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08/18/2014 Pension Trustees Meeting Minutes August 18, 2014 City of Clearwater City Hall 112 S. Osceola Avenue Clearwater, FL 33756 e d s w r' �mu Meeting Minutes Monday, August 18, 2014 1 :00 PM Council Chambers Pension Trustees Page 1 City of Clearwater Pension Trustees Meeting Minutes August 18, 2014 Roll Call Present 4 - Chair George N. Cretekos, Trustee Doreen Hock-DiPolito, Trustee Bill Jonson, and Trustee Hoyt Hamilton Absent 1 - Trustee Jay E. Polglaze Also Present: William B. Horne 11 - City Manager, Jill S. Silverboard - Assistant City Manager, Rod Irwin - Assistant City Manager, Pamela K. Akin - City Attorney, Rosemarie Call - City Clerk, Nicole Sprague- Official Records and Legislative Services Coordinator To provide continuity for research, items are listed in agenda order although not necessarily discussed in that order. 1. Call To Order— Chair Cretekos The meeting was called to order at 1:05 p.m. at City Hall. 2. Approval of Minutes 2.1 Approve the minutes of the July 14, 2014 Pension Trustees meeting as submitted in written summation by the City Clerk. Trustee Jonson moved to approve the minutes of the July 14, 2014 Pension Trustees meeting as submitted in written summation by the City Clerk. The motion was duly seconded and carried unanimously. 3. Citizens to be Heard Regarding Items Not on the Agenda - None. 4. New Business Items 4.1 Approve the new hires for acceptance into the Pension Plan as listed. Pension Name, Job. Class, & Dept./Div. Elig. Date Page 2 City of Clearwater Pension Trustees Meeting Minutes August 18, 2014 Asia Crawley, Customer Service Rep, Customer Service Dept. 6/2/2014 Jodi Ward, Customer Service Rep, Customer Service Dept. 6/2/2014 Jennifer Moulton, Personnel Payroll Tech., Parks and Rec Dept. 6/2/2014 Jody Criswell, Water Distribution Oper. Trainee, Public Utilities Dept. 6/2/2014 Matthew D'Andrea, Water Distribution Oper.Trainee, Public Util Dept. 6/2/2014* Nicole Fairweather, Solid Waste Equipment Oper., SW/GS Dept. 6/16/2014 Rashard Young, Solid Waste Worker, SW/GS Department 6/16/2014 Brittney Nikles, Legal Staff Assistant, Legal Department 6/16/2014 Marina Kiriyeva, Senior Programmer, Information Tech. Dept. 6/16/2014 Timothy Simecek, Systems Analyst, Information Technology Dept. 6/16/2014 Kyle Brotherton, Planner II, Planning and Development Dept. 6/16/2014 Ryan Dilley, Field Service Representative, Customer Service Dept. 6/16/2014** Donna Cacciatore, Human Resources Analyst, Human Resources Dept 5/5/2014 Bryan Tingling, Solid Waste Worker, Solid Waste Department 5/5/2014*** Wayne Lindsey, Pool Guard, Parks and Recreation 5/17/2014**** Kyle Smith, Water Distribution Operator Trainee, Public Utilities Dept 5/19/2014 Ryan Washington, Solid Waste Worker, Solid Waste Department 5/19/2014***** lesha Walker, Customer Service Representative, Customer Svc Dept 5/19/2014 Paul Anderson, Water Distribution Operator Trainee, Public Utilities Dept 5/19/2014 Katie See, Planner III, Planning and Development Services 5/19/2014 *Matthew D'Andrea was hired as a seasonal employee from 03/06-09/06, rehired as a seasonal employee 05/02/13, then transferred to a full-time permanent position as of 06/02/2014 and will be eligible for the pension plan as of that date. **Ryan Dilley was hired into a temporary position as of 06/25/12, transferred to a permanent part time position as of 12/3/12 and into a full-time permanent position as of 06/16/2014; he will be eligible for pension as of that date. *** Bryan Tingling was hired as a temporary/emergency employee on 02/11/2014 and was transferred to a full time/permanent employee effective 05/05/2014; he will be eligible for the pension plan as of that date. ****Wayne Lindsey was hired as a seasonal employee on 04/03/2004 and transferred to a full time/permanent status effective 05/17/2014; he will be eligible for the pension plan as of that date. ***** Ryan Washington was hired as a temporary worker on 02/13/2014 and was hired as a full time/permanent employee effective 05/19/2014 and will be eligible for the pension plan as of that date. Trustee Hock-DiPolito moved to approve the new hires for acceptance into the Pension Plan as listed. The motion was duly seconded and carried unanimously. 4.2 Approve the following request of employees Richard Bennett, Engineering Department, Page 3 City of Clearwater Pension Trustees Meeting Minutes August 18, 2014 David Jackson, Fire Department, Ralph Rowe, Planning and Development Department, John Tierney, Solid Waste and General Services Department, Juan Torres, Police Department, and Dane Whitt, Gas Department for a regular pension as provided by Sections 2.416 and 2.424 of the Employees' Pension Plan. Richard Bennett, Construction Inspector II, Engineering Department, was employed by the City on July 26, 1982 and his pension service credit is effective on that date. His pension will be effective August 1, 2014. Based on an average salary of approximately $51,701.06 over the past five years, the formula for computing regular pensions and Mr. Bennett's selection of the 100% Joint and Survivor Annuity, this pension benefit will be approximately $44,358.12 annually. David Jackson, Firefighter Driver-Operator, Fire Department, was employed by the City on July 29, 1991 and his pension service credit is effective on that date. His pension will be effective August 1, 2014. Based on an average salary of approximately $59,979.95 over the past five years, the formula for computing regular pensions, Mr. Jackson's selection of the 50% Joint and Survivor Annuity with 20% partial lump sum distribution, this pension benefit will be approximately $30,921.48 annually. Ralph Rowe, Plans Examiner, Planning and Development Department, was employed by the City on February 3, 1986 and his pension service credit is effective on that date. His pension will be effective September 1, 2014. Based on an average salary of approximately $64,244.11 over the past five years, the formula for computing regular pensions and Mr. Rowe's selection of the 66 2/3% Joint and Survivor Annuity, this pension benefit will be approximately $50,867.64 annually. John Tierney, Warehouse Supervisor, Solid Waste General Services Department, was employed by the City on May 15, 1995 and his pension service credit is effective on that date. His pension will be effective July 1, 2014. Based on an average salary of approximately $60,374.41 over the past five years, the formula for computing regular pensions and Mr. Tierney's selection of the Single Life Annuity, this pension benefit will be approximately $31,743.84 annually. Juan Torres, Police Lieutenant, Police Department, was employed by the City on December 30, 1991 and his pension service credit is effective on that date. His pension will be effective October 1, 2014. Based on an average salary of approximately $92,231.93 over the past five years, the formula for computing regular pensions and Mr. Torres' selection of the 100% Joint and Survivor Annuity, this pension benefit will be approximately $56,610 annually. Dane Whitt, Gas Specialist, Gas Department, was employed by the City on April 16, 1984 and his pension service credit is effective on that date. His pension will be effective July 1, 2014. Based on an average salary of approximately $54,501.46 over the past five years, the formula for computing regular pensions and Mr. Whitt's selection of the Single Life Annuity with a 10% partial lump sum distribution, this pension benefit will be approximately $40,684.80 annually. Page 4 City of Clearwater Pension Trustees Meeting Minutes August 18, 2014 Section 2.416 provides for normal retirement eligibility for non-hazardous duty employees hired prior to the effective date of this reinstatement (January 1, 2013), a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of fifty-five years and completed twenty years of credited service; the date on which a participant has reached age sixty-five years and completed ten years of credited service; or the date on which a member has completed thirty years of service regardless of age. For non-hazardous duty employees hired on or after the effective date of this restatement, a member shall be eligible for retirement following the earlier of the date on which a participant has reached the age of sixty years and completed twenty-five years of credited service; or the date on which a participant has reached the age of sixty-five years and completed ten years of credited service. Mr. Rowe, Mr. Tierney, and Mr. Whitt have met the non-hazardous duty criteria. Section 2.416 provides for normal retirement eligibility for hazardous duty employees, a member shall be eligible for retirement following the earlier of the date on which the participant has completed twenty years of credited service regardless of age, or the date on which the participant has reached fifty-five years and completed ten years of credited service. Mr. Jackson and Mr. Torres have met the hazardous duty criteria. Trustee Hamilton moved to approve the following request of employees Richard Bennett, Engineering Department, David Jackson, Fire Department, Ralph Rowe, Planning and Development Department, John Tierney, Solid Waste and General Services Department, Juan Torres, Police Department, and Dane Whitt, Gas Department for a regular pension as provided by Sections 2.416 and 2.424 of the Employees' Pension Plan. The motion was duly seconded and carried unanimously. 4.3 Approve the Molpus Woodlands Fund IV subscription agreement and authorize the appropriate officials to execute same. In February of 2011 the trustees approved the pension plan hiring Molpus Woodlands Group as one of two timber managers. At that time the pension plan joined Molpus Woodlands Fund III (Molpus III). Molpus III is a closed end limited partnership IE the partnership has a life of eight to ten years. The funding period of Molpus III in now closed and no additional monies will be sent from the plan to Molpus III. Because of the exceptional performance of Molpus III the pension plan has already received significant cash distributions from Molpus III. The cash distributions and the funding that Molpus III did not utilize come to about two million dollars. The plan's other timber manager is Hancock Timber Resources Group. Hancock has just under one year left on their funding period. To date Page 5 City of Clearwater Pension Trustees Meeting Minutes August 18, 2014 Hancock has been funded with just over half the eight million allocated to Hancock has been utilized. It is unknown how much of the remaining funding Hancock will draw. The pension plan added the timber managers to dampen performance volatility. In assets classes such as timber there is a "J" curve effect on performance in that during the early years there is negative performance. The following is the performance of our two timber managers. Timber Performance One Year Inception Molpus 15.03% 4.78% Hancock 11.69% 9.22% Benchmark 9.78% NA To have a dampening effect on volatility the pension plan needs to have a continuing allocation to timber. Give the funding levels of the current timber allocations the pension investment committee considers it prudent to make a five million dollar allocation to Molpus IV the new fund for Molpus Woodlands Group. Molpus IV is in the final subscription phase. Five million dollars is the minimum in Molpus IV. Molpus IV is identical to Molpus III except for one item. Molpus IV allow for up to 20% leverage. This was added because of the current low interest rate environment where Molpus can borrow against timber land at a 3% rate while trees grow in value 8-12% a year. Molpus Woodlands Group charges an annual management fee of 100 basis points and an incentive fee of 15% on returns greater than 7%. Molpus also charges pass through fees for administration, accounting, acquisition, disposal, legal and harvest supervision. This fee structure is about average for this asset class. As always the pension investment committee is looking at the investment landscape and feels very strongly that now is an excellent time to invest in timber. Trustee Jonson moved to approve the Molpus Woodlands Fund IV subscription agreement and authorize the appropriate officials to execute same. The motion was duly seconded and carried unanimously. 4.4 Approve not-to-exceed expenditure of$13,000 to Gabriel Roeder Smith and Company for evaluation of a change in actuarial cost method and preparation of a formal funding policy, and authorize the appropriate officials to execute same. The implementation of Governmental Accounting Standards Board (GASB) Statement 68 in fiscal 2015 will require the City to use the entry age normal (EAN) actuarial cost method for the City's financial statements and related disclosures at year-end. Page 6 City of Clearwater Pension Trustees Meeting Minutes August 18, 2014 The plan currently uses the frozen entry-age (FEA) actuarial cost method for actuarial valuations used for funding of the plan. While implementation of GASB 68 will still allow the plan to use the FEA method for funding purposes (EAN only required for financial statements, not funding), it may be in the plan's best interests to use the same EAN method for both financial statements and funding. Staff recommends hiring the plan's actuary to evaluate the impact of changing from the FEA method to the EAN method. This would include ten-year projections for the plan under both the FEA and EAN methods. Additionally, the scope of work would include creation of a formal funding policy for the plan. The Government Finance Officers Association (GFOA) has recently published a best practice recommendation that"every state and local government that offers defined benefit pensions" formally adopt a funding policy. A formal funding policy documents key assumptions and methods, such as actuarial cost, asset smoothing, and amortization methods, and typically also defines how often demographic and economic assumptions should be re-evaluated. It essentially serves as a long term road map for the pension plan to help ensure that the cost of benefits will be funded in an equitable and sustainable manner. APPROPRIATION CODE AND AMOUNT: 0646-07410-530100-585-000-0000 $13,000.00 In response to questions, Finance Director Jay Ravins said the assumption changes previously approved by the Trustees did not implement the EAN method. Each year, the actuary has presented the actuary report on the old FEA method and presented information on the comparable EAN method. GASB recommends adopting a formal funding policy. The EAN method changes how the City's contribution is calculated. Efforts will be made to maintain conservative risks to obtain similar results. Trustee Hock-DiPolito moved to approve not-to-exceed expenditure of $13,000 to Gabriel Roeder Smith and Company for evaluation of a change in actuarial cost method and preparation of a formal funding policy, and authorize the appropriate officials to execute same. The motion was duly seconded and carried unanimously. Page 7 City of Clearwater Pension Trustees 5. Adjourn Attest City Clerk Meeting Minutes August 18, 2014 The meeting adjourned at 1 :16 p.m. City of Clearwater -c €,Qrlf (crekQ $ Chair Employees' Pension Plan Trustees Page 8