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11-04-2009 MinutesMinutes of the Regular Meeting of the CITY OF OCOEE GENERAL EMPLOYEE'S PENSION BOARD Held on November 4, 2009 At 150 N. Lakeshore Drive Ocoee, FL 34761 AGENDA ITEM I CALL TO ORDER -Chairman Wainer Chairman Russ Wagner called the meeting to order at 10:04 a.m. in the Commission Chamber in City Hall. A. The roll was called by the chairman, and a quorum was declared present. Present were: Chairman Russ Wagner and Trustees David Wheeler, Jean Grafton, Wendy West and Tom Hendrix. Also present were: H. Lee Dehner, Tim Nash (Bogdahn Consulting) and Doug Lozen (Foster- & Foster);- Jim Carnicella, Human Resources/Risk. Management Director, Debbie Bertling, Human Resources Specialist and Recording Clerk Stella McLeod. B. Approval of Minutes from Regular Meeting Held on August 19, 2009 Chairman Wagner brought the board's attention to the minutes and asked for the board's pleasure. Trustee Grafton noted that there were two scrivener's errors -the listing of Trustee Hendrix as absent (he was present) and the wrong date listed for the July 15tH special session (it was listed in the minutes as July 19th) which the recording secretary has acknowledged for correction. Corrections not withstanding, upon a motion being made by Trustee Grafton, seconded by Trustee Wheeler, which passed unanimously, the board RESOLVED to approve the minutes for the August 19th regular meeting. AGENDA ITEM II. NEW BUSINESS A. Investment Consultant Report -Tim Nash, Bogdahn Consulting, LLC Mr. Nash gave a report to the board regarding the pension funds performance over the last quarter and over the year to date. He noted that overall Ocoee has come quite far given the drop in the market. Mr. Nash reviewed the best performing sectors with the board, which did not perform as well as the consultant would have liked (page 6 of the report). He discussed the quality of stocks as shown on page 7 of the report. With respect to large cap stocks, he said that stocks increased 16 to 19% whether low or high quality stocks. General Employees Pension Board November 4, 2009 Page 2 of 8 -- ~~_lo«, ., ~1;+<. ~+..~LS_w~rf~~tillz~~ ~zr.T,favnr. '~a ` o' a~r~ `~' rated companies were up 30% and 75% respectively. The consultant is recommending a change for the international benchmark. Right now the consultant uses the Morgan Stanley EAFE index (page 8 & 9 of the report). Canada is not included in the EAFE index despite being the fifth largest county around the globe by market cap. The consultant wants to make sure that the benchmark represents the entire opportunity set of countries that the City will invest in. The consultant recommends the Morgan Stanley All Cap World Index which does include Canada along with 20 emerging markets countries. Mr. Nash reviewed with the board the performance of the benchmarks. The benchmark that the consultant is recommending performed better than the EAFE. He continued that the fixed income portfolio did quite well (pg. 15). The overall portfolio grew from $13 million to $15 million. Cash flow grew, earning just under $1 million for the fiscal year, or just over 5%. The City's bond manager was up 13.34% , putting the City in the top 40th percentile. These are good, solid results for the fiscal year according to Mr. Nash. After soliciting the board for questions, he pointed out to the board the compliance checklist, most of which the City's portfolio met. - The Rockwood manager is down more than the benchmark for the year. Chairman Wagner asked at what point the board should take action about Rockwood. Trustee West asked how long the City has had Rockwood. Chairman Wagner responded that the City has had them as long as it has had Bogdahn managing the portfolio -around 15 months. Chairman Wagner suggested that Mr. Nash take a look at Rockwood from the beginning, and see how they have done. The chairman wants to avoid waiting too long for the manager to improve as the board has mistakenly done in the past. Mr. Nash suggested that the board look in the Rockwood book on page nine which shows the quarterly S & P performance of the manager. He noted that historically the manager has had difficulties and yet managed to come out of them, so one would expect they will do so again. Attorney Dehner asked if Mr. Nash would suggest having a meeting of other managers (including Rockwood) so that the board could decide if they would like to change managers. When the chairman solicited the board for comments, Trustee Wheeler pointed out that Rockwood has not done real well over the last three years. He expressed hesitation about trusting the manager for another three quarters. Chairman Wagner asked the consultant for an in-depth analysis of Rockwood along with two or three other firms that might serve as replacements so that they can be reviewed also. Mr. Nash agreed to do so. Trustee West recommended that the board have a special meeting to determine if they want to keep Rockwood. General Employees Pension Board November 4, 2009 Page 3 of S TL.~ehCCII1"I"IZ[Il-JU:l~totl.i. `~7 t trot ~P l~~inn to c:ioit i~nt~i~--llle-~3~ez"rt-~~nPoPvlit~i~M~" Nash said that he could send a report of the managers performance year to date. Chairman Wagner asked that the information be sent in the form of an email. Mr. Nash consented. The chairman asked the board if that was agreeable with them, and they responded affirmatively with no one dissenting. Mr. Nash asked if he might go over the investment policy statement with the board. The consultant has updated the investment policy statement whereby they are moving from the Morgan Stanley EAFE to the Morgan Stanley All Cap World Index which they are recommending to all of their clients. Attorney Delmer asked if this was gives a better proxy for the City. Mr. Nash answered affirmatively. Chairman Wagner asked the board's attorney if they needed to take any action here. The attorney answered that a motion would be needed to change the policy. Attorney Delmer asked about an error he saw in the policy statement under asset classes whereby the range was misprinted as 20% to 30% when it should have been 20% to 40% upon a motion being made by Trustee Grafton, seconded by Trustee Hendrix, which passed unanimously, the board RESOLVED to adopt the revised policy statement as amended by the City's monitor, Bogdahn. Attorney Delmer confirmed that Mr. Nash will make the change and provide new copies, get signatures, etc. The change will go into effect 31 days after it is filed with the City. He further recommended that the City's copy be date stamped. B. Establish Board Officers Chairman Wagner realized that he skipped this item concerning the election of officers. He asked Trustee Grafton if it was correct that officers were to be elected yearly. Attorney Delmer looked up the matter, and read from the rules that the elections are to take place every two years. C. Actuary Report -Doug Lozen, Foster & Foster, Inc. 1. Timing of City Actuarial Report Chairman Wagner raised the issue of timing of the City actuarial report. He noted that last year the report was fairly late ostensibly because the needed information did not get to the actuary on time. The chairman spoke to Tracy Darin (of the City's Finance Department} and she reported that the information had been sent last week. He asked if Mr. Lozen had received it. Mr. Lozen said he had not. Mr. Lozen stated that if the data has been sent out, he sees no reason why the report should not be ready for the board by the February meeting. He further said that once the member data is received, he will have the employee statements to the board in December before Christmas. Chairman Wagner concluded that as long as the board has the information in January and can approve it at the February meeting, that will be sufficient. General Employees Pension Board November 4, 2009 Page 4 of 8 2. Timing of Employee Report Format Chairman Wagner said that the format is difficult to understand. He asked if the consultant could come up with another format. Mr. Lozen said that he was not sure if he could have it ready with the other report because he is unsure as to what the questions are about it. He began to summarize the contents of the report as it is now. Trustee Wheeler suggested that perhaps the board would like to ask employees for suggestions this year as to how to improve the report, and then look to make changes in the report next year. Mr. Lozen suggested that employees compare one statement to a previous year's statement. He further suggested that a workshop every three to five years helps also. Trustee Wheeler asked if the firm could send the board a dummy statement. Trustee Grafton suggested taking a statement from the files and redacting the identifying information. 3. Revision of Employee Report Format Chairman Wagner asked if the statements usually come in with employee paychecks. The answer was that it comes separately. Trustee Grafton asked that the fact that the report is an estimate be emphasized.. Mr. Jim Carnicella suggested, workshop be held that would last an hour to an hour and a half. Chairman Wagner suggested that the board members be invited. Mr. Carnicella agreed to do so. He said that he would like to get together with Mr. Lozen to come up with a presentation. Attorney Dehner reminded the board that if more than one trustee is at one of the sessions, the meeting must be noticed to avoid any potential Sunshine Law problems. 4. Potential Revisions to 81% Provision Mr. Carnicella said that he believes he sent Mr. Lozen at Foster & Foster information to discuss with the board regarding suggestions for those employees who would like to retire after they reach 81 %, but have not reached the age requirement. Mr. Carnicella was hoping if there are options to limit the age penalty reduction by some amount to see whether or not the cost of that kind of change would be something the board could recommend to the commission. Mr. Lozen gave an early retirement analysis - he said that he would go over the points again, and talk about the impact it has on the members. There are two types of service retirements -normal retirement and early retirement (age 60). The reduction for not reaching the age is around 60%. Of the 190 members in the plan, 13 will have the years of service before age 60. Because of the 81 % cap, they would only be getting a 1.5% accrual rate when it is normally 3%. Mr. Lozen said that his firm did the study to provide for an early retirement option. It would have a reduced penalty. The average impact is this: those leaving at a young age would accrue around 3%. City impact: 3.3% of payroll (over what the City is currently paying), which is a conservative estimate. It is General Employees Pension Board November 4, 2009 Page 5 of 8 a +L, + L,o,-. +t, t, +' o„+ 1<, 70/ +~1rA rl~~_ben~t, Fnr tlii~an~~c;~th~ 7uIlIeCC lSIa~W1ILIi LlllJy lva , firm assumed that 5% of those eligible will take it. Trustee West asked if the City would be paying 3.3% annually. Mr. Lozen answered affirmatively. Mr. Carnicella asked if that number would be reduced over time if members didn't take advantage of the change. Mr. Lozen answered affirmatively because you'd have actuarial gains (since the members did not take retirement as anticipated); also the consultant would advise the City to do an experience study every 5 years. If the retirements have not been happening, the assumptions could be changed bringing down the City's costs. It is better to err on the side of caution. Mr. Carnicella said that he is excited about this because it gives him something to go back to speak with the city manager about. Right now the (general) pension is costing 15% of payroll. Chairman Wagner said that he has had employees ask him about that. An employee can choose to quit the retirement program (after reaching 81 %) and wait till retirement. They can also choose to continue to contribute to the retirement which will give one a much better retirement. The third part is about employees being encouraged to leave after 27 years. They are probably already at the top of their earnings. He expressed reservations about such an approach. Mr. Carnicella answered that when long term employees leave they would be replaced at a reduced salary,and the City would bring someone in with new and robust thinking to the positions. Chairman Wagner remarked that this is a bigger policy issue.. Some of the commissioners already noted that that the City is spending a lot on the retirement program. There is only so much that the City can afford. He expressed reservation about being an advocate for things that will cost the City more. 5. Thirteenth Employee Paycheck Mr. Carnicella raised the matter of the thirteenth check. Chairman Wagner asked Mr. Lozen to address the issue. Mr. Lozen said he needed to give the board a heads up on valuation. Regardng the four year smooth; the fund is going to bring in the 5.3% that was realized this year, but it is dropping off from 8.5% from a couple of years ago. Salaries for the last couple of years have come in at 8% increase rather than the 6% that was assumed. This year you could have a source of gain from salaries. It is going to give the City 1.3% increase in its payroll costs. Trustee Wheeler asked how the average employee salary went up 8% when employees got a 2% COLA and a 2% merit. Mr. Carnicella answered that there were some adjustments of salaries, but it surprises him that the increase of 8%. Mr. Lozen recommended that the City should take the total pay, add it up and compare that to the same payroll for 1 year ago. Add up the pay and see what the change has been. The average increase to payroll was 8.1%. Chairman Wagner said that he would not advocate changing anything this year because of the General Employees Pension Board November 4, 2009 Page 6 of 8 e-mere-a,s~~;eriPnred last~ear It's a tis t year and its gcing to be another tight year next year. He solicited the board for additional comments. Mr. Carnicella noted that the strategy was to decrease the City contribution in order to pay for the pension increase. The City was there until the 4% was given to employees by the commission. Trustee Wheeler proposed that the board think about the matter until the coming year for the next meeting. Chairman Wagner asked Mr. Lozen to bring this matter back to the board when he comes to the February meeting. Mr. Lozen agreed. He suggested that the matter be treated as an ad hoc COLA rather than the City responding to a trigger (an arbitrary growth in the fund). The chairman asked him to outline his thoughts about this and get it to the board before the next meeting. 6. Audit of Fund Trustee Grafton suggested that the board have an audit for the fund. Trustee West asked how much it would cost. Trustee Grafton answered that it costs about $10,000. After additional discussion, the chairman asked if the board could get a list of auditors so that they could begin the process of selecting an auditor. Attorney Delmer responded that he could do an RFP since he has a list of auditor that do such work. Chairman Wagner asked the attorney to share his list with the board so that they can look it over and begin the request for proposal process. It will be placed on the agenda for the next meeting. The chairman asked Mr. Carnicella to assist with the matter and he consented to do so. Trustee Wheeler, seconded by Trustee West made a motion that the board issue a RFP for audit services that will be available for review at the next regular meeting. RESOLVED that the board will issue a Request for Proposal to obtain auditing services. 7. Comparison Reports The chairman asked Mr. Lozen if he had any particular comments about the reports. Mr. Lozen replied that the reports simply contain pure data. AGENDA ITEM III. OTHER BUSINESS A. Invoices Trustee Grafton, with a second by Trustee Hendrix moved to ratify the bills already paid and the bill from the recording clerk. Motion carried unanimously, and the board RESOLVED to approve the paid bills and the invoice from the recording clerk. General Employees Pension Board November 4, 2009 Page 7 of 8 Attorney Definer had asked the firm to provide the board with correspondence as a follow up to the boards discussion about the matter at the last pension board meeting. Trustee Wheeler suggested that the board sit on the matter and continue to monitor. The chairman asked the board if they agreed. There were no dissenting answers. C. FPPTA Public Retirees Organization Membership Trustee West gave the chairman information about signing up for a fmancial program with the FPPTA that would save the member $99 off of organizational events. Trustee West joined and became a member. Mr. Carnicella suggested that if the board moves forward, that they do so as a board so that the discounts that they get can be tracked by his office. Trustee West, with a second by Trustee Wheeler, made a motion that the board join the retiree division of the FPPTA for $9.99 for each board member. The motion carried unanimously RESOLVED that the board will join the FPPTA's retirement division for $9.99 each and receive the $99 discount for organizational events. AGENDA ITEM IV. DISCUSSION ITEMS A. Meeting Dates for 2010 The chairman discussed the meeting dates for the next year. The dates would be February 17, May 19, August 18, November 17. Trustee Grafton wanted to know why the meetings were changed. Chairman Wagner answered that it was a matter of working with the consultants schedule. Mr. Nash expressed the fact that he has a conflict with the meeting dates. Attorney Definer will take a look at everyone schedules and work out a proposal of dates. (Note: these dates were agreed to be changed after the meeting to: February 3, May 5, August 4, and November 3). B. Upcoming FPPTA Training Session in Jacksonville 2/4 - 2/7, 2010 The board discussed the next FPPTA training function which will be held February 7~' thought the l Otn It was asked who would be attending the training. The attendees will be Chairman Russ Wagner, Trustees Jean Grafton, David Wheeler, Wendy West. When asked if he would be attending, Trustee Hendrix responded that he will be retiring from the board. General Employees Pension Board November 4, 2009 Page 8 of 8 Trustee Grafton asked if the board trustees could simply stop by Mr. Carnicella's office to view the report which is voluminous. Mr. Carnicella said he had no objections. AGENDA ITEM V ATTTORNEY'S COMMENTS -Lee Delmer, Esquire Attorney Delmer spoke about the general pension fund's exemption from rules of divestment from companies doing business in the Sudan or Iran. Helps Two legislation and Rule 60T, which deals with practices for actuaries, are both still pending. The plan is not pension friendly at all. The IRS will be sending a survey to 200 pension plans nationwide. He advised the board to be on the lookout for it. Trustee Wheeler asked what the chances were that the state could force the City back into the Florida Retirement Systems. Attorney Delmer responded that it is not likely to happen. AGENDA ITEM VI. COMMENTS FROM TRUSTEES None. AGENDA ITEM VII. SET AGENDA FOR NEXT MEETING Foster & Foster -Actuarial report Bogdahn -including Rockwood AGENDA ITEM VIII. COMMENTS FROM THE PUBLIC None. AGENDA ITEM IX. ADJOURN There being no further business, the meeting was adjourned at 12:27 p.m. Res fully submitted b Approved by: Stella W. McLeod, unicipal eco ordinator Russell B. Wagne ,Chairman