HomeMy WebLinkAbout1988-09-29 MinutesMINUTES OF A FIRE PENSION BOARD MEETING
A regular meeting of the Fayetteville Fire Pension and Relief Fund Board of
Trustees was held on Thursday, September 29, 1988 at 1:30 p.m. in Room 313 of the
City Administration Building at 113 W. Mountain Street.
PRESENT: Chairman Pennington, Ex -Officio Treasurer Scott Linebaugh,
Secretary Suzanne McWethy, and members Mickey Jackson, Mike
Bonaduce, John Dill and Pete Reagan.
Also present was Accounting Supervisor Zelda Parson
ABSENT: Carl Springston
Minutes
It was moved by Jackson and seconded by Reagan to approve the minutes of the
August 25 and August 26, 1988 meetings. The motion passed unanimously.
Old Business
M -L Lee Investment
Linebaugh said at the August 25 meeting Curtis Williams said we were receiving
statements showing the market value of the M -L Lee investment. Linebaugh said
this is on the statement but he is asking for a statement showing how much the
investment will sell for. He said he obtained a quote today from a local
Merrill -Lynch agent that it will sell for $900 per share, contrary to what is
shown on the statement. It was clarified that the Board paid $1,000 per share.
Jackson asked if it was a fact that we can't sell the investment for any price
for a fixed period of time. Reagan, with Linebaugh agreeing, said he thought we
could get out of the investment at any time.
Commission Fees
Linebaugh said Yada stated in the last meeting that LOPFI was investing $250-
300,000 at a time, which would make a difference in brokerage fees. Linebaugh
said he thought it was important to make a part of the minutes a letter from
Cathyrn Hinshaw and statement prepared by him showing rates we are paying. He
said it was important we consider what we are actually being charged per trade on
each investment. He said when LOPFI obtained quotes from Prudential Bache and
Stephens they found a minimum savings of 30% on their fees. He said he
understood that LOPFI let Stephens and Prudential bid for a short period but now
Merrill Lynch is charging them lower fees as well. Linebaugh said he thought we
should go out for bids to see what fees we can get.
Fire Pension Board Minutes
September 29, 1988
Page 2
Linebaugh said the Board asked him to write RNC with some questions. He said he
asked them six specific questions. (Questions and response from RNC attached as
part of the minutes).
Linebaugh recommended we go out for bids on brokerage services.
Jackson asked about the mechanics of going out for bids, stating he understands
the Board would do this themselves. Linebaugh agreed, noting we could, in the
alternative, pay 3/10 to 4/10 of a percent to have the money manager do it for
us.
Pennington asked Linebaugh to explain the ultimate advantages and disadvantages
to doing this. Linebaugh said the advantage would be obtaining a lesser fee from
another broker, or being charged a lesser fee by Merrill Lynch. He said he
couldn't see any disadvantage if it was done no more frequently than quarterly.
Pete Reagan said he saw a big disadvantage in going after bids, basically in
execution. He asked why the Board couldn't instruct RNC to call other brokers
every time they make a transaction.
John Dill said Jacques Devore (from RNC) told him he prefers to call for a price
and obtain it at that moment, that if they take bids, they can lose their first
price. Linebaugh said that was why he recommended this be done quarterly, and
RNC be instructed to use one broker all the time during that quarter. Reagan
said that the Board would then have to set up a custodial service at a bank and
it will cost us 3/10 to 4/10 of a percent more for that. Linebaugh pointed out
we were paying 30% more in fees right now. Reagan said RNC's letter to Linebaugh
states the commission charges are on the average .69% per year, well within
industry costs for accounts our size. Linebaugh said he thought we needed to
consider the fees we were being charged per transaction, not for the entire
portfolio. Dill said he thought the Board's real problem was with Cathyrn
Hinshaw and the other brokers in the State. Linebaugh asked Dill if he could
justify paying 30% more than what other brokers are charging. Dill said he
wanted to see a better breakdown.
Linebaugh said he wanted to go on record as saying he felt the fees we were
paying were exorbitant and we can't justify it.
Pete Reagan said Bob Nickles of RNC will be in Fayetteville on Tuesday, October
4, and asked if the Board wished to meet with him at 1:00 p.m. He said Nickles
was trying to meet with all Pension Boards in Arkansas.
Bonaduce asked if there was a breakdown available showing what the Board has paid
over the last year. Zelda Parson said, on the financial statement, she records
brokerage fees as part of the cost of the stock, and it's not really broken down.
Linebaugh said something could be worked up on that, but said it was important to
remember the total will vary depending on how much trading is actually done.
Fire Pension Board Minutes
September 29, 1988
Page 3
Pennington said he would like to see RNC's record compared to the record of other
firms in the same business. He said he would like to see some trends over a five
to ten-year period. Pennington said he would like to see some unbiased
information, noting that some concerns are being expressed across the State.
Jackson asked, if we took bids, would the Board still choose the bidder, and
would not necessarily be required to accept the low bidder. He said the idea of
getting bids periodically might be of informational value, even if the Board does
not want to make a change. Jackson said he couldn't see any disadvantage in
soliciting bids, and commented that this may even have the effect of getting us a
better deal from Merrill Lynch. He asked how much paperwork would be involved in
getting periodic quotes. Linebaugh said it could be done here, and the Board
could decide on a list of brokers. Bonaduce asked if a broker would bid the same
fee for every transaction. Linebaugh said this was done in LOPFI's case.
Reagan said he thought these were good questions for RNC to answer on October 4.
It was agreed that the Board would meet with RNC on that date.
Investment
Linebaugh handed out a list of quotes on rates for today on the investment of
approximately $160,000. He said the best yield was for a five year Zero Coupon
Treasury Strip at a yield of 8.85%. Linebaugh explained this was a Treasury Bill
investment on which you do not receive interest, but instead youare paid the
difference between what you paid for the investment and what it is worth at
maturity. He said it was readily marketable at any time. He said we also
received a quote of 9.14% on a ten-year strip, of 9.32% on a twenty-year strip,
and of 9.089% on a thirty-year Treasury Note. He said he thought we could get
more interest by purchasing a ten or twenty-year investment.
Jackson moved we purchase the five-year zero coupon treasury strip from Mcllroy
Bank at 8.85% yield at no fee. The motion was seconded by Bonaduce and passed
unanimously. Linebaugh pointed out that the fee is built in to the rate.
Investment Policy
Linebaugh said that on September 20 he sent out a draft of an investment policy
to the Board. He said this was drafted based on policies used by pension boards
in Fort Smith, Little Rock and North Little Rock. Linebaugh pointed out some
highlights of the policy, which is attached to these minutes.
In reference to Item IV. C. 2. (Investment Guidelines), Reagan asked if the
investment counsel should be required to be members of both the Arkansas
Securities Department and the Securities and Exchange Commission. Linebaugh said
he thought that change could be made to that section.
Linebaugh asked if anyone had a copy of the contract with RNC. He said City
staff didn't have a copy in the files and had requested a copy from Merrill Lynch
but have never received one.
Fire Pension Board Minutes
September 29, 1988
Page 4
In reference to Item IV. 9, Bonaduce commented that it seemed to him the
selection of brokers on a competitive bid basis could be done twice a year rather
than quarterly.
Reagan, seconded by Dill, moved the investment policy be put on hold for
discussion at the next meeting. The motion passed unanimously.
New Business
Pension List
Chairman Pennington introduced the Pension List for the month of October. It was
moved by Bonaduce, seconded by Reagan, and unanimous, to approve the Pension List
for October.
Retirements
Jackson reported Randall Wright resigned from the department effective September
21, 1988, after 22 years of service, and has asked to retire. Jackson, seconded
by Dill, moved that Randall Wright's application for retirement be accepted. The
motion passed unanimously.
Jackson introduced a request from Chuck Lewis, whose last shift will be October
2. He said Lewis wishes to retire effective October 3, after 20 years of
service. It was moved by Dill, and seconded by Jackson, to approve the request.
No calculations on retirement pay for these two men were available at the time of
the meeting but will be attached to these minutes at a later date.
Other Business
Pennington announced that the Board would meet again on October 4 at 1:00 p.m. in
Room 313 to meet with RNC.
Adjournment
The meeting was adjourned at 2:40 p.m.