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05-13-2009 MinutesMinutes of the Regular Meeting of the CITY OF OCOEE GENERAL EMPLOYEES' PENSION BOARD Held on May 13, 2009 At 150 N. Lakeshore Drive Ocoee, FL 34761 AGENDA ITEM I. CALL TO ORDER- Chairman Wa ner A. Chairman Russ Wagner called the meeting to order at 10:02 a.m. in the Commission Chambers in City Hall. Chairman Wagner introduced the board's new recording clerk, Stella McLeod. He noted that she would betaking over the minutes for the board, and that she would need to enter into a contract with the board [to be paid for taking the minutes]. They would have to take action on that later in the meeting. Trustee Jean Grafton asked if Mrs. McLeod would be doing the minutes on her own time or on City time. Mrs. McLeod replied that she would be doing the minutes on her own time. A motion was made by Trustee Wheeler, seconded by Trustee Grafton, and passed by unanimous vote whereby the board RESOLVED that the board hire Stella McLeod to take the minutes for the board. The roll was called (by the chairman) and a quorum was declared present. Present were Trustees David Wheeler, Jean Grafton, Russ Wagner and Tom Hendrix. Absent was Trustee Wendy West. Also present were H. Lee Dehner, Attorney; Tim Nash, Bogdahn Consulting; Doug Lozen, Foster & Foster. B. Approval of Minutes from Regular Meeting February 13, 2009, Special Session March 9, 2009 and Special Session March 26, 2009 Trustee Grafton stated that she had not received a copy of the RFQ for attorney services. Chairman Wagner questioned other trustees to see if they had gotten the document and they had received it. Trustee Grafton surmised that they were still using her old email address. Chairman Wagner stated that he would check into the matter. Upon a motion being made by Trustee Hendrix, seconded by Trustee Wheeler, which passed unanimously, the board General Employees Pension Board May 13, 2009 Page 2 of 10 RESOLVED to approve the minutes for the following meetings: Regular Meeting February 13, 2009, Special Session March 9, 2009 and Special Session Meeting of March 26, 2009. AGENDA ITEM II. NEW BUSINESS A. Investment Consultant Report -Tim Nash, Bogdahn Consulting, LLC Chairman Wagner questioned whether Mike Welker would continue attending Ocoee's pension board meeting. Mr. Nash answered that the board will see him [Mr. Nash] more often than Mr. Welker. Chairman Wagner noted that the board would prefer to see periodically all of the folks that they originally hired. Mr. Nash said he would make a note that the board would like to see Mr. Welker at the board meetings periodically as well as himself. With respect to the report, he noted that the second fiscal quarter was down; however, the month of April was up 10%. The investment program on page 4 showed that the second fiscal quarter was a difficult one, but the City's portfolio held up well relative to the overall marketplace. The international stocks were down almost 14% for the quarter; domestic market was down 11%. Chairman Wagner asked how the bonds were doing over the last month. Mr. Nash said that Ocoee's bonds were up despite the market's bonds being quite flat. Ocoee is currently at about $6, 00,000. Asset allocation was at $5,955,000, now it is $6,314,012. The ending market value is $12,387,989.00 as of March 31~`. Ocoee has done all that it can do at this point. The market has been unkind. Ocoee did not meet the 8% actuarial assumption, Mr. Nash stated. Domestic equity portfolio -the City is meeting all of its benchmarks there. On the bonds, Ocoee is a little behind the benchmarks on the three year and 5 year time periods. This includes the prior manager's results also. Trustee Wheeler asked if this is the ls' quarter `09 report or the 2nd quarter 08/09 report. Mr. Nash stated that this is the report for the first calendar quarter but it is the City's 2nd fiscal quarter. The consultant determined that it is best to reflect the actual calendar quarter with the dates at the top of the document. Attorney Dehner stated that the City is about to receive its valuation report for October 1, 2008, and that the board needs to determine the expected annual rate of return for the current year. The next several years thereafter will be based on the consultant's recommendation; The attorney asked Mr. Nash for his firm's recommendation. Mr. Nash stated that he believes the 8% assumption is still a reasonable assumption based on 60/40 mix, but he does not believe Ocoee will be able to meet the 8% in the fiscal 2009 year. He does believe that over the next several years and longer term that the City can easily meet the 8% assumption based on the 60/40 stock to bond mix using long term capital market assumptions to come up General Employees Pension Board May 13, 2009 Page 3 of 10 with that mix. He will prepare a letter to that effect for the [Florida] Division of Retirement. Mr. Nash noted that there is backup that shows a calculation going back to 1926 and bringing it to September 30~'. He will send it to the City so that Chairman Wagner can sign it with a copy to the Division, copy to the City, a copy to Doug and a copy to the City's attorney. The board should make that finding at this time by motion, Attorney Dehren noted. With Trustee Grafton having made motion which was seconded by Trustee Wheeler and carried unanimously, the board RESOLVED that the total ezpected annual rate of return for the nett several years and the long term thereafter will be 8% net of investment related ezpenses but may be less than that of the current year. Chairman Wagner stated that Ocoee is still in good shape despite the down market. It appears that the City will meet all of its actuarial requirements. Trustee Grafton asked if the reason for the 8% was because Doug [Cozen] uses a longer smoothing tool. Mr. Nash said `no' and pointed the board to page 5 which shows the different asset classes. B. Actuarial Report Doug Cozen (Foster & Foster) presented the actuarial valuation for October 1, 2008 which set forth the funding requirements for the City for the next fiscal year, the year beginning October 1, 2009. The presentation has nothing to do with changing the current funding requirement since that was determined last October when the valuation report was approved. The presentation will take the following form: 1) what they recommend the City's funding rate be, 2) do a quick review of last year's performance and 3) what lead to the recommended contribution rate. There are three distinct changes that are different from prior years. He referred the board to page one of the report. They recommend that the minimum funding be 15.3% of payroll. He met with Pam [Brosonski] from Finance because she had questions about funding without a particular dollar requirement which is the first change that will be discussed. Ms. Boronski is up to speed and knows how to program the computers to get to those hard dollars. The City has in place via Pam a budget for next year; if payroll grows at a five percent rate, the dollar requirement would be about $1.3 million dollars; a little more that a $200,000 increase. (Trustee Wheeler asked if a copy of the report was furnished to Finance. Mr. Cozen confirmed that Finance has had a copy for about 1 '/z months.) This is an increase. Typically the dollar amount increases because payroll goes up even when you have favorable experience due to salary increases and a few new members in the plan. The plan actually has three fewer members in the plan than in prior year, but there was still an increase in payroll. When the percentage of payroll goes up, that has an indication of net unfavorable experience. To go from 13.4% to 15.3% does have built in net unfavorable General Employees Pension Board May 13, 2009 Page 4 of 10 experience. There is a good piece of news which is there is a new actuarial standard of practice which requires the consultant to look at their smoothing technique. In the long run if it was deemed that actuarial values are above or below market value then aone-time adjustment has to be made. That has been done by the consultants, Mr. Lozen reported. The good news is that they were able to add actuarial value to the trust fund because of that compliance. See page 16. This is a one-time page that will not be in future reports. See the necessary adjustment. The consultants were able to add $221,425.00. Admittedly it did not bring down the City's funding requirements because it is amortized, but it is good news because it is a little extra dollars in the City's trust fund to pay for future benefits. This is the second of the two changes in the report. To recap 1) no dollar requirement, and the second 2) we added $221,425 dollars to the asset value. Trustee Wheeler asked where the money was added from. Mr. Lozen answered that it was added by using the smoothing technique. They did not go anywhere to find the money. By using a four year average one is able to have a different value than the market value. In the long run there can be no difference. They simply just added the $221,000 to the $16.2 million so that going forward we are in compliance. Mr. Lozen continued to the third change on page 9 showing unfunded actuarial liability. He remarked that Ocoee had a relatively small loss while funds like the Florida Retirement System had significantly larger losses. The [Florida] Division of Retirement has asked that actuarial firms tighten up how fast unfunded liability is paid down. Every time there is a change in benefits or change in methods or assumptions or there is an actuarial gain or loss a new mortgage payment must be set up for that. Under statute chapter 112 we are allowed to pay that down over 30 years. Another component of the statute is legislative intent under part 7 of statute 112 that says no component of funding that could be reasonably paid by today's taxpayers can be transferred to future tax payers. That creates something of a conflict between those two statutory requirements. One is a requirement (the non-transference to future taxpayers), and the other is a permissive component of the statute (the pay down over thirty years). Last year the state actuary was putting more weight on not transferring to future taxpayers and said some of your plans have had significant losses and you cannot continue to pay down over thirty years, you'll be against legislative intent. In the meantime, the state actuary has retired. Prior to the retirement, Mr. Lozen said that his firm agreed that they would show the City a faster pay down of the unfunded liability and discuss the pros, cons and the consequences of that. This is what the board members have before them. For prior gains and losses, the firm has tightened up to twenty years [rather than thirty years]. For discussion purposes, the consultants are showing the City a ten year pay down. The net effect is virtually nothing for the City. Ocoee has had gains over the years. Had the City stuck with the 30 year pay down as usual, the city's funding requirement would have only been 3% less than the 15.03%. This General Employees Pension Board May 13, 2009 Page 5 of 10 shows that the city's plan is in better shape than most plans due to the gains the plan has had over the last few years. Usually when this tightening is done, the funding requirement goes up by 5%; Mr. Lozen said he has seen 10%. This is why the consultant recommends that the City fund at 15.03% and stick with this tightening of the amortization period. These reports are getting approved. There is no impact if the state does not approve the plan in the short run to general employees. There is impact for police and fire plans because the state could withhold monies. But the firm's recommendation is this: since there is so little difference between the two, whether a thirty year pay down or a 10/20/30 pay down is done, one might as well go with the higher funding rate (15.03 rather than 15%) and almost guarantee that this report gets accepted by the state. Chairman Wagner asked if Pam Brosonski [Finance] was comfortable with all of this. Mr. Lozen replied that he went over the funding with her and she was comfortable with it. Chairman Wagner asked that if the report is approved, is the City obligated to fund according to the report. Mr. Lozen replied that the City would be obligated to fund the plan if the board approves the report. Mr. Lozen noted that the funding difference between the 15% and the 15.03% is about $25,000. There were questions about the City's funded status. On page 24 of the report for the funded ratio under the GASB 25, it is at 76.38% -last year it was 78.49%. There were questions when he mentioned last year that the plan was more than 100% funded. He was referring to the termination ratio. There are three different ways of looking at funded ratio. Last year there was 114% termination basis. This year there is it is 91%. While Ocoee's fund dropped below 100%, the termination ratio is above the City's GASB ratio. What could be paid out today is 90% assuming that salaries grow at 6% per year. The firm projects out to retirement that 6%.The 6% has two components, COLA and step increases. The actual rate has come in at 8%. There is likely overtime added into the rate reported by the City. It is unwise to change the assumption based on recent experience. If the City does not think that the 6% is reasonable, then it needs to up the 6%. According to Mr. Lozen, if the City does away with overtime and pares back pay increases, then the 6% could be lowered. But the firm thinks it is unwise to have assumptions that chase recent experiences. That gives the City wild fluctuations in funding. Mr. Lozen is not recommending that Ocoee make any changes to methods or assumptions. Chairman Wagner asked if the trustees had any questions. He was glad that Mr. Lozen went over the matter. Trustee Grafton thanked the consultant for explaining the funding ratio. Chairman Wagner asked how Ocoee's ratio compared to others. Mr. Lozen responded that 80% is an industry benchmark. The vast majority of plans will be below 80% [Ocoee is at 91%]. Chairman Wagner confirmed that the long term goal concerning the funding ration is 100%. He solicited a motion to accept the report and forward it to the City. Trustee Wheeler having made a motion, which was seconded by Trustee Grafton and carried unanimously, the board General Employees Pension Board May 13, 2009 Page 6 of 10 RESOLVED that the report be accepted and submitted to the City. C. Proposed Ordinance Amending and Restating the City of Ocoee Municipal General Employees' Retirement Trust Fund -Attorney Dehner. Chairman Wagner thanked the attorney for his work. Chairman Wagner remarked that changes were largely due to federal and state requirements. Trustee Grafton thanked the attorney also. Chair remarked that the attorney had produced a document before up to a certain point like the one with the mayor and commissioners in it. Chairman Wagner clarified the actual intent which was that yes you had to have been a commissioner for nine years minimum to even get a benefit. Chairman Wagner said that they went all the way back to the beginning. If someone now has a break in their service and starts with the City again (not having taken their retirement nor the funds and have not hit the age), they can be a part of the plan again. Chairman Wagner understood that once they take the retirement and come back to work for Ocoee, they cannot participate in the plan. The attorney confirmed that this is true. Trustee Grafton noted that the board never saw any figures as to what benefit the mayor and commissioners will receive. Chairman Wagner said that the question was if there was any cost to employees. Because there is no contribution by the mayor and commissioners, the City will have to add to their component to make up for that. Trustee Grafton noted that this means that the taxpayers will be paying that bill. Mr. Lozen said he will make an impact statement. He said there will be an impact but not a big one. Attorney Dehner reviewed with the board the substantive changes made to the ordinance. Service of commissioners, they will receive credit for service since they took office; continuous service is not required, it is total service. Only the current city manager is coming into the plan; it will not include future city manager unless the ordinance is amended. Trustee Grafton asked if a precedent was being set by allowing the current city manager to "coast" for five years and then join the plan, having gotten the five years for free. Chairman Wagner noted that this was a contract negotiation between the city manager and the commission. He will contribute to the plan now like any other employee. A new city manager might ask for the same provision. Attorney Dehner said that being added to the ordinance also is the amendment to the credited service definition which notes that folks employed prior to 10/1/91 and came back after 10/1/91 get credited service for the pre- 10/1/91 period. With respect to members of the trustee board, an elected trustee must be a vested member of the plan. The term of the trustees changed to four years. For mayors and commissioners there is no vesting or benefits until they have at least nine years of credited General Employees Pension Board May 13, 2009 Page 7 of 10 service. Trustee Grafton asked if all of the changes are spelled out in the document from the attorney. Attorney Dehner noted that they are. For prior government service or military service, employees do not need to make a decision within 18 months of employment. Chairman Wagner noted that the attorney has done a consolidated ordinance. Chairman Wagner expressed satisfaction that finally there is a consolidated ordinance which allows them to put together the summary plan and operating rules and they have a guideline that everyone understands what it is. Trustee Grafton noted that it is really important for this to be processed by the commission within a month. Chairman Wagner said he has spoken with Human Resources Director Jim Carnicella, and they intend to have a first reading the first meeting in June and a second reading for the second meeting in June. Trustee Grafton having made motion, seconded by Trustee Hendrix and carried unanimously, the board RESOLVED to recommend to the City Commission that the consolidated ordinance be adopted. Chairman Wagner asked if Mr. Lozen had a copy of the document. Mr. Lozen replied affirmatively. Chairman Wagner asked Mr. Lozen if he would get started on his report. Mr. Lozen noted that he would have a copy of that report ready by the end of the week. D. Resolution Authorizing Disbursement from Fifth Third Bank The resolution updates the signatories for the board's Fifth Third Bank account and removes Mr. Carnicella's name as the plan administrator. Trustee Grafton having made a motion, seconded by Trustee Wheeler and carried unanimously, the board RESOLVED that the resolution be adopted authorizing disbursements from Fifth Third Bank dated May 13, 2009. The chairman passes resolution down for signature. AGENDA ITEM III. OTHER BUSINESS A. Payment of Invoices The chairman noted that of the invoices have been signed for and paid, so the board is ratifying those. There is one invoice from Debbie Bertling for her fees. Trustee Grafton having made a motion, seconded by Trustee Hendriz and carried unanimously, the board RESOLVED to approve all invoices as they have been presented. General Employees Pension Board May 13, 2009 Page 8 of 10 B. Meeting Dates (item added by the chairman) Chairman Wagner offered August 12~' as an alternate meeting date since the current meeting date happens during his scheduled vacation. Attorney Delmer callede his office to check his calendar. Ultimately the meeting wAS rescheduled for Wednesday, August 19, 2009 at 10:00 a.m. AGENDA ITEM IV. DISCUSSION ITEMS A. RFQ for Attorney Services According to Chairman Wagner Human Resources Director Jim Carnicella put the packet together for the Request for Qualifications (RFQ). Chairman Wagner verified with the Attorney Delmer that he received a RFQ packet. Chairman Wagner noted that the information is due back to the City by June l0a'. He mentioned having a subcommittee depending upon how many responses are received. Trustee Wheeler stated that the short list could be two depending upon how many responses received. Trustee Wheeler proposed that the entire board look at the responses. Chairman Wagner suggested that they have a workshop meeting. He asked the attorney if it is ok to propose meeting dates by email. The attorney confirmed that it is fine to do that by email. Chairman Wagner said that he would get back to the board as far as dates since he did not have his calendar with him. B. Merrill Lynch Lawsuit The group from Tallahassee was going to come down to look at everything, but then they noted that Ocoee has a hard dollar contract, so they are not interested in coming to the City. But then someone called and said they are interested. Chairman Wagner's understanding is that they are trying to set up a time to come, but it is a very limited amount of information for which they are looking. Attorney Dehner checked on what is going on in South Florida. Attorney Dehner said one of the firms in the consortium has filed for arbitration. There was talk of interest in a class action lawsuit. Chairman Wagner asked for clarification that the people from down south are working with the Tallahassee folks. Attorney Delmer confirmed that is true. C. Summary Plan & Operating Rules Sub-Committee Once the consolidated ordinance passes, the Summary Plan can be updated. Chairman Wagner asked if the board wants a subcommittee to work on it or the entire board. Attorney Delmer said that he could scan the rules and send them to the chairman if that General Employees Pension Board May 13, 2009 Page 9 of 10 is useful. Chairman Wagner stated that he can probably get HR to help. Trustee Wheeler asked if he was speaking of collating and such. Chairman Wagner stated that the Summary Plan needs to be edited, 85% of which is probably still accurate. He asked if the board wants him or HR to take a stab at it and then bring it back to the board. It was concluded that Chairman Wagner and Trustee Wheeler along with the attorney will divide the document into parts so that they can each make the changes. The changes will then be sent to the attorney for finalization. D. FPPTA Annual Conference -Boca Raton Given the budgetary constraints, Chairman Wagner said he has decided not to attend. Trustee Grafton made mention of the scrutiny & criticism that such travel can attract. Trustee Wheeler will not be attending. Trustee Wheeler reminded those attending to get with Marilyn [Johnson] to make the arrangements AGENDA ITEM V. ATTORNEY COMMENTS - H. Lee Dehner. Esauire Updates: Proposal to extend $3000 healthcare exclusion is going to be extended to all public employees - it's a federal income tax exclusion; on state side Rule 60-P (mentioned earlier in the meeting) dealing with actuarial standards of practice. There will be two workshops during July and October. It will be a while before anything is finalized. Chairman Wagner asked what was actually passed at the state. It only affected the state retirement system. Attorney Dehner reminded the board to file the financial disclosures by July 1St AGENDA ITEM VI. COMMENTS FROM TRUSTEES None. AGENDA ITEM VII. SET AGENDA FOR NEXT MEETING RFQ for Attorney Services Summary Plan AGENDA ITEM VIII. COMMENTS FROM PUBLIC None. AGENDA ITEM IX. ADJOURN General Employees Pension Board May 13, 2009 Page 10 of 10 There being no other business, the meeting was adjourned at 12:17 p.m. Respectfully sub ed by: tella McLeod Municipal Records Coordinator Approved by: Russell B. Wagner, Ch irman