HomeMy WebLinkAbout2011-11-03 MinutesBoard Members
Mayor Jordan
Chairman
Sondra E. Smith
Secretary
Marion Doss
Position 1/Retired
Pete Reagan
Position 2/Retired
Dennis Mullen
Position 3/Retired
Ronnie Wood
Position 4/Retired
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
November 3, 2011
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
November 3, 2011
Page 1 of 17
A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees was held at
3:00 PM on November 3, 2011 in Room 326 of the City Administration Building.
This meeting was originally scheduled for October 27, 2011 and rescheduled to November 3,
2011.
Mayor Jordan called the meeting to order.
Present: Dennis Mullens, Marion Doss, Pete Reagan, Ronnie Wood, Sondra Smith, Mayor
Jordan, Paul Becker, Kit Williams, Elaine Longer and Kim Cooper, Longer Investments.
Approval of the Minutes:
July 28, 2011 meeting minutes
Pete Reagan moved to approve the July 28, 2011 meeting minutes. Ronnie Wood seconded
the motion. Upon roll call the motion passed 6-0.
Pension List Changes:
Gladys Nora Caselman deceased September 21, 2011
Approval of the Pension List
Re -approval of the October 2011 Pension List (Gladys Casleman deceased)
Approval of the November and December, 2011 Pension List
Approval of the January, 2012 Pension Lists
Pete Reagan moved to approve the Pension Lists. Dennis Mullens seconded the motion.
Upon roll call the motion passed 6-0.
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November 3, 2011
Page 2 of 17
Old Business:
Consolidation with LOPFI
Marion Doss: I might be the only one interested in doing that but I thought in light of things
with Elaine Longer, this would be the proper time to look into that and see what we had to do to
consolidate. My motion I meant to say was to ask the City to approve that. We might have to
negotiate somewhat. We might have to take a slight benefit reduction. Maybe the City would
pick up part of the expense of going to LOPFI. I think consolidation is something that we
wouldn't have to worry about this. It's pretty obvious that this is going to end in just a few short
years. The fund is going down everyday.
Mayor Jordan: Do you want to wait and see what the financial advisor advises you to do?
Sondra Smith: If we were going to take something to the Council we would need a motion and
a second to start that process. I would have to do an agenda item and get it on a City Council
agenda. That is a slow process.
Mayor Jordan: You are a ways out for that. Before we could get all of that done you would be
close to having your financial advisor.
Sondra Smith: It would be around the first of the year and then if you decide you don't want to
do it we could not bring it forward.
Kit Williams: Marion suggested a couple things, a possible benefit decrease. I don't think there
are the votes on this board to do that. I could be wrong. There is still an issue about whether you
can. I think you can but the Attorney General doesn't think you can. The City Council has been
clear, when you had a joint meeting, that they were not interested in trying to consolidate without
a benefit decrease. You can't do a benefit decrease unless you pay Jody Carriero to try to figure
that out. It's to close to the end of the year to be able to do it. The Council is now going into the
budget season and you are looking for new financial advisors. I appreciate what you're doing
Marion and I agree with you. I have been concerned for years about the direction this fund is
going and what might happen if something is not done to consolidate with LOPFI, reduce fees or
something. I don't see it being successful at this point in time.
Lioneld Jordan: I agree with Kit that they are looking at the budget of the City. We are going
to start on that Tuesday and staff is looking at bonding a deck.
Sondra Smith: It wouldn't be able to get to the Council until after the first of the year.
Something like that could be passed with a date to get to the Council in January 2012 or
February 2012 but we would have to have a definite plan, it would have to be something like the
pension board requests a reduction in benefits, exactly what you want done before we take it to
the Council. Council has to vote to send it to LOPFI, correct?
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November 3, 2011
Page 3 of 17
Mayor Jordan: Absolutely.
Sondra Smith: It will be indebtedness to the City.
Paul Becker: The City files the application.
Marion Doss: Does anyone else have any ideas or thoughts on it?
Pete Reagan: We went through the process before and nobody was in favor of doing it. I think
it's more important right now to get an investment advisor on board.
Marion Doss: We know we are going to have to get an investment advisor, that's true. For me
it's obvious when we get an investment advisor its going to earn less than what it has. That just
means the funds life is shorter. It's going to be gone in fewer years than what we thought.
Sondra Smith: I don't see how you can get around a benefit decrease.
Marion Doss: Personally don't either. You have to have more income or less going out.
Sondra Smith: The first motion would be to decrease the benefits if you want to take it to the
Council. The Mayor has never been in favor of voting on that unless the full board is here.
Mayor Jordan: The full board is here.
Ronnie Wood: Personally I would like to get an advisor on board before we do much of
anything.
Mayor Jordan: That's good I just need to know where everybody is.
Kit Williams: We have a lot on our plate right now.
Ronnie Wood: We are going to have a new guy on the board.
Marion Doss: I know there is a window and a certain time for consolidation. What is that time
period?
Sondra Smith: I think its spring.
Paul Becker: If I recall it is February that they will start taking applications and they make a
judgment by October.
Kit Williams: You would have to have a new evaluation.
Pete Regan: January 1st is when they actually take over, right?
Sondra Smith: Yes.
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November 3, 2011
Page 4 of 17
Paul Becker: I believe the application period opens in February and they have to have it
completed by October.
Sondra Smith: It's going to take a long time for the board to do that.
Marion Doss: I agree.
Sondra Smith: All the steps in place to do it.
Kit Williams: Is there a further motion?
Marion Doss: I guess that's it.
New Business:
Revenue and expense report
A copy was given to the board.
NCPERS invoice
Pete Reagan moved to approve the NCPERS membership payment. Marion Doss seconded
the motion. Upon roll call the motion passed 6-0.
Pete Reagan: I would like to say Sondra is very good about sending out the newsletters to all of
us and I hope you all are taking part in that because it is some very interesting reading.
Mayor Lioneld Jordan's letter dated August 10, 2011 to Representative Lindsey regarding
a request for an Attorney General Opinion on the $5,000,000 balance
State Representative, Uvalde Lindsev letter dated August 13, 2011 to the Attornev General
Opinion requesting an opinion on the $5,000,000 balance
Attornev General Opinion dated October 19, 2011 regarding the $5,000,000 balance
City Attornev Kit Williams memo dated October 20, 2011 to the Firemen's Pension Board
regarding the Attornev General Opinion
City Attornev Kit Williams memo dated October 21, 2011 to Elaine Longer regarding the
Attornev General Opinion
2012 Meeting Schedule
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November 3, 2011
Page 5 of 17
A copy was given to the board.
Longer Investments:
Elaine Longer — resignation letter
A copy was given to the Board.
Longer Investment letter dated August 5, 2011— Northern Trust error
A copy was given to the Board.
Longer Investment letter dated August 15, 2011— market update
A copy was given to the Board.
Quarterly Report — 3rd Quarter 2011
A copy was given to the Board.
Longer View
A copy was given to the Board.
Elaine Longer: Last Thursday there was rumor that there would be a Greek deal. With that
Sarkozy of France and Merkel of Germany were meeting and they had arrived at a deal and the
market went up 400 points. Then over the weekend the Chinese backing backed out and some
other problems have come up and then on Tuesday the Prime Minster of Greece is calling for a
referendum. So the market Tuesday, the low was 650 points off the high of Thursday. There are
rumors that the referendum has been ditched so today we are 400 off the low of Tuesday.
This is a wild market. Its not just in stocks it's just as volatile in the bond market. The long
bond fund that owned, and we only own bonds of a certain maturity if we have the ability to
trade them, so we use the bond fund, the bond fund was 10 points higher on Tuesday as stocks
broke down than it was on Thursday when stocks were rallying. You have these 6% and 4%
type swings in the stock market but what is really amazing is the volatility extends to other
markets. We had a 10% point move in the bond market from the low it was at on Thursday to
the high point it was at on Tuesday.
There is a lot out there and we've written in our newsletter and talked about in prior meetings the
importance of maintaining our asset allocations but playing it defensively.
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Page 6 of 17
Page one of your report, as of September 30, stocks were 41% of total portfolio but the dividend
yield on your stocks is over 4%. That compares to a 2% yield on a ten year treasury. On the
stock side of the portfolio you have dividend yield that is twice the yield of the ten year treasury.
We've been able to maintain equity positions in a fairly defensive posture because of the fact that
we are really emphasizing the high dividend paying multi national corporations.
The next category the other income securities, this includes utility stocks, utility funds, and a
multi asset fund which has a very high dividend yield of 5.15%. This category is a 4.85%
income yield. This is high income stocks and that is 7.3% of portfolio. The total is about 49% in
terms of your real equities. The next category is mutual funds and fixed income. You have
about 18% of total portfolio in that category and the yield is 4%.
Page two shows the preferred debt securities that we own which are Double A rated and have a
6.3% income yield, then you have a couple corporate bonds that yield over 7%. The 4%
treasury, which we bought in the first quarter of last year, we purchased it to yield 3.91% as
interest rates have come down price of the bond has gone up so that you have a price
appreciation of about 17 points from the purchase cost but the yield on that bond right now if you
were to buy it in the market at current market prices is about a 1.2% yield. You can see from
where we purchased it at 3.9% interest rates have dropped to 1.2% on the same bond. The
benefit of that is in declining interest rates the price goes up but conversely if interest rates rise
from this level the price of bonds goes down. There is that price volatility to bonds and you can
see the benefit of it as interest rates decline, but the risk in the bond market right now if you are
buying a ten year treasury at 2% is if interest rates go back up to 3% the bond price declines
pretty dramatically by about nine percentage points.
The next one is government agency bonds that yield 6% which will be called in 2012. Then you
have about 10% in cash at the end of that quarter. When the market dropped pretty dramatically
at the first part of October we applied some of that cash to the equity market so that your cash
now is only about 1.5%.
Page three shows the realized gains year to date of about $160,000 and net income of $95,000.
The realized gain report is really the various things that we've taken profits on through the year
just to harvest some of the low hanging fruits. We use a number of technical indicators that
when they start getting a little bit problematic or troublesome looking on the screens we prune
back a little bit. You have seen us fluctuate between 40% equities through the years to 60% so at
about 41% you know we are postured pretty conservatively.
Page four shows the October 21" report. This is the date that we had to offer our resignation
under our existing contract because we are no longer able to act in a discretionary manner. We
operate as a discretionary money manager in all of our relationships. That means whatever we
decide to do we can do within the confines of the investment policy and the contract under which
we were hired. When that changes we have to immediately resign. The contract has a thirty day
grace period that we can stay and help to transition. I would like to offer sort of a like limited
discretionary contract to get to year end so that we can continue to help your transition. The cut
off date for us being able to act under our existing contract was when we received notice from
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November 3, 2011
Page 7 of 17
the City Attorney and also from the Attorney General that we could no longer act in a
discretionary manner.
We are still managing under what they told us we are able to do, for instance when Avon
products reported earnings that were disappointing, we sold the stock we sell for everybody, we
sold it for you too, because we are still able to sell. But, then we wouldn't be able to reapply the
funds the way we do for other clients as this market has encountered this kind of volatility, we
can't really be as tactical and as agile. We can buy index funds, and we have applied the cash to
maintain your equity allocation by using index funds, but we can't control the downside risk like
we do with other portfolios where we place a stop on exchange traded funds or other types of
securities. It is a little bit cumbersome, we are still managing, I don't want you to think that we
are not managing, but we have to manage within the confines of the new rules.
Kit Williams: When you buy the index funds is that like buying the whole market?
Elaine Longer: Yes. October 21" you were at about 47% equities. As you look at the other
income category, which is technically equities, it's a combination of utility funds and high
dividend paying stocks that is about 8%. You're just over the 50% by about five percentage
points.
Pete Reagan moved to approve the equity overage. Dennis Mullens seconded the motion.
Upon roll call the motion passed 6-0.
The next page shows the market value is $4.896 million and cash is at 1.5%. Your over all
portfolio income yield is 4.2%. If you were in a 100% bond portfolio you couldn't have this
income yield on 100% bond portfolio. The income that is on the stock side plus the income in
the other asset categories, that we have been able to use, has really held the portfolio income up
even in an environment of dramatically declining interest rates. That is one of the problems with
the new arrangement is we don't have that kind of flexibility to do that. We don't have to sell
what you currently have. When the long bonds popped up on Tuesday we went ahead and took
that profit that we had on the long bond fund that we use and the problem is I can't reinvest for
you now the way I would reinvest in another account. We were able to book the profit but then
it becomes a problem before we get it cashed out.
We have been in business for twenty six years and you develop your own disciplines and
methodologies and things that will allow you to keep out of trouble, the balance that you keep
between asset classes and the exposure to individual stocks and bonds. It's a real careful
balancing act. When you are able to do this the way we do it you are quite comfortable doing it.
I'm sitting in front of terminals trading, we manage about $175 million that doesn't make me
nervous but to not be able to do it the way I know how to do it that makes me nervous. That is
the reason when the opinion came in we don't know how to function under that kind of a
situation.
On page six the bond portfolio the weighted average yield to maturity is still 4.9% even though
your average maturity is only 6.8 years. If you look at that 4% treasury that own that is a seven
year treasury similar to what your weighted average maturity is but you have a 4.9% income
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Page 8 of 17
yield and a seven year weighted average maturity where as the current income on the seven year
is 1.2%. You can see how dramatically interest rates have dropped but your rates have not
dropped. You were at 4.8% yield to maturity at the end of 2010 and you are at 4.9% now even
though we've been able to reduce your maturities from 9.9 years to 6.8 years. The price
volatility factor, which is a measure of price risk in response to a rise in interest rates, has been
reduced by 20%. That is the duration. We have done this in all of our portfolios to move to a
point where we are still able retain income but to minimize or try to reduce the risk associated
with any increase in interest rates, because at some point the fiscal policy that is in place which is
still very simulative, and the monetary policy that is in place that the Fed is doing with
quantitative easing and the twist program and all these other things, at some point we will get
traction and then the interest rates won't be 2% on the ten year. Whoever is holding a ten year
that they purchased at 2% if that interest rate then goes to 3% they will realize a price decline on
the bond of 9%. The price risk is out there in terms of the bond portfolios and that is the reason
we have been able to reduce the maturity to reduce some of the price risk but we have also been
able to maintain the income.
The next page shows the performance and we go back to 2002. Each column gives your
performance by asset class, the equity mutual funds, which have been foreign, and we don't have
foreign equity exposure in the portfolios right now. We exited foreign earlier in the year as we
started trimming back on emerging, and China and then India and really the multi nationals that
pay the high dividend income in America are the place that we find the greatest value. That is
why as we raise cash going into this volatile correction we have reapplied the cash into these
high dividend paying stocks. We think that the best value out there. Your annualized rate of
return on equities through October 21 has been 4.6% on stocks, that's out performing S&P cash
which is has been 3.2%, S&P with compounding dividends is 5.2%. The fixed income returns
have compounded at 4.8% and the real estate investment trust at 19.7% so that you're
compounded annualized return has been 4.8% from inception to date through October 21.
Through October 31 it's been roughly 4.9%. A 50150 weighting between the S&P and the fixed
income bond index would give you about a 4% rate of return compounded and if you take the
S&P with dividends it would be 4.6%. Even through all of this turmoil you have out performed
what the index returns would be on the equity side and the fixed income side. That is important
to know because I know that you are going into a lot of discussions about the under funding of
the liability. That was there even when we came on in 2002 but even through the 2008 decline
and the various things that we have encountered since we have been managing the portfolio the
investment performance has out performed on both the fixed income side and the equity side.
The next page shows the contributions and distributions from 2002 through September 30, 2009.
The contributions have been about $1.12 million and the distributions have been $9.478 million.
I looked at what the distributions year to date are running and took that as a percentage of the
beginning value of the portfolio December 31, 2010, and if you look at the distributions year to
date through October 21 it is 14% of portfolio of beginning value at the year end. If we project
what the distributions will be through December 31, 2010 that percentage distribution is 17.3%
of beginning portfolio value. It's the weight of the distributions on the capital that is so critical.
The next page shows the asset reconciliation report which gives the beginning value in 2002,
additional contributions that have been made, which are $1.12 million, distributions, and the
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Page 9 of 17
various components of investment return. The ending portfolio value is $4.825 million and the
net investment return has been $3.28 million. The investment return has been $3.28 million but
the distributions have been $9.4 million. That's why we can't keep up with the distributions on
the investment side. The portfolio is now under the $5 million level.
Are there any questions on the report?
Pete Reagan: No, but I have some questions. Elaine, when we are in the liquidation process
and we are looking at other investment advisors and other avenues to travel, when you sell those
stocks and bonds that you normally do throughout the day it goes into cash. You're not going to
put it in T-bills?
Elaine Longer: No, what we've done on the stock side is as we have sold stocks in other
accounts we sell it for you too. What I have done to maintain your equity allocation is I've been
buying the index fund. You're not sitting there building cash. We are able to maintain your
equity allocation by buying the S&P 500 index fund to hold you at the same weighting. We
can't buy what we are buying for other people in terms of individual stocks but we maintain your
equity allocation by using the index fund. What was sold on the bond fund if I were to reinvest
that, I'm very limited on what I can buy as far as that is concerned, because then I would have to
buy CD's or T-bills and the five year treasury yesterday was trading under I%.
Kit Williams: It's safer to be in cash isn't it?
Elaine Longer: At this point I think that feels like the worst trade on my screen, if you can't
trade it and you can't trade it. I'm willing to go into the bond fund when we can trade it with a
close stop on the down side, like we do stocks, but to put you in a five year treasury at 1%
doesn't make any sense.
Pete Reagan: You would hold it in cash?
Elaine Longer: Yes, on the bond side.
Pete Reagan: I would like to openly thank you and your firm for everything you have done for
us and I hate that this has turned out this way. You've taken it on and treated us like we have
never been treated before. You take care of and advise the Police fund also and they have been
very happy with your services.
Elaine Longer: We are not happy with it either but I feel like we have been fortunate to be
involved with both the Police and Fire fund. If I felt like I couldn't do for you what I would do
for others under the change in the policy then it's better for me to get off the stage.
Pete Reagan: I fully understand your position.
Elaine Longer: We appreciate that we have been able to be involved with your portfolio.
We've really enjoyed that and if there was anyway we could stay we would be happy to but with
the change in the rules that none of us has any control over so its better we don't.
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Kit Williams: I noticed that after your report you have an investor advisory agreement where
you made some potential amendments to reflect the reality that you can't buy individual stocks
now. Is this what you were suggesting that you work under through the end of the year to give
the board a chance to decide what they are going to do in the future?
Elaine Longer: Yes, this is our existing contract and Kim has put the changes in bold so that
you can see that basically the ability for the advisor to act in complete, total and full discretion
has now been revoked. This changes the existing contract and shows you how it would be
changed. We have a contract with all these changes that you can sign if you want us to continue
through year end. Our existing contract has a clause that can be terminated by either party with a
thirty day notice. We resigned on October 21st so that takes us to November 21st. If you want us
to stay through year end to allow the transition then we can continue under a more restricted
contract through year end. This is what the contract would be to get us through year end.
Kit Williams: It shows they have limited discretion on the total discretion that she was able to
work under before pursuant to your advisory agreement. This one indicates that because of the
state statute she doesn't have the same right to purchase as she did before.
Elaine Longer: That's right, on page one it is basically revoking the complete total, and full
discretion and replacing it with limited discretion. Page two says that we are operating within
the guidelines proposed in this agreement. Page three there is a little bit more information
related to what we can purchase for the portfolio and it lays out the restrictions that were in the
Attorney General's Opinion. Page four basically changes the contract termination to December
31, 2011 as opposed to what the original terms were.
It gives us the ability to continue to monitor the positions in the portfolio, continue to sell as we
sell for others, we can maintain your asset allocation by continuing to use index funds for the
equity side. I don't anticipate needing to do much on the fixed income side. I won't sell any of
those bonds. There is not much else we can do except to help transition to. When you select the
next management, whether it's the City administration or if it's another manager then it is real
easy for us to help transfer or you're under Northern Trust as custodian and we have a twenty
eight year relationship with them. Some managers could just take over management and I
wouldn't have to move but every manager has their custodian that they are working with. If it's
a manager that's not a Stephens or a bank or something that has to use a custodian they may end
up wanting to move it. We can assist if it ends up needing to move from Northern Trust.
Pete Reagan: What is the custodial fee with Northern Trust?
Elaine Longer: Do you know what it runs annually?
Kim Cooper: It's around .2%
Elaine Longer: It's 20 basis points.
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Kit Williams: If you were moving it out of Northern Trust you can move all the equities to
another custodian. You don't have to sell them so they can still maintain individual stocks.
Elaine Longer: Yes, the only difference may be the index fund that we are using as a Northern
Trust index fund as opposed to the Vanguard index fund. By using Northern Trust, which is
similar in terms of expense ratios and everything, we have a later cut off date during the day to
decide if we want to buy it. If we are buying the Northern Trust index fund I don't have to tell
them until 2:00 p.m. if we are buying Vanguard its noon. When you are buying an index fund as
opposed to buying an exchange traded fund you buy during the day and you are going to get the
settlement price whatever it is at the end of the day and when you are having 400 and 600
hundred point inter day swings you want to wait until the last possible minute to decide if you
want that ending price.
The only potential might be to sell the index fund to go into a Vanguard or something like that
but that would be easy because you are liquidating on the same day that you are putting the buy
order in. You wouldn't have any price difference.
Pete Reagan: Do we need to adopt this revised investment policy and amend the contract to
December 31, 2011.
Kit Williams: I would recommend that you do that to give you enough time to transition.
Elaine Longer: There is an investment policy also that reflects the changes. The policy is part
of our contractual agreement so the policy changed to make the difference. There are actually
two things, the policy and the contract.
Pete Reagan made a motion to adopt the new contract and investment policy. Ronnie
Wood seconded the motion. Upon roll call the motion passed 6-0.
Mayor Jordan: We should discuss what you think you want to do next.
Kit Williams: When you choose Longer Investments, when you left Merrill Lynch, you went
through a regular selection process which is a standard state statute process you do when you
select a professional. This certainly gives you enough time to do that. That would be one of
your options.
Dennis Mullens: Do we advertise?
Kit Williams: I think it is. We can probably utilize purchasing agent's resources like we did
last time. They do that regularly for the City if you are looking for engineers, architects,
attorneys, financial advisors. You would obviously revise it a little bit because now your
financial advisor is not going to have the same kind of discretion as you were seeking the first
time around.
Mayor Jordan: I need to know the steps we are going to take. How this works and what we
need to do.
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Pete Reagan: In speaking with David Clark at the Pension Review Board about our situation
today, I asked him if we had to do that and he said no.
Mayor Jordan: Do what, Pete?
Pete Reagan: Go through a process of screening to pick a new investment advisor. I don't
know if that is state law.
Mayor Jordan: We've looked at that.
Pete Reagan: I don't think it is. According to him its not if you want to look that up and see.
Kit Williams: I'm not 100% sure. I know that state law is required for municipalities whether
this pension board would fit within one of agencies as one that is required to do it the same way
is something I would have to look at. That is what you did the last time and I thought that is
what state law required but I can't tell you for sure that's what the state law requires there might
be some exceptions. I think the last time we looked at it, when you were looking for another
advisor it was our belief that you needed to go through a full process so that you could have
several entities come in and be interviewed and you did, and that is when you decided to switch
off the individual you'd been using before and choose Longer Investments.
Marion Doss: If you don't do it that way you just call someone you might be able to do it.
Pete Reagan: What we did the last time is we sit through eight hours of interviews.
Kit Williams: But you got good results.
Pete Reagan: If we had picked the right one the first time we wouldn't have had to go through
that.
Kit Williams: Some of the selection committees are a two step process, they first turn in some
written stuff you look at that and then you select the top two or three.
Pete Reagan: That is the process we need to go through.
Mayor Jordan: I'm good with that. However you all want to do it.
Kit Williams: That is normally how it is done because if you have eight or ten people that want
to present individual things then it can be an all day process.
Paul Becker: The purchasing group would help you do your ads etc., then you can run the
selection yourself. We would post the ads etc. and then you could evaluate who you might want
to talk to. It takes a while to get through that process, so if you want to go in that direction, the
quicker you come to that conclusion the better.
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Page 13 of 17
Kit Williams: You probably need to make a decision today if possible to go ahead and start the
process if we are going to get it done before December 31s`
Marion Doss: I think we need to get a notice out so some people that are interested could
express their interest.
Kit Williams: I am sure there will be people that will be applying.
Mayor Jordan: We are agreed that we are going to have to have a meeting again pretty quick.
Pete Reagan: We should start the process and have a cut off date then we can meet two days
after that after we have had time to review them.
Kit Williams: Sometimes when the City does it there is a selection committee but I think you
have a small enough board you all can be the initial selection committee, look at the material you
get, cull it down to two or three then have them come in and give a presentation. You can have a
time limit on their presentation.
Paul Becker: Is that the direction you want to go?
Pete Reagan made a motion to begin the process to select a new investment advisor.
Marion Doss seconded the motion. Upon roll call the motion passed 5-0. Sondra Smith
was absent during the vote.
Paul Becker: Do you want to assign anybody to look at what is posted for the bid or do you
want us to use our judgment?
Pete Reagan: I think we can make it pretty general and we should probably put the limitations
in there.
Kit Williams: The Attorney General's Opinion add it to it that this is what you would be able to
do.
Marion Doss: It might limit us. We might not get as many.
Kit Williams: The other thing is they will not be using nearly as much professional judgment as
Elaine Longer and Longer Investments so it might be that their fee should not be as much
because they are not providing as much in the way of professional services.
Pete Reagan: I think we should ask them to provide six or seven copies.
Kit Williams: We always require enough for all the members to have.
Paul Becker: We will do normal we will submit seven.
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Page 14 of 17
Kit Williams: Usually what happens is when we get that there will be a closure date, at that
point in time purchasing will distribute to you all before the meeting so you will have a chance to
read the information, then you will meet together and decide who the top two or three are,
adjourn and invite them in for the final meeting.
Pete Reagan: Mr. Chairman let's look at some dates while everybody is here and has their
calendars. What dates do you think we can get it out?
Paul Becker: We won't be able to get it out this week. It will probably be next week or the
week after that. We will have to put in the paper.
Pete Reagan: In a Sunday publication?
Paul Becker: Yes, but we won't be able to get it out this week.
Pete Reagan: Right, I understand that.
Paul Becker: We have to have it done probably next Thursday.
Pete Reagan: It will be published on the 12th? How many days do we want to give them?
Elaine Longer: Thank you, we have enjoyed our association.
Sondra Smith: Thank you so much.
A discussion followed regarding setting up a meeting time.
Kit Williams: You can use the request we had last time with the Attorney General's limitations.
Pete Reagan: We will have to put the limitations in the writing.
Kit Williams: Right. That should make it easier for Purchasing to get it out.
Paul Becker introduced Andrea Rasco with the Purchasing Division.
Kit Williams: The board approved to try to start the process for a selection.
Andrea Rasco: The main thing to come up with, for a document to go out to get interest from
qualified vendors, is the scope of work that you want them to do.
Kit Williams: We thought they could use the one they used years ago but refine it and change it
so it complies with the Attorney General's Opinion. Paul and I can help on that.
Paul Becker: How long ago was that?
Pate Reagan: 2002.
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Page 15 of 17
Andrea Rasco: We probably meshed that with our RFQ that we did for our City investment
management solicitation.
Kit Williams: Is this one of the positions that you can't put fees as part of the thing?
Andrea Rasco: I think the state law changed in 2009.
Kit Williams: For financial advisors you can't put fees as part of it?
Andrea Rasco: Right, that's correct.
Kit Williams: You can negotiate after you select them. If you don't like their fees you can go
down to your next choice.
Andrea Rasco: That is under state law for procurement code.
Paul Becker: For everybody?
Andrea Rasco: Yes.
Paul Becker: Then you would be under that jurisdiction.
Kit Williams: You can argue about the fees but not until after you make your selection.
Andrea Rasco: Right, it puts everybody on a level playing field. You can evaluate under a
certain criteria that is also defined with state law. There can't be price as a consideration for any
of that as far as the fees.
Paul Becker: You see how many respond and shorten your list. It is very simple but they can
only do so much.
Andrea Rasco: They are going to give you some leverage to negotiate with.
Kit Williams: They shouldn't get a giant fee when all they can do is sell. They shouldn't sell
any of the bonds. They will never be able to invest in bonds after paying that kind of money in.
Paul Becker: What is the time line, how fast do you think we can get it out?
Andrea Rasco: As so as we can get the document together. By City policy we establish a
committee.
Kit Williams: This is the committee.
Andrea Rasco: The committee comes to consensus on the draft, the language, scope work, and
the criteria we are looking at to evaluate everyone then we send out an advertisement.
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Page 16 of 17
Kit Williams: We need to move faster than that. Elaine can only be here until the end of the
year so we have to have a new financial advisor on board before the end of the year.
Andrea Rasco: Then we have to get the draft in works ASAP.
Kit Williams: We will work on the draft. We will send it out to you. It will be basically what
you used the first time as refined by the Attorney General's Opinion.
Pete Reagan: Okay, then what are we looking at for a publish date?
Andrea Rasco: Advertising dates are two days out. If we send the ad for a Monday it will run
on a Wednesday.
Pete Reagan: It only has to run once?
Andrea Rasco: Yes, it only has to run once as long as we open within thirty days of the
advertisement or have the deadline within thirty days. Typically we leave a contract out for
about three weeks.
Kit Williams: We don't need to do it that long.
Andrea Rasco: Maybe two?
Pete Reagan: I would say ten days max.
Andrea Rasco: Minimum is seven.
Kit Williams: Ten business days or two weeks. We might be getting into the Thanksgiving
period and we don't want to give them five business days to get it done.
Pete Reagan: What is the earliest date that we think we can get something published?
Andrea Rasco: Does anybody have the old one that we did?
Kit Williams: I'm sure you have it in your records.
Andrea Rasco: What year was it?
Sondra Smith: We will look for it.
Kit Williams: I have hopes if we can find the old one we can probably get this together by
Monday. That's the earliest as possible.
Andrea Rasco: Today and tomorrow I am concentrating on the parking deck.
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Page 17 of 17
Paul Becker: The earliest you can start on it is Monday.
Andrea Rasco: I can start on it tomorrow but I couldn't finish it tomorrow.
Paul Becker: I don't know if you are going to get it done by Monday. Do you think you could
get it in the paper by next Friday?
Andrea Rasco: That puts it two weeks out.
A discussion followed on the date.
Pete Reagan: Do we take electronic versions?
Andrea Rasco: They are required to submit hard copies and we also ask them for an electronic
version that way we email all the proposals out. We make them bring in all the copies.
A discussion followed regarding sending out the advertisement and setting up meeting dates.
Kit Williams: At some point the board will need to meet with the first group about fees. My
advice to you is to not let them say these are our standard fees we can't do anything else. There
will need to be a final meeting of everybody to approve the new contract.
Meeting adjourned at 4:10 p.m.
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