MINUTES OF THE REGULAR MONTHLY MEETING
GENERAL EMPLOYEES RETIREMENT BOARD
TUESDAY, MARCH 17, 2009
The Board of Trustees of the General Employees Retirement Fund convened in a regular session at 1:00 p.m. on this the 17th day of March, 2009, in the fifth floor Conference Room, Tampa Municipal Office Building, 306 East Jackson Street, Tampa, Florida, with John Tapley, Chairman, presiding. Members present upon roll call were Mark Carron, Ernest Carrera, Bonnie Wise, Steve Kenny, Randy Goers, and John Tapley.
Mr. Winters was absent.
City Staff in attendance were Justin Vaske, Assistant City Attorney (ACA) and Board Attorney; Maria Rivera, Recording Secretary; Marlene Herrera, Payroll & Pension Supervisor; Deborah Hodo, Plan Investment Coordinator; and Paul Broughton, Plan Coordinator.
Others in attendance were Mr. Jay Love and Mr. Keith Reynolds, Mercer Investment Consulting.
CONSENT AGENDA
COMSERV¡¦S REPORT FOR THE MONTH ENDING JANUARY 31, 2009; JERRY WINTER¡¦S $371.23 REIMBURSEMENT FOR ATTENDING THE FPPTA TRUSTEES SCHOOL; LISTING OF CONFERENCES OR SEMINARS; DEFERRED RETIREMENTS, DEFERRED RETIREMENT OPTION PLAN (DROP) APPLICATIONS, SURVIVING SPOUSES¡¦ PENSION BENEFITS, AND ESTATE PAYMENTS.
Mr. Tapley asked Mr. Broughton if all the items on the Consent Agenda were in order. Mr. Broughton stated that they were.
Motion: (Wise-Kenny) Ms. Wise made a motion to approve the Consent Agenda. Motion carried.
DISCUSSION AGENDA
Staff Report:
Funding of the ING Portfolio and Cash needs:
Mr. Broughton indicated he needed to raise cash for the Fund¡¦s cash account. Mr. Love, Mercer Consulting Investment, stated that since the Fund is overweight to fixed income, they should take $19.8 M from Taplin, Canida & Habacht to fund both the cash account and the ING portfolio.
Ms. Wise indicated that there is $750,000 set aside in the cash account for Fidelity to draw. It was then agreed to reduce the funding to the cash account to $4.5M making it a total withdrawal from Taplin, Canida & Habacht of $19.5M; $4.5M to the cash account and $15M to fund ING.
Ms. Wise expressed her frustration to the fact that monies were being taken from the managers that had a good performance. Mr. Love stated that this was necessary to stay within targets.
Motion: (Kenny-Carreras) Mr. Kenny made a motion to take $19.5M from Taplin, Canida & Habacht; $4.5M to fund the cash account and $15M to fund the ING portfolio. Motion carried.
Minutes of the Special Meeting held on February 17, 2009:
Mr. Tapley asked if there were any corrections to the minutes of the Special Meeting. None were noted.
Motion: (Carron-Kenny) Mr. Carron made a motion to approve the minutes of the Special Meeting held on February 17, 2009. Motion carried.
Minutes of the Regular Monthly Meeting held on Tuesday, February 17, 2009:
Mr. Tapley asked if there were any corrections to the minutes of the Regular Board Meeting. None were noted.
Mr. Kenny commented that while reviewing the minutes he did not see any discussion of Ms. Terp¡¦s request for reinstatement of her surviving spouse pension. Ms. Herrera and ACA Vaske indicated that the matter had been resolved so there was nothing to report. Mr. Broughton stated that he had sent Ms. Terp a letter informing her that her request had been denied. Mr. Broughton indicated he had not, however, included any notice of right to appeal the Board¡¦s decision on his letter because he had been instructed not to do so. ACA Vaske stated that if Ms. Terp wanted to appeal the Board¡¦s decision it was understood that she was entitled to do so. Ms. Wise asked for the Board¡¦s procedure on these instances. Mr. Broughton indicated that there is a written guideline that states that we must inform the applicant in writing of the Board¡¦s decision, the reason why the decision was taken, and their right to appeal the decision.
ACA Vaske stated he would review the guidelines and would report later during the course of the meeting.
Motion: (Kenny-Wise) Mr. Kenny made a motion to approve the minutes of the Regular Monthly Meeting held on Tuesday, February 17, 2009.
Marlene Herrera¡¦s Presentation on Pension Board expenses:
In Mr. Huffstutler¡¦s absence, Ms. Herrera distributed an Expense Report Sheet and proceeded to discuss the same. She pointed out how the lower expenses in the first quarter of 2009, compared to the first quarter of 2008, was indicative of the poor market conditions. There was brief discussion amongst Board members.
Mr. Love explained that the Fund incurs in what may seem as high manager fees because it uses active versus passive managers. Ms. Wise indicated she would like to examine what it would encompass to have passive managers as this may result in lower expenses. Mr. Love will prepare an active versus passive manager comparison and will present it to the Board at the April Investment Committee Meeting.
Discussion on Ms. Terp¡¦s letter:
ACA Vaske indicated he had reviewed the Policies and Procedures and was prepared for a recommendation on Ms. Terp¡¦s case. He proceeded to read Section 5C of the City of Tampa Procedures and Standards, GE Retirement Board of Trustees, Procedure for Hearings which supported Mr. Broughton¡¦s comments. ACA Vaske then recommended resending a letter to Ms. Terp to include the reason for the Board¡¦s decision and her right to appeal said decision. Mr. Broughton will draft the letter and ACA Vaske will review and approve it. Mr. Carron asked if the letter should be directed to Ms. Terp or to her attorney; ACA Vaske indicated that the letter should be sent to Ms. Terp with a copy to her attorney, Mr. McIntyre.
Motion: (Kenny-Wise) Mr. Kenny made a motion for Mr. Broughton to draft a corrected letter to Ms. Terp and mail it to her after ACA Vaske has reviewed and approved it. Motion carried.
Mr. Kenny stated that he wanted it to be noted that the Board should always be notified of any letters sent out to an individual, specially if the matter at hand could result in possible litigation. The recommendation was noted.
Mr. Broughton was instructed to review and update the GE Retirement Board¡¦s Policies and Procedures.
New Agreement Procedures:
ACA Vaske informed the Board that the Legal Department had reviewed past court findings and as a result was presenting its legal opinion to the Board that, if they so choose, the need to present any agreements to City Council could be eliminated and any agreements or amendments to agreements could be approved directly by the Board of Trustees. He indicated that this could be done by motion or by resolution, his preference being by resolution. Mr. Tapley and Mr. Kenny favored the recommendation. ACA Vaske then indicated that he would prepare a Resolution to be passed formally by the Board of Trustees. ACA Vaske stated that the Recording Secretary would need to document the exact count of votes in favor and opposed and not just a ¡§motion carried¡¨ statement.
Motion: (Kenny-Carreras) Mr. Kenny made a motion to approve the new agreement procedures as per counsel¡¦s recommendation.
Mr. Carron asked for clarification on what this change would mean. Ms. Wise explained that this measure would allow the ability to react to changes more rapidly. Mr. Kenny commented that this would be beneficial to active and retired members. ACA Vaske mentioned a list of outstanding agreements, the update of the Investment Policy, and the ING contract, among others, that have been delayed; not having to include these matters in the City Council process would prevent these delays. Motion carried.
Distribution of Minutes and Presentation of Bills:
Ms. Herrera informed the Board that the Pension Office was asking for the Board¡¦s approval on two initiatives. The first is not listing all the payments in the Consent Agenda section of the Agenda but rather a line that would reference that all vendor payments for the month are being submitted for approval. All trustees will get copies of all the bills before the Board meeting when the Agenda is sent, but the Agenda page itself would only reflect that the payments are being approved. This procedure mirrors the one used by the City Clerk¡¦s Office on the City Council Agendas. The other initiative would be to stop printing copies of all the Board meetings to distribute to all City departments being that all minutes are already posted on the INET and TampaGov.net. A City wide message will be sent out, and any departments with employees that do not have INET or internet access will print a copy to be posted in a centralized location. This will reduce printing expenses and contribute to the City¡¦s green initiatives.
The trustees agreed with the recommendations and instructed their implementation.
Legal Opinion on Pension Benefits, regarding Ms. Victoria Davis:
ACA Vaske presented a legal opinion on the issue of whether or not Victoria Davis was entitled to a monthly pension benefit. Ms. Victoria Davis married Mr. Gerald D. Davis on June 1990 and Mr. Davis, who was a Division B participant, retired on May 14, 2004. Mr. Davis died on October 29, 2008 and at the time he was not married to Ms. Davis as their marriage had been dissolved on November 30, 2006.
ACA Vaske presented an analysis of the Pension Plan and cited relevant law. He then rendered his conclusion that Ms. Victoria Davis is not entitled to receive a monthly pension benefit because she was not Mr. Davis¡¦ spouse on the date of his death.
Mr. Broughton stated that he had telephoned Ms. Davis to inform her of the finding and that Ms. Davis had indicated that she did not intend to request a hearing. Mr. Broughton indicated that he had been instructed to receive and file the matter. Ms. Wise stated that she thought there should be a written response to Ms. Davis. Mr. Broughton will draft, and ACA Vaske will review and mail, a letter to Ms. Davis informing her of the Board¡¦s decision. Mr. Goers stated that there should always be clear and open communication on all Pension related matters.
Changes to Investment Policy Statement and Contract with ING:
Mr. Reynolds discussed the changes that were being made to the current Investment Policy. There is an asset structure update to reflect the new global real estate allocation; an updated index for real estate; and new guidelines for global real estate. In reference to ING¡¦s funding, Mr. Love indicated that the monies did not need to be pulled from fixed income yet as the contract processing was not completed. Mr. Love will update the Trustees at the next Board as to when the monies need to be transferred. Ms. Hodo asked if there were any time restrictions in requesting the funds from Taplin, Canida & Habacht. Mr. Love indicated that there were no restrictions but he thought Ms. Hodo should advise them that the transaction is forthcoming.
Mr. Tapley stated that he would like to discuss the pros and cons of changing from active to passive managers (ETF) to reduce fees expenses. He suggested having an Investment Committee Meeting to discuss the matter. Ms. Wise agreed and added that she would also like to review the manager¡¦s benchmarks and the criteria being used to monitor the manager¡¦s performance, putting a formal watch list in place, and in general, refresh the performance evaluation process. Mr. Love stated the Board could have an Investment Committee Meeting in April and May. In the April meeting they will discuss small cap and review manager¡¦s performance guidelines; in the May meeting they will discuss the private equity search. It was agreed to conduct an Investment Committee Meeting in April from 10 a.m. to 12 noon.
Shift from the SSGA Aggregate Index Fund to the SSGA Intermediate Credit Index Fund in order to lower the US Treasury Bond Holdings and increase the Corporate Bond Holdings:
Mr. Love indicated that as a result of the financial turmoil in recent months, a flight to quality has occurred. This has led to extremely high demand and prices for the safest securities, US Treasuries, with a commensurate decline in yields. Simultaneously, Corporate Bonds have been sold and their prices have fallen significantly. Mr. Love summarized the opportunity as follows:
„X There are two inter-related causes of the current historic credit risk pricing:
„X Concerns about rising corporate defaults
- Corporate defaults will rise during this economic downturn.
„X After accounting for the expected impact of defaults, corporate bonds still have a significantly higher expected return than Treasuries.
„X Lack of buyers (Liquidity Risk)
- Liquidity risk can not be carried by leveraged investors in the current environment.
- Long term investors are not subject to the same sensitivity to liquidity risk as long as there is ample liquidity in other parts of the portfolio.
„X Liquidity Risk Premium is currently extreme and an opportunity for long term investors.
There was discussion amongst Board members. Ms. Wise did not agree with getting out of treasuries at this time. She believes this reduces diversification and stated that they would be doing with SSGA what Taplin has already done.
Mr. Love¡¦s recommendation was as follows:
„X Shift from the SSGA Aggregate Index Fund to the SSGA Intermediate Credit Index Fund
- Same Fee: 0.06%
„X Will result in ~$34mm being moved from Treasuries and Mortgages to Corporate bonds.
„X Monitor Corporate Credit spreads
- When spreads return to the normal region (<1.5%) shift back to Aggregate Index
„X Result: Annual return increase of ~2% per year on bond portfolio resulting from higher yields; greater return possible through credit spread contraction.
In response to Mr. Goers question, Mr. Love indicated that if the strategy did not yield the expected results, they could switch back to the Aggregate Index Fund at any time.
Motion: (Carron-Carreras) Mr. Carron made a motion to accept Mercer Investment Consulting¡¦s recommendation to shift from the SSGA Aggregate Index Fund to the SSGA Intermediate Credit Index Fund. Motion carried with Ms. Wise opposed.
Ms. Hodo will draft a letter of direction to State Street Global.
Gaetano Dalfino¡¦s Deferred Retirement Option Program payment:
ACA Vaske indicated that Mr. Dalfino¡¦s case was still in the negotiation stage. He indicated that the City of Tampa had made an offer of settlement to Mr. Dalfino and was waiting for a response.
$20,450.80 loss on conversion of 4,000 shares of Global Acquisition Corporation:
ACA Vaske indicated that the Legal Department litigators are reviewing this case and will report to the Board as soon as any progress is made.
Overpayment on behalf of Mrs. Rita M. Wilson, formerly Mrs. Rita M. Cranford:
ACA Vaske indicated that he was still reviewing Ms. Wilson¡¦s case and would provide an update at the next Board meeting.
ADJOURNMENT
There being no further business to come before the General Employees Pension Board at this time, Chairman Tapley adjourned said meeting at 2:15 p.m. on this 17th day of March, 2009.
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CHAIRMAN
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RECORDING SECRETARY
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PLAN COORDINATOR
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