HomeMy WebLinkAbout08-10-2001 Minutes Minutes of the Quarterly Meeting of the
CITY OF OCOEE GENERAL EMPLOYEES PENSION BOARD
Held on August 8,2001
At 150 N.Lakeshore Drive
Ocoee,Florida 34761
Chairperson Dabbs called the meeting to order at 10:06 a.m. Present were Trustees Ison,
Oliver,Cornell and Smith and it was noted that a quorum was present. Also present by invitation were:
H.Lee Dehner,Attorney, Diane Garcia and Tim Nash representing TRUSCO Capital Management,Larry
Cole representing Merrill Lynch,and Jo Ann Lacey,Recording Secretary of the Meeting.
Chairperson Dabbs advised that the minutes of the meeting of the Board of Trustees held May 9,
2001 had been circulated to all Trustees for review. The Trustees were asked if there were any corrections
or additions to the minutes. After a brief discussion,there being no corrections or additions,it was,on
motion made by Trustee Cornell 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.
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 4/1/2001 through
6/30/2001,which indicated the total expenses for the quarter ended 6/30/2001 to be$53,346.57. Mr.Nash
began by stating that there was fmally some good news to report,because there were positive numbers to
report instead of the negatives that had occurred during the previous quarters. Their Investment Overview
showed the S&P to be up 5.9%for the quarter and the Lehman Aggregate Bond Index up.60 basis points,
all of which is in positive territory. All of this is considered to be a result of the aggressive Federal
Reserve,which lowered the interest rate another.25 point during the third week of June. It is generally
believed that the Fed is now at the end of their easing cycle. The cuts during the first two quarters of 2001
were larger than those made during the previous recession periods of 1990 and 1985/86. There is now the
waiting for the economy to pick up and with this come inflationary concerns. However,the easing of the
interest rates by the Fed to spur the economy is in hopes of going forward with consumer spending.
Review of the Market Snapshot report indicates that for the quarter ended June 30,2001,the Dow
was up 6.7%, S&P up 5.9%and tech stocks were up. The Style Indices show the mid caps to be up
32.9%,small caps to be up 29.0%and the large caps to be down 32.4%.
There is plenty of fiscal stimulus around now for economic growth. One of these items is the
Economic Growth and Tax Relief Reconciliation Act under which single individuals will be getting checks
for as much as$300.00 and married couples will be getting checks for up to$600.00. This is to put more
money in everyone's pocket in order to spur spending. Some of the larger merchants(i.e.,Lowe's,Home
Depot)are allowing customers to pre-spend their refund checks with the idea that they will spend more
than the refund amount,requiring more consumer credit and therefore an increase in retail sales. There is
also the Income Tax Refund,which will reduce percentages by 1.0%for the calendar years of 2001-2003,
and 1%by 2004-2005,a 2.0%deduction within the next three years. Also,the"Marriage Penalty"is
reduced and there will be a gradual elimination of estate taxes.
For the first time in six quarters,tech stocks are up 12%. This growth fund is overweighted in
tech stocks,had been heavy in energy stocks,however,OPEC is still constricting supplies so there will be a
reduction of exposure to energy stocks. "What a Difference a Year Makes!" In the second quarter of
2000,Growth was up 22.1%. In the most recent quarter,it was down 32.4%. Value is clearly the leader
now with Growth giving up the most gain. This change is greatly due to the tech stocks. The report of
large cap,mid cap,and small cap,shows that during one-year performance fluctuates,however,a five-year
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average shows that they are all at almost the same range which reinforces the reason for owning some of
each. Short-term bonds are up while long-term bonds are in negative territory. Home mortgage rates were
up during the quarter. This is all based on inflationary expectations,not actual. Performance Comparisons
show that the Plan is up 3.85%for the quarter. Equity is up 6.69%,High Grade Equity up 6.05%. The
Limited Cap Fund is up 16.47%,due to being overweighted in tech stocks.
Chairperson Dabbs questioned whether or not the intention is to continue to be overweighted in
tech stocks.Mr.Nash responded that John Hammond likes the stocks right now and they will not be
reduced,however,energy stocks will be reduced.
Mr.Nash continued on to say that the Plan is up 1.70%for the first nine months of this fiscal
period,however,it will probably not reach the 8.0%goal for the year due to the volatile market activity
included in this fiscal year. He pointed out that the Fixed Income for the three-month period indicates an
increase of 0.17%and the High Grade Bond Fund an increase of 0.17%. For the nine-month period their
increase is shown to be 8.85%and 8.36%respectively. The difference is the Finova Bond fund refund of
$13,241.86 which was posted in these figures in order for the fund's actual performance to be indicated.
The Portfolio Value on June 30,2001,is$7,393,784.
Attorney Dehner questioned Mr.Nash on the latitude used in making decisions for the
investments of the Plan. Mr.Nash responded that there is a series of broad policies and guidelines in place
for Trusco,which allows for a diverse line of investments. These are based on a combination of historical
and standard deviations to come up with the allocations for the Plan. Mr.Nash and the Portfolio Managers
are asked for their input and this all then goes to a Board for their recommendations. There is careful
review of overweight or underweight sectors of the marketplace and an economic overlay for a period
twelve-months out which provides for equal weight of growth and value.
Chairperson Dabbs interjected that the market has a mind of its own. This Plan was heavily into
Growth and then the Value came on strong. He asked how Trusco reacts to change during the month. Mr.
Nash responded that because they work with asset allocation,there are no radical changes. The individual
fund managers take a look at what is the standard that is best for the Fund and they stay close to the 60/40
guidelines. Chairman Dabbs asked about the companies that are part of the International purchase of the
Plan. Mr.Nash advised that candidates for International investment are based on where the companies are
domiciled. Continuing on with his report,Mr.Nash indicated that the portfolio has approximately 15%
based in Financials,Healthcare,and Technology. The return performance for the quarter was 7.9%,
previously it had been—1.4%. In the Technology stocks,some of the major companies represented are
EDS [Electronic Data Systems],and Sunguard Data Systems. Sunguard has the Adobe Systems [Adobe
Acrobat]which is one of the systems used by the IRS. All of the tech companies invested in have products
and earnings—there are no investments in dot-corns. For Health Care,the Fund has invested in Health
Management Association,which is a good performer. Others stocks owned are Boeing and United
Technologies. United Technologies owns Carrier Air Conditioners and Otis Elevator.
The High Grade Equity Income Fund portion of the portfolio had a dividend yield of 2.1%as
compared with S&P 500 of 1.3%. The U.S.Limited Cap Fund has reduced energy ratings. Recent
additions include Marshall&Ilsley[operating in the Mid-West], Stillwater Mining,King Pharmaceuticals,
and Human Genome Sciences [working with human DNA]. The International Equity Fund is still affected
by the fact that Japan is in a no-growth phase at this time. Chairperson Dabbs asked if the debt in Japan
has been written off as had been discussed in previous meetings. Mr.Nash advised that the new Finance
Manager acknowledged two months ago that this does need to be done but will have to be handled
carefully. Writing off the debt will mean a lot of people will be laid off and the concern is that will turn a
no-growth economy into a negative-growth if it is done all at once. High Grade Bond Fund has a low risk
potential. Chairperson Dabbs asked about assurance that there would be no junk bonds. Mr.Nash
advised that no bonds below investment grade"A"are purchased. Attorney Dehner reminded of the
Finova Bonds and wondered about a revision of the guidelines to avoid any disparity in the Fund. Mr.
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Nash indicated that there is a 2-1/2%maximum level of the overall portfolio for any single issue [meaning
one name].
Chairperson Dabbs thanked Mr.Nash for his report and called on Mr.Larry Cole from Merrill
Lynch for the Money Monitor's report.
Mr.Cole stated that he was also pleased to report good news,that the Fund was earning money.
He addressed the question Attorney Dehner had regarding any disparity. He said that when Merrill
Lynch merged with Trusco,it was able to include a lot more products. Because the market is not driven by
one sector,this allows for survival,to find something else that fits,or get out,because all portfolios are not
identical. Value investment does work. The term"deep value"is a term that did not even exist three years
ago,but now allows for more patience to hang on. There is a lot of discretion now available. He continued
that there are some issues on which Trusco needs to tighten up,but they are making great strides in doing
this. He reminded again that the last two to three years have been a volatile market and the theme for today
is the same as he has stated in the past,diversification does pay off. The earnings for this Fund have been
$733,253.00,which is equal to almost 10%of the Fund,which means the Fund has held up very well. The
allocation is near the 60/40 split suggested for the overall Pension Fund. Each portion of the Fund is
managed by a different Portfolio Manager who specializes in that particular category. The Allocation
Comparison with others shows this Fund to be slightly more aggressive,but this is a comfortable position
because of the diversification of the Fund.
The total Fund is up 3.9%for the quarter which is in the top 24%of all public pension funds
which again shows that the diversification is paying off. Equity Funds are up 6.7%[top 40%],and the
Bond Fund is up 0.2%[top 78%] for the quarter,and up 8.4%[top 19%]for the fiscal year to date. He
reiterated what Mr.Nash has advised earlier about the total fund,though up 1.5%[top 24%] for the fiscal
year to date,would not make the 8.0%goal for the fiscal year. He further advised that there is the
smoothing technique to this which shows the annual return after 4 years to be 9.3%, 11.2%after 5 years,
and 11.9%after 6 years. He mentioned that all of the rankings are in the top third and that this is an overall
sound Plan with diversification being the key. Merrill Lynch monitors the diversification. The rank of this
Plan with other Florida Municipalities is 23. He advised that this Plan will never be at the top of this list
because of the diversification,however,reminded that the good news is that the Plan will never be at the
bottom of the list. The conclusion of the money monitor is that there are no violations of the guidelines,
and that all investments are in line with the goals of the Fund. His statement,"What a Difference a Year-
and-a-half Makes!" Attorney Dehner stated that he knows of the municipality that is ranked number one
on the list and it is due to the fact that the Fund is going through a transition because of changing money
managers and all of the assets have been converted to cash. Chairperson Dabbs thanked Mr.Cole for his
report.
Chairperson Dabbs called for a discussion of 30-Year and Out under New Business on the
Agenda. Trustee Smith commented that he had broached this subject with the former City Manager and
was advised that there was no funding available for the 30-Year and Out. He also mentioned that he knows
that the Police and Firemen are looking at a 25-Year and Out option.
Chairperson Dabbs said that he had spoken with Mr.Gleason about the$100 Insurance
Supplement and was told that it was not in the budget. He also maintained that if the Police and Firemen
were looking at a 25-Year and Out and it could be funded that he feels it should be: fund one,fund all. He
then asked for comments from the other Trustees. Trustee Ison indicated that if the budget has already
been done, it should be requested that the budget be amended.
Attorney Dehner advised that the budget being set now is for 2001-2002,that the 30-Year and
Out can be approved to become effective with the next fiscal year which will be 2002-2003. This would
mean that no budget funding would be needed now. Chairman Dabbs stated that he would like to see this
Board stick to their guns and see that the 30-Year and Out Plan is funded for 2002-2003. Trustee Ison
stated that mid-year in the budget term,there could be an amendment which can be prorated for one-half
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the year which would be preferable to including an ordinance through the budget for a year and a half
away. After additional discussion,it was,on motion made by Trustee Ison and seconded by Trustee
Smith,unanimously
RESOLVED, an ordinance be made for a retirement 30-Year and Out plan,
irrespective of age,and that it be presented to the City to be included in the 10/01/01 budget.
Chairperson Dabbs advised that the next order of new business to be considered was the
Elections for September. A copy of Election Procedure had previously been provided for each of the
Trustees. Trustee Cornell advised that an email was sent to all of the City users the end of May,2001,
asking for any interested parties to respond. There was no response at all. The same email was
resubmitted on July 25th,2001. There were two responses to this,one from Jim Washington and one from
John Vogt. Chairperson Dabbs stated that it would not be known until August 15,2001,if there would
be an election. That would be the cut off date for candidates to submit their intent to run to the City Clerk.
The City Clerk would then make up the ballots. Once the election is held there would then need to be a
special meeting to explain what is expected of the elected trustee.
Chairperson Dabbs began a discussion regarding the distribution of the workload among all of
the Trustees. He asked Trustee Cornell to prepare a list of all of the duties currently being done in her
position and it can be presented for discussion at the special meeting following the election. Trustee
Cornell explained that the demands of her particular position as Trustee have required a lot of work and
that it is constantly taking her away from the job for which she is being paid. It is required that all of the
exiting of employees be handled by a Board member and they are constantly asking for advice as they are
attempting to understand their package. She mentioned that she always suggests they contact an attorney
or a tax advisor as it is not her position to give advice. This is a singular problem as the duties for each
Trustee are determined by the position to which they are elected.
Trustee Smith advised that he could appreciate the dilemma Trustee Cornell has found herself in
as their regular jobs are more than full time without having to take on these added responsibilities. He
stated that he has discussed this with the City Manager. Trustee Smith suggests that a staff position be
considered in which a part of the permanently assigned City duties of this position would be to provide
uniformity for employees coming into City employment. There is a disparity and incontinuity in the
explanations given to new employees. Such as,the City rules allow the employee to opt out for the first
ninety(90)days,but this is not always fully explained. The City makes up a good portion of contributions
to this Pension Fund and therefore,suggesting a staff position,paid for by the City,does not seem out of
line.
Attorney Dehner reminded all of the Trustees of the importance of not giving advise to any
employee other than to suggest they see their financial advisor,CPA,or attorney.
Trustee Smith expressed concern about how employees are dealt with when they move in and out
of the fund. Trustee Cornell advised that she has been in this position for two years and has strong
concerns about the exit process. When a person exits the city,privileged information such as their social
security number,date of birth,beginning date,ending date,salary,is provided and she does not believe this
information should be in the Board members' hands,that it should be kept in personnel. The sensitivity of
the information for each employee should be kept in Human Resources. The exit process can be done
without the Trustee being privileged to that personal information.
Chairperson Dabbs stated that it is his understanding that there should be a total separation of the
functions of the City and the Pension Board(s). The City has a vested interest in the monitor's
performance. The Pension Board and the City are two separate legal entities,but it is not inappropriate for
exit interviews to be delegated by the Board in order to assure accuracy of benefits and coordination
between personnel and payroll.
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(II. Trustee Ison proposed a discussion with the City Manager to suggest this process be taken over
by the staff of Human Resources in order to improve communication. Chairperson Dabbs asked
Attorney Dehner if he had any idea of the percentage of other funds which were assisted in this way by
the municipality they were involved with. His response was that the vast majority of others are handled
through Human Resources.
Trustee Cornell stated that she had some un-official survey information where she had made
some calls in this regard and was advised that most generally this function is handled through Human
Resources and/or Personnel. Trustee Smith said he feels the problem will compound as the City grows
and he believes that this will eventually turn into a full-time job. He suggested that perhaps the paid
position could be shared with others,such as the Police and Firefighters.
After additional discussion, it was, on motion made by Trustee Smith and seconded by
Trustee Ison,unanimously
RESOLVED, that Chairperson Dabbs and Trustee Ison would make appointments
to speak with the City Manager to address the concerns of the day to day administration of
the fund.
Attorney Dehner reminded the Trustees that they need to be aware of the Sunshine Law in this
regard. Trustee Ison indicated that they could meet at separate times. He stated that he would meet with
the City Manager to communicate his personal opinion that there should be a complete divestiture of day-
to-day administration for new and/or exiting employees and that there could be no monetary advice given
an employee from any Board member. Attorney Dehner suggested that the City Manager be invited to
attend the Special Meeting which had been discussed previously during this meeting. It was agreed that
this would be an appropriate thing to do,however,the date of that Special Meeting could not be set now as
there would be no way to know if there would be an election until after the filing deadline of 5:00 p.m.on
August 15,2001.
Chairperson Dabbs asked Trustee Cornell about the survey results regarding supplemental
insurance. She advised that there were 168 participants in the survey, There were 97 responses with 71
not responding. Of the 97 responses,90%voted"yes"to the supplemental insurance and indicated their
willingness to contribute the 7.8%necessary to help with funding. It was reminded that the survey was the
result of an actuarial study in which the survey was to be sent out to the employees and if they agreed,then
it would be up to the Board as to what to do. Subject to this affirmative action,it was,on motion made by
Trustee Ison and seconded by Trustee Cornell
RESOLVED that an ordinance be presented to be added to the City budget to go
ahead with the$100 supplemental insurance,based on the employee's picking up the
percentage required per the Actuarial Study and subsequent survey.
Trustee Cornell reported that the purging of the records has been completed and are ready for
transfer,however,no file cabinets have been purchased. Bids on fireproof cabinets are available. It was
decided by general consensus that this item would be left on the agenda for one more meeting to confirm
the storage of the records.
Attorney Dehner was asked about the Rules of Procedure(372). He advised that they have been
drafted but he did not have them ready for review today. This item will be carried forward to the agenda
for the next meeting.
Agent 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 Ison,seconded by Trustee Smith,and it was unanimously
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RESOLVED that the list of bills would be paid as presented.
Agenda Item IV,B. Correspondence. Chairperson Dabbs advised that he had in hand a letter of
resignation from Trustee Oliver,effective December 31,2001. He reminded the Board that the position
held by Trustee Oliver is a position elected by the four(4)other Trustees and this would have to be
addressed in the October meeting after new Trustees were in place. Chairperson Dabbs also mentioned
that he had already turned in four(4)names as suggestions to be named in his place.
Item V. Attorney Comments. Chairperson Dabbs called on Attorney Dehner for comments.
Attorney Dehner reminded the Trustees [in and out] of the financial filing requirements within sixty(60)
days[Form 1-F]and that there would be fines if this was not done. He also stated that there would be
much to discuss after the new Trustees come on because in the next six to nine months there will be
changes required to the Plan as a result of tax legislation and there will be opportunities for Plan members
such as, IRA contributions can be increased,there are catch-up provisions and a lot of other beneficial
changes. By 1/01/02,there will be vehicles out to have expanded 457 [preferred comp plan] and 403B
[education]and printed explanations will be available from the IRS. Therefore,at the first meeting in
2002,the new Trustees will be advised of the parameters and paperwork and amendments necessary to
make these changes to the Fund. He also recommended the Board consider amendments to include prior
service be added to the plan to facilitate including any government service in the State of Florida being
considered as prior service.
Item VI. Set Agenda for Next Meeting. Those items to be on the agenda for the next regularly
scheduled meeting[October 9,2001]will be the discussion of Rules of Procedure(372);Discussion of
parameters for the buy-back of prior government service;Report of Meeting with the City Manager;
Election Results.
(100 When asked for any other new business,Trustee Smith expressed his sincere pleasure of working
with Trustee Cornell while she has been on the Board and commended her for a job well done. These
sentiments were echoed by the other Trustees present.
There being no further business to come before the meeting,it was,on motion duly made and
seconded,unanimously adjourned at 12:05 p.m.
Jo Ann Lacey
Recording Secretary of the Meeting
Lie
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