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HomeMy WebLinkAbout10-05-2018 Minutes Not Signed by ChairmanCITY OF SEBASTIAN POLICE PENSION BOARD MINUTES OF REGULAR QUARTERLY MEETING OCTOBER 5, 2018 1. Call to Order -- Chairman Jason Gillette called the meeting to order at 2:00 p.m. 2. Roll Call Present Board Members: Jason Gillette Christine Vicars Randy Moyer Paul Williamson Tim Wood Also Present Bonni Jensen, Klausner, Kaufman, Jensen & Levinson, Attorney for the Board of Trustees Ken Killgore, Plan Administrator Cynthia Watson, Human Resources Manager Grant McMurray, Highland Capital Management Peter Hapgood, Intercontinental Janet Graham, Technical Writer Courtney Grimmich 3. Approval of Minutes A. Regular Meeting of June 26, 2018 B. Briefing on August 28, 2018 on William Grimmich's Beneficiary Interest Motions to accept the Minutes of the two meetings listed above were made by Mr. Williamson and seconded by Mr. Moyer. Motions carried unanimously by voice vote. 4. Old Business A. Approval of Payments a. Klausner, Kaufman, Jensen & Levinson $ 1,695.00 b. Highland Capital Management, LLC 12,821.31 C. Graystone Consulting 3,375.00 d. Boston Partners 1,763.93 e. Renaissance Investment Management 1,631.70 POLICE PENSION BOARD MINUTES OF REGULAR MEETING OCTOBER 5, 2018 f. Fiera Capital, INC. g. Brookfield Investment Management, Inc. h. Salem Trust Company -- April to June i. Klausner, Kaufman, Jensen & Levinson j. Klausner, Kaufman, Jensen & Levinson k. City of Sebastian -- Reimbursement for Minutes I. City of Sebastian -- July to September Services $ 1,487.80 758.49 4,730.00 2,550.00 2,040.00 80.00 6,000.00 Motion to approve the payments as listed above was made by Mr. Williamson, seconded by Mr. Moyer, and passed unanimously by voice vote. B. Review of Annual Calendar of Board Activities Mr. Killgore reviewed the Calendar of Activities and Scope of Services. SEE ATTACHED. He stated all of the listed activities are up to date. He will discuss later in this meeting approval of the amendment to last year's budget and approval of next year's budget. A motion to receive and file the Calendar of Activities and Scope of Services was made by Mr. Moyer, seconded by Ms. Vicars, and passed unanimously by voice vote. C. Consider Amendment to FY17-18 Operating Expense Budget Mr. Killgore reviewed the spreadsheet that he had prepared. SEE ATTACHED. He described that the report shows a four-year history of expenses and shows the year ending September 2018. In the first column it indicates items that he feels should be amended. Mr. Williamson inquired as to which areas have been amended. Mr. Killgore pointed out the first two columns of the report where initial budget figures are set forth. Then the amended figures are listed, and he described how the figures were arrived at. Mr. Williamson queried why the budget for Salem Trust was so much higher than what was projected. Mr. Killgore reviewed that Salem Trust previously handled only one account, but when it was decided to have six or so different investment managers, those investments now are separated, plus they do a consolidated report which Mr. Killgore needs for the auditors. Mr. Williamson suggested, since most of the Board members are new, there be a meeting held to help educate them regarding these matters. Motion to approve the amendment as set forth was made by Mr. Williamson, seconded by Ms. Vicars, and approved unanimously by voice vote. 5. Public Input -- None POLICE PENSION BOARD PAGE 3 MINUTES OF REGULAR MEETING OCTOBER 5, 2018 6. New Business A. Determination of Whether Benefits for William Grimmich Are Required to be Forfeited Under Florida Statute 112.3173 Ms. Jensen reviewed the history of Mr. Grimmich's case and how Florida Statute 112.3173 applies to his case. She provided to each Board member a copy of the judgment where the court adjudicated Mr. Grimmich guilty of trafficking in oxycodone and grand theft of a controlled substance. She also provided a copy of the arrest affidavit which was the basis upon which Mr. Grimmich pled guilty. She stated that, based upon this history, the Board needs to have a hearing as to whether his benefits should be forfeited as a result of his pleading guilty to the commission of these crimes. She further described case law applicable to situations such as Mr. Grimmich's. Since Mr. Grimmich has passed away, he is no longer able to provide his defense at a hearing. However, the Statute provides for publication of notice and the opportunity for interested parties to be heard. The notice has not yet been sent, and that notice being sent will result from the Board deciding today on a hearing to determine whether a forfeiture should be applied. A motion to hold a hearing according to Florida Statute 112.3173 was made by Mr. Moyer and seconded by Mr. Williamson. Motion carried unanimously by voice vote. Ms. Jensen stated that her office did send notice out to the beneficiaries and/or interested parties, giving them information on procedures that are available to them and notifying them that they have the opportunity of just receiving a refund of contributions, and the requirement of having a hearing would then be unnecessary. Under any circumstance, a member who is convicted of an offense, or their beneficiaries, are entitled to at least a refund of the member's contributions to the pension plan. In this case if the beneficiaries, through their guardians, were to waive the requirement of the hearing and elect to just take a refund of contributions, then there would be no need for the hearing. Ms. Jensen's office also notified the interested parties that they would need to formally become guardians of the minor beneficiaries. Florida law requires that if a child is going to be paid more than $15,000.00, there must be a guardian appointed by the court who will be responsible for that amount of money. In this case the amount of contributions is approximately $78,000.00, so each of the children would be entitled to more than $15,000.00. Ms. Courtney Grimmich was present at today's hearing and stated that she could not speak for the other party who is involved, but she herself is leaning towards just taking the refund of contributions. Mr. Gillette asked if there will be proof that the guardianships have been created before POLICE PENSION BOARD PAGE 4 MINUTES OF REGULAR MEETING OCTOBER 5, 2018 any funds are released, and Ms. Jensen stated her office would make certain that that is accomplished. Mr. Williamson asked if it is usually the parent who is the guardian. Ms. Jensen stated that a parent is a natural guardian of a child for any amount up to $15,000.00; for any amount over that, there must be a formal appointment of a guardian by the court. Ms. Jensen advised waiting to set up the hearing until the guardianships have been set up. The matter could then be addressed at this Board's next meeting, and then the process could be started for the forfeiture if necessary. All members of the Board agreed with that plan. B. Consider Adoption of Fiscal Year 2018-2019 Operating Expense Budget Mr. Killgore drew the Board's attention to the last page of the packet attached to the Agenda. SEE ATTACHED. It describes the schedule for the previous four years, the amended 2017-2018 budget, and the recommended budget for the 2018-2019 budget year. Ms. Jensen explained that this budget is mandated by state statute. She stated that rather that a "budget," this is more of a forecast of what might be needed next year. The State statute mandates certain expenses be included in this report, administrative expenses in particular. She explained that this forecast procedure that must be gone through does not have to include the investment managers, although it can include them. She suggested that there always be included a contingency line, and the reason she suggests that is because this Board are fiduciaries, which means that every penny necessary is spent, but not a penny more. Taking into consideration that there might be a forfeiture procedure next year which might cost more money than this year, or a disability application is filed next year in addition to a forfeiture proceeding, it allows a little flexibility in the budget forecast without having to amend it. Mr. Killgore asked what the process would be if money is needed from the contingency for one of the other items, and does this Board even consider that. Ms. Jensen stated this could be brought before the Board, reminding them that when the forecast was created there was built in some flexibility. Thus, it would not have to go before City Council. Mr. Williamson asked how it is determined what number to put in the contingency account, and Ms. Jensen said it is usually a percentage that is used. Mr. Killgore brought up another item he would like the Board to consider. There is a State POLICE PENSION BOARD PAGE 5 MINUTES OF REGULAR MEETING OCTOBER 5, 2018 report that is required listing every police officer, what their pay was for the year, what their contribution was, etc. He described that there is a lot of time and work that goes into this report. The actuary has just recently offered to do the report, as they have the same information. The cost for the actuary to do the report is $3,000.00, and he is asking the Board to consider having it done by the actuary. Ms. Jensen stated that this forecast was to have been done by September 30, so the approval needs to be done. Mr. Moyer asked if the $3,000.00 could be included in the contingency line of the forecast and approved today. Mr. Killgore and Ms. Jensen said it could. Mr. Williamson asked, if the contingency goes over the forecast amount, what would happen, and Ms. Jensen said there would have to be a revised budget done. Mr. Williamson suggested the contingency be set at $15,000.00. A motion was made by Mr. Williamson and seconded by Mr. Moyer to add a line item for a contingency fund of $15,000.00 for the next fiscal year. Motion carried unanimously by voice vote. A motion was made by Mr. Moyer and seconded by Ms. Vicars to outsource the state report mentioned by Mr. Killgore. After discussion by the Board, motion carried unanimously by voice vote. Mr. Killgore stated he will present the adopted budget to City Council as well as a report on the actual costs. C. Report on Receipt of State Premium Tax Monies Mr. Killgore reported that the City received about $20,000.00 more than it did the prior year. Last year the City had received $168, 688.00. This year it was $188,923.00. This basically means that the City will have to pay less into the plan for the City's share of the cost. D. Report from Investment Monitor Mr. Mulfinger is not present, so that item will be rescheduled. E. Report from Investment Managers a. Highland Capital Mr. McMurray stated Highland Capital had changed their fee structure. Basically, instead of 55 basis points for everything, it will be 50 basis points for the equity and 30 basis POLICE PENSION BOARD PAGE 6 MINUTES OF REGULAR MEETING OCTOBER 5, 2018 points for the fixed income. In addition to that, they are going to skip this quarter because under the new contract that has been drafted they are billing the pension in arrears. It has been decided by Highland that they will now be billing from the ending asset value. So Mr. Killgore will get an invoice in January based on the assets on December 31 St He stated that the pension fund's performance has been good. It shows in the report that was received in August (SEE ATTACHED), what it is as of the end of September. These are the fiscal year numbers, and they show that it was 8.83% or maybe even more than 9%. He reviewed the market in general and reported that the equity market continues to do quite well. Part of that is probably due to the fact that bonds are not doing well. He stated that the market may be negatively affected if interest rates continue to go up. He also stated that he is cutting back on his workload, and he probably will not be coming to Sebastian as often as he has been. Approval to Move 5% or Less of Assets Between Accounts Ms. Jensen reviewed that at the last meeting Scott Owens left a letter that the Board will need to approve that will allow Highland to transfer monies between the large -cap value and the large -cap growth accounts that they manage. A motion to execute that letter will be needed A motion to approve the request for movement between growth and value within the parameters listed in the letter mentioned above was made by Mr. Williamson, seconded by Mr. Moyer, and passed unanimously by voice vote. Ms. Jensen stated there have also been revisions to the Investment Manager Agreement that Mr. McMurray mentioned which brings the Agreement up to date, and a motion is needed to authorize the execution of that Agreement to reduce the fees. After reviewing and discussing the amended fee schedule of Highland Capital as described by Mr. McMurray, a motion to accept the new fee arrangement was made by Mr. Williamson, seconded by Ms. Vicars, and passed unanimously by voice vote. b. Intercontinental Mr. Hapgood distributed copies of his report to all concerned and reviewed in depth this report. SEE ATTACHED. He informed the Board that they are now one of approximately 80 boards in Florida for whom Intercontinental provides services. He reviewed the POLICE PENSION BOARD PAGE 7 MINUTES OF REGULAR MEETING OCTOBER 5, 2018 objectives of Intercontinental and how they work to achieve those objectives. He described their reporting methodology. He said more investors are turning towards real estate as a fixed -income alternative. He described that, after an entity is fully invested, they have the right to redeem at any time. At present, they are working with a 90-day period of time for a reimbursement. He pointed out that it is more liquid than in the past, but it is not yet as liquid as stocks. He described how appreciation of real estate affects the value of the assets and how interest rates impact the portfolio. He described how the management fees are based on the amount of money the pension fund has invested. He described how every property is fully appraised once a year. He explained the difference between core assets and core -plus assets. He explained what value -ad properties are. Mr. Williamson inquired about the management team. Mr. Hapgood described where their offices are located and how the majority of their properties are managed by a third party. Ms. Jensen asked what the impact was on Intercontinental's assets as a result of Hurricane Florence. Mr. Hapgood replied that they had very minimal damage to a couple properties in North Carolina. He stated they sent that information out to their investors. Ms. Jensen inquired about investments in cannabis and cyber, what extent do the real estate portfolios have in their warehouses and real estate spaces —any exposure to cannabis or CBD—and what are Intercontinental's rules regarding leasing. Mr. Hapgood stated they do not have any clients who have interests in any of those businesses. He further stated they have not made a general across-the-board rule. He stated that anyone in the cannabis business is not going to rent out a $50 million industrial site. He was of the opinion that in the future, if a business such as that was large enough, well run and legal, they would probably rent to them. Ms. Jensen's concern is regarding federal banking standards, since cannabis is legal in some states but not all. Mr. Hapgood thanked the Board for their business and informed the Board that Intercontinental has an Extranet system where their clients have access to information regarding their accounts. If anyone on the Board is interested in this, let him know and he will see that they are set up for that. For the record, Ms. Jensen stated that Mr. Killgore had sent out to members of the Board on September 13 the Graystone reports. F. Legal Updates -- Klausner, Kaufman, Jensen & Levinson Ms. Jensen addressed the memorandum in the Agenda packets regarding the Florida Constitutional Revision Commission. SEE ATTACHED. She stated that in the next POLICE PENSION BOARD PAGE 8 MINUTES OF REGULAR MEETING OCTOBER 5, 2018 election there will be voting on changes to Florida's Constitution. There are 12 amendments, of which only one may have an impact on members of the Board of Trustees, which is Amendment 6. There are three different subjects covered in Amendment 6, and the one that may have an impact on members of boards such as this one is the proposal to change the standard of review that a court would have of an administrative decision the Board would make when interpreting a state law. For example, the Grimmich forfeiture is under state law. The standard of review that the court now has is a standard of deference, which means that they defer to the Board's decisions as long as they don't represent manifest injustice —that the Board has followed the rules as they are set forth. In other words, where reasonable people may disagree, the court will not substitute their judgment for the Board's. The standard that is being suggested to be changed is what is called a de novo review, which means that starting at the beginning of a case they would substitute their judgment for the Board's if they disagreed with the Board's decision. So that could be impactful to the Board in the forfeiture provision. The Board's entire pension plan document is based on state law because it is based on Florida Statute 185 provision. So it could impact this Board if someone challenges their decision and the case goes to court. She wanted to bring this matter to the Board's attention. Also included in the packet is a proposed memo explaining the impact of divorce on members and their benefits (SEE ATTACHED), and a copy of this memo can be given to members to present to their attorneys in divorce cases. Ms. Jensen explained that governmental pension plans do not have to accept qualified domestic relations orders, which is a standard method under the Internal Revenue Code of dividing pensions in divorce situations. Unless the Board has specifically adopted provisions that allow it to accept qualified domestic relations orders, they are not applicable to the Board's plan, and the Board is exempt from ERISA, which are the private sector pension rules or laws. G. Board Members Reports and Comments Mr. Williamson stated he has looked into going to the trustee school, and he was told when he attempted to register that this Board was not a member, and for him to attend those classes it would cost approximately $600.00. Ms. Jensen stated that the State is having their conference in Orlando on November 14, 15, and 16. Ms. Vicars stated she recalls that she got the information on the seminar she attended from the City Clerk. Mr. Killgore will try to get information on it. Mr. Williamson is in favor of having a separate meeting for the Board members where representatives of the investment entities are present, so the Board members can be better educated on fee structures, the process of investment managers, etc. Ms. Vicars agreed. Mr. Killgore suggested having a representative from Morgan Stanley and have POLICE PENSION BOARD PAGE 9 MINUTES OF REGULAR MEETING OCTOBER 5, 2018 the contract provided ahead of time so that the Board members can review it. Mr. Williamson requested that Salem Trust should be invited as well. Mr. Killgore will contact Morgan Stanley and Salem Trust in order to come up with some dates for a special meeting. H. Plan Administrator Reports and Comments a. Scheduling of Future Quarterly Meeting Dates Mr. Killgore stated he has been in contact with Ms. Jensen regarding a date for the next meeting, and he will contact the Board members regarding a date. b. Cessation of Disability Payments to Timothy Zelinski Mr. Killgore informed the Board members that Mr. Zelinski has passed away. He has been contacted by Mrs. Zelinski, and Mr. Killgore contacted Salem Trust regarding this matter. Mr. Killgore also reviewed that the Board had considered leaving Salem Trust at one point because of a negative report on their audit, but that has been rectified, and the Board decided to stay with Salem Trust. Next Quarterly Meeting -- To be determined. 7. Adiourn -- Chairman Gillette called for any further business. Hearing none, the meeting was adjourned at 4:30 p.m. Jason Gillette Ire