Loading...
HomeMy WebLinkAbout2009-07-16 MinutesBoard Members Mayor Jordan Chairman Sondra E. Smith Secretary Marion Doss Position 1/Retired Pete Reagan Position 2/Retired Gene Warford Position 3/Retired Ron Wood Position 4/Rctired Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16, 2009 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16, 2009 Page 1 of 7 A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees was held at 3:00 PM on July 16, 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 Trish Leach, Accounting, Paul Becker Finance & Internal, Elaine Longer, Longer Investments Kim Cooper, Longer investments, Audience and Press. Approval of the Minutes: March 12, 2009 and April 9, 2009 Special Firemen's Pension meeting minutes Pete Reagan moved to approve the March 12, 2009 and April 9, 2009 Special Firemen's Pension meeting minutes. Ronnie Wood seconded the motion. Upon roll call the motion passed unanimously. May 14, 2009 Firemen's Pension meeting minutes Pete Reagan moved to approve the May 14, 2009 Firemen's Pension meeting minutes. Ronnie Wood seconded the motion. Upon roll call the motion passed unanimously. Approval of Pension List: August, September, and October, 2009 pension lists Sondra Smith: There are no changes to the pension lists. Pete Reagan moved to approve the August, September, and October, 2009 pension lists. Gene Warford seconded the motion. Upon roll call the motion passed unanimously. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16, 2009 Page 2 of 7 Old Business: Election results Sondra Smith: There are no changes. The two people that were up for election were re-elected. Election process discussion Sondra Smith: You asked me to put the election process on the agenda. We send out nominations and after we get the nominations we send out ballots. The Policemen's Pension does not do it that way, they just send out a ballot. We sent out 47 nominations letters for the Firemen's Pension and only received 17 back. One was after the deadline so we really only received 16. The Firemen's Pension sent out 47 ballots and only received 20 back. Policemen's Pension sent out 50 ballots and received 33 back. They received more than 50% back and the Firemen's Pension received less than 50% back. Ronnie Wood: They get a lot better return on there ballots. Pete Reagan: They don't have the nomination process. I know it's an extra letter to send out but there needs to be a nomination process. From what I understand Sondra sends out the names of the people that are eligible on the Police Pension list, and you put an X by the one you want to vote for? Sondra Smith: No they fill in the blank. We do it basically the same except on the Firemen's Pension you nominate who you want. Once we get the nominations in then we send those nominations back for a vote. On the Policemen's Pension we send out the list of who is eligible they can pick from that list and choose who they want to serve. Kit Williams: Just for your own information the two board members that could be re-elected were re-elected using their system. Marion Doss: You said on ours you sent out 47 nominations and got 16 back? Sondra Smith: We actually got 17 back but one was after the deadline so we can't count it. Marion Doss: And on the vote? Sondra Smith: We sent out 47 and only received 20. Police sent out 50 and received 33 back. Marion Doss: If you send out the list of names and people just check who they want you might get some back that the person that's elected might not want to serve. Where at least with the nomination you can contact that person and ask them if they are willing to serve. I guess you can do the same thing the other way too. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16, 2009 Page 3 of 7 Sondra Smith: We do. We take the ones with highest number of votes and call them just like I do the fire pensioners and ask them if they are willing to serve. If that first person that got the most votes isn't willing to serve then we just go down the list. You would have to do the same thing on nominations. It doesn't matter to me you just asked me to put it on the agenda. Ronnie Wood: I was a little bit afraid that maybe we had some confusion in the way we did it. Sondra Smith: I didn't compare to see if the 17 that sent back the nominations were the same that voted. Jan Judy: In the past I thought that the widows voted but I didn't get a ballot this time. Sondra Smith: The Firemen's Pension is different than the Policemen's Pension. On the Firemen's Pension the widows are not allowed to vote. On the Policemen's Pension they are allowed to vote. The state law changes all the time. It's just changed in the past two or three years allowing the Policemen's Pension widows to vote. We have no control over it that's state law. I always check the state statutes before I send anything out to make sure there haven't been any changes. Mayor Jordan: I don't think we need a motion to leave it the way it is. Sondra Smith: I don't think you do. Actuarial study update Kit Williams: We didn't get anything did we Sondra? Sondra Smith: I emailed him to see where he was at on the study. He thought we were meeting next Thursday. They were planning on coming up but I didn't know they were coming up and I didn't notify him that the meeting changed. He thinks he will have something for us in August. Kit Williams: We can meet with the pension board then? Sondra Smith: I assume. Pete Reagan: We should see if he has the numbers for us. Sondra Smith: He doesn't have them yet. Pete Reagan: I understand that but if he has them on the 19th or 201h then maybe we can call a special meeting. Kit Williams: Why would he want to meet with them if he doesn't have the numbers? Does he have questions? 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16, 2009 Page 4 of 7 Marion Doss: That would be good, if he has it ready to have a special meeting, to find out what he has to say. Sondra Smith: That's close to your meeting time anyway so you might just want to schedule your meeting on that week. Pete Reagan: I think it would be best if we contact him and say when you get the numbers let us know. Then we can set a meeting on the 18th or 19`h and go from there. Sondra would you contact him and when he gets the numbers have him contact us and we will set the meeting date at that time. Sondra Smith: Yes. New Business: Revenue/expense report Sondra Smith: Trish does this report to show the pension board where we are at and where we have been. According to our year to date calculation the book value is at $5.5 million. The market value is about $5.5 million. Pete Reagan: Trish thank you very much for doing this. It is good information. Turn back information Sondra Smith: That is a report on the turnback funds that we received for this year. I put a copy of the PRB letter in there to show that each volunteer was paid $96 and each paid participate $480. Trish has also done a calculation showing the turnback that you received from 2002 forward and the fluctuation in the turnback amount. That was sent out to you in a separate check because we received it earlier than what we normally do. Accounting was nice enough to go ahead and cut a second check for you but normally they will not be doing that. 2008 DROP interest Sondra Smith: That's just the DROP interest that we had to pay for 2008. We do not have anyone else on DROP and that's the final interest that we will be paying for DROP participants. You will not be seeing that in the future. That comes from PRB. They give us a calculation of how much we have to pay out of DROP interest. Attorney General's opinion dated Mav 14, 2009 sent by Kit Williams City Attorney May 29, 2009 memo Pension Board Power to Reduce Benefits to Avoid Exhaustion of the Pension Fund 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16, 2009 Page 5 of 7 Kit Williams as you can see in the agenda packet, a couple weeks before the Attorney General gave their initial opinion about this, I asked Senator Madison to add a supplemental request to the Attorney General to answer a couple questions about your rights and powers to reduce benefits if needed. Senator Madison sent that forward about the same time the opinion came on May 27th two weeks after my letter, where the opinion from the Attorney General basically was that she doubts that you would have that power. After the Attorney General issued his opinion, which was written by an assistant Attorney General in the opinions office, who is a long term very smart and good assistant Attorney General that writes for him, I wrote a memo to you all saying I still believe that you do have the power to do that. The Attorney General often is not given all the facts that might be necessary to give a complete and accurate opinion. I don't think the Attorney General knew that your fund was projected to be depleted totally of funds by 2016. Gene Warford: What difference would it make the law is the law. Kit Williams: The law is always in the context of the various facts that can go into the Attorney General when they interpret this stuff. The Attorney General also did not mention, refer to, or consider a couple of different statutes that I had talked about that to me implied to give you the power to reduce the benefits. The Attorney General did not find a case that I found where a trustee, who was administering a private trust where the document of the trust didn't give the trustee the power to hold back any of the income of the trust in order to preserve the assets of the trust to perform the duties that need to be done. Yet the trustee did it and the beneficiary didn't like that so the beneficiary sued the trustee saying you can't do that it's not in the trust document. The court held that it was an inherent power within the trustee in order to try to preserve the trust to withhold a certain portion of the income in order to cover future problems or expenses of the trust to preserve the trust for the future. After I read the Attorney General's opinion the Attorney General does site the same statute that I sited which states should the fund provided for in this subchapter be insufficient to make full payment of the amount of pensions to all persons entitled thereto, then the fund shall be prorated among those entitled by the proper authorities as may be deemed just and equitable. The statute further provides that proration may be considered just and equitable if.• The board of trustees decreases all payments to all eligible beneficiaries in an equal proportion for the fiscal year and does not allow the assets in the fund to become fully depleted. The Attorney General says that I find clear authority under A.C.A § 24-11-807 (Supp. 2007) for the Board to reduce benefits if the assets of the fund are insufficient to pay full benefits in the current fiscal year. It doesn't say in that fiscal year it says full benefits. My understanding of pensions are that they are suppose to last a lifetime and if the fund doesn't have money to pay full benefits for a lifetime then it doesn't have enough to fund to pay all benefits. The assistant Attorney General and I read that statute a little differently and she put in the fiscal year in her interpretation and I don't think it's there. If you followed her interpretation or the Attorney General's official interpretation, because he has adopted it, then basically the board of trustees couldn't do anything to you until you drove your fund right into the dirt. If you land it in the dirt in 2016 when there's no more money then you can prorate funds. I don't think that's correct. I think if you can see into the future by your actuarial studies that within a few years the fund is going to go broke if you don't do something. I think that particular statute says you shall prorate the benefits. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16, 2009 Page 6 of 7 You have two different ways to do it but the one that I think is by far preferable is if you prorate it before it goes broke and that's number two on that particular statute. We will see if the Attorney General wants to revise their opinion or not. I usually agree with the Attorney General opinions they are not like a court case which controls but they are often very well reasoned and researched and I have only disagreed with a few but if this was to be the final decision by the Attorney General I would disagree with it and say not only do you have the power but I think you have the fiduciary responsibility to the pensioners not to drive your fund into the dirt but instead to do what you can to preserve it. Parking Permits should be used at meter parking only Sondra Smith: Parking Management asked that you not park on the square when using your parking permit. Please park at a metered parking spot if you are using your permit. Longer Investments: Longer Investment — Investment Report Elaine Longer the report that you have is the quarter end report and then we have an update for yesterday's close. Page two the international stocks are about 7%. You closed the quarter at about 57% of equity exposure. We need an approval to be 7% over the 50%. Pete Reagan made a motion to approve the equity overage. Gene Warford seconded the motion. Upon roll call the motion passed unanimously. On page three the portfolio value has recovered back up to $5.5 million. The last column shows a 3.1% income yield. That's the dividends and interest income that you earn regardless of what the stock market does. By comparison the 10 year treasury yield is at 3.4%. The five year treasury is at 2.4%. You have the equivalent of a seven year treasury portfolio yield even though you have a 57% growth component. Page four is an update as of this week and we have trimmed the sails a little bit as we came off the June 301h close of the quarter because from the low that we reached in March through the high that we reached in June the market rebounded 40%. We've taken some chips off the table and turned a little bit more conservative waiting to see what this quarter's earnings look like. Page six shows the market value through yesterday was about where it closed the quarter. We had a pretty strong decline in the market, down about 5% from the end of the quarter and now we are back up so quickly that we are about unchanged within this month. There are still a lot of uncertainties. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16, 2009 Page 7 of 7 Page seven is the summary of your fixed income portfolio and you can see that the average yield to maturity on your bonds has remained at 4.7% even though the average maturity is under four years. The importance of that is you are earning the yield on a 30 year bond but you don't have anymore price risks then if you were holding a four year bond. Bonds have a price risk, for a 1 % increase in interest rates, a 10 year treasury will lose 8% of its value in terms of price. That is why at this point in time when we don't know what the final outcome is of what the government is doing, whether it is inflation, once we gain traction will we have inflation as a result of all this monetary stimulus, for that reason we have to be conservative on how we structure the bond portfolio. We don't want reach for yield and extend the maturities to the point where we have price risk in the portfolio. The percentage of your holdings that mature within three years is almost 55% of your total bonds. What that means is your bond portfolio will be very stable even if interest rates go higher and we can be opportunistic because as far as we're concerned anything that matures within three years is cash because we can sell it and have cash in hand tomorrow. We are structured in a way that the income has stayed high but we have plenty of flexibility to be opportunistic if the interest rates do go higher. Page eight shows your largest stock holdings as a percent of portfolio. Microsoft, Intel, Wal- Mart, AT&T, and Johnson & Johnson are your largest holdings. Intel reported yesterday and their numbers were really good. Technology seems to be a bright spot in the over all look. Page nine is a summary of your equity performance. Your stock portfolio is up 8.9% year to date. The S&P 500 is up 1.8% and the DOW is down 3.8%. You're far out performing the indices year to date in your equity mutual funds, that would be your foreign holdings, they are up 9.6%. EAFA which is the index of foreign stock markets is up 5.6% year to date. The fixed income is up 2% and your total year to date is up 5.3%. Your cumulative return with the fixed income, the equities, and the foreign has been 21.8% from where we began with the Fire Pension. If you look at the lower level, the S&P weighting at 50% and Lehman Government Bond index has returned 17%. You're about almost 5% ahead of the combined indices of what a 50% stock and bond portfolio would be. Longer View — July 1, 2009 A copy of the letter was given to the Board. Longer Investments second quarter 2009 report A copy of the report was given to the Board. Meeting Adjourned at 3:40 PM 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316