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HomeMy WebLinkAbout2009-10-15 - Agendas - Final Fayetteville Policeman's Pension and Relief Fund Meeting Date /5- Inn9nq Adjourn Time 6; �(� /"/� Attendees: H nVtl o 't.9A ' I` IA,Aoh QA t N ` _ e to Subject: Subject: 4 Motion To: Motion To: I Motion By: Motion By: Seconded: Seconded: .414 Mayor Jordan i� Mayor Jordan ��V JerryFriend 5 JerryFriend C.r.0 Tim Helder 0{ Tim Helder a LjIfAt Frank Johnson ✓ Frank Johnson V11- Eldon Roberts I/ Eldon Roberts Melvin Stanley Melvin Stanley Sondra Smith Sondra Smith Subject: Y lI f Subject: Motion To: Motion To: Motion By: Motion By: Seconded: Seconded: Mayor Jordan V-� Mayor Jordan Jerry Friend Jerry Friend Tim Helder Tim Helder Frank Johnson Vol" Frank Johnson Eldon Roberts Eldon Roberts Melvin Stanley Melvin Stanley Sondra Smith Sondra Smith Lioneld Jordan Chairman Jerry Friend Retired Position 2 Sondra E.Smith Treasurer Tim Helder Retired Position 3Eldon Roberts Secretary/Re[ired Position I Melvin Stanley Retired Position 4 a e e0i Frank Johnson Retired Position 5 ARKANSAS Police Pension and Relief Fund Board of Trustees Agenda October 15, 2009 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board will be held on October 15, 2009 at 1:30 PM in Room 326 of the City Administration Building located at 113 West Mountain Street, Fayetteville, Arkansas. Roll Call Approval of the Minutes - • Approval of the July 16, 2009 meeting minutes Approval of the Pension List • November and December 2009 pension list. • January 2010 pension list. Old Business New Business • 2008 Actuarial Valuation Report. • LOPFI Discussion. Longer Investments • Longer. Investments monthly report. • Longer Investments 3rd Quarter 2009 report. Discussion Items Board Members Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes Mayor Jordan Chairman July 16,2009 Sondra o Smith Treasurer aye ev e Page 1 of 12 Eldon Roberts Retired Position 1 Jerry Friend Retired Position 2 Tim Helder Retired Position 3 A R K A N S A S Melvin Stanley Retired Position 4 Frank Johnson Retired Position 5 Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16,2009 A meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees was held at 1:30 PM on July 16, 2009 in Room 326 of the City Administration Building Mayor Jordan called the meeting to order. Present: Frank Johnson,Melvin Stanley,Tim Helder,Eldon Roberts,Jerry Friend,Mayor Jordan, Sondra Smith, City Clerk, Kit Williams, City Attorney, Paul Becker, Finance and Internal Services Director, Trish Leach, Accounting, Elaine Longer and Kim Cooper, Longer Investments,Press, and Audience. Approval of the Minutes: Approval of the February 11 2009 Special Firemen's Pension and Policemen's Pension Joint Meeting Minutes Tim Helder moved to approve the Special February 11, 2009 meeting minutes. Eldon Roberts seconded the motion. Upon roll call the motion passed 6-0. Frank Johnson was absent during the vote. Approval of April 16 2009 Meeting Minutes Eldon Roberts moved to approve the April 16, 2009 meeting minutes. Jerry Friend seconded the motion. Upon roll call the motion passed unanimously. Approval of the Pension List: Revised Pension List's for June and July,2009—Donna Lorch deceased Sondra Smith: We have a revised list because we lost one of the pensioners Donna Lorch. You had already approved those pension lists. Tim Helder moved to approve the Revised Pension List's for June and July 2009. Melvin Stanley seconded the motion. Upon roll call the motion passed unanimously. Policemen's Pension and Relief Fund - Board of Trustees Meeting Minutes July 16,2009. Page 2 of 12 August September, and October,2009 Pension List's Sondra Smith: There are changes to these pension lists due to Marie McChristian passing away on July 1, 2009. She received her full check for the month of July because we don't prorate benefits. The August, September and October lists have been changed and she has been removed. Jerry Friend moved to approve the Pension List's for August, September, and October 2009. Eldon Roberts seconded the motion. Upon roll call the motion passed unanimously. Old Business: None Election Results Sondra Smith: The ones that were serving on the board are still serving. We have no new board members. New Business: Donna Lorch deceased May 27,2009 Informational Marie McChristian deceased July 1,2009 Informational Revenues/Expenses Report Sondra Smith: This is a report that Trish is doing for the board which shows your revenues and expenses from 2004 forward. A discussion followed regarding the report. Turnback Funds Information Sondra Smith: We received the turnback funds earlier this year than what we normally do. Accounting was nice enough to go ahead and cut a second check which you should have already received. Your July pension check should have been down by $50 and you should have received that in August. It will go back up by the $50 because we can't pay that out until we receive the Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16,2009 Page 3 of 12 funds. Last year and this year they sent an extra $600 but they have requested it back. The spreadsheet shows where your turn back from 2002 forward. The next two pages are the letters from PRB explaining the tumback, why you receive it, and how much we have to distribute to each pensioner. The large sum is always a lump sum separate check, the $50 is added to your check on a monthly basis. City Attorney March 5 2009 memo FOIA Applicability to Police and Fire Pension Board Meetings Kit Williams: That's my memo saying that since you all are created by state law that the FOIA covers all meetings that you have. Tim Helder: Was there a question? Kit Williams: There was a question in regards to the Fire Pension Board. City Attorney May 29 2009 memo Pension Board Power to reduce Benefits to Avoid Exhaustion of the Pension Fund. Kit Williams: The Fire Pension Board asked for an Attorney Generals opinion about whether or not they could reduce benefits to their pensioners. The Attorney General said that she doubted that the Fire Pension Board would have that right. As in ever Attorney Generals opinion they usually don't know all the back ground and all the facts. I don't think the Assistant Attorney General that wrote this knew that the Fire Pension plan is predicted to run out of funds in 2016. Senator Madison has already requested another Attorney Generals opinion on the same thing asking about a particular statute. I did write the Assistant Attorney General and gave her more facts. I also sited her to a couple statutes that she had not discussed that I thought were relevant and a case that had to do with a trust and the beneficiary wanting all the income out of it and the trustee wanted to keep some of the income for the trust to survive. There was nothing in the trust document that gave the trustee the power to with hold some of the income. The Supreme Court said that's inherent in the trustee's power to try to preserve the trust even if it is not in the document the trustee has the power to try to preserve the trust. My opinion remains that both pension boards have the power to reduce benefits if it's necessary to keep the pension funds from going broke. The Assistant Attorney General said clearly if you are going to run out of money in one year then you can prorate the funds but she said she didn't think you could do it unless you were going to run out of money that year. The statute that she sited didn't say that you had to wait.until that year, that's something that she read into it that I think was a miss reading of it. The statute talks about if there's not enough money to pay all of the pensioners all of their benefits then it shall be prorated. She interpreted that to mean all of your benefits in one year, you keep paying the benefits out and when you get to the last year then you can finally prorate. My understanding of pensions is that pensions are suppose to be for life, so if a fund gets to a point to where there's going to be a good prediction that it is going to run out of money at that point in time the pension board has the power and maybe even the duty to Policemen's Pension and Relief Fund - Board of Trustees Meeting Minutes July 16,2009 Page 4 of 12 prorate the benefits so that they preserve the fund so that people do not run out of money at one point especially when it is in a reasonable foreseeable horizon,just a few years out. I think when you have the kind of report that was given to the Fire Pension Board and their pension fund I think it is a duty of the Pension Board to take action. An opinion of an Attorney General is an opinion of a lawyer just like me, most of the time I go right along with the Attorney Generals opinions. I think that is a great service they give us. They are impartial, well written, and well researched normally but they are limited because often times they do not have all the facts. They will be the first ones to say they will not know all the background so sometimes that might actually make a difference in how the law is interpreted. Jerry Friend: Is there any legal stuff from looking at it that we might can undo what we have done but not go below the statutes. We were hired under a 50% amount. Kit Williams: Absolutely. The Fire Pension Board which their plan is in much worse shape than yours. They're asking to have some studies done to know exactly what it is but none of their scenarios would be where is would be less than 50%and it's much more likely that it would be at the 70% level if not higher. Yours is in better shape than that. At this point as long as we don't wait too long then I think there would be virtually no chance. I think what the Fire Pension Board is thinking about is if they can get the right number that will equalize it and that it would look like it won't cost the City any money to consolidate with LOPFI then that would be the number they would choose. The City Council at that point in time if they saw that there was no up front cost they might decide to consolidate with LOPFI'S and that would guarantee the plan and at that point the City is on the line. It probably in the future would cost the City tax payers some money but maybe not. Hopefully the actuarial people will be right but the beneficiaries and the pensioners would no longer have to worry because it would be someone else's problem and not the pensioners. Melvin Stanley: In your conclusion you say that the Fire Department Board has the right and probably fiduciary duty to pensioners to adjust pension. What's your opinion of the limit they would have to set that would attract the City Council? Kit Williams: That is what the actuarial study is trying to determine. There were several scenarios that were presented to the actuary, different ways to reduce it not necessarily reducing everybody the same, although that might have been one of the scenarios. Whichever one they choose would have a certain level that that level for this year it would be a cost neutral decision by the City Council. As long as the stock market or investments performed well enough under LOPFI as predicted then it wouldn't cost the City any money, if they didn't perform and there was a problem then the City would have to make up the difference because once it's consolidated it goes from your reasonability to the City's responsibility. The millage would still come in to help, that wouldn't end. I don't think it would end all the way through the end of the pension. That would go into the projections. It's something that you might want to be considering yourselves in the future. You're not under the gun as much as the Fire Pension Board because their funds suffered more significant losses. It was already at a lower level and had been reduced much more dramatically over the years even before the stock market went down. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16,2009 Page 5 of 12 Eldon Roberts: I don't have the numbers that came out in the paper shortly after we had the joint meeting and it was showing the scenarios. It wasn't all that unattractive, it wasn't attractive either to the City, for the Police Pension to receive no COLA's and to not take a cut in their current benefits it was not that bad of a number. Paul Becker: It wasn't nearly as much as the Fire Pension if I remember off the top of my head it was in the $100,000 range. Eldon Roberts: That's what I thought and that is per year and that was for us to receive no cut in current benefits and never get a COLA. That doesn't sound that bad to me but I realize the City's position on it too. Maybe that will improve in a few years. People are passing away and I know they are not drawing large money but they weren't figured into this last actuary. Kit Williams: In actuary studies they estimate the number of deaths. Eldon Roberts: With the economy and the stock market maybe that number will look more attractive down the road. I for one, as far as the Police Pension Board of Trustees, if we can strike some kind of deal with the City where maybe we don't get anymore benefit increases or COLA but we don't take a cut into what we are getting and we can move to LOPFI. I would be for it in a heart beat but that all remains to be seen. Kit Williams: That would be up to the Mayor and the City Council if they would want to try to come up with $100,000 every year. The danger for the City in the long run and this is why even if we have a cost neutral. Eldon Roberts: You can really know what is going to happen. Kit Williams: And that the State Legislature could decide to give everyone a COLA no matter what happened and the City is going to pay for it. That might very well happen and that's a risk the City would be taking. It's not as bad of a risk if it goes in at a zero cost than if it goes in at any other cost. If it goes to City Council we are going to have to be up front with them. Frank Johnson: Kit how are you defining risk? I'm a little confused about.the liabilities that the City may face even with the two plans combined. Kit Williams: Let me talk about the liability. I believe by the way this is set up with the board primarily controlled by the pensioners, five out of seven members controlled by the pensioners, and by the way it has been handled through all the years is that you all are in control and responsible there's no liability at this point for the City to stand behind your fund. However, there are provisions in the statutes that says when it is consolidated, which is at this point a City Council decision, when it becomes consolidated with LOPFI the City then assumes responsibility and assumes the liability at that point in time. You all are no longer responsible for it you. You lose your over site but you also lose responsibility. Right now I think the City has no legal liability for what happens to the funds unless they become consolidated with LOPFI. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16,2009 Page 6 of 12 On risk, I just mean there is a risk for what the legislature is going to do and the risk of what the stock market is going to do. That's the things that I would say are the two risk factors in relation to keeping it here or having it go down to LOPE. Tim Helder: If it goes to LOPFI, the way I understand it, whatever percentage we go in to LOPFI that is it unless there's a COLA attached to it. If we lose control at some point can the LOPFI Board or someone else decide to reduce benefits or is it locked in? Kit Williams I would have to say I am not an expert and we probably need someone from LOPFI to come up and assure us what would happen but my understanding is exactly that. You would go down there with whatever percent you were and it will remain that percent. You will not have any decline but you might have a possible increase if they decide that they are going to give a COLA. The problem for the City is that if they decide to give a COLA I think they will turn around and say to the City you're going to pay for this COLA. Tim Helder: To Franks question the way I was understanding it being asked and my thoughts that where going on during that time if it going into LOPFI at our current rate and then there was even a worse financial catastrophe than we have been going through lately and the bottom dropped out we are no longer in control but the City is ultimately responsible to pay the beneficiary. Kit Williams: We have to pay LOPFI. Paul Becker: What would be happening is you would transfer market risk. The chances are that the actuarial studies where not accurate or did not keep up the current conditions. You would be transferring the market risk to the City essentially who would be required to pay LOPFI. The benefits would stay the same and you would be transferring the risk from here at the fund to LOPFI and would be a risk of the City and a liability of the City. Kit Williams: There probably is one potential risk for you to go down there and that is if the bottom fell out of the State and of the whole LOPFI system and the State Police Pension. Let's say the Legislature said the tax payers are paying too much we can't afford this we are going to cut everybody. Right now you all are in control. Your money's not down there, this is your money, it's not LOPFI money so that can't happen at this point in time. You can run out of money and then you would be in trouble but you're not going to go down if something happen to LOPFI. I think it's very unlikely that the State would ever allow that to happen to a state wide LOPFI plan. There's probably a limit to how much money is going to go out because there are not very many pension plans out there anymore it's only government. How long the government can afford to keep the pension plans that they have is a question? That's a risk that something might happen. It wouldn't happen any time soon but it might ten or twenty years from now if the cost of the taxpayer got so much that there was enough legislatures that said we are not going to do this anymore. That would be a lot of litigation because I think you all have some certain legal rights to a pension that has been promised to you. I think they might have trouble ever trying to undo it but there is a risk there if it goes down and things got really bad. It is probably way safer to have it in LOPFI than anywhere else. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16,2009 Page 7 of 12 Frank Johnson: The difference in the unfunded liability, the current state, verses the risk that we were talking about with combining the two plans could you explain that to me, in terms of the City's inherent or residual obligations to make up any difference. Paul Becker: If it's transferred? Frank Johnson Yes. Paul Becker: If it goes down there first one you are talking about is unfunded liability you would talk about a different calculation. So it's based on if all income stream stops, which in this case it wouldn't, because you are going to take your millage down there with you. That would be if everything stopped at that point in time and you projected it forward there would be an actuarial liability. It all remains to be seen once it's transferred down there what that liability is. If it's transferred down there and the actuary projects that it's funded to the proper level at that point in time there would be no liability. Essentially what you would be done is transferring market risk. Essentially you're talking about the risks that your asset portfolio is not going to keep up with what the projections are or that your expenses are going to stay in keeping with what the actuarial calculated expenses are. Eldon Roberts: If we merge with LOPFI it would be all of our income we're receiving today that would go with it. Paul Becker: It would go with it. Eldon Roberts: If we merge with LOPFI it would be all of our income that we are receiving today would go with it. We keep talking about millage but we are talking about the 10% fines and forfeitures, insurance tum back, and our money is going to be invested and eaming investment monies also. Everything would go with us to Little Rock to LOPFI that we are receiving today. Then it would only the difference that the City would have to be signing off on. Paul Becker: That is correct. Eldon Roberts: Nobody knows what that amount is should the market take a big nose dive after the City signed on the dotted line to stay in good force in LOPFI. Market risk is what we are talking about that the City would be assuming and nobody knows what that is. Paul Becker: Right. That's the actuarial liability that Frank is talking about. That is the calculation by the actuary over long term what he expects it to be. We don't' know that until it actually occurred. The revenue streams would go with it. Melvin Stanley: What benefit would it be to the City to send us to LOPFI? Zero wouldn't it? Kit Williams: Probably zero from a financial point of view. Melvin Stanley: Outside of paperwork that these girls do. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16,2009 Page 8 of 12 Kit Williams: That's true, that would be some savings but on the other hand we want to see your funds as secure as possible. We're not as worried about the police fund because you all are in much better shape. Even though if you look at the actuarial report and it says you are actuarially unsound and here's what your liability looks like. That's not a totally accurate picture because as Paul says that does not account for all of the income that will be coming in. You're probably short because that's why they said $100,000. You're probably some what under funded now but you are not to far out,which means with no benefit increases,then you shouldn't be in a steep dive. The Fire Pension plan got into a fairly steep dive and that's why they're projecting that in 2016 their fund would run to zero. That's why we are concerned about the Fire Pension plan. That's why they're very concerned about seeing about if they can preserve it. These are all former city employees so the city has an interest in not seeing city pensioners come up blank and getting nothing. Fiduciary responsibility for Pension Board—Frank Johnson Frank Johnson: This is not necessarily a legal discussion as much as an acknowledgement that we have to continue with pace While I appreciate what Kit just said in terms of the City's interest in it's retired police officers, the last thing I want to hear is as the revenue streams began to tighten up at the city that we are looked at as encumbering any of the programs in the city that may otherwise be funded if not for us. When it comes down to it for me I just went through that list of beneficiaries and their widows I began to feel the full weight of the responsibilities of being on this board. Looking at that list and combing through the minutes over the last few years it seems like we are showing a pattern of revisiting this, but then we get these single digit returns and we back off a little bit then things tighten up. I'm just looking for at some point something actionable so we don't have to continue to come back to this. I think it begins with a broad discussion of our responsibilities to our beneficiaries. I'm open for any thoughts. Tim Helder: I agree, We started having these discussions about LOPFI five years ago. We really tried. There was serious discussion. I don't know that everybody was on board with doing that. To me it would have been a great thing for the City at that time and for us. There was a money funding stream coming in that the City was quit ready to give up and go forward with us going to LOPFI. This is something that we have just waited until the last second and then we are in peril and we are saying please save us. We were trying to do this before there was a problem. Kit Williams: There certainly have been discussions and I know that at one point Steve Davis was talking about some tumback increase. Eldon Roberts: It did, it got up to $300,000 almost $400,000 for a year and then the maybe the next year almost$300,000, but it has fallen off now. That was one of the reasons we were asked to not go to LOPFI to just sit back and take all that increase tumback you're going to get every year. That didn't last ever year it was just about one or two years in a row and then it has fell back down to where it is now. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16,2009 Page 9 of 12 Kit Williams: I don't think you all are in terrible shape yet. I'm glad that you are interested in this. I do think you have a fiduciary duty and ethical responsibility to look at this and be aware of it and try to stay away from the edge. Tim Helder: We're not but do we wait until we are? Kit Williams No, but at this point the Fire Pension board needs to do something much more quickly. There are some issues out here especially with the Attorney General's opinion that need to be resolved and they can not wait, if they wait very much longer then they're going to be looking at not 70% but 50%. No one wants to do cuts and the more you cut the worse it is and the longer you wait the more you have to cut. It's true a little bit for you all because you have seen yours go down a little bit but its not going down dramatically like theirs has. There is a little more time that you all can wait to see what the final results are with the Fire Pension Board. I am not saying that you are tied to them, you can make your own decisions, but some of the big decisions are going to need to be made by them this year hopefully. That might give you some guidance on what you can and can't do. Tim Helder: Frank I appreciate your thoughts because we do have a responsibility and at some point we are going to have to make tough decisions. What I'm gathering from everybody is we're just not in that situation right now. We need to sit back and wait and watch and see what happens for a while. Kit Williams: It would probably be too late at this point in the year to try to get the kind of actuarial study that Fire Pension people have already asked for. It might even be too late for them this year. I think you can only go down to LOPFI once a year. Paul Becker: It has to be down there and accepted by them I believe in October. There would have to be an actuarial study down there and sent back to the City to see if that was acceptable. The steps you would be taking is have a separate actuarial report done saying do you have to cut benefits if you do how much to make it zero for the City to send it down. If the Mayor brought it forward and the City Council did approve it then we would have to send it down and they would do an actuarial study done by the actuaries of LOPFI. They would then respond to the City what the situation is and that would all have to be done by October. Kit Williams: There is no way you all could do it this year. Paul Becker: I don't think you all could do it this year. That would be my opinion. Kit Williams: It would be very tight to do it this year because obviously their plan is losing considerable funds every year. Eldon Roberts: We are lucky enough to be in position, that with out the stock market diving again like it did in 2007 or 2008, that all we really need to do right now is what we are doing. We are very conscious of this fact and we can watch and see and times may get better for us and Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes July l6,2009 Page 10 of 12 for the City to where we can work out a deal where we are willing to go to LOPFI without too big of a hit on anybody. Sondra Smith: This is your pension fund and no matter what recommendation you receive from a staff member at the City it's your fund and you need to do what you think is best for your fund. If you feel like it's something that you need to do to take it before the City Council then you need to proceed forward with those steps. Frank Johnson: Do you think that is something to be considered at another meeting? I see these meetings as informational to provide us a status at where we are at. Do feel there is a need to consider a special meeting? Jerry Friend: I don't. I think we can talk about it at the next regular meeting. Tim Helder: Based on opinions and what we have heard today I would like to sit back and watch and see what happens with the Fire Pension. Jerry Friend: There will be some questions answered with the Attorney General. Eldon Roberts: When I would vote, as a member of this board, to take it to City Council level to try to sell it to them, I would like to be at a time when it is the most advantageous for the City, at the very least cost for them. I think they would come more near accepting us at that time then if there is a large expense involved in it. We have the luxury of sitting and waiting awhile and seeing if we arrive at that point where it looks attractive to the City and to us to do that. I'm not ready to vote to start the merge with LOPFI just yet. Frank Johnson: I'm not suggesting a meeting to consider a vote as much as to make sure we have something on the agenda. Eldon Roberts: We meet quarterly and at every meeting we can have a discussion on where are we down. Paul Becker: It's every other year but there have been some discussions with the PRB Board to do them on a yearly basis. There is a chance that they will do a study this year but traditional they are done every other year. Eldon Roberts: That will give us a time frame to work on. We are not behind the eight ball just yet. We can mention this at our scheduled quarterly meetings and talk about it. Kit Williams: It should be on the agenda. Eldon Roberts: If we get an actuarial evaluation this year, if not we will sure get one next year, and I think we are financially sound enough as long as we are watching out every meeting to know where we are at. Next year when we get our evaluation we will know where we are at in all of this. Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16,2009 Page 11 of 12 Frank Johnson: The discussion is great and everyone here is very responsible I just think it is important for us to be fully transparent especially if at some point we feel that we might be taking this before the City Council. Parking permits should be used at meter parking only Sondra Smith: The Parking Division has requested that you park at a metered parking spot and not around the square. Longer Investments: Longer Investments Monthly Report A copy was given to the board. The Longer View—July 1,2009 A copy was given to the board. Longer Investments 2"d Quarter 2009 Report A copy was given to the board. Elaine Longer: The first page is the portfolio appraisal as of June 30th. We also have an update for yesterday's close. When I was here in April I talked about the fact that we had gone back into fully invested on the equity side. The percentage of assets that's invested in equities at the end of the quarter was 52%. Page two the percent invested in international equities is 6.2%. We were above the 50% that requires a motion to approve but within the 10% lead way of the policy. Jerry Friend moved to approve the equity overage. Eldon Roberts seconded the motion. Upon roll call the motion passed unanimously. Elaine Longer: Since the end of the quarter we have had a real good run off that low of March 9, from that point until the high that we hit in June we had a 40%bounce. That's categorized as the third strongest Bear Market bounce that we have had in the past 100 years. We've taking some chips off the table and returned to about 46% or 47% equity weighting from the 59% of where we were at the end of the quarter. Page three your ending market value was about $7.79 million and the total income yield on the portfolio is 3.2%. The 3.2% represents what you get in terms of dividends and interest income on the portfolio. To give you some comparison the 10 year treasury is yielding about 3.4% and Policemen's Pension and Relief Fund Board of Trustees Meeting Minutes July 16,2009 Page 12 of 12 the five year is at about 2.4%. Your total portfolio has an income yield that's almost the 10 year treasury even though you have a 56% growth component. Page four is an update as of yesterdays close. At one point this month we were down about 5% from the June 30 close. We had a pretty hard sell off. Now this week we've had a pretty good increase. The market is still fluctuating within this trading range of a low of. about 6,600 in March and then the high was about 9,300. The equity exposure has been pulled back to about 39% and that combined with the International, which is now at 6.5%, you are at about 46% equities down from that 58%to 59% at the end of the quarter. The market value as of yesterday is pretty much where we closed the quarter. Page seven is a break down of your fixed income portfolio. What's interesting is that the average yield to maturity on your bond portfolio, we have been able to maintain a 5.1% even though the average maturity is just 4.1 years. The bonds that mature in three years still make up 52%of your total bond portfolio. Page eight shows your largest equity holdings Microsoft, Intel, Wal-Mart, Johnson & Johnson, and AT&T. Page nine shows the contributions and distributions summary for this year. There have been $537,000 in cash withdraws. Page 10 shows the performance. Stocks in your portfolio are up 8.4% year to date. The indices through that period were up 8.1% on the S&P and the DOW was down 3.8%. The Russell 2000 was about 1.8%. We have had a real strong run this year relative to the market indices. The International has returned 10.2% and by comparison the EFA index;which is the International Index, has returned 5.6%. Bonds have been relatively flat this year but the total portfolio is up 5.2%year to date including the fixed income. That brings your annualized numbers back up to a compound annual of 5.4%. Meeting Adjourned at 2:45 PM POLICE PENSION FUND November 2009 6800-9800 6800-9800 Month 11 Regular Mo 533500 5335-05 11 - EMP# NAME Benefit YTD Reg Benefit Suppl. YTD Suppl. 154 ALLEN,CHARLES $ 2,584.64 $ 28,431.04 $ 50.00 $ 550.00 206 BAYLES,BOBBI J $ 1,587.41 $ 17,461.51 $ 50.00 $ 550.00 107 BLACK,JOE P $ 1,125.64 $ 12,382.04 $ 50.00 $ 550.00 147 BRADLEY,GERALD $ 4,820.09 $ 53,020.99 $ 50.00 $ 550.00 139 BRADLEY,RANDALL $ 2,860.17 $ 31,461.87 $ 50.00 $ 550.00 167 BROWN,JOHN $ 4,362.01 $ 47,982.11 $ 50.00 $ 550.00 157 CARROLL,RONALD L $ 2,106.04 $ 23,166.44 $ 50.00 $ 550.00 151 COLE,RUSTON $ 3,065.74 $ 33,723.14 $ 50.00 $ 550.00 109 COOPER,ADRIAN $ 638.42 $ 7,022.62 $ 50.00 $ 550.00 198 DENNIS,ANNA MARY $ 1,376.88 $ 15,145.68 $ 50.00 $ 550.00 160 DUGGER,GARY $ 3,163.74 $ 34,801.14 $ 50.00 $ 550.00 140 FOSTER, BILLY D. $ 3,207.35 $ 35,280.85 $ 50.00 $ 550.00 148 FRIEND,JERRY $ 3,152.68 $ 34,679.48 $ 50.00 $ 550.00 161 HANNA,JANICE $ 1,368.59 $ 15,054.49 $ - $ - 145 HANNA,MARK $ 1,368.59 $ 15,054.49 $ 50.00 $ 550.00 162 HASKINS,IRENE $ 782.20 $ 8,604.20 $ 50.00 $ 550.00 169 HELDER,TIM $ 5,838.12 $ 64,219.32 $ 50.00 $ 550.00 180 HOYT,RICK $ 7,460.01 $ 82,060.11 $ 50.00 $ 550.00 146 HUTCHENS, BERNICE $ 1,825.54 $ 20,080.94 $ 50.00 $ 550.00 - 143 JOHNSON,CHARLES $ 2,455.50 $ 27,010.50 $ 50.00 $ 550.00 194 JOHNSON,FRANK $ 7,974.81 $ 87,722.91 $ 50.00 $ 550.00 103 JOHNSON,WENDELL $ 783.15 $ 8,614.65 $ 50.00 $ 550.00 118 JONES, BOB $ 3,300.45 $ 36,304.95 $ 50.00 $ 550.00 144 KILGORE, DONALD $ 2,046.48 $ 22,511.28 $ 50.00 $ 550.00 129 LAWSON,FORREST $ 1,567.90 $ 17,246.90 $ 50.00 $ 550.00 150 LITTLE, PATSY R $ 730.35 $ 8,033.85 $ 50.00 $ 550.00 153 LORCH, DONNA G deceased 5/27/09 $ - $ 3,651.75 $ - $ 250.00 156 MARTIN,KENNETH $ 3,692.85 $ 40,621.35 $ 50.00 $ 550.00 128 MCCAWLEY, LARRY $ 1,694.79 $ 18,642.69 $ 50.00 $ 550.00 116 MCCHRISTIAN,MARIE deceased 07/01/09 $ - $ 5,112.45 $ - $ 300.00 126 MCWHORTER, KAREN $ 1,012.10 $ 11,133.10 $ 50.00 $ 550.00 136 MITCHELL,MICHAEL $ 2,305.29 $ 25,358.19 $ 50.00 $ 550.00 141 MUELLER,ROSEMARY $ 2,063.93 $ 22,703.23 $ 50.00 $ 550.00 158 MUNSON,ANGELA $ 4,198.15 $ 46,179.65 $ 50.00 $ 550.00 112 MURPHY,JAKE $ 405.75 $ 4,463.25 $ 50.00 $ 550.00 137 PERDUE, LARRY $ 2,322.67 $ 25,549.37 $ 50.00 $ 550.00 164 PERSHALL, ROBIN $ 1,525.07 $ 16,775.77 $ - $ - 132 PHILLIPS,HOMER GENE $ 1,754.44 $ 19,298.84 $ 50.00 $ 550.00 199 PRESTON,NORMAJ $ 1,601.37 $ 17,615.07 $ 50.00 $ 550.00 135 RICKMAN, LOREN $ 2,231.07 $ 24,541.77 $ 50.00 $ 550.00 104 RIGGINS, RAYMOND C $ 1,669.37 $ 18,363.07 $ 50.00 $ 550.00 183 ROBERTS,ELDON $ 7,479.37 $ 82,273.07 $ 50.00 $ 550.00 183 ROBERTS,ELDON Plus 25 add pay $ 1,029.98 $ 11,329.78 $ - $ - 159 SCHUSTER,JOHN H. $ 3,117.36 $ 34,290.96 $ 50.00 $ 550.00 168 STANLEY,MELVIN $ 4,880.07 $ 53,680.77 $ 50.00 $ 550.00 155 STOUT,BETTY $ 866.51 $ 9,531.61 $ 50.00 $ 550.00 133 SURLES,JERRY $ 2,721.40 $ 29,935.40 $ 50.00 $ 550.00 142 TAYLOR, DENNIS $ 2,063.93 $ 22,703.23 $ 50.00 $ 550.00 106 UPTON, FRANKLIN $ 1,057.08 $ 11,627.88 $ 50.00 $ 550.00 163 WATSON, RICHARD $ 6,947.05 $ 76,417.55 $ 50.00 $ 550.00 163 Watson, Richard Plus 25 Add'1 Pay $ 948.76 $ 10,436.36 $ - $ - 149 WILLIAMS,JOYCE $ 2,539.66 $ 27,936.26 $ 50.00 $ 550.00 195 WRT,BETTY J $ 1,766.83 $ 19,435.13 $ 50.00 $ 550.00 127 WOOD, PAUL J $ 1,580.93 $ 17,390.23 $ 50.00 $ 550.00 $ 135,028.28 $ 1,494,075.28 $2,400.00 $ 26,950.00 POLICE PENSION FUND December 2009 6800-9800 6NO-9800 Month 12 Regular Mo 5335-00 533605 12 EMP# NAME Benefit YTD Reg Benefit Suppl. YTD Suppl. 154 ALLEN,CHARLES $ 2,584.64 $ 31,015.68 $ 50.00 $ 600.00 206 BAYLES,BOBBI J $ 1,587.41 $ 19,048.92 $ 50.00 $ 600.00 107 BLACK,JOE P $ 1,125.64 $ 13,507.68 $ 50.00 $ 600.00 147 BRADLEY,GERALD $ 4,820.09 $ 57,841.08 $ 50.00 $ 600.00 139 BRADLEY,RANDALL $ 2,860.17 $ 34,322.04 $ 50.00 $ 600.00 167 BROWN,JOHN $ 4,36201 $ 52,344.12 $ 50.00 $ 600.00 157 CARROLL,RONALD L $ 2,106.04 $ 25,272.48 $ 50.00 $ 600.00 151 COLE,RUSTON $ 3,065.74 $ 36,788.88 $ 50.00 $ 600.00 109 COOPER,ADRIAN $ 638.42 $ 7,661.04 $ 50.00 $ 600.00 198 DENNIS,ANNA MARY $ 1,376.88 $ 16,522.56 $ 50.00 $ 600.00 160 DUGGER,GARY $ 3,163.74 $ 37,964.88 $ 50.00 $ 600.00 140 FOSTER,BILLY D. $ 3,207.35 $ 38,488.20 $ 50.00 $ 600.00 148 FRIEND,JERRY $ 3,152.68 $ 37,832.16 $ 50.00 $ 600.00 161 HANNA_JANICE $ 1,368.59 $ 16,423.08 $ - $ - 145 HANNA,MARK $ 1,368.59 $ 16,423.08 $ 50.00 $ 600.00 162 HASKINS,IRENE $ 782.20 $ 9,386.40 $ 50.00 $ 600.00 169 HELDER,TIM $ 5,838.12 $ 70,057.44 $ 50.00 $ 600.00 180 HOYT,RICK $ 7,460.01 $ 89,520.12 $ 50.00 $ 600.00 146 HUTCHENS,BERNICE $ 1,825.54 $ 21,906.48 $ 50.00 $ 600.00 143 JOHNSON,CHARLES $ 2,455.50 $ 29,466.00 $ 50.00 $ 600.00 194 JOHNSON,FRANK $ 7,974.81 $ 95,697.72 $ 50.00 $ 600.00 103 JOHNSON,WENDELL $ 783.15 $ 9,397.80 $ 50.00 $ 600.00 118 JONES,BOB $ 3,300.45 $ 39,605.40 $ 50.00 $ 600.00 144 KILGORE,DONALD $ 2,046.48 $ 24,557.76 $ 50.00 $ 600.00 129 LAWSON,FORREST $ 1,567.90 $ 18,814.80 $ 50.00 $ 600.00 150 LITTLE,PATSY R $ 730.35 $ 8,764.20 $ 50.00 $ 600.00 153 LORCH,DONNA G deceased 5/27/09 $ - $ 3,651.75 $ - $ 250.00 156 MARTIN,KENNETH $ 3,692.85- $ 44,314.20 $ 50.00 $ 600.00 128 MCCAWLEY,LARRY $ 1,694.79 $ 20,337.46 $ 50.00 $ 600.00 116 MCCHRISTIAN,MARIE deceased 07/01/09 $ - $ 5,112.45 $ - $ 300.00 126 MCWHORTER,KAREN $ 1,012.10 $ 12,145.20 $ 50.00 $ 600.00 136 MITCHELL,MICHAEL $ 2,305.29. $ 27,663.48 $ 50.00 $ 600.00 141 MUELLER,ROSEMARY $ 2,063.93 $ 24,767.16 $ 50.00 $ 600.00 158 MUNSON,ANGELA $ 4,198.15 $ 50,377.80 $ 50.00 $ 600.00 112 MURPHY,JAKE $ 405.75 $ 4,869.00 $ 50.00 $ 600.00 137 PERDUE.LARRY $ 2,322.67 $ 27,872.04 $ 50.00 $ 600.00 164 PERSHALL,ROBIN $ 1,525.07 $ 18,300.84 $ - $ - 132 PHILLIPS,HOMER GENE $ 1,754.44 $ 21,053.28 $ 50.00 $ 600.00 199 PRESTON,NORMAJ $ 1,601.37 $ 19,216.44 $ 50.00 $ 600.00. 135 RICKMAN,LOREN $ 2,231.07 $ 26,772.84 $ 50.00 $ 600.00 104 RIGGINS,RAYMOND C $ 1,669.37 $ 20,032.44 $ 50.00 $ _ 600.00 183 ROBERTS,ELDON $ 7,479.37 $ 89,752.44 $ 50.00 $ 600.00 183 ROBERTS,ELDON Plus 25 add pay $ 1,029.98 $ 12,359.76 $ - $ - 159 SCHUSTER,JOHN H. $ 3,117.36 $ 37,408.32 $ 50.00 $ 600.00 168 STANLEY,MELVIN $ 4,880.07 $ 58,560.84 $ 50.00 $ 600.00 155 STOUT,BETTY $ 866.51 $ 10,398.12 $ 50.00 $ 600.00 133 SURLES,JERRY $ 2,721.40 $ 32,656.80 $ 50.00 $ 600.00 142 TAYLOR,DENNIS $ 2,063.93 $ 24,767.16 $ 50.00 $ 600.00 106 UPTON,FRANKLIN $ 1,057.08 $ 12,684.96 $ 50.00 $ 600.00 163 WATSON,RICHARD $ 6,947.05 $ 83,364.60 $ 50.00 $ 600.00 163 Watson,Richard Plus 25 Add'I Pay $ 948.76 $ 11,385.12 $ - $ - 149 WILLIAMS,JOYCE $ ,2,539.66 $ 30,475.92 $ 50.00 $ 600.00 195 WITT,BETTY $ 1,766.83 $ 21,201.96 $ 50.00 $ 600.00 127 WOOD,PAUL J $ 1,580.93 $ 18,971.16 $ 50.00 $ 600.00 $ 135,028.28 $ 1,629,103.56 $2,400.00 $ 29,350.00 POLICE PENSION FUND January 2010 6500Aa00 613004B0o Month 1 Regular Mo 5335.00 5336 o 1 EMP# NAME Benefit YTD Reg Benefit Suppl. YTD Suppl. 164 ALLEN,CHARLES $ 2,584.64 $ 2,584.64 $ 50.00 $ 50.00 206 BAYLES,BOBBI J $ 1,587.41 $ 1,587.41 $ 50.00 $ 50.00 107 BLACK JOE $ 1,125.64 $ 1,125.64 $ 50.00 $ 50.00 147 BRADLEY,GERALD $ 4,820.09 $ 4,820.09 $ 50.00 $ 50.00 139 BRADLEY,RANDALL $ 2,860.17 $ 2,860.17 $ 50.00 $ 50.00 167 BROWN,JOHN $ 4,362.01 $ 4,362.01 $ 50.00 $ 50.00 157 CARROLL,RONALD L $ 2,106.04 $ 2,106.04 $ 50.00 $ 50.00 151 COLE,RUSTON $ 3,065.74 $ 3,065.74 $ 50.00 $ 50.00 109 COOPER,ADRIAN $ 638.42 $ 638.42 $ 50.00 $ 50.00 198 DENNIS,ANNA MARY $ 1,376.88 $ 1,376.88 $ 50.00 $ 50.00 160 DUGGER,GARY - $ 3,163.74 $ 3,163.74 $ 50.00 $ 50.00 140 FOSTER,BILLY D. $ 3,207.35 $ 3,207.35 $ 50.00 $ 50.00 148 FRIEND,JERRY $ 3,152.68 $ 3,152.68 $ 50.00 $ 50.00 161 HANNA,JANICE $ 1,368.59 $ 1,368.59 $ - $ - 145 HANNA,MARK $ 1,368.59 $ 11368.59 $ 50.00 $ 50.00 162 HASKINS,IRENE $ 782.20 $ 782.20 $ 50.00 $ 50.00 169 HELDER,TIM $ 5,838.12 $ 5,838.12 $ 50.00 $ 50.00 180 HOYT,RICK $ 7,460.01 $ 7,460.01 $ 50.00 $ 50.00 146 HUTCHENS,BERNICE $ 1,825.54 $ 1,825.54 $ 50.00 $ 50.00 143 JOHNSON,CHARLES $ 2,455.50 $ 2,455.50 $ 50.00 $ 50.00 194 JOHNSON,FRANK $ 7,974.81 $ 7,974.81 $ 50.00 $ 50.00 103 JOHNSON,WENDELL $ 783.15 $ 783.15 $ 50.00 $ 50.00 118 JONES,BOB $ 3,300.45 $ 3,300.45 $ 50.00 $ 50.00 144 KILGORE,DONALD $ 2,046.48 $ 2,046.48 $ 50.00 $ 50.00 129 LAWSON,FORREST $ 1,567.90 $ 1,567.90 $ 50.00 $ 50.00 150 LITTLE,PATSY R $ 730.35 $ 730.35 $ 50.00 $ 50.00 153 LORCH,DONNA G deceased 5127109 $ - $ 3,651.75 $ - $ 250.00 156 MARTIN,KENNETH $ 3,692.85 $ 3,692.85 $ 50.00 $ 50.00 128 MCCAWLEY,LARRY $ 1,694.79 $ 1,694.79 $ 50.00 $ 50.00 116 MCCHRISTIAN,MARIE decessed 07/01/09 $ - $ 5,112.45 $ - $ 300.00 126 MCWHORTER,KAREN $ 1,012.10 $ 1,012.10 $ 50.00 $ 50.00 136 MITCHELL,MICHAEL $ 2,305.29 $ 2,305.29 $ 50.00 $ 50.00 141 MUELLER,ROSEMARY $ 2,063.93 $ 2,063.93 $ 50.00 $ 50.00 158 MUNSON,ANGELA $ 4,198.15 $ 4,198.15 $ 50.00 $ 50.00 112 MURPHY,JAKE $ 405.75 $ 405.75 $ 50.00 $ 50.00 137 PERDUE,LARRY $ 2,322.67 $ 2,322.67 $ 50.00 $ 50.00 164 PERSHALL,ROBIN $ 1,525.07 $ 1,525.07 $ - $ - 132 PHILLIPS,HOMER GENE $ 1,754.44 $ 1,754.44 $ 50.00 $ 50.00 199 PRESTON,NORMA J $ 1,601.37 $ 1,601.37 $ 50.00 $ 50.00 135 RICKMAN,LOREN $ 2,231.07 $ 2,231.07 $ 50.00 $ 50.00 104 RIGGINS,RAYMOND C $ 1,669.37 $ 1,669.37 $ 50.00 $ 50.00 183 ROBERTS,ELDON $ 7,479.37 $ 7,479.37 $ 50.00 $ 50.00 183 ROBERTS,ELDON Plus 25 add pay $ 1,029.98 $ 1,029.98 $ - $ - 159SCHUSTER,JOHNH. $ 3,117.36 $ 3,117.36 $ 50.00 $ 50.00 168 STANLEY,MELVIN $ 4,880.07 $ 4,880.07 $ 50.00 $ 50.00 155 STOUT,BETTY $ 866.51 $ 866.51 $ 50.00 $ 50.00 133 SURLES,JERRY $ 2,721.40 $ 2,721.40 $ 50.00 $ 50.00 142 TAYLOR,DENNIS $ 2,063.93 $ 2,063.93 $ 50.00 $ 50.00 106 UPTON,FRANKLIN ' $ 1,057.08 $ 1,057.08 $ 50.00 $ 50.00 163 WATSON,RICHARD $ 6,947.05 $ 6,947.05 $ 50.00 $ 50.00 163 Watson,Richard Plus 25 Add'I Pay $ 948.76 $ 948.76 $ - $ - 149 WILLIAMS,JOYCE $ 2,539.66 $ 2,539.66 $ 50.00 $ 50.00 195 WITT,BETTY $ 1,766.83 $ 1,766.83 $ 50.00 $ 50.00 127 WOOD,PAUL J $ 1,580.93 $ 1,580.93 $ 50.00 $ 50.00 $ 135,028.28 $ 143,792.48 $2,400.00 $ 2,950.00 PRO Q7- , n""" ARKANSAS FIRE&POLICE PENSION REVIEW BOARD 620 W.3rd,Suite 200 Little Rock,Arkansas 72201-2223 lone: (501)682-1745 RECEIVED TTollll--Free:(866)859-1745 SEP 2 4 2009 Fax:(501)682-1751 To: Board of Trustees TY F FAYETTEVILLE email:info@lopfi-prb.com FAYETTEVILLE Police Pension and Relief umt�YORs OFFICE website:www.lopfi-prb.com From: PRB Staff Re: 2008 Actuarial Valuation Date: September 22, 2009 Under state law the actuary for the PRB tests each local fire and police pension fund for actuarial soundness. Effective with this report,the PRB has implemented an annual valuation cycle to assist each fund in monitoring the funding progress of their pension fund. The enclosed valuation for December 31, 2008, answers the following questions about your fund: YES NO 1. Does income meet or exceed the Necessary Employer Contribution(see page 4)? 2. Is the funded percentage at least 97% (see page 10), OR are there enough assets to cover: all active member contributions; all payments to current beneficiaries; and 100%of all future payments earned by active members (see page 11)? 3. Is the pension fund actuarially sound? (YES response to item 1 and 2) FAYETTEVILLE POLICE PENSION FUND ACTUARIAL VALUATION AS OF DECEMBER 31, 2008 Osborn, Carreiro & Associates, Inc. Actuaries Consultants Analysts Little Rock, Arkansas Osborn, Carreiro & Associates, Inc. One Union National Plaza,Suite 1690 174 West Capitol Avenue ACTUARIES • CONSULTANTS • ANALYSTS Little Rock,Arkansas 72201 (501)376-8043 FAX(501)376-7847 September 22,2009 Board of Trustees Fayetteville Police Pension Fund Gentlemen: This report presents the results of our actuarial valuation of the assets and liabilities of the Fayetteville Police Pension Fund as of December 31,2008. This valuation is required by Arkansas Code Annotated 24-11-205. The purpose of this report is to (1) evaluate the actuarial status of the Fund,(2)determine the level contribution requirement needed, (3) review the development of the Fund over the past several years,and(4)present certain actuarial items on page 9 for disclosure under Governmental Accounting Standards. This report is not intended for any other purpose. The member and financial information used in this report was supplied by the Arkansas Fire &Police Pension Review Board. We did not audit this information, although we did review it for reasonableness and consistency. I certify that this report has been prepared in accordance with generally accepted actuarial principles and practices. In my opinion,the actuarial methods used are appropriate and the actuarial assumptions produce results which, in the aggregate,are reasonable. Sincerely, Steve Osborn,F.S.A.,M.A.A.A. Actuary TABLE OF CONTENTS EXHIBIT 1 CONTRIBUTIONS EXHIBIT 2 COST AND LIABILITIES EXHIBIT 3 SUMMARY OF FINANCIAL INFORMATION EXHIBIT 4 COMPARISON WITH PRIOR YEARS EXHIBIT 5 SHORT CONDITION TEST EXHIBIT 6 EMPLOYEE AND RETIREE PROFILES EXHIBIT 7 PRINCIPLE PROVISIONS OF THE PLAN EXHIBIT 8 ACTUARIAL METHODS AND ASSUMPTIONS EXHIBIT 1 CONTRIBUTIONS The following contribution level reflects the payment of the current year Normal Cost for benefits attributable to said year(see Exhibit 2)plus an amount sufficient to pay off the Unfunded Actuarial Liability over a 5-year period. These costs DO NOT include the contributions due to the Local Police and Firefighters Retirement System("LOPFI") for persons hired after 1982. 2009 Necessary Annual Contribution to pay: 1 Normal Cost,plus $ 0 2 Pay off the Unfunded Actuarial Accrued Liability 2,108,536 3 Total necessary $ 2,108,536 Less 4 Expected Employee Contribution 0 (6.00%of salary) Necessary Employer Contribution $ 2,108,536 (This is the amount needed in addition to investment income) Covered Payroll $ 0 Necessary Employer Rate 0.00% These contributions assume that the dollar contribution grows at a rate of 4%per year. The contributions are assumed to be made continuously throughout the year. The actual 2008 contribution was$767,425 from the employer. 4 EXHIBIT 2 COSTS AND LIABILITIES December 31, 200 A Normal Cost Dollar Percent (Cost to fund current active members) Amount of nay 1 Regular Retirement Benefits $ 0 0.00% 2 Voluntary Termination Benefits 0 0.00% 3 Survivors'Benefits 0 0.00% 4 Disability Benefits 0 0.00% TOTAL $ 0 0.00% B Actuarial Accrued Liability 1 Active Lives Regular Retirement Benefits $ 0 Voluntary Termination Benefits 0 Survivors'Benefits 0 Disability Benefits 0 TOTAL ACTIVE LIVES $ 0 2 Inactive Lives Retirees $ 14,199,854 Disability Retirees 3,338,134 Widows &Children 1,477,150 TOTAL INACTIVE LIVES $ 19,015,138 3 Total Liability $ 19,015,138 C Assets $ 9,384,367 D Unfunded Actuarial Accred Liability $ 9,630,771 5 EXHIBIT 3 SUMMARY OF FINANCIAL INFORMATION (Items D-E, and G determined by Osborn, Carreiro and Associates, Inc.) Year Ended Year Ended Year Ended A. INCOME 12/31/2006 12/31/2007 12/31/2008 1 Employee Contributions $ 4,139 $ 0 $ 0 2 Employer Contributions Employer/Court Fines/Other 133,768 117,191 139,299 Insurance Tax 226,826 190,192 186,429 Local Millage 370,649 388,877 441,697 3 Other Income Guarantee Fund 0 0 0 LOPFI Subsidy 0 0 0 Police Supplement(Act 1452 of 1999) 30,000 30,000 30,000 Future Supplement(Act 1373 of 2003) 60,060 86,040 41,370 Other Income/Donations 1,427 907 161 Adjustment to prior year 0 0 0 asset value 4 Net Investment Income 707,831 664,365 (608,217) TOTAL INCOME $ 1,534,700 $ 1,477,572 $ 230,739 B. EXPENSES 1 Administrative $ 4,481 $ 3,695 $ 3,703 2 Benefits Paid Monthly Benefits 1,456,466 1,581,319 1,638,068 Police Supplements 29,600 30,000 30,000 Future Supplements 60,060 86,040 41,370 DROP Payouts 0 0 0 3 Refunds 0 0 0 TOTAL EXPENSES $ 1,550,607 $ 1,701,054 $ 1,713,141 6 EXHIBIT 3 (Continued) C ASSETS (at book value) 12/31/2006 12/31/2007 12/31/2008 1 Cash&Checking Accounts $ 0 $ 0 $ 0 2 Bank Deposits 1,260 5,952 1,818 3 Savings and Loan Deposits .0 0 0 4 Other Cash Equivalents 272,024 503,276 882,635 5 US Govt. Securities 4,395,290 4,049,437 2,455,193 6 Non-US Govt Securities 0 0 0 7 Mortgages 0 0 0 8 Corporate Bonds 381,729 258,140 401,276 9 Common Stocks 4,984,362 5,003,139 4,601,263 10 Other 84,418 75,657 71,029 11 Payables (15,000) (15,000) (15,015) TOTAL ASSETS $ 10,104,083 $ 9,880,601 $ 8,398,199 D. RATIO OF ASSETS TO ANNUAL EXPENSES: 6.5 5.8 4.9 E. NET INVESTMENT RETURN: 7.3% 6.9% -6.4% (Book Value Basis) 7 Exhibit 3(Continued) 12/31/2004 12/31/2005 12/31/2006 12/31/2007 12/31/2008 F. TOTAL MARKET VALUE I. Market Value,end of year 10,956,940 10,562,465 10,891,530 10,819,789 8,046,356 (Used for GASB calculations,page 9) 2. Market Value,beginning of year 10,937,721 10,956,940 10,562,465 10,891,530 10,819,789 G. DEVELOPMENT OF ACTUARIAL VALUE OF ASSETS 1. Actuarial Value of Assets,beginning of year 11,125,008 10,834,537 10,564,073 10,340,256 10,153,823 2. Non Investment Net Cash Flow (538,770) (525,386) (723,738) (887,847) (874,185) 3. Development of Investment Income (a) Total Market Investment Income(Fl-F2-G2) 557,989 130,911 1,052,803 816,106 (1,899,248) (b) Amount for Immediate Recognition(6%Gl) 667,500 650,072 633,844 620,415 609,229 (c) Amount for Phased In Recognition(a-b) (109,511) (519,161) 418,959 195,691 (2,508,477) (d) Phased In Recognition Current year: 20%of 3(c) (21,902) (103,832) 83,792 39,138 (501,695) First Prior Year 83,802 (21,902) (103,832) 83,792 39,138 Second Prior Year (175,782) 83,802 (21,902) (103,832) 83,792 Third Prior Year (177,436) (175,782) 83,802 (21,902) (103,832) Fourth Prior Year (127,884) (177,436) (175,782) 83,802 (21,902) Total Phased In Recognition (419,202) (395,150) (133,922) 80,998 (504,500) (e) Actuarial Value Investment Income 248,299 254,922 499,922 701,413 104,729 (3(b)+3(d)) 4. Actuarial Value of Assets,End of year ( I +2+3(e)) 10,834,537 10,564,073 10,340,256 10,153,823 9,384,367 5. Net Investment Return on the 2.3% 2.4% 4.9% 7.1% 1.1% Actuarial Value of Assets Note: The Pension Review Board's Board Rule#11 first applies this methodology to determine the Actuarial Value of Assets for the 12/31/99 actuarial valuation report. Different methods were used to determine the Actuarial Value of Assets for the 12/31/98 and earlier reports. 8 EXHIBIT 3 (Continued) ACCOUNTING INFORMATION This page is included to provide the information required by the Governmental Accounting Standards Board Statement No. 25 and 27. The values below are based on the assumptions contained in Exhibit 8. The Annual Pension Cost disclosed in this exhibit will almost always differ from the actual cash contribution to the fund. We must emphasize that these disclosures are shown in the city's financial statements; Sound actuarial projections should be used to determine the actual cash contribution requirements. RECONCILIATION OF NET PENSION OBLIGATION(NPO) 2007 2008 2009 1. Actuarially Required Contribution 2,071,634 1,726,852 2,401,477 2. Interest on NPO 124,319 218,990 253,534 3. Adjustment to(1) 443,241 684,931 792,974 4. Annual Pension Cost(1)+(2)-(3) 1,752,712 1,260,911 1,862,038 5. Actual Contribution Made 696,260 767,425 6. Increase in NPO (4)-(5) 1,056,452 493,486 7. NPO Beginning of Year 2,071,981 3,128,433 3,621,919 8. NPO End of Year 3,128,433 3,621,919 REQUIRED SUPPLEMENTARY INFORMATION (a) (b) (c) (d) (e) (f) (g) Unfunded Entry Age Accrued UAL as a% Actuarial Market Actuarial Liability Funded Annual of Covered Valuation Value of Accrued (UAL) Ratio Covered Payroll Date Plan Assets Liability (c)-(b) (b)/(c) Payroll (d)/(f) 12/31/1999 11,665,225 15,361,181 3,695,956 75.9% 482,457 766.1% 12/31/2001 10,780,521 15,902,803 5,122,282 67.8% 384,312 1332.8% 12/31/2003 10,937,721 18,596,975 7,659,254 58.8% 219,008 3497.2% 12/31/2005 10,562,465 20,132,980 9,570,515 52.5% 70,279 13617.9% 12/31/2007 a 10,819,789 18,707,210 7,887,421 57.8% 0 N/A 12/31/2008 8,046,356 19,015,138 10,968,782 42.3% 0 N/A a Beginning with 12/31/2007 valuation,in consultation with the Pension Review Board, the assumptions were changed to a 7%discount rate and 83GAM mortality. 9 EXHIBIT 4 COMPARISON WITH PRIOR YEARS This exhibit compares current valuation results with those of prior years. Full Paid Actuarial Computed Active Members Emulover Contribution Total Plan Unfunded Normal Valuation Annual Percent Dollar Actuarial Cost Funded Date No. Payroll of Pay Amount Assets Liability Percent Percent 12/31/1984 38 691,245 32.9% 227,671 2,637,566 1,685,881 23.7% 61.0% 12/31/1986 29 604,566 35.5% 214,342 3,251,235 1,712,937 23.9% 65.5% 12/31/1987 * 28 666,941 37.8% 252,114 3,374,250 2,065,775 24.6% 62.0% 12/31/1989 25 634,711 38.8% 246,132 4,009,866 2,175,493 27.2% 64.8% 12/31/1991 24 675,900 35.9% 242,541 5,144,950 1,632,194 28.2% 75.9% 12/31/1993 17 536,070 37.2% 199,314 6,293,999 1,232,923 27.8% 83.6% 12/31/1995 * 15 518,643 37.5% 194,517 7,187,710 989,655 27.7% 87.9% 12/31/1997 12 491,422 15.1% 74,142 9,126,449 (255,946) 26.9% 102.9% 12/31/1999 * 11 482,457 175.7% 847,558 10,572,573 4,788,608 45.2% 68.8% 12/31/2001 7 384,312 252.4% 969,851 11,353,564 4,549,239 41.6% 71.4% 12/31/2003 * 3 219,008 0.0% 1,678,182 11,125,006 7,471,969 36.4% 59.8% 12/31/2005 * 1 70,279 0.0% 2,071,290 10,564,072 9,568,908 40.6% 52.5% 12/31/2007 * 0 0 0.0% 1,872,657 10,153,822 8,553,388 0.0% 54.3% 12/31/2008 0 0 0.0% 2,108,536 9,384,367 9,630,771 0.0% 49.4% * Benefits or assumptions changed Note: Normal cost prior to 12/31/89 is net of 6%employee contributions. 10 EXHIBIT 5 SHORT CONDITION TEST The Arkansas General Assembly has stated that the funding objective for these plans is to pay for benefits with contributions that remain level as a percentage of employee payroll. Thus,the long-term condition test is met when the actual contributions are fairly level and are paid when due. A short condition test can be used to measure a plan's progress. Under the short condition test,the fund's assets are compared with: 1) Active member contributions; 2) The liabilities for future benefits to the present retirees and inactive members; 3) The liabilities for service already rendered by active members. If the plan has been following level cost funding, liability(1)and liability(2)above will almost always be fully covered by the rest of the present assets. In addition, liability(3) above will at least partially fixnded. The larger the funded portion of liability(3),the stronger the condition of the fund. For a closed fund i.e.,one like yours,where no new members are admitted),the funded portion of liability(3)should be steadily increasing. The following table illustrates the history of the short condition test for this plan: Computed Actuarial Liabilities Portion of Liabilities covered by Assets (1) (2) (3) Active Retirees Actives- Valuation Members and Employer Valuation Date Contributions Inactives Financed Assets (1) (2) (3) 12/31/1984 186,492 2,220,660 1,916,295 2,637,566 100% 100% 12% 12/31/1986 200,487 2,982,120 1,781,565 3,251,235 100% 100% 4% 12/31/1987 229,457 3,095,232 2,115,336 3,374,250 100% 100% 2% 12/31/1989 266,726 3,719,388 2,199,245 4,009,866 100% 100% 1% 12/31/1991 336,940 3,674,180 2,766,024 5,144,950 100% 100% 41% 12/31/1993 299,612 4,834,716 2,392,594 6,293,999 100% 100% 48% 12/31/1995 319,728 5,358,162 2,499,475 7,187,710 100% 100% 60% 12/31/1997 317,594 5,944,842 2,608,067 9,126,449 100% 100% 110% 12/31/1999 347,267 10,047,770 4,966,144 10,572,573 100% 100% 4% 12/31/2001 291,291 11,488,981 4,122,531 11,353,564 100% 96% 0% 12/31/2003 155,251 16,072,819 2,368,905 11,125,006 100% 68% 0% 12/31/2005 50,523 19,314,460 767,997 10,564,072 100% 54% 0% 12/31/2007 0 18,707,210 0 10,153,822 100% 54% 0% 12/31/2008 0 19,015,138 0 9,384,367 100% 49% 0% 11 Exhibit 6 Employee Profile Employee data needed for the valuation was obtained from the records furnished by the Arkansas Fire and Police Pension Review Board. The following table shows a detailed breakdown of the present participants by the number of participants and total salary. Actives Years of Service 30 and Age 0-5 5-10 10-15 15-20 20-25 25-30 Over Total Under Count 0 0 0 0 0 0 0 .6 25 Salary 0 0 0 0 0 0 0 25-29 Count 0 0 0 0 0 0 0 Salary 0 0 0 0 0 0 0 30-34 Count 0 0 0 0 0 0 0 Salary 0 0 0 0 0 0 0 35-39 Count 0 0 0 0 0 0 Salary 0 0 0 0 0 0 0 ' 40114 Count 0 0 0 0 0 0 0 Salary 0 0 0 0 0 0 0 sx 45-49 Count 0 0 0 0 0 0 0 Salary 0 0 0 0 0 0 0 ': 50-54 Count 0 0 0 0 0 0 0H' Salary 0 0 0 0 0 0 0 55-59 Count 0 0 0 0 0 0 0 Salary 0 0 0 0 0 0 0 60-64 Count 0 0 0 0 0 0 0 1 " Salary 0 0 0 0 0 0 0 65 & Count 0 0 0 0 0 0 0 Over Salary 0 0 0 0 0 0 0 , �"BE Unknown Count 0 0 0 0 0 0 0 Age Salary 0 0 0 0 0 0 0 Total Count k0 Q 7 x§ .Salary 12