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03/13/2003 PENSION ADVISORY & TRUSTEE MEETING CITY OF CLEARWATER March 13, 2003 Present: Brian Aungst Pension Trustees Chair/Mayor-Commissioner Whitney Gray Pension Trustees Vice-Chair/Trustee & Pension Advisory Committee Acting Chair/Commissioner Hoyt Hamilton Pension Trustee & Pension Advisory Committee Member/Commissioner Frank Hibbard Pension Trustee & Pension Advisory Committee Member/Commissioner William C. Jonson Pension Trustee/Commissioner John Lee Pension Advisory Committee Member Tom Jensen Pension Advisory Committee Member Nathan Hightower Pension Advisory Committee Member John Schmalzbauer Pension Advisory Committee Member Also Present: Joe Roseto Human Resources Director Margie Simmons Finance Director Debbie Ford Human Resources Analyst Brenda Moses Board Reporter The Pension Advisory Committee Acting Chair called the meeting to order at 9:21 a.m. at City Hall. To provide continuity for research, items are in agenda order although not necessarily discussed in that order. ITEM #2 – Oral Presentations by Pension Attorneys Finance Director Margie Simmons reviewed the process for the RFP’s (Requests for Proposal) for a new PAC (Pension Advisory Committee) and Trustees (Pension Trustees) Attorney. Ms. Simmons said Christiansen & Dehner, P.A. have chosen not to respond since they do not perform litigation work. The three respondents, Klausner & Kaufman, P.A., Ronald J. Cohen, P.A., and Sugarman & Susskind, P.A., will give presentations to the PAC and Pension Trustees, and answer five questions prepared by staff: QUESTION #1: The Clearwater Employees’ Pension Plan is governed by two groups: a) The Pension Advisory Committee (currently composed of three members of the Commission, three employees, and one citizen) has certain responsibilities, such as making recommendations to the Trustees for changes in the Plan and making a final determination on disability pensions. b) The Pension Trustees (composed of five members of the City Commission) have final authority and control over the administration of the plan. Have you ever represented a plan that is governed in this or a similar manner? Pension Advisory & Trustees 2003-0313 1 3/13/03 QUESTION #2: If you have not already done so, please tell us some of your current clients that are similar to the Clearwater Employees’ Pension Plan. QUESTION #3: Does your firm represent other interests such as unions or employee groups? If so, do you believe that there are potential conflicts that would result from that representation? QUESTION #4: If you have not already covered this, how does your firm bill for its services, including hourly rate, travel time, and expenses, and is a flat fee available? QUESTION #5: If your firm is selected, who from your firm will be doing the representation and have you had an experience with teleconferencing (as opposed to attending meetings in person)? Also, does your firm have expertise with tax issues and will it be able to handle tax issues for the Plan, including social security, IRS, etc.? Staff requested the PAC and Trustees rank the firms and at the end of the presentations and provide direction to staff regarding authorization to negotiate a contract with the top ranked firm. Should negotiations fail with the top ranked firm, staff would like the ability to negotiate with the firm ranked second and if necessary, the firm ranked third. Copies of the RFPs, the three proposals submitted by each firm, a ranking sheet to assist board members in ranking firms during interviews, and a list of five questions being posed to each firm were provided. a. Klausner & Kaufman, P.A. Robert D. Klausner and Stu Kaufman, Klausner & Kaufman, P.A., reviewed their backgrounds, experience, qualifications, and philosophy. Mr. Klausner said his is the only firm of the three firms interviewing today that represents only public retirement plans. He said he and Mr. Kaufman have read the City’s Pension Plan meeting minutes from the last year and a half to familiarize themselves with Clearwater’s issues and concerns. He said it appears that cost is the major issue. He felt the attorney for the PAC would not need to attend every meeting, as teleconferencing and the use of e-mails and facsimiles is just as effective and saves money. He said his job is not to make decisions for the PAC and Trustees but to assess the legal consequences of their decisions and provide counseling services. His firm also offers both litigation and counseling services. Mr. Klausner cited a case in which he said he was lead counsel for a small pension fund in Palm Beach County. He said he was instrumental in overturning a circuit court judge’s ruling regarding a law governing police retirement plans. He said his firm believes in proper planning and being proactive regarding pension issues and cost effectiveness. He complimented the City for being proactive regarding commission recapture. Mr. Klausner said his firm is the only one that provides a free annual educational conference for its clients. His firm is hosting a two and a half day conference the end of this month in Ft. Lauderdale. His firm provides the speakers and the educational materials. Transportation and hotel are the responsibility of the attendee. This conference is for clients only and a way to give back to the community by supporting education. Mr. Kaufman quoted his hourly rate including fees for travel and expenses. The fee for all services would be billed at $250/per hour. The fee is computed on an hourly basis in one Pension Advisory & Trustees 2003-0313 2 3/13/03 tenth-hour increments, other than the special project fee. All billing is by line item and with detail. His firm does not charge for faxes, long distance telephone or regular postage. Copying charges are billed at the rate of $.25 per page and overnight mail costs are billed as incurred. Travel time for meetings would be billed at a flat rate of $250 for travel time, plus costs for airfare and car rental. He approximates the charges for airfare and rental car at $200. At the board’s option, a fixed rate retainer for all services except disability hearings and litigation can be set. He felt it would only be necessary to attend meetings on a quarterly basis unless unexpected issues arise. After a period of time of approximately six months, a retainer agreement could be negotiated. It would be difficult to determine a retainer fee until both parties have the opportunity to work together. Mr. Klausner responded to the five questions prepared by staff. Questions #1 and #2: Mr. Klausner said for the past 18 years, he has represented the Jacksonville, Florida Police and Fire pension plan and General Employees’ Plan, which is governed similarly to Clearwater’s Pension Plan. He also has represented Lincoln, Nebraska’s Police and Fire Plan. It was remarked that Clearwater also has an Investment Committee that reviews investments quarterly. In response to a question, Mr. Klausner said his firm represents a number of large statewide systems that have investment committees. He said he routinely advises those committee as well. He said the firm either attends by teleconference or in person. It was remarked that over the last two years, the average length of PAC meetings are 65 minutes per meeting; the Trustees is nine minutes per meeting; and the Investment Committee is four to six hours quarterly. Mr. Klausner said it is common that the Investment Committee meetings would be longer, especially during trying economic times. He said his firm’s responsibility is not to tell Clearwater where to put its money, but to provide fiduciary guidance in terms of legal due diligence. Question #3: Mr. Klausner said his firm does not represent other interests such as unions or employee groups. He has been asked on occasion by governments and unions to advise them on pension matters, but his firm does not engage in collective bargaining, grievances, arbitration, or unfair labor practices. In response to a question, Mr. Klausner said it has been six years since he has provided collective bargaining services. He said began practicing as an Assistant City Attorney for Miami, Florida. He was a Police Legal Advisor, became involved in labor relations, and worked on union matters for a number of years. He found as the pension practice grew, he saw potential conflicts trying to provide services both unions and governments. Question #4: Ms. Simmons said Mr. Klausner already answered this question. Question #5: Pension Advisory & Trustees 2003-0313 3 3/13/03 Mr. Klausner said he and Mr. Kaufman would represent the PAC and Trustees, but only one of them would attend meetings. His firm advises both state and local governments regarding tax issues and has experience dealing directly with the IRS (Internal Revenue Service) and with Congress on tax issues. He has been a consultant to both houses of Congress on federal regulation of state and local government plans. In response to a question, Mr. Klausner said after his proposal was submitted, more thought was given to the size and complexity of Clearwater’s pension plan. He has determined that he or Mr. Kaufman would attend meetings and his associate Adam Levinson would only be involved in research. In response to a question, Mr. Klausner said all the clients listed in his proposal are current clients. He said his firm provides different services to each of them. He said approximately half of the out-of-state clients are represented on a daily basis; the other half consult with his firm on an occasional basis. His firm is general counsel for all of the clients in Florida. The police and fire clients listed are all participants in the Chapter 175 and 185, Florida Statutes, plans. In response to a question, Mr. Klausner said after reviewing Clearwater’s pension plan meeting minutes, he noticed a substantial increase the number of disabilities. He also said it appears that the pension plan is a fairly well written, comprehensive, readable, and understandable working document with no glaring errors. He recommended that the recent 2002 tax amendments be added to the plan. Ms. Simmons said they already have been added to the plan. Mr. Klausner said the primary struggle of the plan has to do with the economy. In response to a question, Mr. Klausner said his firm brings to the table three people with experience that he personally trained. None of them are engaged in labor relations. His firm is the only national practice interviewing today. His is the only firm providing the national in-house educational program. Mr. Klausner said there is no other firm that does more pension plan work than does his firm. b. Ronald J. Cohen, P.A. Ronald J. Cohen, P.A. said he felt as his proposal has been submitted in writing, his time would best be spent explaining what he could accomplish for Clearwater. He reviewed his credentials and philosophy. He said his role is to provide proactive fiduciary advice to the PAC and Trustees. His firm keeps abreast of current regulations and emerging trends to ensure his clients have the tools to do their jobs. He is the general counsel of the FPPTA (Florida Public Pension Trustees Association). He has litigated many cases concerning Chapters 175 and 185, Florida Statutes, which apply to fire or police plans. He said the attorneys in his firm have extensive backgrounds in government law, labor, and employment law. He said as he feels continuity is a vital component in advisor services, he would represent the PAC and Trustees at meetings. His firm has developed an extensive legal research indexing system. He reviewed his associate, Jose J. Arrojo’s credentials and discussed examples of his firm’s work. Question #1: Pension Advisory & Trustees 2003-0313 4 3/13/03 Mr. Cohen said he has not represented a pension plan that is governed in the same manner as Clearwater’s, although Key West’s Utility Board may be the most similar. Their elected utility board is composed of five members elected by citizens of Key West. The council members sit on the General Employees’ Pension Fund board in addition to 13 Trustees. He also served as attorney to the council on special pension matters for Sanibel, Florida. He rewrote their insurance contract as well as a plan that would create a Board of Trustees. Question #2: Mr. Cohen said although he does not represent the Coral Gables, Florida pension plan, which is the same as Clearwater’s plan for police and fire, he does represent the Coral Gables Police Officers Share Plan. Question #3: Mr. Cohen said his firm represents three employee groups: 1) FOP (Fraternal Order of Police) in Miami; 2) FOP in Miami Beach; and 3) General Employees in Miami. He said it is not a conflict of interest to represent those three employee groups, as he does not represent the State or National FOP and he is not involved in lobbying union issues. He is involved in local issues in those cities. He said he currently does not represent employee groups in Clearwater and would not do so should he be selected to represent the PAC and Trustees. He said although his firm represents the police union in Miami, he is repeatedly hired by the City Commission in Miami to represent the interests of their employees. Mr. Cohen said he is not and never has been a cause lawyer. He maintains the highest degree of loyalty to his clients. He said although permitted by law, he would not represent a union and a pension fund in the same municipality. Question #4: Mr. Cohen said until he becomes familiar with the PAC and Trustees’ needs, he could not anticipate the number of hours to represent them. He said the hourly rate to perform all legal services for the plan is $200/hour for attorney time and $75/hour for paralegal time. The firm would charge one hour’s travel time for each round trip to a meeting. He estimates total costs per trip of $130 for a round-trip plane ticket and $50/day for car rental. His firm would cover the costs for travel. If an overnight stay were required, his firm would bill the Plan for the government rate. In response to a question, Mr. Cohen said he could fly from Ft. Lauderdale to Tampa the morning of a meeting unless unforeseen circumstances occur. He proposed a second option of a flat rate of $1,800/month for up to ten hours of attorney work. For work in excess of ten hours per month, the firm would charge the hourly rate of $200. The same proposal for travel time would apply. He prefers to implement a flat rate after first spending time on the job. A charge of $.15 per page for copying and costs for actual postage would apply. There would be no charge for incoming and outgoing faxes. Question #5: Pension Advisory & Trustees 2003-0313 5 3/13/03 Mr. Cohen said he personally would represent the PAC and Trustees. He said he is experienced with teleconferencing, but not videoconferencing. He also is experienced with tax issues. In response to a question, Mr. Cohen said his proposal includes a complete list of clients. He said he performs a significant amount of commercial litigation and constitutional litigation for private clients. In June 2003, he will be board certified in labor and employment law by the Florida Bar Board of Legal Specialization and Education. In response to a question, Mr. Cohen said he was a partner in the law firm of Klausner & Kaufman, P.A. for ten years. He left the firm due to a difference in philosophy. He said he and Mr. Klausner have been practicing for approximately the same number of years. He said although his tenure at Mr. Klausner’s law firm was enjoyable, he felt each client should have one attorney to ensure continuity at meetings. He said he and Mr. Klausner remain friends today. In response to a question, Ms. Simmons said last year was not typical due to union negotiations, pension plan changes, and increased disability cases. She said last year, the City paid approximately $70,000 - $80,000 to the current pension attorney. She said in most years, the average cost was $20,000 - $25,000/year. Until four years ago, the City used the services of an in-house attorney for administration of disability cases. The meeting recessed from 10:25 to 10:30 a.m. c. Sugarman and Susskind, P.A. Robert A. Sugarman, Sugarman & Susskind, P.A., said he felt his six-member law firm was better equipped to service a fund of Clearwater’s size. He reviewed his firm’s credentials. He said his firm’s responsibility is to protect its clients in a fiduciary capacity. Mr. Sugarman said as Senior Partner of the firm, he would attend all PAC and Trustees meetings unless ill or in court and also would provide litigation services if needed. He said if selected, he would review all the City’s policies, procedures, ordinances, forms, and manuals to learn the way Clearwater does business and propose changes when needed. His firm’s approach is to be proactive and ensure the pension plan works in the best manner possible. His firm is recommending an annual educational conference. Should the City find that the five conferences currently being offered are insufficient for its needs, his firm would offer a custom made conference that would include other municipalities. Mr. Sugarman said his firm could review and handle disability cases. Comprehensive booklets are compiled with all pertinent information regarding the case. His office would obtain all necessary related documents, consent forms, schedule IME’s (Independent Medical Examinations), etc., as well as handle any related litigation. Progress reports also would be a part of the process. Mr. Sugarman discussed examples of his firm’s work. Associate David Robinson reviewed his credentials which included ERISA and pension fund experience. Associate Kenneth Harrison reviewed his credentials. He said approximately 70% of his time is spent working with public pension clients. He said he would attend meetings should Robert Sugarman be unavailable. Pension Advisory & Trustees 2003-0313 6 3/13/03 Question #1: Mr. Sugarman said his firm has no experience representing pension plans that are exactly like Clearwater’s, however Boca Raton’s Police & Fire Pension fund is very similar, as that city also has an Investment Committee. In response to a question, he said he does not generally attend the Investment Committee meetings, but has participated in one session that pertained to the legality of venture capital, etc. Question #2: Mr. Sugarman said his firm has extensive experience with general employees’ plans. Cocoa Beach, Naples, Tamarac and Lake Worth, Florida are some of his clients listed in the proposal. Question #3: Mr. Sugarman said his firm represents labor unions, however he has no public employee union clients in this part of Florida. The closest one is in Collier County. He represents the Orlando based United Food and Commercial Workers Union in this area. He said his representation is not a conflict, as unions want improvements in the pension code, and a pension board cannot give them those improvements. He said should his firm be selected, he would not represent any City employee groups, unions, or anyone else who would take any adverse action against the City. In response to a question, Mr. Sugarman said there is clear law stating there is no conflict for a union member to serve as a Trustee. Question #4: Mr. Sugarman said he prefers a flat retainer fee of $2,750 - $3,000/month based upon how his firm could package monthly client meetings in this area. Travel time is included in the retainer fee. He said he rarely bills outside the retainer amount, as it is comprehensive. The hourly fee would be $275/hour. Question #5: Mr. Sugarman said he personally would attend PAC and Trustee meetings. He has experience with teleconferencing and with the IRS. Mr. Sugarman said that Associate Kenneth Harrison was one of the founders of the FPPTA. In the past year, all three presenters in attendance from his firm today were selected by the FPPTA to speak at various functions. He said he would be proud to represent the City and wants the City to be proud of his firm as well. ITEM #3 – Ranking of Firms In response to a question, City Attorney Pam Akin said all three firms are highly qualified and she would have no problem working with any of them. She said she is not concerned that more than one attorney would attend meetings, as that was the case with Christiansen & Dehner, P.A. Pension Advisory & Trustees 2003-0313 7 3/13/03 In response to a question, Ms. Simmons said staff needs direction as to which meetings the PAC and Trustees feel the attorney should attend, which meetings can be handled via teleconferencing, and if it is preferred the newly hired attorney should attend meetings for six months to become familiar with the City’s pension plan and operations. Discussion ensued and it was remarked that this RFP process for a pension plan attorney was initiated due to the need for cost savings. A comment was made that the search also was to ensure due diligence. Ms. Simmons said the RFP did not eliminate any firm unless they chose not to respond or were not able to provide the services required. Discussion ensued regarding the qualifications of each firm and information provided in their presentations. Committee members ranked each firm and the reasons for their choices. Human Resources Director Joe Roseto said that since there are cost concerns regarding the attorney fees, it might be possible to bring some of the administrative tasks in- house. ITEM #4 – Approve Ranking and Authorize Negotiating a Contract PAC members cast and calculated their votes. Klausner and Kaufman, P.A. received the most votes. Member Hightower moved to recommend to the Trustees that the Trustees authorize staff to negotiate with the firms in the following order: 1) Klausner and Kaufman, P.A.; 2) motion Ronald J. Cohen, P.A.; and 3) Sugarman & Susskind, P.A. The was duly seconded. Upon the vote being taken, PAC Members Jensen, Hamilton, Hibbard, and Hightower, and carried Acting Chair Gray voted “aye”; Members Lee and Schmalzbauer voted “nay”. Motion . Trustee Jonson moved approve the PAC’s recommendation (stated above). The motioncarried was duly seconded and unanimously by the Trustees. ITEM #5 - Adjournment The meeting adjourned at 11:42 a.m. Pension Advisory & Trustees 2003-0313 8 3/13/03