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07/11/2002 (2) , '" .'.: ,._r .~. . ,...; '. ." ., . " .~'" .... . ,,". ".;.1. ,I, ...' .'. /....... :.. " ....,., ': ' ." ..;. '.' :;'.' '., '" . ,.,. .. ,': " . '.'11., " ,.I. .1 ,. . , . , i'::' ).. <:.' , ~ ! . ~ . ..< , " " , ":,' ,', I. 'e ,~ .' " : :.'. :~.,.:. :.~: . ,oj "..' , .:., " ' .' ,~ . , ,..':, . .', / . .. ' " \. " . ' . ~ ' ....1. " \' ., j'.\;' ..- .." '. . . , .,,> ,I' .'. .r:o..t,' .~"~,<~ ~{- ~~ h..:, ':- ' ',~ :~; ~..~~ ~ .~ .~": ';,., H. . )~.: .'~ ;.~. <. . 1 ........ . . " .. ~ ". .,. . ., . ;~: I .\.0 ~(.: , 1;(,: :. ~\.,?,:.. : .:~:: '. 'r , "/,I ;1.(,0" -,'" 4 'j ., ... J '\,;,(" (;~..::''- . J:':.:'.:';',l -I't ~. 11 t K:~;~:.: ., e:~{ .:...,:.... '. , , .' . , " .,. " , ' ., '.,' '. .' . .,!' ..q ;, :' ., ., , .' " ,l" , ,I," ,.' . ~ I ."" '.' . ,"'; . .' e '),; .. '. .' .;. e \ .;' ~~~:,T-:' :.4..~.::~:;.~__' .~,;.:;,";. W~'::~/..~;;,.'... .. , ' > '.'. .... l '1. " . >~': ./.. ,:.'.':\ (. i',e '.' .\ I. '.':.:.: !~j ,h.. .. .,' .'" ~-I... I :.'. ,.~.. :'~'.'~. ). ,',t ., 1ff,:':. . ..:. ..I',:,,~ ,'. "...." ,~ ~. . , : .~:."" ". 1".,', . ',d fr,:,~:,:.: ':. ,., " ,n..1 r~: ;: I, " " , .. .'...., I- , ~..' .' ; I -_.j ,\ , , , \., .. . ,:t PAC .j ',> > >..... '.Pen~io~ ,Advis0 r.y : ~o~mittee . Minutes '. .., '. I . ':"1 , j .' ..1, , '. ~ . ':1 .., . " / .'~ I: .: , . I;' 1"1. ',e, .~.< II '\ '." .1 ".. , ,\ ., " \ ,:, 07/[1 / {j ~ ., " . '~ . ,.. .' > . ~ . . ~ ' ,~ ..' ..;.C;} . '. ....1 <''l-. ',:, d. " 'i . " " , '. . . ~. :J;;~(}.~:,;, . ..: ;';',)?:!":",, . ,', ." ,',,"'. \ :~:< .l' ,~, .., j :. .', , ': I' '\; ~.I . . ,. ,., ",.j' > ., ~ I' '.. , : ,< d. I" :',. ';,' I ;.: ".,. '. .r~ ' ~ ~.... ' :,(':,'. ,.': ,ej" ~ \ . . ,.,:: ::.~ ~F: .. J :~:, r~,,J '0 \ " .':~:r":>;> ," . : ..' ,jJ. ~.:~ ~ ;"_ 1 I ~ ; " " , . ~ '. . ~ " '.1, . ' ." .,'>:..:: Ie.. :'., ;W~T4t,. ::, .(:.:')',0,," .... ",~ ..... '. ,'. ;. .' .>,>,- ..' ,/e ... , " .,' ~ 'I. '. ~ . \:.,. " ~ r \ .il 'jl .r e... ..' , . ~ . , . .' / ?J.'I " ,. ., ',. :<\'. :1,. ':T ':, ~. " :' " };:."',:F)/;(:.,.~ '1,.;,'.';, .'., .',: ; .'. .', " " '.,; .,. , , . ~. 'I' '. .. i : ' I ~ , ~::. '. .11." ~ ' ..' , , :, I, \ ~,i '. , . I ..... >, ',I. . >'. J I, : " 1",' i, . . .~ < ~ >. , .; 1,<...., .. . ',' . ". "i \ ". . ,',J' }. ' .... I 't.." " "} , ' " : ~,~;/':t.,,>~,::~ ~." '\<'" .,,<.;;:i', , I. , . ..',1-' ";/1 ! . -J , ,,' , . ' . . ~ ~ :tC l; . PENSION ADVISORY COMMITTEE MEETING July 11, 2002 CIly CommIssIon Chambers--Cfly Hall . , ' i I I I I I i . I I I J ',., <',' . 1. . Call Mootlng.to Order. .2.... Solecllon of 9halr and vice ChaIr. 3. ~ppr~val of Minutes of Juno 13, 2002. '. 4. Employees, to.be Heard. 5. Action lIems: :,.0 '. . ~'. . . I ,L ',. , a.' Approval of New HIres as Plan Membors. 1; DavId Prior, Police 2. Brian Swartz, FIre 3. Jade McCree, PoUce .4. . Mellene Taggart, Police 5. Corinne Bello, PlannIng & Development Services ,6. Eric Matherly, Parks & Recreation 7. Karan Helm, Parks & Recreation 8: Jose Correa, Parks & Recreatton 9.. Shannon Fondaw, CLlstomer Service 10~' Corlnno Wells, Public Utilities . ". Thomas Coffey, Gas . , 12. Fernando Rodrlguez-Lamberty, Internal Audit 13. George Shaub, Public Utf/lf/es ,14; Jon Russell, Gas' .16. James RobInson Ill, Parks & Recreation 16. Stephen Holwerda, Marine . 17. Dennis Aponte, ~olJce 18. ~Ichael Schrantz. Parks & Recreallon O. 6. Pen,dlng/New Business: ' '. I " .J: . . . .' ,\ ~ f " f',,'" . .. '. ," , , ;. . " '. . " \c' \ ' 'i,:~:', . . .1: 'J . .' ',.' ~ ,.t.' 'c' .. ,t., I ,;1 , a,. Edward Kutta~HDarlng on Job-connected DIsability Request . b. Sleven Palmer-Set HearlngDate for Non-job-connected Dlsabl11ty Request . c. Robert Housholder-5et Hearing Date for Job-connected Disability Reque'st. " . d." DIscussion of Pension Changes (PendIng City/Union Agreement) , 7. Director's Reports. 8~ ' CommIttee Membe~s to be Heard., 9. Adjournment. .' '. .., ! ;', " ..," \ . 1'. . ,. ,. , . ,. RIchard Ebelke .. ,. In~e~m Secretary, PensIon AdvIsory Committee. , .: . , 'i . .,' , " " : ". " . ~ :.' ~ ". . " . . . .0 ,. " c' ~ '/'J '. , c, " ,'c, ;'. ,4 .\ ,. I, > ; _"L ;:J'.:' 'I',.:':'.' ,. I ;~i:~~.;}.>/:,,; .::;';;:)1.' ': .. ... . . ,.'.. ,. .:'{:.',i;:, ~..:;:', ",.' .'.,' l: , . . , ' .. i. ~ . ~,' : I 1 , ' . . . "I' '1 t . ;...~ . . 'I".~:;'\ ,;".,.. ': ... I".\~''':' :.:....~. ".( ',. ~ ,"",,;':: : . (:"'I'~': .',.,',," . .... , ...r. .;' !~.:~ ...... . ".,.'.::.":.'.~',.' , .:'~ .', :.....'.' .:.'~.~': . ~ ., . . ~lI, : .. {~L) .~ " PENSION ADVISORY COMMITTEE MEETING CITY OF CLEARWATER July 11, 2002 Present: Whitney Gray . Hoyt P. Hamilton John Lee . .. . John Schmalzbauer Tom Jensen . Joseph Egger Frank Hibbard Acting Chair/Commissioner Committee Member/Commissioner Committee Member Committee Member Committee Member Committee Member Absent: Committee Member/Commissioner Also Present: Richard Ebelke . Scott Christiansen Margie Simmons Brenda Moses Interim Human Resources Director Pension Advisory Committee Attorney Finance Director Board Reporter . The Acting Chair called the meeting to order at 9:00 a.m. at City Hall.. To provide continuity for. research, items are in agenda order although not . ~ecessarily discussed in that order. . Pension Advisory Committee Attorney Scott Christiansen said a seventh member was elected at the last PAC (Pension Advisory Committee) meeting. Finance Director Margie Simmons has raised the issue that the seventh member might not be able to be a City e~ployee. .' Since that meeting, Ms. Simmons has researcned City Code. Section 2.063, Qualification and Appointment of Members, provides some exceptions to the Code regarding the prohibition of City employees being appointed to membership on a City board. Section . 2.063 states that no employee of the City shall be appointed membership on a board of the City. That section also provides exceptions to those rules. One of the exceptions is that the Pension Fund Advisory Committee member shall be "elected" as provided in Section 2.3952. Three members, currently in PAC seats, are City employees who were elected by a majority of the employees as required. Mr. Christiansen said that exception does not apply to the seventh PAC member seat. The Code also states the seventh member shall be "appointed" by a majority vote of the other six members of the PAC. This language indicates that an employee is not permitted to sit in the seventh seat. . It was remarked that the PAC by majority vote, elected to appoint the seventh member. Mr. .Christiansen said there could be two potential arguments with respect to whether or not the seventh member was appointed or elected. Discussion ensued and Mr. Christiansen said he would review other sections of the Code and discuss this issue with the City Attorney. In response to a question, he said as long as actions taken today by the PAC result in a majority vote, the seventh member's vote would not be an Issue. mpac0702 7/11/02 1 )~ , Ms. Simm'ons said the City Manager has indicated to her that he expects her to continue to bring information and issues to his attention, to the PAC, and to the Board of Trustees. She is not questioning the seve,nth member's abilities or qualifications or the PAC's decision~making abilities. She said she would continue to bring forward items that could potentially be considered unpopular or could lead to misinterpretation. . It was remarked that staff often acts in an advisory capacity providing information to City administration, advisory boards, and Commissioners regarding items that require additional clarification~ Ms. Simmons said af~er reading Section 2.063 of the Code regarding the seventh .' member on Friday evening, she called Mr. Christiansen's office on Monday morning. She also has c.ontacted the City Attorney regarding the matter. ' , Discussion ensued regarding Ms. Simmons' role on the PAC. She said as Finance Director for the City, she is the Treasurer for the Pension Plan. The Ordinance states ~hat the. Finance Director of the City shall be the Treasurer for the Board of Trustees. She said her comments were made' as support .staff to the PAC. Mr. Christiansen said he would report back to the PAC regarding Ms. SimmonsJ role. , ITEM #2. - Selection of Chair and Vice~Chair Consensus was as one. Member was absent, selection of a Chair and Vice~Chair should' be continued to the next meeting. I . ,..c. '"1,. L . .'1, :\; .:....:.t"...... ". .', .~ I .... ':,l .' Of, .; (-\Ll~t . ~IWJ ITEM #3 - Aooroval of Minutes of June 13. 2002 Member Hamilton moved to approve the minutes of the regular meeting of June 13, . 2002, as recorded and submitted in written summation to each board member. The motion , was duly seconded and carried unanimously. ITEM #4 - Employees to be heard , . Steven Sarnoff said the union is celebrating its 25th anniversary representing employees of Clearwater. He congratulated Member Lee for his re-election to the PAC. He expressed his disappointment over the failure of the City and the union to reach an agreement on the Pension Plan negotiations. ITEM #5 - Action Items a. Approval of New Hires as Plan Members: As of July 3, 2002, the City had 1720.02 out of 1834.7 budgeted positions. . Member Jensen moved to accept these employees into membership in the Pension Plan: iU mpac0702, 2 7/11/02 , , ' , . I"'.. , : ~ .) ., . C~, u Name. Job. Class. & Deot./Div. David Prior, GIS Tech.lPolice Brian'Swartz, Firefighter/Fire Jada McCree, Accounting Clerk/Police Merlene Taggart, Police Information Tech. I/Police Corrine 8el1o, Dev. Review Tech. I/Parks & Ree. Eric Matherly, Parks Service Tech. IIParks & Rec. Karen Helm, Custodial Worker/Parks & Rec. Jose Correa, Parks Service Tech. lIParks & Rec. ,Shanno.n FondawJ Filed Service Rap/Customer Svc. Corinne Wells; Ind. Pretreatment Tech.lPub. Utilities Thomas Coffey, Gas Tech. I/Gas . Fernando Rodriguez-Lamberty, Sr. Audito.r/lnt. Audit George Shaub, Ind. Pret~atment Tech.lPub. Utilities Jon Russell, Gas Tech. I/Gas Jar:nes Robinson, Parks Svc. Tech. [/Parks & Rec. .. . Stephen Holwerda, Sr: Marine Life Guard/Mar. & Avia. Dennis Aponte, Mtce. Worker II/Police Michael Schrantz, Sr. Electrician/Parks & Rec. ITEM #6 - Pendina/New Business Hire Date 5/20/02 , 6/3/02 6/3/02 6/3/02 6/3/02 6/3/02 6/3/02 6/3/02 6/17/02 6/17/02 6/17/02 6/17/02 6/17/02 6/17/02 6/17/02 6/1/02 7/1/02 7/1/02 Pension Elig. Date 5/20/02 6/3/02 6/3/02 ,6/3102 6/3102 6/3/02 6/3/02 6/3/02 6/17/02 6/17/02 6/17/02 6/17/02 6/17/02 6/17/02 6/17102' 6/1/02 7/1/02 7/1/02 7/11/02 a. Edward Kutta - Hearing on Job-connected Disability Request , . Mr. Christiansen reviewed the PAC's procedure for handling disability claims and the criteria for granting them. He said his job is to collect applicable records and advise the PAC on legal issues involved with each claim. He said the burden of proof regarding the disability claim is on the claimant. Mr. Edward Kutta has been employed with the City since 1995, with 7 years of service. His claim results from an accident that occurred In 1997. While on the back of a City truck, the truck moved causing Mr. Kutta to run into the cab, injuring him. He is on Worker's , Compensation pay. The City feels he is permanently and totally disabled. Mr. Kutta has several medical problems. The main problem Is that he has had hip replacement surgery and chronic back pain., A pre-employment physical in 1985 indicated he was witl,in normal limits .with respect to his spine and other extremities. None of his other conditions at that time impact today.s hearing. . In 19'97, Mr. Kutta had an MRI. Mr. Christiansen said medical records indicate Mr. Kutta is not capable of gainful employment. The functional capacity evaluation also indicates that Mr. Kutta would, have difficulty functioning at a sedentary job level. ' ., '. Steven Sarnoff, CWA (Communication Workers of America) representative, said Mr. Kutta operated equipment with no suspension or ergonomics. Mr. Kutta was continuously bounced around on the job while working on the beach. The City has replaced the equipment to minimize injuries to employees. However. the conditions Mr. Kutta experienced affected his recovery and ability to gain full functional capacity. mpac0702 3 . - !: . .: :' ~ '1' , . . . ',oj . I! I . , . ~~: \ '., ~ \ " ~ ~ '. 'j,. ~"I:"'\ ,:: I,. ". ~ ,I' .~j~!" ~''':~'..I'~',':: .~.' f). ,t'- M''<.'),\. l, .~ ...,."t"~rl"t w . In response,to a question, Mr. Christiansen said the City has accepted Mr. Kulta's Worker's Compensation claim for permanent and total disability benefits. Interim Human Resources Director Richard Ebelke said the City Is not contesting the disability claim. Member Schmalzbauer moved that Edward Kutta be granted a job~connected disability pension. The motion was duly. seconded and carried unanimously. b. Steven Palmer - Set Hearing Date for Non-job connected Disability Request AND C. Robert Housholder - Set Hearing Date for Job-connected Disability Request Discussion ensued regarding changing the regularly scheduled August 8, 20021 PAC meeting to include time to review a non-job connected disability request for Steven Palmer and . a job~connected disability request for Robert Housholder. . Consensus was to change the August 8,2002, meeting to August 2,2002, at 9:00 a.m, d. . . Discussion of Pension Changes (Pending City/Union Agreement) One person expressed concern about failed Pension Plan negotiations. Interim Human Resources Director Richard Ebelke said after 11 negotiations sessions between the City and the union, there was some movement and some agreement. The Cit'y's aC?tuary analyzed various proposals and iterations. No final. agreement was completed before , the specified timeframe. He explained the process that was required to ensure the final product was placed on the November ballot. Mr. Ebelke said he sent a letter to all union presidents last week stating that negotiations are ongoing and meetings would continue, however, the November timefram.~ would not be met. . In response to a question, Mr. Christiansen said the summary dated June 21, 2002, that he provided to the PAC regarding Pension Plan changes does not replace the initial Pension Plan document. In response to a question, Ms. Simmons said the proposed revision for the Board of Trustees would not involve actuarial costs, but if the change in the composition of the Board of Trustees caused the Board to change the way it operates, i.e. hiring Trustee staff versus City staff, a cost could be incurred. . One member reviewed his CC1f1cerns regarding the Board of Trustees information that . was distributed at the last meeting. He remarked that the Trustees are receiving secondhand information from the Investment Committee. He felt the process needs to be improved. . It was remarked the CommissIon is elected by citizens to make prudent use of tax . dollars. They often rely on advisory committees for information prio~ to maldng decisions. In response to a question, Mr. Christiansen said he inadvertently left off one pollee officer positron In the summary document provided to the PAC regarding the composition of the Board ot"Trustees. mpac0702 4 7/11/02 .0' ITEM #7 - Director's Reports The.lnves.tment Committee and the Plan's advisors recommend the addition of a "small cap value" style mana.ger to better diversify the investments. This diversification will reduce the risk to the Pension Plan while increasing the probability of a higher rate of return. For the 12-month period ending March 31, 2002, the Employees Pension Plan had a rate of return of 2.14% versus a custom benchmark of 2.08%: . On the equity side, common stocks are defined by the market size of a company Into three main categories. The market sized being defined as the numbers of shares of common stock multiplied by the market price per share. Generally defined large capitalization (cap) stocks are those with a market value of $15 billion and higher. Mid cap stocks with a value of $1 to $15 billion. Sma!! cap stock has a market value under $1 billion. Over time,.the sector with the highest historical rate of return is the small cap value sector. One of the reasons for this is that the5~ stocks are generally not followed or understood by "Wall Streetll. When Wall Street starts to follow these stocks the value of the stock tends to incr,ease. Most companies start out as smaller companies and become larger. Finding these . small cap companies requires more work and research than finding larger companies and thus the fees tend to be higher. However i~ this cas~, the higher fees result in a higher rate of return. At March 31, 2002, the plan had investments with a market value of $443.8 million. Three .breakdowns of the investment styles are. as follows: v . mpac0702 . 6 7/11/02 .t.!{,1 t~;~) ~. ..1. , Domestic Large Cap Value 23% Domestic Large Cap Growth 11 % Domestic Mid ,Cap Growth 18% International Large Value 4% International Large Growth 4% Fixed Income 40% Total 100% Large Cap Stocks Mid Cap Stocks Fixed.lncome Total 42% 18% 40% 1000;0 Value Stocks Growth Stocks , 27% 33% Fixed incorn'e Total 40% 100% The cost 'of committee member travels to investigate/research the top ranked firm (5) is estimated at $3,500. The actual amount will be affected by the location of the investment . manager(s) and the number of firms that need to be researched. The Investment Committee and the plan's advisors recommend the addition of a "small . cap value" style manager to better diversify ~he Investments. This diversification w;1I reduce the risk to the pension plan while increasing the probability of a higher rate of return. . The City contracts with Callan & Associates to provide performance measurement and to provide information on Investment managers.. ). .. . . . .; ~.o . ..:'. ',' ", ':':.. ....,... .:. ~..' .:......r...'~'.. :.~,...., ,1\, '.','"....... ',.'.-:. :..'..t '4.'" ../~.,'.:',.". ~,' :;.,.":', . :! ,~: " " ~ "'I'. .... i > "\' " f"'J1\ . ..:: \i1,.~1 . :.' "\. J. ........, . I , . Callan's fee for the search will be $25,000. .By directing investment trades through a selected broker, the Bank of New York, pays Callan's fees. Our money managers use this selected broker only If they cannot get better execution someplace else, Staff will bring back the results of the small cap value manager search in the fall. Member Jensen moved to recommend that staff to conduct a search for a "small . . capitalization value equity" style manager for the Employees Pension Fund, authorize Callan & . Associates to assist with the search, authorize the cost of the search, Including staff travel of approximately $3,500.and Callan's fee of $25,000 to be paid from the pension fund. The motion was duly seconded and carried unanimously. .. PriceWaterhouseCoopers is the Employees' Pension Plan actuary. A contract was approved on November 13, 2001 for a three-year contract ending 12/31/04 for a not to exceed > cC?st of $94,000. This contact included: . 1/1/02 Actuary Report . 1/1/03 Actuary Report 1/1/04 Actuary Report Actuary Assumption Study Miscellaneous Consulting $19,000 $19,500 $20,000 $20,000 $15.500 $94,000 Total In addition, a review has been underWay looking at some potential changes to the pension plan. On March 18, a $30,000 Increase to the contract was approved by the Trustees 'for a new not fa exceed amount of $124,000. This amount was to conduct an actuarial analysis .. on the cost of the following alternates: 1. Deferred Retirement Option (DROP) 2. "Opt In" option for excluded employees 3. Purchase of prior governmental service credit 4. Designation of beneficiary and joint pensioner option 5. Normal retirement conversion benefit 6. Disability presumption for "extra duty" assignments 7. Reemployment option . 8. Increase to cost of living adjustment (1.5% to 3%) . 9, Increase to benefit formula multiplier (2.75% to 3.5%) 10. Average final compensation calculation (high 5 to high 3) The $30,000 included a formal impact statement for the State for any changes implemented. . All of the above changes were analyzed and annual costs were provided. After these costs were provided, additional services related to potential plan changes were necessary including: . . Preparation of exhibits for presentation including $ 2,960 mpac0702 7/11/02 6 ..". . I ~ .t, 'I .:. . .). . t.. .. tr ".' ~r. ': , . , '; \ . . ~ :'1 ;': : ':' l '. .' . : :". ". , , , ~ :::; .' ',', ,. ,~,,~. . . ' C. ~ '< .", .. , , .,. . "" ", ~ . "\-', ' ,l ~:: .' .! '. . ~. ~~. >, . ~ " T" . t' 1 .: ' . . ,'. ' ". ~..~; .' .~X'? ',' ',' . , , I ,q.' ~ .:;,' ',"', ". , }~fi::r .:' :.::' , . ~ ,.":. ' , . , DROP. normal form of retirement. etc., review of . presentation, attendance at . 5/17 employee meeting · Additional option (non- vested to leave contributions . in plan) . · Revising alternate 10 to 4% salary increases rather than 6%' $ 1,200 $ 1 .400 Sub-Total $ 5,560 " . Analyze multiple' $ 4,500 combinations of alternatives ' Total To Date $10,060 . I These additional costs, combined with any additional analysis required prior to the . resolution of potential plan changes will exhaust the amount already approved for miscellaneous. consulting over the three-year contract. This agenda item requests an additional $20,000 to ' ,. cover the $10,060 above plus any additional services needed directly related to potential plan changes.. , Member Lee moved to recommend approval of an increase in the amount authorized to be spent with PriceWaterhouseCoopers, LLP for actuarY and other related pension consulting. services by $20,000 for a not-to-exceed cost of $144,000 for the th~ee-year period ending December 31. 2004. The motion was duly seconded and carried unanjmou~ly. . Ms. Si.mmons reported the Pension Investment Committee meetin.g Is scheduled for August 8, 2002, at 10:00 a.m. ITEM #8 - Committee Members to be heard .Member Lee thanked tlie employees for re-electing him to the PAC. . He requested the Form 1 financial disclosuri3 forms be provided. Mr. Christiansen said the Supervisor of. ' Elections should already have 'sent them to each Board member. There is a fine for late filing of .forms. ' , ITEM #9 - Adiournment . .The meeting adjourned at 10:37 a.m. . f!lg,;Ja.. 'mo~ Board Reporter mpac0702 7/11/02 7