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HomeMy WebLinkAbout2015-04-30 - MinutesLioneld Jordan Chairman Sondra E. Smith Secretary Roy Cate Position 1 Retired Firemen's Pension and Relief Fund Board of Trustees Meeting Agenda April 30, 2015 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 30, 2015 Page 1 of 9 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 April 30, 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, Ron Wood, Sondra Smith, City Clerk, Kit Williams, City Attorney, Paul Becker, Finance Director, Dee McCoy, City Clerk office, Glenn Atkins of Garrison Financial, and audience. Garrison Financial: 1St Quarter reports Glenn Atkins: I passed out a copy of the quarterly report. On the first page of the report is a graph that shows your asset allocation and we are essentially at the plan's allocation of 60% stocks and 40% bonds. The next couple of pages walk through your portfolio holdings. In the quarter to date we were down slightly versus the index for the twelve months. In March we were up 6.5%, underperforming the index. The main reasons for that is weakness in our energy, technology and utility sectors. There continues to be a lot of volatility in those sectors depending upon how they perform quarter to quarter and year to year. Utilities were the best performing sector in all of 2014, and one of the worst performing sectors in the first quarter of 2015. The bond market performance continues to be good, which is a good thing. Since the end of the quarter, however, the stock portion of your portfolio is up 3.7%. So it's up almost 4% in the last month. We gave up a little bit of ground today so it's probably not quite that high, so call it 3.5% since month end. We've gained a considerable amount of ground since then. The sales in the portfolio that you see in there have nothing really to do with our assessment of particular stocks, good or bad. They are entirely due to the redemptions. What you are likely to see going forward on the other side is the reduction in utility exposure given an expectation of higher rates because typically the utility sector doesn't perform quite like some of the others. In a rising rate environment utilities are typically bad because they pay a high dividend but even so, they don't normally perform well when rates rise. On the bond side, our duration is still about 6.3 years which is a couple of years longer than the index which has helped our performance so far. It will hurt our Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 30, 2015 Page 2 of 9 performance if rates rise and particularly if they rise rapidly. It's giving us more income and more yield now and it will then too. Hopefully, if we do get into a rising rate environment it's a slow rise instead of a quick rise. I think we are well positioned for either of those situations. I would rather see it slower rather than a quick spike in interest rates. The funds that we have on the fixed income side continue to perform well. If we do take any action there it will probably be to sell some of the longer duration funds, for example the LQD's, and perhaps go into more of the Federated Intermediate Bond Fund, which is more of a corporate bond fund that has a maturity and a duration much closer to what we would be managing if we put individual securities in there. I think we are positioned good. We are throwing off as much income and as much gain as we can, notwithstanding performance in the first quarter. Also in your package I have included a typical ten year treasury yield graph. That's sort of what we use as a proxy for the market on the fixed income side. The first page of that is year to date. The second page is one year. I like to put the since inception on the back page. This one year chart continues to show the volatility that we are trying to deal with on the fixed income side. Last but not least is the simulation model that we do. Nothing material has changed there since we talked last quarter. I just wanted to provide it to you guys for the record. At this point I would be happy to hear comments, questions, criticisms, thoughts, ideas, and observations. Pete Reagan: I'm always anxious to hear the forecast. Glenn Atkins: The forecast is more of the same. The Fed had their regularly scheduled meeting Tuesday and Wednesday. They took out any reference to time in terms of raising interest rates. Other than that they pledged to do what's necessary in terms of raising rates. I don't think they will do anything in June, perhaps in September will be the first rate increase that we would see. I don't expect it to be much. Kit Williams: I think they got a little spooked because the gross national product only grew .2%, much less than it had been, it was probably weather related. Glenn Atkins: A lot of it was weather related and dollar related because as the dollar strengthens our exports to other countries weaken. Those are the two components that had the biggest influence on the GDP in the first quarter. I read something interesting yesterday; that study went back 30 years and they looked at all of the quarters of the year. The first quarter is the worst performing quarter in the last 30 years on average. They're not exactly sure why. They said that the government makes adjustments to those numbers after the quarter and during the quarter. But, there's something in there that's causing that first quarter to be the worst performing quarter on average back to 1985. 1 think they expectation would be for stronger growth in the second quarter and hopefully throughout the rest of the year. The problem with the interest rate environment is there's not much inflation. Inflation is not at their target 2%. World interest rates are much lower, on average, in the countries that you would want to invest in, than the United States. They don't have a whole lot of head room to raise rates maybe as aggressively as we thought two or three years ago. I think it's going to be a gradual thing, perhaps with the first move coming in September. The market always reacts with a knee jerk reaction to that kind of stuff. You would think that it would be built into the price, but it seems Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 30, 2015 Page 3 of 9 never to be which is always a strange thing to me because people have been talking about a rate rise for three or four years. I don't think that they are going to be too aggressive. I think we are positioned as well as we can be. The only thing we could do, to be a little safer, is to shorten up maturities but you would give up some income. I think we're trading one for the other. Pete Reagan: Again, I appreciate the hard work and due diligence that you and your firm do for us and we truly appreciate it. Glenn Atkins: We appreciate your business and thank you very much for that. We'll keep working on the performance and do the very best job that we can for you. Approval of the Minutes: Approval of the February 19, 2015 Meeting Minutes Pete Reagan moved to approve the February 19, 2015 meeting minutes. Roy Cate seconded the motion. Upon roll call the motion passed 6-0. Pension List Changes: Dixie Evelyn Morris deceased March 1, 2015 Sondra Smith: Dixie Morris deceased. You already approved the April pension list so we need to do a re -approval of the April pension list. She deceased March 1St so she gets the entire check for March. We need to approve the May, June and July pension lists. Pete Reagan: Sondra who was Dixie Morris' husband? Sondra Smith: I'm not sure. Pete Reagan: Bill? We had two Morris. Sondra Smith: If I remember correctly, she was a spouse of a volunteer. Pete Reagan: Both of them were volunteers. Did we get a copy of her obituary? Sondra Smith: Yes. I'm being careful about the information in the pension agendas now because the affidavits have confidential information on them that I have to redact information. I'm being careful about what I put in the packets from now on. We have her obituary. She passed away and we didn't know for sure if it was her. Dee did some investigating because there was not a date of birth so we couldn't confirm that it was her. The funeral home gave us a date of birth and it matched, and her daughter did contact us so we stopped the pension check. Approval of the Pension List: Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 30, 2015 Page 4 of 9 Re -approval of the April, 2015 pension list Approval of the May, June and July 2015 pension lists Ron Wood moved to re -approve the April, 2015 pension lists. Pete Reagan seconded the motion. Upon roll call the motion passed 6-0. Roy Cate moved to approve the May, June and July 2015 pension lists. Pete Reagan seconded the motion. Upon roll call the motion passed 6-0. New Business: Non Receipt of Affidavit Sondra Smith: I'll not mention who it is because you all know the person very well. The Board passed a motion that if we do not receive the affidavit that we are supposed to stop the pension check. I have offered to go and notarize for this person two or three times. They do not want me to do that. I don't know if you want me to just hold the check until they get their affidavit in, but we need to make sure we receive the affidavit. Pete Reagan: I think we did this per state statute because we have to have an affidavit on file. Kit Williams: It's dangerous not to follow that. Sondra Smith: I'm just letting you know that that person may be calling you because we have to stop the check. He is very aware and I told him that I had a meeting today and would bring it up before the board. We really need to hold the check for May. Kit Williams: They'll get it once they do the affidavit, right? Sondra Smith: Right. Ron Wood: I don't see where we have a choice. Sondra Smith: We don't, I just want to make you aware. That's the only one that hasn't turned in an affidavit. I know they are having some health problems. We go to people's homes every year and notarize for them so they can get their affidavit in. We've done that ever since I've been here. If someone needs help we go and take care of them. I will continue to work with that person. Kit Williams: I can testify that's true, I've been with Sondra when she's gone to collect and affidavit. Sondra Smith: Kit has gone with me before because we won't send one person to someone's home. We always make sure two people go. Pete Reagan: We have a policy and we'll follow it. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 30, 2015 Page 5 of 9 Revenue and Expense Report 12/31/14 and 3/31/15 Sondra Smith: That's the report that Accounting does for the pension board. The one from December we didn't have when we did our February meeting. They do the reports quarterly. LOPFI Letter regarding Consolidation of Local Plan dated January 2015 Sondra Smith: That's a letter that we receive, usually every year, letting you know that if you want to consolidate with LOPFI and do a study it's time to get that done. I have a copy of that in your packet. Pete Reagan: I had a real good meeting with David Clark, Jody Carrerio, and Bill Lundy about this situation. It appears that now there's some new regulations that GASB has come forth with. They are requiring pension funds of our size to use 25 year assumption rather than the 5 year on the unfunded liability. And they are raising the rate from 5% to 8% on investment income. Paul Becker: That has nothing to do with GASB. That's a LOPFI rule. That was a LOPFI administration decision that they would change and do the actuarial study based on a 25 year assumption, it was 15 before. They would use the LOPFI's discount rate which was 8. That was not promoted by GASB, that's an administration decision. Mayor Jordan: You're saying that's a state LOPFI board decision? Paul Becker: If that's the case and LOPFI does that that would change the actuarial study. Any lengthening in your time period is going to change dramatically the actuarial study. Pete Reagan: At one time we were at 8% on our investment and it was reduced to 5%. There was not any good reason given other than that it was going to hurt the bottom line on our fund. Paul Becker: I went there and suggested that they not keep it at 8% at the time. What they had been doing was a 5 year average. At that point the 5 year average pointed to 5%, not to 8%. They said well we don't know there's anomaly's but the issue is if that was their rule, they continue that rule. That's why they pushed it to 5%. We have not had 8% returns in a long time. Sondra Smith: That's one thing that Elaine Longer said. She could not make the 8% return. Paul Becker: I've been down there and been vocal about that. However, what David Clark told you, and I verified, I talked to David myself, he said that the LOPFI board has determined to lengthen the time period to 25 years and to use an 8% rate, which LOPFI uses. That's their decision. Pete Reagan: Yes, that's their decision but GRS does the actuary for LOPFI. It's not Carrerio. Paul Becker: Right. Before he did estimates but that's not the one that counts. The one that counts is the group that does LOPFI's. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 30, 2015 Page 6 of 9 Pete Reagan: Gabriel, Roeder, Smith, GRS. Paul Becker: That is the difference where he is saying there would be a different number. I just wanted to be clear. GASB just sets accounting principles. Pete Reagan: For some reason in the conversation, it was a telephone conference, I assumed it was GASB, they were conforming to new GASB regulations. Paul Becker: There are new regulations for disclosure but that's really different. I just wanted to clarify who it was that did the change. Pete Reagan: With that being said, there's a $1,320 charge. Mayor Jordan: That's the next order, that's the email from David Clark regarding consolidation. Email from David Clark regarding Consolidation Valuation 04/06/15 Pete Reagan: To do this actuary with Gabriel, Roeder, Smith the cost is per person or based on the number of retirees on the fund. It says $1,320, what they've determined it to be. Paul, I think you had one ran five years ago. Paul Becker: We never paid for that. Kit Williams: That was this fund that had it run. You all financed it. Pete Reagan: There was a time when you had one, whether it was Carrerio or GRS, I'm not sure. I thought y'all had one done on consolidation. Sondra Smith: No. Kit Williams: This board actually paid for that. Paul Becker: There was one done, I believe the pension board paid for it. The city has not paid for one since I've been here. Sondra Smith: The annual report is done on an annual basis, the pension fund is not charged for that. Paul Becker: That's not the same. If you want it done, that's the estimated cost. We have never paid for one since I've been here. Mayor Jordan: In his letter it talks about summarized information and that the local plan will need to send a check. Kit Williams: That's what happened the first time too. Pete Reagan: I sure don't recall us doing it the first time. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 30, 2015 Page 7 of 9 Sondra Smith: I don't think we've ever had LOPFI do it. We paid for Osborn and Carrerio to do a special one. Kit Williams: That's because he was working for them at that point in time. That's why we had to use him then. Sondra Smith: Right, because it wasn't to transfer to LOPFI. We paid for a special study to see how much it would cost the plan or see how much more the plan would need to survive. That was through Osborn and Carrerio. Kit Williams: He was the actuary at that point. Paul Becker: He did it. We did not commission him to do it. Sondra Smith: The board paid for a special study. We had a meeting with the Aldermen and anybody on the pension fund that wanted to come and he went over the special study. It was Jody Carrerio and David Clark that came. Mayor Jordan: Eldon, didn't we pay for something out of the policemen's retirement? Eldon Roberts: I don't think we've done a special study, just the one we do every two years. Sondra Smith: One of the funds, at one point in time passed a resolution to send the plan to LOPFI but then they decided not to do that and they did away with the resolution. That's been numerous years ago. We never did go through with the study. Pete Reagan: Would the city be willing to contribute the money towards the fund? Mayor Jordan: When I talked it over with Paul, it would be a non -funded budget so it would have to go to the City Council. I don't have the authority to do that. Pete Reagan moved for the board to spend $1,320 for a consolidation evaluation with Gabriel, Roeder, and Smith. Roy Cate seconded the motion. Upon roll call the motion passed 6-0. Sondra Smith: Do we need to do a resolution to do that or we are just paying for the study? Kit Williams: That's just money to be sent down to do the study. Last time we also talked about what kind of benefits would be able to be paid off by the fund so that if it was going down to LOPFI there wouldn't be an initial payment by the city. But that's not what you're asking for now. You're asking for a standard one. Mayor Jordan: How long will it take them to do the study? Sondra Smith: According to this letter, a couple of months. Mayor Jordan: We'll have an answer on the cost in two months? Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 30, 2015 Page 8 of 9 Pete Reagan: How quick can we get that check to David? Sondra Smith: It takes a little bit of time to get the check cut. I won't be here tomorrow. It will be Monday before we can work on it. We can request a check. We can get it done within the week. Do you want a letter to go with it? Pete Reagan: Sure, requesting consolidation evaluation. Sondra Smith: Okay. Informational: 2015 meeting schedule Sondra Smith: The next meeting will be July. I wanted to bring that we are in the process of elections. The ballots will go out tomorrow. There were several people nominated but only two people willing to serve. We still have to do the ballots according to state law. Pete, according to your rules and regulations that the board set up, we have to open those ballots in open session. Do you want a special meeting to open the ballots? Pete Reagan: There's just two people running? Sondra Smith: There's just two people running. Pete Reagan: I think we just need a witness. I don't think we need to call everybody in. Sondra Smith: Who do you want to be the witness? Pete Reagan: Have we set a date to open them? Sondra Smith: No, that's why I'm asking you today. Usually we open them during the special meeting. Pete Reagan: Ron is right here close. Sondra Smith: We set the deadline for everybody to have their ballots in on or before the 15th of May. We'll give it a week after that and we'll call Ron to come over. Pete Reagan: Who are the two that are willing to serve? Sondra Smith: The two that's currently serving. Nobody else was willing to serve. Mayor Jordan: The next meeting is scheduled for? Sondra Smith: July because we are not going to have a special meeting to open the ballots. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes April 30, 2015 Page 9 of 9 Pete Reagan: July 30th Sondra Smith: We'll have to put that out as a public meeting because I'm a voting member of the board, and Ron is too. We'll have to schedule a time a few days in advance so we can get the meeting on the public calendar because that is a public meeting. Adjournment: 3:31 p.m.