Loading...
HomeMy WebLinkAbout2003-04-24 MinutesPolice Pension April 24, 2003 Page 1 of 5 Police Pension Board of Trustees Minutes of a Special Meeting April 24, 2003 A special meeting of the Fayetteville Police 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. PRESENT: Eldon Roberts, Randy Bradley, Jerry Surles, Jerry Friend, Dr. James Mashburn, and Sondra Smith, City Clerk. MINUTES: Approval of the January 16, 2003 minutes: Randy Bradley moved to approve the January 16, 2003 minutes as amended. Dr. Mashburn seconded. Motion carried unanimously. Approval of the revised minutes from October 17 and July 18, 2002: Jerry Friend moved to approve as amended the minutes of the July 18, 2002 minutes and the October 17, 2002 minutes. Randy Bradley seconded. Upon roll call the motion carried unanimously. ELECTION: Election of Policemen's Pension and Relief Board of Trustees: Dr. Mashburn moved to approve the election of Jerry Friend and Jerry Surles to the Police Pension Board with a term end date of April 30, 2004. Randy Bradley seconded. The motion carried unanimously. Randy Bradley moved to elect Dr. James Mashburn to serve on the Police Pension Board with a term end date of April 30, 2005. Jerry Friend seconded. The motion carried unanimously. OTHER BUSINESS: LOPFI Discussion: Jerry Friend: The way he talked the other day it was not cut and dry over here. Eldon Roberts: I do know it is for the LOPFI people. If you vote to move our plan in with theirs, I don't know if we are going to be governed by the same set of rules or not, but the City is obligated to pay whatever it takes to keep the LOPFI plan a float. Police Pension April 24, 2003 Page 2 of 5 Jerry Friend: I think if we move the LOPFI that once the deal was done then we would be good forever. The actual move the way Mr. Davis talked, to get them to take this plan they are going to say to the City you are going to have to pay all this money. Eldon Roberts: The City Council would have to sign off on this as well as this Board. I think they would be willing to take on that unfunded liability, but they amortize it over 30 years. What they are looking at if I understood Steve right, next year or the year after that there is a law that governs the City's principle's or policies in the state of Arkansas and it is a violation of law for the City to operate in the red, they have to have a budget in the black each year. They law is going to change the City's bookkeeping principles and the City will have to show the old Fire and Police plans unfunded liability which is roughly $9 million between the two of them as a debt. I guess it would affect how they are able to do bonds, but to me they are in violation of a state law that says they cannot operate in the red. Dr. Mashburn: Eldon what is the pay for LOPFI. Eldon Roberts: It is set by state law. The City just this last go around increased, they went to what they call Benefit Level II for LOPFI, they have to have 28 years in now before they can retire and get their full amount, it is around 80%, but they have a guaranteed 3% COLA compounded every year. At one time it was just 3% of your salary, but now it is compounded. A lot of the guys that are on the new plan thought we were lucky because we are getting 90% of salary now then they are beginning to quiet down because they know we have gone down a couple of million, they have moved up to 80% plus a 3% COLA, they have gotten some changes made in this last legislature session that was in their favor, now they are not so concerned that we have a better plan than they do. Dr. Mashburn: If they switch this plan to LOPTI will they still pay the same benefits? Eldon Roberts: I asked Steve Davis when he hit me with this the other day, what will that do to the benefit level that people are currently drawing. He said not one thing; it will stay just like it is. This unfunded liability is tied directly to the benefit, so whenever LOPFI takes on this deal they will realize this debt matches this 90% of salary. I have read the law and it pretty much states that if the old plan consolidates with LOPFI, there is no change in any benefit, the board cannot discriminate against any one individual or any group of people that is in the plan and no changes can be made. A lot of people want to know why would LOPFI want to take on that $9 million debt, well they are not taking on that debt, they are not the ones paying that debt, the City is, LOPFI will be making a little money to manage the plan, %z of a percent. Dr. Mashburn: Is the Fire Department still in their independent plan or are they going to LOPFI or to something like LOPFI? Sondra Smith: Steve Davis has made the same presentation to them. Police Pension April 24, 2003 Page 3 of 5 Jerry Friend: That's what I heard Steve say is the City had to make up any shortage. I am asking myself why the City Board would vote to pay good money to help us keep 90% when all they guaranteed us was 50%. Jerry Friend: If LOPFI says we will take their plan but we need $500,000.00 to keep them at 90% then what is to keep the City from saying no we can't do that. Eldon Roberts: You are not going to need $500,000.00 you are going to need four something million, amortized over 30 years. Jerry Friend: If I was an elected official, I would be thinking how am I going to tell people that I voted, we only guaranteed these guys 50%, here I am using their tax money, and living high on the hog. That's how some of them are going to feel. That is my worry. Dr. Mashburn: The last three years have been downer years, until that point we were looking good and doing great. I do not know how much longer it will remain like the past three years. I can't see the next 10 years remaining that way, I think sometime and I don't know whether it will be sooner or later, but I think during the next 10 years you are going to see another period of good times and it will go back up. Whether the bad times remain long enough that we continue to go broke in the meantime who knows. Eldon Roberts: Everybody speculates, but if the City agrees to keep our benefit at 90% of salary from now on until the last person draws it, irregardless of what the market does, but then over here if we keep it here locally, and it goes on for five more years, who is going to step up to the plate here and make that difference or who is going to come along and say okay let's cut benefits back to 50%. I don't know the answer to that. Jerry Friend: What if we are over here and things turn around and we can get 200%. Eldon Roberts: This is the bird in the bush. Jerry Friend: What if the bird in the bush and things turn around and we can say we can get 200%. Eldon Roberts: We can get more that 100% of salary but it has to go through Little Rock down there and you have to be actuarially sound and we are $4 million in the hole. We are not going to be actuarially sound tomorrow folks. Dr. Mashburn: It is too bad we didn't get 100% raise. Eldon Roberts: That is what we should have done; we were authorized to do that. They recommended in the letter that we go 90% but that we were allowed to do 100% of salary. You won't find very many people that retire at 90% of their salary. We just need to find out more. Police Pension April 24, 2003 Page 4 of 5 Dr. Mashburn: Could we get LOPFI to come up and give us a presentation. Jerry Friend: I would like to get the information from the City and let LOPFI look at it before they come up. Dr. Mashburn: Eldon you stay on as an advisory to us. Eldon Roberts: I intend on coming to the meetings, I will not have a vote, but I intend on coming to the meetings and listening to what goes on. I don't have a clue as to what to do here either, none of us do, and we just don't have enough information. I just threw out some things I think we need answers to. If somebody comes in here and sits down and tells us if LOPFI takes our plan, and this board votes to do it and the City Council votes to do it and it is a done deal it goes down there, that LOPFI is governed under the same rules and principles with us old retired people if they turn over to LOPFI as the current LOPFI members, which is that they continue to pay those benefits, if the plan goes down financially the City pays more. The reason it came into existence was these old plans were faltering in the late 70's and early 80's and that is when they did away with and stopped all these old pension plans across the state and created a new LOPFI system for every police officer and fire fighter that went to work January 1, 1982. They set up that rule that the Cities would pay whatever LOPFI actuarialist said they would owed to keep them going. Randy Bradley: That doesn't sound right to be paying 40% to one police department and 90% to another. Eldon Roberts: We are not using LOPFI's money to pay us, they are going to take our assets that we have invested and the City is going to keep paying on that unfunded liability. LOPFI is not paying one dime's worth of debt. The City will have to pay towards that unfunded liability, but it will be a number that they can live with. Randy Bradley: So it will be coming out of what remains in this fund. Eldon Roberts: What do you want me to do from this point on? Jerry Surles: Wait until we hear back from Steve Davis. Randy Bradley: In the meantime if you have time and don't mind can you talk to someone at LOPFI. Eldon Roberts: Okay. Cathryn can tell me and I would take it to the bank what she tells me, she has been down there and she knows what is going on. Jerry Surles: If we are moved down there to LOPFI, is the City obligated to pay 90% of my benefit that I am receiving now until it no longer needs to be paid. Police Pension April 24, 2003 Page 5 of 5 Eldon Roberts: She can tell me that, she may also be able to tell me what happens if we don't move it down there and we sit right here and we finally get to the point that we are not financially sound enough to continue paying these benefits at 90%, does the City come in and start making up the short fall or do they do they come in and say we are going to keep paying but only at 50% of what you were promised when you went to work here. Randy Bradley: Do what we can before the next meeting and let us know what you find out. Eldon Roberts: The 3% COLA, for everybody to get a 3% raise on your pension somebody has to pay that, it has to come from somewhere. A discussion followed on COLA. Eldon Robert: The person that did the actuarial evaluation for the state plan said several years ago that if we just continue to maintain 6% return on our plans we would be okay. We may be now when you average that all in. I am pretty sure that they were talking about at 50% of salary, and then we jumped up and increased our benefits to nearly double. I think some people think that as long as we can average 6% on our returns according to those actuarial figures that we are going to be okay, that is way before we even increased to 55% and then on up to 90%. It would be hard to say that the 6% would keep carrying you along when they figured it on 6% of benefits. Jerry Friend: I am not sure he did, did we not have an actuary when we gave that raise. Eldon Roberts: We had to have and we were strong enough then to pass it, but I am just saying I don't think 6% will be enough to carry us along the long haul since we nearly doubled our benefits. He projected that out on a sheet of paper for every year up through way up into the 2000's and showed how much money we should have in the plan, total assets and we where ahead of that and that was at earnings of 6%. It made it look like we were okay and we probably were, when we were paying 50% of salary but then we nearly doubled that. Randy Bradley: 6% of nine million is $540,000.00 we pay out a lot more than that a year. Eldon Roberts: I believe that the paper was fair on it's face had benefits remained at 50% of salary. Eldon requested a copy of the report that Steve Davis is completing when he gets it done. Meting Adjourned at 2:25 PM.