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HomeMy WebLinkAbout04-24-2020 MinutesCITY OF SEBASTIAN POLICE PENSION BOARD MINUTES OF REGULAR QUARTERLY MEETING APRIL 24, 2020 Call to Order -- Chairman Gillette called the meeting to order at 10.00 a.m. II. Roll Call Present (via Zoom technoloav) Board Members: Jason Gillette Paul Williamson Tim Wood Albert lovino Also Present (via Zoom technoloav) Bonni Jensen, Klausner, Kaufman, Jensen & Levinson, Attorney for the Board of Trustees Ken Killgore, Plan Administrator Cynthia Watson, Human Resources Manager Andy Mcllvaine, Morgan Stanley Scott Owens, Morgan Stanley Janet Graham, Technical Writer III. Vote to Excuse Absent Board Member -- None IV. Approval of Minutes -- Regular Meeting of December 10, 2019 Chairman Gillette asked if there were any changes or corrections to the Minutes of December 10, 2019 as presented. Mr. Killgore stated that on Page 4 A-3 where it states quarterly report, it should be the annual report from the actuary. Then on Page 4 A-6, it should read that we do have provisions for every liability. There being no further changes, Chairman Gillette called for a Motion to accept the Minutes as written. Motion to accept the Minutes as presented was made by Mr. lovino, seconded by Mr. Williamson, and approved unanimously via voice vote. V. Old Business A. Approval of Payments -- Ken Killgore, Plan Administrator 1. Salem Trust -- October/December $ 6,960.00 2. Highland Capital -- October/December Fixed Income 2,919.16 3. Highland Capital -- January/March Fixed Income 2,996.85 POLICE PENSION BOARD PAGE 2 MINUTES OF REGULAR MEETING OF APRIL 24, 2020 A. Approval of Payments (Continued) 4. Highland Capital -- October/December Equities 10,582.40 5. Highland Capital -- January/March Equities 8,187.36 6. Boston Partners -- October/December 2,194.30 7. Fiera Capital -- October/December 1,627.93 8. Renaissance -- October/December 1,862.06 9. Brookfield Public Securities Group -- Oct./Dec. 784.20 10. Morgan Stanley Consulting -- October/December 3,375.00 11. Klausner, Kaufman, Jensen & Levinson -- Nov./Dec. 3,841.25 12. Klausner, Kaufman, Jensen & Levinson -- Jan./Feb. 1,032.50 13. Klausner, Kaufman, Jensen & Levinson -- March 1,227.50 14. City of Sebastian -- Minutes Preparation for December 162.00 Mr. Killgore reviewed additional invoices he has received as follows: 1. Foster & Foster $20,663.00 2. Renaissance 1,332.50 3. Boston Partners 1,807.40 4. Fiera Capital 1,258.73 5. Graystone Consulting These will all be reported on the agenda for the next meeting. Motion to approve the payments as listed above was made by Mr. Williamson, seconded by Mr. Wood, and approved unanimously via voice vote. VI. Public Input -- None VII. New Business A. Adoption of Administrative Policy Governing the Use of Audio -Video Conferencing of Teleconferencing to Conduct Virtual Public Police Pension Board Meetings Ms. Jensen reviewed that the governor has issued an executive order that will allow us to conduct meetings in a virtual setting. This order is tied to the governor's declaration of an emergency here in Florida. The program that has been established via Zoom or by phone allows for participation by the public in all meetings. She stated that there must be adherence to the Sunshine Law, which has been done. Minutes are being taken by the POLICE PENSION BOARD PAGE 3 MINUTES OF REGULAR MEETING OF APRIL 24, 2020 Recording Clerk. Those Minutes will then be posted for public inspection. This administrative policy will remain in effect until May 8, 2020 unless the declaration of emergency is extended by the governor. Mr. lovino inquired whether this situation will also be in effect during hurricanes or other emergencies. Ms. Jensen stated this declaration is only applicable to this particular situation requiring social distancing. Ms. Jensen asked for the Board adopt the policy for the virtual meetings. A motion adopting the virtual meeting policy was made by Mr. Williamson, seconded by Mr. lovino, and approved unanimously via voice vote. Mr. Killgore will put the motion in writing and Chairman Gillette will sign it. B. Report from Investment Monitor Mr. Owens discussed the situation that is happening in the market. He reviewed that there has never been a time in history when a government has shut down its own economy. Never in history has the market fallen so far so fast and then rebounded in the same manner. Never in history has a government put $3 trillion to work so quickly. He pointed out that this was caused not by an economic crisis but by a health-care crisis. The volatility that has been occurring in the market has been brought on by conditions outside of the market. He opined that in 12 to 18 months from now there will be new highs occurring in the market. He reviewed how the first quarter earnings are going to look good because of the run on certain products and services during that quarter. He is of the opinion that the second quarter will be a much different picture because there will not be the demand for those same products and services, and the positive impact on the first quarter will have a negative impact on the second quarter. He suggests that the negative impact on the market will be astonishing until the economy begins to open up again. He stated it will probably be a very rocky road for a while. He is of the opinion that when people begin getting back to work, the stimulus that was put forth by the government will stimulate growth in the economy. Mr. Killgore asked regarding the values of the pension's real estate investments. Mr. Owens stated real estate has not been affected as much as other markets. Ms. Jensen stated she has read some articles that state that probably sometime around the middle of May problems with real estate, such as businesses being able to pay their rent, will POLICE PENSION BOARD PAGE 4 MINUTES OF REGULAR MEETING OF APRIL 24, 2020 begin to occur. Mr. Owens stated that real estate is going to be better than equities for some time going forward. Mr. Mcllvaine added that, since the technology is now being widely used because of the virus that allows employees to work from home, that will affect companies' decisions in the future as to how much space they really need to lease, which in turn will affect the commercial real estate market. Mr. Owens reviewed the impact of the health-care crisis and how it has caused so much volatility in the market. This will greatly affect the long-term average this year. Adding to this fact is the price war on oil between Saudi Arabia and Russia which has caused the price of oil to drop significantly. Mr. Mcllvaine reviewed the portfolio in general and how it performed thus far this year. The portfolio is at $14 million, which is nearly double what it was at the beginning in 2011. He also reviewed how each manager performed this quarter. Highland has underperformed as has Renaissance. This has been a continuing situation, and he stated it is time to take a hard look at those two managers. Mr. Owens reviewed the Asset Allocation Report, which is a new format, and he pointed out that this report makes it much easier to see how the portfolio is performing. Mr. Mcllvaine went on to review that every manager is within their range, and it is within the investment policy statement. Presently, it is recommended that no changes be made at this time. He stated it is important, since the markets are so tumultuous right now, to not overweight any one sector. He reviewed each manager individually. Highland large -cap growth has underperformed for some time in both up and down markets. Mr. Owens suggested that a search be done in the near future for a different type of manager. Boston Partners was then addressed. Mr. Mcllvaine reviewed that they have underperformed in both up and down markets. His firm is not making any recommendations regarding Boston Partners right now, but they will keep a close eye on Boston. Renaissance has also taken on more risk, and he suggested that a search be done regarding this manager. Mr. Williamson asked that Mr. Mcllvaine explain for the newer Board members what the term "passive" means in the context of market activity.. Mr. Mcllvaine then went on to explain what that term means as well as a few other terms that are used frequently. After much discussion among the Board members and Mr. Mcllvaine and Ms. Jensen, it was the consensus of the Board that a search be instituted regarding Highland and POLICE PENSION BOARD PAGE 5 MINUTES OF REGULAR MEETING OF APRIL 24, 2020 Renaissance. Ms. Jensen suggested that follow-up on this matter could be addressed in a Zoom meeting if needed in the future. Mr. Williamson asked Mr. Mcllvaine if his firm has studied any kind of rebalancing if the markets take another deep dip. Mr. Mcllvaine stated that is not something that is being considered presently. He recommends not making any large changes as long as the markets are in so much flux. C. Legal Updates -- Klausner, Kaufman, Jensen & Levinson • Ms. Jensen covered the IRS changes regarding the allowable mileage rate, which is now 57.5 cents as opposed to 58 cents. The Secure Act passed, and she will be presenting a suggested amendment to the pension plan. There is also a change from the required minimum distribution age from 70 1/2 to 72. Her firm is also recommending that this board track the IRS changes and then have them added to this plan. • The pieces of legislation that were pending in the State Legislature did not pass. Thus, there was nothing that was significantly impactful to this plan. She is not aware of any public sector law changes, such as the Sunshine Law. The last state legislative session allowed for remote notarization. As of January 1, remote notarization was allowed. Basically, notarization can be done through an application such as Zoom, where the transaction will be recorded. A signature of someone who is not in the State of Florida can now be notarized, and the witnesses can also be in another State. That procedure will require a verification process. This means that this plan's forms will have to be changed to reflect this new notarization process. She also reviewed that Form 1 s are due on July 1st. She stated that she has received questions about signing forms while this social isolation order is in effect. She offered to help work this out if any signatures are needed in this manner. • Regarding the CARES Act, there were some pension changes that occurred in this Act. These are not particularly impactful to this plan, but she provided an overview of this matter in case any members of the plan ask questions. There is a provision that allows for a $100,000.00 distribution from a defined contribution kind of program. For example, the DROP plan, if there were someone who wanted to exit the DROP plan and needed to take out $100,000.00 in cash, not roll it over to some other kind of tax shelter entity, that can be taken without an early retirement penalty. So it is not subject to the 10% penalty. It can, however, be treated as a rollover even if they take it in cash, because they have three years to put that back into a tax shelter. If they prefer to take the cash in one sum and not roll it over, they can divide it up into three years for purposes of income tax payments. She POLICE PENSION BOARD PAGE 6 MINUTES OF REGULAR MEETING OF APRIL 24, 2020 does not think that any changes need to be made in this pension plan, but it will be recorded on the 1099R. There are some changes that are being made to loans. There are also some exemptions that are required for minimum distributions, but that does not apply to governmental pension plans. Her firm is part of a group working with the governor to try and get some relief for municipalities in making their contributions into pension plans. In recognition that tax revenues may be down, there will probably be a return that is less than the actuarial assumption, so probably the plan's contributions are going to go up. Mr. Killgore asked Ms. Jensen to address the summary plan description and the operating rules. That subject is not on this agenda, but they are still to be finalized. Ms. Jensen stated she had sent the summary plan description to Mr. Killgore at the end of the year. The changes are pretty limited, basically including the alimony issue that was discussed last year. The changes with the rules and regulations have to do with the time periods for appeals, etc. She will address this in the longer format. Vill. Board Members Reoorts and Comments -- None IX. Plan Administrator Reoorts and Comments Mr. Killgore stated the next meeting will be on June 16, 2020 barring any new developments or need to call another meeting. He stated, if any of the Board members knows anyone who would serve as a Board member, he would welcome suggestions. Mr. lovino inquired whether, when a prospective board member is not voted in by City Council, is there a restriction on if and when that person can reapply. Mr. Killgore stated he is not aware of any restrictions. X. Next Scheduled Quartedv Meeting -- June 16, 2020 XI. Add*ournment Chairman Gillette called for any further business. Hearing none, the meeting was adjourned at 11:42 a.m. By: is &A Jason billette A