We will be looking for some capital appreciation as well as income if
we did go into that sort of maturity again.
Page 11 has your largest holdings on the equity side of the portfolio. All of those are blue chip
stocks; they are all about 3% of the equity. Page 12 has your industry weightings. We are over
weight in capital good, the consumer non-cyclical and the technical side. Elaine wrote in the
latest newsletter about which area of the industry sectors that we were strong in. We are under
weight in consumer cyclical, finance and healthcare. Consumer cyclical's is things like cars,
furniture, anything the consumer has to go into debt to purchase. Right now Elaine feels that the
consumer is not in as good health as the corporations are. Because of that she tends to stay away
from any of the consumer cycical stocks. We are pretty much even weight on the energy side of
the S&P portfolio.
Page 13 has your contributions and withdraws. You did get a refund from a past litigation that
was $259.00 that has been added back into the portfolio. The withdraws were to fund the
pension expenses.
The last page has your performance. Through the end of the first quarter in 2006 the equity side
of the portfolio was up 6.3% that compares to the S&P 500 at 3.7%. So we beat the S&P pretty
soundly. The fixed income side of the portfolio was pretty flat, it was down point one percent
but the Solomon Brother Treasury Index was down 1.2% so we beat the Solomon Brothers
Treasury by about 1.2% so that is looking very good. On the total annualized return historically
you are at 6.9% and actuarially we are suppose to be at 6% so again we have beaten that, so that
looks pretty good.
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Board of Trustees Meeting Minutes
April 13, 2006
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The total investment returns since the account inception has been $5,592,000. That includes
about $3.6 million in withdraws.
There is one other issue that we would like to discuss and that is the amount of foreign
investments that is allowed under the current investment policy. Our current investment policy
restricts the foreign investments to a limitation of 10% of the equity portfolio side of the policy.
Elaine would like the Board to discuss increasing that to 50% of the equity side of the policy.
She sees that there is going to be a lot of value in foreign investments and foreign has beaten
domestic equities by a large percentage over the last year and she expects that to continue. She
would like the board to discuss that.
Mayor Coody: Going from 10% to 50%?
Tina Lamb: You are at 10% now that is Item (C) (4) (e) on page 3 of your Investment Policy.
Because the foreign investments have increased in value so much we are actually at 13% of
equity exposure so we are currently over what we should be. That is a function of the increase in
value of the foreign investments. She will sell to bring it back under if the Board does not
approve an extension. Elaine sees that there is going to be a lot of value in this sector of the
market.
Mayor Coody: Since we rely on your expertise for advice and if that is your advice I would
think the Board would be interested in following suit. Is there any discussion on going from
10% to 50% on foreign investments?
Jerry Friend: The investments that are not exchange traded?
Tina Lamb: We normally only invest in exchange traded.
Jerry Friend: They are on the New York Stock Exchange but they are foreign?
Tina Lamb: Yes sir.
Jerry Friend: Are you talking traded on the Japanese market or something?
Tina Lamb: No sir, we would be trading in the American market. In your portfolio for instance
Barclay Bank and BP Amoco would be considered foreign investments. When we do our
percentages we look at the foreign mutual funds, which is on page 2 of the portfolio that is 5.5%
of portfolio but is about 9% of your equity exposure. There are so many stocks that are familiar
to us now like Sony for instance that we don't even consider them as a foreign stock because
they trade on the New York Stock Exchange, but indeed they are foreign.
Jerry Friend: So all the foreign stock that you would trade is on the American exchange.
Tina Lamb: Yes.
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Board of Trustees Meeting Minutes
April 13, 2006
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Tim Helder moved to increase the foreign stock to 50%. Jerry Friend seconded the
motion. Upon roll call the motion passed unanimously.
Old Business:
Benefit Increase:
Osborn, Carreiro & Associates, Inc. Letter Regarding the COLA dated August 7, 2003
Steve Davis: Basically what the 2003 Carreiro report says is that a temporary COLA for five
years can be funded and then that would be about the extent of what could be done. The 2005
letter says no changes made to the pension fund, benefits remain as they currently are; this
includes the remaining temporary cost of living adjustment. If I could translate that, if there are
remaining years of the temporary COLA to flow in those remaining years continue to flow in and
the temporary COLA stops as dictated by the 2003 letter.
Tim Helder: Did you mention the 2005 letter? Is that in this packet?
Sondra Smith: That was in your last packet, I can make copies if you want.
Steve Davis: To date we have not received any other letter from Osborn, Carreiro & Associates
that says that a permanent COLA can be implemented for the Policemen's Pension.
Eldon Roberts: They are supposed to respond regarding the question on the COLA being made
permanent. I touched base with them as well as Sondra has and I asked him if he could get it to
us by April 20th that is when the meeting was scheduled for. He has not got that to us yet. We
can just wait until we get the information. He agreed to do that for no additional expense
because he had just done a benefit proposal for us that we paid them for. He did not look at
making the COLA permanent in the initial benefit increase proposal. He agreed to do that
because he still had all the numbers in the computer and it would not be that big of a problem. I
called him 6 weeks ago or longer and asked him to do that, he was going to do it and send a letter
to us about what we +could or could not do about making the COLA permanent. I assume surely
by the next time we have a meeting we will have that letter and discuss it then, whatever the
Board wishes to do on it.
Sondra Smith: So he did not calculate a permanent COLA in the most recent study?
Eldon Roberts: Making the COLA permanent he did not.
Jerry Friend: But you are saying he is going to recalculate it and come up with something?
Eldon Roberts: I told him when I talked to him that moving the benefits to 95% of salary failed
and that at that point in time moving the widows to 90% had failed also. So I just asked him to
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Board of Trustees Meeting Minutes
April 13, 2006
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study that because we were interested in making the COLA permanent. He was going to do that
and get a letter to us but he has not gotten that done.
Mayor Coody: So if for example we increase the widow's benefits from 50% to 90% that
would change his study as far as the COLA goes because that would be an impact.
Kit Williams: He would have to include that.
Eldon Roberts: Anything that we do changes the overall picture.
Tim Helder: Do we need to wait to discuss the widow's benefit until we hear back from him?
Sondra Smith: We can go ahead and discuss that because that has been approved. The
widow's benefit has been approved by the actuary.
Tim Helder: So that has nothing to do with what we are waiting to get back then?
Kit Williams: Everything has some affect.
Steve Davis: You have a certain amount of dollars available if the 95% benefit and the 3%
COLA is the most important thing to you then the widows benefits would have to be postponed.
If on the other hand you want to spread the joy around a little bit and increase the widow's
benefits then you have less flexibility for either the 3% permanent COLA or the 95% benefit for
the retiree.
Tim Helder: I don't know what everyone else's thoughts are but I almost think that we need to
not move forward on the widow's benefits since this other thing is already in motion. Then once
we get that information we can act on one or both or whatever. Because he is doing the restudy
not figuring in the widow's increase right?
Eldon Roberts: Right. If we do not receive something within a month I will call him back and
ask him to please get us that information by our next regularly scheduled meeting.
Mayor Coody: But if he does write back and say because you didn't increase from 90% to 95%
and because you didn't increase the widow's benefit then a 3% COLA looks good we are back to
where we started again.
Tim Helder: We can go ahead and act on the widow's benefits and make a call back to him so
that he can figure that in. We will have three months before we meet again and he could figure
that in. What do you all think? I would really like to see the widow's benefits talked about. If
we felt like we needed to move forward on the widow's benefits that would give ample time for
him to include that in on this study.
Eldon Roberts: There is an actuarial study that should be out this month also.
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Board of Trustees Meeting Minutes
April 13, 2006
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Steve Davis: The every two year required study.
Sondra Smith: They did not give me a time frame on how long we can wait on increasing
benefits from the cash flow study. I don't know if after the April study comes out if you can't
use the cash flow study any longer or if you can continue to use it for as many months as you
want to. I asked that in the letter that I sent to David Clark at PRB but did not get an answer
back on that question.
Jerry Friend: My thought is that if we do not do anything with the widow's today and we wait
until this COLA study comes out and he says we can do a COLA are we going to vote for that
and forget the widow's? To me the widow's are more important and then maybe the COLA next
and then down the line the 5% increase. I would like to go ahead and talk about the widow's
increase today.
Sondra Smith: Is that a motion?
Jerry Friend: Yes I will put it in the form of a motion. I don't know how many times we are
going to have to do this.
Kit Williams: We did vote on it already once right.
Jerry Friend: We did.
Sondra Smith: It failed because we did not have 6 out of 7 votes to pass it according to the
PRB rules.
Jerry Surles: I don't know how that becomes the majority, 6 out of 7.
Eldon Roberts: This State law particularly says 75% of the Board and that rounds out to over 5
people and then you have to round up.
Jerry Friend: We thought it passed and we told everybody it passed.
Kit Williams: Now we have been informed that it takes 6 out of 7. That is what the State people
tell us. Because it in fact failed you are actually doing a motion to reconsider I think so someone
who voted against it, one of the three that voted against it would need to make the motion to
reconsider rather than somebody that originally supported it.
Tim Helder: The motion had two things in it.
Sondra Smith: I will read you the motion. I also for your benefit downloaded the Arkansas
Fire and Police Pension Review Board Rules so that you would have them. It states in those
rules the local Board of Trustees must adopt a resolution to raise benefits to the new amount the
resolution must be signed by three fourths of the membership of the Board, at least 6 of 7
members must sign. That is in their Board rules. I thought a majority vote after you had
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Board of Trustees Meeting Minutes
April 13, 2006
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requested the study was sufficient to pass an increase and I think everyone else did too but it was
not. That is the reason I wanted clarification before we increased the benefits.
Mayor Coody: What was in the motion?
Kit Williams: It was just to increase the widow's wasn't it?
Sondra Smith: There was a motion made to go from 50% to 90% of benefits for the widow's.
Those voting against the motion to go from 50% to 90% were Mayor Coody, Eldon Roberts and
Dr. Mashburn.
Kit Williams: So one of the three people that voted against it would have to do a motion to
reconsider because it has already been before the Board and it has failed.
Mayor Coody moved to reconsider the motion increasing the widow's benefits from 50% to
90%. Tim Helder seconded the motion. Upon roll call the motion passed unanimously.
Kit Williams: So you are back to square one.
Mayor Coody: The question I have is going from 50% to 90%, if a couple is getting the 90%
benefit and the husband dies the widow gets that same 90% and instead of paying for two people
they are now just paying for one person, is that right?
Sondra Smith: Unless she remarries is that correct?
Kit Williams: If they remarry they lose it I think.
Eldon Roberts: Yes, it stops. If the policeman himself remarries because of his wife passing
away they have to stay married 10 years.
Kit Williams: I thought that was an option that you all had, did you pass that.
Eldon Roberts: I think it is State law that if they were married 10 years and he passes away his
new spouse could get his benefit.
Sondra Smith: We need to check the State law on that.
Mayor Coody: The reason that I am concerned about giving all the benefits that everyone wants
is that the fund is going to run out of money and then we are left with two options, having to go
to the voters to raise taxes to fund the pension fund and make up the short fall or cut benefits.
Neither one of those are decent scenarios. I also tend to be on the fiscally conservative side and
draw out as much as you can that doesn't hurt the program in the long run. The long run is what
we have to look at here, longer than just us in the room, that's why I said 80%.
Kit Williams: It is pretty much based on these guys' lives; well I guess their wives lives.
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Board of Trustees Meeting Minutes
April 13, 2006
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Mayor Coody: I would not want your wives to have a cut in benefits. If we are at 90% and we
run out of money then there is a problem, that is more likely than if they are at 80% of benefits.
Dr. Mashburn: The wives are going to live longer.
Mayor Coody: Yes that is true. But, 90% funding two people isn't as good as 80% funding
one. So I still think 80% is not an unreasonable benefit for a widow because she only has to pay
for herself.
Mayor Coody moved to increase the widow's benefits from 50% to 90%. Eldon Roberts
seconded the motion. Upon roll call the motion passed unanimously.
Sondra Smith: You need to make a motion as to when this increase will go into effect.
Eldon Roberts moved to have the increase effective May, 2006. Tim Helder seconded the
motion. Upon roll call the motion passed unanimously.
Kit Williams: Do I need to make a resolution to that affect?
Sondra Smith: It would be good if you did so we can send it to PRB.
Resolution 01-04 Requesting a Cash Flow Study:
A copy of Resolution 01-04 was given to the Board.
Letters Regarding the Benefit Increases:
A copy of the letters and response that was sent to PRB was given to the Board.
New Business
Board Member Elections for 2006:
Sondra Smith: You normally have some lady do a telephone poll vote.
Jerry Friend: In the absence of Randy someone needs to get in touch with Ms. Murphy and let
her do the poll vote. Who is up for election?
Sondra Smith: Jerry Friend and Jerry Surles.
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Board of Trustees Meeting Minutes
April 13, 2006
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Jerry Friend: Eldon do you have time to contact Ms. Murphy and tell her who is up for election
and then anybody that she calls can nominate someone else.
Eldon Roberts: I think that is the way they have always done it.
Kit Williams: Since we are having another vote and the State law has changed, I think Dr
Mashburn has to be replaced by a retiree since they have changed the law and they do not allow
a physician.
Sondra Smith: His term is until 2007.
Kit Williams: Well, I read their letter; the only thing that makes me concerned is if there ever
was an issue where his vote was the critical vote I am afraid someone could challenge us. As
long as you can be unanimous we have no problem. I will leave it up to you, usually whoever is
in that position can stay in that position until their replacement is selected of course that does not
mean you can get a new seat on the Board. That is not always true, if an Alderman is
representing the City and then moves to a different ward he is still in the City but will have to
resign. Occasionally the disqualification is more immediate. I do not know what the answer is
in this particular case. That makes me nervous not knowing what the answer is.
Jerry Friend: How would you know what the answer was?
Kit Williams: When we get sued and the judge tells us. The answer could be that Dr.
Mashburn serves until his replacement is validly selected. It is whatever you think This really
will not come to a head unless there would be a controversial vote. There is a potential issue
there and I do not know how it would be resolved.
Eldon Roberts: I read what they wrote back to us and they told us we could do however we saw
fit. I am for Dr. Mashburn staying on the Board until his time runs out in May, 2007. I am
comfortable with him fulfilling his term.
Jerry Surles: I just hate to see us throw him out in the cold.
Sondra Smith: Kit does the new law state the term end date for that position? There will be
three terms that expire next year, Tim Helder, Eldon Roberts and Dr. Mashburn.
Kit Williams: There will just be two terms that expire one year and three terms that expire the
next.
Mayor Coody: If we leave Dr. Mashburn on the Board then there is no action that is necessary.
Sondra Smith: Not today regarding Dr. Mashburn.
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Board of Trustees Meeting Minutes
April 13, 2006
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Act 2094 Disclosure of Gifts:
Sondra Smith: This is a new act and the Mayor has to certify that you have not received any
gift as serving on this Board, and then Mayor Coody had to sign the form.
Kit Williams: I will try to find that act.
Sondra Smith: We also need to see if they need to fill out an affidavit every year stating they
did or did not receive any gifts.
Mayor Coody: It is gifts specifically from investment managers.
Kit Williams: Right, from current or potential investment advisors or managers.
Mayor Coody: Elaine gave us a note saying she had not given you all any gifts. That was good
enough for me to sign the affidavit. Kit can look up the law and let us know.
Kit Williams: My recommendation is that you just let them know. If you received a pen let
them know. It states they shall attest by written affidavit.
Jerry Friend: When does that become effective?
Sondra Smith: In 2006 you have to report on what you received last year, 2005.
Mayor Coody: An affidavit is a legal document isn't it?
Kit Williams: You swear to it so you sure want to swear correctly.
Trish Leach: It is part of the PRB report that we have to send to the sate that was due by the end
of March, we had to do it this year. Elaine sent a letter stating that she had not given anyone any
presents.
Kit Williams: I would recommend that we amend that report to say we got pens.
A discussion followed on the new law.
Sondra Smith: If we received any pens it was probably before that law was passed.
Mayor Coody: Let's call Elaine and let her know not to send us anything.
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Board of Trustees Meeting Minutes
April 13, 2006
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Discussion on the length of meetings:
Jerry Friend: That was put on at my request. A couple of times we have rushed through a
meeting. I would like to be able to if we have something to vote on and the Mayor needs to
leave that we move the agenda around for his benefit so he can leave and then we can take time
with the rest of the meeting.
Sondra Smith: Also I think we have rushed Elaine sometimes.
Mayor Coody: That is a flaw of mine, I like short meetings.
Jerry Friend: I am a slow thinker so I have to have a slow meeting. We have the freedom to
move things around and get the important things done.
Kit Williams: Then you would need to have the investment report always last because there is
normally no voting on that although we did this time.
Mayor Coody: I will make it a point to calm down and try to relax a little bit.
Jerry Friend: That is my request that we take a breath and be able to listen to Elaine.
Arkansas Fire and Police Pension Review Board Rules:
A copy of the Arkansas Fire and Police Pension Review Board Rules was given to the Board.
Meeting Adjourned at 2:25 PM