Pension Board of Trustees

AGENDA WILTON MANORS GENERAL EMPLOYEE & POLICE PENSION BOARD OF TRUSTEES REGULAR MEETING Tuesday March 5, 2019 COMMISSION CHAMBERS 5:30 PM I. PLEDGE OF ALLIGENCE II. CALL TO ORDER Ill. ROLL CALL IV. ADDITIONS/DELETIONS ~ COMMENTSFROMTHEP UBLIC Any member of the Public may speak on any issue for three (3) minutes VI. CONSENT AGENDA Items listed under Consent Agenda, Item VI , are viewed to be routine and One Motion will enact the recommendation in the form listed below. If discussion is desired, then the items(s) will be removed from the Consent Agenda and will be considered separately. Approval of Minutes: • December 4, 2018 Motion to Receive and File: Warrant 2018-029 • Hoekstra - Recording/Secretarial Services $987.50 Warrant 2018-030 • FPPTA Annual Membership Invoice #1352 $600.00 • FPPTA Annual CPPT Re-Certification Invoice #1353 $120.00 Warrant 2018-031 • KSDT & Co. Invoice #65518 $395.00 & #67888 $115.00 $510.00 Warrant 2018-032 • Klausner, Kaufman, Jensen & Levinson Invoice 11/29/18 $1 ,375.00 • FPPTA Registration Winter School $1 ,950.00 Warrant 2019-001 • International Foundation 2019 Dues Membership $1 ,050.00 Warrant 2019-002 • Garcia Hamilton & Associates Invoice #29921 $4,284.15 • Gabriel Roeder Smith & Co. Invoice #444433 $4,850.00 • Klausner Kaufman Jensen & Levinson Invoice 12/31/18 $500.00 • Southeastern Advisory Services quarter ending 12/31/18 $4,621 .67 Warrant 2019-003 • KSDT & Co. Invoice #69047 $100.00 Warrant 2019-004 • Trustees per diem- FPPTA Winter School $440.00 Warrant 2019-005 • Trustees expense reimbursement FPPTA Winter School $1 ,961 .38 Klausner Kaufman Jensen & Levinson, Attorney Invoice 1/31/19 0  • January 16, 2019- Refund Check #8929 FPPTA • 4018 Rate of Return is -8.98% Net of Fees • January 2019 - Klausner Memo House Bill 265 proposed • February 6,2019- Klausner Memo Data in the Division of Retirements Annual Report • Fiscal Year September 30, 2018 11 .10 Net of Fees • Garcia Hamilton & Associates OE 12/31/2018 • Saxena White 04 2018 Select Investor Monitoring Report VII. NEW BUSINESS VIII. OTHER BUSINESS • Gabriel Roeder Smith- Present Study (showing the effect of lowering investment return assumption) • Southeastern Advisory Services OE 12/31/2018 IX. JOAN WALL, ADMINISTRATOR X. ATTORNEY REPORT XI. REPORT FROM BOARD MEMBERS XII. ADJOURNMENT Pursuant to FS 286.015, if a person decides to appeal any decision made by the Board , agency or commission with respect to any matter considered at such meeting, or hearing, he/she will need a record of the proceedings and that, for such purposes, he/she may need to ensure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. ANY PERSON REQUIRING AUXILIARY AIDS AND SERVICES FOR THIS MEETING MAY CALL THE ADA COORDINATOR AT 390-2122 AT LEAST TWO WORKING DAYS PRIOR TO THE MEETING. IF YOU ARE HEARING OR SPEECH IMPAIRED, PLEASE CONTACT THE FLORIDA RELAY SERVICE BY USING THE FOLLOWING 2 PHONE NUMBERS: 1-800-995-8770 (VOICE) 1-800-955-8771 (TDD) POST: City Hall Bulletin City of Wilton Manors General Employee & Police Pension Board of Trustees Minutes December 4, 2018 I. Pledge of Allegiance II. Election of Board 2018-2020 Nomination of Chair Barbara Bihus made a motion to nominate Biagio Balistreri as Chair, seconded by George Farrell. Motion closed. Vote: Ayes: John Pilch, Brian Vodicka, George Farrell and Barbara Bihus. Nayes: None. Nomination of Vice-Chair Barbara Bihus made a motion to nominate George Farrell as Vice-Chair, seconded by Brian Vodicka. Motion closed . Vote: Ayes: George Farrell, John Pilch, Brian Vodicka and Barbara Bihus. Nayes: None. Nomination of Secretary George Farrell made a motion to nominate Barbara Bihus as Secretary, seconded by Brian Vodicka. Motion closed. Vote: Ayes: Biagio Balistreri, John Pilch, Brian Vodicka and George Farrell. Nayes: None. Ill. Call To Order Chairman Balistreri called the meeting of the Wilton Manors GE & Police Pension Board of Trustees to order at 4:45 p.m. IV. Roll Call Barbara Bihus, George Farrell, John Pilch, Brian Vodicka and Chairman Biagio Balistreri. Others Present: Joan Wall, Administrator and Bob Mays, Finance Director, Carol Conol, Finance Melissa Moskovitz, Actuary V. Additions/Deletions VI. Comments from the Public None Page 1 of 7 City of Wilton Manors GE & Police Pension Board of Trustees Minutes Page 2 of 7 December 4, 2018 VII. Consent Agenda Chairman Balistreri asked for a motion to approve the consent agenda and also asked if anyone wanted any item pulled from the Consent Agenda for further discussion and if not he would like a motion to approve the Consent Agenda. Minutes: September 4, 2018 Receive and File: Warrant 2018-022 • Hoekstra- Recording/Secretarial Services $1,000.00 Warrant 2018-023 • FPPTA School Registration $2,400.00 Warrant 2018-024 • FPPTA Fall School- Trustees Per Diem $ 816.00 Warrant 2018-025 • Klausner, Kaufman, Jensen & Levinson Invoice 8/31/2018 $1,275.00 Warrant 2018-026 • Gabriel Roeder Smith & Co. Invoice #441346 $4,600.00 Warrant 2018-027 • Garcia Hamilton & Associates Invoice #29602 $4,233.84 • Gabriel Roeder Smith & Co. Invoice #441987 $2,000.00 • Klausner Kaufman Jensen & Levinson Invoice 9/30/18 $ 650.00 • Southeastern Advisory Services quarter ending 9/30/18 $4,621.67 • NCPERS - Membership Renewal 2019 $ 250.00 Warrant 2018-028 • Trustees- Reimburse Hotel, tolls & fuel- FPPTA School $3,457.32 Klausner Kaufman Jensen & Levinson, Attorney Invoice 10/31/18 0 • 3018 Rate of Return is 4.40% Net of Fees • Fiscal Year September 30, 2018 11.10 Net of Fees • Garcia Hamilton & Associates QE 9/30/2018 • Saxena White Q3 2018 Select Investor Monitoring Report • September 5, 2018 e-mail to Region from John Small, Southeastern Advisory authorizing changes • September 7, 2018- Division of Retirement- Actuarial Valuations through October 1, 2016 • September 17, 2018 updated memo- Amendment 6 • Rita Sanz- Straight Life Annuity Benefit $2,221.29 monthly Trustee Farrell made a motion to approve the Consent Agenda, seconded by Trustee Bihus. Vote: Ayes: John Pilch, Brian Vodicka, Barbara Bihus, George Farrell and Biagio Balistreri. Nayes: None. City of Wilton Manors GE & Police Pension Board of Trustees Minutes Page 3 of 7 December 4. 2018 VIII. New Business November 26, 2018 letter- Finance Director's Recommendations Finance Director Bob Mays went over the recommendations in his letter with the Board. Bob Mays said he is making the following two recommendations to the board: 1. Further reduce the plan's assumed rate of return by 0.5%, in increments of 0.1% annually for the next 5 years, for the actuarial valuation year beginning October 1, 2018. October 1, 2018 6.9% October 1, 2019 6.8% October 1, 2020 6.7% October 1, 2021 6.6% October 1, 2022 6.5% 2. Change the amortization period for new bases so that it is frozen at 15 years. The amortization periods for existing bases will not change. They will continue to go down 1 year with each new year calculations. Only new bases would be amortized at 15 years, and the 15 year period would not change from year to year. Bob Mays believes that the combination of these to actions will have a positive effect on the future of the pension plan, while mitigating the immediate pressure on the City's budget. Bob said he recommends the board revisit this every year and no later than five (5) years Should the board look at the assume rate of return and the amortization period. Melissa from GRS said she agrees with Bob Mays and thinks Theora has agreed as well, that in particular the investment return assumption, lowering that assumption is a necessary step to help improve the funded ratio. Initially you will see a decrease in funded ratio because the liabilities will increase but over time the funded ratio should grow because the chances of meeting that return assumption will be greater and greater as we grade into the 6.5% return assumption. The amortization period they do not have a problem with new bases being amortized over 15 years. In the 10/1/17 actuarial valuation all new bases were amortized over 13 years or any existing bases that were ever amortized over longer periods were scheduled to go down to 12 with this actuarial valuation but 3 years is not really going to make that much of a difference in the cost and as Bob said will lessen the pain if there is a loss (i.e. liability loss) stretching it over a little bit longer period of time. If it were going from 13 to 30, then they would be concerned but 15 is a reasonable period. Attorney Levinson thanked Bob Mays for many reasons and said it was a pleasure working with him. It is not too often a finance director will come to the pension board asking to lower the investment return assumption, often the finance directors are trying to delay the board from doing this but here we have a proactive finance department, this is much appreciated. Attorney Levinson said a lot of information was given to the board and his proposal would be to invite the actuary back to the next pension board meeting, have her run the numbers and do a study. The board should have good communication not just with the current finance director, but with the incoming finance director. City of Wilton Manors GE & Police Pension Board of Trustees Minutes Page 4 of 7 December 4. 2018 Attorney Levinson asked Melissa to briefly explain: why is investment return important and why perhaps we recommend lowering the investment return assumption? Melissa said the City's required contribution is the normal cost of benefits accruing over the contribution year, just for one year and the amortization payment & interest that is the City's required contributions. The amortization payment is when there are fluctuations in the actuarial or the unfunded accrued liability which is the accrued liability minus the fund assets on a smooth value bases. Every year there will be gains and losses because the assumptions are never going to match what they are expecting 100%, so gains and losses are changes to the unfunded accrued liability that occur every year due to not meeting the actuarial assumptions, so a loss for example if the fund returned only 5% on a smooth value bases compared to the current assumption of 7% then you would have an investment loss and that would be amortized or be paid over 13 years as of the 10/1/2017 report. They are just looking at changing the 13 years to the 15 years. The other question was about the investment return assumption. This assumption and the mortality assumption are the two most important assumptions, they have the greatest effect on the liability and the greatest effect on how the contributions are made. The cost of the pension plan is the cost of the benefits whether you are paying more now less later or less now more later you are going to get an equivalent present value it's all the same it's just a matter of how you are dividing it up. The Florida Statutes requires that you take a look at your liabilities and any increases or decreases such as plan amendments. You don't want to be paying those over a period that's longer, 30 years is the maximum but for closed plans a shorter period of years would be more appropriate that is why we are down to 13 years right now. The investment return assumption is the assumption used to discount all your benefit payments. They project out what each member of the plan is going to be paid this year, next year, forever until the last member dies. All those cash flows are discounted back to today's dollar at the investment return assumption so if you are assuming that you're going to earn more on the assets then you're discounting by greater rate and the liability is lower. Another way to think of it is if you are assuming a higher investment return assumption then more of the contribution is going to come more from the investment return assumption meeting or exceeding that assumption. For example: Current assumption is 7%, if next year the investment return is 10% on smooth value basis then your relying less on your investment return assumption to cover the cost of the plan. The more interest you get the less principal you will pay. If you're assuming a higher investment return assumption then you're relying less on the city contributions because they made up for in the investment return assumption whether that investment return assumption is realistic is very important, because in years where you don't need that investment return assumption you will have to pay more anyway. The bottom line is the cost of the plan is a matter of when the amounts are paid. Chairman Balistreri asked if Melissa agreed wit~~ in the proposal and she said yes. Melissa said she did some very rough calculations and it looks like for every 10 basis points that you're reducing , so that 0.1% each year would increase the annual required contribution by roughly $50,000. City of Wilton Manors GE & Police Pension Board of Trustees Minutes Page 5 of 7 December 4, 2018 Trustee Farrell said as a trustee he has no problem setting the new assumption rate for the next fiscal year, he gets the idea of having an idea for the city's budget we would like you to keep it at 0.1 %, but we all know things change. The recommendation by the finance director, is a great recommendation. When we come back for the valuation the following year we can change it to whatever we want. Trustee Farrell said he would be more than happy to support if we put on the agenda at the next meeting to give the first year's recommendations to the actuary and run that valuation and when we get it back we can vote on that. As far as the letter itself, yes it should stay in the record but he is not sure he would vote on the actual letter itself to say we approve this. Chairman Balistreri asked if the board needs to accept this letter or is it already part of the minutes. Attorney Levinson said it is entirely up to the board. Attorney Levinson said the motion they should do is authorize the actuary and investment consultant a. Have any conversation with the city that is appropriate b. Prepare the numbers and any written recommendations from our professionals, we already received a recommendation from the city, but we need recommendations and numbers from the professionals so we will have everything and can vote at the next meeting . Melissa gave a brief statement about the next valuation and Attorney Levinson simplified what Melissa said. The actuary can bring the next valuation using that 6.9% and that methodology from the finance director and for some reason we decide not to accept the 6.9% it can always be changed . Attorney Levinson said if there are ways to do it economically rather than spending money on professional fees he agrees with that and he is deferring to the board and the professionals on what information is useful to bring in a cost efficient manner. Trustee Vodicka said he totally supports the letter and if the target investment return rate is 6.5%, he is just wonder how realistic that is. He was wondering if 10 basis points was enough or should we look at 15 basis points. He would propose to run numbers at 10 basis points and 15 basis points. 15 basis points would lower to 6.85% Attorney Levinson said these are things that can be looked at the next meeting . Right now we are at 7% and the goal is to get us to 6.5% in 10 basis points per year. There are boards that go down in larger increments, there is no right answer. There is no magic number because we don't know what the market is going to do. Attorney Levinson agrees going gradually, but it is not his decision. Bob Mays addressed the board again and said to think about doing this incrementally, the board has the power and authority to set the assumed rate of return at any number, the city has to be able to pay the contributions that is going to be required by the rates the board sets. The board's actions have a very, very strong effect on the city's budget and the taxes the residents pay. Mr. Mays said he encourages the board to take a gradual incremental approach and not go from 7% to 6.5% immediately, he hopes whatever decision is made it will be incrementally. Mr. Mays said he was glad the board was having this conversation . Trustee Farrell asked if the City was in agreement of this. Bob Mays said he had the approval of the City Manager to bring this to the board and she has discussed this with members of the city. City of Wilton Manors GE & Police Pension Board of Trustees Minutes Page 6 of? December 4. 2018 Attorney Levinson said his initial motion is to instruct the professionals to bring reporting 's, numbers & data that is useful to inform the conversation for the next meeting. Trustee Farrell made the motion to have the actuary bring back 10 basis points as well as the 15 basis points for the effect of financial status on the city as well as the plan's impact with the new amortization as well. Trustee Vodicka seconded the motion. Vote: Ayes: Trustees Bihus, Pilch, Vodicka, Farrell and Chair Balistreri. Nayes: None IX. Other Business 1. Southeastern Advisory Services Third Quarter- September 30, 2018 John Small was present to go over the 3rd quarter performance with the Board. • S&P 500 up 7.7% for the quarter, one year 17.9% • The EAFE Index 1.4% for the quarter, 2.7% for the one year • BbgBarc U.S. Aggregate 0.0% for the quarter, -1.2% for the one year • 91 Day Treasury Bills 0.5% for the quarter, 1.6% for the one year • CPI 0.2% for the quarter, 2.3% for the one year Portfolio Growth • All funds were positive for the quarter • $28,560,107 for the quarter ending 9/30/18 Performance Comparison Total Fund Analysis Terrific quarter- Third Quarter 4.4%/6th - 1 year 11.2%11 th Equity Analysis 3rd Quarter • Vanguard Russell1000 7.4%/45th one year number 17.7%/50th *Vanguard Russell1000 was funded on June 16, 2016 • Vanguard Mid Cap Value 3.1%/70th one year 9.5%/62nd *Vanguard Mid Cap Value was funded on June 14, 2016 • Eaton Vance SMID Cap 7.9%/13th, one year 23.4%/18th *Eaton Vance SMID Cap was funded on June 16, 2016 • Garcia Hamilton Fixed 0.2%/59th, one year 0.4% 7th • Vanguard Ultra Short Bond 0.6%/32nd , one year 1.6%/11 th *Vanguard Ultra Short Bond Fund was funded on June 12, 2017 Allocation of Assets for the Quarter Ending September 30, 2018 • Equity 64.3% -International 0.0%- Fixed Income 33.0%- Cash 2.7% City of Wilton Manors GE & Police Pension Board of Trustees Minutes Page 7 of 7 December 4. 2018 Objectives and Policy Review • The total rate of return should equal or exceed the Consumer Price Index plus 5% over a rolling three-year period. Achieved 9.9% • The total rate of return should rank in the top half of the Wilshire Cooperative Public Fund Universe over a rolling three year period. Not Achieved 57th • Each security class to exceed the appropriate selected unmanaged market index over a rolling three year period. • Garcia Hamilton - Fixed -Achieved 1.6% • Percentile Rank of Manager in Appropriate Universe Must Exceed the Median (50th percentile) • Garcia Hamilton Fixed Income -Achieved 7th • Percentile Rank of Manager in Appropriate Universe Must Place Within the Top Third (33 1/3 percentile). • Garcia Hamilton Fixed Income- Achieved 26th Asset Allocation - Actual - Quarter Ending 9/30/18 Equity- Within Range 63.3%- Fixed Income- Within Range 33.0%- Cash- Within Range 2.7% Everything within range and no violations of policy. Terrific quarter and year John said over the last 10 years, we averaged 7.19%. X. Joan Wall, Administrator XI. Attorney Report • RMLO (Records Management Liaison Officer) Attorney Levinson said they will get a form to our Administrator designating me (Judith Hoekstra). • Special Tax Rollover Notice- Will be given to retirees and they will need to sign on the back that they received the form. XII. Reports from Board Members XIII. Participant Section XIV. Adjournment Trustee Pilch made the motion to adjourn the meeting.