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HomeMy WebLinkAbout1988-12-29 MinutesMINUTES OF FIRE PENSION BOARD MEETING A meeting of the Fayetteville Fire Pension and Relief Fund Board was held on Thursday, December 29, 1988 at 1:30 p.m. in Room 326 of City Hall at 113 W. Mountain Street. PRESENT: Members Jim Pennington, Mickey Jackson, John Dill, Mike Bonaduce and Suzanne McWethy; Ex Officio Treasurer Scott Linebaugh; Accounting Supervisor Zelda Parson ABSENT: Members Carl Springston and Pete Reagan Pension List It was moved by Dill and seconded by Bonaduce to approve the Pension List for the next month. The motion passed unanimously. New Business Pennington reported on action taken by the City Board which he said will result in additional funds being applied to the Police Pension Fund by the City, and there will be a request in 1989 that all City pension plans, with the exception of the Fire and Police pension plans, be closely examined as to whether or not to continue to keep six or seven different pension systems. Pennington said there is feeling on part of the City Board to straighten that out and get everybody on a fairly equal basis. Linebaugh explained the Police Pension Fund was given authorization by the City Board to raise the City contribution by 3%, from 6% to 9% towards the pension plan. Linebaugh said he and Pennington recommended this many months ago, feeling it was needed to bring the plans to the point where they will have enough money to make benefit payments 15 or 20 years from now. He said at the same time, a management letter from Arthur Young was reviewed and the City Board said they would support the idea of making the plans more sound, but wouldn't support it for the Fire Pension Board until the City Manager's Office is convinced the investments are being made well and there is a good investment policy. He said the Board has agreed that, when the City Manager can recommend it, a request will go before the City Board to raise the City's contribution by 3%, from 6% to 9%. Linebaugh said as the law currently stands, this cannot be done now, but there is legislation to change that this year. Linebaugh said this is a pretty progressive step, as no one else is doing it in the State of Arkansas. Linebaugh said the Police Pension Fund is in worse shape than the Fire Pension Fund, remarking that the Police Pension Board has never raised benefits since the legislation was passed. Fire Pension Board December 29, 1988 Page 2 Pennington advised the Fire Pension Board should adopt an investment policy. Linebaugh said he and Pennington also have to be able to state that "things are in good shape." Linebaugh said he brought information to the Police Pension Board, as he had to the Fire Pension Board, regarding the fees being charged by Merrill Lynch. He said, after talking with some local investment firms, some of the Police Pension Board members were told the Board was involved in some investments they should not be involved in; that, in fact, of 33 investments, only 11 of them were rated as proper investments. He said the Board then decided to make a change, interviewed about six firms, narrowed it down to three firms, and after many meetings, they selected one investment firm. He said in their search they studied "scattergrams" which ranked prominent firms compared to RNC. He said RNC ranked, in the area of Balanced and Equity funds, as having lower performance and taking higher risks than a lot of major money managers in the country. He said they decided to hire two money managers, Oppenheimer and Liberty Capital, and Shearson Lehman as an asset monitor. He said for all these services, there will be a total fee of less than 1%. He said they compared the records of various money managers before making their decision. He said originally their funds were invested with both A. G. Edwards and Merrill Lynch/RNC but the Board determined the performance of both companies to be poor and rejected them for that reason. Chief Jackson said he sat in on some of the presentations which were made to the Police Pension Board. He said he was very impressed with the presentation given by Elaine Longer and suggested the Fire Pension Board invite her to make a presentation to them. Jackson asked Linebaugh if it was his feeling the City Board would insist the Fire Pension Board separate itself from the ML -Lee investment in order to get their support for a City contribution increase. Pennington said he thought they would, as long as the investment is illegal. John Dill asked if Linebaugh had told the Board the investment was illegal. Linebaugh said a management letter to the Board from Arthur Young stated the City Attorney had determined it was an illegal investment, or words to that effect. Linebaugh said he felt the investment was illegal and improper for a pension fund. Dill said he got the feeling the Police Pension Fund was going to get an additional 3% because the City thinks they are going to do a good job and commented that "they have done an absolutely horrible job with their pension." Linebaugh said there were two major differences in the police pension fund and the fire pension fund, in that the police pension fund has had a lot more full benefits going out for many years than the fire pension fund has, referring to the volunteer firemen's benefits. He said he didn't think the two pension funds were being compared by the Board but that the Board would approve an increase in the contribution when the City Manager feels comfortable with the investment policy. Mike Bonaduce asked if the Fire Pension Board could get an Attorney General's opinion on whether the ML -Lee investment is illegal, commenting that he would weigh such an opinion higher than that of the City Attorney. Pennington said, if Fire Pension Board December 29, 1988 Page 3 the Board wished to pose a question to the Attorney General, Senator Malone could be contacted to request that the Attorney General answer the question, "Is the investment in ML -Lee a legal and proper investment for a fire and/or police pension fund." Pennington reminded the Board that if they go against the opinion of the City Attorney, they could be liable; that if the Board follows the City Attorney's opinion and it's wrong, the liability would be much lower for the Board. Pennington urged the Board to consider the investment policy at this or at their next meeting. Jackson asked if there was anything the Fire Pension Board needed to accomplish other than adopting an investment policy and resolving the ML -Lee question, in order to be looked upon with favor by the City Board. Pennington suggested the Board have a third party look at their investment portfolio. Bonaduce suggested tabling consideration of the investment policy until the next meeting, since two members were absent. Dill pointed out that, if the Board considers dropping the ML -Lee investment, it must be done in either January or July. Linebaugh said there would be no way to get an Attorney General's opinion that quickly. Bonaduce moved to request an opinion from the Attorney,:General. Jackson seconded the motion with the condition that, if one has already been rendered, "let's drop it." The motion passed unanimously. Bonaduce, seconded by Jackson, moved to table consideration of the investment policy. The motion passed unanimously. Pennington asked if the Board had ever received the "scattergram" from RNC which had been requested. Linebaugh said it had not been received. Pennington asked Suzanne McWethy to write to RNC and ask why they haven't provided it. Pennington said the "scattergram" is a comparison of various investment companies according to risk and rate of return, based on the Standard and Poors. Bonaduce asked why the Police Pension Board was unhappy with RNC. Linebaugh said they were unhappy with the rate of return and, after seeing RNC compared to other money managers, they felt RNC was not doing as good a job. Parson said she thought their fees were a factor as well. Dill asked what the cost was last year. Accounting Supervisor Zelda Parson estimated the cost to be about $58,000, or 5 1/2% of the stocks and bonds in the portfolio. Linebaugh said that may be a high estimate.. Investments Linebaugh reported a $255,000 investment had matured. Parson said, of that, $200,000 should be reinvested. She quoted rates for today: Fire Pension Board December 29, 1988 Page 4 1 year Treasury Bill 9.05% 2 year Treasury Bill 9.2% She said the CD bids were quite a bit lower. She said the $20,000 CDs which were purchased are arranged to mature every month until July of 1989, which is about the time State turnback funds will be received. Jackson, seconded by Bonaduce, moved to invest the funds in the one-year Treasury Bill. The motion passed unanimously. Linebaugh asked if the Board had any questions regarding the mistake which was made by the City staff in November, where a T -Bill from the Fire Pension Fund was accidentally photocopied instead of a T -Bill from the General Fund. He said the error had been corrected. There were no questions from the Board. Dill said he was still receiving complaints from retirees that they receive their pension checks anywhere from the 5th to the 30th of the month. Zelda Parson explained that the checks are mailed out on the 15th of every month, since Suzanne McWethy had brought this to her attention several months ago. She said if the 15th falls on a Saturday or a Sunday, the checks are mailed on the Friday before the 15th. Parson said the policy has always been to mail the checks so that they can be received by the 20th of each month. Dill asked if the checks could go out on the 5th of the month. Linebaugh said that could probably be done, although when there are changes to the pension list, it might take longer. Jackson commented that changing the policy to make the job more difficult for the Accounting Office might cause there to be even more complaints from the retirees if the checks don't get out by the 5th of the month. Parson pointed out that the CD's were designed to mature right before the 15th of every month for purposes of sending the checks out at that time. Parson said, right after she started the policy, she sent a memo out to all the retirees explaining how things would be from that point forward. Minutes It was moved by Dill and seconded by Jackson to approve the minutes of the last meeting. The motion passed unanimously. Adjournment The meeting was adjourned at about 2:25 p.m.