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City of Palm Beach Gardens Police Officers’
Pension Fund
Minutes of the Meeting Held
June 1, 2016
The regular meeting of the Board of Trustees of the City of Palm Beach Gardens
Police Officers’ Pension Fund was called to order at 9:08 AM by Jay Spencer in the
Council Chambers at the Palm Beach Gardens City Hall at 10500 North Military Trail,
Palm Beach Gardens, Florida.
TRUSTEES PRESENT OTHERS PRESENT
Jay Spencer, Chairman Audrey Ross (Resource Centers)
Marc Glass, Trustee Bonni Jensen (KKJ&L)
Brad Seidensticker, Trustee John McCann (The Bogdahn Group –
Greg Mull, Trustee via teleconference)
John Manuel, Trustee Steve Stack (Highland Capital)
Alisa Train (Cherry Bekaert)
Pete Strong (GRS)
Richelle Hayes (American Realty)
Randy Buntin (PBG Police Officer/ Union Rep)
INVESTMENT CONSULTANT REPORT
The Bogdahn Group – Presented by John McCann (via teleconference)
Mr. McCann briefly reviewed the market environment during the quarter ending
March 31, 2016 as well as the Plan’s compliance checklist. The total fund net of fees
underperformed the index at 1.89% versus 2.03% and for fiscal year to date they
are up 5.38% versus the index at 5.64%. He reviewed the Plan’s asset allocation
and noted that the transfer from Vanguard to Rhumbline has not been completed
yet, but is in the process. Also Mr. McCann recommended increasing their real
estate target to 10% as that is the max that is allowed under the State guidelines,
and real estate is doing very well too. The Trustees discussed and noted that they
did not want to move ahead with that at this moment and will discuss it again at the
next meeting. Mr. McCann reviewed each manager’s performance during the quarter
and noted that overall the fund is doing very well despite the market place. Lastly
he presented the Board with an updated flash performance report as of May 27,
2016. Mr. Spencer thanked Mr. McCann for providing this additional report and
confirmed with the other Trustees that this report contains the information they
wanted.
Ms. Jensen noted that she has the Thistle Asset/Bogdahn Group addendum as well as
the Assignment and Assumption ready for the Board to execute today noting the
merge between the two companies as well as the reduced fee agreement. Mr.
McCann confirmed he will be reducing the Plan’s fee by $1,800 per year since we will
no longer have the Vanguard accounts to track, for a revised total yearly fee of $12K
effective April 1, 2016.
MOTION: Mr. Seidensticker made a motion to approve the addendum #2
to the investment monitoring services agreement between the
Plan and Thistle Asset Consulting as presented, as well as the
Assignment and Assumption of Thistle Agreement to Bogdahn
Consulting, LLC as presented.
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SECOND: Mr. Glass seconded the motion.
CARRIED: The motion carried unanimously 5-0.
PRESENTATION OF THE SEPTEMBER 30, 2015 AUDITED FINANCIAL
STATEMENTS
Cherry Bekaert – Presented by Alisa Train
Ms. Train introduced herself and stated that she was here to present the September
30, 2015 audited financial statements and Mr. Burdick returned from Cherry Bekaert
a couple of weeks ago. She reviewed the required communication letters in regards
to the audit and noted that there were no findings while performing the audit, no
material weaknesses, or reportable compliance issues. A modified opinion was
issued for this audit, which is the highest level that can be achieved. Ms. Train noted
that there were no changes this year in regards to accounting, planning, or timing of
the audit. There were no incorrect adjustments made this year, or no issues with
management while performing the audit. Ms. Train explained that she will need the
Board to sign an audit representation letter today so that the final copy of the audit
can be issued and filed. Lastly she briefly commented on the Plan’s assets from
2014 to 2015 and noted that they increased from $72.6M last year to $74M, but
mostly everything else remained the same.
MOTION: Mr. Glass made a motion to approve the September 30, 2015
Audited Financial Statements as presented.
SECOND: Mr. Manuel seconded the motion.
CARRIED: The motion carried unanimously 5-0.
PRESENATION OF THE SEPTEMBER 30, 2015 ACTUARIAL VALUATION
REPORT
GRS – Presented by Pete Strong
Mr. Strong noted that he revised the October 1, 2014 Valuation Report due to a
small correction and that has already been submitted and approved by the Division
of Retirement, as well as all other necessary parties. He noted that the revised
report changed the total contribution requirement by $6K, which the City is aware of
and will need to pay.
Mr. Strong presented the Board with the October 1, 2015 Valuation and noted that
the City is making their annual required contribution amount in one lump sum
payment to the Plan at the beginning of the fiscal year as it saved the City money in
interest. For the fiscal year ending September 30, 2017 the total required
contributions are 61.11% ($3.2M) of payroll versus 68% ($3.3M) of payroll this past
year. Mr. Strong reviewed the breakdown of how the additional City contribution of
$601,407 was applied to the Plan’s unfunded liability this year. Also he noted that
the Plan’s funded ratio as of September 30, 2015 is slightly increased to 71.78%
from 70.8% last year. Mr. Strong reviewed the changes in this year’s report which
include the FRS mortality table change, the decrease in the Plan’s assumed rate of
return from 7.1% to 6.9% as their goal is 6.5%, and all the assumption changes that
were previously approved by the Board; salary increase rates, retirement rates,
separation/withdrawal rates, and disability rates. Mr. Strong reported that this year
the Plan had a net actuarial loss of $893,801 which was mainly due to more
retirements than expected, higher salary increases than expected, and the
recognized investment return was below the assumed rate of return. He reviewed
the breakdown of benefit payments and assets and noted that it does not include the
DROP member’s assets which are around $6M. The Plan’s total unfunded liability
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balance is $23.6M. The Trustees had a lengthy discussion on how to pay down the
Plan’s unfunded liability quicker and Mr. Strong stated that they can change the
amortization period from 21 years to 15 years to pay off the balance 6 years earlier,
but that would cost the City approximately an additional $300K each year for 15
years or until the unfunded liability balance is paid off. The Trustees tabled that
discussion until the next meeting when they have time to reach out to the City to get
their thoughts, as the City is hoping to make another additional contribution to the
Plan again this year.
Mr. Strong presented the Board with the GASB No. 67 report for the fiscal year
ending September 30, 2015. He reminded the Board that no action was needed on
their behalf as this report will be filed with the Division of Retirement and is for
informational purposes only.
MOTION: Mr. Mull made a motion to approve the September 30, 2015
Actuarial Valuation Report as presented.
SECOND: Mr. Seidensticker seconded the motion.
CARRIED: The motion carried unanimously 5-0.
MOTION: Mr. Glass made a motion to set the assumed rate of return at
6.9% for this year, next year, and the long term thereafter.
SECOND: Mr. Manuel seconded the motion.
CARRIED: The motion carried unanimously 5-0.
Lastly Mr. Strong discussed the use of the State money. He commented that the
current base amount is $412,644 and the amount received this year was $524,479.
Ms. Jensen explained the new State Statute and explained that the agreement
between the City and the Union (or the State’s default method) on the use of the
excess State money needs to be written into the CBA. Mr. Glass stated that the CBA
is supposed to be ratified tomorrow and this issue is not addressed in it. The Board
called in Mr. Randy Buntin (Union rep) to the meeting. Ms. Jensen explained to Mr.
Buntin and the Board that if no mutual agreement between the City and the Union
about the use of the excess State money is written into this CBA then the default
50/50 split from the Division of Retirement will fall into place. The Trustees and the
members want the use of the excess State money to remain status quo and for that
to happen it still needs to be written into the CBA. Ms. Jensen stated that this
agreement can also be done through a memo of understanding. Mr. Buntin stated
that he will get with the other Union members right away to discuss getting a memo
of understanding regarding this as there is no way they can have this written into the
CBA by tomorrow. The Board also directed Ms. Jensen to contact the City, Union and
Police Chief to get the State money language added into the CBA or a memo of
understanding as soon as possible. Both parties will report back to the Board.
INVESTMENT MANAGER REPORT
American Realty Advisors – Presented by Richelle Hayes
Ms. Hayes welcomed herself back and gave a brief update on the firm. Their total
firm assets are up to $7.3B and they have 10 offices nationwide. They own 154
properties with 399 investors and as of date they have not had any litigation or
conflicts of interest reported. American Realty does not hold any debt on their
balance sheets and their leverage can go up to about 35-40%, but they always stay
around 20%. Ms. Hayes noted that the portfolio does not have an outgoing queue,
but they still do have an incoming queue which is about 2-3 quarters long. She
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reviewed the Plan’s performance as of March 31, 2016 and noted that the total
assets are up to $5.1M with a one year return of 12.09% versus 13.12%. On April
1, 2016 they made another capital call and a portion of this Plans assets were called,
although there is still another $325K to be invested. During the quarter they sold 2
properties which leaves 8 remaining in this portfolio which an average occupancy
rate of 92%. Lastly she reviewed a couple of the properties held in the portfolio and
noted that they are only real estate managers and do not invest in any other sectors.
INVESTMENT MANAGER REPORT
Highland Capital Management – Presented by Steve Stack
Mr. Stack gave a brief update on the market environment during the quarter and
noted that they will keep trading government issued bonds as the rates don’t really
affect them either way because they are staying market and duration neutral.
Growth is the most challenging market to be in right now as they are trying to keep
up. For the quarter ending March 31, 2016 on the value side they are down -1.66%
versus the index at 0.74% and for the fiscal year to date they are also trailing the
index at 2.77% versus 8.11%. Fixed income held up the quarter at 3.36% versus
the index at 3.03% and for the fiscal year to date they are up 3.41% versus 2.45%.
ATTORNEY REPORT
KKJ&L - Presented by Bonni Jensen
Ms. Jensen presented the Board with the proposed Ordinance regarding the required
IRS changes due to the IRS determination letter. This proposed ordinance also
includes the rehire after retirement language and how they are going to deal with it.
Any retiree except for disability retirees can be reemployed by the City in any other
position but a police officer and can still collect their pension. If the member is
reemployed as a police officer then their pension will stop and they will not collect
again until they are no longer working for the City. Also the member does not get
any makeup pension payments for the time they were rehired by the City, unless
they were rehired as a reserve officer. The Trustees discussed what was considered
“rehired” and Ms. Jensen commented that a member cannot willing know that they
will be rehired when they retired. The Trustees also discussed the new normal
retirement age that was recently put into place by the Division of Retirement; the 20
years of service and out no matter the age. Ms. Jensen stated that this proposed
ordinance includes that revised language as well. This ordinance will be presented to
City Council.
MOTION: Mr. Glass made a motion to authorize and approve legal
counsel to forward the proposed ordinance to the City for
approval as presented.
SECOND: Mr. Seidensticker seconded the motion.
CARRIED: The motion carried unanimously 5-0.
ADMINISTRATOR REPORT
Resource Centers – Presented by Audrey Ross
Ms. Ross reminded the Trustees that their annual Form 1 Disclosure forms are due
July 1, 2016. They need to be filed with the Supervisor of Elections in the County
that the Trustee resides in.
Ms. Ross confirmed that the next meeting date is scheduled for Thursday September
22, 2016 at 9AM and she will also have the proposed 2017 meeting dates then as
well.
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MINUTES
MOTION: Mr. Manuel made a motion to approve the minutes from the
March 10, 2016 regular meeting.
SECOND: Mr. Glass seconded the motion.
CARRIED: The motion carried unanimously 5-0.
DISBURSEMENTS APPROVALS
MOTION: Mr. Glass made a motion to approve the disbursements.
SECOND: Mr. Manual seconded the motion.
CARRIED: The motion carried unanimously 5-0.
BENEFIT APPROVALS
MOTION: Mr. Manual made a motion to approve the applications to exit
the DROP for Glenn Wright & George Clay, the application for
distribution from DROP account due to retirement for George
Clay, the applications for distributions from DROP accounts due
to MRD for Ernest Carr & Jules Barone, the application for
distribution from DROP account (1/15/2016) for Wayne Sidey,
the applications for distributions from DROP accounts
(5/15/2016) for Robert Wummer, Ronald Council & Sheree
Brown, and the applications for distributions from DROP
accounts (6/15/2016) for Jay Spencer & Todd Thomas.
SECOND: Mr. Seidensticker seconded the motion.
CARRIED: The motion carried unanimously 5-0.
FINANCIAL STATEMENTS
The board reviewed and discussed the financial statements that were provided
through April 2016.
The board received and filed the financial statements through April 2016.
OTHER BUSINESS
N/A
PUBLIC COMMENTS
N/A
AJOURN
There being no further business, the Trustees officially adjourned the meeting at
11:45M. The next meeting is scheduled for Thursday September 22, 2016 at 9AM.
Respectfully submitted,
_____________________________
Brad Seidensticker, Secretary