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HomeMy WebLinkAbout2013-04-18 - Agendas - Final Fayefteville Policeman's Pension and Relief Fund Meeting Date Adjourn Time 3 t*. Attendees: v I Subject: Subject: Motion To: Motion To: Motion By: Motion By: .......... Seconded: Seconded: Mayor Jordan Mayor Jordan Jerry Friend Jerry Friend Tim Heider Tim Holder Frank Johnson Frank Johnson Eldon Roberts Eldon Roberts Melvin Stanley Melvin Stanley ISondra Smith I ISondra Smith I Subject: na& Subject: Motion To: apg"O'A. Motion To: Motion By: Motion By: Seconded: AWviA Seconded: Mayor Jordan Mayor Jordan Jerry Friend Jerry Friend Tim Holder 95&� Tim Heider Frank Johnson Frank Johnson Eldon Roberts Eldon Roberts Melvin Stanley Melvin Stanley Sondra Smith Sondra Smith Lioneld Jordan Chairman Jerry Friend Retired Position 2 Melvin Stanley Retired Position 4 Frank Johnson Retired Position 5 Sondra E.Smith Tremuru Ile Tim Helder Retired Position 3 Eldon Roberts Secretary/Retired Position I Taye evi ARKANSAS Policemen's Pension and Relief Fund Board of Trustees Meeting Agenda April 18, 2013 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees will be held on April 18, 2013 at 3:00 PM in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. Roll Call Approval of the Minutes: Approval of the February 7, 2013 meeting minutes Pension List Changes: None Approval of the Pension List: * Approval of the May, June, and July 2013 pension lists Unfinished Business: 0 Letter to Pensioners and City Council regarding Local Plan at Risk Status 0 Frank Johnson discussion item: Will a vote to increase the millage possibility cause us to lose the current millage. 0 GFOA Best Practices email New Business: • Revenue & expense report • Request for an actuarial study • Elections: Eldon Roberts, Tim Helder and Melvin Stanley terms will end in May. Discussion Items: LOPFI Longer Investments: * Longer Investments lt quarter 2013 report 0 Longer Investments monthly report Informational: 2013 Meeting schedule Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page I of 27 Melvin Stanley Retired Position 4 Frank Johnson Retired Position 5 Lioneld Jordan Chairman Jerry Friend Retired Position 2 Sondra E.Smith Treasurer Tim Helder Retired Position 3 Eldon Roberts SecretarylRetired Position I Tayve e;lile ARKANSAS Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes February 7,2013 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees was held on February 7, 2013 at 3:00 PM in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. Mayor Jordan called the meeting to order. PRESENT: Frank Johnson, Eldon Roberts, Melvin Stanley, Tim Helder, Jerry Friend, Mayor Jordan, Kit Williams, City Attorney, Sondra Smith, City Clerk, Gail Eads, City Clerk's office,Paul Becker, Elaine Longer and Kim Cooper, Longer Investments. ABSENT: None Approval of the Minutes: Approval of the October 18,2012 meeting minutes Jerry Friend moved to approve the October 18, 2012 meeting minutes. Frank Johnson seconded the motion. Upon roll call the motion passed 7-0. Pension List Changes: Kenneth Martin deceased November 19, 2012 — Spouse Connie Martin will receive his benefit. Karen McWhorter deceased in January, 2013—Benefits will cease. Sondra Smith: I have not received her death certificate but it usually takes a little bit for people to get those to us. We found an obituary online and I spoke to her daughter. That is the way we verified that she had deceased and stopped her pension check. Mayor Jordan: That was in January, 2013 and the benefits will cease. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 2 of 27 Avyroval of the Pension List: Re-approval of the December, 2012 and January, 2013 pension lists due to Kenneth Martin deceased. Approval of the February,March and April 2013 pension lists Tim Helder moved to approve the pension lists. Jerry Friend seconded the motion. Upon roll call the motion passed 7-0. New Business: Revenue & exvense report Sondra Smith: That is the report that Accounting completes for the board every pension meeting. It shows your current balance and your balance for previous years. It is very good information for you to have. It shows as of 12-31-12 your book value was $7,081,000 and your market value was $7,689,000. It's just off about $400,000 from 2011 year end to 2012 year end which is pretty good. It's not going down real fast but it is going down. PRB letter — Funding Status (Local Plan at Risk Status) we need to send a letter to the pension particivants and the City Council. A copy was given to the Board Draft letter to Pensioners and City Council reaarding Local Plan at Risk Status Sondra Smith: I emailed this letter out to everyone. I think Eldon is the only one that doesn't have email. They're going to be sending us more information in the near future. It shows your plan may deplete it's assets within 15 years. You are not as bad as Fire. Fire is predicted to deplete theirs in five years. Kit Williams: That is much more certain. Yours is not necessarily certain what is going to happen- Jerry Friend: Back some time ago we talked about a designation where we lose the ability to control the fund. Kit Williams: That's at$5 million dollars. Jerry Friend: This at risk doesn't do that? Policernen's Pension and Relief Fund Bound of Trustees Meeting Minutes October 18,2012 Page 3 of 27 Sondra Smith: No, the Fire has gone that route. They've dropped below$5 million. Kit Williams: They cannot purchase new individual stocks. Melvin Stanley: And keep what they have. Kit Williams: They can still buy mutual funds which are stocks but they're mutual funds. Tim Heider: What was their predicted date? Kit Williams: I don't know exactly. Sondra Smith: It was probably around five years. Mt Williams: I didn't know it was quite that short. Sondra Smith: They are paying out about $1.5 million a year and they are right at $4 million. That doesn't include what's coming in millage and turn back but its dropping pretty quick. Longer Investments choose not to handle their investments anymore so they had to go with a different investment advisor because of the drop in their fund. It says in here that we need to send a letter. I took a stab at drafting a letter. That's what I've handed out to you separately. I would like everyone to review it. The things I've highlighted are the things for sure I need you to tell me what you want. If you want to add anything or take anything away, we need to discuss that too and get this letter mailed as soon as possible to all the pensioners and the City Council members. Jerry Friend: Is there a list of all the at risk pension fimds? Sondra Smith: I have not seen a list. Paul goes to those PRB meetings. There are several they are putting at risk from what I understand. Mayor Jordan: Eldon don't you go to those. Eldon Roberts: Yes, they discuss it at the last meeting. I didn't hear who they said was on it. It's another segment of plans they have come up with that is looking bad on down the road. They have a list out there right now of the one's that Fayetteville Fire Department is on. I forget what they termed that group but that's the one's that are in dire straits. They have just come up with this idea to pick out the at risk plans. There are several of those in the state. Sondra Smith: The Fire plan is considered insolvent. Eldon Roberts: That's it. Sondra Smith: This is just considered at risk. You don't want to be insolvent. You don't really want to be at risk either but that is a little bit better than insolvent. Policetnen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 4 of 27 Jerry Friend: Is this a legislative thing? Eldon Roberts: It's the Pension Review Board. Jerry Friend: They can just make up a nile? Eldon Roberts: The actuary has given them this information that monitors our plans, the financial aspects of it. If you don't meet the criteria you're at risk. Kit Williams: The other one on limitation of your investment is in the statue. Sondra Smith: They sent it certified mail. That means they want to make sure someone addresses it. Eldon Roberts: This letter you drafted is what you want to send to all of our beneficiaries. Sondra Smith: That is what I'm proposing to send to the Policemen's pensioners and the City Council members. I have taken verbatim out of the first paragraph of the letter we received from PRB but we can take anything away or add anything. I thought this would give us a starting point today to get the letter put together. Frank Johnson: By way of recommendation, I requested a change from what the original statement was on what we were going to do, to make it not sound as dire. I don't have the original one but it wasn't a big change. It was more or less saying this group is getting together to consider what the options are that PRB is going to present to us. As a matter of record I feel like in our meetings we have been discussing the options already. We have been told by the way of legal counsel that there is a statuatory limitation to what we can do. Sondra Smith: The draft letter had in it that there wasn't much we can do. There is not a lot we can do but we are trying to be pro active in the Policemen's Pension Board. Frank chose to put 11 a relief_fund board of trustees will work with the Pension Review Board on finding solutions to protect the plan based on their proposed options. " With the Firemen's Pension plan they did not have many proposed options. We have talked to the previous City Council, we have three new members, so I can't speak to what the current Council would say but the previous Council chose not to hear anything about the pension plan until benefits were reduced. They want people to look at reducing benefits before they brought anything to them about going to LOPFI or any proposals. Tim Helder: Have they figured out a way to do that? Reduce benefits? Kit Williams: The Attorney General and I disagree on that. I think there is the Attorney General says there's not. Frank Johnson: The discussion you are referring to was that part of a City Council meeting? Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 5 of 27 Kit Williams: The City Council members attended the Fire Pension Board meeting when Jody Carreiro came here. They had active members of the Fire Department here that are on LOPFI. Sondra Smith: There were comments made at that meeting. Jerry Friend: Is that the same discussion we had? Frank Johnson: Yes, a couple years ago. Sondra Smith: They may have different feelings now but that was there feelings a couple years ago. Kit Williams: One of elements was Bobby Ferrell and he is no longer on the council. We have three new aldermen. The basic feeling was at least in regards to the Fire Pension; they were in much worse shape than you and we had been telling them for a long time at least since 2006; that they had terrible trouble and needed to get something done. It would cost way too much of the citizens to be able to back it up. It goes to LOPFI then it becomes a City responsibility. The only way to make that less expensive for the citizens would be to reduce the benefits and at that point the benefits would not have to have been terribly reduced. They would be reduced around 70% instead of 95% but not down to 50%. At this point now it's been years later and eventually it will be reduced below 50%. Our Attorney General said if you run out of money they can do something. You distributed it proportionally and then you don't pay anymore until the next year's millage comes in. You don't have to dive the plan all the way into the dirt and crash it before you as trustees can say we need to do something to keep the plane from crashing. Jerry Friend: Would this at risk designation maybe change the Attorney Generals opinion? Kit Williams: No,because the Fire fand was in worse shape then, than you are in now. Frank Johnson: This to me is a very frustrating circular conversation for the City Council to say they are willing to have a discussion only if there is a reduction in the benefits. Seems to me that Kit or the Mayor would say well that's not possible without some legislative change. Kit Williams: I don't believe that. I think it is. I think the Attorney General was wrong in their opinion. I say let the court decide not the Attorney General. The only safe way for a law suit to develop for the trustees is for the benefits to be reduced by the trustees and then one of your beneficiaries could sue you and say you can't do that. You don't have the right to do that and we go to court and the judges tell us, if I'm wrong and you didn't have the right to do it, what's going to happen? The court will order that all the beneficiaries get paid as if you didn't reduce the benefits which is what you are doing now so there is no real down side. What I explained to the Fire trustees were if you wait until you crash and one of the beneficiaries then sues the Board of Trustees and says you didn't do your fiduciary duty to protect the fund, there's no find to protect you if the court says you have that fiduciary duty, you didn't do it, so now you personally own these other people. Policemen's Pension end Relief Fund Boud of Trustees Meeting Minutes October 18,2012 Page 6 of 27 Jerry Friend: Why do you keep advising us to wait? Kit Williams: I'm not advising you to wait. Tim Helder: I think that was our stance. I don't remember you advising us. Jerry Friend: I thought you said wait. Kit Williams: The Fire Board is ahead of the game. They are heading toward the*ground much faster than you. I had hoped they would do something. Now that you are at risk it's something you might seriously want to think about. The Fire people are the ones that should not have waited. Tim Helder: That's the first that I have heard about you saying that if the Fire people had reduced their benefits to 75%that the City would have considered it? lUt Williams: The City Council said that. Tim Helder: That was two years ago. Before we could even consider that if we were in that posture and mind set we would have to have a follow up conversation to find out what would an acceptable reduction be that we could entertain. Kit Williams: That's what they have done. They had an actuarial study done to show what it would have to be reduced to so it basically would be no net cost to the City. It would mean the fund would be protected by the City because the City then becomes responsible. Tim Helder: That was on the Fire. What I'm saying if we got into that seriously we would have to have the same thing done. Sondra Smith: Right and if I remember correctly the state statute doesn't say you can and it doesn't say you can't. Kit Williams: The other problem is there is no procedure spelled out how you would reduce benefits. Tim Helder: It hasn't been done. Kit Williams: PRB agrees with the Attorney General, they say you can't do it. Sondra Smith: There are things that PRB has allowed that are not in state statute. I don't think it's in state statute that you can do a benefit increase on a cash flow basis. Kit Williams: I think so. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 7 of 27 Paul Becker: It is not in the statute. It's an administrative rule ftom PRB based on that they can use an acceptable actuarial method. Kit Williams: Both boards I believe have followed the statute when you were increasing benefits. You got the required number of votes and you got the approval of PRB after they did the actuarial study that said you could do it. I don't think either one of the boards when you were increasing the rates did anything wrong. Frank Johnson: What you are saying now is that those same administrative processes that allowed you to increase it are not applicable for decrease because these's a state statute and PRB opinion that says you can't do that. IGt Williams: No. Paul Becker: What Sondra is talking about is when they did the study to decide whether or not the fund could hopefully grant an increase they used a cash flow study. That is what they used to make that determination. That is not mandated by statute. That's an administrative rule and I asked that question point blank. That's what they use to judge that the plan could increase benefits. There are no provisions for anybody to study or consider within the statues a reduction. Vit Williams: There is a difference between saying that the statutes don't give you express authority to reduce and say they say you can not. Frank Johnson: The difference in solvent and at risk is a barely a palatable heart beat. We are going to have to decide on something. Not looking for any specific direction from you Kit just for my sake at least more clarity on how to pursue this legally or do we need to do it legislatively. We haven't established any momentum other than just having a matter of record of these discussions. If the City Council is receptive to moving us to LOPFI with a reduction of benefits than we need to start talking about what that looks like with them and put together a strategy to get us there. It's my thought that we probably need to wait to see what options. There maybe some rabbit that PRB pulled out of their hat that we are unaware of. Just to see what all the options are and perhaps schedule a meeting once we get that information and then decide on a strategy based on the options that are available to us. Kit Williams: The legislature might change the law we don't know. Frank Johnson: Will they do that without any legislative influence? Who is out there that would sponsor that? Kit Williams: I don't know we have seen bills in the past that would've affected this. Paul Becker: Right now all bills for the pension plans I understand have been filed. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 8 of 27 Vit Williams: There is usually a shell bill or two that might not say what it is really for and then the last couple days of session all the sudden it blooms. Mayor Jordan: I think Lana said that there were a couple pension shell bills. Paul Becker: There are shell bills out there. There was a deadline about a week ago where they said no more pension bills which doesn't mean much because they have shell bills. A shell bills essentially has nothing but a title. Frank Johnson: Is it like a place holder? Kit Williams: Yes. Frank Johnson: Is there one being sponsored from our district? Paul Becker: No. Frank Johnson: Things like these are things we probably need to talk about. Paul Becker: The last time this discussion was had by the Fire Pension Fund with the Council the Fire Pension Fund had hired the actuary to study and essentially come up with a number saying this is what it would cost if we sent the plan to LOPFL As he did that there was a number that had been calculated for police too. If you are considering a discussion with the Council that would involve what conditions to send it to LOPE you kind of have to know and get a calculation or an estimate of what we are talking about. At that point Council was very adamant that they were not going to send it down with the type of future liability that was associated. We were talking about it at that point in time depending on how you funded it. They went from $350,000 a year to $500,000 or$1,000,000. We didn't have the money and there was no way the Council said they would bite off that type of liability. We would send it down as long as the assets were enough to cover it at that point in time and it didn't cost an additional cost. That's just a refresher on what was done last time so everyone understands. Mayor Jordan: During some of the Firemen Pension meetings they decided they wanted Kit's opinion on this. You can correct me if I'm wrong you thought they could reduce benefits. Then someone asked for an Attorney General's opinion. Kit Williams: That's correct. Mayor Jordan: You thought that we could then I believe some of the Firemen asked me to ask the Attorney General and so we did. From the letter I got he didn't really say you could and he didn't really say you couldn't. Kit Williams: Surprise the lawyers read the same statute and came up with different interpretations. Polioctnen's Pension end Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 9 of 27 Mayor Jordan: That is kind of where it is. Now it's been a little better so we probably haven't had to have those type discussions. Jerry Friend: Didn't we consider that and then the news came out that we were in better shape so we were not going to sent it. Mayor Jordan: That sounds right. Vit Williams: The key thing always was we thought that it would be resolved by the Fire Pension because they were so worse off than you and something had to be done. Tim Heider: That may still happen. I don't remember that percentage being tossed out, that if the Fire Department were to reduce benefits what it would be. Kit Williams: It was around 70%. Tim Helder: But the City Council would then be okay. IGt Williams: That percent would make it a wash. The City Council would not be out any immediate money. They might still be out money in the future. They wouldn't know that there was going to be a big liability coming down. Tim Helder: I appreciate the conversation but I don't think we can seriously even talk about that unless we knew for sure or a number is tossed at us that say's if you guys were to reduce to 80% or 65% or whatever it is then we can have a meaningful discussion but right now I'm not in favor of reducing benefits until something is resolved. I also know if things stay the way they are in fifteen years, at least right now it's predicted to be curtains. Paul Becker: It's not going to last fifteen years. Mayor Jordan: I remember Tim, when we were having all of those discussions and when they came in and evaluated they thought it would get a little tough but that you all would be okay. Kit Williams: You don't really know for sure. Tim Helder: As a board I think we have got to have the discussions. Nobody wants to discuss reducing of benefits, I understand that but I don't think it can be entertained unless we know what we are talking about. Kit Williams: You have to be like them and pay for Jody Carreiro to do the study to say what it would have to be reduced to. Paul Becker: They engaged Carreiro who is the actuary of the PRB. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 10 of 27 Tim Helder: I don't know what everyone else thinks, if that is a worth while endeavor. I've never heard that number tossed out about Fire that could potential save their pension if they reduce benefits to 75%. Kit Williams: That's a time controlled number. Tim Helder: It seems like it might be of value for us to at least know that if we were ever to entertain the idea of a reduction of benefits we would have an idea of what that number might be. Melvin Stanley: It would have to be time sensitive because if we did it now and decided to wait three years it could completely be different. Eldon Roberts: The Fire Department was 70%, three or four years ago? It's probably way worse now. Tim Helder: I think we would know what it is now but we could also discern that in five years it's going to be a lot lower than that. Before we have a discussion we need to know what that number is. Kit Williams: I understand that you can only send a plan down to LOPFI during a particular period of the year near the end of the year. That conversation occurred I think in the fall and there were certain members of the City Council here, no vote was taken. As Mayor Jordan said that unless benefits could be reduced down to the level that Jody Carreiro said the City Council would not have to start immediately paying money into LOPFI to take care of the benefits that the City Council was not interested in entertaining that. I do agree with you and before I would reduce benefits I would want something flim to the City Council saying that if you did do that they would then accept responsibility by sending it down to LOPFI. Tim Helder: I don't think we can entertain a discussion until we know what that number is. What if it was 90% or 85%? It might not be such a hard pill to swallow that if it was 40% or 50%. Vit Williams: You would be 80% or above I would bet but only Jody Carreiro can tell us. Melvin Stanley: Did you say Jody Carreiro did that same study for us that he did for the Fire Department? Kit Williams: No, this was a special study that you have to do before you send it down. They use this study to tell the City how much the City is going to have to pay. The study can also be used to determine if the benefits were at this level the City wouldn't have to pay anything at least initially. Melvin Stanley: I thought you said they did something about the Police Department. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page I I of 27 Kit Williams: This one was a special one for the Fire Department. He always does a study every two years but it is not this kind of study. This is a special study if you are going to send the plan to LOPFI. Sondra Smith: The Firemen's Pension plan asked them to do four different scenarios. 1.) To give a percentage of reduction that it would take if all benefits remain as they currently were. 2.) Current and future surviving spouses would be set to 75%of the spouses benefits. 3.) Current and future surviving spouses would be set to 50%of the spouses benefits. 4.) Future only surviving spouses would be set at 50% of their spouses benefits. This was back in 2009, Scenario, 1.) was a 22% decrease 2.) was a 18% decrease 3.) was a 14% decrease 4.) was a 16% decrease Tim Helder: The follow up question is if that were done and the City Council agreed, then the economy really tanked for awhile, is that a protected number? Sondra Smith: No. Kit Williams: It's not protected for the City. We have to kick in more money. Tim Helder: That's all the clarification I wanted. Once this hits our folks there is going to be a certain amount of paranoia and it might be justifiable at some point. I know no body wants to do it but at some point we have got to have this discussion. Sondra Smith: I thought you meant are these percentages set in stone. They're not because they're going to be a higher percentage now for them than they were in 2009. Tim Helder: The position that we are in I'm assuming that ours would be higher than the 78%. Sondra Smith: You are in a better position than they are. Tim Helder: They're starting to put it in writing and set time tables for us. It has come upon us to at least predict the gloom and doom and try and figure out a way, not agreeing to it so nobody panics, but at least have the discussion that we can figure a way to reduce the impact to our pensioners and have some level of protection down the road. Sondra Smith: That's what the Council is wanting too. They want the plan protected but they feel like there's needs to be a small reduction. Tim Helder: There needs to be a concession. Policemen's Pension and Relief Fund Round of Trustees Meeting Minutes October 18,2012 Page 12 of 27 Jerry Friend: Do you know about what that study would cost? Sondra Smith: I would say it is about$2,500. Eldon Roberts: That sounds right. Fit Williams: I thought it might a little more than that. Sondra Smith: It was between $3,500 and $2,500 but that was for doing the calculations four different ways. The more calculations you have it is a little bit more costly. Jerry Friend: It looks like if we ask them to calculate it would be what would it take to be neutral for the City? We could kind of imagine up and down. Paul Becker: You have an idea of the direction. Jerry Friend: What would it take to be neutral to the City? IGt Williams: With just an across the board reduction. This would be a good thing to discuss in your April meeting because everyone is going to be interested in coming to that. Frank Johnson: We can't wait until April to have this discussion. If we are going to construct a timeline there are multiple work strains to essentially replicate what the Fire Department did. We are still not sure if we can reduce benefits. Kit Williams: And you want be. Frank Johnson: That is a different work stream and there was a total different City Council then. Mayor, has this been socialized with them? Mayor Jordan: Before I took office in 2009 1 looked at both pensions and the Firemen's Pension plan was in trouble. The very first day I was in office we had a meeting about that. We had another big joint meeting between you all and the Firemen along about early 2009 but at that point in time they told us that you all would kind of skim along and they thought you all would make it. If I remember this and you correct me if I'm wrong. I knew we were in trouble. I know on at least two occasions there were motions made to reduce the Firemen's Pension Fund and we were voted down. We supported that. They wanted a study done much like what you are looking at now so we did. I am thinking I brought it here and you all according to what was discussed you did not think that you needed to do one. Tim Heider: Based on the information we had. Mayor Jordan: That has somewhat changed now. Frank you're right, we have a different Council then to what we have now. Council's change and their opinions change but I think that Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 13 of 27 you need to start looking at some sort of study and say what would it take and how much would you have to reduce it? I think Sondra's motion was to reduce it 20%. Sondra Smith: I made a motion before the study and then we made a motion after the study. The motion before the study I think was about 25%. We had guessed pretty accurately and the motion after the study was about the same. I pulled up the study and Jody Carreiro invoiced us $2,900. Jerry Friend: So between $3,000 and$3,500. Mayor Jordan: If you want to do the study and start on a plan I'm good with that. You all have been on this board longer than I have and a lot of times I just flow with what you want to do because you all are going to be here after I'm gone. Sondra Smith: You just hate to do the study and spend that money and not do anything and then three years from now have to do the study again and spend another$3,000. Jerry Friend: I think we need to do the study. The only reason I'm not moving that we do it is because I'm not sure. I want to ask the same questions and I don't know if we have time to decide what we want to ask. Frank Johnson: My thoughts are these are informational meetings. We need to schedule a meeting were we can work from an agenda were we know what we are going to accomplish. Mayor Jordan: Frank, I can call as many meetings as you want. We can meet next week, two weeks,just want ever you think you want to do: These are facts this is what is presented to me to pass on. I think they're going to ask you some questions about how bad is it. Eldon Roberts: I have some thoughts that will probably get shot down. Tim Helder: No, let's hear them. Eldon Roberts: I don't think that much has changed. They told us at the joint meeting with the Police, Fire and Jody Carreiro they thought our plan was going to make it, they threw out about seventeen years. Two or three years have gone by so now there are talking about fifteen years. That sounds like that's pretty much in keeping with what they said back along time ago. Guys nothing has changed this is right were we have always been. They have just come out with a new category that they are placing a whole bunch pension plans in now that ours happen to fall in and has been at risk for sometime. They told us at that meeting that I just referred to we were at risk then but we were a long time down the road. Nothing has changed, I don't know if this is a scare tactic or wanting to get all our pensioners all up in arms but we are no worse off than we were two years ago. They just gave us a new category that they are putting us under and lumping us up with the rest of the pension plans and there are several of them. The Mayor asked me who they were, I can't remember how many plans they threw out there at the last meeting that are in the at risk category. Nothing's changed, another thing we have talked Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 14 of 27 about time and time again when you bring this up, guys we have the luxury of setting here and waiting. Some where down the road this is going to be figured out for us by these plans that are projected insolvent in the three, four and five year category. There's something that's going to happen with those long before it does ours. I say we are going to have a road map to follow on down the road and there is no need for us to take any kind of action right now. That's my thought on it. Paul Becker: One thing did change and that's when they were doing the actuarial evaluations they used a 7% discount rating. We pushed hard down there to reduce that discount rate that is going to make all of the plans look worse because that's assuming that your investment earnings are going to be less. The discount was changed from 7% to 5%. It's not a wonder that all the plans don't look worse than that. That's one reason that it looks worse than it use too. Eldon Roberts: I was on this board for fourteen years down at Little Rock. I've going back now the last two or three years haven't missed a meeting. Something I'm beginning to see is more and more people coming together and saying this really is going to be a problem. There has been a certain degree of naiveness and complacency throughout the whole State of Arkansas on these old plans saying it's not going to affect me, we are going to make it. Now they're all beginning to say hey this is a problem Houston. I think that's good for everybody because they are all beginning to look at it now and that's how you get legislative action and how you get your senators, representatives to support stuff that will some how aid these failing plans. It's beginning to come together now. These Mayors and City Managers and all these people from all across the State of Arkansas are showing up down there now and saying hey this is going to be a problem. We have been hearing about it but now we are seeing it. Now that everybody is realizing it and getting on the same page that has got to be a plus for us. Tim Helder: You are probably right. Since you have the most exposure down there, we sit back and we wait for something to be resolved at the legislative level or some how. Do you think there is any solution or anything that is going to happen that's going to salvage a closed pension plan like ours at 90% or 95%? I'm just asking your observation what do you think with all your exposure. Eldon Roberts: I don't know that there would be something happen that would salvage our plan at those rates from now on to the end of time. There might be something that will happen that will kick the can down the road further. But to salvage our benefits at 90% for the duration of this fund I don't know of anything that would come out of the legislation that would be that luxurious. That's asking me to guess at something I don't have a clue about. Tim Helder: I just think you have a lot of exposure. Eldon Roberts: Something is going to happen with these plans long before our fifteen years is UP. Melvin Stanley: When is it going to be in fifteen? What Elaine Longer gave us says in 2012 distributions totaled $833,000 our fund is less than $8 million. It shows 10%, that's ten years if Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 15 of 27 we keep earning the same amount of revenue every year to put back to what we pay our pensioners. Eldon Roberts: Still at that there are plans that are so much worse off than we are. Fayetteville Fire being one that there is going to be something, and they're probably talking about some legislation that's going to mandate some stuff. What it is I don't know. There may be some law suits between now and then. I'm just saying we have talked about this before and all of us have agreed that we have the luxury of kind of waiting and seeing where were going. I don't really have any input, in legislation we have input, you've been around as long as I have about legislative procedures and how you go tugging on the shirt tale of your representative and senators and hey we need this and we need that. We may have a little input in that arena but what's finally passed turns into law and then we are going to have to follow it. Tim Helder: With the exposure that I've had I just find it hard to believe that we could go to a legislature and get anybody to buy into the fact that we need help saving our plan at existing rates, whenever we don't really know that we might be able to soften this blow, toss it out there if we had to reduce from 90% to 85%. 1 don't know I can't imagine it being less than 78% or whatever that was. I don't know what that number is. I don't believe legislatively that anybody is going to pass legislation that's going to save our plan as it exists, I just don't think anybody in there right mind would save it. Sondra Smith: The Fire Pension didn't know what that number was until they did the study. My feeling has always been its better to take a small cut now and bleed a little bit than to have to take a deep gash later on and bleed a lot. Tim Helder: I know but I also see where Eldon is coming from. We should hang on a little bit longer and that number may not change. We can Watch and see and then do something later on. It might still be that same number but the problem is I don't know what that number is. Eldon Roberts: If we have it done now and then we sit on it for three years, its not going to be the same number. Sondra Smith: As long as we are pro active about watching it because you could have a drop in the market. It's so unstable. Tim Helder: I think its going to be talked about. The pension plan for the Fire Department, when was this done, two years ago, they were predicted to be in seven years and all that it was going to require them to do is go down to 78%. We are at fifteen years and in two or three years, we are going to be twice as good, twice as stable as they were when that study was done. I can't even believe that we would still be in the mid to upper 80's. Sondra Smith: Their assets are at $4 million something now. Eldon Roberts: My advice is if you start getting phone calls from this letter is basically they've just come up with a new category they put us in. We have always been in this category and they Policemen's Pension arid Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 16 of 27 just now labeled it as an at risk plan. There are a whole lot more it's not unique to Fayetteville Police Department. Mayor Jordan: I remember those numbers now, they did mention seventeen and I want to say the Fire was nine or ten years something like that so if you look at four years later now they're down to about five years. Eldon Roberts: If they mentioned seventeen for us that has been two years ago. At least we had that meeting so now they're saying fifteen so there are two or three of your years subtracted from seventeen so it's kind of going right along. Nobody can really figure this there are too may variables, like the actuary, the market, the money, the interest, and the economy it just goes on and on and on. Those are variables nobody has a for sure answer too. Melvin Stanley: Say we did spend the $3,000 to have Carreiro do the study and we get it back that it will drop to, let's say 80%, and no impact on the City what are our chances of the board saying lets do it or are they going say we are going to have to think about this and wait a year until everything has changed and we have to do it again? What would our guarantee be from you Mayor,that the board would accept that? Tim Heider: Are you talking about the Council? Mayor Jordan: I don't know how to advise you on that. Sondra Smith: There is no guarantee but I think they would look real favorable. Mayor Jordan: They would certainly look at it but you have to understand we have three brand new council members and three of the other council members have a little over two years experience or less. You have six of eight council members and three with two years experience, three with zero experience, one that has been here four years and one that has been here six. Sondra Smith: We have only two seasoned council members. Mayor Jordan: None of them except for two were on the council two years ago when we had the meeting with the Council and Fire. It's like plowing new turf. Eldon Roberts: Tim lets say we have this study done that Frank was just talking about and the actuary says if were to reduce benefits by 10%, how comfortable do you feel voting for that 10% reduction in benefits when the Attorney General says you can't do it? Tim Helder: I've almost sided with Kit on this; I think that it is something that is going to have to be challenged at some point. Personally 10% right now is not going to impact me because I have another income, I'm working, it's not going to impact me like it is going to impact a lot of other pensioners. Ten percent might be devastating to some folks. Melvin you are relying on the pension and Eldon you kind of are. I know you are working part time but I don't want to speak for all these people because I'm in a different position right now. In about four to six years I'm going to be that guy and I don't know the answer. I don't know Eldon, I'm sorry. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 17 of 27 I am comfortable with challenging the Attorney General's opinion because if it is not going to cost us all it does is say I disagree with you and we've got to go back to 100%. If that is accurate advice that Kit gave us we are not out anything other than trying it and they tell us we can't do it. Sondra Smith: It's better to do that than for us to be sued for not doing our fiduciary responsibilities. Tim Helder: That's down the road Sondra. I just want to be ahead of being forced into something or at least have enough information. I'm willing to wait another year or two years to have the study done but I just think at some point we have got to have a study done to know what we are talking about. What if it was 5%, how would you be feeling about that? Eldon Roberts: It almost sounds like it would be the ideal way to go but with the Attorney General saying we can't reduce benefits I have some concerns. Some of our pensioners are going to sue us then. There is no doubt about it and that is when we are going to finally get in court but that is going to come before we do. That's going to come before someone else's plan. Tim Helder: Do you think they really would over a 5%decrease? Eldon Roberts: Yes,probably. Tim Helder: Okay. Eldon Roberts: You know all those people. Tim Helder: I'm just wondering because I think if it is explained and they were to attend one of these meeting where we are getting the gloom and doom that 5% against a reduction of 50% at some point in their life is like wholly crap. Jerry Friend: Around 1999, which is when I went to the County, the Attorney General told the County you can do this and it was before 1999 and a lawsuit happened and the County suffered for two or three years paying it all back. The Attorney General is not always right. Eldon Roberts: It's just an opinion. Tim Helder: I was just thinking in the big scheme of things $2,500 or $3000 is not a great expense to find out fairly accurately what we are talking about. I'm glad we had the discussion. Jerry Friend: I think we should do the study and make a discussion or else quit talking about it at every meeting. Frank Johnson: How did the Fire Department develop those options? Sondra Smith: We sat down at a meeting and went through what we felt like we would like to ask to see what percentage of reduction would be needed. Policemen's Pension and Relief Fund Bond of Trustees Meeting Minutes October 18,2012 Page 18 of 27 Eldon Roberts: What you look at is everything that is costing the plan money. It's our benefits, the widows, spouses, and ex wives. Melvin Stanley: We wouldn't need three or four different scenarios we only need one. Tim Heider: I agree. Frank Johnson: There's some consensus on that. Sondra Smith: They wanted to know about spousal benefit. Your spousal benefit from what I understand is a big hit to your plan. Tim Helder: What was the difference in the percentages? Mayor Jordan: Your plan is not as bad as that plan was at the time we did that if I remember correctly. Sondra Smith: There are so many variables you can't really compare your plan to their plan when it comes to spousal benefits because there may be a lot of people that are not married on your plan. Paul Becker: There was only one change they would consider. You're not going to consider taking your spousal benefits and cutting them back to 50% leaving everybody else there. If you look at those scenarios I think you would agree that a couple of those they would never implement anyway. Sondra Smith: Would you all like to have a copy of this? Tim Heider: Yes,please. Melvin Stanley: You said who would not approve those spousal benefits? Paul Becker: One of these is what if we cut the spousal benefits way back to what they were originally for. Tim Helder: Aren't you saying that the Firemen realistically weren't really going to entertain those ideas. Paul Becker: There were a couple of those options I don't think realistically that they would've considered to tell you the truth but they threw the options out. One thing I will say if you want to go forward with it right now Jody Carreiro who would do this is in and out of legislative sessions. It will be awhile before he got to it. Jerry Friend: We could plan another meeting and decide. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 19 of 27 Paul Becker: If you make a decision right now you would not get an actuary study done any quicker than if you made a decision a couple months from now. As it was it took awhile to get that study back then and it was not when the legislature was in session. Sondra Smith: It took about nine months from the time we requested it to get the study back. Tim Helder: That might not be all bad because we might be able to see if there is going to be much feed back on this letter. Frank Johnson: Some of the comments of that road map may actually start playing out. Eldon Roberts: It is going to occur somewhere in the state sooner or later. There are going to be some rules laid down for these plans that are insolvent. There will be a lot of them get there before we do so we will have them to follow. Frank Johnson: Is there a standing committee that this would fall into? Is there any need at this point to bring some awareness of what this activity looks like to the Council? Paul Becker: In your packet you will see the Mayor is required to do a report annually. Mayor Jordan: If it was me I would wait until April and the legislative session and if you want to meet between now and then to kick some ideas around, I'm good with that. Frank Johnson: I think that is a good idea. Sondra Smith: The next meeting is April Wit. Mayor Jordan: Then all the legislative stuff is over. You are not going to be affected in the next two months one way or the other. You may get a few phone calls but you can tell them we are going to talk about that after the legislative session. There not going to make any kind of decision between now and April. Sondra Smith: We don't have to send this letter out now. We can wait. Melvin Stanley: I would say it would be good to get out there. Sondra Smith: I think the letter to the pensioners needs to go out. Eldon Roberts: According to what PRI3 says we better send it. Mayor Jordan: Yes,they are the ones that really wanted us to do it. Sondra Smith: We need to send it but we don't need to send it this week. Eldon Roberts: It doesn't have a timeline. It tells us we need to make the City Council and our beneficiaries aware of this. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 20 of 27 Mayor Jordan: Tell them the truth, we are going to be discussing it again in April after the legislative session and we will decide whether we are going to do a study or not. Then I can take it to Council just like I did before. I'm good with that. Sondra discussed how the letter was laid out and what would be attached to the letter. Jerry Friend: I would like an agenda item on the April meeting that we form the request for a study that way we will be thinking about what questions we would like to ask. We will all be ready because we are going to read this letter,talk to everybody and answer all the phone calls. Tim Helder: We might decide we don't want to do anything. Frank Johnson: We are explaining options and having a meaningful discussion about it and we are being diligent in our fiduciary responsibilities. Sondra Smith: How about if I put consider a request for an actuarial study letter. Jerry Friend: Yes, and we don't have to do it. Mayor Jordan: If you all want to meet between now and April, I'm good with that. Frank Johnson discussion item: Will a vote to increase the millage possibility cause us to lose the current millage. Frank Johnson: That was based on something Kit said. I can't really recall what it was he said and I didn't understand. Sondra Smith: Paul had told me that it is probably the way you word the item on the ballot. Paul Becker: That's my opinion. That's a Kit question you should wait until Kit is here to answer that. Mayor Jordan: We can put it on the next agenda. Frank Johnson: Yes, I just wanted the City Attorney's opinion on something like that. Can you imagine if something happened and we lost that revenue stream? Mayor Jordan: Yes,you wouldn't want to lose that, I wouldn't put anything at risk. Sondra Smith: I will add that to the next agenda. Information from Jody Carreiro regarding whether the millage affects the unfunded liability Policemen's Pension and Relief Fund Board of Trustees Mceting Minutes October 18,2012 Page 21 of 27 A copy was given to the Board Sondra Smith: That came up at the last meeting. Jerry Friend: Paul answered that. Sondra Smith: I was asked to get an opinion from Jody. It is in your packet if you can understand what Jody is trying to tell you. Paul Becker: It is a snap shot of where you are. Local pension fund revort to Counci A copy was given to the Board Sondra Smith: That's the report that the Mayor has to do according to state statutes in open session at a City Council meeting. GFOA Best Practices email Sondra Smith: PRB is suggesting that we set up a Best Practices Procedure for your pension plan. You can read the letter. It is not something that we need to do on the spur of the moment. It gives you their recommendations, a manual and an outline of authority. You're governed right now by state statute but I guess they feel like you need more governance. Jerry Friend: Or a policy manual. Sondra Smith: Policy procedure manual. They want a policy this board adopts on how they are going to handle just about anything and everything. Jerry Friend: What should we do study it and be ready to talk about it? Sondra Smith: Study it and let's put it back on the agenda for the next meeting. Paul Becker: That is Governmental Financial Officers Association they have best practices on everything. It's not something they're saying you have to do. It is something they are saying you may want to consider. Act 979 of 2011-Additional allocation Sondra Smith: This is a letter we received about Act 979 that went into effect in 2011. Its additional ftinds that they have come up with to help plans that are at risk. On the second page Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 22 of 27 of the letter there's a calculation sheet that they've done. You're going to get an estimated additional allocation in 2013 if you are eligible but it's not very much. It's not enough to think you are going to save the plan with the money. Eldon Roberts: $39,000, estimated additional allocation. Paul Becker: That's the turn back. Eldon Roberts: That will probably change between now and then. Discussion Items: LOPFI LonlIer Investments: City Attorney letter regarding Investment Advisor Aurcement with LonLyer Investments A copy was given to the Board Sondra Smith: We had to decide whether we were going to vote proxy or not vote proxy and you wanted an opinion from Kit. We have already signed the agreement and we are not going to vote proxy. It's all going to be sent to the investment advisor which is Longer. Longer said if we choose that option she was not going to vote proxy. Si2ned Longer Investment Advisor Agreemen A copy was given to the Board Sondra Smith: You signed the agreement but we did not have Elaine's signature so I just put a copy in the packet for you. Canadian Revenue Agency Declaration of Eligibility form A copy was given to the Board Sondra Smith: You have Canadian holdings and they have to have a form signed. The Mayor and I signed the form and sent it back in. Loneer View Policemen's Pension and Relief Fund Bowd of Trustees Meeting Minutes October 18,2012 Page 23 of 27 A copy was given to the Board Longer Investments 4th quarter 2012 report A copy was given to the Board Longer Investments monthly report A copy was given to the Board Elaine Longer: The first page is the portfolio appraisal for month ending January 3 I't. We have an equity exposure approximately 50% in stocks. Investment policy calls for equity exposure 35%to 50%. We have an income growth category which are high income paying utilities stocks and high income paying funds which hold some high dividend stocks which is 8.8% of the portfolio. We look at that as a bond equivalent or part of the income part of the portfolio because bond interest rates are so low but still technically since it holds stocks I think we should get approval to be over the 50%. Tim Heider moved to approve the equity overage. Eldon Roberts seconded the motion. Upon roll call the motion passed 7-0. Elaine Longer: We have this Guggenheim multi asset fund which we have had in the portfolio for some time now. it only represents 5% of total portfolio but it gives an income yield of 5.66% on costs. This is the reason we are using these types of funds. The fund has appreciated from 20.8%which is the cost of the ftmd to 23.3%. While we have been making 5.5% on income the find has appreciated about 12%to 15%in price. The next one is the utility fuld; again we have better than a 10% appreciation in the value of the fund. It represents 3.7% of total portfolio and it has a 4.4% yield on costs. That's why we put these types of assets into the portfolio. We look at them as a quaiza fixed and growth type of income fund. It's not technically a bond so that's why we are cautions. The next fund is the mutual funds that are fixed income firuds and the first one is a treasury fund that's a seven to ten year maturity. To us that is cash equivalent. When we get a certain amount in money market fund which pays zero percent interest rates; we will put the rest of it in this fund which pays a 174. We have the invest grade bond fund which we have a cost basis of 106; it's trading at 119 and it yields a 432 on your cost. There again the high invest grade corporate bonds have been good performers as interest rates have come down. The next page shows your treasuries and I am happy to report that you still have about 15% of the portfolio in treasuries and about 3% in agencies. These were purchased a long time ago when interest rates were much higher. For instance the 4% that's due 2018 was purchased at a price of 103 is currently trading at a 116. The yield on your treasuries, on your book value, your cost is over 4%. The agency is 6.13%. You don't have any reinvestment risk in the fixed Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 24 of 27 income side of the portfolio until we get out to 2015. Then we will lose the 6 1/8, that's the only thing that comes up that will take these high coupons out of the portfolio. Vit Williams: They never call them early like some the corporate bonds. Elaine Longer: These don't have a call feature. Years ago when we could get 6% in a five year with a two year call the government agencies were often time issued with a two year call. The straight treasuries don't have the call feature. We also have about 4% of portfolio in gold. We've had a couple good trades. Last year in September we traded out of this Canadian Fund a Central Fund in Canada that holds gold and silver and we traded out at about 23 80. Now we are getting back into it around 2145. The reason we trade these things is because gold doesn't pay a dividend or interest so when you get a quick 10% or 15% return on it it's nice to take it to the bank. For a number of reasons gold is very under valued right not when you look at what the central banks of the world are doing with the Federal Reserve monetizing debt creating money with Quantitative Easing. Bank of Japan has now embarked upon a very aggressive monetization program. The European Central Bank is monetizing debt. What that means is you have a lot of money being created by central banks of the world to try and off set the credit unwinding cycle that we are still in that began in the 2008 crisis. What's happening is the value of gold reserves doesn't increase nearly as much as the supply of this money. We call it fiat currency. It is currency that's backed by gold. Its currency backed by nothing. At this point the gold has trailed the rest of the market but having approximately 3% to 5% of the portfolio of gold is a good option. Money market about 2.5% and we also have another asset here that's a master limited partnership of energy producing companies. This is only weighted 1.8% of portfolio value but it yields close to 6%. You can see how different this portfolio is than say five or six years ago when you could get 5%to 6% on bonds. It's really difficult to get income now. You know what this is like with the short treasuries and the short corporate. To give you an idea the five year treasury is trading at a 0.75% income yield and to lock up into ten years you would be looking at about 195 today. That's up from 165 but still that's a 1.95% locked in for ten years. As a result you can see that the way that we're keeping income in the portfolio, we invest in the high income dividend paying stocks so the yield on your stock portfolio is 4%. That's twice the yield you can get on the ten year treasury. Then you can see these other asset types and asset classes that we have built into the portfolio. We have to do it in a way that's cautious; we can't over expose them to anything because these are still equity type investments that in the event of a negative crisis type situation in the market they would act more like a growth as opposed to a bond. For instance in 2008 if you look at performance by asset class the high yield bonds went down about 46%. Real estate investment trust went down about 40%. Stocks were off about 40%. In situations where we have a real negative market environment some of these things that are bond equivalent or bond like can act more like stocks than like bonds. That's why when we are using these types of securities we are very careful with the weighting in the portfolio. Total portfolio value is about $7.872 million and the income yield on the total portfolio even with about 58%having a growth component is still over 4%. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 25 of 27 The next page shows the break down of the bonds. The average yield to maturity is 4.4%. If we go back to a year ago last December the yield to maturity was still 4.4%. The average maturity we've been able to reduce from 5.9 years to 4.8 years without giving up income return. It's real interesting when you look at your bond portfolio and you compare it to what's currently out there in terms of income. It's a much higher yield and yet you have a conservative structure in terms of your maturity. That's what we have been talking about in these meetings for about the last year. The bond that you have that's the 4% treasury that we paid 103 for and now it's trading about 116. That's the price volatility of bonds which is beneficial to a bond holder in declining interest rate environments but if interest rates start moving back up as they have this year than you can experience price decline which off sets the income return. In this kind of an environment what you want to do is hold onto as much income as possible but maintain a conservative maturity structure and that is what you have. The percentage of your bonds that mature within one to three years is about 17% of total. For us that's as good as cash because we can convert that to cash if we get an opportunity to invest in higher interest rates and we want to become more opportunistic the price seeking yield then we can convert that to cash and use it. But at this point in time the structure of the portfolio is pretty conservative and yet has a very high income. The next report is the investment performance inception to date broken out by equities, fixed income, and other income assets, which are these things that we incorporate in the portfolio like the Guggenheim Fund, Utilities Fund and we had some GE Preferred in there but the GE Preferred was called in January. We hated to see that go that was 6.5%. The compound annual return in stocks has been 5.4%, the fixed income 5.9% and the other income assets 8.8% so the total compounding of your returns is still the 6.2% compound annual. That compares to the 6% that was the actuary rate of return assumption from the beginning of the relationship in 199 1. Last years equity performance trailed the index 50% and 4.8% in the fixed income, 3.2% in income other and 4.6% total return. We maintained our defensive posture of the high dividend paying stocks which out performed the prior year when the S&P was flat. The two years taken together we have more of a moderate return in an up market, but we have a better return in the down market. Taken together about a 5% average annual and then year to date thru January, stocks are up about 4.4%. You can see the negative minus 1.2% in fixed income and the reason is because when the stock market appreciated, when we didn't go over the cliff, the flip side of that is we took some of the recession scenario off the table and interest rates popped on the ten year from a 160 to a 195. With that the price declined in the bonds gave a minus 1.2%. The total year to date is about 2.4%. I'm happy to report that from inception to date even though we have had several cycles in here in 1994 a negative year, we had the three year bear market beginning at the end of 1999, it was 2001 and 2002 which the markets were down about 45% on the S&P the total draw down on the portfolio was about 4%during that time period. Then we had the 2008 crisis where the total was down about 19% with stocks off 40%. Even though we've had a few cycles and there is negative returns the benchmark from the actuarial assumption is still enacted. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 18,2012 Page 26 of 27 The next page is the asset reconciliation which is the beginning value of 1990 of$1.35 million. The additions to the portfolio transfers of security and additions that have come in and the total distributions have been $9.54 million. That's from the very beginning in 1990 forward. The ending value is $7.872 million. Net investment return has been $8.204 million. So the investment return even thou it has achieved the actuary target still the weight of the distributions have been greater than the investment return. The distributions in 2012 totaled $833,000 which represented 10.8% a year in value. In your conversation you were having before we came in that is still a heavy weighted distribution on a remaining capital because what it is saying is even though we've had a couple good years post 2008 the distributions are still representing 10.8%on the value of the portfolio. I always like to review the investment policy. It calls for the portfolio to be invested to achieve investment objectives of the fund. It sets out an investment,guideline asset allocation minimum equity of 35% maximum of 50%, but then there are allowances to go over with approval plus or minus 10% of the total. I think that's still a prudent place to be because it gives us the range to be able to become more conservative. What's happening right now in the market is there aren't many alternatives to owning stocks with good dividend yields. Truly that's what the Fed has engineered, there is a term for it called financial repression and they keep the short term interest rates below the inflation rate which forces people, institutions, foundations, pension plans out of the risk curve to be able to get returns as post to staying where it's safe. It's not safe over there anymore because you can't meet your return needs and you also can't cover inflation risk. That's why you see when we finally got to the point to where we had sort of a non resolution to the fiscal cliff at least we didn't go over the cliff. The market breathed a collective sigh of relieve. Now we are coming up to the next deadline which is the sequestered cuts that's going to really start taking the front page towards the end of this month. I'm anticipating that we will be backing off of this $14,000 that we have achieved because now we are starting to see some lines being drawn in the sand again. We don't know what is going to happen, whether we are going to hit the sequestered cuts or whether or not Congress and the President will be able to come to some sort of a real agreement that gives us some stability. We're not out of it yet. The last time I was here I said when I come back I will be able to tell you what happened and all I can say is we are still kind of stuck in fiscal policy. At this point in time the markets are dealing with government of past. We are kind of the best house in a bad neighborhood when you look at what's going on in Europe and what is going on in Japan. Really your major currencies are far as world trade is concerned it the Euro, Yen, and the dollar. By comparison the dollar still looks pretty dam good. Our ability to respond policy wise with a coordinated fiscal policy and monetary policy to help the domestic economy stands out in contrast to what you see Europe trying to do meeting twelve times to decide what you need to do. We haven't really felt from the markets the impact where I think we would otherwise feel because of this fiscal problem that remains unaddressed. What they came up with that got us over the last hurdle really didn't solve anything because we implemented some tax increases and virtually no spending cuts and the tax increases represent about 6% or 7% of the deficit spending less of a percent of the total spending. All those problems that we were to address are still not addressed. The problem is that this can go on and on but at some point we Policemen's Pension and Relief Fund Boand of Trustees Meeting Minutes October 18,2012 Page 27 of 27 risk the rating agencies down grading our debt again. There have been a couple of warnings to that effect. I wish I could tell you we have the all clear but we still don't. Kit Williams: I guess the real risk would be if another economy actually suddenly looked like it was better or safer than us. Elaine Longer: Yes. Kit Williams: I think you all have done a very good job. Elaine Longer: I appreciate that. I appreciate the long relationship we have had with the Policemen. I've looked back on that track record and now its 22 or 23 years. Thank you for trusting us when we were a small firm and letting us manage your money for this long. Informational: Sondra Smith introduced Gail Eads with the City Clerk's office and stated she is the records clerk who takes care of getting the records into our system. Sondra Smith: You want me to send this letter to the spouses, widows, pensioners, everybody on the plan, correct? Jerry Friend: Yes. 2013 Meetina schedule A copy was given to the board. Meeting Adjourned at 4:35 PM POLICE PENSION FUND 5 5 5 5 5 May 2013 68�9%)O 6800.900) Month 6 Regular Mo 5335-00 5335.05 5 EMP# NAME Benefit YTD Reg Benefit Suppl. YTD Suppl. 154 ALLEN,CHARLES $ 2,584.64 $ 12,923.20 $ 50.00 $ 250.00 206 BAYLES,BOBBIJ $ 1,587.41 $ 7,937.05 $ 50-00 $ 250.00 216 BLACK,MILDRED $ 1,125.64 $ 5,628.20 $ 50.00 $ 250.00 147 BRADLEY.GERALD $ 4,820.09 $ 24,100.45 $ 50.00 $ 260.00 139 BRADLEY,RANDALL $ 2,860.17 $ 14,300.85 $ 50.00 It 250.OD 167 BROWN,JOHN $ 4,362.01 $ 21,810.05 $ 50-00 $ 250.00 157 CARROLL,RONALD L $ 2,106.04 $ 10,530.20 $ 50.00 $ 250.00 151 COLE,RUSTON $ 3,065.74 $ 15,328.70 $ 50.00 $ 250.00 160 DUGGER,GARY $ 3.163.74 $ 15,818.70 $ SO-01) $ 250.00 140 FOSTER,BILLY D. $ 3,207.35 $ 16,036.75 $ 50.00 $ 250.00 148 FRIEND,JERRY $ 1,970.42 $ 9,852.10 $ 50.00 $ 250.00 161 HANNA,JANICE $ 1.368.69 $ 6,842.95 $ - $ - 145 HANNA,MARK $ 1,368.59 $ 6,842.95 $ 50.00 $ 250.00 169 HELDER.TIM $ 5,838,12 $ 29,190.60 $ 50-00 $ 250.00 180 HOYT,RICK $ 7,460.01 $ 37.300.05 $ 50-00 $ 250.00 146 HUTCHENS,BERNICE $ 1,825.54 It 9,127.70 $ 50.00 $ 260.00 194 JOHNSON,FRANK $ 7,974.81 $ 39,874.05 $ 50.00 $ 260.00 216 JOHNSON,JOYCE $ 2,455.50 $ 12,277.50 $ 50.01) $ 250.00 103 JOHNSON,WENDELL $ 783.15 $ 3,915.75 $ 60.00 $ 250.00 118 JONES.BOB $ 3,300.45 $ 16,502.26 $ 50.00 $ 250.00 211 JONES,MICHELE $ 1,182.26 $ 5,911.30 144 KILGORE,DONALD $ 2,046.48 $ 10,232.40 $ 50.00 $ 250.00 218 MARTIN,CONNIE $ 3,692.85 $ 18,464.25 $ 50.00 $ 50.00 128 MCCAWLEY,LARRY $ 1,694.79 $ 8,473S5 $ 5D.00 $ 250.00 126 MCWHORTER,KAREN deceased 111012013 $ 1,012.10 It - $ 50.00 136 MITCHELL,MICHAEL $ 2,305.29 $ 11.526.45 $ 5000 $ 250.00 141 MUELLER,ROSEMARY $ 2,063.93 It 10,319.65 $ 50.00 $ 250.00 158 MLINSON,ANGELA $ 4,198.15 $ 20,990.75 $ 50.00 $ 250.00 112 MURPHY,JAKE $ 405.75 $ 2,028.75 $ 50.00 $ 250.00 137 PERDUE,LARRY $ 2,322.67 $ 11,613.35 $ 60.00 $ 250.00 164 PERSHALL,ROBIN $ 1,525.07 $ 7,625.35 $ - $ 7 132 PHILLIPS,HOMER GENE $ 1,754.44 $ 8,772.20 $ 50.00 $ 250.00 199 PRESTON,NORMA J $ 1.601.37 $ 8.006.85 $ 50-00 $ 250.00 135 RICKMAN,LOREN $ 2,231.07 $ 11,155.35 $ 50.00 $ 250.00 214 RIGGINS,BONNIE $ 1,669.37 $ 8,346.85 $ 50.00 $ 250.00 183 ROBERTS,ELDON $ 4.263.24 $ 21.316.20 $ 5000 $ 250.00 183 ROBERTS,ELDON Plus 25 add pay $ 587.09 $ 2,935.45 $ - $ - 212 ROBERTS,CAROLYN K $ 3,216.13 $ 16,080.65 $ - 212 ROBERTS,CAROLYN K Plus 25 add pay $ 442.89 $ 2,214.45 $ - 159 SCHUSTER,JOHN H. $ 3,117.36 $ 15,586.80 $ 50.00 $ 250:00 168 STANLEY,MELVIN $ 4.880.07 $ 24,400.36 $ 50-00 $ 250.00 155 STOUT.BETTY $ 866.51 $ 4,332.55 $ 50.00 $ 250.00 133 SURLES.JERRY $ 2,721.40 $ 13,607.00 $ 50.00 $ 250.00 142 TAYLOR,DENNIS $ 2,063.93 111 10,319.65 $ 5000 $ 250.00 $ 6,947.05 $ 34,735.25 $ 50.00 $ 250�00 163 WATSON,RICHARD 163 Watson,Richard Plus 25 Add'i Pay $ 948.76 $ 4,743.80 $ - $ - 149 WILLIAMS,JOYCE $ 2,539.66 $ 12,698.30 $ 50b) $ 250.00 195 WITT,BETTY J $ 1,766.83 $ 8,834.15 $ 50.00 $ 250.00 213 WOOD,RUTHIE $ 1,580.93 $ 7,904.65 $ 50.00 $ 250.00 $ 127.863.35 $ 640,32885 $2,050.00 $ 10.100-00