Loading...
HomeMy WebLinkAbout2015-10-29- MinutesUoneld Jordan Chairman Sondra E. Smith Secretary Roy Cate Position 1 Retired Firemen's Pension and Relief Fund Board of Trustees Meeting Agenda October 29, 2015 Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 29, 2015 Page I of 8 Pete Reagan Position 2 Retired Dennis Mullens Position 3 Retired Ron Wood Position 4 Retired A meeting of the Fayetteville Firemen's Pension and Relief Fund Board of Trustees was held at 3:00 p.m. on October 29, 2015 in Room 326 of the City Administration Building. Mayor Jordan called the meeting to order. Present: Dennis Mullens, Roy Cate, Pete Reagan, Ron Wood, Mayor Jordan, Paul Becker, Finance Director, Kit Williams, City Attorney, Sondra Smith, Lisa Branson, Dee McCoy, City Clerk Office, Kerry Bradley, Glenn Atkins, Garrison Financial, Eldon Roberts, Audience Garrison Financial: 3rd Quarter reports Kerry Bradley: Good afternoon. As I was telling Kit two seconds ago, I'm glad you had us here today instead of two and a half weeks ago. If you look at the quarterly report that's in your agenda, the investment policy is 60% equity, 40% fixed income. We are about at that level. We certainly had that long awaited 10% correction happen this past quarter in August and September. Your equities fell a bit, so we are a little bit under but not a lot. If you'll go back to the performance page you can see year-to-date the account is down 5.95% for the year. That is, in a large part, due to the equity exposure we have. I think we had expected a 10% correction for several years. We finally got it. I think that's healthy for the market. There were certainly some rumblings with the Fed and concerns about global growth that sent the market into a bit of a tailspin the last couple months. On a much more positive note, I also passed out a performance report for just the month of October, equities are up about a little over 8%. We recovered a lot of that. The account is about flat for the year now. Happy to report that we recovered quite quickly and we never know how swift those ups and downs are going to be. I think, overall, the market is masked a little bit. A lot of the market has been driven by some very large cap growth names, the Amazons, Googles and Netflixs of the world. This portfolio is much more structured with value type names. Those are the large cap holdings that we continue to hold that were a hold over when the account was above the $5 million. I think it's time now that we transition out of those and get you completely diversified. We've had to sell Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 29, 201 i Page 2 of 8 a lot of holdings to fund distributions. I think I mentioned this the last time I was here but there's nothing wrong with those names. For diversification sake, I think it's time. We will be transitioning out of those unless anybody has a problem with that and going to all mutual funds. Nothing wrong with the names, but with the size of the portfolio and the size of the positions, they're just a little larger and a little more concentrated than we're comfortable with at this point. We'll get you back into equities and it'll be diversified, it just won't be in those individual names. Large cap growth has really been driving the market. If you look at the underlying sectors of the market, the smaller companies and midsize companies are much weaker. For instance, large cap growth is up 6%. Large cap value is down 3%. It's rare in the market that you see that vast of a deviation between those sectors, small cap and mid cap, they're also in the negative range. I think I've always said this year, if we can get through 2015 in the black, I'll be happy. We've had two very strong years of market gains. It's time for a breather. There's obviously some question about global growth in some of the emerging markets. We are very comfortable keeping you at that 60% level, we are just going to get you a little more diversified since the portfolio has drawn down a bit. We've recovered a lot, the portfolio is about flat for the year. That's good news. Whether we are going to keep that or have another sell off between now and the end of the year, that's kind of hard for us to say. Certainly we don't really see a recession coming. That could certainly change over the next six months. Right now we are comfortable with that equity allocation. We are a little bit light on the fixed income, if you'll notice on that account summary graph, Glenn can speak to that. Glenn Atkins: Thank you. Referring back to the performance page, for the quarter we were under the market quite a bit. You will recall in late August we sold a significant portion of one of the mutual funds, the IBOXX, what we call the liquids that had about an eight year duration. Right after we did that, the market went straight up. Then you say to yourself, well, do I want to buy it here? Well, probably not. The market went down and straight back up again. In end of the quarter, on the ten year, after having painted a 2.30 and bottomed around the 2%. We're still experiencing the volatility we've been talking about for years. We are under allocated and fixed. When we do invest that, we'll obviously invest it in the funds like we have now. Our duration right now is essentially equal to the index. It's about a 3.6, index is 3.98. We're slightly shorter than the index. Also, in terms of good news as compared to the equity market, in the last four weeks now we've made up the performance differential for the quarter and are slightly ahead now for the quarter -to - date period. Inception -to -date, since we've been managing the fixed income portfolio, we're significantly above the index. What we need to do is get that cash invested at an opportune time and keep doing what we're doing. I always like the pictures, that's the ten year treasury yield for the quarter. If you'll look over to the far right, today we're kind of up in there now. It's pulled back significantly since the end of the quarter. The second chart is a year-to-date on the ten year. Rates are about where they were at the beginning of the year. That volatility and thinking the Feds' going to do something and then the China issue and slow domestic growth, and it's extremely volatile and it's very difficult not to do anything stupid. The last graph is a one year chart of the ten year treasury. It's only slightly lower than it was a year ago. That shows the volatility even more than the year-to-date one does. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 29, 2015 Page 3 of 8 Pete Reagan: Kerry, you talked about cashing out some of our stocks and moving them to mutual funds. We have a meeting scheduled tomorrow at 5:30 p.m. Can we hold off until then? Kerry Bradley: Certainly. Paul Becker: What is your average yield on your bond? Glenn Newman: 2.66. Paul Becker: And your duration you said was 3.6? Glenn Newman: 3.6 years. The yield on the index is 1.74. Paul Becker: What index? Glenn Newman: That's the Barclay's Intermediate Government Credit Index. Paul Becker: Thank you. Glenn Newman: 2.66 versus 1.74 on the yield. 3.60 versus 4 for the index duration. Approval of the Minutes: Approval of the August 6, 2015 Meeting Minutes and the September 30, 2015 Special Meeting Minutes Pete Reagan moved to approve the August 6, 2015 meeting minutes. Roy Cate seconded the motion. Upon roll call the motion passed 6-0. Roy Cate moved to approve the September 30, 2015 Special meeting minutes. Pete Reagan seconded the motion. Upon roll call the motion passed 6-0. Pension List Changes: None Approval of the Pension List: Approval of the November and December 2015 and January 2016 Pension Lists Pete Reagan moved to approve the November and December 2015 and January 2016 Pension Lists. Dennis Mullens seconded the motion. Upon roll call the motion passed 6-0. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 29, 2015 Page 4 of 8 Unfinished Business: None New Business: Revenue and Expense Report 09/30/15 Sondra Smith: That's a report that Accounting does. It shows where your fund is and where it's been in the past. Kit Williams: Even though it shows a pretty low number, it doesn't reflect all of the millage that was going to be paid in October. Your actual number is going to be significantly higher, by probably $250,000, than what it shows, if you look at previous years' millage, assuming it remains about the same. City Attorney Memos to City Council regarding transferring the Firemen's Pension Fund to LOPFI Sondra Smith: That's all of the memos that have been written so that you'd have a copy of them. I didn't know if you'd received all of them or not. Kit Williams: I think they probably heard me at the City Council meeting. Sondra Smith: I think so, but it's good to have your memos. Kit Williams: We are looking forward to tomorrow night. That should be a fun time. Ordinance 1136 Sondra Smith: I've had several questions about when the millage was first adopted so I put a copy of the ordinance in there and a copy of the minutes. It was adopted May 27, 1957. Kit Williams: Do you have the actual ballot or proclamation of election? Sondra Smith: I do not. I can probably find that though. Mayor Jordan: I saw that somewhere. Pete Reagan: It's on the backside. Kit Williams: The proclamation is? Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 29, 2015 Page 5 of 8 Sondra Smith: Well, it says the ballot title will appear as follows. It doesn't say the results. I can pull that too, if it's on microfilm. Kit Williams: I think the County Clerk would have that too, would they? Sondra Smith: Probably. Mayor Jordan: I thought I read somewhere it was passed in November that same year. Kit Williams: That has to go to a general election. That is my understanding. Pete Reagan: It says the 27th day of May 1957. Mayor Jordan: That's when it was sent to the election. Sondra Smith: It went to the election November 5, 1957. It shows on the page of the minutes, on page 67 of your packet about mid -way down. It says it was submitted to the qualified voters of the City of Fayetteville at the next general election on the 5'h day of November 1957. That's when it was actually voted on. Kit Williams: Of course now we have general elections on even years. I don't know what was happening back then. Pete Reagan: Do we know how much the millage originally started at in 1957? Kit Williams: That's why I wanted to see the ballot. It's kind of funny because if you look at this ordinance it says not to exceed 1 mil. It should have said exactly what it was, not to exceed. Pete Reagan: I'm sure there was a good reason for it or they wouldn't have put it in there. Sondra Smith: We can find that. Pete Reagan: And it passed unanimous. Kit Williams: From the City Council, that's true. Sondra Smith: From the City Council to go to the voters. Kit Williams: Something must have passed at the voters because we have a millage. Sondra Smith: We'll see if we can find the ballot language. Back then, the records were not as easily produced as they are now. We'll see if we've got something on microfilm about the election results. Kit Williams: It'd be interesting to see that, I'd like to see it myself. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 29, 2015 Page 6 of 8 Eldon Roberts: Kit, if this ordinance was created, this is Fire only the way I read this. I've got your people looking for mine. I thought it was one ordinance that created both the Police and Fire. Is the way you read this, not to exceed one full mil for the Fire Department? Kit Williams: For the Fire Pension. Eldon Roberts: How did they start out with half a mil? Kit Williams: There's all kinds of guessing we could do. It could be the Police heard about the great deal the firemen were going to get and they decided to jump on board and so the City Council maybe passed something else and had half a mil each at that point. I don't know. When did you all start yours, do you know? Eldon Roberts: I thought it was in the `40's. I was shocked when I saw this in 1957. I've seen that ordinance, it's been down at the Police Department that created the Policemen's Pension fund. What I'm trying to say it, if it's not to exceed one mil, then maybe somebody had the digression to go past one mil. But at some time or other, when they saw this plans begin to get into trouble, how come they couldn't go ahead and raise it on up a little higher by ordinance? Kit Williams: I think the assumption has always been that it's a half mil each. Eldon Roberts: That's an assumption. I didn't think it was one full mil either, until I read this, and it kind of sheds a little different light on it. Sondra Smith: We need to find the actual ballot. Kit Williams: The other question would be, who would have the right, would the City Council or somebody else have the right to raise it? I can't believe the ballot would say not to exceed because that's so unclear. Maybe it did. That's why I'd like to see the ballot. Eldon Roberts: It's these kinds of things here that make a lot of difference in where we are at in our funding, I'll assure you that. Kit Williams: And what can happen from here forward. Eldon Roberts: Absolutely. NCPERS Letter dated July 2015 Sondra Smith: We have a bill to pay NCPERS but we usually vote on whether or not we are going to do that. It's not due until January. Mayor Jordan: That's right, I remember that now. Pete Reagan: We can do that at the January meeting. Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 29, 2015 Page 7 of Sondra Smith: Okay. Informational: 2016 meeting schedule Sondra Smith: That's just informational. Eldon Roberts: If I could speak again, I've been around this for forty-seven years, longer than any of you all have, and I've watched and I've paid attention to what's going on. For years and years and years the actuarial evaluations would come out on both of these plans and there would be a column there that said what the employer's contributions needed to be. There were be another set of figures in another column that said what the employer's actual reporting contributions were. Those numbers never matched, hardly ever. If they ever did. I harped at that bunch in Little Rock to get those numbers added up. They finally have decided, David Clark told me, we're going back and looking all the way back to the start of the first actuary they have on file as to what the employer's contribution should have been and what it actually was. I realize there was no signed contract with the city and these pension plans like there is now with LOPFI, that they should contribute what the actuary said. But, morally, it looks like it would certainly have been the right thing to do and I don't think it happened. We'll see the results of those numbers when they come out. I'm pretty sure that the amount that the employer contributed is not going to add up to what the actuarial evaluation showed that the employer's contributions should be. I might be wrong, but those numbers are being put together right now. If they are different, we've lost a lot of money. Kit Williams: I think where the difference happened was when the benefits were raised. Up to that point in time there was plenty of money going in, the employee's contribution was plenty with just the millage and the turnback. When the benefits were raised the millage could no longer keep up with that. That's why we're in problems. Eldon Roberts: What we need to look at and see is if before benefits were raised if the proper amount was being put in. Kit Williams: At one point, if you look back on those things, it actually said it was 103% funded and now it's 30 something%. That was 103% funded before the benefits were raised, I think for the second time when they went to 90. Eldon Roberts: One other issue that I remember, because Pete and I can put together a lot of information about these things. There was a Mayor with the City of Fayetteville that didn't vote for either of the benefit increases we got, It wasn't Mayor Jordan either, it was prior, who himself determined that the city was not contributing to the old Fire and Police pension plans near what they should be, or even to the general employees contributions. He said "I'm going to go to the Council and recommend that the city doubles their contributions," which was 6% of everybody's salary that was working on the old plan. He did and the Council approved it. They bumped up to 12%. For the last several years, every employee down there, 18% of their salary was going into Firemen's Pension and Relief Fund Board of Trustees Meeting Minutes October 29, 2015 Page 8 of 8 the pension plan, 12% from the city, and 6% from the employee. That was too little too late. That was the Mayor of the City of Fayetteville who pointed that out and brought it to everybody's attention and got it to the Council and got it raised. Paul Becker: The actuarial report that you're looking at that the actuary produces, when they say the city's contribution or the employer's contribution, that's what it would have to be to fund the plan. That does not address whether or not the city or the employer is obligated. Eldon Roberts: No, I said up front Paul, I realize you didn't have a signed contract that says you have to put in what the actuarial evaluation people said. You do now. That's the reason LOPFI is going to be strong from now on out. You've got to pay whatever they say you owe. Dennis Mullens: If we're only getting 4/1 O'h of a mil, where's the other? Kit Williams: That's why we need to see what the ballot said and what happened way back in the `50s. Sondra Smith: It was rolled back from 5/10ei. Kit Williams: It was half a mil when it got rolled back. The question is, why was it half a mil? Pete Reagan: Did it go in as a mil and then get rolled back? Kit Williams: I don't have an answer for that. Mayor Jordan: I don't have an answer for that either. Kit Williams: I assumed that the ballot would say half a mil for Fire and half a mil for Police. Mayor Jordan: We just need to pull the ballot and see what it says. I've been chairing this thing for seven years and as far as I know it started off with a half mil each. Kit Williams: It's been half a mil for as long as any of us could remember. We need to try to find out why and how. Mayor Jordan: We had this very same discussion 2010 but nobody brought any of that up then. Pete Reagan: That's not going to fix our problem. Adjournment: 3:27 p.m.