Loading...
HomeMy WebLinkAbout05-05-2010 Minutes Minutes of the Regular Meeting of the CITY OF OCOEE GENERAL EMPLOYEES' PENSION BOARD Held on May 5, 2010 At 150 N. Lakeshore Drive Ocoee, FL 34761 AGENDA ITEM I. CALL TO ORDER — Chairman Wagner A. Chairman Russ Wagner called the meeting to order at 10:09 a.m. in the Commission Chambers in City Hall. The roll was called (by the chairman) and a quorum was declared present. Present were Chairman Russ Wagner, Trustees David Wheeler, Jean Grafton, Wendy West and Pat Gleason. Also present were Mr. H. Lee Delmer, Pension Board Attorney, Mr. Tim Nash and Mr. Bogdahn of Bogdahn Consulting, Mr. Andy Holtgrefe of Rockwood, Ms. Bittenger & Mr. Cristini of Davidson, Jamieson & Cristini, Mr. Joe Meyers of Hurd, Hawkens, Meyers & Radosevich, Ms. Debbie Bertling of the City of Ocoee Human Resources Department, and Recording Secretary Stella McLeod. B. Approval of Minutes from Regular Meeting Held on February 3, 2010 Chairman Wagner brought the board's attention to the minutes and asked for the board's pleasure. He mentioned that Sharon Zink, his administrative assistant, had done a great job compiling, scanning, and forwarding all of the data to the board members prior to today's meeting. Trustee Grafton contacted the Recording Secretary about corrections to the minutes (scrivener's errors) which were incorporated into the minutes. Trustee Wheeler asked to have the word `period' replaced with the words `time period' on page 11 of the minutes. Upon a motion being made by Trustee Wheeler, seconded by Trustee Grafton, which passed unanimously, the board RESOLVED to approve the minutes for the February 3, 2010 regular meeting as corrected. AGENDA ITEM II. OLD BUSINESS A. Auditor RFQ / Interviews & Selection General Employees Pension Board May 5, 2010 Page 2 of 13 Chairman Wagner said that two auditors were present at the meeting in response to the board's RFQ (request for qualifications) for an auditor. No audit has been performed in the past according to Trustee Grafton. The chairman described how they would proceed: both firms would be allowed to do a 10 to 15 minute presentation to the board. The board and the attorney would be able to question the representatives following the presentation. 1. Hurd, Hawkens, Meyers & Radosevich, P.A. The other auditing firm waited outside during this presentation. The Hurd, Hawkens, et al, representative was Mr. Joe Meyers, son of the firm's partner with the same surname. Mr. Meyers went on record that he is the partner's son and not his father, one of the firm's named partners. His father had to be out of town. He has been with the firm for four or five months. He has performed one pension audit prior since his time with this firm which was the City of Seminole's firefighters' pension. He does have quite a bit of experience which he gained doing pension audits in Salt Lake City, UT. His firm has been in business for 35 to 40 years. He asked why the board is switching auditors, but confirmed with the board that the pension fund had never been audited, the City's CAFR notwithstanding. Chairman Wagner asked Mr. Meyers what the firm's auditing process was. The chairman told Mr. Meyers about the board's recordkeeping challenges, and asked how much of the paper records would be needed. Mr. Meyer said there could be eligibility testing that might require such records. Mr. Meyers said he that had not read the City's pension plan so he did not know the pension's eligibility requirements. The most time- consuming element would be reviewing the plan assets. Generally, the firm would receive a Stat 70 (Type II) report from the plan's administrator. This would make it less likely that they would have to do extensive testing. The firm would be looking at HR type issues; members who terminated or withdrew from the plan. He estimated that the firm would spend one or two days looking at such information. Chairman Wagner confirmed that it would be mostly the bank records that would be reviewed. Mr. Meyer agreed. Chairman Wagner said one of the issues uncovered is how does the board know when a pensioner dies? He asked if Mr. Meyer's firm would be looking at such issues. Mr. Meyer answered that the firm could take such a role if the board wanted them to. A recommendation for what controls are needed would appear in a separate report. Trustee Grafton asked the time period the RFQ specified for the audit. Mr. Meyer answered that he read that the audit period would be from September 30, 2009 going forward. He did not understand that an audit opinion would be needed for the years starting with 1999. Trustee Grafton gave Mr. Meyers information about past General Employees Pension Board May 5, 2010 Page 3 of 13 recordkeeping activities. Chairman Wagner concluded that going back forever would probably not be possible. Mr. Meyer confirmed that he was not sure that doing so would be cost effective. When Chairman Wagner asked about what the cost would be, Mr. Meyers deferred the answer to those in the firm authorized to set fees since he cannot do so. Trustee Wheeler said that for now, the board needs to follow the specs set forth in the RFQ. Trustee Wheeler asked if Mr. Meyer would be doing the audit if his firm were hired. Mr. Meyer said that he would be performing the audit. Attorney Dehner confirmed with Mr. Meyer that the board could ask the firm to do additional work if Mr. Meyer recommended that it was needed, and the board agreed. The chairman asked if any other board members had questions for Mr. Meyers. Trustee West asked Trustee Grafton if there was a specific reason for an audit going back to 1999. Trustee Grafton answered that FPTTA asked if they had ever had an audit, and further advised that they needed to have an audit for the board's protection. Chairman Wagner said that once a firm is under contract and something abnormal were discovered in the audit, they could have the firm do the additional work required. Attorney Dehner asked contractual questions of Mr. Meyers, specifically if the firm would be willing to acknowledge that they are a fiduciary to this fund. Mr. Meyer answered that he believed so. Attorney Dehner asked would the firm agree that if there were a dispute, the resolution of the matter would be governed by Florida law with venue in Orange County. Mr. Meyer answered affirmatively. Attorney Dehner asked what the fee would be. Mr. Meyer answered $6400 per year. Attorney Dehner asked if the firm could guarantee the fees not to increase for any period of time. Mr. Meyer said the RFQ was for two years and that the firm was willing to agree to that period of time for fees. Attorney Dehner asked if the fee was as favorable a fee that they would offer to any fund that was similarly situated. Mr. Meyers responded affirmatively. The chairman thanked Mr. Meyers for coming. Mr. Meyers distributed his business cards to the board. 2. Davidson, Jamieson & Cristini, P.L. Chairman Wagner asked Ms. Bert ling to ask the other firm's representatives to come into the chamber. Chairman Wagner welcomed them and invited them to speak at the podium. The firm is Davidson, Jamieson and Cristini. Chairman Wagner asked the two representatives to introduce themselves and make a presentation about the firm. The chairman told them that the board would ask questions of them following the presentation. The two representatives introduced themselves. Ms. Jeanine Bittenger is the senior audit manager for the firm. Mr. Richard Cristini is one of the firm's audit partners. General Employees Pension Board May 5, 2010 Page 4 of 13 Ms. Bittenger stated that governmental pension plans are the firm's specialty. They do 27 pension plans throughout the state of Florida. They do work with cities and fire districts as well as audit work for the FPPTA (Florida Public Pension Trustees Association). They perform peer reviews (the audit of auditors) for other accounting firms throughout the state. She serves the FICPA as chairman. They are very serious about what they do. The firm is a small one. Ms. Bittenger and Mr. Cristini will actually do the audit. They would review the payroll records and pension records to do the audit. They spend a lot of time doing the audit. Mr. Cristini said that the firm has been around since 1982. They are reviewers for the governmental finance officers' certificate of excellence in financial reporting (Comprehensive Annual Financial Report - CAFR). Only two cities in Florida that have them: the City of Orlando and the City of Sunrise, which this firm audits. As certificate reviewers, they are aware of the proper reporting and disclosure standards that the plan should take. The GASB is looking hard at actuarial methodologies. This firm is very familiar with all GASB requirements since they have had the opportunity to work with plans across the state. Chairman Wagner told Mr. Cristini that the fund has never been audited and therefore no prior reporting. Mr. Cristini corrected the chairman by saying that there is a statement in the CAFR about the pension fund. The firm would start by getting September 30, 2008 statements, as well as the balance sheet of assets. Mr. Cristini explained that the CAFR does not go into great detail about the pension fund because the fund does not contain City money. The money in the fund belongs to the participants. Mr. Cristini asked if the plan had always been a separate plan. The board responded that it had been since 1991. Trustee Grafton asked if all pension boards have their funds audited. Mr. Cristini said that they all have them audited to one degree or another: either as part of the general auditor as a stand -alone report. The auditor has a contractual obligation to the board and only the board. The city auditor has little concern for the board. Their contract is not with the board. This firm would have its contract with the board and as such would answer only to the board. Trustee Grafton said that she wants to use the fund's money wisely. She further wondered if other boards have this type audit or if Ocoee is being a frontrunner. Mr. Cristini answered that such audits are going on all over the state. Ms. Bittenger added that there are boards that have gone above and beyond annual reporting to quarterly reporting because they greatly value the information that they get from more frequent reporting. Trustee Grafton said that she is hearing that the firm would check the City's investments. Mr. Cristini clarified that they compare and test investments as opposed to challenging the decision of the board in due process to make an investment. He said that he has made speeches to boards that the General Employees Pension Board May 5, 2010 Page 5 of 13 final responsibility for investment actions lies with the board; hence, he encourages board members to investigate when the board is presented with alternative investments. He said board members should ask tough questions and read the prospectus. Trustee Grafton asked if the investigation would include checking to see if retired members are receiving what is rightly due them. Ms. Bittenger replied that the firm would check the contributions, any board contracts, the board's minutes, etc. Trustee Grafton said that her reason for asking the question was that when the deputy city clerk retired, she received the wrong amount in terms of her monthly benefit. Mr. Cristini said that their program requires testing of all retirees calculations and that the firm looks at payroll records from the city and they see if all pensionable earnings are subjected to the proper withholding levels as called for by the pension plan. Trustee Gleason asked about the firm's cost to perform the audit. Mr. Cristini responded $8400, but Chairman Wagner looked it up and responded $8000 for the first year, $8300 for the second year, and $8700 in the third year. Mr. Cristini agreed. The chairman asked if any other board member had questions. There were no questions. Attorney Dehner asked Mr. Cristini the same questions that he asked Mr. Joe Meyer (from the first firm Hurd, Hawkens Meyers & Radosevich). Mr. Cristini responded affirmatively to each question. Chairman Wagner thanked Mr. Cristini and Ms. Bittenger and they left the chamber. Discussion among the board members ensued about the two firms. Upon a motion being made by Trustee Grafton, seconded by Trustee Wheeler, and that motion having passed unanimously, the board RESOLVED to select the Davidson, et al, firm and that the subsequent contract be prepared by the board's attorney and submitted to the auditing firm for signature. Attorney Dehner said that he will prepare the contract, send it to the auditing firm for signature, and instruct them that having signed the contract to send it back to the City. Chairman Wagner confirmed with the attorney that the chairman would be the contact person, and that the board would then be able to introduce the firm to the City's staff and pension participants. B. Actuarial Valuation Report (10/01/09) Adoption General Employees Pension Board May 5, 2010 Page 6 of 13 The chairman referred to the annual actuarial report that was presented at the last meeting. The board had held off from approving the report at that meeting. Chairman Wagner had a couple of meetings with the city manager, the finance director and the human resources director. The chairman said that there was not much that could be changed about the assumptions in the report since the assumptions were based on the City's records. Chairman Wagner added that there is smoothing done over several years. The chairman solicited the board for a motion to adopt the report, looking to the board's attorney for the proper wording. The attorney suggested that the board begin by adopting the report. Upon a motion being made by Trustee Grafton, seconded by Trustee West, and that motion having passed unanimously, the board RESOLVED to adopt the October 1, 2009 actuarial evaluation report. The attorney noted that a second motion will be needed. The previous motion accepted the assumptions of the actuary. The next motion needed will deal with anticipated earnings of the fund. Charles Schwab set this in motion in the year 2000 so that the board would remember the relationship between what the fund actually earned and what the actuary was using as an assumption. Mr. Tim Nash (Bogdahn) confirmed that 8% was a reasonable assumption. He will provide the corresponding letter and back -up to the state, the actuary and the city. Upon a motion being made by Trustee Grafton, seconded by Trustee West, and that motion having passed unanimously, the board RESOLVED, based upon the recommendation of its consultants, that the total expected annual rate of return for the fund for the current year, for the next several years and the long term thereafter, will be 8% net of investment related expenses. AGENDA ITEM III. NEW BUSINESS A. Investment Consultant Report 1. Rockwood — Andy Holtgrefe Mr. Nash yielded his place on the agenda to Mr. Andy Holtgrefe, Rockwood equity manager. Mr. Holtgrefe greeted the board and then reviewed with them the distributed report. He said that they are in much better times than a year ago. Page 1 gives an overview. There General Employees Pension Board May 5, 2010 Page 7 of 13 was a $306,000 net increase. They are ahead of the index by 1.5 %. For the calendar year, they are about 4% ahead of the market. Page 2 showed the positive change; there is a net of about half million dollars increase. Page 3 shows the cost of reform. The equity markets for the first quarter of this year showed the best e quarter in 12 years, being up by almost 5 %. Why did the City's portfolio do well? Because of the consumer discretionary sector (hotels, retail) and industrials (Ford Motor which represents 3.5% of portfolio). He said it is nice to see those positive, double digit performance figures. Page 6 shows Ford as the fifth best performer for the quarter. Page 7 gives the performance attributes for the quarter. The City got 25% versus 10% for the index. The finance sector did not do as well as other sectors, but it is doing better. Mr. Holtgrefe said it is interesting to see how certain sectors `snapped back'. Mr. Nash said that it looks as though the portfolio supports the improvement of the economic environment. Mr. Nash asked Mr. Holtgrefe to speak about Goldman Sachs. Mr. Holtgrefe said that they collaborated with the folks who manage their equity process back in 2004. Rockwood was looking for someone in whom to trust their client assets on the equity side. Rockwood was impressed a great deal about the process because they seemed to miss the `blow ups', such as World Com and Lehman Brothers. Goldman Sachs was in the portfolio up until the beginning of April. The lawsuit hit Goldman Sachs on April 16 . Page 10 shows the sales for the most recent quarter as of March 31 Rockwood worried about the real estate market; recently, however, the manager is starting to see some positive numbers show up. On page 11 are the individual holdings. The following page shows the proxy voting. Overall, Mr. Holtgrefe said, they like what they see. He said that they value the City's business. He solicited the board for questions. Chairman Wagner said that he was heartened to see the report and that he is happy with how it is going. 2. Bogdahn Consultants — Mr. Tim Nash Mr. Nash had good news also. On page 4 of his distributed report, international stocks were up just under 1% for the quarter, the S &P 500 was up 5.4% and even bonds were positive up 1.9% for the quarter. Page 6 shows the different sectors of the Russell 1000 & 2000. Mr. Nash described Rockwood and ICC as two different equity managers with different styles. Pages 8 & 9 has a lot of data about international stock. Baring is up but not as much as other managers. The chart on page 9 shows all of the countries in the EAFA index. Two phenomena existed: Japan is at the top of the list and the UK is second. Usually the UK was first and Japan was lower on the scale. Secondly, Asian countries did better than Europe given the situation going on with Greece. Baring had fewer stocks in Asia for the time period in question. On the bond side, lower quality General Employees Pension Board May 5, 2010 Page 8 of 13 stocks and bonds have done better for the quarter. Junk bonds were up 57 %. Ocoee does not have junk bonds in its portfolio because they can go down over 48 %. Lastly, on page 12, the returns for the asset classes show international stocks are up 55% and S &P 500 up 49.8 %, and bonds up 7.7 %. One thing the report says to the consultant is that it is important to have a more disciplined, strategic policy regarding asset allocation. There is 39.7% in fixed income portfolio. The remainder of the investments is split between Rockwood, ICC Multicap, and Barings International Portfolio. Page 15 shows all of the equity managers. The portfolio has grown from $16,600,000 to $17,520,315. Page 17 shows the dollar gains. For the quarter, the fund earned $659,202 up halfway through the fiscal year the fund is up $1,341,114.00 adding the income line and capital appreciation line together. The dollar gains are expressed as a percentage on page 18. Page 19 shows the international portfolio, which was up a little more than a quarter of a percent or 28 basis points. The EAFA index was up just under 1% or 94 basis points. This is because we had an underweight to Japan and an underweight to Asia in general. Half way through the fiscal year, we have beaten our benchmarks and we are in the top 25 percentile. The equity funds are in the top 14 percentile. Mr. Nash said that the numbers are good and there are no recommendations for change. We are beating our benchmarks. He asked if there were any questions or comments. Chairman Wagner said that he thinks that it is working pretty well and that he hopes that the international will kick in a little more. He asked Mr. Nash if the board will continue to see this steady improvement. Mr. Nash said that the consensus is that it will continue and that 8 to 9% growth would be reasonable out of the S &P 500. Until the unemployment improves, there will be concerns in the marketplace. Employment is coming back to the manufacturing sector of the U.S. B. Certification for Custody Services w/ Fifth Third Bank The chairman said that this matter concerns the form that will make Trustee Gleason a signatory on the bank account. Chairman Wagner asked the attorney if there was anything more that was needed other than to approve the matter by motion. Attorney Dehner said a motion is needed. Upon a motion being made by Trustee Grafton, seconded by Trustee Wheeler, and that motion having passed unanimously, the board RESOLVED to approve the certification submitted by Fifth Third Bank. General Employees Pension Board May 5, 2010 Page 9 of 13 Trustee Grafton said for clarification that this is something that is done each time a board member changes. Chairman Wagner added that when HR Director Jim Carnicella gave up the duties as plan administrator, his signature needed to be removed as a signatory. AGENDA ITEM IV. OTHER BUSINESS A. Payment of Invoices Affirmation Upon a motion being made by Trustee Grafton, seconded by Trustee West, and that motion having passed unanimously, the board RESOLVED to affirm the payments that have been made by the board, and pay the invoice of the recording secretary. B. Pension Board Administration Subcomittee Chairman Wagner has had conversations with the city manager, the HR director and the police chief who is chairman of the police /fire pension board. Different options were discussed as to whether or not a plan administrator is needed. The police /fire pension did hire a remote plan administrator at $25,000. Pension participants do have to call him since he is not regularly on site. Chief Charlie Brown is generally pleased, but employees have said that they would prefer a warm body with whom to talk. It was decided that there would be a meeting with representatives of the police and fire departments. There would be a discussion to see if they can share an administrator. There will be discussion about hiring a plan administrator for the more complex pension matters. The general thought, Chairman Wagner said, is that they need their own person. The chairman said that continuity is needed. He does not want to see a vested employee leave the city, reach retirement age and return to file retirement papers at Ocoee, only to have staff not know who the person is. He said that he believes that the employees will feel more comfortable when there is a retirement board office. Trustee Grafton asked if the City is going to provide a space. The chairman said that the City would. Chairman Wagner said that he was not sure if he should contact everyone about the subcommittee meeting or not. Trustee Wheeler said that the chairman should contact the entire board about the meeting and it is up to the individual members as to whether they show or not. Attorney Dehner reminded the board that the subcommittee meeting would need to be properly noticed. General Employees Pension Board May 5, 2010 Page 10 of 13 C. DROP Communications / Board Acknowledgement The chairman referred the board to the activity report compiled by Human Resources Specialist Debbie Bertling. The chairman said the board may want to engage someone who can give financial advice. When someone is going to retire or wants their contribution back, Ms. Bertling has the board chairman sign off. Now it will take two signatures if a check has to be cut. There is quite a bit of paperwork required for DROP, but there is no acknowledgement from any board member signature required for DROP or the retirement process. Chairman Wagner suggested that, without objection, the chairman would sign off on the worksheet with DROP options prior to presenting it to the employee. Trustee West asked if there were a new person to take over the administration of the plan, would Debbie's duties go to the new person. Chairman Wagner said most of what Debbie does will go to the new administrative person. Trustee Grafton spoke about how it was difficult getting access to payroll information. The chairman agreed there will be a legitimate need for such access. Trustee Wheeler asked if the person would be a City employee. Chairman Wagner said that there are advantages and disadvantages to both. If the boards hire the person, they would be answerable to the pension boards only. The employee could be a part time employee so benefits would not have to be paid. D. Board Attorney Fee Structure The board's attorney, Lee Dehner, spoke about the increase in his fees. He said he represents all of his client's on the same fee basis. The last increase was April 1 of 2007. The fee will go from $295 per hour to $325 per hour. He listened to the clients who said they would rather have frequent, smaller increases rather than less frequent, larger increases. The fee is due to change on July 1 He asked for the board's approval for the schedule. Trustee Grafton said that if the index does not increase every year, it would be inappropriate to increase the attorney's fees. Attorney Dehner said it is not inappropriate when they redo the contract. The chairman asked how the attorney felt about the his fees compared to fees of other attorneys providing similar services. The attorney said he believes his is the only firm that does pensions exclusively. Trustee Grafton said she believed the board has the best attorney in the state so she probably would not want to rattle his cage. Trustee Wheeler said if we need to, we need to. We probably might want to extend the contract. He said they would spend more money trying to find a new attorney. Upon a motion being made by Trustee Wheeler, seconded by Trustee Grafton, and that motion having passed unanimously, the board General Employees Pension Board May 5, 2010 Page 11 of 13 RESOLVED to grant the increase of the attorney's fees. E. Fiduciary Insurance Payment The chairman said that the insurance costs around $4200 per year. The board paid for it last year. Trustee Wheeler had several questions about it. The chairman suggested that the board agree to the payment, and direct the human resources department to do further investigation about the matter, particularly to find a better deal. Trustee Wheeler said that the liability insurance is for $1,000,000. The policy would cover the board members in the case that someone sued them. Attorney's fees would also be covered. The chairman solicited the board for a motion. Upon a motion being made by Trustee Wheeler, seconded by Trustee Grafton, and that motion having passed unanimously, the board RESOLVED to sign the invoice for the fiduciary insurance payment. Upon a motion being made by Trustee Wheeler, seconded by Trustee Grafton, and that motion having passed unanimously, the board RESOLVED to do research on the matter so that the board can have the information when the renewal comes up next year. AGENDA ITEM V. DISCUSSION ITEMS A. Individual Financial Statement Reminder The chairman reminded the board members to complete their financial disclosure forms in a timely manner. They are due by July 1St B. FPPTA Schedule / Events Trustee West went to the New York event. She got to go to the New York Stock Exchange. She said she had a great time and that it was well worth it. Chairman Wagner said that the conference is coming up. Trustee Wheeler is up for his certification. The chairman asked if anyone else was going. Trustee Gleason said that she did not know anything about it. The board explained briefly about it. Chairman Wagner cautioned members to go only if they have a burning desire to do so given the expense, and the tight City budget. C. Class Action Lawsuit Proceeds General Employees Pension Board May 5, 2010 Page 12 of 13 The board received a check from SunTrust as proceeds from a lawsuit. The check was in the amount of $1,495.14. D. City Commissioner Pension Issue The chairman place this information in members' packets for informational purposes. It was asked if the commissioners could back out of the program. The attorney said that for those who are vested, it cannot be undone. Trustee West asked if the board could get in on the loop to see what is going on. Chairman Wagner said that was the reason for his inclusion of the information in the board members' packets. AGENDA ITEM VI. ATTORNEY COMMENTS Senate Bill 1902 which would have had an adverse impact on cities, never made it out of the governmental affairs committee. The provision that could have had an impact Ocoee was an amendment to 112.65 which deals with the maximum pension benefit that one can receive. It was good that it did not pass according to Attorney Dehner. The Helps 2 legislation has now been assigned to the Ways and Means Committee. It expands the long -term care health premium exclusion ($3000) to all employees. AGENDA ITEM VII. COMMENTS FROM TRUSTEES None. AGENDA ITEM VIII. SET AGENDA FOR NEXT MEETING Pension administration Financial Reporting AGENDA ITEM IX. COMMENTS FROM PUBLIC None. General Employees Pension Board May 5, 2010 Page 13 of 13 AGENDA ITEM X. ADJOURN There being no other business, the meeting was adjourned at 1:00 p.m. Respectfully submitted by: Approved by: Stella McLeod, Municipal Rec. Coordinator /....J___ Russell B. Wagner, C airman