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HomeMy WebLinkAbout05-02-2012 MInutes Minutes of the Regular Meeting of the CITY OF OCOEE GENERAL EMPLOYEES' RETIREMENT TRUST FUND BOARD OF TRUSTEES (GERB) Held on May 2, 2012 At 150 N. Lakeshore Drive Ocoee, FL 34761 CALL TO ORDER — Chairman Wagner Chairman Russ Wagner called the meeting to order at 10:00 a.m. in the Commission Chambers at City Hall. A. Roll Call Chairman Wagner called the roll. Present were Chairman Russ Wagner, Trustees Jean Grafton, David Wheeler, and Pat Gleason. Trustee Wendy West was absent. The recording clerk declared that a quorum was present. Also present were GERB Attorney Lee Dehner, Mr. Tim Nash of Bogdahn Consulting, LLC, Senior Administrative Assistant Sharon Zink, and GERB Recording Clerk Stella M B. Approval of Minutes Chairman Wagner directed the board's attention to the minutes for the February 1, 2012 meeting (Exhibit #1). A motion having been made by Trustee Grafton and seconded by Chairman Wagner, and that motion having carried unanimously, the board RESOLVED to approve the February 1, 2012 minutes. CONSENT AGENDA A. Chairman Wagner directed the board's attention to the consent agenda noting the list of paid invoices. Chairman Wagner announced the fact that although Pension Technician Junelli Maher is no longer with the City, she did a tremendous amount of work getting the board's records up to speed and the spreadsheet completed. Ms. Maher got everything scanned as well, the chairman added. He announced that the board will pay the City for Senior Administrative Assistant Sharon Zink's time, specifically nine hours of overtime per biweekly pay period, to take on the extra duties of pension administration, the chairman announced. A motion having been made by Trustee Grafton, and seconded by Trustee General Employees Retirement Board May 2, 2012 Page 2 of 9 Wheeler, to ratify payment of nine hours of overtime biweekly to the City of Ocoee for pension administration duties performed by Senior Administrative Assistant Sharon Zink, and that motion having carried unanimously, the board RESOLVED to ratify payment to the City for Ms. Zink's services. Trustee Grafton asked if it would now be necessary to recruit for a permanent replacement. Chairman Wagner answered that since Ms. Zink was working out quite well, that Ms. Zink sits right outside the chairman's door, and given all of the work Pension Tech. Maher did, it would not be necessary to recruit. He reminded the board that Ms. Zink served the board prior to the hiring of Ms. Maher. Nevertheless, Ms. Zink is still in a learning mode with respect to working with fund members given that the pension needs of each member are different. The chairman added that Ms. Zink is going above and beyond the call of duty [in handling the additional responsibilities] to which Trustee Grafton added, "As usual ". Trustee Grafton reminded the chairman that the board was about to improve invoices. Ms. Zink listed the invoices that were added. Trustee Grafton commended Ms. Zink for giving the trustees invoice information as it came in rather than all at once. The trustee said that she found this method quite helpful. Discussion ensued. A motion was made by Trustee Grafton to ratify the payment of the invoices. Trustee Wheeler asked if invoices that came in after the agenda was published could be held until the next meeting since adding invoices after the fact amounts to amending the agenda. Chairman Wagner replied that rather than have an invoice wait three additional months, he preferred to get as many of them as possible ratified at the advertised meeting. Trustee Wheeler said that he was simply voicing his opinion. His second matter of concern was having Fifth Third Bank notified that Mr. James Carnicella no longer works for the board. Chairman Wagner answered that the notification to the bank has been made three times. Trustee Wheeler having seconded the motion, and the motion having carried unanimously, the board RESOLVED to ratify the invoices. As a point of clarification, the recording clerk asked if the previous motion was intended to approve the entire consent agenda. Trustee Grafton confirmed that such was the original purpose of the motion. Trustee Grafton, seconded by Trustee Wheeler, having moved to approve the consent agenda, and that motion having carried unanimously, the board RESOLVED to approve the consent agenda. General Employees Retirement Board May 2, 2012 Page 3 of 9 NEW BUSINESS A. Investment Consultant Report — Mr. Tim Nash of Bogdahn Consulting, LLC Mr. Nash greeted the board. He said that the markets had been kinder to the fund during the second quarter, and with that, began his report. Page 3 International and emerging markets were both up 11% and 14% respectively. S &P 500 was up by 12.6 %, bonds (Barclay's Aggregate Bond Index, the plan's benchmark) were positive by 1/3 %. Mr. Nash remarked that Bogdahn is very pleased to have an active bond manager rather than just using an index fund. The reason for that is the Barclay's Aggregate Index has 40% of the overall portfolio in treasury bonds. Treasury bonds were down 1.3 %. Agincourt owns less than 15 % of treasury bonds in its portfolio yet did three times better than the benchmark. This is largely due to not having treasury bonds in the portfolio. Page 5 The top chart on page 5 shows how different sectors in the large cap stocks did during the quarter. Rockwood did not do well for the quarter compared to the benchmark. The Russell 1000 is the relative benchmark. The top performing sector contains energy stock which comprised about 10.8 % of Russell 1000 index. Rockwood contained only 2% of energy stock. If Rockwood had more energy stock, they would have done better. Utility stocks were down 1.6% and made up only 3.4% of the benchmark, but Rockwood had 11% of it. Having a lot of a lower performing stock hurt Rockwood. Page 9 The credit qualities of bonds appear at the top. Ocoee's fund does not have many junk bonds in its portfolio, but over the last two and a half quarters, junk bonds have done quite well. Corporate bonds did well and the plan has over 60% of its investment in those bonds which caused the plan to do well overall. Page 13 The investment program is displayed showing what each money manager has done. As of March 31 the plan closed at $22,128,950, up from $19,000,000. The plan is in line with its investment policy statement. Page 14 Mr. Nash pointed out that this page shows cash flow for the quarter. Trustee Wheeler asked if in the March 2012 disbursement, the $841,000, is the money going off to the REIT (real estate investment trust). Mr. Nash answered that the funds are in the money market General Employees Retirement Board May 2, 2012 Page 4 of 9 fund sitting in the disbursement account waiting for the real estate company to call for that capital, hopefully within the next quarter. With respect to cash flows, the plan had a dollar gain of $1,437,803 for the quarter. For the fiscal year the dollar gain is $2,450,079. Page 15 Mr. Nash went on to point out the gains expressed as a percentage. Of the 430 plans (throughout the nation) in the sample to which Ocoee's fund is compared for the six months ending in March, the range was as low as 10.5% total return of stocks and bonds, and as high as 17 %. Ocoee's fund was at 12.63% which was at the lower portion of the range. This low ranking is primarily due to the underperformance of Rockwood, Mr. Nash said. Rockwood was a part of the funds multi -cap strategy. The fund did not do as well as the median money manager, and this put the plan below the median at the 67 percentile. Regarding international stocks, Baring was behind for the quarter. There are two reasons for this: 1) they are wading in energy and basic materials securities for the quarter and were a little bit under the market. Longer term they will perform very well. For the quarter they were only up 10.45% when the index (fiscal year to date) was up 15.55 %. For the full year, this stock did a great job protecting the fund from more extreme downturns. They were only down 1.33% when the index was down by 6.75 %. Agincourt was positive 1.3% which is 40% of the portfolio. The index was up only by 1/3 %. Further discussion ensued. Mr. Nash said that a lot of credit is due the bond manager because the money manager has done a good job of having the right mix of bonds to help stave off volatility. The chairman remarked that it was quite significant that in a one -year period, even the fixed income exceeded the 8% expected return. Mr. Nash agreed that it was rather remarkable. He said that a lot of the credit goes to the bond manager who diversified the bonds. He drew the board's attention back to Rockwood. As of March 31 when the most recent quarter is added, Rockwood is below the 40 percentile target in the investment policy statement on a three -year and five -year view. One must look at what has happened in the last five quarters with respect to the investment statement. Rockwood has been a `mixed bag'. See the report on page 23. Rockwood does not have 5 full quarters of underperformance, but quite a few quarters did not meet the index. The highs and the lows have become more extreme. Bogdahn thinks that it would be a good idea to look at options to replace Rockwood, Mr. Nash concluded. Chairman Wagner remarked that ICC was not doing so well either, Mr. Nash responded that ICC's underperformance was related to the American Airline bankruptcy which took the wind out of their short term sales. Bogdahn likes their long term strategy, however. Mr. Nash continued that they can take a look at both ICC and General Employees Retirement Board May 2, 2012 Page 5 of 9 Rockwood, if the board would like, but he thinks the board definitely needs to take a look at Rockwood. Chairman Wagner said that he had requested the pension report for police and fire because he did not know what their strategy was. He wondered how the General Employees Retirement Fund was doing compared to the Police /Firefighters Retirement Fund. Mr. Nash answered that the general employees' fund has done better long -term, but the police /fire fund did better last quarter and fiscal year to date. He continued that the other plan is doing things differently than the general employees' fund. The chairman said that he would feel a lot better if the ups and downs were not as up and down. He wants to know that the board is using money managers who are doing a good job consistently. Mr. Nash said in the longer term, the general employees' fund is actually closer to its projections. They have a different bond manager, Garcia Hamilton, who they just hired after having SunTrust. Mr. Nash continued that Garcia Hamilton's strategies are similar to those of Agincourt. On the international side, the police /fire fund has Manning and Napier, a mutual fund, while the general employees' plan has Baring. On the equity side, the general employees' fund portfolio has two all -cap managers (Rockwood with large -cap stocks and ICC which tends to have smaller and mid -cap stocks), both of which can move all around. From an investment standpoint it looks a lot like the index, never being tilted too far to value stocks, or too far to growth stocks. The police /fire fund has done it a little differently. It has a core manager called Westand. They have only 20 to 25 stocks in their portfolio they're always going to be core and will always stay in the large -cap bucket which reduces the extreme ups and downs. They have an all -cap value manager and an all -cap growth manager. Moody Aldrich, their value manager, has enormous swings, which is something that the police chairman was not happy with. In the last six months they were up 32 %. For the whole year they are in the 100 percentile; in other words, at the bottom. Mr. Nash says that he can show the board a combination of both types. There really is no right or wrong between the two pension fund strategies, he concluded. Chairman Wagner remarked that as they are writing the checks to the money managers and he looks at the returns from each, he begins to think that they could have simply put the money in an index fund and have achieved a better return. Trustee Wheeler reminded the board that a couple of years ago, Rockwood was in the dumper. Chairman Wagner added that Rockwood pulled out of that slump. The chairman said that he would rather have the funds that plod and get closer to the index. He added that he would like Bogdahn to help the board find those managers that will help the fund find consistency. The chairman stated that the board could have a special meeting without the board attorney, who interjected that he, the board attorney, would like to be present for any for interviews. Trustee Wheeler asked General Employees Retirement Board May 2, 2012 Page 6 of 9 if the board wants to have the selection made by next board meeting or if it is going to drag the matter out for two or more meetings. The chairman answered that he would have to ask Mr. Nash. The chairman said he had read that a boost to the market has already happened. He continued that Ocoee's fund missed out on the biggest bump by quite a few points. Chairman Wagner said that they have always been behind everyone else. Then for a year or so they were doing quite well, but have now slipped back. The chairman asked Mr. Nash if he saw anything on the horizon indicating that Rockwood might improve. Mr. Nash said this is a long -term strategic allocation move for the fund, and he would be happy have special meeting to review it all. Trustee Wheeler said that his comments were not to delay action. In fact, he would like to see the matter resolved by the next regular board meeting, and have a special meeting by next week. Mr. Nash said that Bogdahn will need 20 to 25 days because they will custom blend all the different managers with Ocoee's managers. Chairman Wagner asked if it would make sense to also look at ICC. Mr. Nash said that Bogdahn can bring information so that they can fully evaluate both managers. Further discussion ensued as to a date for the special meeting. June 13th was selected. B. Retirement Ordinance Changes Chairman Wagner spoke about the April 18 memorandum that he sent to Attorney Lee Dehner. After meeting with the city manager and his staff, the changes were forwarded to Foster and Foster (the City's actuary). It was agreed by all parties that the changes would be those contained in the memo. The basic answer from Foster & Foster was that none of the changes individually would have a large effect. The biggest change would be the change of the employee contribution from 7.4 to 7.8. Right now the City contributes more than double what the employees contribute. The fund also has to comply with state regulations with respect to personal time calculations. The employee gets the maximum amount of paid leave at the time of his retiring as of July 1, 2011. The board is basically `grandfathering in' employees so that they will be paid for their leave at the time of retirement. The board also recommended changes to the DROP program by supporting a set interest rate for calculation. The interest rate recommended would go from 6.5% to 3 %. All changes will apply to new employees only. On the second page of the memo are all of the changes which include 7 years to vest no matter ones age; retirement age will go from age 60 to 62; one must have at least 10 years of service to even apply for DROP. Chairman Wagner asked Attorney Dehner how long it would be before they will see the changes in the ordinance. Attorney Dehner replied he would shoot for four to eight weeks to incorporate the changes. He added that if he can get the changes sooner to the board, he General Employees Retirement Board May 2, 2012 Page 7 of 9 will do so. Further discussion ensued. Chairman Wagner asked the attorney if the changes had to come back to the board. Attorney Dehner replied affirmatively. OTHER BUSINESS A. Report on N.Y. Stock Exchange School Chairman Wagner reported on his experience at the New York Stock Exchange. He said that the experience was very valuable. His group went to JP Morgan and got to speak with some very top people. The chairman spoke about how he was struck by the youth of the speaker, a young man in his thirties, yet they are in charge of worldwide investments for the firm. It was interesting with the computerization of everything, and with microsecond trading going on, yet our speaker's education was in Art and Anthropology. This is because lot of investment requires looking at what the market is doing or has done. They look at public perception/reaction to events going on in the world; a very humanistic type of approach. They use human qualities (for example, people's desire for tooth whiteners in toothpaste) to determine how the market will react. They would conclude that Colgate Palmolive would be a company in which to invest. The group went on the floor of the US Stock Exchange and got to talk to the 'market makers', formally called stock traders. Their speaker had thirty stocks that he watches all day and he makes sure that no one is doing anything funny with Colgate Palmolive, for example, or whatever stock he is responsible for. It was a great trip. Trustee Grafton said that it makes one feel good about FPPTA. The chairman agreed. B. FPPTA — Upcoming Events The chairman noted that the next association meeting would be held soon. Trustee Grafton supplied that it will be June 24 through the 27 at Hilton Disney in Lake Buena Vista. The chairman will not be attending as he will be celebrating his mother's 90 birthday with her in Iowa. Trustee Gleason said that she will be attending. After some discussion, Trustee Grafton said that she will be attending as well. The chairman directed Ms. Zink to work with the trustees to make the necessary preparations for the trip. ATTORNEY COMMENTS Board Attorney Dehner had three topics. General Employees Retirement Board May 2, 2012 Page 8 of 9 1) There was no pension related legislation passed during the last session. The main focus has been on the Florida Retirement System (FRS). 2) Several years ago, it was discussed whether it would be in the City's interest to sue Merrill Lynch regarding their prior services to the pension fund. They determined not to sue. A class- action suit was filed consisting of some 70 agencies that did not sue. The class action will be settled at a conference on July 27 The City is in that class and will share in the recovered funds as long as the City does not opt out by July 6th. Attorney Dehner said that there is no reason for the City to opt out. The preliminary amount the City will receive is $26,500. The attorney said that he has copies of the notice of the proposed settlement plus claims forms. The board will be receiving the original claims forms from the court. The forms need to be filed before September 11 Chairman Wagner asked if the forms were something that needed to be run by him (Attorney Dehner) or are they simple enough for him (the chairman) to fill out. Attorney Dehner answered that there is a 1 -800 number to use for questions about the forms, but the board can call on him (Attorney Delmer) if they need anything. 3) Attorney Dehner reminded board members to file financial disclosures. He also stressed that the members complete the forms accurately. Attorney Dehner spoke about an elected official having to pay $38,000 for an inaccuracy in his financial disclosure forms. COMMENTS FROM TRUSTEES / CITY LIAISON Chairman Wagner noted that the liaison was not present. He asked Ms. Zink if the Mr. Williford had been notified about the meeting. She said that she thought he had been notified. Trustee Gleason asked about the City paying twice what employees pay in contributions. She wanted to know how that compares to other cities. The chairman said he has been told that Ocoee is in the `middle of the pack'. The chairman noted the City this year will pay $800,000 more for both pensions. This is why the board is looking for other managers that can do well with regard to better returns on investment, Chairman Wagner said. He also reminded the board that there will be significant savings to the City as current employees leave and new employees come aboard. Trustee Wheeler said it will take one more year for the negative smoothing factor to fall off. Mr. Nash confirmed that this is so. Further discussion ensued. Chairman Wagner reminded the board that he included a Bogdhan report in each agenda packet. It shows how the up and down cycles have happened throughout history. The report shows that stocks have come through the downward cycle and are now moving upward. People who got out of the stock market will miss the whole up side. The Bogdhan report said the wider the fund invests in, the better the returns will be long term. Chairman Wagner ended with General Employees Retirement Board May 2, 2012 Page 9 of 9 saying that the board is doing all of the right things. Mr. Nash said former Federal Reserve Chairman Alan Greenspan echoed Chairman Wagner's sentiment. AGENDA FOR NEXT MEETING Special Meeting — June 13, 2012 COMMENTS FROM PUBLIC None. ADJOURNMENT There being no other business, the meeting was adjourned at 12:04 p.m. (e s ectfully submitted by: Ap . r t ed by: A o e 114 — Stella McLeod, Muni • :a ' - . Coordinator Russell B. Wagner, GE : Chairman GERB Recording Clerk