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09-15-2000 Regular Meeting 1k I MIAMI SHORES VILLAGE GENERAL EMPLOYEE'S PENSION BOARD SEPTEMBER 15, 2000 1. CALL TO ORDER The regular meeting of the Miami Shores Village General Employee's Pension Board was held on Friday, September 15, 2000 in the Chamber of the Village Hall. The meeting was called to order at 8:15 A.M. 2. ROLL CALL The following members present: Mary Ross Agosta Joseph Charles Les Forney Tom Benton, Village Manager Absent: Richard Trumble Also Present: Steve Cypen, Pension Board Attorney Mark A. Malatak, Plan Administrator Lisa Keeley, Recording Secretary For the record,Detective Dearden's resignation from the General Employee's Board was read. Mr. Malatak advised that Mayor Ulmer resigned from the General Employee's Board at the Village Council Meeting and was appointed along with Vice-Mayor Blum to serve on the Police Pension Board. 3. SELECT CHAIRMAN Mr. Cypen recommended that an acting chairperson be nominated as there are two vacancies on the Board unless the nominee receives four unanimous votes. Mr. Benton nominated Mrs. Ross Agosta as the chairperson with a second from Mr. Charles. The vote was unanimous in favor. 4. SELECT SECRETARY Mr. Charles nominated Mr. Benton as Secretary with a second from Mr. Forney. The vote was unanimous in favor. 5. APPROVAL OF THE MAY 17, 2000 REGULAR MEETING MINUTES Mr. Forney moved for approval of the May 17, 2000 regular meeting minutes as submitted. Mr. Benton seconded the motion. The motion passed unanimously. General Employee Pension Board September 15, 2000 Page 2 6. APPROVAL OF THE PAYMENT WARRANT Mrs. Keeley explained the payment disbursements. Subsequently, Mr. Forney moved for approval of the payment warrant with a second from Mr. Charles. The vote passed unanimously. Mr. Cypen recommended that the warrant be redesigned to provide for all Board members signatures on the warrant, allowing for a minimum of four signatures required for approval. Mr. Cypen noted that Legion insurance provides fiduciary policies at a reasonable rate. He also noted the warrant is only for items being paid and any reconciliations should be prepared on a separate document. 7. DISCUSSION REGARDING THE RETENTION OF GABRIEL, ROEDER, SMITH AND COMPANY Mr. Palmquist addressed the issue of response time for various items citing the additional workload due to State Statute Chapter 99-1 requirements. Mr. Cypen confirmed the increase in work associated with the new requirements. Mr. Palmquist expressed concern for the Village's displeasure with Gabriel, Roeder, Smith& Company as there has been a long standing relationship between the two. Mr. Malatak addressed the timeliness issue. Discussion regarding several outstanding issues ensued identifying the Drop Plan statements and deferred holiday calculations as priorities. Based on Mr. Palmquist's verbal commitment to address the issues presented, Mr. Malatak recommended that the Board entertain a six month evaluation of Gabriel, Roeder, Smith& Company to evaluate their work performance with Mr. Benton concurring. Mr. Forney moved that the Board reconsider this matter in six months with an interim progress report at the next Board meeting. If the actuary's performance has not improved significantly, there will be consideration for change. Mr. Benton seconded the motion. The vote was unanimous in favor. 8. DISCUSSION REGARDING THE ACTUARIAL ASSUMPTIONS FOR SALARIES. Mr. Malatak addressed the change in actuarial assumptions for general employee salaries. Mr. Palmquist indicated that the past salary increase assumption was consistently higher than the actual increases for general employees. Page 10 of the 1999 annual report shows the average increase of the general employee salary over the 15-16 years as 5.3% which included a higher rate of inflation for the late 1980's. The assumed rate before the change was 6.5% which was lowered as of October 1, 1998 to 5.5% with an actual experience of 5.3%. Mr. Malatak inquired as to the inflationary factor included in the salary assumption. Mr. Palmquist indicated that embedded into the salary assumption of 5.5% is a 4% expected rate of inflation. Historically, since 1926, the country has experienced an average raise increase of/2 to 1% in excess of inflation. The current salary assumption rate anticipates a 1'/2% increase over inflation. Mr. Palmquist stated that he was comfortable with the 5.5% rate. General Employee Pension Board September 15, 2000 Page 3 Mr. Charles asked what the impact would be if there was an increase in the salary assumption rate to which Mr. Palmquist replied that a 1% increase would significantly increase the Village contribution by 3 to 4% of salary. As there is no change to the salary assumption rate, Mr. Cypen indicated there was no motion needed. 11. INVESTMENT STRATEGY AND ASSET ALLOCATION. Mr. Cypen addressed Senate Bill 372 which mandates that certain provisions be included in the Investment Policy of each public pension fund in Florida. Mr. Cypen recommended that the Pension Plan come into compliance by December 31, 2000 and asked Mr. Hamilton of Merrill Lynch if they have addressed the issue. Mr. Hamilton replied in the affirmative. 13. OTHER BUSINESS Discussion regarding the vacancies on the Board followed. Several names were suggested as possible submissions for the vacancies including: Mr. Bill Heffernan,Mr. Mark Piper and Mr. Hank Courtney. It was the consensus of the Board to request of the Village Council that the vacancies be filled as soon as possible. Mr. Forney departed at this time. 9. INVESTMENT REPORT: TRUSCO CAPITAL MANAGEMENT- Mr. Bill Tarry Mr. Tarry introduced the new firm, Trusco Capital Management. Mr. Tarry proceeded to review the performance of the last quarter ending June 30, 2000 indicating that the S&P 500 was down 2.7% and the Lehman Government Corporation was up 1.3%. The plan's equity portfolio was down 1.5% beating the S&P 500. The bond portfolio was up 0.6% up less than the Lehman Government Corporation bond. Mr. Tarry explained the downgrading of the Suntrust high grade bond fund. He indicated that the Finova Bond credit rating was downgraded below the minimum credit rating which impacted the market price. Mr. Tarry ensured that Trusco should have the issue resolved within 15-30 days as the bond in noncompliant with the current investment policy. Mr. Tarry provided a current market analysis through August 2000 indicating that the third quarter has had a better performance. Mr. Tarry described the Trusco investment strategy as a conversion to a separately managed portfolio with both growth and value. Mrs. Ross Agosta inquired as to the status of similarly situated municipalities incurring losses as well. Mr. Tarry replied in the affirmative. Mr. Tarry characterized the fund's comparison to an index which invested 30% in technology stocks. The new portfolio has more of a safeguard against a strong industry group. General Employee Pension Board September 15, 2000 Page 4 Mr. Hamilton of Merrill Lynch clarified that the new Trusco core equity growth fund would be the sole stock portfolio, in essence abandoning the previous three prong approach of two value funds and one growth fund. Mr. Tarry confirmed it would be. The Board expressed some concern in the new portfolio especially in the category weighting within the fund. Mr. Charles noted that the fund outdid the S&P 500 with less risk which Mr. Hamilton noted is atypical for any fund. Mr. Malatak noted that fifty percent of the fund was allocated to technology and cyclicals which is currently on a down slide, recognizing that it is unusual to have all investments in one location. Mrs. Ross Agosta asked Mr. Malatak to further investigate the core equity growth fund. Mr. Benton inquired as to the feasibility of investing in T-bills with a return of 6%. Mr. Tarry indicated that kind of investing involves market timing which is difficult to anticipate. It was noted that the 7.1%return from October 1, 1999 to August 30, 2000 was contradictory to the consistently negative returns in the quarterly reports. 10. INVESTMENT REPORT: MERRELL LYNCH- Mr. Craig Hamilton Mr. Hamilton touched upon several issues that need to be addressed due to the recent splitting of the Board. The first item is to update the investment policy with a provision to allow foreign investing. He also suggested that the top three credit rating requirements on stocks. Mr. Hamilton posed some consideration in identifying domestic investment managers that are successful in both growth and value. He noted that there are economies of scale in considering a joint venture with the Police fund suggesting a pooled investment. He encouraged a special meeting to address these issues. Mrs. Ross Agosta suggested that the Board review current policies with Mr. Benton in agreement. 12. FUTURE MEETINGS It was the consensus of the Board to have the regular meeting on the second Thursday of the second month following the close of the quarter. The first regular meeting following this format would be on November 9, 2000. Those dates for 2001 will be provided via written memorandum to the Board of Trustees. A date to have a special meeting to address investment managers, investment policies and foreign investments was discussed. It was agreed to have a joint meeting of the General Employee Pension and Police Pension Boards on October 25, 2000 at 9:00 am. 14. ADJOURNMENT The September 15, 2000 meeting of the General Employee Pension Board was adjourned at 11:00 A.M. Mary ioss Agosta, Inter&Inter' Chairperson Thomas J. Benton, Secretary -�-e,� # ............................ WARRANT - G No. 00-2 L For payment from the Village Pension Fund for General Employee's in the Village of Miami Shores,Florida. s To Chair and Administrator, or such other officers,who from time to time are duly designated and authorized by the Board of Trustees of said Fund,to sign checks,drafts or orders for the payment of money;You are hereby authorized by the Board of Trustees of the Miami Shores Village Pension Fund for General Employees in Miami Shores Village to pay the amounts listed below for services rendered to the said Board of Trustees,and to pay the persons named below,hereby certified by the Board of Trustees as being on the Pension list of said Board at its meeting held on 9/15/00 ,pensions from 5/17/00 to 9/14/00 inclusive,or for the period of time opposite the name of said persons. Name(Pensions,Benefits,Services Provided or Obligations) Amount `Check Nr. Reimburse Miami Shores Village for Extension on Fiduciary Policy from 6/15/00-7/15/00 $ 762.00 158224 Extension on Fiduciary Policy from 7/15/00-9/15/00 $ 1,574.00 159830 Crime Bond Policy-2"Installment of 3 year policy $ 186.00 159300 Federal Express Delivery $ 16.26 159823 Federal Express Delivery $ 55.66 158880 Gabriel,Roeder,Smith&Company-July Billing Invoice#78330 $2,351.00 Sandra Margarita Montiel Distribution of Pension contribution due to resignation $2,161.86 4000269 $7,009.57 4000235 Estimated Payments: Distribution of Pension contribution for the following employees: Curtis Sanford-To be provided $ Payment for actuarial calculations Gabriel,Roeder, Smith&Co.-Not to exceed $3,000.00 Payment for Quarterly management fees period ending 9/30/00 SunTrust-Not to exceed $29,000.00 Actual Payments authorized by Payment Warrant-G No.00-1 Cypen&Cypen Actual costs incurred to date as authorized Warrant-G No. 00-1 $15,000.00 Billings prior to June 2000 <$ 5,907.31> June billing-Invoice#628 <$ 600.00> 160047 July billing-Invoice#671 <$ 950.00> 159822 Balance from pre-approved authorization $ 7,542.69 Gabriel,Roeder,Smith&Company Actual costs incurred to date as authorized Warrant-G No.00-1 $10,000.00 Billings prior to June 2000 <$ 6,209.00> 157133 May billing-Invoice#77512 <$ 2,158.00> 158220 June billing-Invoice#77749 <$ 500.00> 159217 Balance from pre-approved authorization $ 1,133.00 SunTrust Actual quarterly fees for the period ending 06/30/00 $27,897.34 deducted from Pension fund Dated this 15`s day of September,2000 Approved by: As Chair of the Board of Trustees Village Pension Fund for General Employee's in the Village of Miami Shores,Florida .............................................................................................................................................................................................................................i