HomeMy WebLinkAbout2015-02-19 - MinutesLioneld Jordan Chairman
Sondra E. Smith Secretary
Roy Cate Position 1 Retired
Firemen's Pension and Relief Fund
Board of Trustees Meeting Agenda
February 19, 2015
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
February 19, 2015
Page 1 of 6
Pete Reagan Position 2 Retired
Dennis Mullens Position 3 Retired
Ron Wood Position 4 Retired
A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees was held at
3:00 p.m. on February 19, 2015 in Room 326 of the City Administration Building.
Mayor Jordan called the meeting to order.
Present: Roy Cate, Pete Reagan, Mayor Jordan, Dennis Mullens, Sondra Smith, City Clerk,
Kit Williams, City Attorney, Paul Becker, Finance Director, Dee McCoy, City Clerk office,
Trish Leach, Accounting, Glenn Atkins and James Bell of Garrison Financial.
Absent: Ron Wood
Garrison Financial:
3rd Quarter and 4th Quarter Reports
James Bell: You should have in your packet your yearend quarterly report for the fund. Starting
on page two, we always like to look at your asset allocation, your actual allocation versus your
policy. The policy is 60% equity, 40% fixed income. As you can see from looking at the chart, you
are about 63.9% equity right now, so slightly overweight on the equity side. Given where interest
rates are currently and our opinion of the markets, if we are going to be overweight, we want to be
slightly overweight in equities. That's kind of where we want to be. Turning to the next page as
we look through your appraisal, all the securities that you own, what we've sold over the course
of the year has mainly been in that section that says common stock. These are the stocks that were
inherited from the previous manager. By law we are not allowed to buy individual securities like
this. Over time you'll see as we have to sell to reallocate or to fund distributions, that's where the
sales are going to come from. You'll see that common stock section of the portfolio shrink over
time. There is one new position in there, 106 years of Halyard Health. That's not something we
bought, that was a spinoff from Kimberly Clark.
Looking at the next page, the yearend value at December 31, 2014 was $4.28 million. Turning on
ahead to the performance report for quarter -to -date the account was up 3.5% versus 3.3% on your
benchmark. That was up 1.61% on the bond side fixed income, and 4.69% on the equities. For the
year ending December 31, 2014 the account was up 9.3%. Since year end, through yesterday,
there have been about $142,000 in distributions. Your account value as of yesterday was about
$4.16 million.
Firemen's Pension and Relief Fund
Board of'frustees Meeting Minutes
February 19, 2015
Page 2of6
Briefly on the equity markets, what we see going forward, where interest rates are right now on
the bond markets interest rates continue to be very low. We don't see a lot of value on that side.
All else being equal we would probably recommend that you stay in equities and continue to favor
equities. If you look real quick, one of the charts I handed you is the price of oil over the last year.
Other than interest rates, that's probably the main thing we've been focusing on is what does that
mean, the fifty -plus percent decline in the price of a barrel of oil. The big question that we're trying
to answer is, is that decline supply related? Is there too much oil on the market both in the Middle
East and being produced here in the U.S.? Or, is it demand related? Is the price of oil coming down
because there's less economic activity, less demand for oil in the economy? We tend to think it's
the former. We think there's an oversupply of oil and that's why the price is down. Other than
energy companies, that's actually been a positive for the U.S. economy. That's something that
we're looking at as beneficial for most of the rest of the economy.
Kit Williams: It seems like it scared the stock market some.
James Bell: It did. If you go back and look from the time that it declined until now and you'll see
a lot of sectors are actually up since that happened, especially things like retail, transports, and car
manufacturers. It's good for a lot of sections of the economy.
Glenn Atkins: We had a really good year in the bond market considering what we thought it might
be and considering how low rates continue to be. I've included in your packet this thing you see
every quarter there are no material changes in that. I'd like to turn your attention now to the other
packet of charts. This is what we are continuing to deal with, the volatility. This is the ten year
treasury.
The first page of that is the yield year to date. The second page is trailing twelve months. The third
page is a five year look at the rates. The very last page is back to 1962. The point to that is the
volatility in interest rates continue. I agree whole heartedly with what James said earlier, your
portfolio is well positioned in terms of being tilted slightly toward the stock market versus the
bond market. We still expect at some point rates to rise. We did some restructuring of the portfolio
in the first part of the year that I think really helped our performance for the rest of the year. I think
we are positioned about as well as we can be. We've mentioned to you guys in the past that given
our mutual fund constraints that we try to pick mutual funds that manage money very similar to
the way we would if we were picking individual bonds. That strategy has worked out well for us,
at least over the last twelve to eighteen months. We are pleased about that. I think the bond portion
of the portfolio is in really good shape. The maturities on it might be a little bit longer than I would
like it to be. I think given the situation with the fund, it's not something we need to be concerned
about or change. Average maturity runs about six years. The consensus seems to be that the Fed is
going to raise the rates at the end of this year. I would have thought rates would have been higher
now than they are. You can look at that first chart, year to date, it's gone from basically at 2.20 to
a 1.65 back almost up to a 2.20 again. At this point we'll take questions and comments.
Pete Reagan: I think y'all are doing a great job. We appreciate your due diligence.
Paul Becker: I don't see it on here, is the average duration of bonds on the report?
Glenn Atkins: It is not on there.
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
February 19, 2015
Page 3 of 6
Paul Becker: Is it six years?
Glenn Atkins: 6.3.
Kit Williams: The Fire Pension Board doesn't have any problem with the fact that they are slightly
overweight in stocks, about 64% instead of 60%.
James Bell: We have a variance written in the policy.
Paul Becker: If you get out of the stocks and go to bonds, you can't go back into the stocks.
Approval of the Minutes:
Approval of the July 31, 2014 Meeting Minutes
October 30, 2014 meeting was cancelled due to lack of a quorum
January 29, 2015 meeting was rescheduled to February 19, 2015
Sondra Smith: We canceled the October meeting because we didn't have a quorum and we
rescheduled the January meeting.
Pete Reagan moved to approve the July 31, 2014 meeting minutes. Roy Cate seconded the
motion. Upon roll call the motion passed 5-0. Ron Wood was absent.
Pension List Changes:
Arnold Christie Deceased September 19, 2014
Sondra Smith: Arnold Christie passed away in September. We didn't see it in the paper. We
finally caught that, Accounting helped us catch that. I think a couple of checks went out to him
and the family returned those checks. You have a new pension list for October, because you had
already approved the October pension list. You need to re -approve the October pension list. The
ones for November, December, January, February, March and April have been corrected removing
his pension from those lists. He was a volunteer, so it was only $109.
Approval of the Pension List:
Re -approval of the October, 2014 pension list
Approval of the November, December, 2014 and January 2015 pension lists
Approval of the February, March, and April, 2015 pension lists
Pete Reagan moved to re -approve the October, 2014 pension lists and to approve the
November, December 2014 and January, February, March and April 2015 pension lists.
Dennis Mullens seconded the motion. Upon roll call the motion passed 5-0. Ron Wood was
absent.
New Business:
Revenue and Expense Report 09/30/14
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
February 19, 2015
Page 4 of 6
Sondra Smith: That is the revenue and expense report that is completed by the Accounting
division. It shows your revenue and expenses through September 30, 2014. It gives you a
comparison of one year to the next year of where your account was. It's a good little piece of
information to have.
Pension Transfers — Denuty Clerk to sign transfers in absence of City Clerk
Sondra Smith: In 2007 you approved Amber Wood, because she was the Deputy City Clerk, to
sign the pension list transfers. Amber is no longer the Deputy City Clerk. It probably would be
wise to change that to say Deputy City Clerk instead of a person's name. The Deputy City Clerk
can sign some city business items according to state statute when I'm absent. You might want to
put in the motion that the Mayor, City Clerk, and Deputy City Clerk have permission to sign your
pension transfers.
Pete Reagan: There's just one Deputy City Clerk?
Sondra Smith: There's only one Deputy, and right now that's Lisa Branson. I will let you know
if there ever is a change in that position.
Roy Cate moved to remove Amber Wood and add the Mayor, City Clerk, and Deputy City
Clerk to be able to sign pension transfers. Pete Reagan seconded the motion. Upon roll call
the motion passed 5-0. Ron Wood was absent.
Osborn. Carrerio & Associates estimated 2015 Premium Tax Allocation
Sondra Smith: That is your estimated premium tax allocation for 2015, which is the turn back
funds. The estimated amount can vary drastically because it's determined by the state and your
insurance premiums. The estimated turn back for 2015 is $165,883. We receive an additional
allocation because our fund is not sound. They are estimating that to be $55,294. At the bottom
of the page in bold says please note that it could vary as much as 20% one way or the other on
either one of those numbers. In 2014, you received $182,000 and your additional was $48,000. If
it goes down to $165,000 that is less than you received last year. The additional allocation is a little
bit more. So it will average about the same.
Kit Williams: They base their estimate on 2013 levels because they do not have 2014 levels for
sure yet.
Sondra Smith: When we get a better fire rating, our premiums go down. That might make your
turn back a little bit less because they aren't collecting as much in premiums. Our fire rating did
go down to a two.
Paul Becker: The total is based on the total premiums on insurance throughout the state, and its
property tax.
Pete Reagan: It used to be zip code, now its state wide.
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
February 19, 20 ] 5
Page 5 of 6
Paul Becker: It used to be to a particular district, but now it's a state wide total and it's distributed
based on property insurances.
Pension Review Board PRB Funding Status Letter— Need to respond
Sondra Smith: That is the letter that we received, and I e-mailed it out. We received it in
December and the bottom sentence or paragraph is what you need to be aware of, I asked in an e-
mail that you think about it and we discuss it today at the meeting. It says "because of the
importance of this matter, the PRB requires that your local plan promptly alert each participant of
the local plan as well as your City Council members and advise the parties of the local plan's
projected insolvent status". The City Council has already been notified of that because we do that
report in January. It doesn't say how they want us to notify them. We can forward a copy of that
pension report that the Mayor does for the City Council to the entire membership. Or you can do
your own letter.
Kit Williams: Or you can send them this PRB letter.
Sondra Smith: I want the board to decide how you want that notification to go out to the pension
plan. I think we do need to notify them in some way.
Pete Reagan: I don't think there's a need to send a letter out. I think we have a way to contact
them electronically, but there's a few that aren't on the electronic list.
Sondra Smith: We can just do a letter and send it to everybody. We can attach the PRB letter
here or the report to the council.
Roy Cate: We don't have to do certified mail?
Kit Williams: I don't think you do. There's a presumption that if you put a proper address and
postage on it that they will receive it.
Roy Cate: Well addresses change. Would it be a problem if they didn't receive it?
Kit Williams: We are sending them checks.
Trish Leach: When you read this it talks about that Carrerio is going to issue a special report and
that they are wanting us to turn in what we call the PRB report. Yours was e-mailed on the 91h to
them, so they have received the fire's report and they looked over it and sent any questions they
had. You almost wonder how quickly they are going to be able to turn that around and prepare this
special report.
Sondra Smith: I think they just want us to notify the plan too. It would be good to let the plan
know that we received that special report, but I think they want us to notify the plan that you're
insolvent.
Pete Reagan: I think they all know that already. If we are required to get it out then we'll just send
it out.
Firemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
February 19, 2015
Page 6 of 6
Kit Williams: The easiest thing is to send them a copy of this letter from the PRB and a copy of
what the Mayor gave the City Council. We don't have to draft up anything new.
Sondra Smith: Is that agreeable with everyone to send the pension report that the Mayor does to
the council and a copy of that letter?
Pete Reagan: Yes, let's just do that then.
Informational:
2015 meeting schedule
Mayor Jordan: When is the next meeting?
Pete Reagan: April 30tb
Sondra Smith: Are you all happy with the meeting time and day? It's been hard to get a quorum
here recently.
Mayor Jordan: The attendance is a little better in the summer time.
Adjournment: 3:27 p.m.