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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.