04/14/2003 (2)
", ,PENSION
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(TRUSTEES)
Board of Trustees of the Employees' ,
Pension Fund
Minutes
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OLf /''1 /03
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ACTION AGENDA - CLEARWATER PENSION TRUSTEES MEETING
Monday, April 14, 2003 - 1 :09 P.M. - Commission Chambers
ITEM #2 - Approval of Minutes - 3/17/02
ACTION: Minutes approved as submitted.
ITEM #3 - Request for Acceptance into Membership: Amy Mobley, Bennett Elbo, Edward
O'Neal, Jonathan Phillips, Bryan Elbell, Vance Peel, Marlene Torres, Judith LaCosse, Rebecca
Wikerson, Lana Beck, Brandi Portalatin, Thomas Jensen, Emilio Maldonado, Aleix Wells,
Matthew McCombs, Michelle Friedline, and Rafael Salazar.
ACTION: Approved
ITEM #4 - Requests fo'r Pension by Francis Mays, Eddie Lloyd, Danny West, Robert McKenna,
and Jerry Lovett.
ACTION,: Approved
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ITEM #5 - Approve the contract with Northern Trust (IendinQ agent) to provide securities lending
,'services for the Employee's Pension Plan.'
ACTION: Approved
ITEM #6 - Designate Maroie Simmons. Jay Ravins. and Steve Moskun as havino the ability to
'authorize the transfer of funds by Northern Trust. the plan custodian.
,ACTION: Approved
ITEM #7 - Other Business: - None.
ITEM #8 - Adiournment: 1 :14 p.m.
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Pension Trustees Action Agenda 2003-0414
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TRUSTEES OF THE EMPLOYEES' PENSION FUND MEETING
CITY OF CLEARWATER
April 14, 2003
Present:
Brian Aungst
Whitney Gray
Hoyt Hamilton
Frank Hibbard
William C. Jonson
Chair
Vice-ChairlTrustee
Trustee
Trustee
TrJstee
Also Present:
Garry Brumback
Pamela K. Akin
Rick Ebelke
Cynthia E. Goudeau
Patricia O. Sullivan
Assistant City Manager
City Attorney,
Assistant Human Resources Director
City Clerk
Board Reporter
The Chair called the meeting to order at 1 :09 p.m. at City Hall.
To provide continuity for research, items are in agenda order although not
necessarily discussed in that order.
ITEM #2 - Aporoval of Minutes:
Trustee Hibbard moved to approve the minutes of the March 17, 2003, 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 for Acceptance into Membership:
Assistant Human Resources Director Rick Ebelke presented the recommendation of the
, PAC (Pension Advisory Committee) to approve membership for employees: Amy Mobley,
Bennett Elba, Edward O'Neal, Jonathan Phillips. Bryan Elbell. Vance Peel, Marlene Torres,
Judith LaCosse. Rebecca Wikerson, Lana Beck, Brandi Portalatin, Thomas Jensen, Emilio
Maldonado, Aleix Wells. Matthew McCombs, Michelle Friedline, and Rafael Salazar.
Trustee Jonson moved to accept the recommendation of the Pen'sion Advisory
Committee. The motion was duly seconded and carried unanimously.
ITEM #4 - Regular Pensions to be granted
Mr. Ebelke presented the recommendation of the Pension Advisory Committee that
Francis Mays, Eddie Lloyd, Danny West, Robert McKenna, and Jerry Lovett be granted
regular pensions under Sections 2.393 and 2.397 of the Employees' Pension Plan.
Francis Mays. Gas Specialist, Gas Department, was employed on November 19. 1969,
and his pension service credit is effective on May 19, 1970. His pension will be effective March
1, 2003. Based on an average salary of approximately $43.992 per year over the past 5 years,
the formula for computing regular pensions, and Mr. Mays' selection of the 50% Joint &
Survivor Annuity, this pension will appro)(imate $41,064 annually.
Eddie Lloyd, Public Utilities Technician II, Public Utilities Department, was employed on
October 14, 1971, and his pension service credit is effective on April 14. 1972. His pension will
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be effective March 1, 2003. Based on an average salary of approximately $35.434 per year
over the past 5 years, the formula for computing regular pensions, and Mr. Lloyd's selection of
the Joint & Survivor Annuity, this pension will approximate $30.173 annually.
Danny West, Police Sergeant. Police Department, was employed on May 16, 1983, and
his pension service credit is effective on that date. His pension will be effective April 1 , 2003.
Based on an average salary of approximately $65,071 per year over the past 5 years, the
formula for computing regular pensions. and Mr. West's selection of the 100% Joint & Survivor
Annuity, this pension will approximate $35,001 annually.
Robert McKenna, Firefighter, Fire Department, was employed on October 11. 1976, and
his pension service credit is effective on that date. His pension will be effective March 1, 2003.
Based on an average salary of approximately $44,865 per year over the past 5 years, the
formula for computing regular pensions, and Mr. McKenna's selection of the Joint & Survivor
Annuity, this pension will approximate $32.493 annually.
Jerry Lovett, Firefighter, Fire Department, was employed on January 10, 1983, and his
pension service credit is effective on that date. His pension will be effective March 1, 2003.
Based on an average salary of approximately $45.527 per year over the past 5 years, the
formula for computing regular pensions. and Mr. Lovett's selection of the 66 2/30/0 Joint &
Survivor Annuity, this pension will approximate $25,541 annually.
The PAC approved pensions for Francis Mays, Eddie Lloyd, Danny West. Robert
McKenna, and Jerry Lovett on March 13,2003. Section 2.393 (p) provides for normal
retirement eligibility when a participant has completed 20 years of credited service in a type of
employment described as "hazardous duty" and further specifically defines services as a Police
Officer, Fire Lieutenant, and Fire Lieutenant'Rescue/Paramedic as meeting the hazardous duty
criteria. Section 2.393 (p) also provides for normal retirement eligibility when a participant has
reached age 55 and completed twenty years of credited service, has completed thirty years of
credited service, or has reached age 65 and completed ten years of credited service. Messrs.
Mays and Lloyd qualify under the 30 years of service criteria. Messrs. West, McKenna. and
Lovett qualify under the hazardous duty criteria.
Trustee Gray moved to grant regular pensions for Francis Mays, Eddie Lloyd. Danny
West, Robert McKenna, and Jerry Lovett under Sections 2.393 and 2.397 of the Employees'
Pension Plan, as approved by the Pension Advisory Committee. The motion was duly
seconded and carried unanimously.
ITEM #5 -Approve the contract with Northern Trust (Iendinq aqent) to provide securities lending
services for the Emplovee's Pension Plan.
Securities lending is the process where the owner of a security (stocks or bonds) loans
the security to a third party. The borrower benefits because they get the use of the security.
The owner of the security benefits through extra income. The lender/owner of the security
retains all economic benefits of the security except proxy voting. Securities lending has a long
history and very definitive regulations. For example. statutes give the lender the right to recall a
security at anytime. Regulations govern the behavior of all parties involved. Securities lending
is transparent to the Pension Plan's money manager and will have no effect on them or their
decision to buy or sell a security.
The main reason organizations borrow securities are: 1) to cover a settlement failure; 2)
to cover a short trading position; and 3) in a proxy fight. When securities are loaned, the
borrower provides collateral to the lending agent with a value of 1020/0 of the market value of
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the security being loaned. On a daily basis, the collateral is marked to the market value of the
security being loaned and adjusted, if needed. The vast majority of the time, the collateral is
cash. The lending agent (Northern Trust) invests the collateral at a rate higher than they are
paying the borrower. The additional earnings are split 700/0 Clearwater and 30% Northern
Trust.
Steps involved in securities lending between the lending agent (Northern Trust) and the
securities borrower: 1) loan initiated; 2) terms negotiated; interest rate borrower will receive for
collateral; 3} Lending Agent receives collateral; a) 95% time in cash and b) 1020/0 of market
value of security beIng lent; 4} security transferred to borrower; 5) daily mark to market on
collateral, constant 102% value; 6) security returned to Lending Agent; and 7) collateral
returned to borrower.
With securities lending, risks include: 1) Borrower Default - borrower fails to return
security on demand because of financial difficulty or bankruptcy. Plan protection is collateral of
1020/0 and Northern Trust will hold Plan harmless in case of borrower default: 2) Operational
Risk - Northern Trust fails to mark the collateral to 1020/0 on daily basis or fails to collect
income due: Northern Trust will hold Plan harmless in these cases; and 3) Collateral
Investment Risk - Failure to earn sufficient earnings on collateral to cover interest earned by
borrower. Staff will invest collateral through Northern Trust in specific investment options
provided by Northern Trust. When the terms of a security loan are being negotiated by
Northern Trust, they will know where the collateral is being invested and at what rate the
collateral will earn.
As part of the custodian RFQ (Request for Qualifications) process, staff asked the three
finalists to provide an estimate of what the Plan's portfolio (Plan's share of the earnings) would
have earned over the past year: 1) $132,4 10 - Northern Trust; 2) $68,500 - State Street; and
3) $83,354 - Bank of New York.
In addition to earnings. Northern Trust will reduce the custodial fee by $25,000 if
securities lending is approved.
It was stated the PAC had discussed this issue and unanimously supported it.
Trustee Hibbard moved to approve the contract with Northern Trust (lending agent) to
provide securities lending services for the Employee's Pension Plan, and that the appropriate
officials be authorized to execute same. The motion was duly seconded and carried
unanimously.
ITEM #6 - Designate Maroie Simmons. Jay Ravins. and Steve Moskun as havinq the ability to
authorize the transfer of funds by Northern Trust. the plan custodian.
Northern Trust. the plan custodian. has requested that the Trustees designate
individuals who have the ability to authorize Northern Trust to transfer funds. The transfer of
funds occurs when managers are hired or terminated, the portfolio is being rebalanced, or when
funds are needed to pay obligations of the plan. As an internal control function, two of the three
individuals will have to approve a transfer. The transfer of plan assets to Northern Trust
occurred on March 3, 2003.
It was,stated the PAC had discussed this issue and unanimously supported.it. It was
requested Pension Trustee items report PAC action.
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Trustee Hamilton moved to designate Margie Simmons, Jay Ravins, and Steve Moskun
as having the ability to authorize the transfer of funds by Northern Trust, the plan custodian.
The, motion was duly seconded and carried unanimously.
ITEM #7 - Other Business - None.
ITEM #8 - Adjournment
The meeting adjourned at 1:14 p.m.
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Pension Tru'stees 2003-0414
Chair
Empioyee's Pe
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