Loading...
HomeMy WebLinkAbout05-09-2001 Minutes Minutes of the Quarterly Meeting of the CITY OF OCOEE GENERAL EMPLOYEES PENSION BOARD Held on May 9,2001 At 150 N.Lakeshore Drive Ocoee,Florida 34761 Chairperson Dabbs called the meeting to order at 10:08 a.m. Present were Trustees Oliver,and Smith and it was noted that a quorum was present. Trustees Cornell and Ison were absent. Also present by invitation were: Diane Garcia and Tim Nash representing TRUSCO Capital Management,Larry Cole representing Merrill Lynch,and Jo Ann Lacey,Recording Secretary of the Meeting. Attorney H.Lee Denner arrived shortly after the meeting was called to order. Chairperson Dabbs advised that the minutes of the meeting of the Board of Trustees held February 14,2001 had been circulated to all Trustees for review. The Trustees were asked if there were any corrections or additions to the minutes. Trustee Smith indicated that he was aware of one correction on page five of the minutes in which he was reported to state that "he believes the employees should have the right to contact legal counsel directly." The statement should read"he believes the employees should not have the right to contact legal counsel directly." Correction was duly noted and,there being no other corrections or additions,it was,on motion made by Trustee Oliver and seconded by Trustee Smith, unanimously RESOLVED,that the minutes of the meeting of the Board of Trustees of the General Employees Pension Board,be and they are hereby approved. Chairperson Dabbs asked the Board for any comments they may have regarding the format in (mw which the minutes had been presented. Chairperson Dabbs indicated that he felt the format used was adequate to give any employees interested in reading those minutes a clear understanding of what had transpired during the meeting. General discussion among the Trustees indicated that this format could continue to be used. The money manager's report from TRUSCO Capital Management was called for from representatives Tim Nash and Diane Garcia. Quarterly reports were distributed to those present. Ms. Garcia distributed a statement of expenses paid through the Plan for the period from 1/1/2001 through 3/31/2001,which indicated the total expenses for the quarter ended 3/31/2001 to be$54,836.03. Mr.Nash began their report by advising the Board that there has been a volatile climate in the market. He advised that there continued to be negative returns after the very negative year of 2000 and that the first quarter of 2001 for the S&P 500 was down 12%with technology stocks comprising the largest share of loss,down 60%in the last year,and the Russell 1000 was down almost 13%. Bonds continued to be the bright spot closing up 3%. They were the saving grace for 2000. This shows again that diversification is the best way to grow the fund. He reported that there were three major reasons for the losses in the first quarter: 1)more people are out of work and the jobless rate is the highest it has been in the last three-year period,2) portfolios values have declined and,3)there has been a slow down in spending both by corporations and consumers. Mr.Nash indicated that the climate does appear to be improving. There are several reasons for that improvement—the economy appears to be stabilizing;the Federal Reserve is very accommodating in that the Fed rate has been reduced four times in the last four months,three times in the quarter ended 3/31/2001,and once again in April,2001;equities are improving and,there is a lot of cash being held because of the nervousness about the market and the economy in general. That cash will begin to circulate again once the market has stabilized. When questioned by Chairperson Dabbs,Mr.Nash responded that the Federal Reserve is looking at the U.S.economy and the overall world economy,which is slowing down. He stated that there was a general feeling that there would be another.50 point rate decrease in the next few months. The world economy is more reactive to the lower U.S.rate which gives other countries 1 (nr, better access to capital and makes it cheaper for everyone to do better in a low interest rate environment. There was general discussion regarding the fact that the market has been down because of earnings estimates and there was also a lot of uncertainty because of the projected"Y2K"problems in 2000. The world was spending on technologies at that time and now that mentality has changed. Continuing on with his report,Mr.Nash reported that if history is a predictor,based on an analysis of the stock market performance following times when there has been a third Fed rate cut over the period from 1930 through 1998,there has been a return to double-digit performance within the twelve months following the cuts. The general feeling is that everything is now moving into an opposite climate of that from the last year. Technologies earnings are down and blue chips earnings are being revised downward. The market will continue to have ups and downs during the summer,however,the overall picture is the market is ready to move forward,probably in the last quarter of 2001 as opposed to the third quarter. Therefore,the 8%target of the Plan may not be reached from an actuarial perspective in the fiscal year ending September 30,2001. Chairperson Dabbs questioned if cash has been a precipitating factor in the market. Mr.Nash responded that in 1999, $7 Billion was invested in Equity mutual funds. That figure increased to$18 Billion in the first quarter of 2000. In January 2001,that amount was increased to$102 Billion,which represented five times the average flow of 1999. This was due,in part,to new investors who had made a lot of money in the market and,when times started to get rough,took their funds out and have been sitting on them until things straighten out and become a little less risky. Mr.Nash reported that the performance of the Plan is good in relation to the market. It was down 2.5%for the quarter and down 2%for the fiscal year to date,which makes the relative performance quite good. Internationally,Japan has assets on their bank's books which are highly overstated. They need to reduce these assets down as the U.S.did. They now have a new Finance Minister and it is the general (we feeling that he will do this. It will make for a painful couple of months and then the improvement will begin to be seen,as those assets will be more in line with their actual values. Chairperson Dabbs questioned what,if any,effect Korea and Indonesia may have. Mr.Nash advised that there is none at this time as the U.S. is avoiding being involved in the smaller markets. While the International index fund may have some exposure there,it is very small. Only 3%of the Plan portfolio is International. The balance of the Plan is 7%US Limited Cap;4%High Grade Equity Income; 18%STI Growth&Income;25%High Grade Growth;and,43%High Grade Bonds. He indicated that this puts the Plan near the top of the pack and recommends that there be no changes made at this time. Chairperson Dabbs thanked Mr.Nash for his report and called upon Mr.Larry Cole, representing Merrill Lynch Consulting Services,for his report. Mr.Cole greeted the Board and advised he is one of four persons with Merrill Lynch dealing with municipal clients and that he expects to be the person most involved with the City of Ocoee General Employees Pension Plan. Directing the Board's attention to the Summary Report for March 31,2001,he indicated the loss for the quarter to be$198,074. This was due to the difficult market environment. He commented that no one had expected the magnitude of the changes in the market that occurred in such a short time. He agreed with Mr.Nash that diversification is the best thing for this Plan. He reminded the Board that the plan is up slightly over $461,000 since it's inception,the Plan is slightly more aggressive that the average,and diversification is still the key. This has been the tightest market in some time and this Plan can still expect double-digit returns even though it is down 2.7%for this past quarter. The Plan has held up well. Bond funds have held up well and things look good though that may not be evident by the fiscal year end of September 30, 2001. Mr.Cole advised that there are a lot of land mines at this point in the economic cycle but feels that this Plan is on the right track. When reviewing the Investment Policy Checklist,Mr.Cole advised that there were no compliance issues. There are a couple of"no's"on the checklist,however,they are"no's" by a very slim margin. On the ratings list for the 86 Florida Municipal Clients of Merrill Lynch,the Ocoee Plan ranks number 26 of 86. (iw 2 Mr.Cole handed to the Trustees a sheet of graphs showing the Bear Markets of the Last 30 Years. These graphs show the next period of eighteen months from the bottom of the bond market and there are significant double-digit improvements. All indications are that the market is on track to do this same thing again. Chairperson Dabbs asked if Mr. Cole was of the opinion that the market has bottomed out yet? Mr.Cole answered that he is not sure but that he felt it was close,now that the earnings problems have been addressed. The technology sector has obviously been the most dynamic. He reiterated that this Pension Plan is as healthy as can be in this market. Chairperson Dabbs asked what impact or impetus day trading has had on the market. Mr.Cole responded that it has had a huge impact,though not enough to make a significant change in the market. It did,however,add to the volatility of the market because of the braggarts among the day traders telling their friends and neighbors of how much they were making with their trades. These are the persons Mr. Cole called"amateur traders." They have lost a lot of money and are now getting real jobs. Tim Nash interjected that another thing to remember is that a lot of corporate America has 401-K plans and as part of the plans,more of the assets have been moved into cash which will be held until the market has calmed down before new investments are made. Chairperson Dabbs asked the Trustees if there were any other questions. There being none,he thanked the money managers for their reports and moved on to New Business on the Agenda. The first item to be discussed was the 30-Year and Out Plan. He indicated that he remembered about a year ago that Trustee Ison wanted to consider it but the City would not fund it at that time. He also indicated that he knew the current budget process was underway but was not sure what stage it was in at present. Trustee Smith advised that it is currently with the individual departments who must have their proposals turned in to the Finance Department by 6/4/01. The budgeting process would start immediately thereafter. He also advised that he is confident there are no funds available to pay for the 30-Year and Out Program. This is based on the fact that employee health insurance will be going up by 25%and there are interest payments due on the Coca-Cola property. He also mentioned that he has heard of the possibility of a proposed millage rate roll back. Therefore,no City contributions for the Plan will be able to be included in the next budget. Chairperson Dabbs remembered a conversation with the former City Manager in which it was stated that Ward Foster suggested they could use the performance of the Retirement Fund to offset the cost. Attorney Dehner read from correspondence from Ward Foster dated February 13,2001. This correspondence indicated Foster&Foster,Inc.has performed an actuarial study regarding the provision to future service retirees with$100 per month benefit supplement,payable for life. Funding for the supplement could come from one of three methods: Increase employee and City contributions;Utilize favorable fund experience;or,some combination of the two. For the Fiscal year ended September 30, 2002,the increase in member and the City's contribution rate would be from 16.1%to 16.9%of the projected payroll. The employee contributions would be increased from 7.4%to 7.8%[.4%] and the City's contribution would be increased from 8.7%to 9.1%[.4%]. This would mean the cost would be split at almost 50%for each. It was determined that this could best be discussed at the meeting to be held in August. The budget might be complete by then,but if not,at least the trend of how it was going could be determined. This item will again be an agenda item at the August meeting. A Survey Regarding Improved Retirement Benefits was prepared by Ward Foster to determine employee interest in the$100 monthly benefit supplement. Trustee Smith made a motion that Trustee Cornell be asked to do this survey and compile the results. Trustee Oliver seconded the motion and it was,on motion duly made and seconded,unanimously 3 RESOLVED that Trustee Patricia Cornell will distribute the Survey Regarding Improved Retirement Service to all City of Ocoee General Employee's Retirement Trust Fund members and will compile the results of said Survey prior to the August 8 Board Meeting and will present those results at said meeting. Chairperson Dabbs stated that he would meet with the City Manager to advise that this Survey was being done. He also reminded the Board that this Survey would be an"all or nothing"vote by the Fund members and the impact on the budget would be determined after the survey completed. Reminder also that this is a survey only—no changes guaranteed. Chairperson Dabbs asked Attorney Dehner to discuss his findings about the search procedure to a new Money Manager. Attorney Dehner advised that the first step would require a recommendation from the consultant[in this case,Larry Cole from Merrill Lynch]that the Money Manager be replaced. Then the Board would put out a request for proposals and would be provided managers for consideration with an eye towards determining a manager from three to five proposals. Chairperson Dabbs reminded the Board that Mr.Cole has not recommended that TRUSCO be replaced,instead he had advised that they had done an admirable job in the active and volatile marketplace. He asked Mr.Cole for any comments. Mr.Cole advised the Board that it is good for them to know the procedures which would be necessary to change Money Managers,however,he does not recommend changes now. As he had previously indicated in his report,he stated that the current Money Managers are meeting guidelines within the parameters set by the Plan. Chairperson Dabbs asked for any other questions or comments. Trustee Smith stated that he would like to compliment the current Money Managers and Consultant as they as a group are the first ones who have made him feel good about losing money and that,given what has taken place in the market,he feels it is not the time to make any changes now. The other Trustees indicated their consensus to these comments and the meeting moved on to the next item on the Agenda. Item B. Records Storage Discussion. Chairperson Dabbs indicated that Trustee Cornell is working now on purging the records and there will soon be a room available in City Hall in which the permanent records could be stored. The records of the West Orange Airport Authority are currently in that room,but the Authority has been advised that those records must be removed. Once that procedure was completed,the Pension Board would have access to that space. Item C. Drop Plan Application,Ordinance and Summary Plan. Chairperson Dabbs indicated that this item has been completed. Trustee Smith asked for clarification of the purpose of the clause which states that this must be done within twelve months of the normal retirement age. Attorney Dehner advised that was simply to establish a window of time and that the intent was to encourage employees not to stay more than six years beyond their retirement age. There being no further discussion,this Item was considered concluded. Item IV,A.Payment of Bills. Chairperson Dabbs asked for any additions or comments about the bills presented in the package provided for the Trustees. There being none,motion was made by Trustee Oliver,seconded by Chairperson Dabbs,and it was unanimously RESOLVED that the list of bills would be paid as presented. Item B. Correspondence. Chairman Dabbs noted that he had noticed that the Board had again joined the FPTTA. Attorney Dehner reminded the Trustees of the required statement of financial disclosure which is to be sent to the Supervisor of Elections by each Trustee. He advised the Trustees that if they have not already filed their disclosures,the necessary forms should be available at City Hall and advised them to check with Trustee Cornell if they needed the form.He also reminded that it is necessary to file a financial disclosure and those stepping down this year will file one for 2001. Attorney Dehner 4 was asked about the rules of procedure and the requirements for 372. He stated that he would update the Board at the August meeting. The Agenda for the meeting scheduled for August 8,2001 will include the 30-Year and Out Plan, Survey discussion with results of survey to be presented by Trustee Cornell,records storage,and Rules of Procedure(372)to by updated by Attorney Dehner. Chairman Dabbs reminded each Trustee that if there is any other item that needs to be added to the Agenda for the August 8,2001 meeting,they should contact Trustee Cornell to have it added. There being no further business to come before the meeting, it was,on motion duly made and seconded,unanimously adjourned at 11:26 a.m. Jo Ann Lacey Recording Secretary of the Meeting C (kw 5