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HomeMy WebLinkAbout2009-03-12 MinutesBoard Members Mayor Jordan Chairman Sondra F. Smith Secretary Marion Doss Position 1/Retired Pete Reagan Position 2/Retired Gene Warford Position 3/Retired Ron Wood Position 4/Rctired Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page l of 30 e _..ille Special Firemen's Pension and Relief Fund Meeting Minutes March 12, 2009 A special meeting of the Fayetteville Firemen's Pension and Relief Fund was held at 6:00 PM March 12, 2009 in Room 326 of the City Administration Building. Mayor Jordan called the meeting to order. Present: Mayor Jordan, Ronnie Wood, Marion Doss, Pete Reagan, Gene Warford, Sondra Smith, City Attorney Kit Williams, Paul Becker and audience. New Business: Mayor Jordan: I received a membership directive and Paul has the actuary report. We can start with the actuary report or the directive. What would you like to do first? 1. Steps that need to be taken to sustain the plan Reports: 1. Current market Balance Osborn, Carreiro & Associates, Inc. Actuarial Study March 11, 2009 A copy of the report was given to the board. Paul Becker: We commissioned the actuary to look at the plan because we saw some significant things taking place, for example in 2007 the asset valuation was approximately $8 million by the end of 2008 it was $5.8 million and it has declined since then. We asked the actuary to look at the report and give us an evaluation of where the plan was and how sound the plan looked, that included both the Fire and Police Pension Plans. Based on the actuary report taking into the assumptions of the revenue in flow to the pension plan which is .4 mills from the taxpayers, an allocation of premium taxes, and deducting that from pay outs which are roughly $1.5 million dollars a year the actuary did the study and came to the conclusion that the plan Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 2 of 30 would probably run out of funds in approximately 9 to 10 years. Based on that we discussed what the options were and what to look at in the plan. We had a meeting where the actuary was here plus a representative from LOPE to discuss options. Options were discussed such as pension benefit decreases, what it would take to send the plan to LOPFI, which it would take City Council approval, that is their authority. The trustees do not have the power to do that. The bottom line of the report is that in 9 to 10 years the plan would be in trouble. We're certainly looking at uncertain economic times and we have been paying out more than a million dollars more than we have been taking in. Mayor Jordan: What questions does the board have about the actuary report? Pete Reagan: I would like to first thank Paul and yourself Mayor for doing this report. It is my understanding that this is the 2007 valuation with the 2008 numbers plugged into it. Is that correct Paul? Paul Becker: That's correct. Pete Reagan: In some of them it says depletion of assets in 15 to 20 years and some places it says 10 years. I don't think they changed all of the wording to go with the numbers. Paul Becker: That's correct. You will see two different graphs one takes it where the actuary valuation was in 2007 and of course we had almost a $2 million market decline last year. That's why these have dropped so significantly but it was based on the 2007 study updated based on the conditions that existed in 2008. Pete Reagan: The bottom line on the numbers in the fund some of those are unrealized gains and unrealized losses along with realized gains and losses. Paul Becker: That's correct. They are unrealized losses though. Kit Williams: It's market value. Pete Reagan: Right, but if you don't sell them you haven't lost nothing. Paul Becker: Well that's correct but you have to market to market. Pete Reagan: I understand I just want to make sure were comparing. On page two on the current status of the fund the first sentence I don't believe is applicable. Paul Becker: No. Pete Reagan: I think that was the part that was left in here. I'm just making light of this not to correct anybody just so our members will know. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 3 of 30 Paul Becker: Just so the members will know the analysis, the 15 to 20 years was based on the 2007 actuarial study which is required every two years. Because of the market conditions that has changed dramatically and from then on it discusses what numbers is used. Pete Reagan: I would also like to draw light to the second paragraph titled benefit decrease second paragraph of that heading. I received a memo from Kit Williams at the start of the meeting and I haven't fully read it but I would like for the membership to take note of that. This is something that has never been done before in the State of Arkansas. The actuary notes that a reduction in benefits would have significant legal hurdles to cross and to my knowledge has not been in Arkansas history. Paul Becker: I would like to encourage the pensioners to get a copy of the report and if we run out Sondra will certainly get you a copies because I think it is in your best interest to look at it. If any of us can help you with deciphering it we would be happy to. Marshall Mahan: The eight to ten years is with the present trends of the market? Kit Williams: That's where we are right now assuming 7% growth from here on. Paul Becker: That is 7% return on your invested assets. Kit Williams: It doesn't take into account January and February losses which are even more significant. Paul Becker: Page five is the updated page and if you look at the graph and look at the yellow lines going down that's the estimate at this point in time based on the actuarial assumptions. Marion Doss: $557,000 employer contributions that's a combination of the .4 mills plus insurance turn back fund, is that correct? Paul Becker: Roughly $440,000 in millage and approximately $140,000 worth of premium tax turn back. That's correct. Marion Doss: Millage will vary with property values they could decrease or go up or the City could annex them or they could possibly go up. Paul Becker: They could go up but I doubt it is going to be dramatic but yes they would fluctuate. That's correct. Marion Doss: The old pension fund is the only one that gets the .4 mill, right? Paul Becker: The old Fire Pension Fund and the old Police Pension Fund. That's correct. Kit Williams: That's always been the case. Marion Doss: Yes, .4 mills each. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 4 of 30 Paul Becker: That's correct. Marion Doss: The balance like the insurance turn back funds that's prorated between the LOPE employees and the old employees. Paul Becker: That's correct. Marion Doss: Is that based on the total number of members like the on the department and total number of members. Paul Becker: It's a little more complex like that that the driver is the total membership. It's actually actuarial cost and need is factored into that but the biggest driving force is members. There is a formula that calculates that. Marion Doss: The .4 mills can the Council increase that or does it have to go before the vote of the people? Paul Becker: That would have to go to referendum. Kit Williams: It has to be a vote of the people Council cannot do that. Marion Doss: Is it legal to collect .1 mill for each the Police and the Fire Pension Funds or is it .5 a piece, the top? Kit Williams: The top would be 1 mill for each pension fund. Marion Doss: Any increase would have to go before a vote of the people. Paul Becker: Absolutely. Sondra Smith: The concern about going before a vote of the people is when you go before the vote of the people and you ask for a millage increase they could totally deny the millage and you not have any millage whatsoever. Marion Doss: I understand that's a risk. Did we ever collect 1 mill for the Fire Fund and 1 mill for the Police or is the most it has ever been is one half of a mill? Kit Williams: Not to my knowledge. It was half a mill to my knowledge. I don't know if anybody else goes back further to know if we were collecting a full mill or not. Pete Reagan: We were at one time collecting a full mill then Amendment 59 did the roll back. Kit Williams: Still half for each though. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 5 of 30 Pete Reagan: Right it went half for each and then a couple years after 59 they refigured the millage. Kit Williams: There was a roll back mandated by a suit against the County, School Boards, and including the Pension Plans. Pete Reagan: Right. Marion Doss: I use to hear the term I mill and I thought it meant I mill for us and I guess maybe it did at one time and I didn't know if it meant 1 mill for us only or 1 mill total between the two funds. Mayor Jordan: I always thought it to be 1 mill total. Paul Becker: To the max going back as far as any of us and Kit certainly goes back a long ways before I do but to my knowledge it was always a half each. Mayor Jordan: I think so but I could be wrong on that too but I think that is correct. We will move on to the next item. Discussion on the membership directive Mayor Jordan: There will probably be someone that wants to address us on this. Would the Board like to hear the membership directive? I am sure you do but do you have any questions or statements before we go into that? Pete Reagan: Mayor I was of the opinion that this was directed from the membership to the representatives on this board. I don't know how this ended up on the agenda but that was my understanding it was for us to know how the members felt. Mayor Jordan: It was my understanding that it was supposed to be discussed tonight. Kit Williams: This would be the appropriate time because they should address the members as a body. Pat Boudrey: That was a directive of the membership that they wanted the board to hear them out. I think the board may have some more issues that they also need to raise along with the directives. Mayor Jordan: So you did attend to bring this forward? Pat Boudrey: That's exactly right. The membership met and that is why this discussion meeting was called so the board could at a special meeting discuss what the membership had in mind. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 6 of 30 City Attorney Kit Williams: Maybe you should come up here so you can speak into the microphone. Pat Boudrey: John Jenkins is a member of the membership and I feel they need to be represented by one of their own. John Jenkins: Could we defer to the board and let them present what they have? I know that there are several issues that the board is going to talk about and I think it would be good for the membership to hear what Pete has to say and what's going on. Mayor Jordan: That's perfectly fine with me. John Jenkins: I know that might not be the agenda of the meeting. Mayor Jordan: I just needed to put an agenda together and I put it together. John Jenkins: The membership agreed to listen. That's why we are here and to see what Pete has to say. Pete Reagan: Mr. Chairman at this time I would like to make a motion that this board seek an Attorney General's opinion on the question of whether we can legally and constitutionally reduce benefits to our retirees and if I can get a second on it I would like to speak on it. I would like the read the wording into the minutes if I could then I would be glad to take any questions. The question that I would like answered of the Attorney General of the State of Arkansas is if the Fayetteville Firemen's Pension and Relied Fund Board takes action to reduce pension benefits to retirees will that violate the rights protected under Article 2 Section 17 of the Arkansas State Constitution as interrupted by the Arkansas Supreme Court? The second part of that question would read if so will members of the pension board and the City of Fayetteville be exposed to liability should a lawsuit be filled on behalf of any retiree? Kit Williams: Certainly the City has in many cases asked the Attorney General for opinions about issues that are questionable especially ones that have not been decided before. An Attorney General's opinion is entitled to some persuasiveness but it's not a real decision like a court would make. For example when the City was entering into the TIF District situation and I felt that the law was very unclear. The Attorney General's opinion would not protect the City. He could have said something and they had already both Attorney General Beebe and Attorney General Prior before him had spoken about the TIF issue and issued opinions but I knew that that would not protect the City if a court found otherwise because the courts don't have to follow Attorney Generals opinions. I'm certainly not apposed to you all requesting an Attorney General's opinion however I think it's really unnecessary at this point in time. You can certainly do that and see how long it will take him to respond. It often takes several months especially with the legislature in session and the Attorney General is concerned about a lot of the laws that the legislatures are attempting to Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 7 of 30 pass. This is one of the busier times for the Attorney General and his office. I'm not saying that it would it would necessarily take a long time but my experience has been it is a few months before you get an Attorney General's opinion. I looked at this issue. You brought up that part of the constitution and let me read you what that constitution says. Article 2 Section 17 of the Arkansas State Constitution says no bill of attainder, ex post facto law, or law impairing the obligation of contracts shall ever be passed. That particular section deals with laws no laws can be passed. In the particular case that you sighted to me on that Jones verses Chaney which is a 1973 case. The Supreme Court was looking at a change in law that the legislature had passed which changed the pension rights of Mr. Jones who wanted to receive a pension. He had qualified in every way for his pension except for his age and then the legislature right before he hit the right age they changed the law and said you have to do other things to qualify and so he was no longer qualified. The Supreme Court looked at that and they decided they didn't like that and they said that they would follow what is the minority view throughout all of the states and said that he was going to be qualified. That had nothing to do with the decision of a pension board. It had to do with passing a new law. That particular case and that constitutional provision have nothing to do with whether a pension board has a right to make a decision to lower pension benefits because in their fiduciary duty responsibility they believe it is necessary to save the pension, at least that my opinion. I certainly don't mind you asking the Attorney General for his opinion. As Pete mentioned I prepared a legal memo on this. I looked at this because I knew that this was an issue. Maybe just for the crowd you all should know maybe what I think your powers are or your board's powers are in this particular case. I started my memo by going back a little bit and referring to a memo I had written back on August 31, 2006 to Mayor Coody, City Clerk Sondra Smith, Paul Becker, and Accounting Manager, Marsha Farthing regarding the increasing unsoundness of the closed Police and Pension funds at that point in time. I pointed out that consolidation with LOPFI under the current benefits would cost the city taxpayers millions of dollars and I didn't think the City Council would go for that. I stated "without consolidation and no change in benefits the pension fund is likely to exhaust its savings within several years. Once savings are exhausted the statutes mandate pro rata payments to retirees based upon available funds which in that case would only be the .4 millage and the insurance turnback funds and this would be a drastic and permanent cut in benefits to our retirees." I concluded my 2006 memo with this recommendation "to preserve this pension fund for the retirees as long as possible it would be wise to immediately and substantially reduce benefits possibly to the pre 2001 levels." This memo was written before the 50% drop in the stock market which has accelerated the problems that I was concerned about back in 2006. I still believe my advice to reduce current benefits to preserve the pension fund for the long haul is correct. Some have questioned including the actuary, who is not an attorney but the actuary from the LOPFI system, have questioned if the pension board of trustees had the legal power to reduce current benefits. I believe the board has such legal authority as long as the benefits do not go below the minimum statutory level of 50% of ending pay. The local Police and Fire Pension Relief Fund Chapter of the Arkansas Code is 100 pages long with numerous sections. The procedures detailing how a board can increase benefits is very clear. I could find no section explaining what procedures should be followed if a pension board of trustees determine that benefits should be decreased to preserve a fund that otherwise would Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 8 of 30 soon be exhausted. I could find no section saying that a board of trustees could not lower pension benefits to preserve the liability of their pension fund. It's just silent in that, so there's no expressed statute either way on that. However there are a couple of sections that deal with under funded pension plans. A.C.A § 24-11-208 is entitled Administration of Under Funded Plans. It states that basically the Arkansas Fire and Police Review Board shall notify plans that are projected to deplete their assets within 10 years of "options that are available to the fund to protect the benefits of its members, retirements, and beneficiaries." The bi annual accounting was preformed on December 31, 2007 and that's when they were suppose to notify us and that was before the 50% drop in the stock market, the projected insolvency of the fund might have been more than 10 years away at that point in time. What Pete read to you where it might be 15 years away was probably correct. That means that they are not under any duty to notify us at this point in time. However the current projections by the state actuary of the current situation, where the fund is actually right now even though the losses haven't been realized but the stocks are that down, it shows that our fund will hit zero sometime in 2016. Since A.C.A § 24-11-208 speaks of "options" to protect the benefits of its beneficiaries, I believe this demonstrates the legislative intent to authorize the local board of trustees of our Fire and Police Pension funds to consider benefit reduction as one permissible option to protect the long term benefits of the retirees. Now the very next section in this code is entitled Arkansas Fire and Police Pension Guarantee Fund. This fund "shall be created and established in providing a state fund to provide financial assistance to certain Municipal Fire and Police Funds. This fund may assist funds which have exhausted their funds so as not to be able to pay their pensioners. To be eligible to receive benefits from the guarantee fund the local fund "must be receiving a dedicated millage of 1 mill and we are not doing that and benefits shall not exceed the minimum amount provided by law. A minimum amount is one half of the highest salary year. If a pension board of trustees could never reduce benefits then no pension fund that had ever allowed even a tiny increase in pension benefits, 51% of ending pay could qualify for assistance from the Arkansas Fire and Police Pension Guarantee Fund. I believe that virtually ever pension fund in the state has probably increased benefits at least slightly and if no reduction was ever possible then no fund could ever be helped under the Arkansas Fire and Police Guarantee Fund. This simply makes no sense to me and violates the expected rules of statutory interpretation that courts use to interpret statutes. The basic rule of statutory construction is to give effect to the intent of the legislature. This is a quote from a Supreme Court case in 2000. "The Legislative intent is gathered from the plan language used also a particular provision in the statute must be construed with reference to this statute as a whole': In other words you look at the whole chapter involving pensions as a whole. Even though the legislature has failed to set forth how such a benefit decrease should be approved nor explicitly authorized it by precise statutory language the Supreme Court has long emphasized that they will use clear legislative intent to analyze the statute even if it is not perfectly written. I have a couple of long quotes from the courts saying that. The first one is too long but I will read the second one. "We decline to give such a limited interpretation to the statute because the literal interpretation does not give effect to the legislative intent It is a duty of this court to give effect to the intent of the general assembly even though the true intention though obvious has not been expressed by the language employed when given its literal meaning': That's a 1983 case. The obvious legislative intent was to create a pension system for Fire and Police Retirees that would pay them a life time benefit of at least half of their Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 9 of 30 highest salary. Disallowing the pension board the right to reduce pension benefits to ensure life time benefits will be paid would be directly contrary to the most basic purpose and goal of the legislature when enacting statutes authorizing these pension funds. The Arkansas Supreme Court is held that trustees have inherent powers when exercising their fiduciary duty in exercising a high standard of care in managing another's money or property. The court said even when the terms of trust do not expressly authorize an accumulation of reserves the trustee is never the less empowered to create reasonable reserves and he can properly withhold enough of the income to meet present and future expenses which are properly chargeable to income. I was also asked by Pete if reducing benefits might violate Article 2 Section 17 of the Arkansas Constitution. I have already explained I think that's a restriction on the power of the legislature to pass a law that would do that and not a restriction on this board. The court that talked about Mr. Jones and his problems also dealt with a law that's been changed and I want to point out that obviously that this is not relevant here there has been no change in the law which would make anyone in eligible for a pension that would have been eligible before. We're also not talking about making anyone ineligible we're talking about can you reduce benefits to preserve the pension plan so that everybody continues to receive benefits. Let me conclude that the pension board in my opinion has the legal right to take corrective action including lowering pension benefits if necessary to prevent the collapse of the pension plan. Pete Reagan: Kit, do you think that we as pension board members or we as the pension board or the City of Fayetteville has any liability if a suit was to be brought by a retiree because his benefits were reduced? Kit Williams: I think that if you reduce the benefits and you don't reduce them below 50% which is the minimum lets assume that I was wrong and the courts said you can't reduce benefits the relief then would be is that whoever sued and all the pensioners would be paid out of the pension fund the benefits they normally would have been getting except for the reduction. The City would not be liable, you as pension board members would not be liable, the pension fund would then be depleted more quickly by court order until I guess it went to zero. I would say no that none of the pension board members or the City would be liable in that particular suit because the money would be taken from the pension fund. The argument would be I should get more money from the pension fund, I'm not getting as much as I should and so if they win the judge will say take more money out of the pension fund. I have talked to the board about this before, that you all have fiduciary responsibilities to your pensioners. I think that you have fiduciary reasonability to try to make sure the fund does not go dry and that people don't end up with nothing except the millage. If that ever happened then one of these good people out here might say that you have failed in your fiduciary duty and that would be the only way I could see that there would be any personal responsibility on the pension board members. I should tell the beneficiaries every benefit increase that has been approved by this pension board and put into effect has also been approved by the State Pension people after they did a study to say that it could be approved. It's not like your pension board has been approving benefit increases outside the law. They have followed the law throughout. I wanted to make sure that's clear that everybody knows they have followed the law. They have sent studies down, the studies have been done and even though they would not have come out actuarially sound they came out using Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 10 of 30 a cash flow method as permissible. Your board has not done anything improper. I want to make sure you all understand that throughout this entire process. Now we are looking at a situation where dramatic changes have occurred and there is a real danger that the pension fund could run out of money. Sondra Smith: I don't mind getting an Attorney General opinion but that is not going to affect any other decision that I make tonight. If we decide to reduce benefits I think what we need to do is reduce them on temporary basis immediately and then get an Attorney General's opinion. I respect our City Attorney he has always given us very sound legal advice and I think we need to take his advise in this situation too. In January 2008 the market value was $8,331,001.74 and as of March 6, 2009 our market value is $4,809,458.89. That's a drop of $3.5 million in just a little over a year. I can't see us waiting another several months and see the fund drop even more to where we are at an extreme alarming amount. To me we are at an alarming amount right now. I don't think we have a choice as a board. I know I don't have a choice as a board benefits need to be reduced. I think we have some pensioners that have requested that we take that step. Pete Reagan: I would just like to say that I as a board member understand the predicament that we are in. It did not happen without us noticing it but we do know what has happened in the last year. Anybody that has a 401k knows what has happened, everything is down, and if you made money it was by accident in your 401k. I would like to go on record as saying that our investment advisors I think have done us an excellent job for the time period that we are talking about. I don't know that I can quote the exact numbers but I believe that for the last five years that Longer Investment Firm has averaged 7.9%. Paul does that ring a bell with you? Paul Becker: I don't remember off the top of my head. Pete Reagan: I think that is close so it's nothing that was done on the investment side. There's no money made off it in this deal. This is all because of market fluctuations. I still say to make sure that we are doing this correctly because there is no state statutes and Kit I take your opinion on this that we can do this but I would like to have the Attorney General, that is his job, to do an interpretation for us because there is no state statute dealing with reduction of benefits. I think we can have a turn around in 30 to 45 days of an AG's opinion. I have contacted our State Senator and she said that as soon as we got her the language that she would ask for it and if we would send it to her by email she could do it tomorrow. It's not something that is going to drag this out. I think we all understand the predicament we are in. I want to make sure that what monies that are left in the fund, the City, and the pension board are doing it correctly. I don't think we need to do anything in haste. If we are going to do something let's make sure we do it right. Marion Doss: I appreciate what Kit said about the board. We didn't just act on our own and do this. We had to send everything down to Little Rock and get an okay from the Pension Review Board before we could do any of these benefit increases. Everything came back saying we could. I'm kind of in favor of doing what we need to do to combine with LOPFI that's just my personal opinion. I'm not speaking for the rest of the board that's just myself. I think that is the Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 11 of 30 only thing we can do. If we did combine with LOPFI what effect will this have on current employees, Fire Department employees and city employees in general? Mayor Jordan: The only thing I can tell you Marion about that until we actually get with LOPE and we get some scenarios it is difficult for me to answer that. We heard several different things it could affect. I heard one quote that if it stays with the current benefits and there's a COLA it was about $1.7 millions a year. Is that what you all remember? Paul Becker: That was the quote. It's in an excess of a million dollars. Mayor Jordan: To me until someone down there puts it to a pen and brings this back it's difficult for me to say what that cost would be. The actuary presented that if I remember correctly. Kit Williams: So much of it depends on what benefits are going to be paid. If you have the benefits at this level, you have a COLA it's much more expensive for the city taxpayers to pay. There's obviously a limited amount of money the taxpayers pay and if we have to send a million or a million and a half dollars a year down to LOPFI then our current employees are going to suffer because current employees is over 80% of our budget. Mayor Jordan: True. Kit Williams: If we have to take that much money out that means raises and other benefits to city employees will suffer. There's only a limited amount of money. Marion Doss: This first chart here says current plan no COLA that it will cost a million a year but $550,000 of that would be covered under the .4 mill and the insurance tumback so the City would be out $450,000. Paul Becker: That's still $450,000. That's accurate according to the report. Marion Doss: I just wanted to clarify. Paul Becker: These numbers are different than what was estimated at the meeting. Mayor Jordan: That's what I'm trying to get at we're getting all kinds of different figures here on this stuff. We need someone who really does this to come back and give us some accurate figures. Keep in mind the City of Fayetteville last year in the budget process wanted to take $500,000 out of reserve funding to balance the budget. So there's not a whole lot of money to go around. We have tightened up money and we are trying to squeeze it as best as we can but if we are hit with another $500,000 or something like that I'm just going to honest with you something is going to have to give somewhere and I don't know exactly where we go. So if we were looking at taking money out of reserves to balance the budget last year and we are hit with another $200,000 to $500,000 it could be somewhat interesting around here for services and employees that are here. I just want everyone to keep that in mind too. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 12 of 30 Sondra Smith: I did not say that Longer Investments wasn't doing a good job. I think they have done a very good job for us. Regarding the 401k's going down, I agree with that everyone's 401k has gone down but on a 401k you are not paying out over a million dollars a year like we are. When our fund goes down and you've got pension checks that have to go out and you're paying out over a million dollars a year in pension checks that hurts you even more than if you were on a 401 k. Pete Reagan: I understand that. Mayor Jordan: The other concern that I have is and I want everyone to understand I'm not blaming the board. This is what it is. There's more going out than coming in and I'm not saying it's anybody's fault and I'm not talking about lawsuits. We are in a situation that we've got to work our self out of. Some of the concerns I have is the longer you wait. They did our yearly tumback millage income is about $565,000 and the yearly pay out is $1.5 million. We broke it down monthly and it's about $47,000 coming in and $119,500 going out. That concerns me and if you have to wait a month or two then that's that much further you could be down. I'm not saying you would but you could be in that kind of situation. What I'm trying to do is make sure this pension plan stays solid, stays functional. We are all up here trying to do what we know is best. You all may have a different opinion then what I have but both of us what the same thing. We want this pension to last and be good. Sondra Smith: In the minutes on September 30, 2008 Elaine Longer our investment advisor said "Yes, that would be helpful to know what that would be because your options are A, B, or C, get more capital into this fund, cut benefits, or roll into the state fund. You probably don't have another option outside of those three. " Marion Doss: I think our directive says that the members of the old plan are interested in seeing what it would take to go to LOPFL Paul weren't you down at Little Rock recently or did you just get this sent to you? Were you actually down there talking to the people? Paul Becker: This was sent to me but I was at the Pension Review Board meeting Tuesday. Marion Doss: How long does it take to get into LOFPI if everything worked out and everything is okay? Do they just except you at certain times of the year like your insurance company? Mayor Jordan: Even if everything went smooth you still need Council approval. Marion Doss: Council has to approve it. Paul Becker: First you have to have Council approval, then LOPFI has to except it, which normally isn't the issue, but they have to do an actuarial study. There are steps, you go to Council, the Council has to make that decision and then LOPFI has to do an actuarial analysis to find out exactly what the City's cost would be. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 13 of 30 Pete Reagan: Mr. Chairman we have a motion on the floor on the AG's opinion. Mayor Jordan: You all still want to speak on this issue don't you? John Jenkins: Mr. Mayor we had deferred for the board to present the case and I had a question. Mayor Jordan: Let me make sure I am legal here with everything. Do we need to vote on the motion and the second first? Kit Williams: I can say I have no problem requesting an Attorney General's opinion. I'm always happy to have the Attorney General give us his opinion. Mayor Jordan: Is there any discussion on getting the Attorney Generals opinion? Dennis Mullen: This thing has gone on for quite awhile. Hast makes waste why do we not get his opinion. It's takes long enough to get all of this done anyway and if we can get it back I think it's a valuable tool. Pete Reagan made a motion to seek an Attorney Generals opinion on whether benefits can be reduced. Gene Warford seconded the motion. Upon roll call the motion passed 4-2. Mayor Jordan and Sondra Smith voting no. John Jenkins: I don't know all of the Roberts's Rules of Order. We have a lot of people here that aren't necessarily familiar with that and I understand there has to be order to the meeting and absolutely appreciate that because I fall under those same rules in the job I do. There's going to be some questions that come up like I would like to know a time line on what you were talking about. I think everyone back here would like to know a timeline if we present it to LOPFI. How long does that take best case scenario and worse case scenario? We would like to ask those questions. Paul Becker: I wish I could give you a definitive answer unfortunately I don't have one. First we would have to take it to Council it takes at least two weeks before we request it to get to Council. Depending on if Council deals with it immediately it could be dealt with in two weeks or it could be tabled for further discussion. That could take between two to six weeks. Then we would send it down to LOPFI they would have to have an actuarial report. I would assume that would take at least three or four months. I would say from the time a decision is made to take it to the board for discussion I'm going to guess six months. Mayor Jordan: The Council might pass it on the first night but I don't look for it to. There is a lot of information. I have done a lot of studying on this stuff and it's not easy. It's relatively complicated. Kit Williams: I think the real issue is whether the City Council would entertain this at all. They are faced with a decision of whether or not they want to commit a least a half a million dollars every year for at least the next 15 years so that the retired pensioners can receive 90% to 100% Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 14 of 30 of their ending pay, at the same time they have many other demands for their money. We have had a loss of revenue so that money is extremely tight. I don't believe this will pass the Council unless there is a benefit decrease so that the cost to the taxpayer is substantially reduced. That's just my opinion. I have no vote one way or the other and I won't speak one way or another on it, it's purely a Council decision. It's a policy decision on what to do with the Citizens' money. If the Council will passes it you are there. Mayor Jordan: You have to understand you are dealing with eight people. You're not just dealing with me, Sondra, or Kit you are dealing with a legislative body that has to pass a budget at the end of the year. Pete Reagan: I was at the Arkansas Pension Review Board meeting and I asked David Clark who is the executive director about a timeline. I said if we chose to do that when would that happen? He said it cannot happen until December 31 st. That is the date of the change over. We were talking about a timeline we have got to have the consolidation report and all of that has to be done and ready so that on December 31 it will change over. That's my understanding. Paul Becker: That is the transfer of assets. I didn't ask him that question precisely. John Jenkins: Kit when you said a half a million dollars is that a half millions that is already coming in or is that an additional half million dollars that the city has to provide plus the half million in insurance turn back money that is already coming in? Kit Williams: I think if there was no cost to the City other than what the City is paying right now, the .4 of a mill and the insurance turn back then I don't think that would be a problem. John Jenkins: Is that the half a million dollars you referred to? Kit Williams: No, the half million dollars I was referring to is the actual real cost, the additional money that the City Council would have to come up with. They would have to decide well we don't need anymore Police or Fire or we don't need to put money over here because we are going to put the money into LOPFI instead. If this was a wash, if this wasn't going to cost the city taxpayers additional money beyond the four tenths of a mill they are already paying, there would be no problem I would think with the consolidation. The only problem with consolidation is that there is going to be substantially long term revenue cost to the taxpayers that the City Council has to decide is that the appropriate use of taxes and it's up the City Council. Ralph Tate: In some of the scenarios that I understood if LOPFI would come back with a percentage of rate decrease on our pension. Is that not the case Mr. Becker did you hear that mentioned at the meeting or were we under the wrong impression? Paul Becker: No, if you're referring to what I remember at the meeting we discussed that the board may wish to go and ask them to analysis it under certain scenarios to see exactly what they would have to do under different scenarios and analysis it. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 15 of 30 Ralph Tate: That's my question is if we take a rate decrease now I think it would be better to wait until they tell us how much of a decrease we would have to take in order for it to not cost the City anything. Paul Becker: Let's be clear on that. What would have to happen is the board would have to have a contractual relationship and actually hire an actuary to do that. That would not be done by LOPFI. So that's what was discussed at the open meeting that we had that the board may wish to have a separate study done to see what it would take to get it in line. That's not something that LOPFI or the Pension Review Board would do automatically. Jan Judy: I am a widow on the plan I appreciate you having this meeting and getting this together. We all talked about it before and agreed that we would be willing is necessary to do this. I do think that the AG's opinion is important and I do think that we can get that in short notice that Senator Madison will help us do that. I don't think we are talking about a long period of time. My question is how do we arbitrarily just decide that we are going to cut everybody back to 50% or 70%? How are we going to come up with that number? Say we cut 30% or 40% tonight and we all agree to do that when it comes back and we really could have stayed at 60% are we going to get that money back? We don't have enough tools tonight to make a decision or I don't feel the board does as to what our figure needs to be of decrease. Mayor Jordan: Paul do you have any idea of how you would figure the cut? Jan Judy: It's an arbitrarily number at this point you don't know. Paul Becker: That's true it is an arbitrarily number however if you do look at the study that was done it does give some estimates but you are right those are not necessarily precise estimates. Jan Judy: Would the board then be allowed to increase us back to say 65%? Paul Becker: There's a very definite procedure for what it takes to increase benefits. Kit Williams: If the study showed that you could support 65% then obviously you could go back to 65% but I don't think that anybody is suggesting that 50% is where the benefits should go at this point in time. If you look at the actuarial studies they don't even talk about that kind of cut. You have to have one mill dedicated which means it requires an election. Jan Judy: Do you have to have both or can you just have one? Kit Williams: Statute requires both. Jan Judy: So even if we went back to 50% they wouldn't bail us out. Kit Williams: No they wouldn't. If we had a mill we would be getting substantially more money and we would be in better shape. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 16 of 30 Gene Warford: If we did a 10% decrease and they gave us an estimate without any cost of living it would cost the City $300,000 a year. Is that correct? Paul Becker: That is what the study said. No COLA 10% decrease it would cost the City $300,000 that's correct. Gene Warford: We went from a million down to $300,000 correct? Paul Becker: Yes, a COLA really drives your actuary study cost. Gene Warford: Just in my simple figures if we drop 15% with no COLA it looks like the City would be close to zero. Paul Becker: No. A 20% decrease would cost the City $175,000, if you look at the final table in the study. Pete Reagan: Paul I know when the consolidation report is done basically it is an actuary and were you of the understanding that we could put scenarios in that or are you understanding that we have to do a separate actuary with scenarios to determine what the actual cost is? Paul Becker: No, you would have to do a separate one to put scenarios in there. The actuary study that would be official would be done by LOPFI. They are two separate actuaries one that works for the Pension Review Board and one that works for LOPFI. That actuarial study would have to be done by LOPFL There are no scenarios involved. Then they would determine what the City's actual cost is. Dennis Ledbetter: Is there anyway you can talk to these people on the phone and they kind of give you an estimate? I can understand they say lets fire off 30% and they say sure we can do that but you could have got away with 20% or 25% but their not going to tell you that. They are going to look at what you send down. I'm wondering if before someone gives a figure if you could talk to them on the phone and kind of get a feel of what you can work in instead of jumping off the deep end. Mayor Jordan: I hope you are more successful with them than I have been. Paul Becker: I think all we can do is look at the particular study we are looking at and it says if you take a 20% decrease you're in an estimated $175,000 cost to the City. This isn't official but just off the top of my head I would suspect that it would take about a 25% decrease to go close to a zero cost if we can extrapolate from this table that's not an official calculation. Sondra Smith: Kit is there anyway that we can do a temporary decrease dependent upon the study coming back? Kit Williams: Of course there's nothing within this particular section that tells you how you decrease, whether it has to be approved by anybody besides the board. It doesn't seem like it would be because you would never be making your plan more actuarial unsound by decreasing so I don't know why you would want to have a study done and send it down to them to say yes Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 17 of 30 you are not as bad as you were if you decrease. I don't see any reason for that but I would certainly want to talk to LOPFI and see what kind of documentation they would want. That same would be true for whether or not we can do a temporary one or permanent one. We would like to ask them about whether or not if we did a temporary one would they honor that and then allow us to put back 5% if we wanted to if our studies showed that it was better and we could afford it. I don't know what they would say and they might tell us they don't know because this is uncharted water we haven't done this before. Mayor Jordan: So you are basically saying that it might be wise to wait until we get the studies back. Kit William: If we are trying to hit it right on the dot I would say you could do that. The other thing you can look at was the fact that even with the 20% decrease and no COLA it's still going to cost the City $175,000 a year. I doubt if there's a 20% decrease that the study would come back and say that you didn't have to decrease but 15%. I'm not an actuary but I don't know how that would work. I think with a 20% decrease I don't see how it would be too much and that you left something on the table. John Jenkins: I'm sorry Mayor I'm still strung out on this cost to the City. Kit Williams: It is the net cost after we receive the millage and the turnback the net General Fund money that has to go in. John Jenkins: I'm sorry, I don't do this daily. Kit Williams: I don't think it's fair to talk about anything else we should just talk about the net cost to the City. John Jenkins: That's what we've got to have. Marion Doss: It's net cost but at the same time when you say $1 million there is an estimated $550,000 coming in from the turnback funds and the millage. Kit Williams: Yes, but I'm talking about the net cost. Paul Becker: If you look at the column that said net to City out of pocket. I know we are looking at the report and you are not and we are certainly here to try to clarify as much as possible to everybody. Sondra Smith: They have the report. Kathleen Doss: Once you go to LOPFI with a 20% decrease and no COLA is that forever? When would we be allowed to creep back up? Paul Becker: The decision would no longer be in your hands. It would be sent down and administered by them as the plan is sent down. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 18 of 30 Kathleen Doss: So no more monies from the City would be required? Kit Williams: The millage would still be going down there. The .4 mill would continue and so would the turnback. Kathleen Doss: In ten years if we got a COLA would that mean more monies from the City having to go in other than when what's is in this column. Gene Warford: You're not going to get a raise. Once it goes to LOPFI it's a done deal. No raises period. Pete Reagan: I think the City Council has the right to raise it. Kit Williams: I think one thing the City Council will be concerned about is that even if the benefits are reduced enough where it won't be costing the City Council much money. Once it goes to LOPFI then the City is responsible for any short fall. If the legislature decides they want to give you a COLA then they will do it and the City will pay for it. That is one thing that the City Council is going to be concerned about even if we get to an original place were it doesn't look like it's going to cost the City and the taxpayers any additional money besides the .4 mills. They will be concerned that in the future there will be an unfunded mandate by the legislature to increase your benefits by a COLA and the state can do it real easily because they won't pay for it they will make the city taxpayers pay for it. That's one thing the City Council will be concerned about and that's another kind of hurtle you all have. I hope that we can get it to LOPFI because I'm concerned that this plan is never going to be totally secure until it goes to LOPFI and you have that kind of protection. I think that's the best thing for both this plan and the police plan which is not in as much trouble as you all are but I still think they are looking at something happening on down the line a few years after you. 1 hope they will look at what you are going through and act even faster. Paul Becker: I would like to expand on that just a little bit so we all understand what we're asking. If you go forward to the Council and you say send it to LOPFI it's not going to cost you anything. It ends there but what Kit is eluding to is then the City assumes market risk. If the market goes down or the asset portfolio goes down the City still has to assume that risk and make up any short fall. We are asking the City to take a risk when you ask them to take over the plan even though initially it doesn't appear there would be any cost. The City would be taking on that risk so that's what you get from the City. It would be more or less a partnership here. Kathleen Doss: Is that risk still there after that 15 years of paying out the unfunded part? Paul Becker: Sure you always have that market risk. That 15 year amortization that you are referring to we would have to pay $175,000 in the lowest over a 15 year period according to the study but then the next two or three years the market could have a down fall we don't know. This is based on an actuary study which is based on a 7% increase in the portfolio. If that doesn't happen the City would have to make up the difference. The City is still taking market risk, the City still has to consider that, and the City would still be participating in attempting to help you with the situation. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 19 of 30 Chuck Lewis: How much over this millage and tumback has the City had to be out on this group of men over the years that our pension has been there? Kit Williams: The only thing the City has contributed up to now besides the millage and the turnback which comes from the state even though it might be based on City stuff is just the amount of contribution it made like the amount of contribution you all made while you were getting this established. The City has not had to dip into general reserves and in fact this is not a liability to the City right now. It's a liability only for the pension board and you all. You all have the fund you can control it. It's your liability it's not the City's liability at this point in time. If it gets sent to LOPFI it becomes the City's liability and the City will have to pay what ever it takes. Marion Doss: Do LOPFI employees get a COLA? Kit Williams: I think they do but I'm not sure. Paul Becker: It's my understanding is they do. Marion Doss: How much is their COLA? Mayor Jordan: Jeremy how much is your COLA? Jeremy Ashley: 3%. Mayor Jordan: That's what I thought. Gene Warford: How much do you all retire at? Jimmy Vinyard: Maximum is 85% but that's unattainable in 28 years. You are not eligible to get a benefit until you have retired 28 years and accumulated that and have met certain age requirements. They have different age requirements at 20 years and 25 that a person has to meet. You're technically not eligible without an age requirement at 28 years unless you draw disability. Current maximum for a LOPFI member is 85% which is not attainable in the 28 years. LOPFI one plan would be close to 33 years of service to get 85%. Gene Warford: I thought it was attainable if you were a volunteer and worked for full paid department both. Jimmy Vinyard: You would have to have an accumulation at both departments at the same time of 28 years but your paid time contribution would be against your paid time. Say you worked as a volunteer and a paid department and you put in 14 years your multiplier times 14 years would be what you would achieve and it would be somewhere around 40% of your pay. Gene Warford: What is your widow's benefit? Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 20 of 30 Jimmy Vinyard: We don't have a widow's benefit technically. We have a pay as you go widow's benefit in our system. If we die in the first five years of retirement she will receive probably 50% or your pension left for that 60 month period. It's like a life insurance policy. Audience: But you have to take a reduction to get on the plan in the first place. Jimmy Vinyard: Plan B you pay for. You have a Plan B 50 and a Plan B 75 and you take a reduction in your retirement. Say you were at 80% they take and nock down 9% of that 80% down to 91 % or somewhere in that range and then your spousal benefit would get a 50% of what you were making but you take that reduction for your lifetime in that plan. Plan B 75 if I understand it drops you down to getting 84%. If it was 80% you were going to get you are only getting 84% of that. You take a 16% reduction in your benefit to get a spousal benefit of 75%. Those are options that you have to take and sign before you retire. Pat Boudrey: I just want to address the membership and say that I have put in countless hours myself on coming up with these figures that you have gotten in emails and mailings and its my understanding after setting here tonight and listening that if the City chooses not to send the plan to LOPFI and if the minimum percentage of decrease is 50%, which is what the guys were promised when they were hired on, there is no option except to decrease the fund to 50% until it zeros. Is that the option left? Mayor Jordan: I don't know. Kit Williams: I actually don't think at this point in time that you would have to go to the minimum. I think you went to 90% in 2001? Pete Reagan: I think that's correct. Kit Williams: Then after that there was a COLA. If you add the five years of 3% COLA to that 90% it actually is at this point a little bit more than 100% of ending pay. Obviously there has been inflation, that's why there was a COLA, but the final one right now is a little bit better than 100%. I don't think that with the millage that is coming in and the turnback even with the market being down as low as it is that you would have to go to 50% at this point in time. I asked in 2006 for them to think about reducing it then because the longer you wait the farther you will have to reduce. I don't think at this point even with a bad market that we have had I don't think a 50% limit is necessary at this point for the solvency of the fund. I think you can be higher than that. Pat Boudrey: I sit down and put a simply math equation out to the membership and at $1.5 million per year to be changed only by death to the benefit fund and there are no absolute figures here because we don't know what Longer Investments is going charge and we don't know the deaths they are just variables. When I put a pencil to $1.4 million per year and this year or for last Friday night we had $4.8 million in the fund that will last three years. Kit Williams: Keep in mind we're getting over $500,000 a year in millage and tumback. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 21 of 30 Pat Boudrey: You're one million dollar deficit per year. That's a deficit. Paul Becker: That's correct so you are assuming no change in the market value. Pat Boudrey: That's exactly right. I'm assuming no losses or maybe even more losses or I'm assuming no gains. This was just a simple math equation that I wanted the membership to know the severity of the situation. I came up with two plus two does equal four and when you have $4.8 million and $1.5 million coming out it's not going to last very long. Sondra Smith: Pete Reagan asked when the last large benefit increase was. On January 1, 1997 the plan went from 50% of final salary to 65% of final salary. On January 1, 2001 the request was to go to 95% but it was denied and was only approved for 90%. It was January 1, 2001 that we went to 90% of base. Marion Doss: You said that the first thing is the Council has to approve this before we can do anything but we would actually have to get the figures other than this estimate to give the Council wouldn't we. Mayor Jordan: Absolutely. Kit Williams: I would say practically yes. You don't legally have to do it but practically if you hope to have Council approve it, yes. Marion Doss: In this membership directive on number five it says that possibly the City would help with some administrative costs. Exactly what does that mean? Mayor Jordan: I don't remember. That was explained to me. Jan didn't you bring that up. Jan Judy: I went to visit with Mayor Jordan and Mr. Becker last Friday and we were discussing the fact that the city probably would be a hard sell to get them to pay any yearly amounts and Mr. Becker brought up that even once we switched to LOPFI there would be an administrative cost. Mr. Becker said that would probably be the only possibility or a possibility that the City Council might pick up the administrative costs. Paul Becker: This wouldn't be part of the $175,000 we are quoting in here, in other words this would not be a cost amortized over time. Once the plan goes to LOPFI there would be an administrative cost charged for LOPFI administration and that would be absorbed. Pete Reagan: Is that a percentage? Paul Becker: Yes it is but I can't remember what the percentage is off the top of my head but it is a percentage. Once it goes down there the City is responsible for keeping the funding sound so the administrative costs are correlated into there. Marion Doss: This projected cost of $2,200 for some variable scenarios is that through Carreiro or LOPFI? Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 22 of 30 Paul Becker: That is the actuary. The question was asked to the actuary and he is a Pension Review Board actuary. If you wanted a study done under different scenarios to see what it would come out that that was his estimated cost. Now you would have to contract with them as a board I would not. I represent the City. This particular study was requested by the City and paid for by the City. You would need to work something out and have a contract with him to analysis whatever scenario you would want. I guess what we are talking about here is how do you get the cost to the City at zero under some circumstances. That was the discussion you had with him. He is the actuary. Marion Doss: Are we talking that it would have to be where the City had absolutely zero or is there some negotiable amount in there where we could work something out. That is providing that we could do this decrease type thing which we are asking for the Attorney Generals opinion on. Kit Williams: I don't think you can ask staff because that is up to the City Council. They are the ones that will make the decision on whether or not they want to devote money to it or not. Mayor Jordan: It actually goes out of our hands it goes to the Council. Kit Williams: Well you still get a vote Mayor. Mayor Jordan: I do. Paul Becker: I'm going to call everybody's attention if you all read the papers and look at what we went through last budget year. We had a $500,000 gap in the budget. It took us months to deal with that so it not that we have a couple hundred thousand dollars to allocate to anything. We are struggling to provide the citizens the current level of services that we are providing to them now. I'm just trying to be realistic to you that I don't particularly feel and I can't speak for the Council that it would be receptive for them to entertain additional costs but that's a personal view. Mayor Jordan: Keep in mind also that the workers in the City have not received a cost of living raise this will be their third year. I believe that's correct. Kit Williams: I think you're right. Mayor Jordan: That's kind of what we face too. Gene Warford: This is kind of off subject but how come we can have money for speed bumps but we can't have money for raises? Mayor Jordan: That's a great analogy I asked the same question in another previous deal. You've got CIP money and you have General Fund money too. Paul can explain that better than I can. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 23 of 30 Gene Warford: That rubs me too. You've got a million dollar bridge out there at Lake Fayetteville. Mayor Jordan: Those are Capital Improvement Projects not General Fund. We are talking about General Fund. There's CIP and General and we've moved all the money out of CIP into General. Kit Williams: We've had a resolution for a long time about how the sales tax will be split so much into operations which is wages and some much into capital and so the City Council obviously doesn't like to continue to rob the capital funds to put more and more into operations. Gene Warford: Most of us were around when that sales tax was passed and they also promised that they would take care of us when the City passed it and we helped them pass it. Sondra Smith: What sales tax was that? Gene Warford: The one cent sales tax. Sondra Smith: When? Kit Williams: That is probably 1993 you are talking about. Gene Warford: Yes. Pete Reagan: I think Mr. Grimes was the City Manager at that time. Kit Williams: We didn't have a City Manager at that time it was when I was on City Council. We just had the suit that invalidated the other sales tax and so we substituted that bond sales tax with an operating penny instead. Sondra Smith: If that was in 1993 at that time you were at 65% of benefit and they probably could have taken care of you at 65% but when you go from 65% to 90% it makes it a lot more difficult. Audience: When I was working there was a law, an ordinance, state law or something that I had no choice but to participate in this pension fund. I could not join social security or pay into social security and I was wondering if someone could answer my question as to whether that was a city ordinance, state law or whatever. Kit Williams: It was actually part of the State law. For the City to be able to have this pension fund and have the millage supporting it then it required that the firefighters and police at that point in time were in it and then later the state law got changed so that we had a statewide system that the current employees are in. Both times it has been state law that has required that. Pete Reagan: Sondra when is our next scheduled meeting? Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 24 of 30 Mayor Jordan: I would say the next scheduled meeting would be as soon as you get that Attorney General's report in. Pete Reagan: I'm not doing that Kit is. Kit Williams: I thought you dictated it. Pete Reagan: Do you want me to do it? Kit Williams: No, I don't care she's got it in the minutes we will send it off tomorrow probably. Pete Reagan: Do we have her email address? Kit Williams: I do. Mayor Jordan: That would be my recommendation. Pete Reagan: It would get there a lot quicker that way then by mail. Mayor Jordan: True. Kit Williams: We will probably send it all kinds of ways. Sondra Smith: The next scheduled meeting for the Firemen's pension is April 30th Marion Doss: Do we want to wait for that opinion or do we want to work on trying to get some scenarios to send down now? Gene Warford: I think we are going to have to start coming up with some scenarios so when do get his opinion and if it's agreeable we are ready to act. We've got to have a plan in place. Marion Doss: We changed to quarterly meeting in the last year just because of time constraints of the previous Mayor not having time to make the meetings. Sondra Smith: I think it was Pete also that had a hard time making the meetings. Marion Doss: I make a motion that we go back to having regular monthly meetings until things are resolved and if anything pertinent comes up we have a special meeting. Pete Reagan: Can we agree on dates before we set these meetings. I've got no problem with meeting monthly but I have a schedule. I know you do to Mayor. Sondra Smith: Right now you are meeting the last Thursday of the month. Marion Doss made a motion to go back to having monthly meetings on the last Thursday of the month. Mayor Jordan seconded the motion. Upon roll call the motion passed 6-0 Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 25 of 30 Kit Williams: Since this is March and the next one is already scheduled for April I guess we can keep it that date? Sondra Smith: Yes, I assume. Is it going to stay the last Thursday of the month so everyone here will know when those meeting are going to be? Mayor Jordan: Okay in the mean time we will wait on the Attorney General but we need to meet and I agree we might even meet earlier to work on some scenarios. Sondra Smith: I would like to know about directive number three that we received? What exactly that means? Mayor Jordan: Yes, we probably need to discuss that amongst the group out here. What do you all think about directive number three which basically says the membership directed the pension board to make cuts in benefits necessary to keep their plan from going solid broke? I guess hearing everything do you just want to take a hand vote and see what they think or do you want individuals. Sondra Smith: I would just like to know what that means. Mayor Jordan: Yes, what does that mean? Dennis Mullens: You had a place on here where we could sign them and return them. How many did you get back? Marshall E. Mahan: While she is looking that up my personal opinion is that I would like to see our board start working on some scenarios immediately. Kathleen Doss: How are they going to do this? No offense you guys aren't professionals. How do they go about now making a good decision about what it's going to take to keep the plan afloat? How do they go about doing this? We know what to do to go to LOPFI, if we don't get to LOPFI, how will they know what to do? Who is going to help them work on these numbers is there some place to turn? Kit Williams: That is what that actuarial hiring would be doing, although looking at what was given to us he says he is not the actuary for LOPFI he is the other actuary but hopefully they will all come up with the same answers. You never know, but even then a 20% cut would still be costing the City net about $175,000 a year. I guess what they have to look at is scenarios around that level and maybe even greater to see could they get it where it would be a zero, neither cost nor benefit to the City. I don't know what they want to do but obviously we should not wait until the end of April for you all to start talking about scenarios. Kathleen Doss: I was thinking that was two scenarios. One if we go with LOPFI and the other if the City says no we are not going with LOPFI. Is that what we are looking at perhaps two different scenarios here? Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 26 of 30 Kit Williams: Both of them might need to have the same answer because you want to be solvent either way. Kathleen Doss: Does Jody do both of those? Whoever does these actuary's is he the one who would do both of those? Pete Reagan: Osborn, Carreiro & Associates, Inc. will do the one for the determination of keeping the fund in house. They will also give us some projections on what they think it will be if we did cuts but going to LOPFI it's my understanding the firm out of Minnesota is the actuary for the LOPFI Board. Paul Becker: That's correct and they would do the official one which would tell us what the City's cost is but that's after the City has requested to send the plan down there. I believe your question is would this actuary do a couple different scenarios, one what would it do to keep it afloat and fund it over 15 years at zero cost to the City. Either way it would be the same. The study would be the same whether you keep it in house or send it down to make it actuarial sound over 15 years would be the same question. Kit Williams: As long as they use the same input. In other words right now they are using a 7% profit from your investments. It used to be 6% and they raised it to 7%. I don't know if LOPFI is using the same percentage or not. Paul Becker: Yes they are and that was chosen by their board. Marion Doss: The directive two says the pension board would start communication immediately with LOPFL I'm saying the members are directing us to work with consolidating with LOPFI. Paul Becker: You can work with LOPFI all you want but the decision there is not going any where they are going to tell you you have to have the City Council approval. There's not much you can do with LOPFI. Carreiro & Associates does the actuarial study for the Pension Review Board that's what jurisdiction you are under right now. When you say scenarios you want to specific and your goal could be what type of benefit cost across the board we would have to make so there would be zero cost to the City if you transfer it down. Those scenarios you have to decide and you would want to appoint somebody to express that and enter into an agreement with that actuary firm and set a deadline of when you want those number back. Marion Doss: We received that figure in that meeting we had a month ago, four scenarios for $2,200. Paul Becker: That is what he said and that is the representative you would be dealing with. The reason you would want to deal with him he is the Pension Review Board and he has all of your numbers. You go to another actuary they start from scratch and believe me you are not going to get the time of day for $2,200. Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 27 of 30 Marion Doss: So we need to come up with our scenarios, send it to him, and get that back and then that's when we go to Council. Paul Becker: You negotiate a contract with them, he comes back, and then you put it in place or do what you need to do and then you would proceed to Council. That would be your game plan. Ron Wood: In other words we would take the contract to Council? Paul Becker: You would negotiate and have a contract with the actuary to do the numbers. Once the numbers come back then we can go to Council and say based on the actuary's estimates this is what it would cost. No cost to the City other than market risk, which is a big cost to the City. If the Mayor agrees we would take it forward to Council, ask the Council if they would agree to that. Mayor Jordan: The board votes it in we will take it to Council. No matter what the Mayor wants to do. Paul Becker: The board says yes we complete an application stating the City wants to make the transfer and we send it down there and they do an actuary study but that's our cost and they say this is the actual. Kit Williams: And we hope that it agrees with the other actuarial study. Paul Becker: They will be close they won't be perfect. That's how I believe you want to proceed if I understand correctly what you want to accomplish. Mayor Jordan: I want you all to understand something these are just rough figures, you are losing about $72,000 a month. So every month we wait and the longer it goes unless the market does a backward summersault that's the figures that I have. Paul Becker: If everyone agreed you certainly want to solicit input unless you feel you have sufficient input from your membership of what scenarios they want to look at. Gene Warford: That is one thing I want to ask, does everyone want a strictly across the board percentage cut? There's a lot of thought going to have to go into this. Roy Cate: I don't know about anyone else but I feel we are up the creek. This seems from what I'm getting tonight that the City is going to be real reluctant to put us in that state fund unless they can show zero. You're talking about the market and the market goes down and the City's going to be out some money we have to still think that hopefully in a short time maybe the market will come back. If we decide to take cut we are just putting a band-aid on it because it looks like that even though we take the cut we are just prolonging it because if it goes out, if I understand we don't have a 1 mill, so that's it weren't out. We've done all this service and expected to draw something, it's not much in my case, a third of it goes to health insurance, the rest of it utilities and a little bit of food. That's where I'm at right now but in the same token I'm willing to take less but I think it's just a band-aid. If the City is not willing to look at us and take Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 28 of 30 us on to go to the State. This state fund was set up because the State of Arkansas had all these little different departments crying that they needed a pension and they didn't have anyway to generate the money and so they got it but we don't. We are going to be without. I can't imagine them voting to take us on and be out any money. Even if they have a zero balance they are still going to be reluctant to that might change and they are going to have to put something in. We can present it to the board 50 times and it probably never will pass and then we are still not going to get to the State until we get it through you all. Kit Williams: I actually think if you can get to where it appears to be no net cost to City initially they would be willing to take the risk because their concerned about all of you all too. Even if they don't have a fiduciary responsibility or don't have a financial responsibility for the plan right now because the plan is suppose to be administered by your own pensioners and it's suppose to be standing on its own, I think that they would like to try to assure you that the plan will never run out of money and the way to do that is to get it to LOPFI. They should realize that there could be problems in the future where your benefits could be increased by the State Legislature and that means city taxpayers will have to pay. If you go down there at a no cost situation to the City then I think the other variables that could cost the City money in the future I think they will probably be willing to take that risk. I don't know I can't really speak for them but I do think they can and I think if you do have a benefit cut it won't just be a band-aid. Right now there a big torrent of blood flowing away from you and if you put a band-aid on and you staunch that flow a little bit then you have a lot more blood for awhile. If you look at the scenarios they gave with the 20% cut the cost to the City would be $175,000. Now that tells me your plan will not be suffering the major losses it is now. Even with a fairly seemingly minor, I know 20% is a big cut but not a 50% cut. Even with a relatively minor cut you could make your plan a lot healthier. Roy Cate: We are speculating on the market too if we go another 18 months and it keeps dropping or it could go up. No one really knows, even if we cut 30% how long is it going to last us or if we go back to 50%. I'm just concerned. I think its going to be a battle with the City. Marion Doss: I think a benefit decrease without going to LOPFI is a band-aid. I think if we can go to LOPFI I think that will be a permanent fixture but I think any benefit decrease without going to LOPFI is strictly prolonging the agony. Kit Williams: It's the agony of drawing benefits. I think you want to prolong drawing benefits as long as you can. Marion Doss: I'm talking about the agony when they end or when we come back here a year later if we decrease benefits and try to stay with the old plan we would be back here a year or two later doing the same thing then the cost to go to LOPFI would be even more. Paul Becker: None of us can speak for the board but if you take a benefit decrease you are in fact saying to the Council we are willing to do this part, will you do your part and assume that market risk? I would say that is a pretty fair argument, to go forward and say we have raised benefits and raising benefits got us into trouble, we are willing to cut back, would you assume Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 29 of 30 the market risk and I think there would certainly be some receptive. I think everybody sincerely knows what your situation is and is sympatric but we have to be realistic. Marion Doss: I think your support will go a long ways if does get to the Council. Mayor Jordan: That's why we need to sit down and work something out. Marion Doss: I think that support is real important. If we don't have that I don't think we would stand a chance with the Council. Pete Reagan: Do we need a motion for expenditure on starting this process? Kit Williams: I think it probably makes sense to try to get your actuary hired and it would delay the process if we don't. What was the amount of money? Pete Reagan: $2,200. Paul Becker: He quoted $2,200 at the meeting. You do want to appoint a contact one of yourselves to deal with. Pete Reagan: Who wants it? Marion Doss: I thought it might be proper for the City Clerk to deal with the actuary. For us to come up with scenarios and have Sondra deal with them. They usually send their information to you don't they? Sondra Smith: If you will give me the scenarios I will be happy to do that. Gene Warford: Right now we've got to just pass it. Pete Reagan: We just have to vote to authorize the expense. Pete Reagan made a motion authorize the expenditure of $2,200. Marion Doss seconded the motion. Upon roll call the motion passed 6-0. Sondra Smith: I want to make it clear that I am very uncomfortable about anybody having to take a benefit decrease. I feel like we have had since 2006 to make a decision and we have kind of put it off. I don't think we can put it off any longer. I feel like our City Attorney has given us a very good legal opinion. I don't think we can wait. I don't think we can wait another month. I don't think we can wait another six months. It grieves me to even have to make a motion to do a benefit decrease but I think it needs to be done. Therefore I move that we do a 20% across the board benefit decrease excluding volunteers because they are governed by State law and they only make a little over $100 a month and then get our information from the actuary. As Paul Becker said it could take up to three to six months I don't think we have that long to wait. We have a directive from several of the pensioners that have asked us to do a benefit decrease and Special Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes March 12, 2009 Page 30 of 30 several of them have contacted me. I feel like it is my responsibility as a board member to make a motion to cut the benefits by 20% excluding the volunteers. Mayor Jordan asked for a show of hands before the vote of how many would take a 20% decrease? Who is against it? Mayor stated that it looked relatively dead even. Gene Warford: Before we vote I would like to ask them do you all want to do this right now before we get any scenarios or anything? Do you want to take a 20% cut right now? Sondra Smith: I would also like to add to that motion to make it affective May 1st. Marion Doss: Do you think we will have that AG's opinion back before May 1st? That is what I'm concerned about. Pete Reagan: Mayor I appreciate our City Clerk's desire to do this but I want it stated that I can't support that because of the AG's opinion. If I know for a fact that it's legal do that and my membership says that's what we want to do than that's what we will do. I can't support that and I will vote against it until we have an AG's opinion back. Sondra Smith made a motion to cut the benefits by 20% excluding the volunteers. Mayor Jordan seconded the motion. Upon roll call the motion failed 3-3. Mayor Jordan, Marion Doss, and Sondra Smith voting yes. Pete Reagan, Gene Warford, and Ronnie Wood voting no. Meeting Adjourned at 7:55 PM