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.
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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
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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:
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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.