HomeMy WebLinkAbout08-09-1995 Minutes THE CITY OF OCOEE GENERAL EMPLOYEES' RETIREMENT TRUST FUND
(PENSION BOARD MEETING) - August 9, 1995
In the absence of Chairman Miller, Acting Chairman Grafton called the meeting of the City
of Ocoee General Employees' Retirement Trust Fund to order at 10:05 a.m. in the
Commission Chamber Conference Room of City Hall. The roll was called and a quorum
declared present.
PRESENT: Acting Chairman Grafton, Members Dabbs, Oliver and Waldrop. Also present
were Attorney Dehner, Actuary Garrett, Money Manager Ballew, and
Clerk/Stenographer Lewis.
ABSENT: Chairman Miller.
APPROVAL OF THE MINUTES
Member Oliver, seconded by Member Waldrop. moved to a. .rove the minutes of the Ma 8
1995 and the June 26, 1995 meetings as presented. Motion carried 4-0.
QUESTIONS/COMMENTS FROM AUDIENCE
None
OTHER BUSINESS
ELECTIONS
Chairman Grafton explained the process of the election in accordance with the Operating Rules
and Procedures, and said that her seat was expiring. She reported that, although no nominations
had been submitted as yet, she intended to submit her name in nomination. The Notice would
be posted that day. She asked if the Board could meet on September 7, 1995 to count the
ballots, and if it would be possible to delegate that particular chore to the Clerk's Office or to
the Personnel Office with the Deputy City Clerk supervising as her seat was the one being
vacated. Attorney Dehner said the Board should follow the Rules verbatim. Discussion ensued
about meeting dates and Thursday, September 14, 1995 at 4:00 p.m. was selected to certify the
election.
ASSET ALLOCATION
Chairman Grafton said Actuary Garrett had called to say that he would be late to the meeting,
and asked that the Board defer the discussion until he arrived, however, the Board did discuss
asset allocations and global investments. The Plan would only invest in the American markets,
and Ms. Grafton said that she thought the Board needed to review that. She asked if SunBank
was hampered by the Plan's Rules, and Attorney Dehner said that the Board should hear
directly from SunBank and the Actuary on this. Under State Law, the Board did not have the
same restrictions that are adhered to by the Police/Fire Plan. The ordinance for the General
Plan that they had provided initially when the Plans were done for the same restrictions which
does prohibit foreign investments, limits the equity to 50% as the current limitations. As a
General Employee Fund, the Board can consider this issue of providing for the ability to go into
international investments, or even go to a higher equity than 50%, upon input from SunBank or
The City of Ocoee General Employees' Retirement Trust Fund
August 9, 1995
the Actuary. An ordinance must be prepared amending that section of the current ordinance
allowing either a higher percentage or to go with the foreign investments, and review the policy.
The Board should annually review the policy. Attorney Dehner said that he did not think
SunBank would be hampered, that the fewer restrictions the better.
TRUSTEE SCHOOL
Chairman Grafton reported that the Board needed to authorize the Secretary to make
arrangements for those attending schools, and asked that the Board consider a motion to cover
the whole year, rather than a specific date and conference. Member Dabbs, for the record,
asked that the Board consider him for an FPPTA conference as he had not been to a school.
Member Oliver, seconded by Member Dabbs, moved that the Board approve anyone on the
Board attending the Pension Board schools, seminars or conferences for the remainder of 1995
and 1996. Motion carried 4-0. Chairman Grafton asked that members notify her of dates they
have chosen so that she can make the reservations.
BILLS AUTHORIZED FOR PAYMENT
Chairman Grafton presented the bills for payment, and said that a correction should be made
to the statement on Christiansen& Dehner to read $761.15. She then requested approval of the
Board to present to SunBank for payment, the following bills:
1. Christiansen & Dehner, P.A.
Professional Services Rendered $ 761.15
TOTAL $761.15
2. City of Ocoee
May:
Copies 142 $ 3.55
Postage $ 5.32
June:
Copies 40 $ 1.00
Postage $ .00
TOTAL $ 9.87
3. Judie Lewis, Recording Secretary
May 8, 1995 General Meeting
May 8, 1995 Joint Meeting
June 26, 1995 General Meeting
TOTAL $ 105.49
4. SunBank
Authorized to be taken out, via
transfer, of the Board Funds. $2,708.48
TOTAL $2,708.48
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The City of Ocoee General Employees' Retirement Trust Fund
August 9, 1995
Chairman Grafton asked if SunBank needed a voucher from the Board, and Attorney Dehner
said that to his understanding, it is done automatically according to contract. Member Dabbs,
seconded by Member Oliver, with the correction on the statement of Christiansen & Dehner,
moved to approve payment of the bills as presented. Motion carried 4-0.
DISCUSSION OF TRAINING PROGRAM FOR EMPLOYEES ELIGIBLE TO RETIRE
Chairman Grafton said that the Board had talked about providing a training program for
employees eligible to retire. A sample program was presented that would include the member
and spouse to cover a variety of topics such as finances and tax planning, supplementary
retirement plan, legal affairs and estate planning, health and wellness, along with Social Security
and Medicare. Member Dabbs said that unfortunately most people wait until retirement time
to think about retiring. Discussion ensued about formulating the seminar and whether to cover
a topic per quarter or to run one evening a week for five weeks. Consensus was that it would
be discussed in more length at the November meeting. Chairman Grafton asked if there would
be any objections to the Clerk/Stenographer putting together a program. Some hype and
advertising would be needed. Member Oliver asked if the seminar would be funded by the
Pension Board, and Chairman Grafton said that it could be discussed with the Joint Board.
Actuary Garrett arrived at 10:40 a.m.
Member Oliver said that the Board should make the seminar available on a volunteer basis to
anyone that works for the City. Attorney Dehner recommended that Foster & Foster, Inc. as
Actuary be added to the program to explain how the adjustments work,joint and survivor option
vs. life annuity. Chairman Grafton explained that the seminar would be held after work
hours, and said that the plan should be brought to the attention of the City Manager for his
approval.
UPDATE ON ORDINANCE - Chairman Grafton explained that the City Manager would not
be recommending the Ordinance to the City Commission as had been presented. Attorney
Dehner said that the City Manager had only been opposed to the benefit improvements and
asked for the deletion of Section 3 only. He explained the importance of sending a letter with
the Impact/No Impact Statement to the Division of Retirement, and gave details about the timing
of the letter.
Attorney Dehner recommended two things: 1) After the next meeting, if the 2.2% doesn't pass
and if that is deleted, then they will do a new document before second reading showing that
deletion, and 2) Actuary Garrett does the letter of No Impact. They did not want that going to
Tallahassee with that section in there as it would not be consistent with the letter of No Impact.
They would do a new draft showing that it has been removed. Discussion ensued about the
proper advertisement for the Ordinance.
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The City of Ocoee General Employees' Retirement Trust Fund
August 9, 1995
Brian Ballew, SunBank Money Manager representative, arrived at 10:53 a.m.
Actuary Garrett will send the letter of Impact/No Impact to the Department of Retirement
(DOR) which could can be postmarked the day of the Second Reading. Attorney Dehner said
that complies with the local Charter and procedures. Then, if there is an amendment on the
Second Reading, they will send a final copy of the Ordinance to Tallahassee, accompanied that
with a letter of No Impact upon the final one that's signed. DOR will see the deletion and see
what has been changed. It is no problem for the Actuary to follow that, if the Plan's procedures
allow for that to occur at the Second Reading.
RECESS to the JOINT BOARD MEETING 11:08 - 11:15 A.M.
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JOINT MEETING
GENERAL EMPLOYEES'/POLICE OFFICERS'/FIREFIGHTERS' PENSION BOARDS
Chairman Reed called the Police Officers/Firefighters' Pension Board to order at 11:05 a.m. in the
Commission Chamber Conference Room of City Hall, and a quorum was declared present.
PRESENT: Chairman Reed, Members Gledich, Strosnider, Williams, and Wilson. Also present
were Actuary Garrett, Attorney Dehner, Money Manager Ballew, and
Clerk/Stenographer Lewis.
ABSENT: None.
Acting Chairman Grafton called the General Employees' Pension Board back to order.
PRESENT: Acting Chairman Grafton, Members Dabbs, Oliver, and Waldrop.
ABSENT: Chairman Miller
REPORTS
ATTORNEY
ACTUARY AGREEMENTS/MONITOR AGREEMENTS - Attorney Dehner explained details
in the Monitor Agreement and also the Actuary Agreement that were common to both Boards.
There were things in the Police/Fire agreements that did not apply to the General Plan, and he
would discuss those during the Police/Fire meeting. He had spoken with Actuary Foster who had
reviewed their agreements and he did not anticipate any problem. Mr. Dehner said that Actuary
Foster had informed him that the contracts were fine. Mr. Foster was away from the office at that
time and he had asked if there would be any problem from the Boards, upon returning, about
signing the Affidavit. The contracts reflect the agreement that the Plans had been working under
with Foster& Foster, Inc. and Attorney Dehner would send those back to the Boards for signatures
once Actuary Foster had signed them.
ATTORNEY AGREEMENTS - Attorney Dehner presented two copies of an agreement with
Christiansen & Dehner, his firm, for each of the Boards. He said that the agreements reduced to
writing the on-going relationship that the Attorney/Board had held in the past.
Member Strosnider, seconded by Member Gledich, moved to accept the Agreement for the
Investment Performance Monitorin. and the Adviso Services Actuarial Services A.reement with
Foster & Foster, Inc. and the City of Ocoee Police Officers'/Firefighters' Retirement Trust Fund
as presented. Motion carried 5-0.
In response to Member Waldrop, Attorney Dehner explained that the Board and the consultant,
as fiduciaries, could terminate the contract which provides for a termination period upon 30 days
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The Joint Meeting of the City of Ocoee General Employees' and
Police Officers'/Firefighters' Retirement Trust Boards
August 9, 1995
notice. The three year fee guarantee was only a record and was representation should the
consultant remain with the Plan for three years. It was basically a contract from month to month.
Member Waldrop stated that he had no problems with the attorney but would object to being locked
in with a three year contract. Attorney Dehner said that the consultant is locked in for that fee for
that period of time, should they remain.
Member Waldrop, seconded by Member Dabbs, moved to accept the Agreement for the
Investment Performance Monitoring and the Advisory Services (Actuarial Services Agreement) with
Foster & Foster, Inc. and the City of Ocoee General Employees' Retirement Trust Fund as
presented. Motion carried 4-0.
Member Oliver, seconded by Member Dabbs, moved to accept the Attorney Contract with
Christiansen & Dehner, P.A. as presented. Motion carried 4-0.
Chairman Reed said that the Police/Fire Board would vote on their Contract with the attorney
during their Board meeting.
AT THE REQUEST OF MONITOR GARRETT, CHAIRMAN REED RECOMMENDED
THAT REPORTS FROM SUNBANK BE GIVEN AT THIS TIME DURING THE MEETING.
MONEY MANAGER
Brian Ballew, SunBank representative, said that the figures might differ between the quarterly
report and the six month ending. He distributed The Investment Reports, and said that the financial
markets continue to respond favorably to the economic conditions that existed in the second quarter.
It had been one of the best quarters in the stock market in two and one-half years but we were at
somewhat of a plateau stage. The economy was slowing down and they were getting a mixed bag
of indicators from the government. The Federal Reserve had lowered the Federal Funds rated
quarter point to hopefully stimulate the economy. They had been trying to engineer the so called
"soft landing" over the last 12 months, and for the most part it had worked. Another easing might
be seen in September. He said that they would continue to watch the data but the bond and stock
markets have had terrific runs for the first six months of '95. The Funds had benefited. The
returns in terms of real returns were fantastic, and they had made a lot of money. It had been tough
to beat the indexes. Through the first quarter of 1995, the S&P index ranked around the 9th
percentile and it had out performed 91% of domestic stock, mutual fund and portfolio managers.
Through June it had still been 83% of domestic stock of their mutual portfolio managers. It had
been a tough bench mark to beat.
Money Manager Ballew presented a chart of the "S&P 500: Relative Performance By Sector" as
of June 30, 1995. The chart showed which sectors had out performed the market (the S&P Index)
as a whole through the six month period ending June, 1995.
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The Joint Meeting of the City of Ocoee General Employees' and
Police Officers'/Firefighters' Retirement Trust Boards
August 9, 1995
Chairman Reed left at 11:32 A.M. and returned to the meeting at 11:35 A.M.
Mr. Ballew said that the markets had done remarkably well. The bond fund was lagging in the
index. The bond funds, historically and financially, will continue to have a good quarter in this six
months in terms of real returns. Mr. Ballew asked for the patience of the Boards as they continue
working to beat those indexes.
Money Manager Ballew presented the Investment Performance Report of the General Employees'
Fund, and said that the terms of the plan was 6.2% with an asset allocation of roughly 60% fixed
income, 40% equities, and a little cash. As of August 1, 1995 nearly all the individual stock had
been sold. The equity fund and the equity income funds, both did roughly 6.5% for the quarter,
and the S&P soared at 9.5%. The Bond Fund had been up 6.13% versus Lehman Brothers Bond
Index at 6.48%, and had lagged by about 40 basis points. For the six month period, the Equity
Fund had been up 16.5%, the Equity Income Fund up 18.3% with an S&P up 20%. The market
had been up 20% for the six month period ending in June. Mr. Ballew said that although they were
great returns, that we had still been beaten by the S&P 500. The Bond Fund had been up to
10.85% versus the Index of 11.8%.
The report also included a reconciliation of the account for the quarter ending in June, and a
Cumulative Investment Performance for the period ending also in June. Mr. Ballew said that he
expects the momentum holding in the first half of '96, and he also thinks that the stock prices will
go higher in '96. He explained how the weight in the High Grade Bond Fund was changing, and
that the High Rate Equity Fund were over weighted in technology relative to the S&P as of June 30.
Drug stocks, health care, and retail were doing well. Industry chart showed how the Fund matched
up versus the S&P as to the weighing and gave a complete list of assets in the Funds.
Money Manager Ballew presented the Investment Performance Report of the Police/Fire Fund, and
said that the numbers were virtually identical.
MONITOR
Monitor Garrett of Foster & Foster, said that they had matched up well with SunBank. Time had
resolved some of the earlier differences. Mr. Garrett said that the Monitor's returns were a little
higher than SunBank's, and he presented Mr. Ballew with a written report for SunBank. He said
that there was a point of deception on the chart presented in the report for periods prior to 12/94.
The Monitor's races of history had the over lapping period between ICC and when SunBank had
taken over but they were now monitoring only SunBank's performance. The Board could request
a work up of how the Fund had done over five years in the dollar weighing and total returns. He
said that the Fund had done well. The last quarter showed long term rate returns with SunBank and
ICC. The report was for a lot shorter time period. Mr. Garrett presented an analysis of the
investment performances of both of the Retirement Trust Funds for the period January 1, 1995
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The Joint Meeting of the City of Ocoee General Employees' and
Police Officers'/Firefighters' Retirement Trust Boards
August 9, 1995
through June 30, 1995.
PERFORMANCE REPORT - GENERAL EMPLOYEES' FUND
Monitor Garrett reported that the rate of return for the quarter was 6.3%. This rate of return
failed to outperform the composite index of market indicators (40% S&P 500 Composite Stock
Index, 55% Lehman Brothers Government/Corporate Bond Index, and 5% U.S. Treasury Bills)
which also registered a return of 7.4%. This rate of return was ranked in the 57th percentile of the
Cadence Universe of investment managers.
The equity portion of the Fund underperformed the S&P 500 over the latest quarter (7.0% vs.
9.5%) and ranked in the 72nd percentile of the Cadence Universe.
PERFORMANCE REPORT - POLICE OFFICERS'/FIREFIGHTERS' FUND
Monitor Garrett reported that the rate of return for the quarter was 6.3%. This rate of return
failed to outperform the composite index of market indicators (40% S&P 500 Composite Stock
Index, 55% Lehman Brothers Government/Corporate Bond Index, and 5% U.S. Treasury Bills)
which registered a return of 7.4%. This rate of return ranked in the 57th percentile of the Cadence
Universe of investment managers.
iiror The equity portion of the Fund underperformed the S&P 500 over the latest quarter (6.8% vs.
9.5%). This performance ranked in the 72nd percentile of the Cadence Universe of investment
managers.
ASSET ALLOCATIONS
Actuary Garrett presented a chart for the Boards to review, and said that most of their clients had
moved to a higher equity allocation. The chart showed levels of volatility as measured in standard
returns and associated with different asset allocations. The Policy Statement must also be changed
if the Board decided to change the asset allocation. Attorney Dehner said that the ordinance for
the General Employees Fund and the Police/Fire Fund gave the same restrictions for the money
manager and the actuary. Discussion also ensued on changing the General Employees ordinance
to allow their Fund to go into international investments as they do not have the same quality
standards. Mr. Dehner asked for input from the money manger about international investment.
Money Manager Ballew said that he believed that it was an excellent idea, and explained some of
the risks in going to international. He stated that the timing would not be bad now either as the
U.S. markets are the place to be in the world for the first six months of '95. Mr. Ballew
recommended some international exposure, and said that it reduced the risk and could add to the
Fund's returns. He said there were a lot of opportunities abroad and we were truly coming to a
global economy. He also recommended participation in growth companies that were already abroad.
Actuary Garrett said that they saw it as another avenue in further diversification. He explained
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The Joint Meeting of the City of Ocoee General Employees' and
Police Officers'/Firefighters' Retirement Trust Boards
August 9, 1995
that their top performing client is a general employee fund that had gone with 20% of the total fund
into international, typically holding less than that, and that has had an outstanding return. They
were a little more aggressive on the other equities as far as the restricted. Mr. Garrett supported
the change and said that the ordinance would need changing to include the international piece, and
the equity allocation.
In response to Chairman Grafton, Attorney Dehner said that it had been highly recommended by
both of the investment advisors, and asked that Mr. Ballew provide the packages for further
consideration of the Boards. He said that it was important to make the distinction between the two
different potential changes being discussed, as follows:
1) Increasing the asset allocation to 50% by Board action amending the Investment Policy
Statement. The current ordinance already gave the authority to legally go as high as 50%.
2) The changes that would be required enabling the Fund to legally go into international or
some quality below the top three rating classification would require an ordinance change
before the Board could change the Investment Policy.
Actuary Garrett asked if there was a fund already tailored for international (at SunBank), and if
they were developed in U.S. dollars, or if there was a currency risk. Mr. Ballew said there were
currency risks, and that it was currently just a common trust fund that will ultimately become a
mutual fund. There is currency exposure and it was typically a "unhedged" international fund.
They will employ some hedging, seizing a steady trend of the dollar strengthening or weakening as
it will definitely affect the returns.
Chairman Grafton wanted the General Employees' Board to review the asset allocations and their
investment policy once again, and asked that the Board reconsider it at the September 14 meeting.
Member Oliver said that she had asked Mr. Ballew to send the information to her for distribution.
Member Dabbs stated that he and his family had foreign funds, and said that he believed that it
merits discussion.
In response to Actuary Garrett, Mr. Ballew said that none of funds were loaded for any of their
plans. It was just compost funds, individual spanning investment. The current recommended asset
allocation to a plan or a plan that wants to accept some international is roughly 10% of the equity
exposure. If the Board decided to move to 50% equities, SunBank would recommend 10% of that
or 5% of your total portfolio to be international. There would be no dramatic shift. Chairman
Grafton expressed concern about the Plan remaining sound. Member Dabbs emphasized that the
Board had a responsibility to do the best that it could and to look at all of the options without
"selling the farm."
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The Joint Meeting of the City of Ocoee General Employees' and
Police Officers'/Firefighters' Retirement Trust Boards
August 9, 1995
Member Dabbs left the meeting at 12:09 p.m.
Actuary Garrett said that the Board could go ahead and consider the change in the equity
allocations and discuss the international part later. Chairman Grafton said that she would really
rather wait until Chairman Miller could be present.
Chairman Reed opened the Police/Fire Board to a discussion into leaving the allocations the same
or going to 50-50. He explained that the Plan had made an increase over a year ago, and he said
that he believed that it had been a mistake. He then asked how much of an advantage would it be
to go 50-50 over what they now were through 1996, and Mr. Ballew said that that was kind of a
short window. Mr. Ballew emphasized that the Board should think long term, 10 - 15 years, to
extend the benefit by having more equity exposure. He said that historically, there was no guarantee
but that they believed that over the long term that the Fund would do better with stocks.
Member Gledich expressed support in increasing the equity allocation to 50% at cost within the
discretion of the manager to go there, that they were not directing the manager to 50% but they
were giving the manager the discretion to go as high as 50% at cost. In response to Member
Gledich, Attorney Dehner said that from a fiduciary standpoint the Board should look at where the
median level of these types of fund and administrator were in terms of asset allocation. The 50%
equity allocation is about the median 50-52%, in that range of equity investments, and if the Fund
gets below 35 they were in the 5th percentile on the low side. If they were above 65 in equity then
they were in the 5th percentile on the high side. As fiduciaries, if they were going to be in either
extreme, the Board wanted to have a good reason to be there, a record such as certain equity needs.
He said that he did not think that that was the circumstances of the Board. It was more comfortable
from the legal and fiduciary standpoint in terms of defending what you were doing if you play
around the median. The statistics that he quoted were still accurate, and from a legal and fiduciary
position he would be comfortable with that.
Member Gledich, seconded by Member Williams, moved that the Investment Policy of the Police
and Fire Board be amended with respect to the maximum equity exposure of cost to reflect the
increase from 40% to 50%, that any increase would be within the discretion of the manager and that
the Board is not telling the manager to go to 50%, they're merely telling the mana'er the have the
discretion to go to 50% equity in cost, and that change is effective as of Au. st 8, 1995. Motion
carried 5-0. The Board directed Foster& Foster, Inc. to make the appropriate changes in the Policy
Statement.
Actuary Garrett pointed out that the next quarter's Police/Fire Performance Report would show
the change in the index, and that they would show 50% S&P 500, 45% Lehman Brothers Bond, and
5% cash. That would be in effect all the way to the 12th and they could not say that they were at
40% this period. There will be only two quarters of history and the rates would be down a little
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The Joint Meeting of the City of Ocoee General Employees' and
Police Officers'/Firefighters' Retirement Trust Boards
August 9, 1995
bit.
In response to Member Waldrop's question, Actuary Garrett explained that if the investments
were good that it could affect the portion paid by the City.
DISCUSSION OF TRAINING PROGRAM FOR EMPLOYEES ELIGIBLE TO RETIRE
Chairman Reed said that he believed there was a need for a retirees training program for people
eligible for early or normal retirement within the next five years. Chairman Grafton said that this
had been discussed during the General Employees meeting. She explained that Stenographer Lewis'
husband had recently retired and the retiree and spouse had been required to attend a series of
meetings covering a wide range of topics. She pointed out that Ms. Lewis had stated that it would
have been very helpful had they attended the meetings 20 years earlier. The General Board had
talked about setting up a series of lectures or programs for the entire membership, after working
hours, that would be open to the employee and their spouse. Discussion ensued about speakers,
materials, expense, publicity and promotion for such a seminar. A sample program was presented
to the Boards for review. Member Strosnider, seconded by Member Gledich, moved that the
Trustees from Police/Fire Board and the General Employees Board work together to develop a Pre-
retirement Seminar in early 1996. Motion carried 4-0. Chairman Grafton said that the General
Employees Board had reached a consensus earlier.
ADJOURNMENT FOR THE GENERAL EMPLOYEES' PENSION BOARD
Chairman Grafton adjourned the General Employees' Pension Board at 12:34 p.m.
Respectfully submitted,
Ju F. Lewis
Clerk/Stenographer
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