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HomeMy WebLinkAbout2012-07-26 MinutesBoard Members Mayor Jordan Chairman Sondra E. Smith Secretary Roy Cate Position I/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 July 26, 2012 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 26, 2012 Page t of 9 A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees was held at 3:00 p.m. on July 26, 2012 in Room 326 of the City Administration Building. Mayor Jordan called the meeting to order. Present: Roy Cate, Dennis Mullens, Mayor Jordan, Kit Williams, City Attorney, Sondra Smith, City Clerk, Lisa Branson, Deputy City Clerk, Paul Becker, Finance Director, Trish Leach, Accounting Manager, James Bell and Glenn Atkins, Garrison Financial. Absent: Pete Reagan and Ronnie Wood Sondra Smith welcomed Roy Cate as a new board member for the Firemen's Pension and Relief Fund Board. Approval of the Minutes: April 26, 2012 meeting minutes and May 30, 2012 special meeting minutes. Roy Cate moved to approve the April 26, 2012 meeting minutes and the May 30 2012 special meeting minutes. Dennis Mullens seconded the motion. Upon roll call the motion passed 4-0. Pete Reagan and Ronnie Wood were absent Pension List Changes: James H. Moore deceased June 28, 2012. His spouse Betty Moore will receive his pension. Sondra Smith: Therefore, because he deceased and we had already approved the pension list for July, we need to re -approve the pension list for July and then approve the August, September and October pension list. The reason we approve the lists three months in advance is because you don't meet again until October. Approval of the Pension List: Re -approval of the July pension list (James H. Moore deceased) 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 26, 2012 Page 2 of 9 Dennis Mullens moved to re -approve the July pension list. Roy Cate seconded the motion. Upon roll call the motion passed 4-0. Pete Reagan and Ronnie Wood were absent Approval of the August, September and October 2012 pension lists Sondra Smith: At this time there are no changes to the pension lists. There could be changes in the future. Dennis Mullens moved to approve the pension lists. Sondra Smith seconded the motion. Upon roll call the motion passed 4-0. Pete Reagan and Ronnie Wood were absent New Business: Revenue and expense report A copy was given to the Board Sondra Smith: That's a copy of a revenue and expense report that our Accounting Department completes. It shows what your revenue and expenses were from one period of time to another. In 2011 your book value was $4,534,000.00 and 2012 at 6/30 it was $4,198,000.00. This is an overview of the fund from 2005 to the end of June 2012. It shows how the fund has consistently decreased in value. Kit Williams: I think there is only one place the fund is going at this point, which is down. The only way to keep it from going down before you all would run out of funds is to lower the benefit payments. The Attorney General doesn't believe you can. I believe you can but there hasn't been any motion yet that has passed where you would reduce benefits. That's why we are all concerned because we can read the writing on the wall and the same thing that the state actuary said. He came in and said there is almost certainly a crash to zero coming in the future. It's unfortunately not that far away at this point in time. That has us all concerned about what's going to happen when that happens because according to state law, then you would still have money coming in on the millage. You would have .4 mils that support this. When that .4 millage money would be paid, it would be divided proportionally compared to what you should have been receiving until it's gone. Then when it's gone for that year it's gone and you have to wait for the next year. That's pretty tough because it will be many months that you would not receive anything. That's why I think in the past the Mayor and Sondra have made a motion to look at reducing the rates a little bit so that the fund will not go broke but there's never been a majority on this board to support that. Sondra Smith: The longer we wait the larger the percentage would have to be to reduced. Dennis Mullens: The Attorney General's opinion for me that's where I stand. 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 26, 2012 Page 3 of 9 Kit Williams: He disagrees with me. He said he didn't think you could. Sondra Smith: There is nothing in the statute that says you can and there is nothing in the statute that says you cannot. Roy Cate: Has this ever been tested before; any precedence been set? Kit Williams: No, I advised the board when that first happened that there are two ways to test it. One is that you let the fund go broke and then one of the beneficiaries says that this board is not active in its fiduciaries responsibility to preserve the fund and sue you individually. Then the courts will say whether or not you had the right to do it. Your defense would be we couldn't do it. The Attorney General has one opinion I have another. The way to test it safely would have been to reduce benefits and then have one of the petitioners and one of the beneficiaries say you can't do that. At that point then they could take that to court and the judge would decide whether or not a reduction was possible. If you were wrong then the only thing that would happen is that the payments would go back up. You all would not be individually responsible for anything. That's the course that was not taken but that is what the Mayor and Clerk has suggested we do in order to try to resolve this issue and also to preserve the fund. That's really the only way to test it. Roy Cate: The scenario if we do it then we are still in the same boat as far as liability if we decide to cut the fund. Kit Williams: No, you wouldn't be personally liable because the fund itself has the money to pay. If the court says you are wrong you can't reduce the benefits then the money would come out of the trust fund that's there, the fund that you are administrating. If you wait until there is no money in the trust fund then they can't get any money out of the trust fund they can only get it out of individuals. Sondra Smith: It concerns me that the fund is dropping at a rapid rate. I want everybody to have their pension. Kit Williams: At least as much as possible and have it preserved for your life and not have it run out. Roy Cate: Everyone wants that but from looking at where we are at it's a train wreck. It just a matter of when. Kit Williams: Not necessarily, the benefits would have had to have been cut around 20%. The minimum when this begun was 50% of your ending pay. That has been raised up to about 90%; plus there was a cost of living put on it. It could have been reduced to around 70% which is still more than what the minimum was and it would not have run out according to the state actuary. 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 26, 2012 Page 4 of 9 However, at this point it might have to be reduced more because it has not been. Funds have been flowing out of it. As Sondra said, the longer it waits you might not even be able to get to the other minimum which is 50%. It might even be less than that. Roy Cate: The 70% actuary was done how long ago? Kit Williams: A couple years ago. Paul Becker: I think it was in the spring of 2011. Kit Williams: Barely over a year ago then? Sondra Smith: The meeting was done in 2010. Kit Williams: It's not been a real happy time to be on this board. Dennis Mullens: We are representing the rest of the retirees. The majority of them do not want to cut anymore. They have built there life around it and some of them get so little. Kit Williams: That is true. The people that retired a long time ago have very much less per month. You might be able to cut the benefits more proportionally but that's never been desired either. A lot of people on board are some of the later retirees who are getting the most money. Sondra Smith: The sad thing about it is they should have built their life around the 50% and not the overage. That would be like me thinking I'm going to get $900.00 Social Security but wanting to spend $1300.00 a month and not have enough to cover. Dennis Mullens: You are looking at way back when and way back when doesn't apply anymore. Sondra Smith: It hasn't been that long ago that some of the benefit increases were implemented. Dennis Mullens: It's been a pretty good while now. Lioneld Jordan: I take it you gentlemen don't want to reduce the funds today. Dennis Mullens: Not me. Roy Cate: I have to say this is my first and I need a little bit of time to study it. Lioneld Jordan: You will get to hear this again. Kit Williams: I just wanted to bring you a little up to date about this serious nature of the 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 26, 2012 Page 5 of 9 State of Arkansas Department of Finance and Administration — turn back letter and copies of the turn back checks June 2012 A copy was given to the Board Sondra Smith: The amount we received this year because they re did how they were distributing the money is a little bit more but its never going to be enough money to bail the pension fund out of the shape it's in. We got $229,129.75 to go into the fund which is close to $100,000.00 more than last year. The $36,105.00 is what you get in a check and you should have already received that one time lump sum check. We did get an extra distribution because of the way they changed the distribution and it was $57,282.44. In all you got an additional about $150,000.00 and that only comes once a year. We don't know next year if that amount is going to be the same or less. That varies greatly from one year to the next. There is a spreadsheet in your packet that goes over the past several years. How much you received each year and how it has changed. Dennis Mullens: I think this is the biggest one we've ever got. Sondra Smith: In 2005 you got $225,000.00, in 2004 $185,000.00, in 2003 $412,000.00, so it's not the largest you've ever received but its bigger than you've been getting in the past few years. Paul Becker: Are you talking about the distribution or the supplement. Dennis Mullens: I was talking about the distribution. Paul Becker: That's correct. Sondra Smith: The future supplement, the little one time check you get is a little bit larger, but the big distribution check that goes into your fund is not that much larger than it has been in the past. The future supplement check is maybe $10,000.00 more than we've gotten before in the past. Paul Becker: If I can interject, there were two checks, one for $171.104.00 and $57,000.00 the combination of those two which has gone into the fund are $229,000.00. What you actually got into the fund is $97,592.00. What you want to look at and put in perspective to what the payouts are, and the payouts are if we look at this point in time we have currently paid out in expenditures is $335,000.00. This is our report that we talked about before our quarterly reports are where they are, you are paying out about $335,000.00 a quarter more than you are taking in. You fund is still declining. This is not going to be a long term solution which is what Sondra is conveying. 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 26, 2012 Page 6 of 9 City Clerk memo dated July 18, 2012 - 2012 turn back funds from the State of Arkansas A copy was given to the Board Sondra Smith: That is more information about the turn back funds. The memo I sent out to the Firemen's Pension Board letting them know that we received the money. It was $725.00 for each regular retiree and $145.00 for the volunteers. Anybody that's on the pension plan as a Qualified Domestic Relations Order, which is a divorcee does not get any of that money according to the State. Dennis Mullens: What did you say? Sondra Smith: Anyone that's drawing part of the pension as a Qualified Domestic Relations Order after they have been divorced. If a Firemen and his wife are now divorced and she gets half of his pension, she does not get any of that supplement check. Dennis Mullens: If you get married that new wife doesn't get anything. Kit Williams: Right, that's correct. Dennis Mullens: Even though you might have spent the majority of your life with her. Kit Williams: Or you can get married right before you retire and someone you barely met and she gets a lot. Dennis Mullens: I don't think the other that the guys have a wife's benefit at all. Kit Williams: Which one are you talking about, the new LOPFI? Paul Becker: Yes, they do. They can select a spousal benefit. The over all benefits they receive is a little less. Kit Williams: They have to pay for it by accepting fewer benefits. Paul Becker: They take a reduced pension to cover their wife in case they pass. Sondra Smith: Your fund is not like that. Dennis Mullens: No. Sondra Smith: Your spouse gets the same amount as you did. Pension Review Board (PRB) letter dated June 5, 2012 - Evaluating Local Plan Investments 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 26, 2012 Page 7 of 9 A copy was given to the Board Sondra Smith: This is the letter that we usually receive ever year from PRB telling you that you probably should evaluate your investments. Make sure your investment people are distribution the money in the way that they should be. Paul Becker: That's what we talked about before. Once you drop under $5,000,000.00 you can't hold individual equities. Kit Williams: You can hold them but you can't buy them. Paul Becker: Or bonds. Kit Williams: I think your current advisor is doing the right thing and is complying with this. Garrison Financial: 2nd Quarter reports A copy was given to the Board James Bell, Portfolio Manager, Garrison Financial: On page three as of yesterday the portfolio value was $4,606,000.00. Right now we are spot on with our target asset allocation just over 60% equities, 35% fixed income, and about 4% cash. We tend to hold some of that cash because know you have some distribution needs that come up throughout the year. We hold cash to be sure we are able to meet those distribution needs. Year to date you have distributed from the portfolio $375,000.00. To report on performance for the second quarter of 2012 your portfolio was up just over 1% verses your 60/40 benchmark down percent for the quarter. We were pleased with that performance. With that I will open it up to any questions you might have. Paul Becker: To make an observation you still have about $2.8 million in equities. James Bell: Yes, just under $2.8 million. Paul Becker: Do you have a plan in the future or are you just going to keep an eye on what the equity market is? James Bell: We are going to stick to the policy asset allocation which is 60% equities. That includes the individual securities that were legacy holdings. By policy we can't buy new 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 26, 2012 Page 8 of 9 individual equity securities so, as new money gets reinvested into the equity market it's done through open end mutual funds by policy. Paul Becker: You are looking at the open end mutual funds? James Bell: Yes sir. Every equity position that we've bought since we started managing the account has been open end mutual funds. The individual securities that you see are legacy holdings. Paul Becker: Those are the ones that are identified on page one. Those are the mutual funds and those are the transactions that you have done? James Bell: Yes, on the first page of the portfolio appraisal you'll see treasury notes, corporate bonds, preferred stock; those are in the fixed income asset allocation. Below that you will see common stock those are the legacy individual securities that came with the account when started. We can no longer by policy buy new positions under that and mutual funds; those are the types of securities that we are purchasing for the account. Kit Williams: That's state law that we can't do that anymore. Paul Becker: I was bringing this up for our new member so he is up to speed. We have to switch the investment policy from individual equities. If you are going to stay in equities you have to be in no load mutual. That's what they are going to do slowly over time. You will see a rise in the mutual funds identified from the individual equities. Glenn Atkins: That's also true on the fixed income side as well. Kit Williams: It would be nice to hold onto corporate bonds as long as we can because we are not going to see interest rates like that again. Glenn Atkins: The coupon on the Hershey and IBM are pretty good but as those mature we will reinvest the proceeds to the extent we can into a fixed income mutual fund and try to get as much income as we can. Garrison letter dated April 30, 2012 — Privacy Policy Notice and Item 2 Material Changes to form ADV Part 2 Sondra Smith: The rest of the information from Garrison is what I received before the meeting and it is reports from them. You might want to look at them too besides the reports you got today. Informational: 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 26, 2012 Page 9 of 9 2012 meeting schedule A copy was given to the Board Sondra Smith: The next meeting is October 25t1i 3:00 p.m. Pension Board member list A copy was given to the Board Sondra Smith: We have a new updated Firemen's Pension Board list since Mr. Cate is now on the board. Please check your information on the list and let me know if any changes need to be made. Meeting adjourned at 3:25 p.m. 113 West Mountain 72701 (479) 575-8323 TDD (Telecommunications Device for the Deaf) (479) 521-1316