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HomeMy WebLinkAbout2008 01 29 Board of Trustees Regular MinutesCITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING JANUARY 29, 2008 CALL TO ORDER The Board of Trustees Regular Meeting was called to Order by Chairman A. Mark Sardo on Tuesday, January 29, 2008 at 6:30 p.m. in the East Conference Room of the Municipal Building (City Hall, 1126 East State Road 434, Winter Springs, Florida 32708). Roll Call: Chairman A. Mark Sardo, present Vice Chairman Michael S. Blake, present Board Member Damon Basco, present Board Member David W. McLeod, present Board Member Vernon Rozelle, Jr., present Chairman Sardo led the Pledge of Allegiance, followed by a moment of silence. Next, Chairman Sardo inquired if there were any Agenda Changes. No changes were voiced. Continuing, Chairman Sardo welcomed new Board Member Damon Basco. Board Member Basco introduced himself to the Board. • • AGENDA NOTE: THE FOLLOWING AGENDA ITEMS WERE DISCUSSED NEXT, IN THE ORDER AS DOCUMENTED. • • CONSENT AGENDA CONSENT 200. Office Of The City Clerk Approval Of The October 30, 2007 Regular Meeting Minutes. "MOVE APPROVAL." MOTION BY VICE CHAIRMAN BLAKE. SECONDED BY BOARD MEMBER McLEOD. DISCUSSION. WITH CONSENSUS OF THE ADVISORY BOARD, THE MOTION WAS APPROVED. MOTION CARRIED. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING-JANUARY 29, 2008 PAGE 2 OF 9 INFORMATIONAL AGENDA INFORMATIONAL 100. General Services Department General Services Director Providing A Summary Of Pension-Related Expenditures For The Quarter Ended December 31, 2007. Mr. Kevin Smith, Director, General Services Department stated, "We did not spend any money for the Quarter." Mr. Smith continued, "The Bogdahn [Consulting LLC] quarterly fee is from January and you'll see that on your next Report." AWARDS AND PRESENTATIONS AWARDS AND PRESENTATIONS 300. Not Used. 400. REPORTS Mr. Smith informed the Board of the Dedication Ceremony naming Winter Springs Fire Station #24 in Honor of Former Fire Chief Timothy J. Lallathin on Saturday, February 2, 2008 starting at 10:00 a.m. and being held at Fire Station #24 on Moss Road. PUBLIC INPUT No one spoke. PUBLIC HEARINGS AGENDA PUBLIC HEARINGS 500. Not Used. REGULAR AGENDA REGULAR 600. General Services Department Election Of Officers. Chairman Sardo asked, "At this point, do we have any Nominations for the Chair?" CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING-.IANUARY 29, 2008 PAGE 3 OF 9 "MR. CHAIRMAN, SINCE, I THINK, YOU ONLY SERVED A PARTIAL YEAR FILLING IN FOR SOMEBODY WHO LEFT EARLY, I WOULD LIKE TO NOMINATE YOU, IF YOU WOULD BE WILLING TO ACCEPT AS CHAIR." MOTION BY VICE CHAIRMAN BLAKE. SECONDED BY BOARD MEMBER ROZELLE. DISCUSSION. VOTE: BOARD MEMBER ROZELLE: AYE CHAIRMAN SARDO: AYE VICE CHAIRMAN BLAKE: AYE BOARD MEMBER McLEOD: AYE BAORD MEMBER BASCO: AYE MOTION CARRIED. Chairman Sardo asked, "Do I have a Nomination for Vice-Chair?" "[NOMINATE] MICHAEL BLAKE." MOTION BY BOARD MEMBER McLEOD. SECONDED BY CHAIRMAN SARDO. DISCUSSION. VOTE: CHAIRMAN SARDO: AYE VICE CHAIRMAN BLAKE: AYE BOARD MEMBER McLEOD: AYE BAORD MEMBER BASCO: AYE BOARD MEMBER ROZELLE: AYE MOTION CARRIED. REGULAR 601. General Services Department Presentation Of The Actuarial Valuation Report For The Plan Year Ended September 30, 2007. Mr. Smith passed out the "City of Winter Springs Defined Benefit Pension Plan Actuarial Valuation and Annual Report for the Plan Year Ended September 30, 2007" handout and the "City of Winter Springs Defined Benefit Pension Plan GASB Report for the Plan Year Ended September 30, 2007" handout. Ms. Sandra Turner, CPC, QPA, President, Retirement Plan Specialists, Inc., 815 Eyrie Drive, Suite 4, Oviedo, Florida: introduced her team and spoke to the Board about the Actuarial Valuation Report. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING- JANUARY 29, 2008 PAGE 4 OF 9 Ms. Turner remarked, "As far as we can ascertain, this has been a very healthy Plan up to this point. In fact, it was a very healthy Plan up to September 30th of [20]07." Discussion. Regarding the Total Contribution as a percentage of 2006-2007 payroll on page 10 in the "City of Winter Springs Defined Benefit Pension Plan Actuarial Valuation and Annual Report for the Plan Year Ended September 30, 2007" handout, Ms. Turner commented, "So, we're within our target range there at fifteen percent (15%)." Mr. Donald D. Chapman, E.A., M.A.A.A., M.S.P.A. Consulting Actuary, Retirement Plan Specialists, Inc. 815 Eyrie Drive, Suite 4, Oviedo, Florida: addressed the Board regarding the exhibits in the handout. As to the total contribution percentage of payroll amount, Vice Chairman Michael S. Blake asked, "This year we did?" Mr. Smith remarked, "I believe it's sixteen (16). I was trying to confirm that, but I think it's sixteen (16)." Vice Chairman Blake said, "It is true, but this doesn't take in any consideration the design change that was made in April or there about." Ms. Turner commented, "Yes, it's going to be interesting to see what that does and we'll take a look at..." Mr. Smith remarked, "... We guesstimated down a half percent." Vice Chairman Blake asked, "A half?" Mr. Chapman replied, "Yes." Further discussion. Regarding the "Present Value of Accrued Benefits" on page 11 in the "City of Winter Springs Defined Benefit Pension Plan Actuarial Valuation and Annual Report for the Plan Year Ended September 30, 2007" handout, Mr. Chapman commented, "This represents what you have in the way of accrued benefits to date and the present value thereof based on actuarial equivalencies in the plan and what you have now, well, for all of the accrued benefits that are vested and not vested, it's thirteen million nine hundred and forty-three thousand three hundred and thirty-one dollars ($13,943,331.00). The vested total -you have thirteen million two hundred and fifty-six thousand dollars ($13,256,000.00). Compare that to the assets, you're in good shape. You're about ninety-seven percent (97%) of the -present value of accrued benefits and you're even better for vested accrued benefits. You've got a surplus." Discussion. Ms. Turner commented, "One of the things that Don (Chapman) wanted me to bring up to you guys about Item `£ [Salary Projections]' on page 12, is he did say there was some concerns because the current salaries increased by eight percent (8%) and the average about three percent (3%) from last year." Further discussion. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING- JANUARY 29, 2008 PAGE 5 OF 9 Regarding page 14 in the "City of Winter Springs Defined Benefit Pension Plan Actuarial Valuation and Annual Report for the Plan Year Ended September 30, 2007", Ms. Turner remarked, "At this point, keep an eye on that" related to salary increases being reflected in the costing. Ms. Turner continued. "That happens not only with your cost of living increases, but if you get rid of lower tier people and -they keep getting higher. I suspect though when we start to -remove some of the higher people which will be retiring beginning at the end of this year, that actually might go down. But again, it is something that we would like to keep a watch on." Chairman Sardo called a Recess at 7.• 01 p. m. The Meeting was called back to Order at 7:04 p. m. Discussion continued. As to page 16 in the "City of Winter Springs Defined Benefit Pension Plan Actuarial Valuation and Annual Report for the Plan Year Ended September 30, 2007", Ms. Turner commented, "But if you'll notice, we've got like thirty-five (35) in between the ages of fifty (50) and fifty-four (54) and we've got twenty-three (23) from fifty-five (55) to fifty- nine (59). That's seventy-eight (78) people - so you need to be keeping a look at these columns here -really closely. And you really need to worry about the ones that have - the ten (10) years and over group." Discussion. Vice Chairman Blake remarked, "So, it's thirty-three (33) -that we need to focus in on and make sure they do not leave." Referring to page 17 in the handout, Ms. Turner stated, "We were running in those ranges so I'm pretty happy with that." Ms. Turner continued, "But all in all, your plan's really doing very well." Vice Chairman Blake asked, "This still includes [20]02, correct?" Mr. David West, CFA, Bogdahn Consulting, LLC, 340 West Central Avenue, Suite 300, Winter Haven, Florida: replied, "The funding ratio would be in the top ten percent (10%) of other plans -and most -programs are targeting, you know, at least eighty (80) and - they'd like to be higher and ninety-seven (97%) that's got to be in the top." Further discussion. Regarding page 3 in the "City of Winter Springs Defined Benefit Pension Plan GASB Report for the Plan Year Ended September 30, 2007", Ms. Turner said, "You remember, every year we try to shoot for a target for contribution and then we actually see what we've made and on [page] 3 you can see in [20]05, we were eighty-nine percent (89%) on target; [20]06 we were ninety-six percent (96%) and the end of [20]07 we were ninety- eight percent (98%) on target. C-TY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING- JANUARY 29, 2008 PAGE 6 OF 9 So, we were -really good at guessing what we needed to put in there versus what we actually needed. So, I thought that's about the best we've ever done." Discussion continued. Ms. Turner introduced Camille Walker, Retirement Benefit Administrator, Retirement Plan Specialists and that she was the person who deals with the City's plan on the day to day basis. REGULAR 602. General Services Department Presentation Of Investment Review Report For The Quarter Ended December 31, 2007. Mr. West distributed copies of the "Defined Benefit Plan And Trust for Employees of the City of Winter Springs December 2007". Discussion. Mr. Smith passed out the "Defined Benefit Plan and Trust for Employees of the City of Winter Springs December 2007" handout. Chairman Sardo asked, "Any exposure, David (West), to the sub-prime? And you are going to get that question and we have talked about that, but what exposure do we have here?" Mr. West commented, "Everybody's responding back, number one (1), which we would expect -short answer `no'." Mr. West remarked, "I think the important answer here, as we look at all the assets, all those securities, they're retaining the ratings -that they were originally purchased with. So, they're not being stressed or collateralized by this sub-prime that's causing the wipe outs." Continuing, Mr. West remarked, "No direct sub-prime to answer the question directly, but the bond portfolio obviously is going to be affected in this type of market. Anything but Treasuries gets -cheap." Mr. Smith passed out the "Market Cycle Experience: Growth/Value Cumulative Growth of $100.00 Style Benchmarks (Period 09/30/95 - 12/31/07)" handout. Discussion ensued on the "Market Cycle Experience: Growth/Value Cumulative Growth of $100.00 Style Benchmarks (Period 09/30/95 - 12/31/07)" document. Tape 1/Side B Mr. West distributed the "Relative Risk Premium ML 5-7 Yr Finance Spread Premium to 5-7 Treasuries" handout. Next, discussion ensued on the "Cumulative Growth of $100.00 Style Benchmarks (Period 09/30/95 - 12/31/07)" document. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING-.IANUARY 29, 2008 PAGE 7 OF 9 Mr. West remarked, "Just for perspective, the International Fund and the Fixed Income Fund, that's a monthly entry. So, there's going to be a cash lag there. And then obviously, as we already discussed, the real estate is a quarterly entry -subject to capital call. So, that's a significant cash lag until -we're fully up and -fully running." Further discussion. Mr. West said, "Let's go to page 7. This is Galliard [Capital Management, Inc.] by itself. We're reporting on the cumulative of everything, but we've also broken out and identified the new Managers so we can look at those separately at the Board's request." Mr. West continued, "Now, I will tell you, there is fifty (50) basis points of Investment lag here because the first month, the way the funds came in from the Trustco [Bank] liquidation, they were not able -with the Money Market in the first month..." Vice Chairman Blake asked, "When did we actually get invested?" Mr. West replied, "... So, it actually got invested the beginning of the second month of the Quarter." Vice Chairman Blake said, "So, November 1 [2007]." Mr. West replied, "Right." Mr. Smith said, "With the exception of International..." Mr. West stated, "...and same - thing with the International." Mr. West continued, "Yes, there was a lag." Discussion continued. Continuing, Mr. West added, "Page 8, here's our hero, one (1) of the hero's Imentioned - 4.94% for a single Quarter; very nice piece to have in there." Further discussion. Regarding page 9 and the total equity, Mr. West said, "Pop down with me again down to the third box and the portfolio all in was down 4.58. Our bogey was down three (3). So, we left a one hundred and fifty-eight (158) on the table." Mr. West continued, "We'll move to page 1 l; let's talk about the Manager that had the - greatest difficulty which was Snow [Capital Management, LP]. And Snow [Capital Management, LP], again, is our all-cap Value Manager and they were down 8.35 versus 5.92. And again, remember, these are the guys swimming in the asset pond -they actually had about four (4) stocks that affected the portfolio. They were early in, regrettably, to Countrywide." Discussion ensued on Bank of America [N.A.]. Continuing, Mr. West stated, "Because of that, Snow's [Capital Management, LP] taken the position, look, we're going to cut our losses. We did make a mistake on this one. So, they are out of Countrywide at this time. Obviously, if the Bank of America [N.A.] deal falls through, there's additional risk, a downside risk." Chairman Sardo asked, "What were the other three (3) stocks?" Mr. West replied, "The other three (3) stocks, two (2) of them were retailers and one (1) of them was United Healthcare [Services, Inc.], which is -involved in litigation and was involved at their time - of entry. And -again, this is - almost a contrarian Manager style." Mr. West suggested, "Again, no change in the process - we don't think we need to change anything." Discussion. CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING- JANUARY 29, 2008 PAGE 8 OF 9 Next, Mr. West remarked, "On page 13, here's our International Equity who had - a very - tough time." Mr. West stated for the Record that he spoke to Bernard R. Horn, Jr. President, Portfolio Manager, Polaris Capital Management, LLC. Further discussion. Mr. Smith asked, "And Dave (West), we're -now fully invested with the target on that recent cap call?" Mr. West replied, "Yes, actually, we do -have one (1) more pending." Mr. West stated for the Record that he meet with American Realty Advisors. Regarding American Realty Advisors, Mr. West stated, "So, bottom line is they are not affected in anyway. Their cost of funding has not been affected in anyway." Discussion. Chairman Sardo asked Mr. West, "Comfortable with the strategies of the Money Managers?" Mr. West answered, "Yes, I'm actually -excited because volatility when you have good opportunistic Managers -volatility is a good thing." Chairman Sardo said, "Utilizing their strategy in this Market?" Mr. West replied, "Right." Further discussion. Vice Chairman Blake asked, "October 1, 2008 we turn over a time when -additional Pension Fund benefits are going to be available to current employees. And we do not know who they are, but suspect that at that time, that we are going to have greater than average withdrawals coming out because of that -with more retirements happening. Is there anything that we should be doing to prepare for that in terms of our -mix that we are looking at or - is there anything we should be doing? Nobody knows the magnitude that it is going to be." Mr. West replied, "Short answer, yes. And I think we've done that and -tried to move away from our more volatile, trying to lighten up our equity and increase our -income producing element by adding the real estate portion of the portfolio. So, that will be step number one (1) and -that's been done. Step number two (2), we need to know -now we're dependent upon the actuary - to determine what this experience, and if your idea - to keep people from retiring works - we need some experience that we can work with. We're going to need the fresh actuarial look and then make another assessment and again, we are experiencing a higher outflow to the plan, then at that time - we would be anticipating shifting to a higher level..." Vice Chairman Blake asked Mr. Smith, "Do we have any mechanism to report to Dave (West) and his team when we have retirements?" Mr. Smith replied, "Sure." Vice Chairman Blake continued, "Are we doing that currently?" Vice Chairman Blake suggested, "It just seems to me to make sense that if we have information, if we know some folks are going to be leaving, that we get that information in terms of the numbers, what they might be, to use." CITY OF WINTER SPRINGS, FLORIDA MINUTES BOARD OF TRUSTEES REGULAR MEETING- JANUARY 29, 2008 PAGE 9 OF 9 Mr. West added, "I think from our perspective and -from this Advisory Board's perspective, I think our interest would be in -tracking what that -impact is on the net cash flow of the Plan. So, to the extent that we can -start tracking or at least be aware that we need to start -tracking that number." Continuing, Vice Chairman Blake stated, "Once the bump happens it will be very stable for a long period of time -but this bump could be significant." Vice Chairman Blake continued, "My question is really one more of net inflows, hopefully it would be net inflows or if it is actually going to be a net outflow from the Fund, then it's appropriate for us, from our Investment Manager standpoint, to understand that. But they know there is going to be liquidations coming out three (3) months prior or four (4) months..." Mr. West said, "...Right -and again, at that timing, this is such a beautifully, healthfully funded program, again - if there is a need to bring in more income producing type of assets to -offset that cash flow, arguably, that is probably going to pull down the expected long term rate of return, so consequent to that, it might be appropriate - to review the eight percent (8%) target." Mr. Smith stated, "I'll put some measures in place to get that information sooner." ADJOURNMENT Chairman Sardo adjourned the Regular Meeting at 7:55 p.m. RESPECTFULL Y SUBMITTED: -_ _` ; `J . NIEL~.E HARKER ASSI~TAI`JT TO THE CITY CLERK NOTE: These Minutes were approved at the , 2008 Board of Trusts Regular Meeting.