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HomeMy WebLinkAbout2006 07 25 Board of Trustees Regular Minutes CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES - PENSION PLAN REGULAR MEETING JULY 25, 2006 CALL TO ORDER The Board of Trustees - Pension Plan Regular Meeting was called to order by Chairman Robert Nippes on Tuesday, July 25, 2006 at 7:30 p.m. in the City Commission Chambers of the Municipal Building (City Hall, 1126 East State Road 434, Winter Springs, Florida 32708). Roll Call: Chairman Robert Nippes, present Vice Chairman A. Mark Sardo, present Board Member Guy DeMaio, present Board Member Byron Giltz, present Board Member Vernon Rozelle, Jr., absent After a moment of silence, Chairman Robert Nippes led the Pledge of Allegiance PUBLIC INPUT No one spoke. AWARDS AND PRESENTATIONS AWARDS AND PRESENTATIONS 100. None None. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - JUL Y 25,2006 PAGE 2 OF 10 REGULAR AGENDA REGULAR 300. General Services Department Requesting The Board Of Trustees Meet With Its New Third Party Pension Advisor, Bogdahn Consulting, LLC, For Purposes Of An Initial Discussion Regarding Their Services. Mr. Kevin Smith, Director, General Services Department, introduced the Consultant, Mr. David West, for this Agenda Item. Mr. David West, CF A, Bogdahn Consulting, LLC, 340 West Central Avenue, Suite 300, Winter Haven, Florida: noted for the Record that he gave a "List of items" needed to Mr. Smith. Advisory Board Member Byron Giltz asked Mr. West, "What was your start date?" Mr. West stated, "I would have to go back and check'that one." Mr. Smith added, "I don't recall the actual approval date with the City Commission. I could go back and check and let you know." With discussion regarding Police and Fire Program funds, Mr. West stated, "To enable the program of the City to receive those funds, two (2) things have to happen. An Ordinance has to be passed, creating the separate Police and Fire 175/185 Programs, number one (1). Number two (2); an Ordinance - a levying Ordinance basically has to be passed which essentially directs the State who is already collecting this money, it goes into the State General Revenues. The levying Ordinance directs the State to move those funds into that now, created official designated program." With comments regarding the forum for discussion on the Police and Fire Program, Mr. West added, "We are happy to take whatever direction the Board feels is appropriate." Discussion. Mr. Ronald W. McLemore, City Manager commented on the City's Pension Plan. Regarding the Police and Fire Programs, Chairman Nippes stated, "If we Vote to have a Special Meeting to - talk about this, we can do that." A brief overview of recommendations to the Pension Plan was then presented by Mr. West. Mr. West continued and stated, "We had identified a couple of issues. One (1) was the Asset allocation. Handling of the Asset allocation." Then, Mr. West stated, "The second issue is 'How are those individual mandates handled within that Asset allocation'. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - JUL Y 25, 2006 PAGE 3 OF 10 Do we work within the Trusco (Capital Management) model? We are happy to take direction there and pull out the pieces that we think are non-performing and plug in substitutes. Or, the second direction - is to start from scratch and look to bring in a new Manager. So, that is what we would look to you for direction as to what path you would like us to take. Again, we will be conducting - completing a formal review of the whole program." Then, Mr. West added that "We would be looking for - to get some sense of the direction that you would like us to focus on. That is what we will come back to you in a Report at the next Meeting, those findings and recommendations based on that direction." Furthermore, Mr. West stated, "So, I am looking for - Option A, piece meal, fix the pieces that are broken; or Option B, is the preference to pursue a restructuring and wholesale look at the program." Board Member Giltz asked Mr. West, "So, you have basically two (2) functions, whether you want to put out an investment advisory, Investment Manager search for different Managers..." Mr. West stated, "...Correct..." Continuing, Board Member Giltz said, ". .. Then you have the Asset allocation on the percentage of stocks and bonds, so forth." Mr. West stated, "What we will do initially is go through, review the Investment Policy, and, we do that as the engineering platform basically for the program; are we aligned with the actuarial liability there; are there enhancements or improvements that we can make to that; if so, we will identify them and recommend them. Then we bring back the proposed restructured, hopefully enhanced, Investment Policy statement which incorporates those changes. . . " Board Member Giltz asked, "... Which you incorporate that? Asset allocation..." Mr. West added, "...That is correct." Then Mr. West added, "Then the next piece is obviously bring back recommendations on how those particular mandates, if you will, or Asset allocations would be managed. Then, again, we could work within the Trusco (Capital Management) framework to the extent possible, or we could look to go a couple on the outside and take a fresh look." Board Member Giltz asked, "You started probably at least a month ago I guess - our next Meeting is not until the end of October. How long is it going to take you to do those two (2) things that we talked about?" Board Member Giltz added, "We could have Special Meetings if the Board chooses." Mr. West stated, "We are happy to have Special Meetings." Board Member Giltz asked, "We need some timeframes to even think about those I guess." Mr. West stated, "Thirty (30) days from now, we would be prepared to come back and deliver the first Report and recommendations." Discussion. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - JUL Y 25, 2006 PAGE40F 10 Chairman Nippes stated, "I - think we need to look at the quarterly Report, see where we are, then I would expect that the Consultant would look at the quarterly Report and come back with recommendations. I would think that if we need another Meeting in thirty (30) days, I am sure that is not a problem." Board Member Giltz stated, "Now, you are getting copies - of the Report, right?" Mr. West stated, "We are not authorized yet to receive that." Manager McLemore stated, "What the Commission has authorized is to go forward with an RFP (Request for Proposal) for new services for your Investment Managers. What your Consultant - is telling you, there are two (2) ways, there is not just one (1) way. I think - you have to come back with is two (2) alternative approaches." Manager McLemore continued, "Then that has to go to the City Commission for ratification as to what your approach is going to be." Continuing, Manager McLemore stated, "My recommendation would be that as early as you could, we would come back to you and say, 'Here are your two (2) options, we have looked at your Plan, we understand it' . . ." Then to Mr. West, Manager McLemore stated, "...I need you to meet our Actuary. I can go over some issues that you are not aware of yet, I will help you - in making this Report to you. Then make that decision." Discussion. Board Member Giltz asked, "Who is going to - draft the RFP (Request for Proposal) and who are we going to send it to?" Mr. West stated, "We will assist you in that process and will assist you in the review." In addition, Mr. West stated, "We are going to go out into our universe and pick, again, in the case of hiring the best of breed for the mandate, we are going to go out into our universe and make sure that we are bringing everyone in that needs to be looked at. So, we will assist and guide that process the entire way. Bring our recommendations rolled up in a Report to you so that it is very easy to make a quantified, qualified decision on who the replacement should be. Whichever approach is taken." Discussion. Board Member A. Mark Sardo stated, "Is there a potential to examine both those trains to see exactly what would be more attractive, surgical versus wholesale, and see what the alternatives are under each option, cost?" Mr. West stated, "Absolutely, we can do that." Chairman Nippes asked, "Can you get that information in thirty (30) days?" Mr. West stated, "We would propose to come back in thirty (30) days and address the three (3) options. " CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - JULY 25, 2006 PAGE 5 OF 10 Then Mr. West stated, "Our next set of marching orders would be - 'Now it is time to do the Manager search; incorporate the RFP (Request for Proposal)'. Then at the next Meeting we will have all that in process, and we will have rolled up all of the results and we will bring back a summary Report - with - recommendations based on our findings." Board Member Giltz asked, "Will that include the Investment Policy also?" Mr. West stated, "Yes, Sir." Mr. West stated, "I am going to repropose the marching orders here. At the next Meeting, to take place in thirty (30) days, whenever you are scheduling it, we will come back to the Board with a look at three (3) different alternatives; one (1), is a complete wholesale change in Managers; two (2), is a surgical working within the Trusco (Capital Management) confines and involved in that wholesale we have a couple of options, we will present those options. We are going to come back basically, with solutions and be prepared to proceed with the RFP (Request for Proposal) following that - summary Report. Included in that Report will be our IPS (Investment Policy Statement); engineering recommendations for the Plan; and we will have met with the Actuary and will be totally up to speed." Then, Mr. West said, "We will be presenting all of those findings at the next Meeting so the Board will have a basis to make a decision." "I MOVE THAT WHATEVER DATE WE DECIDE TO HAVE THE NEXT SPECIAL MEETING, THE CONSULTANT WILL COME BACK WITH RECOMMENDATIONS ON HOW TO PROCEED WITH INVESTMENT MANAGERS; HOW TO PROCEED WITH ASSET ALLOCATION; THE RFP (REQUEST FOR PROPOSAL); AND THE INVESTMENT POLICY, ALL OF WHICH WILL BE PRESENTED OR DISCUSSED WITH THE CITY COMMISSION AND THEN WE WOULD PROCEED FROM THERE." MOTION BY ADVISORY BOARD MEMBER GIL TZ. SECONDED BY VICE CHAIRMAN SARDO. DISCUSSION. WITH CONSENSUS FROM THE ADVISORY BOARD, THE MOTION WAS APPROVED. DISCUSSION. MOTION CARRIED. REGULAR 301. General Services Department Review Of Trusco Capital Management Financial Statements. Ms. Molly A. Halcom, Investment Officer, Trusco Capital Management, 300 South Orange Avenue, Suite 1600, Orlando, Florida: with a brief overview of the Investment Review Booklets, Ms. Halcom stated, "We are seeing some economic slowdown. I think those things are going to help keep inflation in check." Tape I/Side B CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - JUL Y 25, 2006 PAGE 6 OF 10 Ms. Halcom continued discussion on the large and small cap growth. With discussion on the letter from Trusco (Capital Management), Ms. Halcom stated, "We have had a change here that I would like to address with the Board. I sent a letter to Michelle (Greco, Director, Finance Department) and I believe she passed it out to everyone. What occurred at the end of June, June 26th, our 'Small Cap Growth' Manager and Lead Analysts left Trusco Capital Management to start their own Investment firm. The fund itself has now been taken over by two (2) new Managers. The two (2) Managers are listed, if you do have a copy of the letter." Discussion. Ms. Halcom answered a question from Mr. West, "There was a group of individuals that left Trusco (Capital Management), our Director of Sales." Ms. Halcom continued, "We had several sales team members that departed with him, the 'Small Cap Growth' Manager, Lead Analysts, and some other individuals." The following question by Mr. West was restated for the Record which was answered above by Ms. Halcom, "Were there any - other senior level management, or executive management departures that went with the 'Small Cap Growth' Manager? We also request a copy of the notification from Trusco (Capital Management), letter of notification from Trusco (Capital Management) for our file." Discussion ensued regarding the portfolio. Regarding several months of economic environment, Board Member Sardo asked, "Would you recommend any changes or any kind of enhancements, or - Asset allocation changes, knowing what is going to happen?" Ms. Halcom stated, "I think that within the current Investment Policy statement that we have in place, which does place us a little - more aggressive - we will see some volatility in the markets, but there are a lot of opportunities still on the equity side. Within the equity weightings, I would continue to maintain the more overweight position in 'Large Caps'. I think the weighting in international is appropriate. One thing that I might mention on the fixed income side is - we recently developed a product - that - we developed it for our municipal clients because we historically have had high quality restrictions on the fixed income side, so we have always used our 'High Grade Bond' fund. We have had more municipalities that are now changing their Policy statements to allow for investment grade Bonds. So, we have created a new common trust fund that is for our municipalities does go down into that investment grade Bond fund level. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - JULY 25,2006 PAGE 7 OF 10 That is a change that I have been seeing in many of the Plans that I manage and that is something that I think the Board might want to consider. It would just really broaden your allowance - on the Bond side." Chairman Nippes stated, "Is this some information you can get to our Consultant?" Ms. Halcom stated, "Yes. Certainly." Board Member Sardo stated, "Thanks." CONSENT AGENDA CONSENT 400. Office Of The City Clerk Approval Of The April 25, 2006 Regular Meeting Minutes. "ON THE APRIL 25TH [2006] MINUTES, I MAKE A MOTION TO APPROVE THOSE MINUTES." MOTION BY VICE CHAIRMAN SARDO. SECONDED BY ADVISORY BOARD MEMBER GIL TZ. DISCUSSION. WITH CONSENSUS OF THE ADVISORY BOARD, THE MOTION WAS APPROVED. DISCUSSION. MOTION CARRIED. CONSENT 401. Office Of The City Clerk Approval Of The May 24, 2006 Special Meeting Minutes. Chairman Nippes noted that the Board would like to add a comment from Mr. Steven Alexander, CCM, Pension Investment Advisor, Public Financial Management, Inc., to the Minutes. "I WOULD LIKE TO STATE THAT WE PUT A MOTION FORWARD TO ACCEPT THE MINUTES AS AMENDED - MAY 24 2006." MOTION BY VICE CHAIRMAN SARDO. SECONDED BY ADVISORY BOARD MEMBER DeMAIO. DISCUSSION. BOARD MEMBER GILTZ ASKED, "THAT SAME PARAGRAPH, WHERE IT SAYS, UNDER STEVE ALEXANDER, THERE IS JUST A SENTENCE THERE - THE SENTENCE READS, 'IT IS THE RESULT AND PLANS COMPARED TO YOUR EXISTING PLAN'. I KNOW STEVE ALEXANDER SAID THAT, BUT I DO NOT KNOW ABOUT THE REST OF YOU, BUT I CAN NOT RECALL WHAT THAT MEANS." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - JUL Y 25, 2006 PAGE 8 OF 10 VICE CHAIRMAN SARDO STATED, "NOT TO SPEAK FOR MR. ALEXANDER, BUT BOTH THE FEES WERE PROBABLY VERY SIMILAR, BOTH PRESENTATIONS." VICE CHAIRMAN SARDO CONTINUED, "FEES BEING EQUAL, LET US LOOK AT THE RESULTS AND THE VALUE ADDED THAT EACH FIRM BRINGS TO THE SITUATION, IF THE FEES ARE BEING EQUAL. BUT, THAT IS ME SPEAKING FOR MR. ALEXANDER." BOARD MEMBER GILTZ STATED, "JUST SO WE REMEMBER THE RESULTS ARE ACTUALLY THE INVESTMENT MANAGER'S, NOT THE CONSUL T ANTS. THE CONSULTANT MAY PICK A GOOD INVESTMENT MANAGER AND WE MAY VOTE ON THAT, BUT THEY ARE THE ONES THAT CREATE THE RESULTS, WHICH I GUESS HE MEANS RETURNS OR PERFORMANCE." CHAIRMAN NIPPES STATED, "MY RECOLLECTION WAS THAT HE WAS TALKING MORE ABOUT FEES THAN ANYTHING ELSE. IF I RECALL, THE FEES WITH SOMEBODY LESS EXPENSIVE AND SOMEBODY MORE EXPENSIVE AND YOU DO NOT REALLY WORRY ABOUT THE FEES. WE ARE REALLY WORRYING ABOUT WHAT THEY ARE GOING TO DO FOR US IS THE WAY I RECALL IT." BOARD MEMBER DeMAIO STATED, "THE WAY I RECALL IT IS THE FEES WERE NO BIG DEAL AS LONG AS THE RESULTS WERE THERE." WITH CONSENSUS OF THE ADVISORY BOARD, THE MOTION WAS APPROVED. DISCUSION. MOTION CARRIED. Board Member Giltz asked "Steve Alexander, that night, was he paid by the Pension Plan and, or the City to do what he did that night? I am more concerned about the Pension Plan." With discussion, Manager McLemore stated, "The Pension Plan pays all of the Administrative charges." Manager McLemore added, "If he sent an invoice of being here for giving you advice - that would be paid from the Pension Plan." Advisory Board Member Guy DeMaio asked, "No invoice received?" Mr. Smith stated, "Not that - I am aware at this point." 600. REPORTS Manager McLemore stated, "This is extremely important. I authorized our Actuary's to go forward with some studies about two (2) months ago on the Plan. As you recall we all agreed, you agreed, on this four (4) year transition into the three percent (3%) benefit, retroactively for all employees. The analysis on that work was performed, it was performed based on an actuarial assumption of a thirty (30) year funding on average. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - JULY 25,2006 PAGE 9 OF 10 I went back to our Actuary's and said, 'We need to take a snapshot of the Plan performance today, based on its assumptions and see where it stands and then we need to project forward to probably about six (6) to seven (7) years and project forward where we think the Plan is going to be performance-wise, based on an anomaly that is going to occur in our system out in the fourth (4) year'. That is the potential that we will have a large number of people who will be leaving the Plan very quickly within one (1) year because they will have reached their full-time retirement status." Furthermore, Manager McLemore stated, "What impact does that have on the original assumptions in the Plan when we set up the three percent (3%) benefit retroactive and the four (4) year Plan for phasing it in? I did even include in the Budget, and I advised the Commission of this, for another one percent (1 %) increase in contributions to the Plan, just to give the flexibility to begin doing or to do whatever we need to do, if we need to do anything, to make sure that the Plan is fiscally sound in order to meet that bubble or that anomaly that is going to occur." Then, Manager McLemore stated, "What is going on right now is that the second part to project out for six (6) or seven (7) years beyond that time where potentially a large number of people would retire at one time and come back and say, 'This is the contribution level that is going to be required in order to maintain the performance of the system, hopefully at the fifteen (15) year level rather than the thirty (30) year level." Manager McLemore stated, "We could have a totally funded Plan - that is my goal. We are well on to that except for this bubble that we have facing us. So, as soon as that information is available to you, or available, I will make it available to you along with what recommendations our Actuary needs to suggest to you in terms of maintaining our fiscal soundness, with the assumption that we are going to have this issue out there. Part of that discussion would need to be are the things we can put in place that would possibly link them that retirement time that some employees would choose to not retire on that date, or maybe stay two (2), three (3), four (4) years later." Manager McLemore stated, "The question is, 'Do we need to raise contribution levels', in order to maintain the soundness of the Plan. We certainly would not want to go beyond a thirty (30) year funding. We would like to maintain our fifteen (15) year funding if we could - the goal is over a period oftime to be fully funded." Then Manager McLemore stated, "As soon as that information is complete, which I think will be within two (2) weeks, I need to get back to you (referencing the Consultant), I need to get back to you, and we need to say, 'Here is a recommendation that we need to take to this Commission'. I am trying to get the Commission to delay on its decision relative to the Budget numbers to make sure we have the flexibility to invoke this other one percent (1 %), or maybe more." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING - JULY 25, 2006 PAGE 10 OF 10 Chairman Nippes stated, "Is this real to talk about in the thirty (30) days?" Manager McLemore stated, "I hope so. Yes. Absolutely - maybe - we may need to call another Special Meeting ahead of the time that he is able to talk to you about your alternatives just to talk about this so that you can get a recommendation to the City Commission before the Budget process is finalized." Chairman Nippes asked, "When is that?" Manager McLemore stated, "They do not really finalize the Budget until September, technically September 30, they do not have to. Decisions are being made. They set a cap - Monday night on the Budget. That one percent (1 %) is still there." With discussion on representatives from the Police, Fire, and "General employees", Board Member DeMaio stated, "I recommend - that at least one (1) from each agency be represented at each and every Meeting if they want to be." Chairman Nippes stated, "It is an open Meeting." Manager McLemore stated, "Not only that, we have already by Policy made that statement supporting employees who want to come to this Meeting to be here." FUTURE AGENDA ITEMS None were noted. ADJOURNMENT "I MAKE A MOTION TO ADJOURN." MOTION BY VICE CHAIRMAN SARDO. SECONDED BY ADVISORY BOARD MEMBER DeMAIO. DISCUSSION. WITH CONSENSUS OF THE ADVISORY BOARD, THE MOTION WAS APPROVED. MOTION CARRIED. Chairman Nippes adjourned the Meeting at approximately 8:46 p.m. RESPECTFULLY SUBMITTED: dfliL':;Z .A i{ #4t-/J~ DEBBIE FRANKLIN DEPUTY CITY CLERK NOTE: These Minutes were approved at the November 16 2006 Board of Trustees Regular Meeting.