Loading...
HomeMy WebLinkAbout2003-01-16 MinutesPage 1 of 12 Police Pension Board of Trustees 1/16/03 minutes MINUTES 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. Johnson, 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 12 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. INVESTMENT 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 I 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 1 did some more research and 1 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. Ms. Longer: Okay of the first page of your report is the current portfolio, well it's not current it's as Page 3 of 12 Police Pension Board of Trustees 1/16/03 minutes 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 mutual 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 ''/2% dividend yield, because we think that there's some chance that President Bush's package, part of it will get past with eliminating double taxation of dividends. What that is going to it will make the dividend streams from stock investments more valuable than it is now, subject 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 you're 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 haven't got enough people here right now. 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. Page 4 of 12 Police Pension Board of Trustees 1/16/03 minutes 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 here is 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 be set 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 rut 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 a long time ago and I don't know if it's ever been done. I wouldn't know how to do it if it is in there so we struck it out. But that's just for your review and as I said it's 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. Mr. Longer: The thing is, the only way to avoid flat years is having completely out of stock and Page 5 of 12 Police Pension Board of Trustees 1/16/03 minutes 100% bond. Because the bond return in the last three years has averaged about 9% plus, of course that's been offset by equity 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, so 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 it's happening. So we're trying to just kind of jockey in there to get position as much as possible. But you really can't advocate leaving 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 it's 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 equilibrium 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 it's proposed or even close it is going to be good for stock, at least for a quarter 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 decline in the bonds more than offset the income that was generated so 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 worked 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: Another 1991 is all we need. Ms. Longer: That's right. You know there were rumors out there about Hussein's going into exile and things like that. If something like that happened or if it became very apparent quickly that we weren't going to be there long I think you could have that actuarility right back. Because a lot of people have sold clown to the point they hold what they know they can go through war and uncertainty with. It feels every much like 1990. Page 6 of 12 Police Pension Board of Trustees 1/16/03 minutes Bradley: 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. This war with Iraq does not have very many people behind it, as matter fact I've 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 Britain's 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 Roberts: Okay like right here. Today we had a pension list approval, this one is January 2003. But 1 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 Page 7 of 12 Police Pension Board of Trustees 1/16/03 minutes 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 it's 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. The total amount of money this is going to be out. 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. Bradley: 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. Bradley: 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 dollars or whatever. 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? Page 8 of 12 Police Pension Board of Trustees 1/16/03 minutes Gina: I'm thinking its 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 sell 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 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 haven'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 turn back check that comes in every August or September has a hundred fifty, Page 9 of 12 Police Pension Board of Trustees 1/16/03 minutes 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 that 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 months we don't get a 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 turn 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 it took guess that's the total for the whole year though. That $429,000. We need more than that now for 2003. Bradley: We need more than that already that's just what ya'll need. Roberts: Yeah, that's right. We need 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 $8,000 a month, $96,000 more a year. Probably another $100,000 just on these two guys. I just thought the insurance turn back checks came straight to you all and you did what you do with our money and then the contributions that we pay out of our paychecks I guess they go into that account as well. Page l0 of 12 Police Pension Board of Trustees 1/16/03 minutes 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 they are really not crazy about selling. But we've got to have the money so we have to sell it. Bradley: We might need to take some kind of action, 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 think the cash is just sitting around but, we really never have cash balances, cash just doesn't stay that long, there's always something better than cash in my opinion. In fact everyday I think we are covering an overdraft before three o'clock. Robert: 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 these people more time. We don't have a problem with calling these folks up and telling them we need money because that's what the name of 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 have the cash funds just sitting around that they can just write a check out of to cover that. They have to start raking and scraping and hurrying and scurrying and trying to sell something to generate that needed 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 to pass this information. Ms. Longer: The other alternative is we can always block $100,000.00 that doesn't even show on your trade, we just put it in the restrictive account and it is always there. But then it is earning a lesser percent. Page 11 of 12 Police Pension Board of Trustees 1/16/03 minutes 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 are 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're going to have to have some more money in there and that would give you 30 days if we do the three months thing and tell them to give us some money. I 'm' m like Randy, I don't want it sitting around in cash and that's probably what they think. That is probably 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 in the bank before we write the checks. 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. Bradley: It's too bad our contributions don't equal our expenditures. Roberts: Can you imagine only four people working down there, in terms of confusion how that amounts to. 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 that comes your way. Page 12 of 12 Police Pension Board of Trustees 1/16/03 minutes 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 mail 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. Roberts: The next meeting is third Thursday in April, whatever day that is, 16th or 17th I can tell you that. Hopefully more people on board here and the weather won't be so messy. Ms. Longer: We've got extra copies of that policy so if they want to see it before we come back in and they may have questions that need further discussion. Roberts: What's going to happen with the City Clerk, I understand Sondra. is interested in it. Bradley: Are you interested? Gina: No. I live outside the city limits. They are going to take applicants until the 21st 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. Roberts: A lot of responsibility and a lot of hours. Ms. Longer: 1 know so many times we've called for minutes to the prior meeting to be able to read those before this meeting and she'd be working on them at home at night, and still not have them done. 1 know that it's a round the clock job, isn't it. Roberts: That's true. Meeting adjourned at 2:50 PM.