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HomeMy WebLinkAbout2005-07-21 MinutesPolicemen's Pension & Relief Fund Board of Trustees Meeting Minutes July 21, 2005 Page l of 5 Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 21, 2005 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board was held on July 21, 2005 at 1:30 p.m. in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. Eldon Roberts called the meeting to order. Present: Eldon Roberts, Jerry Friend, Dr Mashburn, Jerry Surles, Sondra Smith, Kit Williams, Trish Leach, Accounting, Elaine Longer and Kim Cooper with Longer Investments. Absent: Mayor Coody and Tim Helder Approval of the Minutes Approval of the April 21, 2005 Meeting Minutes. Eldon Roberts: Kit, did we hire an attorney to represent us in the TIF lawsuit? Can you tell us if there has been a ruling on that? Kit Williams: The attorney has been hired. There has not been a ruling. We had a meeting and I am still trying to get everyone to agree on the stipulated facts so that we can keep the expenses down. We will have a meeting next week, the Depaltment of Finance and Administration has been brought in because they are the ones that will be asserting that the 25 mils should not go into the TIF District. There has been a new law passed by the legislative that says it is suppose to go in there. There are a lot of procedural issues about which law will take affect, when it will take effect and does it affect our plan or not. Jerry Friend: I thought at our last meeting a new law had been passed not to put the money in there. Kit Williams: For you all, however there was a law that was passed, that I was not aware of at that time, that has an emergency clause so it went into effect immediately. It went into effect before that TIF law, and it said that if you have an ordinance that was not a general and permanent ordinance, it took effect immediately. Every time we turn around it gets more complicated. I will let the judge figure that out, we will make our argument to the judge and let him tell us what the law is. I hope to get the stipulated facts agreed to next week and if we can do that then we can file a motion for summary judgment and have it start moving up through the court system. Eldon Roberts: Are we paying the attorney by the hour. Kit Williams: Yes. I don't think he has much to bill at this point in time. Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes July 21, 2005 Page 2 of 5 Jerry Friend: Are you looking at a year or more? Kit Williams: I think the local courts will decide fairly quickly but then we have to go to the Supreme Court because you can not get a definite ruling on this until the Supreme Court has spoken. Jerry Friend moved to approve the minutes. There was no second to the motion. Upon roll call the motion carried 5-0. Approval of the Pension List Approval of Mav, June and July 2005 Pension List Sondra Smith: We had one pensioner that deceased in May which was Harold Flowers. You will see funds paid to him on the May report but not on the June and July report. Kit Williams: He didn't have a surviving spouse? Sondra Smith: No, he did not. Eldon Roberts: I have been in touch with Sondra on this. There were some people that thought they should draw his benefits. Thank heaven for the affidavits that we send out each year, he listed a nephew and a care giver on his affidavit but they did not qualify. Doctor Mashburn moved to approve the Pension List for May, June and July, 2005. Eldon Roberts seconded the motion. Upon roll call the motion passed 5-0. Longer Investments Investment Report Elaine Longer: We have an update in here because so many things have changed since June 30th. Page 6 is the updated report through July 15th. On June 30th you were still showing about $370,000 in cash and that has all been invested at this point. A number of things have happened since June 30th, but mostly the earnings numbers are coming through real good. There was a big question coming off the first quarter earnings whether or not the second quarter would be weak or the outlook uncertain. In the first quarter the earnings were okay but the outlook was cloudy. That caused the market to stay in the second quarter and we basically did nothing. The earnings estimate on the S&P 500 had gone up to 73.50 and the ten year yield was below 4% when we wrote the second quarter newsletter so the valuation stretch between stocks and bonds was stretched even more. Since we closed the quarter, month to date the S&P is up over 3%, so a lot has happened since June 30th. What we are hearing is that the outlook looks good so that is what has brought the market backup to about 10,650 on the DOW. You are over the 50% range in stocks, you are about 51.1%. You approved a 5% overage amount for equities. That is real helpful because we don't have to sell something unless we bump up against the 55%. Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes July 21, 2005 Page 3 of 5 Jerry Friend moved to approve the overage in equities. Jerry Surles seconded the motion. Upon roll call the motion passed 5-0. Elaine Longer: Page 11 shows your realized gains year to date they are about $133,000 and net income is about $145,000. Page 12 is a summary of your bond holdings; you have a weighted average yield to maturity of about 4.8% within a maturity range of 5.9 years. That compares to the ten year treasury which is about 4.25% with a ten year maturity. You still have a very high income yield within a very moderate average maturity. The number that is most important is how many of your bonds mature within the next one to three years, this is as good as cash to us. You are fully invested but you have 33.5% of your bonds held in the very short maturities which we can sell and lengthen maturities and go out longer and get higher incomes as these interest rates increase. I think with the break down that we have had in the bonds today that is a good sign that we will be getting better yields out there in the 10 year maturities in the not too distant future. I really like the way that we are structured right now and you still have a fairly high income even though we've got such a short maturity structure. Page 13 shows your largest holdings. Page 14 is your industry weighting. We are overweight the capital goods sector, that is the area that is up the most today. Consumer cyclical's are about even weight and we are underweight the consumer area. We think the real strength in the economy is in the capital sector. Corporate America is very healthy compared to household America. The household sector is so heavily indebted and cash flow needed to service that debt is really quite stretched. On the corporate side you have balance sheets that are in the best condition they have been in since World War II and they have very ample cash flow. That is why we have seen dividend increases of almost 20% year to date. We are overweight in the energy sector. The total financial sector is about equal with the S&P 500, we are a bit overweight on healthcare and we are slightly overweight on technology. The technology sector is beginning to deliver excellent earning surprises and several of them meet our valuation parameters which are pretty stringent. Page 19 shows contributions and distributions, basically there have been no contributions this year and the distributions this year have been $585,000. Page 20 shows the returns, the bottom line here is the year to date through June 30th. Through June 30th you were down about 1% year to date and as of this week you have pulled into the black. The average annual return inception to date is still well above your 6%, at 6.9%. The account reconciliation shows $5.032 million total investment return since inception. We had a pretty sluggish start to the year the first quarter was down in every market, bonds and stocks, the second quarter the bond market recovered because the longer term interest rates came down in the 5-30 year maturity, even though the Federal Government was raising the short term rates. Now what we are seeing is a recovery in the first three weeks of July. There are more sectors that are beginning to perform and deliver good results. Kit Williams: Why has the financial not moved? Elaine Longer: Typically they are hurt by rising interest rates. They borrow short term and lend long term, as the short term rates come up their cost of money goes up faster than their loan interest rates go up so their interest margin in the short run tends to get squeezed when interest rates are going up in the short end. Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes July 21, 2005 Page 4 of 5 Old Business Benefit Increase: Sondra Smith: I sent a letter and a copy of the resolution to the Pension Board requesting the benefit increase and that the actuarial study be completed. They will bill us and after they receive our payment they will start the study. It might be after our next meeting before we hear back from them. Eldon Roberts: This would actually take you to 100% of salary the day you retired plus the COLA. Hiring of the Attorney for the TIF Lawsuit: A copy of the filed lawsuit was given to the Board. Income Tax Refund Letter: Sondra Smith: Trish and Wendy in Accounting have worked hard to get the information together. The goal is to try to have the letters out by the end of next week, there is a sample letter in your packet. We are going to add a block that they will check if they agree with the information that Accounting will be submitting to the State. The pensioners that do not qualify will also receive a letter letting them know they are not eligible. Trish Leach, Accounting: We will submit the information to the State for the retiree that qualifies. It will take the State three to four weeks after they get the information to make the calculations. We expect it to take about six weeks after we send the information to the State for the pensioner to receive a check. 2005 Election Results — Tim Helder and Eldon Roberts: Sondra Smith moved to approve the newly elected Board members, Eldon Roberts and Tim Helder. Jerry Friend seconded the motion. Upon roll call the motion passed 5-0. New Business Act 386 Sondra Smith: Act 386 states the Pension Board will change from four to five retired members. There will no longer be a physician on the Board. It also states that one of the Police Pensioner's will serve as secretary of the Board for a period of two years or until his or her successor is elected and qualified. Kit Williams: Probably when this act goes into effect the physician will be replaced by a retired pensioner. When they use words like shall, those are mandatory words. Policemen's Pension & Relief Fund Board of Trustees Meeting Minutes July 21, 2005 Page 5 of 5 Jerry Friend: Maybe the idea behind this is that most Pension Boards are like us there are very few active members and they probably thought there is no longer a need for a doctor. Eldon Roberts: It will load the Board now more heavily with police officers. Sondra Smith: This law does not take affect until August 12th. It will be in affect by the next meeting. A discussion followed on Act 386. Jerry Surles moved to elect Eldon Roberts as secretary of the Board. Jerry Friend seconded the motion. Upon roll call the motion passed 5-0. A discussion followed on replacing the physician that serves on the Board. The Board decided not to replace the physician at this time. Wendell Johnson Affidavit: Sondra Smith: We have not received an affidavit from this pensioner. His attorney has contacted me and assured me that he is alive and has no minor children or spouse. Harold Flowers — Deceased May 11, 2005: A copy of the Harold Flowers obituary, affidavit and funeral benefit check was given to the Board. Other: Eldon Roberts: Have we received our turn back check? Sondra Smith: When they sent me the pension list they still has not received the supplement funds or the turn back funds. Meeting Adjourned at 2:50 PM