HomeMy WebLinkAbout2011-02-24 - Agendas - Final Fayetteville Policeman's Pension and Relief Fund
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Mayor Jordan Mayor Jordan
Jerry Friend Jerry Friend
Tim Helder Tim Helder
Frank Johnson Frank Johnson
Eldon Roberts Eldon Roberts
Melvin Stanley Melvin Stanley
Sondra Smith Sondra Smith
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Eldon Roberts Secretary/Retired Position 1 'A FraniJ Stanley Retired Position 4
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ARKANSAS
Policemen's Pension and Relief Fund
Board of Trustees Meeting Agenda
February 24, 2011
A meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees will be
held on February 24, 2011 at 3:00 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 October 21, 2010 meeting minutes
Pension List Changes:
• None
Approval of the Pension List:
• Approval of the February, March, and April 2011 Pension Lists
New Business:
• A discussion regarding the Firemen's Pension Board letter to PRB in support of State
Statute changes.
• Board Election: Eldon Roberts, Tim Helder and Melvin Stanley
Discussion Items:
• LOPFI
• How we can we get the beneficiaries involved in the discussion of the future of our
plan.
Longer Investments:
• The Longer View
• Northern Trust Correction Letter
• Longer Investments monthly report.
• Longer Investments 4th Quarter 2010 report.
Informational:
• 2011 Meeting Schedule
Board Members
Policemen's Pension and Relief Fund
Mayor Jordan Chairman Board of Trustees Meeting Minutes
Sondra E.Smith Treasurer TayeVI
October 21,2010
Bl ndr Roberts Treas aryBetired Position 1Page 1 of 12
Jerry Friend Retired Position 2Tim Helder Retired Position 3 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
October 21,2010
A meeting of the Fayetteville Policemen's Pension and Relief Fund Board of Trustees was held
at 3:00 PM on October 21, 2010 in Room 326 of the City Administration Building
Mayor Jordan called the meeting to order.
Present: Jerry Friend, Tim Helder, Melvin Stanley, Eldon Roberts, Mayor Jordan, Kit
Williams, City Attorney, Sondra Smith, City Clerk, Paul Becker, Finance and Internal
Services Director, and Kim Cooper,Longer Investments.
Frank Johnson was absent
Approval of the Minutes:
Approval of the July 15,2010 meeting minutes
Eldon Roberts moved to approve the July 15, 2010 Policemen's Pension and Relief Fund
Board of Trustees meeting minutes. Melvin Stanley seconded the motion. Upon roll can
the motion passed 6-0. Frank Johnson was absent.
Pension List Changes:
Glen Riggins deceased in August—Surviving spouse—Bonnie Riggin
Sondra Smith: Mr. Riggins deceased in August. We have a revised list for September and
October removing him and adding his spouse..
Approval of the Pension List:
Re-approval of the September and October,2010 pension list. Glen Riggins deceased.
Approval of the November and December,2010 Pension List
Approval of the January,2011 Pension List
Eldon Roberts moved to approve the Pension Lists. Tim Helder seconded the motion.
Upon roll call the motion passed 6-0. Frank Johnson was absent.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
October 21,2010
Page 2 of 12
New Business:
Bonnie Riggin affidavit was received
Sondra Smith: We received Ms. Riggin affidavit stating she is eligible to draw the pension.
Sent funeral expense check to Glen W22ins estate
Sondra Smith: There is a benefit amount that goes to the pensioner's estate for $200. The
check was sent to Mr. Riggins estate.
Revenue Expense Report for August 31 and September 30
Sondra Smith: Trish Leach does this report for the board. August 2010 shows a market value
of $8,074,655.67. The market value for September 30s' is $8,275.970.61. Your market value
went up a little bit. Your book value stayed about the same.
2010 Turnback Distribution
Sondra Smith: I completed a spreadsheet for the board to show you the distribution amount for
2010. We went back to 2002 so you can see the difference in the distribution amount over the
years. There were two people that deceased, Anna Mary Dennis and Forrest Lawson. Their
turnback goes into your fund.
December 31,2009 Actuarial Valuation
A copy was emailed to the board.
Sondra Smith: That is the very latest actuarial report where they changed the assumption
numbers from 7% to 5%, which caused the unfunded liability to increase. Page 11 is the short
test. Page 10 shows the unfunded actuarial liability is now $13,561,667. It was $9,637,071 in
2008.
Paul Becker: The reason for the big jump in those unfunded liabilities is because of the
discount rate going from 7%to 5%but that is much more realistic to where you are.
Sondra Smith: It shows that you are only 39.7% flmded because of that change.
Kit Williams: That's obviously an assumption. I will say the historic record of getting 6%, if
Elaine can continue to do that, it would be a better number than what the actuary is giving you.
Sondra Smith: The report is normally only done every two years. There was a special report
done in 2008.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
October 21,2010
Page 3 of 12
Paul Becker: This is an extra one. This is the second one in a row they did because of the very
bad investment returns from the previous year. I don't know if they plan to do that in the future
or not.
Sondra Smith: They should go back to every other year unless they decide to do it yearly.
Discussion Items:
LOPFI
Sondra Smith: I was asked to keep the LOPFI discussion on the agenda. We can take it off
anytime you choose.
Kit Williams: The good news is they didn't come to tell you that you are a distressed bankrupt
fund like they did with the Fire.
Mayor Jordan: I don't want this pension system to get into what I'm seeing with the Fire.
Eldon you are right in thinking we are going to get 6% and we are going to come out of this
thing. There are no guarantees in that so you may need to take a small reduction in benefits to
keep this solid. I can't do too much about what's happened with the Fire Pension but we can do
something here. I'm not saying you need to do that.
Tim Helder: It always needs to be on the table. It's my understanding through all the
discussions that there is really no precedence set that we can reduce benefits. What we are going
to have to do at some point is make a determination if we are going to move in that direction.
Then I guess the courts are going to decide this matter.
Kit Williams: Then one of the beneficiaries would need to say "that's wrong I'm entitled to my
full benefit, you can't reduce it even 5% or 10%." Then we would have a case where the judge
could tell us. Until that happens I don't know how we get to court for the judge to tell us.
Jerry Friend: What if we did it and no one sued?
Kit Williams: We wouldn't get an answer.
Jerry Friend: In twenty years someone could still sue.
Kit Williams: I think they can go back three years. They can't go back all the way. In fact if a
decision was made they might be cut off if they wait too long on the initial decision. I would
rather have it done immediately.
Jerry Friend: I would too.
Kit Williams: So that we could get a quick decision. It would have to go to the Supreme Court
to get a final decision on how that should be interpreted. Then it won't necessarily be a final
decision because legislature can always change the statute. I could be arguing before the
Supreme Court and it would be mute. There is no simple answer here. Fortunately you all are in
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
October 21,2010
Page 4 of 12
significantly better shape than the Fire. Page eight shows the ending market and in 2005 you
were at almost $11 million, then you went down to $10.5 million, you didn't get below $10
million until 2008 where you went to $8 million. Now you are back up a little bit. The last
couple years you have scrambled back up while still paying benefits and you are at $8.3 million.
You're not bleeding like the Fire Pension is bleeding. No matter what the market does there's
virtually no way that it can pull them out. You all certainly have more time.
Mayor Jordan: Absolutely.
Eldon Roberts: That's what I relish is the fact that we have more time.
Melvin Stanley: When the time comes that we have to cross that bridge and there has been no
precedence set, what will our guidelines be for reduction of benefits? Can we write up a contract
between all of us that we reduce benefits for twelve months?
Eldon Roberts: We will have to look at it.
Kit Williams: You would certainly be able to go back in and increase them in the future if your
fund could pass a cash flow method again.
Tim Helder: You wouldn't be able to do the reverse like we did on the COLA, where we set a
five year limit and at that time it came back and we would have to vote on it again. In your
thinking would be able to do the same thing with the reduction and put a time frame on it to
revisit?
Kit Williams: We are just shooting in the dark here. There is no procedure set forth in the
ordinance. It just says if it is going to go bankrupt then you can prorate it. It doesn't say you can
prorate for a certain period of time or not. First you would want to choose an amount that
wouldn't be anymore than you would absolutely need. In your case you are probably talking
around 10% and not 20% or 22% like the Fire. If you ander shot it and the fund starts growing
and you are not paying out that much and you are getting more in then you would certainly be
able to go back to the board and use the standard method that you've used in the past to have a
COLA or increase benefits.
Eldon Roberts: If we, as the local pension board, decide to reduce benefits since there is no law
telling us we can do that, why can't we do it for a two year period and not have to jump through
all the hoops of a cash flow study? Who's to say we are going to get that passed.
Kit Williams: That would be possible. The only real limitation you have on doing that is that
the part of the over all statute, the section that I think gives you the most power to do this, talks
about prorating the benefits. You would have to do it as a percentage rather than a certain
amount. You could just say everybody is going to lose this amount. You would have to do a
proration but it is possible you could do it just like you did with a COLA especially if you could
get an agreement from the other members. Even though this is governed by the statute if
everyone agrees then no one would be there to challenge it.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
October 21,2010
Page 5 of 12
Melvin Stanley: That would be the fear of other pensioners and me is that if we did reduce
benefits even if the fund came back to $20,000,000 we might never be able to return to those
benefits because we couldn't get a vote to okay it.
Kit Williams: That's possible too. I think you would get a vote but to ensure that it would not
be a problem I think we might go the other way.
Tim Helder: We are setting a precedence either way.
Kit Williams: Part of it is because I think you have the inherent power as a board to try to keep
your trust fund from going broke. If you have that inherent power that's more than just the
statutory part therefore you have more options.
Tim Helder: In your opinion if we did word it like we did the COLA, beginning January 2011 a
reduction of benefits of 5% or 10% for a certain amount of time and at such time it reverts back
to what it was before we had a reduction. Then we could visit it again and if we are still in need
of having a reduction we could vote it back in.
Paul Becker: Legally you don't know where you are.
Tim Helder: If we do any kind of reduction the odds are we are going to get sued by somebody.
Mayor Jordan: If you let the thing go in the ground you are probably going to get sued
anyway.
Tim Helder: I'm not afraid of being sued. I'm just trying to figure out what's the best way to
react as a board to be responsible to the other pensioners.
Kit Williams: That would also possibly restrict the amount of any attorney's fees that would be
allowed to the other side because it would be a more limited reduction. The reduction would not
only be a fairly small percentage but a limited amount of time.
Jerry Friend: He could say I saved you for forty years. Now he can only say I saved you for
three years.
Kit Williams: You might want it to be a three year term instead of five and then see where you
are at.
Jerry Friend: I like that idea.
Paul Becker: Let's not forget that the PRB is actually the overseer of all these pension plans. If
in fact you lowered benefits and they took exception to it you might automatically end up in
court. What you would have to do if you did it, is send it down to them and tell them what you
are doing. They have one big hold on us. They can withhold premium tax and they have the
ability to do that.
Jerry Friend: Why would they not want us to lower?
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
October 21,2010
Page 6 of 12
Paul Becker: I'm speculating I have no idea.
Kit Williams: What right do they have to withhold premium tax?
Eldon Roberts: Anytime we are out of compliance with their rules and regulations that is the
big stick they hold over you.
Paul Becker: Anytime we are out of compliance under their recommendation they have the
ability to withhold.
Kit Williams: Then we would have to sue them.
Eldon Roberts: Just like if we were granted benefit increases without their blessing they can
withhold it.
Paul Becker: All I'm saying is by lowering the benefits you might automatically have a
controversy.
Kit Williams: If they didn't pay us what they should be paying us that would surely be a
controversy.
Eldon Roberts: We are not there yet.
Mayor Jordan: We are just opening it up for discussion.
Kit Williams: That is something to think about. I think the short term thing makes a lot of
sense.
Melvin Stanley: What Sondra said about the LOPFI discussion is probably wasted ink. I was at
the meeting Monday.
Kit Williams: It's more expensive to go to LOPFI than to pay the amount they were short. Isn't
that what it looked like Paul? When he did his figures and said this is how much it costs to go to
LOPFI. If they just lost money and ran the bank down and then the City paid, it looked like the
City paying cash into the fund was less than if we sent it to LOPFI.
Paul Becker: It was a graduated 15 year schedule if they sent it to LOPFI. It started at
$163,000 and graduated to almost $600,000. If you looked at the bottom line of both numbers
they were pretty close.
Melvin Stanley: Then it was $250,000 for 30 years.
Paul Becker: I think it was $325,000 or $350,000 over a 15 year period or if it was send to
LOPFI it was a graduated schedule. If you looked at the bottom line of the numbers actually
they were not that far apart over time.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
October 21,2010
Page 7 of 12
Kit Williams: They made the costs to go into LOPFI much more because they have reduced
that to 5% so they are going to assume it is only going to grow at 5% and that means our cost
going into LOPFI just zoomed up. Now they are predicting a much bigger deficient.
Melvin Stanley: I wouldn't assume that the board's attitude toward us if we got in this position
would be much different than it would be towards the fire department. There was not a whole lot
of sympathy that I saw in the room the other day. I think we are pretty much on our own.
Paul Becker: That's probably true but the numbers for you would be a lot lower. You wouldn't
have to make as deep a cut if you did something.
Eldon Roberts: When Carreiro came up here a year and a half ago and we had a joint meeting
with Fire and Police it came out in the newspaper that for $150,000 a year the police pension
could be moved to LOPFI with no benefit reductions and no COLA but our benefits would be
etched in stone.
Kit Williams: But we would be on the hook for it.
Eldon Roberts: No, I understand that but $150,000 would move us to LOPFI, no benefit
decreases to our beneficiaries, no COLA from now on, and we would be good to go from now
on. We wouldn't have all these discussions about going broke. I didn't think that sounded too
bad. Since that time we have got a lot more financially sound.
Kit Williams: It made it look worse even though it wasn't worse.
Sondra Smith: The feeling I got from the Council members, that were at the meeting Monday
night, was if the Fire Pension reduces benefits,then they can come and talk to them but until they
reduce benefits they are not really interested.
Paul Becker: He said $150,000 and that was off the top of his head under pressure. They are
going around to six funds that they feel are in jeopardy of going defunct over the next ten to
fifteen years so they did specialized studies. They did two hundred simulations in their
sensitivity analysis so they have a 90% confidence level. They put a lot of time and effort into
that calculation. To do the same for you would be very costly and they did that because they
were instructed to by the board. To come up with a definitive number like you are talking about
would probably be pretty expensive.
Sondra Smith: That $150,000 isn't a guaranteed number for the City.
Eldon Roberts: That's right I understand that too.
Paul Becker: They really have to do a calculation.
Kit Williams: That was under the 7% instead of 5%. That number would go up since they are
assuming less growth now.
Policemen's Pension and Relief Fund -
Board of Trustees Meeting Minutes
October 21,2010
Page 8 of 12
Jerry Friend: Kit you said a few meetings ago, since we are not in dire straights right now it
would be better to let some other entity sue or lower their benefits and make sure it is going to
work.
Kit Williams: It's much more incumbent upon the Fire Pension to do that because theirs is in
very serious shape. Other cities could do it too.
Eldon Roberts: Maybe other cities will do it ahead of ours.
Jerry Friend: I know Little Rock is in bad shape.
Eldon Roberts: Little Rock PD is supposedly in worse shape than Fayetteville Fire.
Jerry Friend: I don't want us to freeze and say we are not going to do it.
Sondra Smith: I serve on the Arkansas Municipal League Public Safety Commission and we
took a vote to look at the premium tax and see if that distribution needs to be changed. They
have put that forward.
Kit Williams: That's not going to be enough to save the pensions.
Sondra Smith: That is not going to be enough but may help a little bit. It may help some cities
and it will hurt some cities so they may not want to do it at all.
Kit Williams: You are at $8.3 million now so you are not in desperate straights where you have
to make a quick decision.
Eldon Roberts: If we could get something done on the insurance turnback and we were to get a
larger amount that's certainly helping tip the scales in our favor. It would take a combination of
things to pull us out of this.
Longer Investments:
Longer Investments monthly report.
Kim Cooper: Page one shows the September 30th portfolio appraisal. Your domestic equities
are 51.4%. Your International equities are 4%. Your total equities as of the end of September
were 55.4%.
Tim Helder made a motion to approve the equity overage. Melvin Stanley seconded the
motion. Upon roll call the motion passed 5-0. Frank Johnson was absent. Sondra Smith
was absent during the vote.
Eldon Roberts: What is our limit, 50%?
Kim Cooper: Fifty is your limit but we have a 10%variance with a motion.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
October 21,2010
Page 9 of 12
Kit Williams: That's because you think the market is going up so you want to stay invested.
Kim Cooper: Continuing on page one the dividend yield on your stocks is 3.35%. That yield
exceeds what we could get on a ten year treasury by 90 basis points. What we have been doing
this year is emphasizing dividend income on the stocks that we have bought to be more
defensive,to get more total return, and to boost your over all portfolio return. The dividend yield
at 3.35% is higher than we can get in government bonds right now or investment grade bonds.
Page two you will see the mutual funds fixed. We own an investment grade corporate bond that
is yielding 5.08%. We purchased it at 105.77 and it has appreciated up to 113.09. The preferred
debt which is AA Plus and A Rated Corporate that is yielding 6.4% and your government bonds
are yielding 4.4%. You've got no reinvestment risk in the government bonds they mature in
2016 and 2018. Also in the government bonds we've achieved over 10% in capital appreciation
so far this year from the date that we purchased them. Your government agencies are yielding
5.83%.
Page three the Central Fund on Canada is a gold and silver fund. It's weighted at 3% of your
total portfolio and it also has had a run up of 10%this year as we've had a run up in pricing gold
and silver.
We have included a portfolio appraisal for October 20th through yesterdays close to show you
what the portfolio has done since the end of the quarter. Your stocks since the end of the quarter
are up an additional 3%and your total portfolio year to date is now up 8.9%.
Page seven is your realized gains and losses. So far this year you've had realized gains of
$240,000 and your net income, which is the income from your stock dividends and your bond
interest, is $157,000.
Mayor Jordan: How would you compare this retirement against what we are seeing with the
Fire.
Kim Cooper: The investment policies are basically managed the same way.
Mayor Jordan: This one is doing relatively better.
Kit Williams: This one started at a lower level.
Kim Cooper: We've managed this account much longer than we've managed the Fire Pension.
Mayor Jordan: Does this one in your estimation look in fairly good shape?
Kim Cooper: I can't really comment on the performance that the Fire Pension had prior to the
time we started managing it but I can talk about what this fund has done and how its compares to
actuarial returns.
Mayor Jordan: I'm just trying to compare one to the other.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
October 21,2010
Page 10 of 12
Paul Becker: The basic issue is that the Fire Pension has less assets and the Police Pension fund
has more assets.
Kit Williams: Compared to their liabilities the Police Fund is in better shape.
Sondra Smith: Longer Investment has been managing the Police Pension fund a lot longer than
the Fire Pension Fund. The Police Pension did not do a DROP but the Fire Pension did a DROP.
Eldon Roberts: We don't have one.
Paul Becker: As far as your investment philosophy and the investment performance for the Fire
and Police Pension.
Kim Cooper: The policies are very similar and managed similar.
Page eight is a report that shows your fixed income distribution. The current yield to maturity is
4.6%. Your average maturity is 6.2 years. That hasn't changed much since December 2009
even though the rates on the 10 year treasury have dropped about 150 basis points since the end
of the year. That has stayed fairly constant. The maturity distribution on the lower page shows
that 15% of your bonds mature within the next three years. These are all government and
investment grade corporate bonds and we have been very opportunistic during the year by
extending maturities and locking in yields as close to 4% as we could. So you have a stable
income stream locked in with minimal reinvestment risk.
Kit Williams: Compared to what the treasury bills pay over 10 years which is less than 2.5%,
they have been getting a lot better returns for you than if you were buying just treasury bills.
Kim Cooper: With that 15% that is maturing within the next three years we have full liquidity
to tap into higher yields should they appear. In this environment it's all about having a strong
balance between securing the income that you have, offsetting the reinvestment risk, and
retaining flexibility to address inflation risk. We are postured that way going forward.
Page nine is contributions and distributions year to date. So far the contributions have been
$245,000. $244,000 was a contribution and the rest of it was securities, litigation, and claims.
Your distributions year to date have been $795,000.
Kit Williams: So about$500,000 out.
Kim Cooper: Right,through September 30th.
Paul Becker: That's between contributions and withdraws. That's not accounting for
investment earnings.
Kim Cooper: Exactly.
Kit Williams: This is money realized and money paid.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes
October 21,2010
Page I I of 12
Paul Becker: This is just the total dollars contributed which is basically coming from your
premium tax, and or your .4 mill and the withdraws from there to pay your expenses. This does
not factor in any returns from your actual investments.
Kim Cooper: Page 10 is the performance summary. Through September 301h your stocks have
achieved about in line with the S&P 500. Your foreign performance is well ahead of what the
EAFE or MSCI Europe Australasia Fast East Index, that's the benchmark for foreign
performance and it has exceeded that. Bond performance is 11.3% and that compares to the
index return year to date at 4.7%. The reason we have that good performance in bonds along
with the coupon rates, we also had the capital appreciation in some of the trades that we were
able to do on treasuries for you. This brings your year to date total through September 301h to
6.9%. Your annualized return from the inception of your account has been 6.1%.
As the discussion about unfunded liabilities proceeds Elaine said it is important to note that this
performance at 6.1% has satisfied the actuarial assumption that they had in place when we
started managing the account that they said was necessary to meet the goals to fund the
retirement for the police officers. The number was set at 6% and the fund has achieved 6.1% net
of all expenses even though you have come through the most traumatic economic and financial
market crisis since the 1930's. It's important for the discussion that will follow regarding the
unfunded liabilities to see that it's not investment performance related but rather a function of the
weight of the distributions or the benefits on the capital base. Without securing additional
sources of funding to shore up the pension fund it's not reasonable to assume that investment
performance will rite the ship. The performance has achieved the actuarial assumptions since we
started managing it back in 1990.
Mayor Jordan: Thank you, that explains a lot for me.
Eldon Roberts: That 6% that they are talking that we need to obtain, I remember when that
came about it's been several years ago. I don't think that took into consideration the benefit
increases that we have received. This was talking about at whatever percent it was, it might have
been 50% that everybody retired at years ago, before all the benefit increases came about. I
think any of us can sit here and see that 6.1% from here on out is not going to carry us over. I've
brought that up before. Had all the benefits remained at 50% or maybe 55%, we had three or
four jumps before we got to where we are now. The 6% is talking about what we needed to
maintain with those benefit levels. Obviously they have increased significantly. We are not
going to be able to invest ourselves out of this financial hole we are in.
Kim Cooper: I think they have been using that 6% discount rate for all of your actuarial reports
since we have been managing it until last year when they went to 7% and this year when they
reduced it to 5%.
Paul Becker: This year it has gone to 5%, right.
Kit Williams: I think they were using that even when they were looking at raising the benefits.
What they didn't possibly factor in there is there was going to be increased raises that you would
base your benefits on. I'm impressed that you have been able to get 6%.
Eldon Roberts: I am too. That's not where I was going.
Policemen's Pension and Relief Fund
Board of Trustees Meeting Minutes -
October 21,2010
Page 12 of 12
Kit Williams: I know you weren't criticizing. If you all hadn't gotten raises on top of the
increased percent I'm sure everything would have been okay but I think the one factor they
didn't include is the fact that there were raises given therefore your benefits were increased.
Eldon Roberts: Plus the benefit increases that we have received over the years and what they
have brought us up to. I was not criticizing. I think that is great that you have earned that for us
but that is not going to get us out of the financial hole we are in.
Kim Cooper: The bottom of the page shows a reconciliation from the beginning of your
account. Your beginning balance, deposits, transfers, withdraws and the income on the account.
The total investment return since 1990 has been$6.4 million.
There was some discussion in the last minutes about the investment policy. We always include a
copy of your investment policy in your packages if there is ever a question about how we are
managing the account or if you want to review the policy during the meeting.
Eldon Roberts: We leave that up to you all to bring it to our attention if there is something we
might need to change that will help you all.
Longer Investments 3rd Quarter 2010 report.
A copy of the report was given to the Board
Informational:
2011 Meeting Schedule
A copy was given to the Board
Meeting Adjourned at 3:50 PM
POLICE PENSION FUND 2 2 2 2
Feb 2011 6000.9000 6800.9000
Month 2 Regular Mo 53354)0 6M3 05
2
EMP# NAME Benefit YTD Reg Benefit Suppl. YTD Suppl.
154 ALLEN,CHARLES $ 2,584.64 $ 5,169.28 $ 50.00 $ 100.00
206 BAYLES,BOBBI J $ 1,587.41 $ 3,174.82 $ 50.00 $ 100.00
107 BLACK,JOE P $ 1,125.64 $ 2,251.28 $ 50.00 $ 100.00
147 BRADLEY,GERALD $ 4,620.09 $ 9,640.18 $ 50.00 $ 100.00
139 BRADLEY,RANDALL $ 2,860.17 $ 5,720.34 $ 50.00 $ 100.00
167 BROWN,JOHN $ 4,362.01 $ 8,724.02 $ 50.00 $ 100.00
157 CARROLL,RONALD L $ 2,106.04 $ 4,212.08 $ 50.00 $ 100.00
151 COLE,RUSTON $ 3,065.74 $ 6,131.46 $ 50.00 $ 100.00
109 COOPER,ADRIAN $ 638.42 $ 1,276.84 $ 50.00 $ 10D.00
160 DUGGER,GARY $ 3,163.74 $ 6,327.48 $ 50.00 $ 100.00
140 FOSTER,BILLY 0. $ 3,207.35 $ 6,414.70 $ 50.00 $ 10D.00
148 FRIEND,JERRY $ 1,970.42 $ 3,940.84 $ 50.00 $ 100.00
211 FRIEND,MICHELE $ 1,182.26 $ 2,364.52
161 HANNA,JANICE $ 1,368.59 $ 2,737.18 $ - $ -
145 HANNA,MARK $ 1,368.59 $ 2,737.18 $ 50.00 $ 100.00
169 HELDER,TIM $ 5,638.12 $ 11,676.24 $ 50.00 $ 100.00
180 HOYT,RICK $ 7,460.01 $ 14,920.02 $ 50.00 $ 100.00
146 HUTCHENS,BERNICE $ 1,825.54 $ 3,651.08 $ 50.00 $ 100.00
143 JOHNSON,CHARLES $ 2,455.50 $ 4,911.00 $ 50.00 $ 100.00
194 JOHNSON,FRANK $ 7,974.81 $ 15,949.62 $ 50.00 $ 100.00
103 JOHNSON,WENDELL $ 783.15 $ 1,566.30 $ 50.00 $ 100.00
118 JONES,BOB $ 3,300.45 $ 6,600.90 $ som $ 100.00
144 KILGORE,DONALD $ 2,046.48 $ 4,092.96. $ 50.00 $ 100.00
150 LITTLE,PATSY R $ 730.35 $ 1,460.70 $ 50.00 $ 100.00
156 MARTIN,KENNETH $ 3,692.05 $ 7,385.70 $ 50.00 $ 100.00
128 MCCAWLEY,LARRY $ 1,694.79 $ 3,389.58 $ 50.00 $ 100.00
126 MCWHORTER,KAREN $ 1,012.10 $ 2,024.20 $ 50.00 $ 100.00
136 MITCHELL,MICHAEL $ 2,305.29 $ 4,610.58 $ 50.00 $ 100.00 1.
141 MUELLER,ROSEMARY $ 2,063.93 $ 4,127.86 $ 50.00 $ 100.00
158 MUNSON,ANGELA $ 4,198.15 $ 8,396.30 $ 50.00 $ 100.00
112 MURPHY,JAKE $ 405.75 $ 811.50. $ 50.00 $ 100.00
137 PERDUE,LARRY $ 2,322.67 $ 4,645.34 $ 50.00 $ 100.00
164 PERSHALL,ROBIN $ 1,525.07 $ 3,050.14 $ - $ -
132 PHILLIPS,HOMER GENE $ 1,754.44 $ 3,508.88 $ 50.00 $ 100.00
199 PRESTON,NORMA J $ 1,601.37 $ 3,202.74 $ 50.00 $ 100.00
135 RICKMAN,LOREN $ 2,231.07 $ 4,462.14 $ 50.00 $ 100.00
RIGGINS,BONNIE $ 1,669.37 $ 3,338.74 $ 50.00 $ 100.00
183 ROBERTS,ELDON $ 4,263.24 $ 8,526.48 $ 50.00 $ 100.00
183 ROBERTS,ELDON Plus 25 add pay $ 587.09 $ 1,174.18. $ - $ -
212 ROBERTS,CAROLYN K $ 3,216.13 $ 6,432.26 $ -
212 ROBERTS,CAROLYN K Plus 25 add pay $ 442.89 $ 885.78 $ -
159 SCHUSTER,JOHN H. $ 3,117.36 $ 6,234.72 $ 50.00 $ 100.00
168 STANLEY,MELVIN $ 4,880.07 $ 9,760.14 $ 60.00 $ 100.00
155 STOUT,BETTY $ 866.51 $ 1,733.02 $ 50.00 $ 100.00
133 SURLES,JERRY $ 2,721.40 $ 5,442.80 $ 50.00 $ 100.00
142 TAYLOR,DENNIS $ 2,063.93 $ 4,127.86 $ 50.00 $ 100.00 '..
106 UPTON,FRANKLIN $ 1,057.08 $ 2,114.16. $ 50.00 $ 100.00
163 WATSON,RICHARD $ 6,947.05 $ 13,894.10 $ 50.00 $ 100.00
163 Watson,Richard Plus 25 Add l Pay $ 948.76 $ 1,897.52 $ - $ -
149 WILLIAMS.JOYCE $ 2,539.66 $ 5,079.32 $ 50.00 $ 100.00
195 WITT,BETTY $ 1,766.83 $ 3,533.66 $ 50.00 $ 100.00
213 WOOD,RUTHIE $ 1,580.93 $ 3,161.86 $ 50.00 $ 100.00
$ 131301.30 $ 262602.60 $2250.DD $ 4500.00
POLICE PENSION FUND 3 3 3 3
Mar 2011 6800.9800 680oslim
Month 3 Regular Mo M35.00 5335-05
3
EMP# NAME Benefit YTD Reg Benefit Suppl. YTD Suppl.
154 ALLEN,CHARLES $ 2,584.64 $ 7,753.92 $ 50.00 $ 150.00
206 BAYLES,BOBBI J $ 1,587.41 $ 4,762.23 $ 50.00 $ 150.00
107 BLACK,JOE P $ 1,125.64 $ 3,376.92 $ 50.00 $ 150.00
147 BRADLEY,GERALD $ 4,820.09 $ 14,460.27 $ 50.00 $ 150.00
139 BRADLEY,RANDALL $ 2,860.17 $ 8,560.51 $ 50.00 $ 150.00
167 BROWN,JOHN $ 4,362.01 $ 13,066.03 $ 60.00 $ 150.00
157 CARROLL,RONALD L $ 2,106.04 $ 6,318.12 $ 50.00 $ 150.00
151 COLE,RUSTON $ 3,065.74 $ 9,197.22 $ 50.00 $ 150.00
109 COOPER,ADRIAN $ 638.42 $ 1,915.26 $ 50.00 $ 150.00
160 DUGGER,GARY $ 3,163.74 $ 9,491.22 $ 50.00 $ 150.00
140 FOSTER,BILLY D. $ 3,207.35 $ 9,622.05 $ 50.00 $ 150.00
14B FRIEND,JERRY $ 1,970.42 $ 5,911.26 $ 50.00 $ 150.00
211 FRIEND,MICHELE $ 1,182.26 $ 3,546.78
161 HANNA,JANICE $ 1.368.59 $ 4,105.77 $ - $ -
145 HANNA,MARK $ 1,368.59 $ 4,105.77 $ 50.00 $ 150.00
169 HELDER,TIM $ 5,838.12 $ 17,514.36 $ 50.00 $ 150.00
180 HOYT,RICK $ 7,460.01 $ 22,380.03 $ 50.00 $ 150.00
146 HUTCHENS,BERNICE $ 1,825.54 $ 5,476.62 $ 50.00 $ 150.00
143 JOHNSON,CHARLES $ 2,455.50 $ 7,366.50 $ 50.00 $ 150.00
194 JOHNSON,FRANK $ 7,974.81 $ 23,924.43 $ 50.00 $ 150.00
103 JOHNSON,WENDELL $ 783.15 $ 2,349.45 $ 50.00 $ 150.00
118 JONES,BOB $ 3,300.45 $ 9,901.35 $ 50.00 $ 150.00
144 KILGORE,DONALD $ 2,046.4B $ 6,139.44 $ 50.00 $ 160.00
150 LITTLE,PATSY R $ 730.35 $ 2,191.05. $ 50.00 $ 150.00
156 MARTIN,KENNETH $ 3,692.85 $ 11,076.55 $ 50.00 $ 150.00
128 MCCAWLEY,LARRY $ 1,694.79 $ 5,084.37 $ 50.00 $ 150.00
126 MCWHORTER,KAREN $ 1,012.10 $ 3,036.30 $ 50.00 $ 150.00
136 MITCHELL,MICHAEL $ 2,305.29 $ 6,915.87 $ 50.00 $ 150.00
141 MUELLER,ROSEMARY $ 2,063.93 $ 6,191.79 $ 50.00 $ 150.00
158 MUNSON,ANGELA $ 4,198.15 $ 12,594.45 $ 50.00 $ 150.00
112 MURPHY,JAKE $ 405.75 $ 1,217.25 $ 50.00 $ 150.00
137 PERDUE,LARRY $ 2,322.67 $ 6,968.01 . $ 50.00 $ 150.00
164 PERSHALL,ROBIN $ 1,525.07 $ 4,575.21 $ - $ -
132PHILLIPS.HOMER GENE $ 1,754.44 $ 5,263.32 $ 50.00 $ 150.00
199 PRESTON,NORMA J $ 1,601.37 $ 4,804.11 $ 50.00 $ 150.00
135 RICKMAN,LOREN $ 2,231.07 $ 6,693.21 $ 50.00 $ 150.00
RIGGINS,BONNIE $ 1,669.37 $ 5,006.11 $ 50.00 $ 150.00
183 ROBERTS,ELDON $ 4,263.24 $ 12,769.72 $ 50.00 $ 150.00
183 ROBERTS,ELDON Plus 25 add pay $ 587.09 $ 1,761.27 $ - $ -
212 ROBERTS,CAROLYN K $ 3,216.13 $ 9,648.39. $ -
212 ROBERTS,CAROLYN K Plus 25 add pay $ 442.89 $ 1,328.67 $ -
159SCHUSTER,JOHNH. $ 3,117.36 $ 9,352.08 $ 50.00 $ 150.00
168 STANLEY,MELVIN $ 4,660.07 $ 14,640.21 $ 50.00 $ 150.00
155 STOUT,BETTY $ 666.51 $ 2,599.53 $ 50.00 $ 150.00
133 SURLES,JERRY $ 2,721.40 $ 8,164.20 $ 50.00 $ 150.00
142 TAYLOR,DENNIS $ 2,063.93 $ 6,191.79 $ 50.00 $ 150.00
106 UPTON,FRANKLIN $ 1,057.08 $ 3,171.24 $ 50.00 $ 150.00
163 WATSON,RICHARD $ 6,947.05 $ 20,841.15. $ 50.00 $ 150.00 '
163 Watson,Richard Plus 25 Add'I Pay $ 948.76 $ 2,846.28 $ - $ -
149 WILLIAMS,JOYCE $ 2,539.66 $ 7,618.98 $ 50.00 $ 150.00
195 WITT,BETTY $ 1,766.83 $ 5,300.49 $ 50.00 $ 150.00
213 WOOD,RUTHIE $ 1,580.93 $ 4742.79 $ 50.00 $ 150.00
$ 131 301.30 $ 393 903.90 $2 250.00 $ 6.750.00
POLICE PENSION FUND 4 4 4 4
April 2011 65. 9300 sunt moo
Month 4 Regular Mo 5335.00 533505
4
EMP# NAME Benefit YTD Reg Benefit Suppl. YTD Suppl.
154 ALLEN,CHARLES $ 2,584.64 $ 10,338.56 $ 50.00 $ 200.00
206 BAYLES,BOBBI J $ 1,587.41 $ 6,349.64 $ 50.00 $ 200.00
107 BLACK,JOE P $ 1,125.64 $ 4,502.56 $ 50.00 $ 200.00
147 BRADLEY,GERALD $ 4,820.09 $ 19,260.36 $ 50.00 $ 200.00
139 BRADLEY,RANDALL $ 2,860.17 $ 11,440.68 $ 50.00 $ 200.00
167 BROWN,JOHN $ 4,362.01 $ 17,448.04 $ 50.00 $ 200.00
157 CARROLL,RONALD L $ 2,106.04 $ 8,424.16 $ 50.00 $ 200.00
151 COLE,RUSTON $ 3,065.74 $ 12,262.96 $ 50.00 $ 200.00
109 COOPER,ADRIAN $ 638.42 $ 2,553.68 $ 50.00 $ 200.00
160 DUGGER,GARY $ 3,163.74 $ 12,654.96 $ 50.00 $ 200.00
140 FOSTER,BILLY D. $ 3,207.35 $ 12,629.40 $ 50.00 $ 200.00
148 FRIEND,JERRY $ 1,970.42 $ 7,881.68 $ 50.00 $ 200.00
211 FRIEND,MICHELE $ 1,182.26 $ 4,729.04
161 HANNA,JANICE $ 1,366.59 $ 5,474.36 $ - $ -
145 HANNA,MARK $ 1,368.59 $ 5,474.36 $ 50.00 $ 200.00
169 HELDER,TIM $ 5,838.12 $ 23,352.48 $ 50.00 $ 200.00
180 HOYT,RICK $ 7,460.01 $ 29,840.04 $ 50.00 $ 200.00
146 HUTCHENS,BERNICE $ 1,825.54 $ 7,302.16 $ 50.00 $ 200.00
143 JOHNSON,CHARLES $ 2,455.50 $ 9,822.00 $ 50.00 $ 200.00
194 JOHNSON,FRANK $ 7,974.81 $ 31,899.24 $ 50.00 $ 200.00
103 JOHNSON,WENDELL $ 783.15 $ 3,132.60 $ 50.00 $ 200.00
118 JONES,BOB $ 3,300.45 $ 13,201.80 $ 50.00 $ 200.00
144 KILGORE,DONALD $ 2,046.48 $ 8,185.92 $ 50.00 $ 200.00
150 LITTLE,PATSY R $ 730.35 $ 2,921.40 $ 50.00 $ 200.00
156 MARTIN,KENNETH $ 3,692.85 $ 14,771.40. $ 50.00 $ 200.00
128 MCCAWLEY,LARRY $ 1,694.79 $ 6,779.16 $ 50.00 $ 200.00
126 MCWHORTER,KAREN $ 1,012.10 $ 4,048.40 $ 50.00 $ 200.00
136 MITCHELL,MICHAEL $ 2,305.29 $ 9,221.16 $ 50.00 $ 200.00
141 MUELLER,ROSEMARY $ 2,063.93 -$ 8,255.72 $ 50.00 $ 200.00
158 MUNSON,ANGELA $ 4,198.15 $ 16,792.60 $ 50.00 $ 200.00
112 MURPHY,JAKE $ 405.75 $ 1,623.00 $ 50.00 $ 200.00
137 PERDUE,LARRY $ 2,322.67 $ 9,290.68 $ 50.00 $ 200.00
164 PERSHALL,ROBIN $ 1,525.07 $ 6,100.28. $ - $ -
132 PHILLIPS,HOMER GENE $ 1,754.44 $ 7,017.76 $ 50.00 $ 200.00
199 PRESTON,NORMAJ $ 1,601.37 $ 6,405.48 $ 50.00 $ 200.00
135 RICKMAN,LOREN $ 2,231.07 $ 8,924.28 $ 50.00 $ 200.00
RIGGINS,BONNIE $ 1,669.37 $ 6,677.48 $ 50.00 $ 200.00
183 ROBERTS,ELDON $ 4,263.24 $ 17,052.96 $ 50.00 $ 200.00
183 ROBERTS,ELDON Plus 25 add pay $ 587.09 $ 2,348.36 $ - $ -
212 ROBERTS,CAROLYN K $ 3,216.13 $ 12,864.52 $ -
212 ROBERTS,CAROLYN K Plus 25 add pay $ 442.89 $ 1,771.56. $ -
159 SCHUSTER,JOHN H. $ 3,117.36 $ 12,469.44 $ 50.00 $ 200.00
168 STANLEY,MELVIN $ 4,880.07 $ 19,520.28 $ 50.00 $ 200.00
155 STOUT,BETTY $ 866.51 $ 3,466.04 $ 50.00 $ 200.00
133 SURLES,JERRY $ 2,721.40 $ 10,865.60 $ 50.00 $ 200.00
142 TAYLOR,DENNIS $ 2,063.93 $ 8,255.72 $ 50.00 $ 200.00
106 UPTON,FRANKLIN $ 1,057.08 $ 4,228.32 $ 50.00 $ 200.00
163 WATSON,RICHARD $ 6,947.05 $ 27,788.20 $ 50.00 $ 200.00
163 Watson,Richard Plus 25 Add1 Pay $ 948.76 $ 3,795.04. $ - $ - .
149 WILLIAMS,JOYCE $ 2,539.66 $ 10,158.64 $ 50.00 $ 200.00
195 WITT,BETTY J $ 1,766.83 $ 7,067.32 $ 50.00 $ 200.00
213 WOOD,RUTHIE $ 1,580.93 $ 6,323.72 $ 50.00 $ 200.00
$ 13130130 $ 525205.20 $2.250.00 $ 9.000.00
//11 Office of the City Clerk Treasurer
a ylLle 113
West Mountain
i ayeFayetyetteville,AR 72701
Phone: (479)575-8323
Fax: (479)7184695
q
city
_clerkQc.fayetteville:ar.us
www.accessfayetteville.org
i
's
I
February 22, 2011
r David Clark, Executive Director
Arkansas Fire & Police Pension Review Board
620 W 3"Street Suite 200
Little Rock,AR 72201
RE: Firemen's Pension and Relief Fund Board of Trustees
Projected Insolvent Status
Dear Mr. Clark:
The Firemen's Pension and Relief Fund Board of Trustees met on February 14,2011 to discuss
a response to your letter regarding the Projected Insolvent Status of the Firemen's Pension
Fund dated December 16, 2010. The following is our response to your letter.
Question 1: What actions have you planned as a result of the Special Report?
(A) 'The Board is awaiting the outcome of the 2014 Legislative Session to see what benefits
we can gain from the Guarantee Fund.
(B) The Board as a whole has not taken any action since the October 18, 2010 Special
Meeting.
Question 2: What discussions have you had with the city officials to explore solutions? How
has your city board been made aware?
(A) Pursuant to State law the Fayetteville City Council has been informed several times
during recent years that the Firemen's Pension Fund is not actuarially sound.
(B) The Fayetteville City council has been made aware of the dire financial condition of the
fund several times.
Question 3: Did you find the Special Report helpful in your planning?
Yes
Question 4: What would you have wanted to have been included in the Special Report that was
not previously included?
It would have been helpful if the reportcame a few days prior to the meeting so that the Firemen's
Pension Board wouldhave more time to study the information.
Page 1 of 2
Telecommunications Device for the Deaf TDDR'TY(479)521-1316
Question 5: What additional,information could be provided by the PRB to assist your fund?
(A) The Pension Review Board staff should track and advise our Board of any legislative
changes that would affect our fund or the Guarantee Fund.
(B) The Fayetteville Firemen's Pension Board requests the Pension Review Board to explore
a change to State statutes to allow a benefit reduction for plans above the State mandated
level.
In closing we would like to thank the Pension Review Board for their time. We certainly hope
that we can work together to sustain the plan to ensure pensioners continue to receive benefits.
Sincerely, r
'Ot
Mayor Lioneld Jor
Firemen's Pension and Relief Fund Chairman
10&,. w de"
Sondra E. Smith, City Clerk Treasurer
Firemen's Pension and Relief Fund Secretary
Page 2 oft
FAYETTEVILLE °'° °�
THE CITY OF FAYETTEVILLE,ARKANSAS ;Rd
KIT WILLIAMS,MY ATTORNEY RECEIVE D
DAVID WMAKER,ASST.CITY ATTORNEY
DEPARTMENTAL CORRESPONDENCE APR 12 2010 LEGAL DEPARTMENT
CITY OF FAYETTEV I LLE
CITY CLERK'S OFFICE
TO: Lioneld Jordan, Mayor
Sondra Smith, City Clerk
Fire Pension Board of Trustees
FROM: Kit Williams, City Attorney
DATE: April 12, 2010
RE: Rules and Regulations for Elections To Pension Board
A.C.A. §24-11-801 Board membership of the Firemen's Relief and
Pension Funds subchapter states:
"(g) The board shall have the power to make all rules and
regulations needful for its guidance to implement the
provisions regarding board composition." (emphasis added)
This has long been interpreted to provide authority to the Board of Trustees
to set the procedures for electing members to the Board. The Police Pension Board
of Trustees has approved one set of procedures for elections, and the Fire Pension
Board has approved different voting procedures which ensure secrecy, but do not
allow the City Clerk's Office to determine who has voted.
Now a retiree has asked that a second ballot be provided to him as the first
did not arrive. Under the system mandated by the Board, the City Clerk is
supposed to mail only a single ballot to each retiree. There is no provision to allow
a second ballot to be provided. There is also no way to track a ballot or otherwise
ensure that no double voting can occur if additional ballots are provided to retirees.
State law gives the Board as a whole "the power to make all rules and regulations
needful ... to implement (Board members elections) ...." Neither the City Clerk
nor a Board Member can change the election policy of mailing a single ballot to
each retiree. Under your established policy, the City Clerk cannot mail a second
ballot to any retiree. Only the Board can change your election policy.
The Board of Trustees can address this issue at its next meeting. In order to
provide secrecy of the ballot, but ensure full rights to participate with no chance of
double voting, I suggest the following election procedure in the future:
(1) The ballot would not have the voter's name on it.
(2) The return envelope (supplied by the City Clerk's Office)
would have the name of the eligible retiree on the return
address location.
(3) When the envelope is received, the City Clerk would note the
name of the eligible retiree voter and indicate on a master list
that person had returned a ballot.
(4) The ballot would be removed from the envelope and placed
unread with other ballots in a file.
(5) After the date for election passes, the ballots would all be taken
from the file, read, counted and the winners announced.
I would suggest this procedure for all future elections so you will not be
faced with this difficult dilemma in which fairness to a retiree who claims not to
have received a ballot must be weighed against possible double voting if the ballot
did end up in somebody's hands and was sent back in as a valid ballot.
Hopefully, the election will not come down to one vote, and so this election
will not be determined by how the Board of Trustees decides to resolve this
dilemma. However, even if this is not an election deciding issue for this election,
this has exposed a real problem in the current system where an eligible retiree
could be denied a vote because of your current policy. Thus, please consider the
policy I proposed which would ensure that no eligible retiree could lose his right to
vote because a ballot was "lost in the mail."
� 6 I E NA.M4.�vy 1".Pjy�,a,LUYv
To
WW
�������� CO MMENTS AND OUTLOOKS FROM LONGER INVESTMENTS INCORPORATED
December 29, 2010
JAN 03 2011
The year 2010 is drawing to a close. What climbed steadily to a high of 3.6%in mid-
CITY OF FAYET-LEV ILLiI was! We saw volatility in all world December, ushin 30- ear mortgage rates
CITY CLERK'S l . W Y p g y
markets—bonds,gold,commodities,stocks, above 5%for the first time since May. In other
L16
and currencies—as the credit crisis that began words,the$600 billion quantitative easing
in 2007 continued to unfold. announced in November failed to achieve its
primary objective—to drive rates lower. The
Domestically,the stock market began the markets responded more to the rising commod-
year with a strong open in January. From the ity prices and dollar devaluation that resulted
Egli reached in April,it fell 17%to a low of from the Fed's policy announcement. Investors
1010(as measured by the S&P 500) in July. demanded higher interest rates to compensate
It then rallied 12%before declining to test the for the greater risk of inflation down the road.
lows in August. From that point,the market
gained over 20%to achieve a positive return of QE2 was the second"quantitative easing"
11.5% for the year(as measured by the S&P since the financial crisis began. A quantitative
500 cash index through Dec. 17). Although it easing is an intervention in which the Federal
was a bumpy ride, the U.S. market outper- Reserve actively purchases Treasury debt in
formed many foreign markets in 2010. By maturities of five to 30 years.
comparison, results were 2.6% for EAFE
(MSCI Europe Australasia Far East Index),
-12.2% for China and 1.5% for Europe. U.S. Treasury Yield Curve
The bond market in the U.S.displayed Maturity 12/31/09 06/30110 12/17/10
volatility as well,as the markets responded to Fed Funds 0-0.25% 0 -0.25% 0 -0.25%
economic data,legislative events,Fed policy, Two-Year 1.14% 0.62% 0.61%
international turmoil,and inflation concerns. Five-Year 2.68% 1.79% 1.97%
3.84% 2.95% 3.33%
Since June,the yield on the 10-year Treasury 30-Year 4.64% 3.91% 4.41%
note has ranged from a low of 2.3%, achieved
after the second quantitative easing(QE2) was
announced in early November,to a high of We believe that Treasury rates in the 10-
3.6% in early December before settling back to year maturity are still range-bound between the
3.3% on Dec. 17. The Fed controls short-term low of 2.1% set in December 2008 and the high
rates by setting Fed Funds rates (maintained at of 4.0%set in June 2009. That situation may
0%to 0.25%); long-term rates are determined persist until economic growth accelerates
by market forces that reflect international (above 4%real GDP), inflation picks up(above
investors'relative currency valuations,inflation 3%)or a currency market correction(resulting
expectations,and confidence. Although the in significant dollar weakness)appears. Even
Fed's intention in announcing QE2 was to drive this range-bound 2%variation results in signifi-
Treasury bond interest rates lower to support cant price fluctuation(approximately 15%)in
the still-weak housing market,the result was the 10-year Treasury prices.
higher rates. Before the Fed's announcement
on Nov. 3,the 10-year Treasury bond yielded The currency markets and precious metals
2.7%. There was a quick decline in response markets were also volatile this year because of
to the policy announcement,but after that yields
the still-unfolding credit crisis among the The European debt problems will continue to
weakest of the Eurozone economies. The so- weigh on markets in 2011 because the new
called PIIGS(Portugal,Italy,Ireland, Greece austerity measures which have already resulted
and Spain)saw yields on sovereign debt rise in riots in Greece,Portugal,England and Ireland,
as investors backed away from purchasing the have not really taken hold yet. It's still unknown
debt of countries that have budget deficits well whether Spain and Portugal will escape the fate
in excess of the Eurozone's 3%of GDP limit. of Ireland and Greece. At the heart of the crisis
tj As a result, the European Central Bank,the lies an even bigger question: Will the common
International Monetary Fund,and the stronger European currency survive in its current form?
euro-members (Germany and France) have
already had to rescue Greece and Ireland with In the midst of all the turmoil,gold and
massive injections of capital and purchases of precious metals have turned in very strong
government debt. In return, the rescuers performances this year(gold+28%). Gold
demanded politically unpopular austerity prices rose as the flow of funds internationally
measures. sought safe harbor in"the currency of last
resort." This year we invested client accounts
We can expect to see more uncertainty in in a fund that holds both gold and silver bullion.
European markets and in politics as this drama However,in the fourth quarter,we reduced our
unfolds. Although Italy has not yet required position by half. We harvested part of the gains
intervention,its financial status is as troubling in anticipation of a price pullback at some point.
as Greece's or Ireland's. Italy has not had the Gold has strong support in the$1,000 to$1,100
near-term funding requirements of Greece and price range. A return to that level would
Ireland. Credit default swaps on Italy,Portu- represent a decline of 25% from the Dec. 17
gal and Spain debt have widened recently. price. At that point,we would have the pur-
This is particularly worrisome. Spain and chasing power to add to gold again. We want to
Portugal represent much larger debt markets maintain a long-term position(hence our deci-
than Ireland and Greece, and European banks sion to only sell a portion of what we owned)
have significant exposure to the sovereign debt because the supply of dollars and of the other
of Portugal and Spain. fiat currencies is likely to increase faster than
the supply of gold in the years ahead.
On the domestic political stage,much
German, French and U.K. Banks transpired in 2010. Fromthe momentum
Are Highly Exposed displayed by Democrats during the passage of
Foreign exposure, end of 1Q, $billions Obamacare and Financial Regulatory Reform,
to their fall from grace at the polls in November,
_ __ _
❑Greece®Ireland Portugal®Spain it has been a volatile year politically. The public
500 responded to the frustration it feels toward a
aae seemingly out-of-touch political class and the
no still-painful reality of a sluggish economy with
r f persistently high(9.8%)unemployment. Voters
zao a reacted in classic style in November by"throw-
100°° ing the bums out."The electorate returned the
0 - House of Representatives to Republican control
Germany Frame U.K. and diluted the Democratic majority in the
Senate. We are already seeing results of this
Source: Bank for International Settlements shift in power. In the lame-duck session,
Congress extended the current tax rates The strategy we outlined in the July
(avoiding an increase in tax rates on income, newsletter still holds. Although the stock
capital gains and dividends),passed a tempo- market as measured by the S&P 500 cash
nary 2%cut in personal Social Security taxes, index was up by 11.5%this year,earnings on
and prolonged unemployment benefits. Senate the S&P increased more dramatically than
leader Harry Reid was forced to pull an prices did. So the market is still reasonably
omnibus spending bill of$1.2 trillion from the valued at 13 times estimated 2011 earnings.
j voting agenda because of a public outcry over This is considerably below the long-term
the many earmarks it contained. The extension average market multiple of 15.6.
of current tax rates and other provisions in the
tax extension bill will add fiscal stimulus
(estimated at$850 billion)to the monetary
stimulus of the Fed. Government officials— Trade-off Between PIE Multiples
the president, the Congress and the Fed—are and Inflation
bringing out the big gums to prevent a double-dip S&P 500 average PIE, 1871 to present
recession. They are hoping for a return to * *
economic growth sufficient to bring unemploy- 18 2m trailing 12mtwd
+
ment lower. Most economists say that concis- 1e we:%9P+e 12.8
tent growth above 3.5%real GDP would be
required to reduce unemployment from today's 14 4
currently high level. The current growth rate of 1 -
2%to 2.5%is sufficient only to assimilate new 12
workers into the workplace; it is not enough to 10 „
reduce unemployment significantly. Republi- -3% -s% 2r -t% o% +t% -2%+3% +4% +5% +6%
cans, Democrats, and the Federal Reserve are or
rbelow to- to to to to Lo to to to or
2%-+% 6% +i% +2%+3%+4%+5% +6% below
aligned,determined to bring economic growth Inflation Range
to a sustainable rate of 3.5%or higher. hifla-
tion? That's a problem to be dealt with later.
For now,deflation is believed to be"public Source: Thomson Reuters,Robert Shiller,Credit Suisse research
enemy No. 1."
When inflation averages 1%to 3%,the P/E
Longer Investments Strategy multiple usually averages 18. It is possible to
see a modest increase in earnings (estimates
As we face 2011, we continue to manage are 7%growth in 2011)along with a P/E
our clients'portfolios with policies that specify multiple expansion from the current 13 times
each individual or institutional client's unique earnings. This combination would produce
investment considerations: time horizon,risk attractive equity returns in 2011. At current
tolerance,tax rates,liquidity and distribution market levels and current interest rates (3.3%
needs, and the return objectives of income and on the 10-year Treasury),we believe that
growth. Within the portfolios,we incorporate stocks still offer better value than bonds.
broad diversification among asset classes,
which includes domestic stocks,international Within equity portfolios we are well bal-
stocks,bonds,gold and cash. At this point,we anced among economic sectors,industries and
don't hold real estate investments;we have individual stocks. We are not making big bets
found better value elsewhere. In each asset
category,we seek to hold the highest-quality For additional information,visit our Web site:
investments. www.longerinv.com
LONGER INVESTMENTS INCORPORATED
on anything;rather we prefer to win by hitting We face 2011 cautiously optimistic,willing
singles. The volatility among sectors has been to adopt a more conservative or a more aggres-
pronounced,so it's especially important to sive stance as circumstances unfold.
maintain balance in each portfolio. We avoid
overexposure to any one sector or concentra- A Personal Note
tion in any individual security.
We wish all of you a joyous holiday season
There are still many risks ahead as the debt and a new year of good health and great times
crisis unwinds. Some of the risks we have with family and friends. Longer Investments
Lilt written about through the year are being celebrated its 25th anniversary in September. It
resolved slowly. Others are still with us and was a very special occasion. We appreciate all
still worthy of our attention. They include risks of you who celebrated with us,those of you
to international markets posed by the PIIGS' who encouraged us from afar,and all of our
sovereign debt,a disruptive geopolitical event friends and clients. Without you,this would not
(possibly involving North and South Korea, have been possible.
Afghanistan,or Iran),and political gridlock that
could preclude serious policy initiatives to On a personal note,I find the profession of
reduce our deficits before the bond and cur- investment management as exciting as I did in
rency markets lose confidence. We must also 1983 when a local banker hired me, a newly
consider the intended and unintended cone- minted M.B.A.,to be trust investment officer
quences as the two legislative behemoths of First National Bank in Fayetteville,Arkan-
passed in 2010—Obamacare and Financial sas. His name was John Lewis, and he is no
Regulatory Reform—are implemented. There longer with us. In preparation for the celebra-
are many other risks that might be added to this tion in September,I reflected on all those who,
list,and more unknown risks to be uncovered throughout my professional career,believed in
as we move into 2011. Our job is to balance me. So many generous people encouraged,
risks and return potential in portfolios in keeping coached,mentored,and inspired me.I am truly
with individual clients'stated risk tolerance in grateful for the opportunity they and others
order to achieve their long-term return objec- gave me to be engaged daily in a profession I
tives. We must be attentive to the risks and yet find so gratifying. I offer special thanks to all
enter the markets daily, searching for relative of you who journey with us now. We wish you
value that represents attractive opportunities. and your families the best in 2011 and beyond.
It's all about balance—between risk and
return,among asset classes,within economic
sectors,and with individual securities.
The information provided herein is illustrative only. It
should not be construed as a formal recommendation by
Longer Investments Inc.
Lilt LONGER INVESTMENTS INCORPORATED
Services Provided by Longer Investments Inc.:Personal Investment Planning-Risk Tolerance Assessment•Development of '..
an Invstmmt Policy-Retirement Planning-IRA,Pension and Profit Sharing Management•Survivorship and Estate Transfer Planning-
0writable Trust Management-Nonprofit Foundation and Endowment Management•Tax and Accounting Facilitation•Reputable
Fee-Based Asset Management
P.O.Box 1269•Fayetteville,Arkansas 72702
Telephone:479-443-5851 •Toll free:800-827-7710• Fax:479-443-7129•E-mail:info@longeinvmm
Web site.wwwlongerinvrom
LONGER INVESTMENTS INCORPORATED
C C ` /c
ARegistnedlnveshnentAdvaor RECE! V E®
DEC 16 2010
December 14,2010
C COF E
CITY CLERK'S OFFICE
Ms. Sondra Smith
City of Fayetteville
Police Pension Fund
113 W. Mountain Street
Fayetteville, AR 72702
Dear Sondra:
Upon reviewing the November 30,2010, statements from Northern Trust,we discovered a
substantial error in their pricing of the options in the City of Fayetteville Police Pension Fund
account. This discrepancy resulted in Northern Trust reporting a market value significantly lower
than the actual value of the portfolio.
Northern Trust priced the Chevron December 80 calls at $325.00 per option when the actual
value was $2.25 and priced the ConocoPhillips December 60 calls at$169.00 per option when the
actual value was $1.43. The undervaluation of the account is detailed below.
Number Actual Northern Trust
Securi of Calls Valuation Valuation Undervaluation
ConocoPhillips -18 -$2,574.00 -$304,200.00 $301,626.00
Chevron -20 -$4,500.00 -$650,000.00 $645.500.00
Total $947,126.00
Enclosed you will find a month-end portfolio appraisal that accurately reflects the value of the
account. Longer Investments Inc. carefully monitors each transaction and reconciles the monthly
statements from Northern Trust in order to ensure that all items posted to the accounts are
accurate. We are working with Northern Trust to make sure future option positions will be
properly reported. If you have any questions regarding the monthly statements, please feel free
to call our office.
Sincerely,
IA
im M. Cooper
Executive Administrator
/kmc
Enclosure
P.O.Box 1269
Fayetteville,Arkansas 72702
Telephone.479-443-5851
Toll fi ee.800-817-7710
Fae-479-443-7129
Web site.w vlongejvvmm
Longer Investments Inc.
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension Fund
November 30, 2010
Unit Total Market Pct. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
Common Stock
5,100 AT&T 25.48 129,965.17 27.79 141,729.00 1.7 1.680 8,568.00 6.6
1,500 Abbott Laboratories 46.41 69,611.10 46.51 69,765.00 0.8 1.760 2,640.00 3.8
2,325 Alexander&Baldwin, 35.90 83,472.85 35.09 81,584.25 1.0 1.260 2,929.50 3.5
Inc.
3,350 American Electric 34.21 114,619.58 35.60 119,260.00 1.4 1.840 6,164.00 5.4
Power Co.,Inc.
7,435 Applied Materials Inc. 11.04 82,098.01 12.43 92,379.88 1.1 0.280 2,081.80 2.5
2,000 Archer-Daniels-Midland 25.87 51,748.40 28.99 57,980.00 0.7 0.600 1,200.00 2.3
Co.
3,415 BCE,]nc. 24.40 83,311.32 33.88 115,700.20 L4 1.780 6,078.70 7.3
4,200 Bristol-Myers Squibb 24.46 102,717.18 25.24 106,008.00 1.3 1.280 5,376.00 5.2
Company
2,025 Chevron Corp. 69.86 141,465.13 80.97 163,964.25 2.0 2.880 5,832.00 4.1
1,700 Coca-Cola 52.86 89,853.56 63.17 107,389.00 1.3 1.760 2,992.00 3.3
1,875 ConocoPhillips 51.73 96,990.19 60.17 112,818.75 1.4 1200 4,125.00 4.3
2,825 Danaher Corp. 40.70 114,973.55 43.25 122,181.25 1.5 0.080 226.00 0.2
1,640 Devon Energy Corp. 61.81 101,366.92 70.57 115,734.80 1.4 0.640 1,049.60 1.0
5,000 Duke Energy 17.67 88,364.07 17.55 87,750.00 1.1 0.980 4,900.00 5.5
Corporation
1,500 Emerson Electric Co. 38.89 58,328.96 55.07 82,605.00 1.0 1.380 2,070.00 3.5
2,325 Exxon Mobil Corp. 64.65 150,316.38 69.56 161,727.00 2.0 1.760 4,092.00 2.7
23,500 Financial Select Sector 14.59 342,905.91 14.46 339,810.00 4.1 0.196 4,613.52 1.3
SPDR Fund
7,635 General Electric 16.09 122,864.82 15.83 120,862.05 1.5 0.480 3,664.80 3.0
2,525 Genuine Parts Co. 37.08 93,635.86 48.14 121,553.50 1.5 1.640 4,141.00 4.4
4,000 Home Depot,Inc. 29.24 116,947.68 30.21 120,840.00 1.5 0.950 3,800.00 3.2
1,760 Illinois Tool Works Inc. 48.41 85,207.41 47.63 83,828.80 1.0 1.360 2,393.60 2.8
6,500 Intel Corp. 19.03 123,699.81 21.16 137,523.75 1.7 0.630 4,095.00 3.3
1,225 International Business 125.93 154,265.91 141.46 173,288.50 2.1 2.600 3,185.00 2.1
Machines Corp.
1,750 Kimberly-Clark 60.74 106,298.55 61.89 108,307.50 1.3 2.640 4,620.00 4.3
Corporation
3,000 Merck&Co,Inc. 28.34 85,022.98 34.47 103,410.00 1.3 1.520 4,560.00 5.4
4,750 Microsoft Corp. 27.74 131,746.43 25.26 119,973.13 1.5 0.640 3,040.00 2.3
1,720 Northern Trust 49.66 85,417.14 50.30 86,516.00 1.1 1.120 1,926.40 2.3
Corporation '..
2,100 Nucor Corporation 40.85 85,788.99 3274 79,254.00 1.0 1.440 3,024.00 3.5
3,250 oracle Corp. 17.93 58,279.88 27.05 87,896.25 1.1 0.200 650.00 1.1
3,725 Paychex,Inc. 26.47 98,592.76 28.54 106,311.50 1.3 1.240 4,619.00 4.7
3,500 Petroleo Brasileiro 33.56 117,473.09 32.44 113,540.00 1.4 0.160 560.00 0.5
6,000 Pfizer Inc. 16.53 99,174.50 16.30 97,800.00 1.2 0.720 4,320.00 4.4
1,850 Procter&Gamble Co. 52.01 96,209.84 61.07 112,979.50 1.4 1.930 3,570.50 3.7
4,650 Steel Dynamics Inc. 16.02 74,471.82 15.97 74,260.50 0.9 0.300 1,395.00 1.9
3,100 Wal-Mart Stores Inc. 50.96 157,987.71 54.09 167,679.00 2.0 1.210 3,751.00 2.4
3,795,193.45 4,094,210.35 49.7 122,253.42 3.3
Mutual Funds-Equity
2,510.0000 Japan Smaller 8.30 20,844.85 8.24 20,682.40 0.3 0.053 133.53 0.6
Capitalization Fund Inc.
785.0000 iShares MSCI All 56.79 44,577.80 60.88 47,790.80 0.6 0.862 676.59 1.5
Country Asia ex Japan
Idx
1,300.0000 iShares MSCI Hong 16.10 20,935.32 18.89 24,557.00 0.3 0.484 628.89 3.0
Kong Index Fund
I
Le LONGER INVESTMENTS INCORPORATED
A Registered Investment Advisor
Longer Investments Inc.
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension Fund
November 30, 2010
Unit Total Market Pct. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
8,505.0000 iShares MSCI Japan 10.91 92,824.50 10.27 87,346.35 1.1 0.157 1,333.18 1.4
Index Fund
1,500.0000 iShares MSCI Singapore 11.68 17,523.83 13.36 20,040.00 0.2 0.374 561.70 3.2
Index Fund
3,800.0000 iShares S&P Europe 35.97 136,701.45 36.38 138,244.00 1.7 1.017 3,865.37 2.8
350 Index
333,407.75 338,660.55 4.1 7,199.27 2.2
Mutual Funds-Fixed
7,000.0000 iShares iBoxx 105.77 740,391.81 110.12 770,840.00 9.4 5.289 37,022.93 5.0
Investment Grade Corp
Bond
740,391.81 770,840.00 9.4 37,022.93 5.0
Calls
-20 Chevron Corp. 2.68 -5,361.11 2.25 -4,500.00 -0.1
December 80 Calls
-18 ConocoPhillips 1.68 -3,030.76 1.43 -2,574.00 0.0
December 60 Calls
-8,391.87 -7,074.00 -0.1
Preferred Debt Securities
8,000 AT&T Preferred 24.84 198,737.94 26.88 215,040.00 2.6 1.594 12,750.00 6.4
6.375%A2/A(C
2-12-12)
2,500 G.E.Preferred 6.10% 24.91 62,286.75 25.37 63,425.00 0.8 1.525 3,812.50 6.1
Aa2/AA+(C II-15-07)
3,500 G.E.Preferred 6.625% 25.04 87,637.00 25.82 90,370.00 1.1 1.656 5,796.88 6.6
Aa2/AA+(C 6-28-07)
348,661.69 368,835.00 4.5 22,359.38 6.4
Corporate Bonds
100,000 McDonald's Corp A3/A 98.45 98,450.00 102.07 102,070.90 1.2 6.000 6,000.00 6.1
(NC)6.21%YTM
6.000%Due 04-15-11
Accrued Interest 750.00 0.0
98,450.00 102,820.90 1.2 6,000.00 6.1
Government Bonds
150,000 U.S.Treasury Note 100.00 150,000.00 118.48 177,714.91 2.2 5.125 7,687.50 5.1
5.125%Due 05-15-16
900,000 U.S.Treasury Note 103.76 933,831.15 112.28 1,010,530.96 12.3 4.000 36,000.00 3.9
4.000%Due 08-15-18
400,000 U,S.Treasury Note 102.09 408,343.74 105.39 421,562.43 5.1 4.375 17,500.00 4.3
4.375%Due 02-15-38
Accrued Interest 15,874.25 0.2
1,492,174.89 1,625,682.55 19.7 61,18T50 4.1
Government Agency
50,000 Federal Home Loan 100.00 50,000.00 102.59 51,296.88 0.6 6.000 3,000.00 6.0
Bank INC)
6.000%Due 05-13-11
2
® LONGER INVESTMENTS INCORPORATED
I
A Registered Inveshnent Advisor
Longer Investments Inc.
PORTFOLIO APPRAISAL
City of Fayetteville Police Pension Fund
November 30, 2010
Unit Total Market Pet. Unit Annual Cur.
Quantity Security Cost Cost Price Value Assets Income Income Yield
200,000 Federal Farts Credit 99.97 199,938.00 121.22 242,437.50 2.9 6.125 12,250.00 6.1
Bank(NC)6.127%
YTM
6.125%Due 12-29-15
Accrued Interest 5,263.19 0.1
249,938.00 298,997.57 3.6 15,250.00 6.1
Alternative Investments
9,000 Central Fund of Canada 15.27 137,453.70 19.26 173,340.00 2.1 0.010 90.00 0.1
Ltd.
137,453.70 173,340.00 2.1 90.00 0.1
Cash and Equivalents
Dividends Accrued 13,779.21 13,779.21 0.2 0.000 0.00 0.0
Money Market 445,633.42 445,633.42 5.4 0.010 44.64 0.0
Restricted Cash 10,000.00 10,000.00 0.1 0.010 1.00 0.0
_--____ _.._
469,412.63 469,412.63 5.7 45.64 0.0
TOTAL PORTFOLIO 7,656,692.05 8,235,725.56 100.0 271,408.14 3.6
3
L® LONGER INVESTMENTS INCORPORATED
I
A Registered Investment Advisor