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HomeMy WebLinkAbout2009-02-11 - Agendas - Final Fayetteville Fireman's Pension and Relief Fund Meeting Date February 11, 2009 Adjourn Time A deer: G i 0 . / Pn AcxY a©� t/� �pvtdt� K�Y1Md ' —t February, March, and April, Subject: Roll Subject: 2009 Pension List Motion To: Motion To: Approve Motion By: Motion Seconded: Seconded: 11,10A, I 1AkqId Mayor Jordan ✓ Mayor Jordan I/ Marion Doss Marion Doss Pete Reagan Pete Reagan Gene Warlord Gene Warlord Ronnie Wood Ronnie Wood Sondra Smith Sondra Smith September 30,2008 Meeting Subject: Minutes Subject: Motion To: Approve Motion To: Motion By: -n Kl�a Motion By: R Seconded: CA k;y� 1�06d Seconded: Mayor Jordan ✓ Mayor Jordan Marion Doss ✓ Marion Doss Pete Reagan ✓ Pete Reagan Gene Warford ✓ Gene Warford Ronnie Wood ✓ Ronnie Wood Sondra Smith ✓ Sondra Smith Lioneld Jordan Chairman Sondra E. Smith Secretary eville Marion Doss Position 1/Retired Pete Reagan Position 2/Retired Gene Warford Position 3/Retired layve Ron Wood Position 4/Retired ARKANSAS Firemen's Pension and Relief Fund Meeting Agenda February 11, 2009 A meeting of the Fayetteville Firemen's Pension and Relief Fund will be held at 1:00 PM on February 11, 2009 in Room 219 of the City Administration Building. Welcome Mayor Lioneld Jordan Approval of the Minutes: • September 30, 2008 Meeting Minutes Approval of the Pension List: • February, March and April, 2009 Pension List New Business: 2008 Pension Report to the City Council • Signature authorization for transfers • 2009 Board Member Elections 2009 NCPERS Conference - Approximate cost $3,000 • 2009 Parking Permits Longer Investments: • Longer Investments November 3, 2008 letter regarding the market • Longer Investments December 18, 2008 letter regarding the market Longer Investments letter regarding the Bernard Madoff scandal • Longer Investments 2008 3rd Quarter Report 0 Longer Investments 2008 4t" Quarter Report Firemen's Pension and Relief Fund Board Members Board of Trustees Meeting Minutes September 30,2008 Mayor Coody Chairman Pae 1 of 15 Sondra E. Smith Secretary g Marion Doss Position 1/Retired Pete Reagan Position 2/Retired Tayve Gene Warford Position 3/Retired ARKANSAS Ron Wood Position 4/Retired Firemen's Pension and Relief Fund Meeting Minutes September 30, 2008 A meeting of the Fayetteville Firemen's Pension and Relief Fund was held at 2:30 PM on September 30, 2008 in Room 326 of the City Administration Building Mayor Coody called the meeting to order. Present: Mayor Coody, Ronnie Wood, Marion Doss, Pete Reagan, Gene Warford, Sondra Smith, Trish Leach, Accounting, City Attorney Kit Williams, Chief Johnson, Elaine Longer and Kim Cooper, Longer Investments. Approval of the Minutes: Approval of the July 31, 2008 Meeting Minutes Gene Warford moved to approve the July 31, 2008 Meeting Minutes. Ronnie Wood seconded the motion. Upon roll call the motion passed 5-0. Pete Reagan was absent during the vote. Approval of the Pension Lists: Approval of the November and December 2008 Pension Lists Mayor Coody: Any changes to the 2008 pension lists for November and December? Sondra Smith: No, there are no changes. January, 2009 Pension List Mayor Coody: Any changes on the January, 2009 pension list? Sondra Smith: Not at this point in time. Gene Warford moved to approve the November and December, 2008 and January 2009 pension lists. Ronnie Wood seconded the motion. Upon roll call the motion passed 5-0. Pete Reagan was absent during the vote. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30, 2008 Page 2 of 15 New Business: 2008 Turnback Funds Sondra Smith: In your packet is a list of the turnback money that we received from the state. It shows how much we received. At the last meeting we were short $609.60 but we have since received that check. Trish followed up on that and made sure they sent the money. Mayor Coody: Do we have any action to take on that? Sondra Smith: No action it's just informational. It is the turnback from 2002 to 2008. It keeps going down. Mayor Coody: Any questions on that from anybody? NCPERS Membership Renewal Sondra Smith: If you all would like to renew the NCPERS membership I need a motion and a second to go ahead and pay the membership. Ronnie Wood: How much is it? Sondra Smith: I think it is $150 this year. Gene Warford moved to approve paying the NCPERS Membership dues. Ronnie Wood seconded the motion. Upon roll,call the motion passed 5-0. Pete Reagan was absent during the vote. Actuarial Report December 31, 2008 Sondra Smith: In your packet is the report from the actuary that we received. We are going to have a meeting with the actuary, Elaine Longer, and the Police Pension to go over the report. The meeting is going_to be in November or December. I think Pete's working on trying to get Jody Carreiro up here and then we will have to plan around Elaine and the Mayor's schedule. On the actuary report the unfunded liability went up just a little bit. Next year may hit us a little bit harder because this year the markets have been so topsy-turvy. Kit Williams: What's funny is that it says the unfunded actuary liability actually went down $30,000 but the funded percent went from 51% to 47%. I'm not exactly sure how that works. The assets went down from $10.2 million to $8.7 million. Mayor Coody: That is a big drop, it is almost 20%. Kit Williams: Closer to 15% but still that's a pretty big drop. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30, 2008 Page 3 of 15 Sondra Smith: They also compiled that number on two different assumptions. Did you notice that Kit? Sondra Smith: Page nine they compiled it at a 6% discount and a 7% discount and they've never done that before in the past. Trish Leach: Looks like they changed the mortality numbers. Sondra Smith: Looks like it. If you go by the `B" calculation they are only 45% funded. If you go by the "A" calculation they are only 47% funded. Kit Williams: Both of them look like pretty scary numbers especially 'since we know what happened in the stock market this year. Sondra Smith: On the unfunded accrual liability both scenarios "A" and `B" went up. It will be good to get him up here. Kit Williams: I'm sure the actuary just uses the state law. Marion Doss: I look forward to having Carreiro explain a little bit more about this because I have never really understood it that well either. Sondra Smith: On page eight your total market value is one thing you need to compare. In 2003 your market value was $10,625,000 and the market value as of December 31, 2007 is $8,725,000. That is a two million dollar drop in the market value. Marion Doss: That market value can change on a daily basis the way things are going lately. Sondra Smith: It has gone down every year. We won't have the big hits from DROP any more. Ron Wood: If you look at the DROP that's huge. Kit Williams: That's where it really jumped down. Ron Wood: That's a big difference from 1999 to 2007. Sondra Smith: Trish was good enough to do a calculation for the DROP payments. Over three million dollars was paid out of the fund for DROP payments. Trish Leach: We paid the final DROP payment out in 2008. Sondra Smith: Right. Trish Leach: You will see another DROP payment in 2008 and then that should stop. Marion Doss: It's hard to figure if the DROP was good or bad because you're kind of guessing is those people would have retired as soon as they got twenty years and started drawing immediately or if they would have worked another five or ten years. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30,2008 Page 4 of 15 Sondra Smith: There's no way you can determine that. Marion Doss: You just don't know. Sondra Smith: If they would have gone ahead and worked the plan would have been better off because they wouldn't have drawn that big DROP payment but if they would have gone ahead and retired the plan would have stayed about the same. Pete have you thought of a date for the special meeting? Pete Reagan: I didn't know if everyone still wanted to have it. When you say special meeting we are talking about bringing in Jody and meeting with the Police Pension and Elaine? No, I have not. Sondra Smith: I think everyone still wants to do that don't you? Pete Reagan: When I was at LOPFI I asked him what his schedule was and he said the actuary's should be out and he should be available next month. He said he was doing some calculations for Mr. Becker. If he's doing work for the City and comes up on official business it won't cost us anything, if not it will cost us $600 to get him up here. Sondra Smith: If there is a cost to the fund I need to get that budgeted. Pete Reagan: The Police said they would be interested. I'm sure they will throw in on the cost too. Sondra Smith: Do we need to go ahead and approve that cost before he comes up? Pete Reagan: I think that would be proper. I think we should check with Mr. Becker and see when he is planning on being up here or even if he is. Sondra Smith: Do you think he was coming up to see Paul? He was just going to do a report and mail it. Trish Leach: From what Paul told me this is a report that Steve Davis requested in 2006 and they just got it finished and he was probably just going to mail it. That would be my guess. Sondra Smith: I don't think he was making a special trip up here to go over anything with Paul. It probably will cost the plans. Marion Doss: Carreiro is not actually with PRB is he? Pete Reagan: He is an actuary. Marion Doss: Shouldn't we have someone from PRB here at the same time as he explains the actuary to see what they think too. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30, 2008 Page 5 of 15 Pete Reagan: They review every one of these. I don't see any need for anybody from PRB to come because the only thing the Pension Review Board does is review the actuaries that are in dire straights and make sure that all of the reporting requirements are done. Marion Doss: I guess that's what I was getting at. Pete Reagan: I think we can get David at no cost. David is Executive Director. Marion Doss: I would like to have someone say what they think about the soundness of our plan. Ron Wood: You want to hear it from the horse's mouth. Marion Doss: Yes, I would like to hear where it is at. Kit sent a letter that I am sure you read. So I would like to hear from PRB as well as the actuary people to see what they say to see if we are in dire straights or not. \ Pete Reagan: I don't think we are in as dire straights as it appears but I think the actuary is the one that is going to tell us that. I don't see any reason why we can't ask David Clark to come too. Marion Doss: I think that would be a good idea if we could. I would just like to know where we actually stand and what our options might be. Ron Wood: I would like to do that too. I would like to see where it is in troublesome times. Let's get this thing out here on the table so we can all look at it on the same level. We've got some folks that would be interested enough to show up. All of our meetings are open meetings. We would like the pensioners to show up so they will know what is going on. Marion Doss: I have had people ask me if we were going to have to cut benefits. That is what I would like to hear about. ` Ron Wood: I think it would put our tensions a little more at ease if we could get all the information that we could get a hold of. Trish Leach: You guys know that there is a report that we do for PRB at the end of every year? Pete Reagan: Yes. Trish Leach: It's done in our office and I think that's where Jody gets a lot of his information. Pete Reagan: That's where he gets his numbers. That's the one that West Helena didn't turn in and they lost $245,000 in turnback money. Trish Leach: We work with Sondra on the affidavits that the members turn in and make sure we have up to date information on spouses and dates of birth because that is an important part too. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30,2008 Page 6 of 15 Pete Reagan: Thank you Trish. Trish Leach: That's part of the job. Sondra Smith: Isn't turnback also based on the boundary of the city? Marion Doss: I think it is. Pete Reagan: The pro ration part of it and that is part of Jody's presentation. Sondra Smith: We send to Little Rock every year the city boundaries and any annexations that we've had so that they can calculate turnback funds properly. Marion Doss: I had to do that a couple of times. I wondered why they never did it before and never did it after. Sondra Smith: We started doing it because they told me it affected your turnback money. Pete Reagan: It is not as much of the boundary as it was because it was 80% boundary and 20% population. Lake Village wound up with islands out in the Mississippi River and everywhere else. They had the largest coverage area of any fire department in the state of Arkansas. Longer Investments: Letter from Elaine dated September 22, 2008 A copy was given to the board. Sondra Smith: Elaine is letting us know about what is going on in the market. I thought it was a very informative letter. It is good of her to keep us updated. Monthly Report A copy of the Longer Investments monthly report was given to the board. Elaine Longer: We are not going to talk about yesterday. We will just focus on today. Today is better but it's interesting, we closed up about 480, but amazingly that only takes us back to 1 :30 yesterday afternoon. We have bounced back today. It's fairly light volume and it's a Jewish holiday so this is kind of like one of those bounce back rallies off of a climatic low. There was a lot of technical damage done in the market yesterday so we have to see what happens the rest of the week. I was telling Kim on the way up here I really wish we could have been 500 hundred down today instead of 500 up because I'm afraid that this is going to take the pressure off of Congress to get something done by the weekend. They might mistake this as being a relief that the Bill didn't get passed. I think if they don't do something by the weekend or at least give the guidelines of what can be passed by the weekend then we will probably see a lot of this 500 point rally go away. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30,2008 Page 7 of 15 Paul Becker: What was the volume like today compared to yesterday? Elaine Longer: Today it is light. I don't know the exact numbers. Yesterday was very high volume and the decline advance ratio yesterday was 19 to 1. Today on the advance we are about three to one. Paul Becker: We are a lot lighter on. Elaine Longer: A lot of what's going on, and you don't see this on the stock market reports, but the credit markets have frozen up because the fear of the banks. I was reading something over the weekend and they said every weekend in September we have come in and there's another massive buy out on Monday, whether it's Leman, AIG, Fannie Mae, Freddie Mac, Washington Mutual, or Wachovia. Henry Paulson I don't know when that guy sleeps, because over the weekend they were arranging this Wachovia situation and he's doing all of these 24 hour stints with Congress on the bail out plan. It has been a case of high nerves that really started in March when they tried to bail out Bear Sterns and then the market took a sigh of relief going into May. The last time I was here I think I told you whenever the market, or someone draws a line in the sand, like price controls and the Nixon administration and various other things, any time a government tries to support a currency at a certain level the market just pushes against that and breaks it. No government is big enough to try to hold back what the markets are going to do. We are too big and too internationalized now. I felt like the market was going to test that line in the sand, that the government had drawn, that they could back stop the financial system. So with . what we have seen in the last four or five weeks that test is in full force. We owned AIG last year and we sold financials in June and that was one of the ones that we sold. We sold between 63 and 68. I would have never thought when I sold it at that price that you would see the world's largest insurance company and a member of the DOW Jones Industrial Average go to zero. That is what we are looking at. We use to own Fannie Mae when I was a trust officer. I haven't owned it since but that was a blue chip growth company. They are now owned by the government. What we are going through is really historical. It is like throwing a deck of cards in the air. Everybody who is managing money, all of the sign posts and the guide lines that you use, and the ratios you run, and the equations that you rely on, they have just blown them because you don't know what is real because you have so much government intervention. The evaluations you run on price earnings multiple to apply to earnings are based on what the ten year treasury yield is. The ten year treasury yield is very low right now because that's the flight to safety but it's not indicative of what it would be in a normal situation giving our normal inflation rates. All of those variables get mixed up in an environment like this where you have so much going on. That's why you see so much volatility because no one has much conviction about what they are doing or where they are going in and we've had to do the same thing. Google dropped under 400 we sold it at 725. The core holdings were fairly light on our equity exposure and we've added to some treasury holdings to get that cash into two year treasury. We can convert that to cash the next day if we want to use it. We don't have to hold it for two years. The whole world is in a lot of turmoil right now. That's why you see everything happening on television and in the newspapers. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30, 2008 Page 8 of 15 I was encouraged because today Hank Paulson is out visiting with Warren Buffett and last week at the time that Congress was meeting and trying to come up with a plan I emailed a friend of ours who is a Congressman and said why can't we have the Buffett plan. He put five billion into Goldman Sachs the night before and he got a 10% perpetual preferred which means he gets 10% dividend perpetually and he got warrants to buy the common stock at 8% below were it closed the night before. I thought if Warren Buffett can get that why can't the US Government if they need a capital call, get something back for the tax payers that you can defend and say it's not just bailing out the bankers, which I think most Americans took it as. I didn't get very far with my email but it felt good to at least to talk about getting the Buffett plan for Americans. Today Hank Paulson is out there in Omaha talking to Warren Buffett so maybe there will be something good that comes out of this. ' I think that they have to demonstrate for seven hundred billion the tax payers have something in return. Gene Warford: The way it's looking right now they are not going to get anything signed. Elaine Longer: They have to come back with something that wins over the public because this vote needs to take place before they break to go campaigning. These guys are asking to be reelected in four or five weeks and apparently the phone calls were a hundred to one against passage. They think it will pass the Senate more easily, but the House, since everyone is up for reelection, that's more difficult. I think they are going to come back and hopefully they will have something that looks good to the taxpayer. Warren Buffett is such an esteemed investor and I thought if they could just package it as the Buffett plan or something that's an equity kicker for the taxpayers where they have some idea that they're not getting taking advantage of. It is high stakes if they come back and it is business as usual in Washington and then they want to break on Friday and go campaigning. I don't want to be at my desk on Monday. I think that we are not out of this yet that's for sure. Pete Reagan: If that doesn't happen do you think there will be a run on the banks? Elaine Longer: The Fed today is talking about some more tools in their tool kit that they can use to off set that possibility. One of the things that happened is the money market started breaking the buck, which means everyone has always assumed that if I put a hundred dollars in a money market I get a hundred dollars back, but technically they are not government insured and they are not guaranteed. Some big high profile money market funds have broken the buck. We have always keep client accounts in government money market funds. I've never felt that the yield difference was worth it to break away from treasuries to go to commercial paper. Especially now you have so much bad commercial paper out there that you're seeing these money markets threatened with breaking the buck. There's been a run on money market funds into T-bills. The T-bill rate the week before last, when we hit this freezing up in the credit market, went negative, which means if you put a million dollars in you weren't getting a million dollars back. You were paying the government to hold your money. This hasn't happened since the depression and then for a couple days it held at zero. At least you have zero return but the last time we saw that was the Pearl Harbor invasion in 1941. These are really unusual times. You're having sort of a silent run on the banks as you saw with ANB being taking over in Northwest Arkansas, if you had a hundred thousand or less you got your money on Monday no big deal. If you were a Northwest Arkansas corporation and you had a payroll account with a million dollars in it you did not get your million dollars back. You're subject to the status of claims against that bank and against the assets of that bank and you have to wait. As you see Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30, 2008 Page 9 of 15 more banks fail, what's happening is people are getting jittery and they're pulling that payroll account. They are going to treasury bills or they're going to banks that are too big to fail like Citibank, JP Morgan, or Bank of America. The government wants to stem this tide and what they are talking about doing now is back stopping or guaranteeing the money market funds. The president issued an order under some Act that goes back to the thirties to free up fifty billion that can be used to protect money market funds. Every time the government tries to do something in the free markets it screws something else up. Now you have money market funds, you can put a million dollars in there and President Bush is going to protect you but if you keep a million dollars in Regions Bank and something happens there the government is not going to protect you over a hundred thousand dollars. So now you've got even more of a problem. Today the FDIC is exploring what it would take to raise the guaranteed limits on banks. In Ireland they said for two years they would guarantee all bank deposits. I think we're too big to be able to do that but these are the kind of things that are being talked about. The other thing they are talking about changing is the mark to market on bank assets like mortgages. Right now they have to be marked to market and in a situation like this where the market value keeps falling on these securities, especially asset backed mortgage securities. It . creates sort of a vortex because as banks have to mark their assets down it further depreciates the value of those assets, it depreciates bank capital, it kind of gets into a fire sale type of thing. What they are talking about doing is changing the mark to market rules on these long term assets like mortgages, and getting.. more towards reconnection that it doesn't have to be marked to market today, if it's current and it's intended to be held for long term. They don't see what's going on behind the scenes with the T-bill rate, with the commercial paper market frozen up, with the bank deposits being pulled to be put into T-bills, and all this stuff that Hank Paulson and Bernanke see. . If you saw their testimony to Congress they were pleading for them to pass this Bill. They see the stuff going on behind the scenes and it's important for all Americans because when credit markets freeze up then companies can't make payroll. The largest Chevrolet Company dealership in the country goes back to 1919 and is shutting down because they can't get financing to keep cars on the lot. The way it was put is they can't get financing to put the cars on the lot and if they can find someone to put in a car they can't get a car loan for that person to buy the car. The more that this freezing up of credit goes on the more it spreads and it will affect the mom and pop and small business owners and people's ability to get student loans. They are not crying wolf, they see the stuff going on behind the scenes and it is really serious that it gets done. Gene Warford: I think a lot of it was they were handing out money left and right to people that shouldn't have been getting the money. Elaine Longer: That's true. Gene Warford: The public out there, people that pay their bills, don't like it that they're going to get stuck with more taxes and a tax burden. Elaine Longer: And others are going to have their mortgages reduced. There is a lot of that. I read this in the in the Wall Street Journal. They say to talk about that it's like the fire truck pulling up to the house and the house is burning down and you don't want to lecture anybody Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30, 2008 Page 10 of 15 about the fact that they shouldn't be smoking cigarettes in bed you need to put the fire out first and then you teach them how to not have this happen again. My daughter said everyone is so worried and what do you think about this bail out plan? I said it's like a guy showing up in an emergency room and he's having a stroke and he smokes three packets of cigarettes a day. They are going to be getting him out the stroke condition and they are going to try to save his life but once he is stable he is going to be put on a wellness program and told he can't smoke three packets of cigarettes a day. At this point they are just trying to stabilize the patient and then you will see regulation like you have never seen before. I think that's sort of the down side on this whole thing because the free flow of capital in the system is like the life blood of capitalism. That's what feeds the economy and that's what has keep us in these long growth periods without serious recessions, and I think if you clamp down too hard with regulation it would be like applying a tourniquet. They are going to come with more regulation because the government can't keep doing this stuff but I'm hopeful that it won't be too much. If you take a look at stocks relative to bonds on every evaluation that you run, stocks are a buy. I was running the numbers the other day and if you look at the Fed model to value the market and you apply this years earnings, which are probably going to be $80 per S&P 500 unit, even if you say worst case scenario that we have a terrible recession next year, those go down by another 25%. So then you're at $60 for next years earnings and if you discount that by the current ten year yield you're still about 35% cheaper than where we should be even with all of those bad assumptions. I can't list all the stocks on my screen that are selling with higher than a 3% dividend yield and the two year treasury is less than 2% and the ten year treasury is about 3.5% taxable. Stocks are definitely the value place to be but until we get some clarification about what's going on you're going to see more of this trading activity. As bad as the US markets have done this year the foreign markets have done worse. We will see what happens after this next week. Today's rally is kind of encouraging in that there are people out there who still want to own stocks. To come up 500 points is pretty good after a day like yesterday. We went ahead and updated you through last Friday instead of cutting it off for the month before since so much has happened in this month. Domestic stocks are about 32%, international stocks are about 6% so you are about 38% equities and we can go up to 55%. Where we have put a lot of the purchasing power is in the treasuries. You own $550,000 of the 2% and then $75,000 of this 4.25 that we were able to buy at par back in June, so you have about 10% 'sitting in treasuries. All of your agencies can be converted to cash whenever we need. The money market fund, since it is mostly treasury bills, the yield has dropped to about 0.8% so we would rather move it over to treasuries while we are parked then to keep too much in the money market fund. Page four is a summary of your realized gains year to date about $90,000. That's just the gains we have taken, that's not the performance on the account. The net income is $151,000. Page five is the bond portfolio. We still have an average yield to maturity of 4.4% on your fixed income securities. That compares to current yields on the five year which are just below 3% and the two year is just below 2%. Your weighted average maturity is just under five years. We still have a lot of liquidity in that 49% of what you own matures within three years. Any of that is convertible to cash if we get interest rates that go higher. Page six shows your largest holdings. We have good blue chip companies but even they go down in a market like this. In fact yesterday the S&P was down as much as the other indices Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30, 2008 Page 11 of 15 because it's the most liquid. The good side about the blue chips is that they are very secure and their dollar decline beneficiaries are able to capitalize on the international growth. The bad side is they can be sold like that and if someone gets out of an S&P 500 fund that's what gets sold. It pretty much the market is going to determine the short term. Page eight shows your contributions and distributions that goes back from 2002. The contributions have been about $864,000 and distributions have been about $6.7 million. Page nine shows the return history. What I'd like to show you is through last year you are compounding at 10.4% on stocks, 8.8% on international, and 4.1% on fixed income. The REITS that we owned at one point, we don't own now, did a 21% annualized return. Your compounded annual was 7.1% which is above the 6% assumption. I did see that in the actuary report in the 2007 evaluation they bumped the actuary assumption of return to 7% from 6%. That's a higher number to achieve when your fixed income side is only earning 4% in this kind of environment, our expectations on the equities that we are running on our systems is 8%. In a 50150 weighting what you are looking at is fifty percent of eight percent which is four percent and fifty percent of four percent which is two percent. So your weighted average return on our expectations would be 6%. The difference is huge on the compounding because if they give you a 7% expected return that deceases your unfunded liability and as low as the funded portion is as a percent of the total liability it would have been much worse if they were still running the numbers at 6%. Seven percent gives you a much higher present value when you are discounting back. Year to date through Friday stocks are down 17.2%, International was down 22%, and the S&P was down 17.4% during that time frame. The total account was down 8.4% through Friday. In a market like this we haven't been through this together. We have done this with the Policemen before because we have been through a lot of bad market cycles since 1989 when we started managing that account. The only thing you can do is you have to maintain some core holdings because you can't ever just run to cash or pay 0.3%. So you skinny up to your core holdings and then we have ample purchasing power for that trade where we come back in first through the spiders, the S&P 500 proxy, and then we use that to build positions. We've tried that a couple times this year, we just have to keep getting back out and build cash away for the next one. With yesterdays market activity we took out another key level support so on today's bounce back up we're back to some cash reserves that we had sitting in the S&P 500. I hate to do it this way put the performance shows that it works. Then you have cash reserves to come in and hopefully have a higher allocation when the market is going up than when it is going down. That is the strategy we play. We are pretty light at this point but you can't leave them completely because in this kind of environment it could turn on a dime. Page 10 shows the beginning value of the portfolio, the deposits and withdrawals and the ending value. The total investment return has been $2.7 million. That goes through Friday of last week. Are there any questions on all of that? Pete Reagan: No, are you going to talk about our actuary? I know you have been very busy with the market. Elaine Longer: I have looked at it. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30, 2008 Page 12 of 15 Sondra Smith: Elaine received it yesterday so she probably hasn't had a chance to review it. Pete Reagan: What we would like to do is set up a meeting with your firm, Jody Carreiro with Osburn, Carreiro & Associates, the Chairman of the Pension Review Board and the Police Pension Review Board. Elaine Longer: We have tried to set that up haven't we? Sondra Smith: Yes, we have tried several times. Pete Reagan: We all have busy schedules I understand that, but sometime in the next couple or three months. Elaine Longer: Yes, we are open to it. Sondra Smith: I have been working with Kim. Pete Reagan: I knew you told me that you had. Sondra Smith: We are just waiting on you to tell us when they can come from Little Rock. Pete Reagan: I will get with him and see when he can come. Sondra Smith: It would be better to wait until after election if we could. Pete Reagan: I completely agree. Elaine Longer: The only thing I would mention is when we started managing it, I think at that time they were 40% under funded. Sondra Smith: It's on the report. Elaine Longer: That was at the end of 2003. The thing about that is, and this was something that I said in that original meeting, you can't reasonably expect investment returns to get you out of there. Even at that time we were talking about 8% as the average expected return and we had fixed income returns pegged at about 4.5%. When you look at a weighted average return on a balanced portfolio that's about at the 6% if everything comes out great the 10.8% that you've had compound annual and the 7.1% even exceeded our expectations because the equity side out performed what we thought it would do. The whole thing that comes down on this is other revenue sources. I know the last time that we were here you talked about some turn back money that may come into the pension. That's the only hope because at this point the capital is not there to support the benefits. The investment return can't possibly hope to get you there, because if you are 47% funded, you would have to grow at 100% to get to funded and then grow 6% or 7% on that to stay funded. To say that we are meeting your actuary assumed rate of return, that's great, but as long as you are starting behind the eight ball it still doesn't get you there. In looking at this the thing that concerns me is you have to have 100% to get to funded and then from there maintain that actuary assumption. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30, 2008 Page 13 of 15 Pete Reagan: What I would like to see Jody do is try to give us a readers digest version of how an actuary is performed on the account and what mortality rate he uses for the firefighters and the mortality rate for the widow. All the factors that go into coming up with that figure. Elaine Longer: Yes. If he was still using 6% this 47% number would probably be closer to 38% to 40%. They say we need this amount in the future and then if they assume that you are going to earn 7% that takes less capital in 2008 to get you there. If they assume you're only going to earn 6% a year it takes more capital in present value dollars to get there. The fact that they tweaked it to 7% is actually giving you a much better report than if it was still at 6%. Pete Reagan: I'm sure there is a reason for that. Elaine Longer: I would like to know the reason because the University Foundation has gone down to something like 5%. Most big pension funds are going the other way because of the reduced return in the fixed income market. I wonder how they got it to go up a full percent. Pete Reagan: That is why we want you need to meet with them. Elaine Longer: I always have questions. Pete Reagan: That's the reason we want this meeting is to find these things out. Elaine Longer: Is there a chance that you can get the turnback funds into the pension? Pete Reagan: I asked to be invited to that meeting with the Governor and I didn't get an invitation in the mail. They mailed it to the Governor and he told them no. We were not State employees he didn't care about us. The goal of this year's legislature is to do away with the rest of the grocery tax. The economic stimulus is the next thing. Elaine Longer: If you rolled into the State fund then are your benefits guaranteed? I'm concerned when I see this if that other revenue doesn't come in there's no other way to get to the capital amount that needs to be there to guarantee your benefits at their current level. Pete Reagan: There is that option but it's my understanding the City would have to guarantee the difference of the unfunded liability. Elaine Longer: Would they have to annuitize it and pay into the fund? Pete Reagan: Basically they would pay it in at a higher percentage of payroll for the LOPFI employees annually, which in turn would put them higher on the insurance turnback list which in turn would get them more money from the insurance tumback but the two won't equal out for sure. I know North Little Rock I think is paying 28% or 30% of payroll for their old fund to LOPFI. Those are the kind of things we need to know before we make any decisions at all. Elaine Longer: Yes, that would be helpful to know what that would be because your options are A, B, or C, get more capital into this fund, cut benefits, or roll into the State fund. You probably don't have another option outside of those three. It would be interesting to know what all the parameters are to rolling into the State fund to keep the benefits. _ Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30, 2008 Page 14 of 15 Pete Reagan: We could stand on the street corner with a petition sign to go to one full mill. Ron Wood: Do you think this would be a good time to try that? Pete Reagan: I don't think so. Sondra Smith: In your packet is a listing of the insurance turnback from 2002 forward. It keeps declining. If you are a divorcee you do not get the turnback. There are two on the plan that do not receive a check. Pete Reagan: As you can see 2003 and 2005 were our biggest years. Elaine Longer: What makes up for the difference in that? Pete Reagan: This is what Jody went over when he met with the Governor, the fire insurance premium tax. It is suppose to assist in the funding for the old fire department pension funds. We don't have a date but it was in the early twenties when that tax was put on and then in the eighties a foreign tax was put on for companies that didn't headquarter out of Arkansas. Then LOPFI came along and the new members were on LOPFI and gradually we became the minority. It started in 1983 and you can see us declining each year in the number of dollars that we get because this same amount per person goes to LOPFI which is the statewide fund for police and fire. Elaine Longer: As people have retired then you have less coming into this fund. Marion Doss: The LOPFI employees have grown. There's no one left that is working under the old plan. They have all retired. Elaine Longer: How can we determine what the numbers are related to if you were to fold into LOPFI? Pete Reagan: David Clark the Executive Director of the Pension Review Board, and he is also the Executive Director of LOPFI. Elaine Longer: Would we call him? Pete Reagan: Yes. Elaine Longer: I think that is something that you are going to have to weigh because I don't see another option. It's A, B, or C and if you can't get more capital into the plan either by the one mill or the turnback funds then I think you are going to get increasing pressure from the City Attorney and the Mayor to make a decision on benefits. It sounds like to protect the benefit level, if you can't bring more capital into this fund, then you are possibly looking at folding into the State plan but what is the cost and does it guarantee your benefits. Pete Reagan: The other thing is the legislature has the power to change the formulas, as you can see between 2002 and 2008 the difference in numbers. In trying to make it fair they have Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes September 30,2008 Page 15 of 15 inadvertently made a much larger portion of it be paid by the ten major cities in Arkansas which Fayetteville is one of. It cost us more money than it cost the City of Lowell for example. That was not the determination of the legislature. The determination was to try to make it as fair as possible and in doing so they charged the ten major cities with costing them the most. It's my understanding that the Mayor of Harrison is going to meet with the Mayor tomorrow. He is the one that is leading the fight on it. He is going to lead the charge whether the Governor is on board or not to go after more of that insurance turnback money. Elaine Longer: Good. Pete Reagan: There are all kinds of things working. Elaine Longer: You wouldn't have to get it all at once but even if you have that as a higher revenue stream into the fund that changes your actuary numbers. Pete Reagan: Sure. Elaine Longer: Jody would be able to say how much that needs to go up by to get you to something that shows a higher funded percentage. Pete Reagan: Are you looking at the middle of November, late November, or early December? Sondra Smith: Whenever you get a date. You probably need to pick two or three dates that Jody can come up and then you get me those dates and I will try to work magic on this end. Elaine Longer: The first week of December is great on our schedule. Pete Reagan: Thank you very much we appreciate you making yourself available for our meeting. Elaine Longer: I look forward to it. Thank you. Sondra Smith: Do you want to go ahead and move to approve the expenditures? I can't obligate the Police Pension but I can put it on their agenda to see about splitting the cost. They meet next month. Pete Reagan moved to approve the expenditure to pay the full amount of the cost to have the Actuary travel to Fayetteville to a meeting and to ask the Police Pension to split the amount. Ronnie Wood seconded the motion. Upon roll call the motion passed 5-0. Meeting Adjourned at 3:55 PM FIREMEN'S RELIEF AND PENSION February 2 THE FOLLOWING ARE THE OBLIGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE MONTH LISTE YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE PAYEES, IN THE AMOUNTS SHOWN , AND FOR THE PURPOSE SO STATED. DATE OF Regular Mo Year To Date EMP# RETIREMENT NAME Benefit Reg Benefit Q 79 11/99 ARMSTRONG (DILL), PAMELA 1,812.74 3,625.48 R 177 4/04 BACHMAN, EDDIE 2,618.55 5,237.10 S 74 3/86 BAIRD, JULIA 1,802.08 3,604.16 V 63 5/72 BOLAIN, ANN 109.27 218.54 R 68 7/99 BONADUCE, MICHAEL 2,988.76 5,977.52 S 44 9/86 BOUDREY, BETTY MRS. 2,477.42 4,954.84 R 45 9/86 BOUDREY, HOWARD 2,089.28 4,178.56 R 49 7/88 BOUDREY, JACK 1,647.63 3,295.26 V 5 5/72 CASELMAN, ARTHUR 131.13 262.26 R 57 5/90 CATE, ROY 1,788.90 3,577.80 V 6 4/68 CHRISTIE, ARNOLD 109.27 218.54 V 8 10/76 COUNTS, WAYNE 109.27 218.54 R 77 11/99 DILL,GARY JOHN 1,812.75 3,625.50 R 188 12/05 DOSS, MARION H 5,376.91 10,753.82 R 188 12/05 DOSS, MARION H plus 25 additional pay 731.61 1,463.22 R 11 2/76 FARRAR,ALONZO 998.86 1,997.72 R 192 4/06 FARRAR, DANNY 4,155.36 8,310.72 R 38 5/84 FRALEY, JOSEPH G. 1,768.12 3,536.24 R 170 5/03 FREEDLE, LARRY 3,816.75 7,633.50 R 170 5/03 FREEDLE, LARRY plus 25 additional pay 141.37 282.74 R 92 03/02 GAGE,TOMMY 2,596.69 5,193.38 V 34 6/79 HARRIS, JAMES E. 109.27 218.54 V 70 11/99 HARRIS, MARY RUTH 109.27 218.54 Q 182 10/04 JENKINS, EILEEN 1,788.75 3,577.50 R 93 06/02 JENKINS, JOHN 1,788.76 3,577.52 R 86 07/01 JOHNSON,ROBERT 3,073.47 6,146.94 R 64 4/95 JORDAN, CHARLIE 2,274.95 4,549.90 S 76 5/88 JUDY, JAN 1,647.63 3,295.26 R 37 3/84 KING, ARNOLD D. 1,522.37 3,044.74 R 54 5/89 KING, ARVIL 1,711.21 3,422.42 R 13 10/67 LAYER, MERLIN 456.22 912.44 R 173 12/03 LEDBETTER, DENNIS 3,775.80 7,551.60 V 181 10/04 LEE, VIOLA LOUISE 109.27 218.54 R 51 10/88 LEWIS, CHARLES 1,647.63 3,295.26 R 40 9/85 LOGUE, PAUL D. 2,868.28 5,736.56 R 202 02/08 MAHAN, MARSHALL 4,077.28 8,154.56 R 50 9/88 MASON, LARRY 1,631.25 3,262.50 R 39 4/85 MC ARTHUR, RONALD A. 1,753.74 3,507.48 V 35 2/82 MC CHRISTIAN, DWAYNE 109.27 218.54 R 15 4/77 MC WHORTER, CHARLES 1,334.51 2,669.02 R 29 8/81 MILLER, DONALD 1,304.07 2,608.14 R 73 2/00 MILLER,KENNETH 3,180.02 6,360.04 R 73 2/00 MILLER,KENNETH plus 25 additional pay 170.60 341.20 V 42 2/86 MOORE, JAMES H. 109.27 218.54 V 176 4/04 MORRIS, DIXIE E. 125.66 251.32 R 48 7/88 MULLENS, DENNIS W. 2,191.30 4,382.60 R 184 3/05 NAPIER, LONNIE 3,518.28 7,036.56 R 196 01/02 ONEAL, TEDDY 4,120.99 8,241.98 R 46 5/88 OSBURN, TROY 1,899.66 3,799.32 81 02/01 PHILLIPS,LARRY 2,765.09 5,530.18 203 02/08 PIERCE, JOEY 3,647.18 7,294.36 ' R 53 2/89 POAGE, LARRY 2,346.70 4,693.40 1/7/2009 K:\Fire Pension\Pension List\Pension List 2009\020109 FP.xls WM DATE OF Regular Mo Year To Date EMP# RETIREMENT NAME Benefit Reg Benefit R 186 06/05 REAGAN, PETE 3,535.71 7,071.42 V 201 ^02/08 REED, JUNE 109.27 218.54 S 172 12/03 SCHADER, MADGE 1,386.01 2,772.02 R 41 9/85 SCHADER, TROY 1,524.99 3,049.98 R 190 04/06 SHACKELFORD, GLEN 3,647.18 7,294.36 R 36 5/76 SPRINGSTON, CARL 806.19 1,612.38 S 90 03/02 STOUT, IMOGENE W. 767.80 1,535.60 R 165 12/02 TATE, RALPH 3,668.10 7,336.20 V 65 3/66 TUNE, BILLIE SUE 136.59 273.18 R 71 1/00 WARFORD,THOMAS 2,502.72 5,005.44 R 28 7/68 WATTS, DONALD 437.09 874.18 R 88 01/02 WOOD,RONNIE D 3,077.15 6,154.30 R 52 9/88 WRIGHT, RANDALL 1,691.34 3,382.68 119,540.61 239,081.22 WE, THE UNDERSIGNED, DO SOLEMNLY SWEAR THAT THE ABOVE OBLIGATIONS ARE JUST AND CORRECT; THAT NO PART THEREOF HAS BEEN PREVIOUSLY PAID; THAT THE PENSION PAYMENTS SO CHARGED ARE IN ACCORDANCE WITH THE ACTIONS OF THE BOARD OF TRUSTEES OF THE FIREMEN'S RELIEF AND PENSION FUND; THAT THE SERVICES OR SUPPLIES FURNISHED, AS THE CASE MAY BE, WERE ACTUALLY RENDERED OR FURNISHED; AND THAT THE CHARGES MADE THEREFORE DO NOT EXCEED THE AMOUNT ALLOWED BY LAW OR THE CUSTOMARY CHARGE FOR SIMILAR SERVICES OR SUPPLIES SECRETARY CHAIRMAN AND PRESIDENT ACKNOWLEDGEMENT STATE OF ARKANSAS ) COUNTY OF WASHINGTON) SWORN TO AND SUBSCRIBED BEFORE ME THIS DAY OF , 2006. NOTARY PUBLIC MY COMMISSION EXPIRES : YTD 6810-9810-5335-00 0.00 239081.22 6810-9810-5335-06 0.00 Drop Payout/intrest Checks to Drop Retirees 0.00 YTD Column 0.00 Difference 0.00 1/7/2009 K:\Fire Pension\Pension List\Pension List 2009\020109 FP.xls WM FIREMEN'S RELIEF AND PENSION March 3 THE FOLLOWING ARE THE OBLIGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE MONTH LISTED ABOVE YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE PAYEES, IN THE AMOUNTS SHOWN , AND FOR THE PURPOSE SO STATED. DATE OF Regular Mo Year To Date EMP# RETIREMENT NAME Benefit Reg Benefit Q 79 11/99 ARMSTRONG (DILL), PAMELA 1,812.74 5,438.22 R 177 4/04 BACHMAN, EDDIE 2,618.55 7,855.65 S 74 3/86 BAIRD, JULIA 1,802.08 5,406.24 V 63 5/72 BOLAIN, ANN 109.27 327.81 R 68 7/99 BONADUCE, MICHAEL 2,988.76 8,966.28 S 44 9/86 BOUDREY, BETTY MRS. 2,477.42 7,432.26 R 45 9/86 BOUDREY, HOWARD 2,089.28 6,267.84 R 49 7/88 BOUDREY, JACK 1,647.63 4,942.89 V 5 5/72 CASELMAN, ARTHUR 131.13 393.39 R 57 5/90 CATE, ROY 1,788.90 5,366.70 V 6 4/68 CHRISTIE, ARNOLD 109.27 327.81 V 8 10/76 COUNTS, WAYNE 109.27 327.81 R 77 11/99 DILL,GARY JOHN 1,812.75 5,438.25 R 188 12/05 DOSS, MARION H 5,376.91 16,130.73 R 188 12/05 DOSS, MARION H plus 25 additional pay 731.61 2,194.83 R 11 2/76 FARRAR,ALONZO 998.86 2,996.58 R 192 4/06 FARRAR, DANNY 4,155.36 12,466.08 R 38 5/84 FRALEY, JOSEPH G. 1,768.12 5,304.36 R 170 5/03 FREEDLE, LARRY 3,816.75 11,450.25 R 170 5/03 FREEDLE, LARRY plus 25 additional pay 141.37 424.11 R 92 03/02 GAGE,TOMMY 2,596.69 7,790.07 V 34 6/79 HARRIS, JAMES E. 109.27 327.81 V 70 11/99 HARRIS, MARY RUTH 109.27 327.81 Q 182 10/04 JENKINS, EILEEN 1,788.75 5,366.25 R 93 06/02 JENKINS, JOHN 1,788.76 5,366.28 R 86 07/01 JOHNSON,ROBERT 3,073.47 9,220.41 R 64 4/95 JORDAN, CHARLIE 2,274.95 6,824.85 S 76 5/88 JUDY, JAN 1,647.63 4,942.89 R 37 3/84 KING, ARNOLD D. 1,522.37 4,567.11 R 54 5/89 KING, ARVIL 1,711.21 5,133.63 R 13 10/67 LAYER, MERLIN 456.22 1,368.66 R 173 12/03 LEDBETTER, DENNIS 3,775.80 11,327.40 V 181 10/04 LEE, VIOLA LOUISE 109.27 327.81 R 51 10/88 LEWIS, CHARLES 1,647.63 4,942.89 R 40 9/85 LOGUE, PAUL D. 2,868.28 8,604.84 R 202 02/08 MAHAN, MARSHALL 4,077.28 12,231.84 R 50 9/88 MASON, LARRY 1,631.25 4,893.75 R 39 4/85 MC ARTHUR, RONALD A. 1,753.74 5,261.22 V 35 2/82 MC CHRISTIAN, DWAYNE 109.27 327.81 R 15 4/77 MC WHORTER, CHARLES 1,334.51 4,003.53 R 29 8/81 MILLER, DONALD 1,304.07 3,912.21 R 73 2/00 MILLER,KENNETH 3,180.02 9,540.06 R 73 2/00 MILLER,KENNETH plus 25 additional pay 170.60 511.80 V 42 2/86 MOORE, JAMES H. 109.27 327.81 V 176 4/04 MORRIS, DIXIE E. 125.66 376.98 R 48 7/88 MULLENS, DENNIS W. 2,191.30 6,573.90 R 184 3/05 NAPIER, LONNIE 3,518.28 10,554.84 R 196 01/02 ONEAL, TEDDY 4,120.99 12,362.97 R 46 5/88 OSBURN, TROY 1,899.66 5,698.98 R 81 02/01 PHILLIPS,LARRY 2,765.09 8,295.27 R 203 02/08 PIERCE, JOEY 3,647.18 10,941.54 R 53 2/89 POAGE, LARRY 2,346.70 7,040.10 R 186 06/05 REAGAN, PETE 3,535.71 10,607.13 V 201 ^02/08 REED, JUNE 109.27 327.81 S 172 12/03 SCHADER, MADGE 1,386.01 4,158.03 R 41 9/85 SCHADER, TROY 1,524.99 4,574.97 R 190 04106 SHACKELFORD, GLEN 3,647.18 10,941.54 DATE OF Regular Mo Year To Date EMP# RETIREMENT NAME Benefit Reg Benefit R 36 5/76 SPRINGSTON, CARL 806.19 2,418.57 S 90 03/02 STOUT, IMOGENE W. 767.80 2,303.40 R 165 12/02 TATE, RALPH 3,668.10 11,004.30 V 65 3/66 TUNE, BILLIE SUE 136.59 409.77 R 71 1/00 WARFORD,THOMAS 2,502.72 7,508.16 R 28 7/68 WATTS, DONALD 437.09 1,311.27 R 88 01/02 WOOD,RONNIE D 3,077.15 9,231.45 R 52 9/88 WRIGHT, RANDALL 1,691.34 5,074.02 119,540.61 358,621.83 WE, THE UNDERSIGNED, DO SOLEMNLY SWEAR THAT THE ABOVE OBLIGATIONS ARE JUST AND CORRECT; THAT NO PART THEREOF HAS BEEN PREVIOUSLY PAID; THAT THE PENSION PAYMENTS SO CHARGED ARE IN ACCORDANCE WITH THE ACTIONS OF THE BOARD OF TRUSTEES OF THE FIREMEN'S RELIEF AND PENSION FUND; THAT THE SERVICES OR SUPPLIES FURNISHED, AS THE CASE MAY BE, WERE ACTUALLY RENDERED OR FURNISHED; AND THAT THE CHARGES MADE THEREFORE DO NOT EXCEED THE AMOUNT ALLOWED BY LAW OR THE CUSTOMARY CHARGE FOR SIMILAR SERVICES OR SUPPLIES SECRETARY CHAIRMAN AND PRESIDENT ACKNOWLEDGEMENT STATE OF ARKANSAS ) COUNTY OF WASHINGTON) SWORN TO AND SUBSCRIBED BEFORE ME THIS DAY OF , 2006. NOTARY PUBLIC MY COMMISSION EXPIRES : YTD 6810-9810-5335-00 0.00 358621.83 6810-9810-5335-06 0.00 Drop Payout/Intrest Checks to Drop Retirees 0.00 YTD Column 0.00 Difference 0.00 FIREMEN'S RELIEF AND PENSION April 4 THE FOLLOWING ARE THE OBLIGATIONS OF THE FIREMEN'S RELIEF FUND FOR THE MONTH YOU ARE HEREBY INSTRUCTED TO ISSUE CHECKS TO THE PAYEES, IN THE AMOUNTS SHO\/ AND FOR THE PURPOSE SO STATED. Emp# Date of Name Regular Mo Year To Date Retirement Benefit Reg Benefit Q 79 11/99 ARMSTRONG (DILL), PAMELA 1,812.74 7,250.96 R 177 4/04 BACHMAN, EDDIE 2,618.55 10,474.20 S 74 3/86 BAIRD, JULIA 1,802.08 7,208.32 V 63 5/72 BOLAIN, ANN 109.27 437.08 R 68 7/99 BONADUCE, MICHAEL 2,988.76 11,955.04 S 44 9/86 BOUDREY, BETTY MRS. 2,477.42 9,909.68 R 45 9/86 BOUDREY, HOWARD 2,089.28 8,357.12 R 49 7/88 BOUDREY, JACK 1,647.63 6,590.52 V 5 5/72 CASELMAN, ARTHUR 131.13 524.52 R 57 5/90 CATE, ROY 1,788.90 7,155.60 V 6 4/68 CHRISTIE, ARNOLD 109.27 437.08 V 8 10/76 COUNTS, WAYNE 109.27 437.08 R 77 11/99 DILL,GARY JOHN 1,812.75 7,251.00 R 188 12/05 DOSS, MARION H 5,376.91 21,507.64 R 188 12/05 DOSS, MARION H plus 25 additional pay 731.61 2,926.44 R 11 2/76 FARRAR,ALONZO 998.86 3,995,44 R 192 4/06 FARRAR, DANNY 4,155.36 16,621.44 R 38 5/84 FRALEY, JOSEPH G. 1,768.12 7,072.48 R 170 5/03 FREEDLE, LARRY 3,816,75 15,267.00 R 170 5/03 FREEDLE, LARRY plus 25 additional pay 141,37 565.48 R 92 03/02 GAGE,TOMMY 2,596.69 10,386.76 V 34 6/79 HARRIS, JAMES E. 109.27 437.08 V 70 11/99 HARRIS, MARY RUTH 109.27 437.08 Q 182 10/04 JENKINS, EILEEN 1,788.75 7,155.00 R 93 06/02 JENKINS, JOHN 1,788.76 7,155.04 R 86 07/01 JOHNSON,ROBERT 3,073.47 12,293.88 R 64 4/95 JORDAN, CHARLIE 2,274.95 9,099.80 S 76 5/88 JUDY, JAN 1,647.63 6,590.52 R 37 3/84 KING, ARNOLD D. 1,522.37 6,089.48 R 54 5/89 KING, ARVIL 1,711.21 6,844.84 R 13 10/67 LAYER, MERLIN 456.22 1,824.88 R 173 12/03 LEDBETTER, DENNIS 3,775.80 15,103.20 V 181 10/04 LEE, VIOLA LOUISE 109.27 437.08 R 51 10/88 LEWIS, CHARLES 1,647.63 6,590.52 R 40 9/85 LOGUE, PAUL D. 2,868.28 11,473.12 R 202 02/08 MAHAN, MARSHALL 4,077.28 16,309.12 R 50 9/88 MASON, LARRY 1,631.25 6,525.00 R 39 4/85 MC ARTHUR, RONALD A. 1,753.74 7,014.96 V 35 2/82 MC CHRISTIAN, DWAYNE 109.27 437.08 R 15 4m MC WHORTER, CHARLES 1,334.51 5,338.04 R 29 8/81 MILLER, DONALD 1,304.07 5,216.28 R 73 2/00 MILLER,KENNETH 3,180.02 12,720.08 R 73 2/00 MILLER,KENNETH plus 25 additional pay 170.60 682.40 V 42 2/86 MOORE, JAMES H. 109,27 437.08 V 176 4/04 MORRIS, DIXIE E. 125.66 502.64 R 48 7/88 MULLENS, DENNIS W. 2,191.30 8,765.20 R 184 3/05 NAPIER, LONNIE 3,518.28 14,073.12 R 196 01/02 ONEAL, TEDDY 4,120.99 16,483.96 R 46 5/88 OSBURN, TROY 1,899.66 . 7,598.64 R 81 02/01 PHILLIPS,LARRY 2,765.09 11,060.36 R 203 02/08 PIERCE, JOEY 3,647.18 14,588.72 1/8/2009 CADQCUME-1\ssmith\LOCALS-1\Temp\XPGrpWise\ApdI 2009.xis WM Emp# Date of Name Regular Mo Year To Date Retirement Benefit Reg Benefit R 53 2/89 POAGE, LARRY 2,346.70 9,386.80 R 186 06/05 REAGAN, PETE 3,535.71 14,142.84 V 201 ^02/08 REED, JUNE 109.27 437.08 S 172 12/03 SCHADER, MADGE 1,386.01 5,544.04 R 41 9/85 SCHADER, TROY 1,524.99 6,099.96 R 190 04/06 SHACKELFORD, GLEN 3,647.18 14,588.72 R 36 5/76 SPRINGSTON, CARL 806.19 3,224.76 S 90 03/02 STOUT, IMOGENE W. 767,80 3,071.20 R 165 12/02 TATE, RALPH 3,668.10 14,672.40 V 65 3/66 TUNE, BILLIE SUE 136.59 546.36 R 71 1/00 WARFORD,THOMAS 2,502.72 10,010.88 R 28 7/68 WATTS, DONALD 437,09 1,748.36 R 88 01/02 WOOD,RONNIE D 3,077.15 12,308.60 R 52 9/88 WRIGHT, RANDALL 1,691.34 6,765.36 119,540.61 478,162.44 WE, THE UNDERSIGNED, DO SOLEMNLY SWEAR THAT THE ABOVE OBLIGATIONS ARE JUST AND CORRECT; THAT NO PART THEREOF HAS BEEN PREVIOUSLY PAID; THAT THE PENSION PAYMENTS SO CHARGED ARE IN ACCORDANCE WITH THE ACTIONS OF THE BOARD OF TRUSTEES OF THE FIREMEN'S RELIEF AND PENSION FUND; THAT THE SERVICES OR SUPPLIES FURNISHED, AS THE CASE MAY BE, WERE ACTUALLY RENDERED OR FURNISHED; AND THAT THE CHARGES MADE THEREFORE DO NOT EXCEED THE AMOUNT ALLOWED BY LAW OR THE CUSTOMARY CHARGE FOR SIMILAR SERVICES OR SUPPLIES SECRETARY CHAIRMAN AND PRESIDENT ACKNOWLEDGEMENT STATE OF ARKANSAS ) COUNTY OF WASHINGTON) SWORN TO AND SUBSCRIBED BEFORE ME THIS DAY OF , 2006. NOTARY PUBLIC MY COMMISSION EXPIRES : YTD 6810-9810-5335-00 0,00 478162.44 6810-9810-5335-06 0.00 Drop Payouttintrest Checks to Drop Retirees 0.00 YTD Column 0.00 Difference 0.00 1/8/2009 C:\DOCUME-1\ssmith\LOCALS-1\Temp\XPGrpWise\April 2009.xls WM PE LOCAL NSION FUND REPORT 2008 In keeping with statutory requirements, I am presenting this report for 2008 on the local Police and Fire retirement funds for the City of Fayetteville. Both of these plans were closed, by law, in 1983 and there are no longer any active members remaining. There are currently 52 police and 63 fire retirees and beneficiaries in the system. _ At December 2008 projected expenses from the fire pension fund were in excess of$1.5 million as compared to fund revenues of approximately $232,000.Projected police pension fund expenses exceeded $1.7million as compared to fund revenues of approximately $424,000. This is before adjusting investment's to market value. Therefore, final losses will be even larger. Obviously, on a cash flow basis, contributions are not close to covering expenses. Actuarial evaluations are the responsibility of the State of Arkansas Fire and Police Review Board. Since these evaluations are performed biennially, the last one was completed as of December 31, 2007. Based on those evaluations the unfunded pension obligations of police and fire were $$3,100,000 and $4,700,000 respectively and had grown considerably from prior years!The unfunded actuarially accrued liabilities for these funds were approximately $9.2 million for-police and $10.5 million for fire. In the annual reports issued by the Arkansas Pension Review Board neither the fire nor police pension fund were adjudged actuarially sound pursuant to established financial tests. Again, this actuarial valuation was performed before the 2008 current year. The appropriate local oversight pension boards have been notified of these facts and are currently examining the situation and reviewing possible options. Although, the City has no direct obligation to fund these pension plans other than a .4 mill dedicated levy for each, plus state insurance turn back and certain dedicated fees, the status of these plans need to be carefully monitored . FAYETTEVILLE THE CITY OF FAYETTEVILLE,ARKANSAS KIT WMLIAMS, CITY ATTORNEY DAVID WMAKER,ASST. CITY ATTORNEY DEPARTMENTAL CORRESPONDENCE LEGAL DEPARTMENT TO: Dan Coody, Mayor Sondra Smith, City Clerk/Treasurer . Fayetteville Firefighters Pension & Relief Board CC: Paul Becker, Finance Director FROM: Kit Williams, City Attorney DATE: April 28, 2008 --- RE: Train wreck approaching No one likes to be the bearer of bad news, but I need the Fire Pension ,and Relief Board'Trustees to focus on and understand the very real long term dangers to the Pension Fund. The train wreck of the total depletion of the Pension Fund's assets could be only ten years away. On August 31, 2006, I wrote a memo to you expressing my concerns over the large and growing unfunded liabilities of your Pension and Relief Fund. I ended that memo as follows: "Since the actuary has already determined the fund is not actuarially sound, his prediction is that the fund will be exhausted during the lifetimes of you or your beneficiary :. members ... Acting as fiduciaries for every beneficiary, your duty should be to try to avoid that benefit reduction day and to try to preserve this pension fund and not allow its- `deterioration of actuarial soundness.' " Reviewing page 10 of the Longer Investment Performance Summary makes me even more concerned now. Even though Longer was able to earn over $3 million on your $10 million portfolio in the last 5 '/2 years (a very strong period of stock market advance), the Fund's net value dropped $2.5 million. With only $7.5 million left, you- cannot expect to earn nearly so much the next five years. During that period, over $6 million ' was paid out to retirees. Although there will be no more large DROP payments, the over 104% of ending pay each retiree now receives (90% plus 3% compound interest for five years) will rapidly deplete the Pension and Relief Fund. After the next state.evaluation of I warned you in my October 3, 2006 memo that the annual cash flow out of your pension of"approximately $700,000.00 decline per year cannot be allowed to continue or by 2020, the pension fund could be broke." This might have been too optimistic as I now fear fund.bankruptcy as early as 2018. SOLUTIONS? What can you as trustees of the Pension and Relief Fund do to prevent the train wreck of bankruptcy and poverty pension payments in ten years? I do not believe you can successfully increase revenues. Remember that the school board lost its most recent millage increase election. I do not think you could win an election to increase millage so you could continue to receive over 100% of ending salary. If you cannot increase revenue or get the City Council to spend the millions it would take to send .you to LOPFI, then your only option is to reduce benefits to sustainable levels. The earlier that benefits are returned to sustainable levels, the less they will have to be reduced. Delaying corrective actions while the pension fund continues to deplete will only make the situation more difficult and the benefit reductions more extreme in the future. In four or five years, your fund could lose another one-third of its value and be reduced to under five million dollars. That means another one-third or more potential earnings from the fund's investment earnings which (with the .4 millage and any insurance turnback) is all you have to pay your benefits will be gone forever. Depleting your fund is like eating your seed corn. Bankruptcy and famine would be the result. Once you receive your biennial actuarial valuation this summer or early fall, you should determine what a sustainable level of benefits is possible with your remaining pension fund balance. You might also look forward to see what the likely balance of your fund would be in five years (with no change) and what amount of benefits could be sustainably funded. Then it will be time to choose your medicine: a little now or a lot more later. If this board .does nothing to remedy this problem and allows the pension fund's investment account to continue to be paid out for current benefits, within a decade or so the pension fund account will be gone and your pension fund will be bankrupt. All pension benefits will then be drastically reduced placing all your pensioners in dire financial straits. Benefits must be reduced to sustainable levels very soon to avoid this train wreck scenario. 1 ' aa! ' 'EV LLE FAYETF THE CITY OF FAYETTEVILLE,ARKANSAS KIT WILLIAMs,CITY ATTORNEY DAVID WMAKER,ASST.CITY ATTORNEY t '. DEP.AR'TMENTAL CORRE-SPONDENCE LEGAL DEPARTMENT TO: Firefighters Pension and Relief Board FROM: Kit Williams, City Attorne C DATE: October 3, 2006 RE: Revenue Supporting Pension Amendment 31 provides that: "After consent of the,majority of those voting on the question at any general or special election in cities of the first or second class, the cities may annually thereafter levy a tax (for the pension fund) . . .." Fayetteville voters approved a half mill for the Firemen's Pension and Relief Fund which had to be rolled back to .4 mills because of Amendment 59. I am somewhat concerned because the constitutional language is permissive "may" rather than the mandatory shall "annually thereafter levy A.C.A. §24-11-812 makes this annual levy mandatory, . "shall. be levied annually by the city . . .." It is. easier to change statutes than the constitution. Property_taxes have been a "hot button" issue in the recent past so it is possible. this 'statute could be amended to allow ending of this millage. Others support- for the old pension plan (insurance policy premiums, etc.) could also be moved to the new plan. If these revenue supports are taken away from the old plan;. it will be far from actuarially . sound. It would almost certainly also fail the' thirty year cash flow projections which rely upon current funding measures to remain in place. The Dow Jones Industrial Average is back up to its historical highs of 2000-2001. Unfortunately the assets of the pension fund have declined by $2.7 million since December 2001. With the Dow Jones about equal at these dates, it is not the stock market, but the benefit increases of 2001 , 2003 and 2005 and the inherent lack of adequate revenue to offset these increasing benefits that have led to the pension fund's two million seven hundred thousand dollar decline in four years. This 'approximately $700,000.00 decline per year cannot be allowed to continue or by 2020, the pension fund could be broke. Because there are only three more DROP members who will be paid several hundred thousand dollars out of the pension fund in the next couple of years, I hope the trust funds' decline will slow. Please keep in mind that the decline in your fund means there is less money to invest to earn income and so more of the principal must be used to pay benefits (which speeds up the decline of your total assets). Although the Fayetteville Firemen's Pension and Relief Fund is supported by Fayetteville city millage pursuant to a vote of the citizens, the City of Fayetteville, itself, is NOT responsible to make pension payments if the pension fund goes broke, The Pension Board administers the Pension Fund and is responsible to make certain it remains healthy. There has been some discussion in the past about the possibility of the City Council declaring the fire pension fund to be "inactive" and assigning it to the Arkansas Local Police and Fire Retirement System (LOPFI) pursuant to A.C.A. §24-11-804. This could also be done for the police pension fund - pursuant to A.C.A. §24-11-406. If this were to be done, the benefits would be secured because the City .Council would have to agree to pay for the unfunded liability of the pension fund. With the unfunded accrued liability ballooning to Ten Million Dollars for the fire pension fund because of'the 2001 benefit increase to 90% of ending salary and additional benefit increases in 2003 and 2005, the price tag is now probably too high for the city taxpayers. Both of these statutes are not mandatory, but permissive: "the pension fund may be declared as inactive by the employer." Thus, it is the City Council's sole decision and discretion whether or not the city taxpayers should be taxed to pay the unfunded liability of the pension funds 2 in addition to the annual city millage. If the pension boards hope to get the City Council to agree to send the pension funds to LOPFI sometime in the future, it should do whatever is possible to reduce this ballooning deficit. Increasing benefits again will only worsen the problem. What happens if the pension fund runs out of money? T could find no statute requiring a city to pay (unless the City Council declared a pension fund "inactive"). Instead, the law is that: "Mhe board of.trustees pays the full minimum benefit each month to all eligible beneficiaries until the assets in the fund are depleted for the . fiscal year, at which time all payments shall cease . . .."' A.C.A. §24-11-807. Your fiduciary duty to these beneficiaries is to avoid that calamity. 3 EEI NOV 04 Zoos LONGER INVESTMENTS INCORPORATED CITY OF FAYEf`rEVILLE A Registered Investment Advisor CITY CLERK'S OFFICa - November 3, 2008 Ms. Sondra Smith City of Fayetteville Fire Pension & Relief Fund 113 W. Mountain Fayetteville, Arkansas 72701 Dear Sondra: Greetings from the frontlines! When we wrote the update letter on September 22, 2008, the TARP (Troubled Asset Relief Program) was in the process of coming to Congress for a vote. After it was voted down in the House, it was passed with a few modifications and sweeteners in the Senate. Once it passed both houses of Congress and President Bush signed it into law, the investing public's attention turned from financial Armageddon to economic weakness. We have seen a massive, coordinated response to the crisis by the Federal Reserve (the Fed) and the legislative and executive branches of the U.S. government. It is hard to enumerate all the programs, subsidies and rescues we have seen in just the month since the last letter. In addition, the Fed has cut interest rates by a full percent since September— in mid-month by 50 basis points in coordination with world central banks and then again last week at the regular Federal Open Market Committee (FOMC) meeting. The Fed funds rate sits at 1%, the all-time low, as a result. The stock market is down approximately 34% year-to-date and was down 17% in October. It had been worse (down 42% and 27%, respectively) before Tuesday's double-digit percentage gain. It was a very challenging month, marked by records being set in volume, volatility, intraday swings, daily declines and daily rallies. The markets are going through a violent period of unwinding the leverage that built up in the good times in banks, hedge funds, households, businesses, insurance companies and brokerage firms and moving to a posture that reflects the new economic future. As a result, not only have we seen tremendous volatility on the surface with the market indices, but also within the market itself as sector volatility has been even more pronounced. The chart on page two (Chart 1) shows that 10-year annualized returns over two centuries have bottomed out at 2.3% to 2.5%. This chart goes through September 30, and when updated through the end of October, the returns are negative over a 10-year period. In other words, this is a once-in-200-years occurrence. The other world markets are responding to the uncertainty with wild swings as well. The euro has declined relative to the dollar from a level of 160 to 128 (a dollar gain of 20%) in three months. This has resulted in a collapse in gold, oil and food commodities as a strong dollar works to suppress the world prices of these commodities. The yen has strengthened relative to the dollar and the euro as hedge fund "yen carry" trades are unwound. Basically as firms deleverage, they are paying off the loans they took out in Japan when interest rates were low, which they then used to buy U.S. or European assets. As those loans come due or are called, firms must buy yen to repay them. This creates a shortage of yen and the price goes up. All of this disrupts trade flows so there is now a coordinated effort to intervene in the currency markets to slow the rise in the yen. It all reminds me of a song we used to sing as kids: "The hip bone's connected to the thigh bone, the thigh bone's connected to the knee bone, ...." Because of the international nature of the crisis, no asset markets have escaped. International funds have declined more than U.S. funds (the EAFE is down 45% year-to-date), and gold/commodity and real estate funds have also declined dramatically. Even investment-grade bond funds are down double-digit amounts year-to-date. We live in a world of interconnectivity of markets, trade and currencies. It is complex, and the events in one country affect other countries in sometimes unpredictable ways. In many respects, we are in uncharted territory in this crisis P.O. Box 1269 Fayetteville,Arkansas 72702 Telephone:479-443-5851 Toll free: 800-827-7710 Fax:479-443-7129 Web site:www.longerinvcom ISI