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HomeMy WebLinkAbout2008-01-17 MinutesBoard Members Mayor Coody Chairman Sondra E. Smith Treasurer Eldon Roberts Secretary/ Retired Position 1 Jerry Friend Retired Position 2 Tim Helder Retired Position 3 Melvin Stanley Retired Position 4 Frank Johnson Retired Position 5 ale evit e ARKANSAS Policemen's Pension and Relief Fund Meeting Minutes January 17, 2008 Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 1 of 12 A meeting of the Fayetteville Policemen's Pension and Relief Fund was held at 1:30 PM on January 17, 2008 in Room 326 of the City Administration Building Mayor Coody called the meeting to order. Present: Mayor Coody, Melvin Stanley, Tim Helder, Eldon Roberts, Frank Johnson, Jerry Friend, Sondra Smith, Kit Williams, Amber Wood, Trish Leach, Accounting, Kim Cooper of Longer Investments. Approval of the Minutes: Approval of the October 18, 2007 Meeting Minutes Eldon Roberts moved to approve the minutes. Tim Helder seconded the motion. Upon roll call the motion carried 7-0. Approval of the Pension List: December, 2007 Pension List Mayor Coody: Any changes? Sondra Smith: There are no changes to the December list. The January, February and March Pension list are different because of the COLA. Eldon Roberts moved to approve the December Pension List. Jerry Friend seconded the motion. Upon roll call the motion carried 7-0. December, 2007 Pension List Approved Mayor Coody: The January, February and March lists changed because of the COLA. Is there any other news on that? Tim Helder moved to approve the January, February and March Pension List. Eldon Roberts seconded the motion. Upon roll call the motion carried 7-0. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 2 of 12 January, February and March, 2008 Pension List Approved New Business: 2008 Pension Elections Sondra Smith: There are two terms that expire at the end of May. The two people that are up for election are Jerry Friend and Frank Johnson. I will be sending letters out April 1st and will ask that the ballots be retuned by the end of April. That will give us a little bit of time to ask the one's that are elected if they are willing to serve and if they are not willing to serve that will give us time to do something different. Kit Williams: When you send your letters out is that just for nominations or is that the actual election? Sondra Smith: That's the actual election. It's just a ballot and they mark who they choose. Last year the state law changed and the widows are not eligible to serve on the Board but they are eligible to vote for the Board members. Tim Helder: The letter you are sending out will be an inquiry of who is willing to serve? Sondra Smith: We send a letter with the ballot that states the two terms that are expiring. It also states the three terms that are not expiring can't be elected because they're already serving on the Board. We attach a list of all the pensioners excluding the widows and they can look at that list and determine who they want to fill those two open positions. Kit Williams: So they vote for two then? Sondra Smith: They vote for two and it is real clear on there that you need to select two. I think it is position two and five and it will say position two and position five. Tim Helder: It will show who is holding those offices at the current time? Sondra Smith: The cover letter shows who's holding those offices at the current time and that they are eligible for re-election. Tim Helder: Okay. Sondra Smith: We send a list of the pensioners. It doesn't include widows. They can look at the list to decide who they want to serve on the Board. The ones that are currently serving that can't be elected which would Tim, Eldon, and Melvin we don't put your names on the list. Kit Williams: Don't put the widow's names or their names on it. Sondra Smith: Right. Jerry Friend and Frank Johnson's name will be on the list. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 3 of 12 Eldon Roberts: Is there anyway that can get confusing as to which position you are voting for? Do you understand what I'm saying? Sondra Smith: We talked about that but I don't think it really matters. Eldon Roberts: As long as you vote for two people. Kit Williams: We are just going to say the two top voter getters. Eldon Roberts: Will fill those two positions. Kit Williams: You're not running for positions. Sondra Smith: Right. Eldon Roberts: Okay. So if you just put two names on there for position two or position five two people is all you are voting for. Sondra Smith: Right. That's all you're voting for is two people. We can put those two people in which ever position we want to. It will say position two or position five but it won't make any difference because their term end times are the same. Frank Johnson: When you distribute the current composition of the Board with the two positions that are expiring that's not the same as a ballot is it? Sondra Smith: No, but there is a ballot too. There is a cover letter, the second page is the ballot, and third page is the list of pensioners. Tim Helder: So they will write in on the ballot. Sondra Smith: They will write in on the ballot and return it. We send a self addressed envelope with the City Clerk's Office on it so all they have to do is write in the names of who they want to serve on the Board on the ballot and then mail it back in. Tim Helder: So you will have it in rank so that if there were three top vote getters you would call number one and if they say I'm not serving on that crazy board. Then you just drop down? Sondra Smith: Yes. We have an excel spreadsheet for every person that gets voted on and how many votes each person gets so I can keep up with it. I have someone in the office check it. We just start at the top and if they are willing to serve then they are elected. If someone is not willing to serve then I go to the next person with the most votes. I will let you know if any one won the vote but are not willing to serve at this time. Kit Williams: What I would like for you to do probably by motion is just to say that's a good procedure for you, because you could do other procedures. You could do it by position, you could require nominations, this is the simplest procedure for the clerk but I want to make sure you all are satisfied. I don't think there's anything in the law that says how you do it. It says when you do it and who's eligible but it doesn't say exactly how you do it. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 4 of 12 Sondra Smith: I think we did that in 2006. Kit Williams: I just want to make sure everyone's still satisfied. Melvin Stanley: Wasn't there some confusion when I had to go through this that some of the people didn't want to sign their ballots? Did that get straightened out? Sondra Smith: What we did in the past was a mail merge so the pensioners name would be on the ballot they receive and return back. Jerry brought up that some people didn't want anyone to know who was returning that ballot so we took their name off. Kit Williams: That concerns me a little bit. I would like to do what we do when we elect the bar people. We sign the envelope that way we know that the envelope comes from a bar person but not have anything on the ballot. You just check the envelope but you don't keep the envelope matched with the ballot. That way it's still a private ballot. Sondra Smith: We talked about that. We discussed instead of the pensioner having to sign the envelope, because some of them wouldn't remember to sign it and then would we count that ballot or not, we decided to use labels on the envelope that is being returned to us. The envelope will have our address and the pensioners name on it in the return address, just the envelope itself not the ballot. Kit Williams: As long as we make sure it's one vote. Jerry Friend: So if a pensioner says I don't like my name being on there and sends it in a different envelope it doesn't count? We need to know that. Sondra Smith: I went back and checked the minutes and you did not make a motion to not count ballots that did not have a name on it. Jerry Friend: Right. Sondra Smith: If you do not want to count those ballots then there needs to be a motion and a second. Kit Williams: That needs to be included in the letter. Melvin Stanley: I think if that ballot came back in an envelope other than the one you provided then it shouldn't count. Jerry Friend: Can we keep the process as is other than that. Kit Williams: That's the only change to the process. Eldon Roberts moved that if any election ballot is returned in an envelope other than the one provided by the City Clerk's office then that ballot shall not count. Melvin Stanley seconded the motion. Upon roll call the motion carried 7-0. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 5 of 12 Jerry Friend: Do we need motion to do the procedure that Sondra said she was doing because it wasn't in that motion. Kit Williams: I think that your current procedure will be continued as long as you don't make any changes to it. You can make that motion if you want to but you don't necessarily have to. Jerry Friend: I thought you said you wanted us to. Kit Williams: What I wanted you to do was consider it. I wanted to make sure that everyone was happy with the policy even though it was approved in the past. Eldon Roberts: When you moved to do it this way probably in 2006 we probably passed something and it should be in the minutes. Kit Williams: We will do it exactly the same as last time except this one change that Eldon suggested. Sondra Smith: I've already started the draft version so you can look at it today. We haven't proofed it yet. I have a copy of it and you can look at it before you leave. I will add to the ballot that if it doesn't come back in the envelope that we provided it will not be counted. Frank Johnson: For clarity please, your willingness to hold a position is based on how many people you call? Kit Williams: By how many people vote for you. Frank Johnson: Okay. Everyone is eligible right? Eldon Roberts: Right, except the three of us that is not up for election. Sondra Smith: Except for widows. Frank Johnson: The position that I have now was based on your view of the law Kit. Kit Williams: Yes, you were the last one and the law required that you serve even though you didn't specifically volunteer at the time but I appreciate you doing it. We don't have any active members left so that part is now gone. Jerry Friend: Didn't he take the doctors place. Frank Johnson: No, Jerry Surles. Kit Williams: Since you are already a qualified member you continued your term even though you were the last active member but you were no longer active. Frank Johnson: But I didn't fill a vacancy. Kit Williams: No you had your own position because you were the only active member we had. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 6 of 12 Tim Helder: This brings us back to the number we had before Dr. Mashburn. Kit Williams: Do we have the wrong number now? Tim Helder: No. Is that what you are talking about? Frank Johnson: Yes, because it says here replaced Jerry Surles. Tim Helder: I don't think so didn't it dissolve Jerry's position and his was replaced by the active member. Eldon Roberts: Jerry Friend and Jerry Surles both were up for vote and they both got re-elected but Jerry Surles for some reason couldn't serve because we had to put Frank on the Board by law. Kit Williams: We had to have Frank. Eldon Roberts: We had to have Frank because he was the last active member. Jerry Friend: So it was only one position? Eldon Roberts: That's right. Frank Johnson: That makes since. Sondra Smith: The minutes of May 16, 2006 said that Terry Surles moved to send out a written ballot to elect the Board members. Dr. Mashburn seconded the motion and it carried unanimously. It doesn't say what the ballot is supposed to look like. Also Eldon moved to not have the survivors vote in the elections, or be on the Board, or make nominations. Jerry Surles seconded the motion and that passed unanimously but now that has now changed because of state law. Eldon Roberts: They still can't serve on the Board but they can vote. Kit Williams: I don't think anything else needs to be done even if the previous motions weren't real detailed. We are using the same policy as before and everyone understands it and agrees to it then I don't believe there would be a problem. 2008 Board Meeting Schedule — Informational Sondra Smith: There should be a copy in the packet. 2008 Parking Permits — Informational Sondra Smith: I've already given them out. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 7 of 12 Alliant Insurance Services — Informational Sondra Smith: They are a company that would like to provide investment services. We have to bid that out so it's really nothing that we need to take action on. I just try to make you all aware when we get information like that. Eldon Roberts: You mentioned something there I'm not familiar with. You say we have to bid this out? Kit Williams: You have to select a professional selection. Eldon Roberts: Okay because I don't want somebody in a bidding process. Sondra Smith: Not really a bid but you have to go through our selection process. Kit Williams: You consider more than the money you consider their qualifications. Eldon Roberts: Thank you. Sondra Smith: Right. Eldon Roberts: Okay. Longer Investments: Investment Report Kim Cooper: The first report is a portfolio appraisal as of December 31st. If you will look at the equity percentage as of the end of the year it was 46%. On page two you also have 7.4% in foreign stocks so your total equities as of year end were 53.4%. We will need to get your approval to be at that 53.4% as of year end. It has changed since then. Equity Overage Eldon Roberts moved to approve the equity overage. Tim Helder seconded the motion. Upon roll call the motion passed 6-0. Mayor Coody was absent during the vote. Eldon Roberts: We only have to vote on that if it's over 50%? Kim Cooper: Yes. Eldon Roberts: So we're barely over. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 8 of 12 Kim Cooper: As of today you are at 42.7% we have moved very quickly to a much more conservative stance since year end. That's closer to the low end of your equity range that's in your policy. Eldon Roberts: What is it? Kim Cooper: 35% and then we have the 10% variance. We sent all of you a newsletter and since Elaine wrote that newsletter things have changed. Since then unemployment numbers have been released and one of the caveats that she had brought up in the newsletter was that if we saw inflationary pressures that could cause an impact on earnings then that would change our stance and that has changed our stance. In fact even today the Chairman of the Federal Reserve, Bernanke, said that the risks of an economic downturn are more pronounced and the housing sector will continue to be a drag on the economy for most of the year. Elaine wanted me to be sure and tell you that even as we speak it looks like the recessionary pressures are increasing at a quickening pace. We don't know what that's going to do next but there will probably be some sort of an impact on earnings but we don't know what that's going to be at this point. We're at a more conservative posture since the end of the year. We reduced some of the more cyclical sectors in the portfolio. We've reduced both your technology exposure and we've reduced capital goods. We're just going to play defensively until the market clears. Page four shows your value as of year end which was $10.789 million. Your income yield is 3.6%. That's your overall yield on the portfolio including your bonds and stocks. That compares to a five year treasury right now which is trading at about a 2.93%. So your overall yield on the whole portfolio even with stocks is higher than you could get in a five year treasury. Eldon Roberts: That's net of fees too is it not? Kim Cooper: That is not net of fees. Eldon Roberts: Do you know off hand what that would bring it down to? Kim Cooper: Your fees are on a graduated scale so they are less than 1%. They're probably in the range of about .8%. Page five is income and expenses. The realized gains so far for all of 2007 are $413,642. That's just the gains that were realized when we sold positions that you held. Then there's a listing of your income and expenses. Your management fees for the year were $82,000 so that's about .82%. Your net income for the year was $284,749. Page six is your fixed income distribution. The weighted average yield to maturity as of December 31, 2007 was 5.4% and that's just on the bonds in your account. Your average maturity or the length of time until maturity was 4.4 years. Again that compares to that five year. You're less than a five year treasury which is trading at 2.9% but your bonds have an average yield of 5.4%. You still have about 32% of your portfolio that will mature in less than three years. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 9 of 12 Page seven is a listing of your largest holdings, General Electric, Wal-Mart, Johnson & Johnson, Oracle Corp. and Microsoft where your largest holdings as of year end and that's probably still about the case now. Kit Williams: You stayed with Wal-Mart? Kim Cooper: Yes, we still hold Wal-Mart. Page eight is a listing of the various industry sectors. As of December 31 you were overweight capital goods, healthcare and technology. The capital goods and technology we've pretty much been overweight throughout all of 2007. Since the beginning of the year we have backed off on the capital goods and technology and you're about even weighting in those two now. On December 31 you were underweight the consumer cyclical, cyclical industries, financial and utilities and about even weight consumer non-cyclical and energy. Page nine is a listing of your contributions and withdrawals for 2007. You had $120,000 in deposits and about $900 in litigation claim proceeds that you received. Your distributions were $1,017,000. Page 10 is your performance report. Your equities were up 10.8% for the year and that compares to the index returns. The S&P 500 including dividend reinvestment was up 5.5% so your 10.8% return is about double what the S&P 500 did last year. We were over weighted in the large cap multi national companies. That was where our focus was and that's where our focus stays. We had been negative on the small cap stocks. The Russell 2000 Index was down 2.8%. That shows that it was good to not be focusing on the small caps last year. 6.5% was the return on your bonds and that's higher than that 5.4% yield that you have because interest rates were falling through the year so you also got some capital appreciation on your bonds. Your total account return for 2007 was 8.2% that compares to the actuarial assumption of 6%. Your total return annualized compounded is 7.1 % that's over the seventeen years that we have been managing the account for you. It has out performed the actuarial assumption by 18% on a compound annual basis over that seventeen year period. Your total investment return during that seventeen year period has been $7,146,000. After the report we have a copy of your investment policy. Elaine said to remind you that the newsletter can be outdated before we get it in print. That certainly happened this time. The economic numbers continue to reflect a rapidly weakening economy. The Fed meets the last week of January and Elaine expects that there will be a 50 basis point cut in interest rates again. That still may not be enough and there may be another 50 basis point cut. Jerry Friend: The provision we just voted on as of December to okay going over the equity is there one to okay going under? Kim Cooper: It's the same provision that we had, it is 10% on either side. We are not there yet but we are getting close to that point. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 10 of 12 Eldon Roberts: Did you say 35% was the bottom line on equity? Kim Cooper: 35% is your policy. Eldon Roberts: And we are at 42% today. Kim Cooper: Right, but we've just stuck to our disciplines and as we've seen stocks that have hit a technical point were we don't want to hold them if there is not support there then we just stuck to those disciplines and sold them. Eldon Roberts: Do you foresee us getting down to 35% or maybe needing to go lower? Kim Cooper: I really can't say. We went very quickly from 52% to 42% and that's just in the last two weeks. So it's possible that we could. Eldon Roberts: We are just 7% away from there now. Kit Williams: Are you changing that into bonds? Where are you putting that 10%? Kim Cooper: We did buy a short term treasury bill with some of the proceeds of it. We are holding most of it in money markets so that it's available if the point comes that we are ready to go into the stock market. Eldon Roberts: What's the money market yielding right now? Kim Cooper: As of 12:31 it was 3.807% so that is still higher than that five year treasury that we talked about. We use US Treasury money market fund. Your funds are held at Northern Trust Company and it's in a US Treasury money market fund. So if you hear news stories about the problems that some money market funds have been having because they are invested in commercial paper and some of the sub prime problems that have accompanied that. You don't have to worry about your money market funds. Kit Williams: So we didn't put anything in Capital One? Kim Cooper: No. Tim Helder: We dropped back on the total portfolio from last quarter by $100,000. Eldon Roberts: We are paying out so much right now. Tim Helder: Is that going to be the trend unless we really hit a boom time? Eldon Roberts: I don't see how it can keep from being a trend until something changes in the economic situation the country is experiencing. At this time we have received our last COLA as of January 1 of this year there's no more pay increases scheduled for the beneficiaries so that's going to level off for a spell. Then we hit this down turn in the economy and our investments have really taken a hit and turned south. So until they change and start the other direction its going to be hard to hold our own I think. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 11 of 12 Kim Cooper: I checked before I came in here and the S&P is down about 6% through yesterdays closing. Your account total was down about half of that about 3% through yesterday. Kit Williams: How much was the S&P up last year? Kim Cooper: The S&P 500 was up 5.5%. Kit Williams: Basically they've giving back everything. Eldon Roberts: That's always been my analogy of this I have told these guys and other people too when financial audits are done or actuaries as we refer to them and they come up with the idea that well you don't have enough assets on hand to pay off what you owe. That's like a thirty year mortgage on your home and after fifteen years of it has been paid they do an audit of your financial holdings and say well you don't have enough money to pay off your note. Well it's not due yet either. That's the way with this. Obliviously we would like to be in a position where we have enough assets on hand right now to meet our nine or ten million dollar actuarial unfunded liability but we don't have but it's not all due right now. Frank Johnson: You can change the policy a little bit. Kit Williams: You decided after you did the last COLA that you needed to wait and see what happens. The millage is still going up. The good thing is the TIF District didn't affect the millage it won't affect the millage in the future. Eldon Roberts: Right. Kit Williams: As long as you don't get rolled back and with the small millage number like you have, you didn't get rolled back this last time. The school district had some rolled back but you didn't get rolled back so that means that you get all the increase that is coming up on the property taxes. So hopefully that will help in the future. Eldon Roberts: Will it be four tenths of a mill? Kit Williams: Yes. Eldon Roberts: And the Fire is? Kit Williams: Same thing. It used to be five but on that one big suit it got rolled back but hopefully that won't happen again. That won't ever get so extreme that it will affect yours. Jerry Friend: Is the TIF District ever going to take off? Kit Williams: The TIF District has taken off now whether their project is going to get built is another issue. The TIF District is fine we will pay off all the bonds, there's no problem there. It's just if these guys do what they said they were going to do. I hope they can. That will help the millage by putting another forty million dollar building down there. Eldon Roberts: If they can pay the taxes on it. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes January 17, 2008 Page 12 of 12 Kit Williams: If they build it I will be happy, if we have to sale it to pay the taxes than we can do that. Eldon Roberts: We are lucky to come out of that where the TIF District didn't affect us on our millage. We hired Jim Rose and I don't know how much work he put into it but it was worth whatever we paid him and probably more. I think he offered to do it for us for $50 an hour. Jerry Friend: I think Kit did all the work didn't you. Kit Williams: I did the big part of it but I could not represent you and I was glad you hired Jim. Eldon Roberts: The biggest problem we have right now and that's something we always have is where are the investments going up or down? Right now they're going down and there is not a lot we can do about that. Client Survey — Informational Meeting Adjourned at 2:20 PM