HomeMy WebLinkAbout2007-07-26 MinutesBoard Members
Mayor Coody
Chairman
Sondra E. Smith
Secretary
Marion Doss
Position 1/Retired
Pete Reagan
Position 2/Retired
Gene Warford
Position 3/Retired
Ron Wood
Position/Retired
Marshall E. Mahan
Position 5/Highest
Ranking
17a*ye evl e
ARKANSAS
Firemen's Pension and Relief Fund
Meeting Minutes
July 26, 2007
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
July 26, 2007
Page l of 6
A meeting of the Fayetteville Firemen's Pension and Relief Fund was held at 11:00 AM on July
26, 2007 in Room 326 of the City Administration Building
Mayor Coody called the meeting to order.
Present: Mayor Coody, Pete Reagan, Gene Warford, Marshall E. Mahan, Marion Doss,
Ronnie Wood, Tony Johnson, Paul Becker, Trish Leach & Wendy Moore, Accounting,
Amber Wood Deputy City Clerk, City Clerk Sondra Smith, City Attorney Kit Williams,
Kim Cooper and Elaine Longer, Longer Investments.
Approval of the Minutes:
Approval of the June 28, 2007 Meeting Minutes
Pete Reagan moved to approve the June 28, 2007 Meeting Minutes. Gene Warford
seconded the motion. Upon roll call the motion passed 6-0. Ronnie Wood was absent
during the vote.
Approval of the Pension List:
Approval of the August, 2007 Pension List — Supplement Amount for 2007 was added
Mayor Coody: What does that mean?
Pete Reagan: That's the insurance turn back funds.
Mayor Coody: Any other discussion on that? Any pension list changes?
Sondra Smith: Just the insurance turn back funds.
Mayor Coody: Okay.
Pete Reagan: So that was the Fire insurance turn back and Future Supplement.
Sondra Smith: Yes, we have that later on in our discussion so you can see what we received
and there is a comparison from last year to this year.
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
July 26, 2007
Page 2 of 6
Marshall E. Mahan moved to approve the August, 2007 Pension List. Pete Reagan
seconded the motion. Upon roll call the motion passed 7-0.
Old Business:
Dennis Mullens retirement classification (Tabled from the April 26, 2007 meeting.)
Mayor Coody: What is the status on this?
Pate Reagan: I have been out of town Mr. Chairman and I have not had any contact with
Dennis. I don't know what to do except if you would like me to I can contact him and see about a
presentation for the next meeting.
Mayor Coody: This is at least the fifth or sixth meeting that there is a no show. I don't think
there is any real serious interest in this and I think we are spinning our wheels.
Pete Reagan: Mayor with all do respect this is a pensioner that asked for and I think we should
give him his day in court.
Mayor Coody: Absolutely, I just think it would be nice if he could actually show up for one of
the days in court we have sit aside for him. We all have a responsibility to put a little bit of effort
into the things that we request.
Pete Reagan: I understand.
Mayor Coody: Are you making a motion to table this a fifth time?
Pete Reagan: So move.
Pete Reagan moved to table to the August meeting. Gene Warford seconded the motion.
Upon roll call the motion passed 7-0.
Pension Protection Act (Tabled from the June 28, 2007 meeting.)
Mayor Coody: Any input on that?
Kit Williams: What is the Act number? I saw the minutes that said I'm going to give a report. I
wasn't here last time. I tried to find it but I couldn't.
Pete Reagan: It is a new one that was passed.
Kit Williams: Right.
Sondra Smith: I don't know if we have the Act number what we received was from NCPERS.
Pete Reagan: No, this was state. This was in last month minutes.
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
July 26, 2007
Page 3 of 6
Kit Williams: It might have been before last months. I remember the hand out that had several
different acts. I had not reviewed that enough to give you an official report.
Mayor Coody: Do you want to table it to the next meeting?
Gene Warford moved to table Pension Protection Act to the next meeting. Pete Reagan
seconded the motion. Upon roll call the motion passed 7-0.
New Business:
Supplemental Benefits
Sondra Smith: That is the amount that was added to the August pension list. The amount we
received and the future supplement was $38,916.72. We have to break that down and so much
goes to the voluntaries and retirees. I have it broken down for you as to how much went to the
retirees and the spouse. If there is a QDRO which is part of a divorce decree they do not get any
of the supplemental benefits. One thing you need to be aware of is in the past they were holding
back 10% of this supplemental benefit in a reserve fund. This year they released that 10% so this
$38,000 is quit a bit more than we have received in past years. In 2008 that number will likely
be a lot less because they released that reserve so you received a lot more this year because they
are not holding any in reserve any longer.
Mayor Coody: What was the purpose of the reserve?
Sondra Smith: I have no idea.
Pete Reagan: This is an insurance turn back supplemental fund. Each department in the state of
Arkansas that qualifies sends in their paperwork, has an audit and all of that gets a return from
the insurance that is written foreign and domestic in Arkansas. Part of that money was held back
by the governor's office to go to his discretionary fund, and the Fire Departments that did not
qualify at that time, their monies were held back until such time as they did. A lot of smaller
departments didn't do that and didn't qualify so that money has been sitting there. We went to
the legislature after the State Police went after that supplemental fund to help fund their
retirement system because it was money sitting there that couldn't be used so we went after it
and got it. Now all the money is disbursed.
Sondra Smith: In the future 100% of the money will be disbursed. This $38,000 reflects the
past amount and the current amount.
Pete Reagan: It's think it's normally about $400.
Sondra Smith: Last year it was $27,000. The $150.066.58 just goes into your fund.
Pete Reagan: Was that sent to Longer or is that being keep local?
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
July 26, 2007
Page 4 of 6
Trish Leach: We keep all but $50,000 to fund the August checks and sent the rest of it to
Longer.
Sondra Smith: I have a copy attached to the PRB memo stating how much we are suppose to
give because they regulate how much we are suppose to give to the pensioners and to the
voluntaries and a copy of both checks for you.
Longer Investments:
Elaine Longer: The market is down 200 today. There are all kinds of concerns about the credit
risk in the economy right now. We have a lot going on with the LBO's and the sub prime
mortgage stuff so this is affecting the banking stocks and brokerage stocks. A lot of times the
financial stocks lead the rest of the market. When the financials which are banks, brokers and
insurance companies come under a lot of pressure like they have in the past week, because of the
credit concerns, then the rest of the economy follows. We are in the middle of the earnings
season and the earnings reports have been very good, in fact they are coming in above
expectations. There have been a few disappointments like Google, Exxon Mobile but the stocks
trading at 89 after just reaching a recent high of 93. It's really sort of an exhale by the market. I
don't think we have done any real serious technical damage but we tagged 14,000 on the DOW.
If we were to do a 5% pull back that takes us to about 13,300 and I wouldn't be surprised to see
that.
Mayor Coody: Where is it today?
Elaine Longer: 13,583.
Mayor Coody: So it could drop another 250 points and it would still be.
Elaine Longer: Within a 5% direction. We had a lot in a short period of time. Page one on the
report shows the June 30th cut off date portfolio appraisal. We do have to vote to approve the
fact that you were about 55% to 56% equities at June 30th.
Equity Allocation Overage Report
Pete Reagan moved to approve the equity overage. Gene Warford seconded the motion.
Upon roll call the motion passed 7-0.
Elaine Longer: Page 6 is an update through Friday, July 20th' What is interesting is just in that
period of time between June 30th and July 20th the stock market was up about another 3'/z %. It
has been a pretty remarkable run because the first quarter of the year the stock market was flat.
So if you look through July 20t11 your stocks are up about 10.6 %, the mutual funds which are
foreign stock are up about 8%, all of that really happened from March 31st forward. That's a lot
to compress into about a four month time period and so now what is happening is the correction
has ensued and now we see how much the correction is going to bring about. I would say that
giving the fact that the interest rates have really backed off again we are probably looking at 5%
correction off of that 14,000.
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
July 26, 2007
Page 5 of 6
Page 10 you can see the value as of last Friday was about $8.8 million. Through yesterday we
were down 1% from Friday and through today were down about another 2%. So the 3'/2% up that
we had from June 30th to last Friday has pretty much been erased in three or four trading days
this week. That is the volatility that we are experiencing in the market. A lot of the reason has to
do with the fact that you have a lot of leverage players like leverage buy out organizations and
the hedge funds. The hedge funds now make up over 50% of the trading activity in the US
markets on a daily basis. So the movements that would normally take two or three months, five
or eight years ago, now are compressed into two to five days. That is exactly what we have seen
in the fixed income markets, we saw it in the first quarter in the month of January when the oil
stocks corrected about 17% in less than a month and now they're at new highs for the year. The
corrections that used to be spread out in longer periods of time take place now in much shorter
periods of time. A 5% correction could be over before Wednesday of next week and it's
interesting that this is just a function of the kind of markets that we are dealing with now. I think
it is a good thing because what happens is the market is going to reach a state of equilibrium
giving a certain piece of information or economic news or the Federal Reserve action, now we
just reach that equilibrium point a whole lot faster.
Page 11 shows your realized gains year-to-date of about $227,000 and net income is about
$111,000.
Page 12 shows the bond portfolio. The bonds have been very volatile. We had about a 4.6%
yield on the ten year in May and then we had an increase in the ten year yield to about a 5.3% in
June. That was a big move, that's about a 15% to 17% increase in the yield in about a one month
period of time. Since then the ten year yield has backed off in the 5.30% that we had June to a
4.75% today. This is a lot of volatility in the bond market and the ten year yield is important
because the thirty year mortgage rates key off of the ten year treasury. So when we popped up to
a 5.30% in June then all the fears were this is really going to slow the economy in the second
half. Mortgages are going to be more expensive, consumer spending will taper off and so now
we have backed off to a 4.75%. Well the market has backed off from 14,000 to 13,500 so this is
another reason why I am not too concerned about this pull back because the valuation of stocks
is still very attractive giving the interest rates of 4 3/4 in the ten year. So once the money flees
where is it going to go, 4 3/4 on the ten year treasury fully taxable is not very attractive to
investors. Ultimately they will come back into a growth, the stocks because stocks are not over
valued. You have a yield to maturity locked in on your bonds of 5.6%, your average maturity is
only 5.6 years so this compares to a 4 3/4 % yield on the ten year treasury. You have a maturity
or a risk factor in your portfolio that is half of what the ten year is and you have a much higher
yield, almost a 100 basis points higher. We have a lot of flexibility if interest rates do go higher
because we have 33% of the bond portfolio has a maturity of three years of less. As you've seen
us in the past if we get a good buying opportunity on bonds we will sell things that mature within
a year, we don't have to hold a bond to maturity. We can reinvest it and lock in higher yields but
at this point in time you have a conservative maturity structure and you have a real good income
yield.
Page 13 shows your largest holdings as of June 30th none of which exceeds the 5% of equity
portfolio restriction in your policy.
Page 14 shows our industry weighting summarized. We're still overweight the capital goods,
industrials, health care and technology. We're underweight consumer cyclical, consumer non-
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
July 26, 2007
Page 6 of 6
cyclical mostly because we are stilt concerned about consumer spending and the slow down in
the housing market. We're underweight financials which has really helped us get through the
storm this past week and utilities. We're even weighted on energy at this point and time.
Page 15 we have the contributions and distributions from inception to date which is August 15,
2002 through June 301h. You can see that the contributions into the fund have been about
$769,000. The distributions have been $5,047,000.
Page 16 is the performance summary. Equities through June 30th were up 7.7% that compares to
the S&P being up 6% year to date and the S&P with compounded dividends up 7%. Your mutual
funds which are the international stocks have trailed the US market somewhat year to date are up
6.2% and fixed income is up 1.6%. The total is up 4.8% and as of Friday the numbers were
10.6% on equities. Fixed income was still flat to 1.6%. The funds were up 8% and the total was
up 6.2%. So your compound annual returns have been 10.9% on stocks inception to date and
10.7% on your foreign funds, fixed income at 3.7% and then the over all return has compounded
at 7.2%. That compares to your actuary assumptions at 6.0%.
Are there any questions on the report?
Mayor Coody: Thanks for the report.
Pete Reagan: Thanks very much.
Elaine Longer: Thank you. Thanks for moving us forward.
Monthly Report
A copy of the Longer Investments monthly report was given to the board.
Quarterly Report
A copy of the Longer Investments quarterly report was given to the board.
Meeting Adjourned at 11:25 AM