Loading...
08-09-2000 Minutes Draft Subject to Approval THE CITY OF OCOEE POLICE OFFICERS' /FIREFIGHTERS' RETIREMENT BOARD MEETING - August 9, 2000 Chairman WILSON called the meeting of the City of Ocoee Police Officers'/Firefighters' Retirement Trust Fund to order at 1:05 p.m. in the Commission Chambers of City Hall. The roll was called and a quorum declared present. PRESENT: Chairman Wilson, Secretary Firstner, Members Coschignano, and Williams. Also present were Attorney Dehner, STI Administrative Officer Dianne Garcia, STI Client Service Officer Tim Nash, Merrill Lynch Performance Monitor Craig Hamilton, and Sue Mela for Recording Secretary Lewis (who arrived later). ABSENT: Member Gledich. APPROVAL OF MINUTES At a later time during the meeting, Performance Monitor Craig Hamilton explained that the last paragraph on page 5 should read "...The (Policy) had been signed by Tim Nash (STI) and approved by the Board." rather than "...The (Policy) had been signed by Mr. Hamilton at that time..." Member WILLIAMS, seconded by Member COSCHIGNANO, moved to approve the Minutes of the May 10, 2000 Police Officers'/Firefighters Retirement Trust Fund as amended. Motion carried 4 -0. QUESTIONS /COMMENTS FROM AUDIENCE None AGENDA ITEM V. OTHER BUSINESS, C. UPDATE RE: ORDINANCE — TWENTY - FIVE (25) AND OUT OPTION WAS DISCUSSED AT THIS TIME DURING THE MEETING. Attorney DEHNER announced that he had heard nothing from the City (regarding this issue). In explanation Chairman WILSON responded that the City had decided that they did not want to go with the 25 and Out but would fund one -half of a supplement. As a study by Actuary Foster had been completed for the General Board, Attorney DEHNER inquired about whether or not Mr. Foster had done a cost study for this Fund. Chairman WILSON had spoken with City Manager Shapiro after the last Board meeting on what the Fund anticipated doing, and had provided the material to him at that time. The General Board was pursuing a 30 and Out, and a supplement for insurance, and Mr. Shapiro had wanted the Police/Fire to do the same thing. He had indicated non - support of the 25 and Out. Attorney DEHNER said that it was his understanding from a General Board discussion that morning, that their 30 and Out was on hold until next (fiscal) year. The only subsequent thing that the City was looking at was the $100 supplement. Apparently it was on the basis that the City would fund one -half and that the members would fund the other half in increased `, contributions. Mr. Foster had done a cost study for the General Board, and in their case it was Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund 1 41,,, August 9, 2000 going to be an extra .8 % of payroll; the City would fund an extra .4 %, and membership would put in an extra .4 %. They were getting input of interest from the membership. If one had not already been requested, Mr. DEHNER advised the Police/Fire Board to contact Actuary Foster to provide a cost study for the Plan to do the $100 supplement. Member COSCHIGNANO announced that he had received responses about the 25 and Out plan rather than the supplement. Chairman WILSON explained that the City Manager had informed him that the cost would be very minimal, approximately $12,000 for the Police/Fire plan. No details had been provided. A study done by Actuary Foster approximately three years ago revealed the cost to be too expensive at that time. More people wanted the 25 and Out right now than those who wanted the supplement next year. It appears that the City wanted both Boards to request the same thing, either it was across the board or nobody gets it. It was the General's cost of $300,000 as opposed to the Police/Fire for $25,000. In response to Chairman WILSON, Attorney DEHNER said that the Board should consider asking the Actuary to determine the cost to buy that service since the City Manager had made the overtures, and proceed from there. They might consider this issue at the September meeting when the Board considers the Investment Policy. Chairman WILSON will contact Actuary Foster about doing the cost study of the 25 and Out. DISCUSSION /APPROVAL RE: SENATE BILL 372 ,` Attorney DEHNER reported that Senate Bill 372 had passed this session of the Legislature in Tallahassee, and it becomes effective October 1. The purpose of the Legislation was to assist Charles Slavin in monitoring the actual rate of investment in terms of the fund versus the actuarial assumed rate. Interest and responsibility of Mr. Slavin's job was to assure that this fund was earning to or greater than the assumed rate that the actuarial assumes. If it was not, then that produces additional funding requirements. This was the primary purpose for this Legislation — assist in the monitoring act, and to help inform the Trustees on the issues. The Actuary was already doing this as well as the Plan's sponsor. This bill essentially addresses three major areas: • It requires amendments or official language that must be placed in the Investment Policy Statement. It does not mandate any substance or changes that the Plan had nor does it change what the primaries are for the investment policy as provided in the ordinance. Mr. Hamilton was working on the addendum that should meet those requirements. The General Fund was having a special meeting in September to look at the Policy Statement for adoption at that time, prior to the October 1st date. The Police/Fire Board may wish to consider it at the same time. The effective date of the Policy Statement after October 1, unlike what we have done in the past which was adopted by motion would have that as the effective date on the date of the motion. After October 1s it has provided the effective date will be 31 calendar days after the Board files the Policy with the City. The purpose for that was so that the City can have feedback to the Board or if they see something that they would like to comment on regarding the Policy Statement. It was important to note that if the City did not like something or would like to see something different, they could 2 Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund August 9, 2000 not mandate the Board to do any different than what is in the Policy so as long as the Policy is within the restriction of the ordinance. Nevertheless, after October 1s and from that point forward any time that the Board amends the Investment Policy Statement the effective date will be 31 days later, 31 calendar days after filing with the City, not after adoption. We have to have proof of the date that we filed it with the City so we can take the measures to let the Managers know when the Policy goes into effect. In addition, the Investment Policy will have to be filed with the Actuary and with the Department of Management Services. • One area in the Statute was amending the Investment Policy, and the secondary was the filing requirements being imposed on the Board. Filing the Investment Policy was one of those, and the second was that each year when the Actuary does the evaluation report we must get input from the Managers, Performance Monitor, and the Actuary on what the expected rate of return will be for the Fund for the current period, the next several years, and the long term thereafter. That determination must then be filed with the Department of Management Services. As long as that determination is equal to or greater than the assumed value, then we were fine. If the expected rate of return whatever indicated to be is less than that, then Charles Slavin would notify the Board that you are to expect a lower rate of return than the assumed rate and you must consider reducing it. • The third part of the Legislation was education. As a matter of policy, the Board had always encouraged Trustee education, and now the Statute requires it. Two areas must be covered, Investment and Trustee Responsibility. It does not say how often you have to do it but a reasonable interpretation was at least one per term. For new Trustees, sooner rather than later. There were schools between the FPPTA and the Division of Retirement that provided five opportunities to do that from each year to the next. The next two are October 1' in Key West (the FPPTA) and the Division is having one in Orlando at the Sheraton Four Points — October 15 and 16 that will cover Trustee Responsibility. Attorney DEHNER said that there were a couple of things that was interesting to note in the Legislation that the Board Members needed to know about. One was that shall we bring up the Investment in the Portfolio that falls outside the Investment Policy, (the Plan) will get down graded; as a percentage basis too much equity. The issue was when that occurs, must you immediately divest of that or do it over time and approve in a reasonable economically peaceful manner. It specifically states now that you may do it prudently and make it in a economically peaceful manner over time. If we ever have an asset like a limited partnership interest that was difficult to value or illiquid, the Board must provide a valuation method to Charles Slavin. If there was not a good valuation method then the Board must notify him of that, and it would be up to Mr. Slavin to determine whether or not he wants to valuate after the funding purposes. There were a couple of instances where limited partnerships could not demonstrate to his satisfaction whether the value was 3 Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund August 9, 2000 leaving the fund value with a zero. This obviously increases the fund of the requirement. The funding requirement would be increased, and we would rather it be for benefit improvements. In response to Member FIRSTNER, Attorney DEHNER said Performance Monitor Hamilton was working on an addendum to the Policy now that will meet the requirements in the Statute. Performance Monitor HAMILTON said that things like recording, education, etc. would need to be added to the Policy. OTHER BUSINESS AUTHORIZE /RATIFY PAYMENT OF BILLS Chairman WILSON asked for ratification of payment, and requested approval of the Board to present to SunTrust for payment, the following bills: 1. FPPTA $325.00 2. Robert Williams $212.50 3. Christiansen & Dehner, P.A. $1,052.28 4. Robert Williams $591.21 ,, 5. City of Ocoee $78.35 6. SunTrust for the Administrative Services $14,442.19 Member FIRSTNER explained that an invoice for Brenda King who had submitted two (2) invoices for her services, had not been paid. However, two had been ratified but only one had been submitted to STI. Member WILLIAMS, seconded by Member COSHINANO, moved to h , ze ind atifv . avment of the bills. Motion carried 4 -0. UPDATE RE: SECRETARIAL SERVICES Chairman WILSON explained that no one had expressed an interest in providing Secretarial Services to the Board. Judie Lewis will continue providing the coverage until such time the Board finds a Recording Secretary. Mr. WILSON added that the Internet as well as the local schools had been contacted. He said that he would check again to see whether or not Judie Lewis might re- consider accepting the position. DISCUSSION RE: TWENTY -FIVE AND OUT OPTION Chairman WILSON said that the City Manager had suggested that it not go to budget next year, and it was now on a "back burner." A lengthy discussion had occurred at the last Board meeting. However, the Plan was now in a better position and the Board must decide whether or not to continue in moving forward on this benefit improvement. 4 Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund August 9, 2000 REPORTS ACTUARIAL There was no report. Recording Secretary LEWIS arrived to the meeting at 1:50 p.m. MONEY MANAGER Money Manager NASH reported about the change of the company name that is now TrustCo Capital Management. Headquarters will be in Atlanta. The CEO was Douglas Phillips who had been TrustCo's CEO for the last 18 years so he was intimately familiar with the running of the firm. Atlanta will be the parent office with five (5) regional offices, and also the regional office in Orlando. The fund's managers were located in the Orlando office. Other offices were located in Washington, DC, Richmond, Virginia, and Chattanooga, Tennessee. Mr. Nash provided additional information about these company changes, and a more user friendly reporting system. The S &P was down 2.7% for the quarter. Most may have seen on the nightly news, that there was a lot of volatility in the Market Place. The S &P had been up 2.5% for the first quarter of this year, down 2.7% for the second quarter, and they were in negative territory year to date, down about %2 a percent. The NASDAQ was down about 9 %, and the Dow down about 8 %. We had been in kind of an ugly market place. The only Stocks that had done well for that time frame were Health Care stocks and consumer staples. Energy stocks had seen a stronger performance for the quarter. On the Bond side, we have had six federal reserve rate increases in the last 12 months so the Bonds had pretty much flattened down for the year. There was a particular holding that was in the Bond fund that had adversely affected the performance. The Market overview showed the "sliced and diced" variety of things such the S &P, the NASDAQ, and the Dow. There had been a lot of negative numbers for the quarter and calendar year -to -date from January 2000 so it had been a tough market place. The GDP growth in the market place and the gross domestic product had a little more than a 5.3 %. The non - inflationary growth rate (the Fed likes the economy growing at about 3.6 %) was growing almost twice as fast. It had been one of the reasons for lower interest rates. The second reason was that the pool of workers in the market place was shrinking. If a company loses an employee, it costs a lot more money to hire another one. The result was inflationary pressure. The good news was that over May and June, we were starting to see things slow down a little bit. The CPI was growing at about 1.8% a year. In the first part of 2000, we were pretty close to 3% and inflation was growing twice as fast as it has in the past. It was largely due to the higher energy prices. They were concerned about inflation that was easing somewhat and were pretty confident that they had seen the end of the rate increases for the next four months. Mr. NASH said that they were also comfortable that the corporate earnings continued to come in above expectations. The market might pick up a little bit at the end of the year if the Fed do not 5 Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund August 9, 2000 make any moves. Their performance for the quarter had been up 64 basis points to make a combination of stocks and bonds. For the last six months we were up 1.6 %, and for fiscal year - to -date were up 6.09 %. The actuarial assumption was at 8 %. Our stock bond mix was pretty close to 60 -40 Equity Fixed Income mix. For the rolling 12 month time frame (not the Plan's fiscal year end but the last 12 months) we were up only 55 basis points. The last three years had been up 11.2 %, and the last 66 months which was a little more than five years and the amount of time that they had been managing the assets, it was about 14.8 % final average each year. The cash flow close -out of the June quarter was $7,702,502. The equity was up about 58 basis points for the quarter. Mr. NASH explained that it had come from adding the STI growth and income funding which was one of the two value funds that they were using. It was down 1.3 %. The high grade equity income fund which was their value fund that they had been using in the past, has had a dividend requirement that was down 2.3 %, S &P was down 2.6% so both of the funds were doing better than their market bench mark. The high grade growth fund was up 62 basis points, and the U.S. Limited Cap fund which was their small and mid -cap option, was down 1.46 %. They were investing in the International Equity Index fund, which was their index that mirrors the Morgan Stanley Index. It was down 4.32 %. Fixed income for the quarter was up a little more than three - quarters of a percent, about 72 basis points, and the Lean and Government Credit index was up 1.45 %. We were a little behind the index for the quarter. Mr. NASH also explained about the individual funds that they were invested in and the percentage to r the market value (60/40 mix). The growth and income fund was sort of a newer value fund. Technology stocks were in this portfolio, and they had located additional Technology stocks that they feel has good earning potential in going forward. In response to Secretary FIRSTNER' inquiry about whether or not overall Technology stocks had reached a value or were still going downward, Mr. NASH explained that Richard Bernstein who worked for Merrill Lynch believed that the consensus was that those stock earnings growth out in 2001 and 2002 was slowing. They probably had a little bit more room to fall going forward in general. There were some attractive valuations out there that we may not have necessarily seen in the end of the NASDAQ decline. High Growth Sector fund shows that the Technology sector was at about 21% of the Portfolio compared to the S &P at 32 %. That is the fund where they paid back our Technology exposure in June, and it had hurt them in the latter one -half of 1999. It has actually helped in the last quarter. We were back in the top third of all managers for the quarter which was certainly a good sign but the under -weigh in Technology is largely the reason to out performance of the growth fund during the quarter. That has a very high weighting in the Health Care sector. Bristol Myers, Murk, and Eli Lilly were among the names of strong performances for the quarter. The high -grade equity income fund had not changed very much. Some of the bright spots for that fund was the energy sector. The fund has had an over - weight in basic materials that was paper or aluminum companies. Capital goods and communication services such as telephone 6 Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund August 9, 2000 utilities had not done very well on the market place. Their stocks were extremely cheap but they had not seen much price appreciation out of those stocks over the last eighteen months. The limited cap funds were their small and mid -cap option, and had been one of their stronger performing funds over the last few years. It had been over - weighted in small and mid -cap energy companies, and smaller and mid -cap technology companies. Those sectors had over valued as some of the larger technology stocks. The fund year -to -date, for the six months, was up 19.75 %, and over the last 12 months had been up 57 %. It had been a strong performer for the portfolio. International Index fund had been added to the fund for the quarter, and we were now getting some International exposure. We were down about 4% within the fund. The reason for the decline on the International side was the result of Telecom names among the top ten holdings. They had been real strong performers in the last half of 1999 and had been beaten down rather significantly along with their U.S. counter parts of the NASDAQ. This had been largely attributed to the interest down of their performance for the quarter. In response to Mr. HAMILTON's concern that there may have been a tracking error at the bottom of page 9, Mr. NASH said that they had talked about it during the last quarter when Mr. Hamilton had presented International options. They did not 100% replicate or copy the EPA index. The reason for that was there were a lot of smaller company names that are rather illiquid. 'tow It had been tough to get out of anything so they had gone through and created an International index fund based on GDP (Gross Domestic Products). They were looking at different countries and countries that have the largest GDP, and then they were buying a lot of the names within each one of those countries. They were sort of a fiscal analysis in either over - weighting by 1% or under- weighting by 1% for each one of the countries based on the valuation. It had been a little bit of active managing in that portfolio as well. This would be where they would see that we were down a little bit more than EPA during the quarter but in looking over the one, three, and five years, our index funds had a tendency to out perform the Morgan Stanley's EPA index. This fee for this fund was the fee schedule for the total account. This was a mutual fund and that was an important thing to note. We would see a fund level fee if we were to go out for other information sources on investment information. For example, on this Fund, it was about 1.45 %. This was not what the Fund was paying. The Fund was paying the standard 72 basis points. Mr. HAMILTON said that he wanted to draw their attention to the high grade bond fund and the market sector. We had about 45% of the portfolio in corporate bonds. They have not done very well during the last six months. The place to be was in U.S. Treasuries, and we had approximately 38% of the portfolio in U.S. Treasuries from short to long term maturities. Also, there was about 3% in mortgages. Our Fund was up about 7 3 /4 % for the quarter, and the index was up about 1 3 /4% so we were a little behind the index. The reason for that was two fold. We were a little bit under - weighted in looking in the 10 and 20 year time frames. We had been under- weighted in long term treasuries /securities basically because they felt like we would get a better yield on the short term, and there was not a whole lot of benefit of locking up your money *416..r 7 • Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund ... August 9, 2000 over the longer time frame. As he had explained in the last meeting, the Treasury came out and started buying back some of its 30 year treasury bonds, and also made an announcement that they were not going to issue additional bonds. Basically there was an unlimited supply of treasury bonds pushing up their price. The performance for a 30 years treasury bond for the last six months was up about 9.8% and a 10 year treasury bond was up only about 5.3 %. A lot of high return had come from the longer term treasury securities. That in addition to owning a corporate bond called Synova that was a finance backed corporate bond. Mr. NASH explained that they go out in mid - market, a financial company, and lend to different businesses. They have a credit card lending division or real estate loans for corporations, and they do short term loans for corporations. There was approximately an 8% addition in it that was a little bit higher than they normally take, and usually they only had about 5% in Bonds. The reason that they had the higher position was that they were expecting the bond to be upgraded. That had not occurred and just the opposite had occurred. It was down graded. Their CEO had retired early, and they announced a write off of a large channel and distribution loan that they had in their portfolio. The market had sort of swooped by that and the Bond value fell almost in half from what they had paid for it. Mr. NASH said that the fund manager, Earl Denning, has had an on -going dialog with the company. They did not want to sell that bond at this time. As a matter of fact, the CEO of the company said that what they planned to do was open their books to outside vendors, and he thinks that they will be acquired by a company that has a higher credit quality which will restore the bond back to its full value. The CEO indicated that sometime in August and September, that Feds were coming through to look at the books and evaluate the situation. Our investment policy does not force us to sell it right away even though it was below investment grade. They would like to hold on to it for the next three to six months because they believed that the value was going to return. It seemed sort of a downward pop this quarter, and you might see above average positive return in the next two quarters. Attorney DEHNER announced that he had just spoken with the City Manager about the supplement, and feedback as a result of the (General Employees') meeting that morning. Mr. DEHNER said that he had mentioned to the Board that the original idea was that the City could pay one -half of the improvement in the Pension Fund. He had further explained that if the Pension Fund pays, it would end the City's funding requirement instead of the City putting it in, otherwise it must come from Member contributions. The City Manager had asked him to write a letter to identify the Board's discussion, and that it doesn't necessarily have to come from increased Member contributions. There were three funding sources: member contributions, City contributions, and positive actuarial experiences which could be derived from positive investment experience, more than expected salary increases, turnover, or any number of things. The City Manager was willing to present a Plan to the City of those alternatives, and if the City was willing to adopt the improvement, and fund the other half through positive experience which would otherwise be a reduction in their contributions Actuary Foster provides the Board as there was last year. Last year with the Actuarial valuation, the City required contributions by virtue of 8 Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund August 9, 2000 favorable experience, and it had gone from 15.1 to 14.3 % . The City Manager was willing for it to occur any of those ways. It was going to be up to them (City Commission ?). The City Manager also asked whether or not a study had been done for this Plan (as done for General). The City had gotten a ballpark on the supplemental and what that might be but the City Manager would like the supplemental for both funds. Attorney DEHNER said that in light of that, the Board might want to hold off on asking the Actuary for a specific study until they see what the end result of planning by the City. In response to Chairman WILSON, Attorney DEHNER said that the 25 and Out has had the impact statement that was $27,000 for the cost of that but the City Manager had not brought that up. The General Plan had looked at the 30 and Out but the General has a little different structure. Same category but it might provide a glimmer of hope. Member COSCHIGNANO inquired about whether the City Manger was asking to do this on a yearly basis as the Police/Fire Plan keeps improving, and the General appears to be dropping on a scale or was he saying that we should treat it like anything that we have and anything in between we could put it toward improvements (all over). Attorney DEHNER said that he believed that he only wants to see what the favorable experience was from last year, and that when there was favorable experience, if benefits are improved than the automatic effect was to reduce City contributions. The presentation here was that if this portion was covered by favorable fund experience, then we should therefore put that toward something to supplement those improvements. Freezing contributions at 15 was discussed, and Member COSCHIGNANO asked whether or not it would drop, historically, as it improved. Attorney DEHNER said we could not freeze our contribution because they were always viable but we could put a floor on contribution. It would automatically lock money into the Funds to use specifically for benefit improvements in the future. ie. if the floor was 15% and if the Department to fund actuarial salaries under 112 was 12 %, than we must retained 3% into the Fund that could only be spent in benefit improvements. He said that he thinks at this point, that the City Manager had asked him to write this letter identifying the sources. The point that Attorney Delmer had been making was that if you don't increase member contributions when you are paying money out the Fund from favorable fund experience, the effect is that either the City is funding it or allocating part of the favorable experience to fund it which they don't have it. There had been a misunderstanding for that being there — he had thought that I said that it was illegal to do it, and that had not been the case. I simply said member contributions aren't increased than it was going to become another favorable experience, and that if the City did not spend on benefit improvements than it would reduce the City contributions. It was like the City paying for it. Chairman WILSON said that the City had not done the last benefit improvement (from 2.5 to 2.75). Discussion ensued about whether or not the City had paid one -half of the benefit improvement in going from 2.5 to a 2.75 multiplier. 9 Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund August 9, 2000 Member COSCHIGNANO expressed his support for establishing a floor, and said that he had always been in favor of it. As the Plan improved, if the City could keep theirs at a base then essentially it was the way that they were going to pay for it. We could pay for a lot of improvement if we had that option in there. In response to Chairman WILSON, Attorney DEHNER said that it could go down to where the City would not be contributing anything to the Fund, theoretically. In 1997 when we went to the 3 %, member contributions increased another 2.6 %, a 7.6 increase to the City's cost was also 2.6% additional percentage. It just goes to show that at that time how favorable our experience had been, and that made the City's contribution cost with that improvement, up from 17% to 19.6 %. In September 30, 1998, the City was putting in 19.6 %, and from there it had gone down another 14. They could see the decline. Chairman WILSON said so it was the City that would benefit from it and not the Members, and Attorney DEHNER said if benefits are unimproved that was correct. It was one of the reasons why the Actuary monitored these reports so that it was appropriate if there had been good experience to go to the City and tell them that we need part of the benefit funds. This was really what the City Manager was thinking about doing with regard to the supplement. Now if there was a floor then it would happen automatically. Automatically because of favorable experience when the cost goes below the floor. Other cities were already going with the floor. Attorney DEHNER said that he had checked their State money, and this had been a more positive experience for our Fund. We have had a significant increase in the rebate money for the Police in 1997 that is our frozen base amount of $77,593. This year we had $112,398. Fire was a bit of an increase, not quite as much, but in 1997 they had gotten $34,009, and then up to $40,006, and this year it was up to $44,485 so between the two of them, that has taken the Plan from the frozen amounts in 1997 of $101,000 up to $157,000. It was a nice sum. Last year we had not met the increase of the one minimum requirement that we didn't meet which was the cap on the Early Retirement Reduction of 3 %. He was quite sure that the Actuary will cover it by saying that the above amount was more than enough to do it. It was a change that the Board will have to get into the Plan by adoption of an ordinance before spending the other State money next year. Then, to the extent beyond that and there is money beyond that, than it is the source of an actuarial gain. The cost that the Actuary had developed last year on the 25 and Out had been $27,000 so this was a $157,000 increase. A portion of that must fund the 3% cap but if we stayed at these levels, that money was going to keep coming. It could fund it or be very close to it, depending upon what the 3% was going to cost. This was obviously good news. The Board directed Attorney DEHNER to proceed in writing the letter regarding the supplement. Attorney DEHNER announced the City Manager had asked that he pass along information that the Police Officers' and Firefighters' were now included in the Disability Policy, long term disability that former Member REED had shown the most interest. As a result of that, the Board *tor 10 Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund August 9, 2000 had the Actuary to do a study to reduce the vesting period required to provide lighter duty disability eligibility from 10 years to 90 days to try to address at least a portion of that problem, and there was no need now to do that. It was only 1% of payroll. There was support to see that put in writing. Attorney DEHNER said that he could not say that it was in effect but only that it had been added. Member COSCHIGNANO said that there were a lot of employees in Police and Fire that were interested in that (disability eligibility period). It had been directed their way for a very long time and it was how they had become involved in it. PERFORMANCE MONITOR Performance Monitor Hamilton reported that the bump in the State Police money this year was huge. On the average this year, the Police and Fire money had only increased 1.8 %, and the last 10 year average had been 8 %. The average had gone down as of October 1. That was a 77% increase. The long term performance of the Funds, back in 1994 had grown now to $7,702,000. The contribution earnings for the quarter had been $49,000. The snap shot as of June 30, 2000, was that the S &L allocation had bonds coming in at 40 %, equities at 59% which had broken into different styles that STI was now managing for the Plan. The allocation was close to the medium fund. Mr. Nash had gone over the performance numbers earlier but he wanted to place them in perspective. For the quarter, the good news was that it had been an ugly quarter. There had been a lot of volatility in the Equity Market, and our manager had managed to hang onto a lot more than other managers did so for the Fund the quarter was up .6 %, and the tracking percentile Ni`., ranking in the top quartile for the quarter. The equity funds had the five styles placed together. The Plan had earned .6 %, and the boggie was right now at Russell 3000 had lost 3 %2 %. Once again, it was a good percentile ranking of 22. The good news was the positive up .7% but because of that loss of the NOVA position, it had not kept up with the long term government corporate which was up 1.3% hence a very low percentile ranking for Fixed Income. Fiscal year - to -date we had earned 6 %, and that annualized so we were on track. We were making our actuarial assumption. Twelve month numbers were up .5% for the total plan. The reason for the under performance was the Equities were down 1.5 %. They were sure that the Russell 3000 was up almost 10 %. The percentile ranking for twelve months was 77, and down for the Bond for the year was up 3.4 %. The underperformance in this quarter had pulled that percentile ranking down as well. To get a long term look at the health of the Plan, the five year number had averaged 14% year in, year out for Stocks and Bonds. They were still one -half time or more ahead of the actuarial assumption. They wanted the Plan's return funds to be above target index, above average in all the time periods. For the quarter, earning .6 %, and we had not lost any money so we were above target index and in good percentile ranking. The one year numbers were still positive but we were not keeping up with the target index which was up about 5 %. Longer time period share going out to five years, we had not been above target and not been above average in all of these annual rates return. The equities over the last five years, and had been above the target for the quarter earning .6 %. There was a good ranking there of 22. The one year column and a little bit for the year was Stocks at 1.5% compared to the S &P 500 up 7 %. Longer term numbers, two years through five years, had been below target but close to average when they were up to the four and five year numbers. A couple of quarters ago, we had been above average 11 Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund ., August 9, 2000 and this quarter obviously helped pick that up to get that closer to the medium for those numbers. Fixed income was below the Government Corporate Index at .7 %. The first three periods during quarter fiscal year, and one year those percentile those rankings had dropped very low. One again, this quarter had hurt those numbers. We were used to seeing STI fixed income above target, on average or above average for the three year to five year longer term periods. Mr. HAMILTON said that as your monitor each quarter, they go through a Policy Check List. They had instituted some new guidelines. All were in compliance until they reach the Fixed Income. Tim had explained that NOVA had dropped to a BAA so that one position was out of compliance. They had address that in the Investment Policy to work out the best solution that the manager comes up with, and hope that those things will take place, and we could get on a position without a hurt. Mr. HAMILTON explained that had the manager met the all term objectives that had set out for them for the portfolio for the five years, they would like to exceed the Target Index. We had averaged about 14% over five years. The Target Index had been about 15 %. In going to the Equities, we wanted to keep up with the Target Index, and our Plan had averaged 20 %, and the Target Index had averaged 23 %. The ranking for five years though was not above average, it was in the 51' percentile. It was right about average. Fixed income was split, they had beat that long term index over five years, and met it exactly for three years. They had been above average for Fixed Income. In a ranking of 86 clients of Merrill Lynch, they look at the one year rate of return in coming in with a .5% return, our Plan was at 47. Last quarter we had come in at the mid 50's so there had been an improvement there. Mr. HAMILTON also pointed out that the current allocations versus new target allocation was very close which was what they liked to see. In response to Attorney DEHNER that the Board had amended at its May 10, 2000 meeting, the Investment Policy at that time, Mr. HAMILTON had prepared three original copies of the new statement. Attorney DEHNER stated that he had three originals available that required the Chairman's signature. While it was going to change again in September, and since they had already been adopted, it would be a good idea for the Chairman to sign them. Attorney DEHNER directed Mr. HAMILTON to include a signature line for the bank (STI) as well as the Policy Statement. The substance amendment to that by virtue of the action taken during the last meeting was to increase the Equity percentage to 60% at cost to allow International up to 10% of value of the Fund, and 20% limit on the small and mid -cap. It was at this point in the meeting that Mr. HAMILTON stated that a correction should be made to the minutes of May 10, 2000, last paragraph on page 5 should read "The (Policy) had been signed by Tim Nash (STI) and approved by the Board... " rather than "...had been signed by Mr. 12 Draft Subject to Approval Police Officers' /Firefighters' Retirement Trust Fund �w.. August 9, 2000 Hamilton at that time." He said that the Performance Monitor doesn't sign that as it was direction that the Board gives to the Investment Manager. The Police/Fire Board will hold a meeting in September, as well as the General Board, to approved the changes made as a result of Senate Bill 372. Money Manager NASH and Performance Monitor HAMILTON left the meeting at 2:25 p.m. Discussion ensued about the upcoming election for the Police seat currently held by Chairman WILSON. Recording Secretary LEWIS had provided the Board Members with a draft of the Election Notice. ATTORNEY COMMENTS Attorney DEHNER suggested that the Plan holds off in doing anything until feed back is received on what the City Manger gets from the City Commission for the medical portion of improved benefits. Member COSCHIGNANO announced that he would continue to push for a COLA for retirees, and will try to push the flooring of the contribution. Discussion ensued about the process, and Attorney DEHNER said that it would require an Ordinance but there was not hurry at this time. SET NEXT MEETING AGENDA Discussion ensued on coordinating with General Employees Board Member Pat Cornell about a meeting date in late September for the next meeting. Possible agenda items are: • Discussion/Approve the Investment Policy Statement • Certify Election Results • Elect Officers (Chairman/Secretary) Discussion ensued about the school on October 2, in Key West. Ms. GARCIA reported about a handout regarding divorce and child support. ADJOURNMENT Chairman WILSON adjourned the meeting at 2:45 p.m. Respectfully submitted, Judie Lewis, Recording Secretary a:\MS Word\PF080900 -M \j l 13