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HomeMy WebLinkAbout2009-02-11 MinutesBoard Members Mayor Jordan Chairman Sondra E. Smith Treasurer Eldon Roberts Secretary/Retired Positior Jerry Friend Retired Position 2 Tim Helder Retired Position 3 Melvin Stanley Retired Position 4 Frank Johnson Retired Position 5 17a*ye evl e ARKANSAS Policemen's Pension and Relief Fund Meeting Minutes February 11, 2009 Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page l of 15 A meeting of the Fayetteville Policemen's Pension and Relief Fund was held at 2:00 PM on February 11, 2009 in Room 219 of the City Administration Building Mayor Jordan called the meeting to order. Present: Frank Johnson, Melvin Stanley, Eldon Roberts, Tim Helder, Jerry Friend, Sondra Smith, City Clerk, David Whitaker, Assistant City Attorney, Paul Beck, Finance and Internal Services Director, Elaine Longer and Kim Cooper, Longer Investments, Jody Carrerio, Osborn, Carrerio & Associates, Inc., Actuary and David Clark, Arkansas Fire & Police Pension Review Board, Executive Director. Approval of the Minutes: Approval of the October 16, 2008 Meeting Minutes Tim Helder moved to approve the minutes. Eldon Roberts seconded the motion. Upon roll call the motion carried 7-0. Approval of the Pension List: February, March and April 2009 Pension Lists Sondra Smith: At this time there are no changes to the pension list. Tim Helder moved to approve the February, March and April 2009 Pension Lists. Frank Johnson seconded the motion. Upon roll call the motion carried 7-0. Old Business: None New Business: 2008 Pension Report to the City Council Sondra Smith: That is a copy of the report that Mayor Jordan has to give by state law to the City Council in January of each year. I wanted to make sure that you had a copy of the report. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 2 of 15 Signature authorization for transfers Sondra Smith: The signature authorization for transfers is for your pension transfers. They were signed by Mayor Coody we have now have a new mayor. I wanted to make you aware that the signature authorizations have been changed. I don't think there is a vote that needs to be taken on that. I think you allow the current Mayor to sign the authorizations and the City Clerk. 2009 Board elections Sondra Smith: The board elections are in May of each year. We have a process in place and unless you want to make changes to that process we will just continue with the current process. Eldon Roberts: Have there been any problems with the way we have been doing this the last two or three years? It's worked about as good as it can. Sondra Smith: I don't know if there have been any problems with the pensioners or not but there have been no problems on my end. It has gone pretty smooth. Eldon Roberts: No one has brought it to my attention that they're unhappy with the way it is being done so we will just continue on in the same manner. This year Tim Helder, Eldon Roberts and Melvin Stanley are up for re-election, am I correct? Sondra Smith: I believe you are correct. Revenues/Expenses Report Sondra Smith: This is a copy of the expenses and revenues report that Trish Leach in Accounting prepared. I think that's something that Eldon requested at the last meeting. I thought it was a very good report and very informative. Eldon Roberts: I want to commend Trish for putting this together. Now all we have to do is keep it up every year or every six months. You have this in good order back from 2004 to 2008. Thank you, Trish. 2009 parking permits Sondra Smith: I believe everyone has received their parking permits. Longer Investments: Longer Investments November 3, 2008 letter regarding the market A copy was given to the board. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 3 of 15 Loner Investments December 18, 2008 letter reearding the market A copy was given to the board. Longer Investments letter re2ardina the Bernard Madoff scandal A copy was given to the board. Longer Investments 4`h Ouarter 2008 renort Elaine Longer: The report that you have is similar to what we have always handed out. The first page is the portfolio appraisal listing the assets in the account. This is as of December 31sf We ended the year with about 40% invested in stocks, approximately 6% in foreign equities, and 46% total equity in a policy range of 30% - 50%. Similar to the Firemen's Pension the rest of the portfolio is invested in investment grade corporate bonds, preferred debt, and government agencies. The total portfolio on page four shows the value that at $7,969,000 at the end of the year with a current yield or dividend and interest income return of 3.6%. Page five on the fixed income side your weighted average yield to maturity is 5.2%. That's a little bit higher because we go back further so we have some of those higher income bonds that haven't matured yet. That's within the portfolio structure on the fixed income side weighted average maturity of 4.7 years. Again the difference between current five-year of 1.75% verses the income yield that we have on the portfolio of 5.2% is what causes concern going forward about the expected return. We have approximately 50% of the portfolio that will turn over on the fixed income side within the next three years facing a lower re -investment rate. Page six for the year 2008 the contributions amounted to approximately $100,000 and distributions were about $982,000. Page seven is the return history over time and this goes back to 1991 so through the actuary report which was December 31, 2007 a 7.1% compound annual return. Last year with fixed income at 6.5%, international down 40%, domestic stocks down 40%, the total return was minus 19%. This is what I was talking about in terms of the long term history. If you look at this year it's certainly a terrible year but going back, you can go back to 1991, the total account was up 28%, 1995 19.6%, 19.2% in 1997. What I'm trying to impart by that is that although this was a negative year and it's pretty dramatic, on good years it can be made up. That's the good news. The three years that we had in 2000, 2001, and 2002 were negative years in the stock market after the intemet crash. During that time the S & P fell by about 45% and the NASDAQ was down about 89%. The total decline on this pension fund was about 4%. We do play defense, this time it just hit all in one week in October. It's interesting we closed the September quarter and the first week in October the market fell down to 7,800 then rebounded up to 9,800 and we have probably been in that range for all these months since then. At some point I think we will get our footings again and be able to move forward but right now the outlook is still pretty unclear. At the bottom of the page you'll see that the beginning value, all the contributions in terms of deposits and transfers of securities, and total withdrawals have been $6,000,000 net Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 4 of 15 investment return has been $5,200,000. Up until this year, which took approximately $1,700,000 off the value of the portfolio, the investment return has kept up with the withdrawals prior to this year. Any questions about the report? Mayor Jordan: The question I would like to know is we were talking about this year the market possibly being at 6% is that best case scenario? Elaine Longer: We can't really pick a 6% rate of return for the year. Mayor Jordan: I understand, but what will it do to this plan if the market increase is 3%, 2% or flat. Elaine Longer: The 6% target rate of return is over a long term time period so any given year it's impossible to predict what the market will do, but over a long term time period what that 6% represents is the historical average return on stocks and the fixed income returns that are available. Mayor Jordan: I understand that. What I am trying to get a grasp on is if the stock market tanks another year where is this retirement plan going to be? Elaine Longer: It will be worse off as far as the unfunded liability is concerned. We know this for a fact. I just ran an assumption recently for another account that we manage and coming off of last year what we are looking at is, if the market, worse case scenario, takes another 20% hit, what is the total impact on the total portfolio? If you are 50% and we go down 20% then that component of the portfolio, 10% is the overall hit to the portfolio but your income return is 3.6%. So that would mean that in a year the market goes down say another 20% on the stock side that would be offset somewhat by the fixed income side so the total portfolio should go down about 6.5% in a worse case scenario. Mayor Jordan: Okay, I always like working from the worst to the best, instead of best to the worst. Elaine Longer: We will take the best case any day but the down side is the planning side. Jerry Friend: If we took 2008 the minus 19% off and took 1997 off would we be where we were in 2007? Elaine Longer: It is not easy to compare it like that because the asset size may have been smaller back when we did the 19.6 % so in terms of dollar amounts the 19% dropped this year could be higher. Jerry Friend: Basically 19 is 19 whether it's plus or minus. Elaine Longer: Right it's just the dollar amount that would make the impact. Did we do a plus 19% when the account was much smaller in terms of asset size as opposed to the minus the 19%. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 5 of 15 So from the projection forward of the unfunded liability a minus 19% of the asset size is bigger. It might be more of a negative impact than the plus 19%. Jerry Friend: Right, okay. Tim Helder: I don't know if I am the spokesperson, I've got my own thoughts. We heard from the Fire Department and we've had some discussions about both of our plans. I think it is fairly obvious that we are both in a little bit of trouble. I think on paper the Fire Department is in a little worse shape than we are but we all have to start looking at how we guard against going deeper in trouble. I think what the Fire Department has asked is reasonable. I think it would be very difficult at this point and grab a number out of the air and say we really need to look at having a 10% decrease in benefits or a 20% or whatever it is. I think we are all in agreement that whatever it takes to make this pension plan solid we are willing to do but we just need some information. I don't know the best way to come up with that information. I think if we can task a study and look at some options we need to do that. I don't know whether we can do that today at our meeting. I don't know that we necessarily need to meet with all members to decide to have a study done but I think there are a variety of things we need to look at. David may have to get involved on some of these issues as far as legality. For instance if we were to look at spousal benefits whereas the widows that are out there now leave them alone but if we look at a future spousal benefit decrease, would that help the plan? I don't know that is something we would have to find out. Is it legal to have a suspension of benefits rather than across the board decrease forever whereas, if we suspended them for a time until the market came around or we put a time table on it three years or five years would that be legal and would that help our plan? Then I go back to the original scenario that obliviously for protection long term I still like the idea of getting under the umbrella of LOPFI. I know that that takes City Council action and what would the cost involved be. You throw out a million on the Fire Department I don't know what we've heard. Mayor Jordan: I asked him to get those figures up for us at lunch. Jody Carreiro: This is rough. I think I am still Jody Carreiro and I'm still the Actuary. I'm not sure after this morning. Right now and again rough estimates of consolidation, since I am not the Actuary for LOPFI these are not the final figures, but I know kind of how they do it and I can do a pretty good estimate. Current benefits with no COLA the cost would be about $850,000 per year. You've got current sources of income that are about $700,000 as we talked about earlier. That would be additional city money of $150,000 a year to do that. Same four I did for the Firefighters. Current benefits with a 3% COLA would be a $1.4 million per year so net to the City would be a $700,000 increase. A 10% decrease in benefits without a COLA would be $700,000 which is roughly the amount of the current sources of income so there would be no additional city cost or if you did a 10% benefit decrease with a 3% COLA the estimate was $1.2 million minus $700,000 is about $500,000 a year from the City. It's significantly smaller than what the fire numbers were that we talked about this morning but it is still money. Eldon Roberts: That was to move us to LOPFI at the current benefit level but no COLA? Jody Carreiro: The first one was, yes sir. Eldon Roberts: That would be $150,000? Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 6 of 15 Jody Carreiro: $150,000. Mayor Jordan: Jody lets get some sort of average here. Let's just say for the police all in all possibly $500,000 give or take one way or the other. Eldon Roberts: Fire and Police combined? Jody Carreiro: Under current benefits? Current benefits and no COLA was $150,000 for this plan, $450,000 for the Fire. Paul Becker: $450,000 for the Fire. The million dollars talked about with the Fire that included the 3% COLA. Mayor Jordan: Let me just write this stuff down. Its a million dollars if we give a COLA for fire, right? Jody Carreiro: Yes, sir. Mayor Jordan: Alright. Jody Carreiro: $700,000 for police. That's both plans with the current set of benefits and a COLA. Mayor Jordan: Okay or $1.7 million total. Jody Carreiro: Yes, sir. Mayor Jordan: Now give me the next one if we don't give the COLA. Jodi Carreiro: $450,000 Fire, $150,000 Police that's $600,000 per year. Mayor Jordan: Is that it? Jody Carreiro: The other two that I did were a 10% decrease both plans without a COLA is $300,000 Fire and zero Police additional city money. Mayor Jordan: $300,000 on the Fire and how much on the Police end of it? Jody Carreiro: Zero and no COLA. 10% reduction with a COLA was $800,000 Fire and $500,000 Police. That's a million $1,300,000 total additional revenues that would be needed. Melvin Stanley: That was for fifteen years? Jody Carreiro: Yes. All the things we talked about this morning, I will send a full report that I will send copies to the City that's got all the assumptions and everything in it. I will reiterate some of this in the cover letter to that so that you have a written copy of all of that. Again the final LOPFI cost will calculate by the LOPFI Actuary, which I am not. They will give you the final numbers those are just rough estimates. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 7 of 15 Mayor Jordan: Okay, that is good. I appreciate that. Frank Johnson: Aside from the obvious interest is this now officially being considered as viable option? Are we moving in this direction now just based on the inquiries and reports? I ask that only because of reflecting back on some of the notes from the previous years and just making some reference to what Rick Hoyt said in an earlier meeting, there was some indecision with a slight amount of accismus and this type of discussion that we are having right now. It didn't appear, at least in the record, that it was ever formal. It was actually some informal consideration. Just for the record I'm curious to know if this is the direction that we are moving in. Mayor Jordan: The only thing I can tell you Chief on that is that Mr. Reagan said that they were going to get with you all and get some sort of report or estimations as to what it would cost. From what I see with the Police end of it, it looks like you all could pretty much get through if everything holds out. The Fire end of it is in trouble from what I can see. So we have to look at the options here and I don't know exactly, I wish I could answer you better, and I don't know what those options are until I get some reports back and we can look at it. Is that a fair statement? Tim Fielder: I don't want to speak for Frank but I will speak for myself because I was in those discussions early on when we anticipated, probably four years ago, that these times might come and that we might need to look at moving to LOPFI and that's when we had those discussions. We weren't in dire straights. So what I really want to get out is that this is not a knee jerk reaction on our part. We have been talking about this for a long time and most of us believe it's the prudent thing to do back then and today. Mayor Jordan: The only thing I want to stress is that I'm not in a panic here and I don't want us to get into a panic. I want us to think through what we need to do. We don't have to make a decision today but probably in the future we are going to do something. That is one of the reasons I asked about the stock market what happens if we take another hit next year that we took this year where is the retirement plans going to be then. I think we need to deal with that. Probably if you just look at my point of view if it's five, six, or seven years down the road my administration will probably come and go but I think it's something that we need to deal with. I'm thinking about the pensioners right now. I want to make sure they have a retirement. I think that's important and that is why I wanted to bring this forward to where we could have this discussion and have an open discussion decide what we want to do so possibly the next mayor that comes along will not be faced with a critical situation. Hopefully the economy will not be this bad again, but we don't know, we need to be prepared. Does that answer your question? Frank Johnson: Yes, that answers the questions. I think there is also the element of concern that the public may have been thinking. Again, reflecting back on previous minutes from the board meetings, that we would go to the public to ask for an increase in the millage. When I reflect back on what I read and I see language like bailout, raiding, and different things like that I think we should be open in terms of discussion moving forward now so the citizens won't think there is some impending doom that we're going to look at them to get us out of. Mayor Jordan: Okay, I agree. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 8 of 15 Eldon Roberts: In speaking about what Helder said about the suspension of benefits. I can't find anywhere in the law that says that we can't suspend the benefits and keep it in control of the local board. Then if the financial picture turns around then the local board could possibly meet and reinstitute those. I believe without a doubt we can suspend benefits, put them out here and hold them for a time, but when we go to reinstitute them, should that time ever come, I have some concerns about if someone might say well that is going to be a benefit increase so now we have to go through all the state laws to try and get that done and we would never have it. If you could look at that and maybe get with Kit sometime before the next time we meet and have some information on what we might be able to do legally to suspend benefits, at the local level and then in a couple years, should the financial picture improve, this local board have the authority to reinstitute that same amount not any more. Because if it is going construed as a benefit increase when it comes time for us reinstitute we can't get it done. Mayor Jordan: Rather than just bringing it back to where you were. David Whitaker: I assure you that is question number six. Eldon Roberts: Secondly one other thing that I might mention. I would like for the city officials to think and concern themselves with treating us old fire and police employees equally as they are treating the new fire and police employees. We performed the very same service, a lot of times with less pay, less equipment, and less training, than our police and fire are today. That was brought up in the meeting this morning that the LOPFI people are going to be able to retire at 84% to 85% of salary, they are going to be guaranteed a 3% cost of living raise every year, and we're retired at 90% of salary right now with no cost of living. We did have a cost of living, a temporary five years but it ran out, we're on a fixed income. If we are going to have to start reducing our benefits back more and more we are really being treated quite differently than you are treating your new fire and police. That is just something to think about it's a moral issue it's not anything that is etched in the law but it's something to think about. Our benefits are not larger, as a matter of fact they are not as large, as the new fire and police are going to receive when they retire given that there is going to be a 3% cost of living raise given to them every year. That is something to think about in all fairness for both sides the old and the new. Sondra Smith: I just wanted to remind the board that any decision that we make is not a final decision it still has to go before our City Council. We need to take the best case scenario that we can to City Council so that if you do decide to go to LOPFI the City Council is more likely to approve it. Tim Helder: Does anyone know what that is? I don't think we do at this point. I think that is what I tried to voice awhile ago there is not a person up here that's not willing to do whatever it takes but we've just got to find out what that is. Frank Johnson: I agree. I would hope that in the future of the plan that we would consider any action to take a reduction of benefits. If they are not going to take a reduction in benefits, if that's on the table, why would they do that? That's not the case at all. I understand what you said Sondra. Sondra Smith: If we show them the numbers that we received today a 10% decrease with no COLA is no additional cost to the City but if you go the current level with no COLA there is Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 9 of 15 $150,000 cost to the City just on Police but if you go the current level with a 3% COLA there is a $700,000 cost to the City each year. That's what they need to know. What are our options as a City Council? Mayor Jordan: Yes, that is what we are going to be asked. That is the reason I wanted to get all of that down the best we could. They are going to ask us. We have to be prepared as well. Tim Helder: I think the response to that and I think you have seen that today is that we are willing to listen and willing to do what we have to do. We just don't know what that is right now. Eldon Roberts: I also I think a response to that is like David mentioned earlier if I remember right 103 cities has opted to do just this and that's why they did it. They just didn't do it because they wanted to. Most of them were in the same situation that we are in here in the financial structure and that many cities in the State of Arkansas have opted to do that. That's some credence of support for that I would think. Sondra Smith: I wanted to comment on that too. I asked David during the break what the average level of pay that these plans went to LOPFI and he said the majority of them were between 50% and 60%. Eldon Roberts: That they reduced benefits to join LOPFI or is that what they were at? David Clark: No they didn't reduce benefits but a good many of plans have come in at the benefit structures that they were at, which is the minimum state levels, half salary or something a little bit above that. We have one that I can think of that's at 100% salary, we have a few that are at 90%. A good many of them have already put COLA's in place as well. It's a whole menu. Melvin Stanley: David didn't you say this morning that there was no provision in the law for a board like us to reduce benefits. David Clark: That is correct. Melvin Stanley: So what can we do? David Whittaker: If I can clarify, the Mayor asked me to take a look at that during the noon hour, which I did. I was here and heard the earlier statements. I am not prepared to accept the face value of the concept that silence in the statue equals an absolute prohibition. As I said to the Fire Board, just an hour or so ago, I think a broader look and full of research suggests also that your inherent duties as a board of trustees implies a fiduciary duty to take actions to ensure the health of the principal and the evidential soundness of the fund throughout its life. I'm not prepared to tell you that yes absolutely without a doubt you can reduce benefits but I'm also not prepared to accept the face value that there's an absolute prohibition. We are going to continue to research it and we will be advising you along the way. At this point and it appears to be that you are in a study mode and looking at your options that I would urge you to continue that as one of the paths to possible salvation for the fund. Repeating what I said to the Fire I don't get the impression, from everything we have seen, this is going to blow up next week. So prudence suggests through study so that you not only wrap this up as quickly as you can for the peace of Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 10 of 15 mind for your members and beneficiaries but also err on the side of getting it right. Whatever you decide eventually is going to have far reaching implications for the members and beneficiaries of this plan. If I may Mr. Mayor I have one question, I know that the Fire Board discussed an estimate of $2,200 for a valuation study. David Clark: No, that wasn't an estimate that was the valuation fee. David Whitaker: The fee yes. Is that just for the fire? David Clark: Yes, just for the fire. David Whitaker: Would there be two separate valuations? David Clark: Yes, there are two funds and two valuation fees. David Whitaker: Thank you. David Clark: To follow up to actually give you an answer to your question on the ability to reduce benefits that is correct. There's not a provision in law that states that, except for in the instance where the asset base has depleted such that there is not enough money to pay out pension benefit payments for that year, then there is actually a provision that talks about pro- ration. It sounds like you guys are being very cautious and you need to be. You need to explore all of your options, if that is the direction that you go. You have to remember that the meeting this morning was projecting out various "what if' scenarios. I think that is the reason that the wisdom of the law is that it is not in the law to reduce benefits because we could probably come up with thousands of "what if' scenarios about whether or not a pension fund will be solvent or become insolvent. I just caution you be really measured if you have that discussion any further. Tim Helder: Mr. Mayor if I may just so that I am on track. A while ago when we asked if our fund is, in your mind going to be okay, you said it looks like the police fund is going to be alright. Jody Carreiro: My statement was that the long term projection that not in all scenarios but in the most likely scenario that the police fund would keep assets to keep all benefits right now. Tim Helder: The reason I asked that was to make sure I have it clear in my mind, the reason that we would do a study, would be if we really were looking at moving to LOPFI. Correct? Mayor Jordan: That is what I understood. Tim Helder: If we wanted to spend $2,200, we are really looking at those benefit decreases to determine if we want to move to LOPFI and then there is no guarantee. We don't know what the City is going to do; regardless of benefit decreases or whatever we decide to do. We don't have that guarantee. It sounds like there are several things we need to do along the way. One thing is we can stay and do exactly what we have been doing, we can decide as a board that we do want to look more seriously at moving to LOPFI, but that's going to require a study on benefit decreases, and what it will do long term to our fund and how it would decrease the City's Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 11 of 15 liability. Then we have to get into discussions with the City Council and I don't know necessarily how that works. Mayor Jordan: I don't know either. Tim Helder: What I'm saying is if we don't have an idea that they are even interested. Why would we even pursue these other options? Does this kind of put it in your ball park to approach the Council and say both the pension funds are willing to explore a reduction in benefits or whatever it takes to be taken under LOPFI? Mayor Jordan: Tim I don't know how to answer that because you have eight aldermen up there and they don't all think alike so some may be in favor of it and some of them may not. We may bring something back to the Council and they may just vote it down. Sondra Smith: They may say bring us the options. Mayor Jordan: Bring us the options, let us look at it, and then we will decide. Tim Helder: With that said then I guess what the board has to decide is do we want to spend $2,200 to get this study done just on the idea that we might want to move to LOPFI. Jerry Friend: Who are we paying that to, LOPFI? Sondra Smith: To the Actuary. Jerry Friend: To the Actuary, so they could get us scenarios that we could go to LOPFI or stay like we are doing. Jody Carreiro: Let me clarify one thing. Since I am not the Actuary for LOPFI the cost for a consolidation study would go to LOPFI for the Actuary that does the LOPFI plans. The studies that I have done for the City through Paul that we presented results from this morning, I'm going to give you a written report to back up that. We haven't quite spent what Paul had allocated so if there's something within the old plan that you want to do let me know and I can put that in the letter or whatever when I send you the final report. There's still a little wiggle room there as far as options that don't involve consolidation if you want me to look at that. Jerry Friend: Myself I would like to see some options of going to LOPFI. I would also like to see some options or not going. Who knows the city board may back that as Tim said and we might need to know the other side of that. Mayor Jordan: Another thing when you are making these decisions and looking at these options the majority of the board may want to go a direction but Sondra and I may vote for the City. We may have a different option from what the majority of the board may have and then you will be sending it to Council with us maybe voting against it or for it. Tim Helder: We thought that was going to change with you. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 12 of 15 Frank Johnson: I can only speculate that if the Council were presented with options that they would ask or look at the most preferred option which would be a reduction of benefits. I think that is something that we need to talk to the pensioners as well. As it has been pointed out that for those of us that are still working that 10% variance can be picked up in our other sources of income. I look at the list and that 10% can make a big difference to some people so I think we in our capacity have an obligation to asses what the pensioners input would be as well. Eldon Roberts: Before I could ever vote for a decrease I've got to have a number from my actuarial folks as to what they think. I'm not about to reach up here and pull out a number arbitrarily out of the sky and say a 10% cut would do it. It might be enough, might not be enough, and it might be away too much, and then we would look bad in a year or so. I can vote for a benefit decrease and I will but not until I get the numbers from the people that crunch all the numbers as to what they think it should be. Mayor Jordan: I don't disagree with that. Eldon Roberts: That is what we are paying them for. That is what they are in business for and they can make a lot better guess than we can. What they do might be a guess but it would be a lot better than what we can guess. I've got to hear from them whenever it gets to that point. I don't know that I'm interested in spending $2,200 or $2,500 of our money right now until some feel comes back to me from the city officials, the Mayor or Mr. Becker that they are somewhat receptive to this idea of merging with LOPFI. Once I hear that and they are on record as stating they are somewhat receptive to that then I might say than lets get some scenarios together, but until that I'm not interested in spending $2,200 to give a bunch of scenarios to people that might not be interested. That is where I stand on that. Jerry Friend: I can see the City Board members saying the same thing you did that they are not going to make that decision if they are interested until they get some numbers. Mayor Jordan: Exactly. Jerry Friend: It is kind of a catch 22. I would just like to have some scenarios laid out. Sondra Smith: I think if I understood Jody correctly he said that on the scenario of not going to LOPFI that we can probably ask for that and that be included in what they are currently doing. Tim Helder: Is that right? Jody Carreiro: To some extent. We have some room if there is something you want me to look at and put in the final report please let me know. We try to be easy to work with. Paul Becker: Now if I can interject if you are going to want multiple scenarios, decrease it 5%, 10%, 20% etc. you are going to have a separate report. Basically the report that he has verbally discussed he is going to send us in writing to look at. He can't do multiple scenarios in there. If you're going to want something like that you are going to have to engage them separately and pay for it. Is that a fair statement Jody? Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 13 of 15 Jody Carreiro: Right, that is what I am saying within reason. I have already looked at some things. I didn't share everything I looked at today. I can put some of those things down and if there is something that you really want me to include I'll look at that, if that is something I have already looked at we can include that without extending the project. If we need to extend the project we can. Just let me know. I will tell you if that is beyond what I have already done or not. Tim Helder: I suppose and this may be totally opposite of what you are thinking Eldon, but in my mind as a show of good faith if that is what the two representatives of the City are thinking is going to sway the Council to at least entertain the idea, we may need to proceed and have this study done. Is this how I am taking this from you guys? Mayor Jordan: The only thing I can tell you is its kind of your call. The Firemen this morning decided they wanted to do that. Sondra Smith: I think the first thing we as a board have to decide is do we want to go to LOPFI? Mayor Jordan: The first decision has got to be made right here on the two boards and then it has to go to Council if there is some sort of budget adjustment we have to make. We can't do anything without getting budget adjustments from City Council. It's not like we can go ahead and vote and say we are going to do this that it's going to pass the Council and if we vote against it it's necessarily going to fail at the Council. I'm just saying when you start looking at budget adjustments its got to go to City Council and you have eight representatives on that Council and I can't predict what they are going to do and what they are not going to do. It's kind of your call to decide whether you want to take a chance on spending the money and having the study done or not. Tim Helder: In my option we need the numbers regardless but my stance hasn't changed. I think in the long run if we have the ability to go to LOPFI we need to get that done but I am just one voice. Frank Johnson: I agree with that as well. Jerry Friend: I'm okay with spending some money for numbers. The only way we are going to get any information that is going to help us is to come up with some reasonable numbers or numbers we can believe in. I'm not ready to narrow our options just to LOPFI without some numbers from that, what if we don't go to LOPFI. Then once someone convinces me that's the best thing then I will be on it really fast. Eldon Roberts: One thing too if we have any thing in our favor in all of this it's not a decision that has to be made today, next week, or next month. The Fire Department might need to make theirs a little sooner than we do but we don't have to make this decision right now. We can wait six months to see how things began to look and still do the same thing that we are toying with doing now. I think we are lucky that we don't have to make a decision in haste. We've not waited right down to the wire to have to make this. We have been looking at this, as Frank says, four or five years. We know the situation and it's getting closer to the train wreck, as Kit Williams entitled his letter he wrote to the Fire Department back in 2008. We don't have to Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 14 of 15 make that decision today but we can have it in the back of our minds. It's out here today for everyone to hear that that may be where we are going. We have the luxury of putting that off for a little bit. It doesn't have to be made immediately. Paul Becker: If I may make a suggestion, there is going to be a report drafted, the report will be distributed to everybody, unless you have specific questions right now, you don't have any instructions to complete a study. You may want to wait until this is in writing, passed out and you have had time to digest it. This is the first you have seen of this and then at that point decide whether or not you want an expanded study to look at further things. Mayor Jordan: Yes. I'm not saying you need to make a decision today. It is up to you all whenever you want to do that or not at all. Eldon Roberts: Plus we can see what the Fire Department pays for and read their information. Rick Hoyt: I just wanted to bring up something and this is way premature because we don't know which direction this board is going to go. We don't know what the Council is going to do. I told you my personal feelings earlier that I wish we were on LOPFI. I'm really doing this for your benefit Mayor because you may be the tie breaker in a public vote. I would just like to say that I worked for the City twenty eight and a half years and many of those years I was directly involved in the budgeting process. I was very well aware of what percentage we were paying in of salary to the pension system. I'm on the old plan and in 1983 all the policemen started to be on LOPFI. I'll just tell you the old plan has always been under funded. I'm not blaming it on the City don't take wrong I'm just saying the way it was structured, the city met the law, but they were putting in 3% or 6%. It fluctuates year to year because LOPFI redoes the valuation but there were years we we're having to budget almost 18% of salary was going in on the LOPFI people to help fund future benefits and yet we were putting in 3% and 6%. So later down the road if we ever get to that stage where we are asking the City Council to fund some extra money to keep the old guys benefits remember that the City got off pretty good years ago because they did not pay. When you start talking about Council members saying why should we pay anything for those people they don't even work here anymore and they just granted themselves increases we don't need to take that out of the taxpayer's kitty. The problem is it wasn't taking out of the kitty way back when, when it should of. So just keep that in mind. I think that the thing that Eldon brought up was very important about keeping parity a least with what's available to the LOPFI members. Now when they retire they are up around 84% to 85% with that 3% COLA and I sure hope that we can have that as a goal for the old people. Just remember we were paying 17% to 18% on LOPFI people years ago when we were only paying 3% and 6% on us guys. Thank you. Mayor Jordan: I understand what you are saying. I don't want it to be construed that I am saying that Council is not going to vote it in. I didn't want to promise you something here today that may not happen. Rick Hoyt: I make this point to say obviously it would be much easier for the Council, if it ever gets to the Council level, to say they have come up with a scenario that there's no price tag to this. Well then in most cases they would say it sounds like a good deal but if the price tag is $50,000, $100,000, or $800,000 a year there's going to be a lot of cogitating and saying why should we take that out of our general fund. Just remember you didn't take it out way back Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 11, 2009 Page 15 of 15 when, when the fund should have been fully funded back then. I'm not blaming it on the City don't get me wrong. They did what they were supposed to do but here we are at this stage in the game. Mayor Jordan: This is something I inherited this month and if I had a little more experience with this maybe I'd know a little more of what to do. I will get better as we go along. Dennis Taylor: All I wanted to say is when we went to work for Fayetteville our agreement was 50% retirement. So anything we get above that I'm just grateful for. The only thing else I wanted to say is, I kind of disagree with you Tim, I don't want our spousal benefits touched. That is something we have fought for to have my family taken care of when I am gone is probably as important to me as me being taken care of. That is the only thing I wanted to say is if we can avoid it all that is one thing I don't want touched other than that, do what we got to do. Eldon Roberts: I want to thank Jody Carreiro and David Clark for taking time out to come up here. David was a police officer at Springdale. He's kind of back home here. He runs a really good company down there in Little Rock with an open door policy. I hear back from him. Jody is the same way. I've known Jody for probably twenty years plus doing the actuary's for the State. I just want to thank them for their time and effort and coming up here and giving us all the information and the information they are going to give us in the future. Elaine Longer again thank you for all you have done. I know you are earning your money right. I think you are doing a great job. Thank all of you. Meeting Adjourned at 3:00 PM