05/08/2003
PENSION ADVISORY COMMITTEE MEETING
CITY OF CLEARWATER
May 8, 2003
Present: Whitney Gray Chair/Commissioner
John Lee Vice-Chair
Hoyt P. Hamilton Committee Member/Commissioner
Frank Hibbard Committee Member/Commissioner
Nathan Hightower Committee Member
John Schmalzbauer Committee Member
Absent: Tom Jensen Committee Member
Also Present: Joe Roseto Human Resources Director
Jay Ravins Assistant Finance Director
Leslie Dougall-Sides Assistant City Attorney ? arrived 9:08 a.m.
Brenda Moses Board Reporter
The 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
necessarily discussed in that order.
ITEM #2 ? Approval of minutes of March 13, 2003, and April 10, 2003
Member Hightower moved to approve the minutes of the Pension Advisory & Trustee
meeting of March 13, 2003, as submitted in written summation to each board member. The
motioncarried
was duly seconded and unanimously.
Member Hamilton moved to approve the regular Pension Advisory Committee meeting
minutes of April 10, 2003, as submitted in written summation to each board member. The
motioncarried
was duly seconded and unanimously.
ITEM #3 ? Employees to be heard ? None.
ITEM #4 ? Action Items:
a. Review and Action on Employee Requests for Years of Service Pensions:
1. Charles Howard, Police
2. John Hodgden, Solid Waste
Member Hibbard moved to approve Years of Service Pensions for Charles Howard and
motioncarried
John Hodgden. The was duly seconded and unanimously.
b. Review and Action on Employee Requests to Vest Pensions:
1. Elizabeth Garrett, Police
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Member Hightower moved to approve a request to vest pension for Elizabeth Garrett.
motioncarried
The was duly seconded and unanimously.
c. Approval of New Hires as Plan Members:
As of April 24, 2003, the City had 1752.36 FTEs out of 1844.9 budgeted positions.
Member Hibbard moved to accept the following employees into membership in the
Pension Plan:
Pension Elig.
Name, Job. Class, & Dept./Div. Hire Date Date
Deborah Lemon, Recreation Leader/Parks & Rec. 4/15/02 3/22/03
Jeffery Schmitt, Solid Waste Worker/Sd. Wste 3/24/03 3/24/03
Joseph Miller, Custodial Worker/Parks & Rec. 3/24/03 3/24/03
Kimberly Miller, Neighborhood Services Coordinator/Dev. Ser. 3/29/03 3/29/03
John Sever, Field Service Representative/Customer Service 4/7/03 4/7/03
Christoph auf dem Kampe, Utilities Chemist/Public Utilities 4/7/03 4/7/03
Kari Connor, Accounting Clerk/Gas 4/7/03 4/7/03
Felicia Leonard, Pedestrian-Bicycle Coordinator/Parks & Rec. 4/7/03 4/7/03
Floyd Thurman, Mechanic II/Solid Wate/General Services 5/19/00 3/25/03 *
Ronald Gideon, Risk Management Specialist/Finance 3/24/03 3/24/03
Christopher Jenkins, Recreation Leader/Parks & Rec. 3/24/03 3/24/03
Michael Reynolds, Senior Planner/Planning 3/24/03 3/24/03
Clifford Fisher, Police Recruit/Police 3/24/03 3/24/03
Mark R. Coffin, Custodial Worker/Parks & Rec. 4/8/02 4/7/03 **
Lisa Hobin, Senior Payroll Technician/Finance 4/21/03 4/21/03
Dimitrios Tsoustas, Solid Waste Worker/Gen. Svcs./Sd. Wste 4/21/03 4/21/03
Robert Fegley, Custodial Worker/Parks & Rec. 4/21/03 4/21/03
Zane Morris, Recreation Programmer/Parks & Rec. 4/21/03 4/21/03
Sharon McAuley, Police Information Technician/Police 4/7/03 4/7/03
Eddie Marry, Solid Waste Worker/General Services/Sd. Wste 4/21/03 4/21/03
Michael Olsa, WWTP Operator Trainee/Public Utilities 4/21/03 4/21/03
*Floyd Thurman originally hired in 2000; resigned and withdrew pension contributions;
rescinded resignation on 3/25/03.
**Mark R. Coffin originally hired as part-time; transferred to full-time and pension eligible
as of 4/7/03.
motioncarried
The was duly seconded and unanimously.
ITEM #5 ? Pending/New Business
a. Annual Actuary Report
Assistant Finance Director Jay Ravins said the annual actuary report dated January 1,
2003, determines the City?s fiscal 2004 budget requirements for the pension plan. He said this
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is the third consecutive year of poor stock performance. As a result, the City?s five-year rolling
average which is used to smooth the investment performance, dropped from a positive 7.4%
last year to a negative 1.85% this year. As a result, there is an actuarily-required contribution of
approximately $7.2 million or 11% of covered salaries. The difference between the 11%
required contribution and the City?s minimum contribution of 7% of covered salaries can be
funded from the City?s credit balance, which has accumulated to $25 million. That will allow the
City to continue to budget at the 7% level for fiscal 2004. The five-year average has resulted in
a gap between the actual value of the plan?s assets and the actuarily calculated value or rolling
5-year average, which is $80 million. With current conditions, barring any major upturn in the
market, staff anticipates that the $80 million would deplete the credit balance within the next
three to five years. In response to a question, Mr. Ravins said he was unaware of any state
requirements to fund the $80 million gap within the next four years. He said as long as the City
continues to fund the actuarily-required amount on an annual basis, the Pension plan is in
compliance with state statutes. Mr. Ravins said the $80 million figure is the difference between
the actual value of assets and the actuarial value calculated per the five-year rolling average.
This actuarial value is capped at 120% of the actual value of the assets and has reached this
cap in the current year. Therefore, if future years of poor performance occur, the City would be
forced to take most or all of the ?hit? in that current year as the actuarial value cap has been
reached. In response to a question, Mr. Ravins confirmed that the ?hit? the City took would
have to be funded from the General Fund. . Mr. Ravins said the 8% contribution from
employees, which remains constant, and the 11% contribution this year from the City is needed
to keep the pension plan whole. The City always is required per ordinance to contribute a
minimum of 7%, however this year it is contributing 11%.
In response to a question, Mr. Ravins said the $232,000 in expense savings came from
a decrease in professional fees paid to money management firms.
motion
Member Schmalzbauer moved to accept the actuary report as drafted. The was
carried
duly seconded and unanimously.
ITEM #6 - Director?s Report
Human Resources Director Joe Roseto said the IME (Independent Medical
Examination) report received on Police Officer James Heinz, was not available in time to
distribute the information to the board for this meeting. Mr. Heinz has exhausted all sick leave
and is using vacation leave time. Within the next two days, Mr. Heinz will have depleted all
paid leave and go into a no pay status. He has sufficient employment to apply for a length of
service retirement, however he has chosen to apply for a disability retirement.
Discussion ensued regarding scheduling a special meeting to hear Mr. Heinz?s disability
case. Consensus was to re-schedule the regular meeting of June 12, 2003 to June 3, 2003 at
8:30 a.m. in Chambers.
Cash & Investments Manager Steve Moskun gave a presentation on the Employee?s
Pension Plan performance and plans for the future. The goal is to maintain diversity to avoid
negative results and to maximum earnings. Mr. Moskun said some of the current investment
restrictions are limited to 65% of equities on a cost basis and 10% of a manager?s position
invested in any one company. Mr. Moskun reviewed: 1) definitions of stocks including value
stocks, peer ranking; 2) consultants; 3) change to Northern Trust Bank regarding securities; 4)
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search for a small and mid-cap fund manager; and 5) an RFP (Request for Proposal) for a
performance measurement consultant.
In response to a question, Mr. Moskun said Callan & Associates advises staff of
benchmarks, where the plan should be in future, its performance, and changes in
management with respect to money managers. Concern was expressed about the time it has
taken staff to react to Sirach?s performance. Mr. Moskun said until this last quarter, staff felt
that Sirach might have been able to turn around their performance. Staff is performing a
search for a new fixed income manager to replace Sirach. In response to a question, Mr.
Moskun said the only issue related to de-funding Sirach immediately is where to place those
funds taken away from Sirach. He said Sirach could be terminated today if the Pension
Trustees approve that action.
In response to a question, Mr. Moskun said the search for a money manager takes
time, as it involves Callan screening potential managers and making a recommendation of six
managers, interviewing potential firms, researching their performance, discussing the final
results, making recommendations to the PAC and Trustees, and awaiting a decision by the
Trustees. The entire process normally involves a nine-month period. Staff always tries to
expedite the process.
Discussion ensued regarding where the funds taken from Sirach should be allocated.
Member Hibbard moved to recommend to the Trustees that the Sirach funds be moved
into an indexed Lehman Aggregate fund.
Member Hightower moved to amend the motion to state that Sirach be de-funded
immediately and that the funds allocated to Sirach be moved into an indexed Lehman
Aggregate fund.
motion
Member Hibbard agreed to amend his motion. The was duly seconded.
Concern was expressed that staff has not recommended that Sirach immediately be
de-funded. In response to a question, Mr. Moskun said he would discuss Member Hibbard?s
motion to de-fund Sirach at today?s Investment Committee meeting and distribute the
Investment Committee?s decision/recommendation regarding the matter to the PAC and the
Trustees no later than tomorrow. It was suggested that a policy be developed and
implemented regarding the amount of time required before de-funding a money manager. Mr.
Moskun said although there is no written policy regarding a timeframe for de-funding a money
manager, staff regularly reviews money managers? performances. Sometimes a manager?s
results improve and sometimes they do not.
Upon the vote being taken, Members Hamilton, Hibbard, Hightower, and
carried
Schmalzbauer, and Chair Gray voted ?aye?; Member Lee voted ?nay?. Motion .
ITEM #7 - Committee Members to be heard
In response to a question from Member Lee, Mr. Roseto said the Trustees will be
reviewing a request to approve funding for a new attorney firm chosen by the PAC to represent
the PAC. There will be a transition period between the current firm and the new firm. The new
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firm also will meet with staff. The firm of Christiansen & Dehner, P.A. will continue to serve the
PAC, including Police Officer Heinz?s case, until the new firm is on board.
Mr. Schmalzbauer said he would meet with Mr. Roseto regarding a proposal to amend
the current procedure in the Pension Plan that only permits a vested employee who dies to
receive one survivorship option. Mr. Roseto said he could not dictate to unions that they
should submit their own proposals, however, he said it would be a good idea if the unions met
regarding the matter. Member Schmalzbauer said he would be more comfortable first meeting
with Mr. Roseto and sending a proposal to each union to start discussions on the topic. It was
suggested that the proposal include a revocable decision option in the event that a family
status changes between the time the employee becomes vested and the time of divorce or
other subsequent occurrence. In response to a question, Mr. Roseto said any proposal put
forth regarding this matter would come before this board.
ITEM #8 - Adjournment
The meeting adjourned at 9:44 a.m.
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