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07/15/2002 (2) .. ~', . ~ . '. . 1 " '..' . ",' . l' I .'.. . . " \.. . . .' I.. ~ ' . ". I. .": ,. .. '. ~ I.' . I" .:. : . .' , ,,' , :j \ . , . I, '. ' . .' , "'.c' .l .' , , ' .' e" . ., ; 1 , " , " " , ' , ;, " . , ~. i. t'". . 'J.c , " > . -t, ' \' , . , ' , ,c I :,'1 ,\ : ~ . \ I >. '. . , ',' , .., "." . <".; +- .. ,~h'_ , ~..... ~ ' . '. . .. pc" '\ .,. ,+'. .1,... . ....., . , , , . " , ' " , o ',' I' ~ + : " ' " :" ............. . , ~ , ~ . '...+.:'.1., j ... I "', '.' . ~ ~ )'" " , ~ : I :c, .,1, " '. !. ',. ' ,;. '~ ' , '1 I , ;:;':,"..,. """u,u, PENSION J.C . '. ~ i:"" " , I .~ ~ >:1 D . ~: >. . > . . ',":,',,: '!,"',,',','.'.,' '(TRUSTEES) :y';,r.::,: ' " , 1. '" ,:;',':,\', . ::. ' ;'lloard 'of Tr~stees,of the Employees' , "'::,,:,:,, ,'."','. Pension Fund ~~.;',; c, >! >.1 c' I .".. ., "<.' ~":" ';, ,.,,' Minutes , , c' , \ , , , , " , t I I" , " : ',,: >~:?'\ '," ,.~ ", ' , ';'fJ.>,.. . , , ;'," ";riate 07//5 /O~ , , I' " " , .\ . ." " ,.' ','" .' 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":' ..i ~..'~ . , , , I ..! \;' : .r') '. ., '.,"-' ACTION AGENDA, Board of Trustees of the Employees' Pension Fund .. , July 15. 2002 ~ 9:00 a.m, ' ' ,f. Call to Order - 9:05 a.m. '2. ' . Approval of Minutes: . 06/17/02 - Approved .: '" . , . 3. ,Request for, acceptance Into membership: Delaney Mulholland, Joanne Bunton, Mary . ' , ... Anne Fetuuaho. Itay Seigel. Theresa Irby. Jim Hallos, Joey Sprecher, Debey David. " : " Juan' Santos~ Brent- Peters. Alex Rakita. Simon George, Christopher Vamls, Daniel Holcomb, John Klinefelter. Anthony, GomIllion. Kevin White. ~ Approved 4. " ,Regul~r ,Pension to be gra'nted:Benjamin Sturgis - Ap'pro~ed " \ :t ," " ' . '5. ,'. Pension to be vested: Donald Beckman - Approved " . 6.': '. Authorize,' staff to conduct a search for a Us mall 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. ~ Approved ' . . I " ~ > . .. .~ ~ " ' :' ." ',' 7. ,Approve 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 three-year period, ending December 31, 2004, - Approved ' "'0 <," . ; ",...1 , , 8.' ' Other Business.~ None '.. 9. Adjourn ~ 9:17 a.m. , . '" , . 'I. .. r. .' . ., , " . , . '; , .: I' . ~ ~ . ~ . . , "O~\'Q ,:". , . , " , I I " ) I .' .' 07-15~02 Pension Agenda' \ 1 'v " .:,'. . .~..I.; .'+.J....,...,' .~i".t..... l.,....~., .~:.r :.' ~ .::..'.!,./ '~'....!''''~ r' . .~.;. . /..' :.... .'/' .....~~ " '.~'~" ~~~'. ..,.\. I' ~. ,.'. " 1.:'. :'d .~ ~ , , ' ,0" ~. '. '/.' . TRUSTEES OF THE EMPLOYEES' PENSION,FUND MEETING CITY OF CLEARWATER , July 15, 2002 Present: Chair , , Vice-ChairlTrustee Trustee Trustee Trustee Brian Aungst Whitney Gray Hoyt Hamilton Frank Hibbard William C. JOI;son Also Present: William B. Horne II Pamela K. Akin 'Rick Ebelke ' Margie Simmons . Lee Dehner Cynthia E. Goudeau Brenda Moses City Manager City Attorney ; Interim Human Resources Director' Finance Director Pension Trustees Attorney City Clerk Board Reporter ' The Chair called the meeting to order at 9:05 a.m. at City Hall. To provide continuity for research, Items are in agenda order although not. necessarily discussed in that order. ' \ 1 I I , , ITEM #2 - Approval of Minutes: 6/17/02 Trustee Jonson moved to approve the minutes of the June 17,2002, meeting, as . recorded and submitted in written summation by the City Clerk to each Trustee. The motion was duly seconded and carried unanimously. ITEM #3 - Request far acceptance into membership: Request for the Pension Advisory Committee to approve membership for the employees listed below: ' , . Delaney Mulholland, Joanne Bunton, Mary Anne Fetuuaho. Itay Seigel. Theresa Irby, Jim Halios. Joey Sprecher. Debey David, Juan Santos.-Brent Peters, Alex Rakila, Simon George, Christopher Varnis, Daniel Holcomb, John Klinefelter, Anthony GamilHon, and Kevin' Wh~. " , Trustee Gray moved to accept the request for membership in the Employees' Pension Plan for Delaney Mulholland, Joanne Bunton. Mary Anne Fetuuaho, Ilay Seigel, Theresa Irby, Jim Halios. Jgey Sprecher, Debey ,David. Juan Santos, Brent Peters, Alex Rakita, Simon George. Christopher Vamis. Daniel Holcomb.. John Klinefelter, Anthony Gomillion, and Kevin White. . The motion was duly seconded and carried unanimously. ,mpf0702 ' 7/15/02 1 T. _.....,.... I~H.oJ.c.+...~ ~./.ll t..... .. ., ._I."}~ n'" _..<......\.........\.c..>...>.'......:lf'..\'.~t'H..~ ~. ',} ~ I, (N~ -...-;(# u ITEM #4 - Recular Penslon(sl to be Qranted: Benjamin Sturgis Benjamin Sturgis, Pollee Officer. Police Department, was employed by the City on March 27, 1974. and his pension service credit Is effective on October 7, 1974. His pension will be effective June 1, 2002. ' Based on an average salary of approximately $54.526 per year over the past five years, the formula for computing regular pensions, and Mr. Sturgis' selection of the 100% Joint & Survivor Annuity, this pension will approximate $40,493 annually. This pension was approved by the Pension Advisory Committee on June 13, 2002. Section 2.393 (p) provides for normal retirement eligibility when a participant has completed twenty years of credited service in a type of employment described as "hazardous duty" and further specifically defines service as a Police Officer as meeting the hazardous duty criteria. Mr. Sturgis qualifies under the hazardous duty criteria. Trustee Hamilton moved to approve the request for Benjamin Sturgis for regular pensions. The motion was duly seconded and carried unanimously. ITEM #5 - Pension to be vested: Donald Beckman Donald Beckman, Air Conditioning Technician, Solid Waste/General Services Department, was employed by the City on January 6.1986. Mr. Beckman terminated from City- employment on May 31.2002, The Employees' Pension Plan provides that should an employee cease to be an employee of the City of Clearwater after completing ten or more years of creditable service (pension participation), then such employee shall acquire a vested Interest in the retirement benefits. Vested pension payments commence on the first of the month following the month In which the employee normally would have been eligible for retirement. Section 2.393 (p) provides for normal retirement eligibility when a participant has reaclled age 55 and .completed twenty years of credited service, has completed 30 years of credited service, or has reached age 65 and completed ten years of credited service. Mr. Beckman would have completed twenty years of service and reached age 55 on January 6, 2006. His pension will be effective February 1. 2006. This pension was approved by the Pension Advisory Committee on June 13, 2002. Trustee Jonson moved to approve the request for a pension to be vested for Donald Beckman. The motion was duly seconded and carried unanimously, ITEM #6 - Authorize staff to conduct a search for a "small capitalization value ecultv" style manaqer for the Emplovees Pension Fund. authorize Callan & Associates to assist in the search. authorize the cost of the search. includinQ staff travel of approximatelY $3.500 and Callan's fee of $25.000 to be paid from the pension fund. 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 01.2.08%; mpf0702 2 7/15/02 ..I"'~ ~ ..tt,I"~.'.I" ~ .....~ ,~"':"I+ ,'~I..L ',..p.. .',~ ";:'4"" . 'I'.:..,".:" .~.! .... ,.~;_.. "',J, "I':'_~' :1.',.:"'.:"", .:. ':.~:'.~I:':"':::'.' ~:".t""",,!~."~"'.'..'t"'.' ...~J ~ 0' ......../ '~) . ">" . , 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, Small 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 these stocks are generally not followed or understood by "Wall Street". When Wall Street starts to follow these stocks the value of the stock tends to Increase. 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 in this caset 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: ' Domestic Large Cap Value Domestic Large Cap Growth Domestic Mid Cap Growth International Large Value International Large Growth Fixed Income Total 23% 11% 18% 4% 4% 40% 100% Large Cap Stocks Mid Cap Stocks Fixed Income Total 42% 18% 40% 100% Value Stocks Growth Stocks Fixed income Total 27% 33% 40% 100% The cost of committee member travels to investigate/research the top ranked firm(s) 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 the investments. This diversification will reduce the risk to the pension plan while Increasing the probability of a higher rate of return. The City contracts with Cal/an & Associates to provide performance measurement and to provide information on investment managers. Callan's fee for the search will be $25tOOO. By directing investment trades through a selected broker. the Bank of New York, pays Callan's fees. Our money managers use this se,lected 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. , In response to a question; Investment Manager Steve Moskun said $10 million would be . allocated to tl1e small cap value fund, Trustee Gray moved to authorize staff to conduct a search for a "small capitalization value equity" style manager for the Employees Pension Fund, authorize Callan & Associates to assist In the search, authorize the cost of the search, Including staff travel of approximately mpf0702 3 7/15/02 ~"I.'''~''.. ........':;.:::.....:.....:,,:, :-.", :'.', "." ':~ .:',( 1">+4":-~'::':',. ':0.; ;L.......~..r. ., .!....,.~. ,. 1,',''-';:'1'>'''''':.,' ..,' :.; t.J ()' o $3.500 and Callan1s fee of $25,000 to be paid from the pension fund. The motion was duly seconded and carried unanimously. ITEM #7 - Approve an increase In the amount authorized to be spent with PrlceWaterhouseCoopers, LLP for actuary and other related pension consulting services bv $20,000 for a notMto~exceed cost of $144,000 for the threeMvear period endlnQ December 31. 2004. " 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 cost 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-to-exceed amount of $124,000. This amount was to conduct an aduarial' analysis on the cost o~ 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 analyzec:f and annual' costs were provided. After these costs were provided. $10.060 in additional services related to potential plan changes were necessary. 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, In response to a question. Interim Human Resources Director Rich Ebelke suggested as no agreement has been finalized. t,he Special Pension Trustees meeting scheduled for July 19, mpf0792 7/15/02 4 I.; I ...,':~ I" : .~. '," 4 . I....' .,', ~. 'j'", :"',: ,~" ';' I ',: ......1,.,...., ,,' I.',,' ,'.', l'.",' ': ",'.. ...." ".'4:."~' '.,'.' ~ :~..~...: " I ,I l , , " .. ~~.i~....(/ '~::.l',l-;...~;"...'\,. .'1:(:""':" "~.\~'..".':' t*") " " " , ' 1i' ".. j , :.i ~ .. " "" " r,' I ',"'~8' ". . , ", ' :: > c " " , T':"C,:} ~ ' '~:1"~" ~"., ~ \ I . I ~. ~ ' , i , , . ,. 2002, be can'celled, Although no bargaIning sessions have been scheduledt negotiations are expected to continue. He said In order to have met the tlmellne to place pension changes on ' the November 2002 ballot, an agreement was to be reached and ratified by all 5 labor unions, presented to and approved by the PAC (PensIon Advisory Committee) last week, approved by , the Pension Trustees on July 19, and scheduled for first and second readings In August. The City Ifltends to move forward with language changes as required by Federal regulations. Those c~anges do not require a referendum. It was commented that it was ambitious to try to reach an agreement In time for the , November ballot.. Assistant City Manager Garry Brumback said the City Is focusing on the , '. operatioral, contract. In response to a question, Pension Trustees Attorney Lee Dehner said the current contract will rem~ln in effect until a new one Is ratified ' " " , ' Trustee Jonson moved to approve 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 three-year' period ending December 31 t ,2004. The' motion was duly seconded and carried unanimously. ITEM #8 - Other Business - None. ITEM #9 - Adlourn The meeting adjourned at 9:17 a.m. , Attest: ; . C~~~,~o.. ,Cital,erk ," ' , ' --: l " ' :' \ , , .. '. " ,', , . ' ~ l. . mpf0702 ',., , 7/15/02 5 ... "', , ~. . . I .' .', . .' ,".' :. '.,. ,> . ~', ',' ".,'. ...., , ~.' ,,:,..:".' '.,. . .~ ::, ..~. .' '. .