Police & Fire Pension

POLICE & FIRE PENSION BOARD MEETING DATE: April 20, 2015 CITY HALL, ROOM 112 TIME: 10:00 A.M. Present: Doug Bagwell, Gail Budrow-Bradstreet, Stan Chubinski John Hausman and Joe Newman. Absent: None. Also Present: Dori Drayton of Plante Moran Financial Advisors (PMFA); Linda Morrison, Finance and Revenue Services Director. Chair Newman asked for approval of the agenda. Motion Chubinski, seconded Budrow- Bradstreet to approve the agenda. On a voice vote, motion carried. Minutes of the regular meeting of March 16, 2015 were presented. Motion Hausman, seconded Bagwell to approve the minutes as presented. On a voice vote, motion carried. A summary of assets prepared by Comerica Bank was presented. As of 3/31/15 the market value of our portfolio was $134,503,938, a loss of $368,101 since 2/28/15. As of today the market value of our portfolio is $134,407,006, presently an additional loss of $96,932 since the 3/31/15 month end. Motion Hausman, seconded Chubinski to accept the financial report as submitted. On a voice vote, motion carried. Board Reports Bagwell – none. Budrow-Bradstreet:  New hires: Police Department – Jonathon Kilbourn on 4/13/15.  Retiree Ralph Shulters (fire fighter) died 3/15/15; his spouse, Elsie will receive 60% surviving spouse benefits. The gross pay for March was pro-rated for the 15 days of Ralph’s gross benefit ($1,089.02) and 16 days for Elsie ($696.97).  Nothing back from retiree Ed Jacobs yet. Will call to find out the status.  The FAC changes related to the Dept. of Labor and Fair Labor Standards Board are back from GRS. All but two look good. Calculations for retro pay have been made, awaiting second review. Working with Comerica for the retro pay and appropriate deductions for those contributing to the health trust. GRS billing for the process will be paid by the city of Battle Creek ($1,830). Chubinski – none. Hausman – none. Newman – none. Old Business FAC Policy Review: still working on it. Five-Year Experience Study discussion of results and recommendation. PMFA is part of the independent advisors group of Callan and Associates. PMFA did a projection similar to Gabriel Police & Fire Pension Board April 20, 2015 Page 2 of 2 - Official Roeder Smith and Company (GRS), which is a hybrid of Callan and PMFA. Callan is a very large consultant for pension plans such as ours. GRS used 20 year projection. PMFA hybrid is a 10- year projection. They evaluate current markets and risk/return correlation. Following are the themes explored in setting the 2015 expectations:  Asset classes appear fairly valued or overpriced right now;  Yields, interest rates fell in 2014 so yield position for U.S. is positive;  Non-us markets are poised for a rebound but not much and not for very long. 2015 Capital Market expectations – return & risk: provided summary from 2015 to 2024 organized by asset class; inflation rate is 2.25% Equities look good, slightly over 7% but fixed income average is low with a 10-yr mean for a 50/50 balanced portfolio at 5.9%. The 10-year mean for a moderate portfolio is projected to be 6.6%. Motion Hausman, seconded Bagwell to accept Alternate 1 as presented by Gabriel Roeder Smith and Company which accepts the decrement changes, adjusts wage inflation from 4.5% to 4.25% and the investment return from 7.0% to 6.75%. On a voice vote, motion carried. Hausman would like to the Board to review the asset allocation. PMFA will provide an optimization analysis at the next meeting to help with the analysis. New Business Dori Drayton from PMFA updated the Board. The market perspective showed earnings in Europe are expected to rebound. As of 3/31/15 fixed income has done well except for global credit. The equity market shows an improved yield for the MSCI EAFE (international funds). As of 3/31/15 the time weighted returns net of fees is up 1.9%, outpacing the benchmark slightly. Next month Wells will be replaced by Boston Company and reflected on the portfolio performance. The time weighted fiscal year to date return through 4/10/15 is 4.99%; annualized that is 6.99%. The time weighted calendar year return is 2.99%; annualized that is 11.36%. Asset allocation shows we are running low on cash. PMFA proposed raising $2.5 million by selling large cap stocks. Public Comment – Linda Morrison, Finance & Revenue Services Director, spoke with City Manager Fleury regarding the recommendations to lower the rate of return and the impact it has on the required contribution. MERS rates are still in the 8% range. Morrison will share PMFA’s presentation with Fleury. Morrison understands the Board’s decision to follow the recommendations from GRS and PMFA. Next regular meeting: Monday, May 18, 2015 at 10:00 a.m. Meeting adjourned at 10:55 a.m. Respectfully submitted, Gail Budrow-Bradstreet, Secretary __________________________________ _________________________________ Board Member signature Board Member signature