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HomeMy WebLinkAboutMinutes Police Pension 12111911 City of Palm Beach Gardens Police Officers' 11 Pension Fund Minutes of the Meeting Held December 11, 2019 The regular meeting of the Board of Trustees of the City of Palm Beach Gardens Police Officers' Pension Fund was called to order at 9:09 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 Jay Spencer, Chairman Brad Seidensticker, Secretary Marc Glass, Trustee Greg Mull, Trustee Allan Owens, Trustee AMERICAN REALTY ADVISORS OTHERS PRESENT Denise McNeill (Resource Centers) A.C. Lovingood (Resource Centers) Bonni Jensen (KKJ&L) John McCann (AndCo Consulting) Richelle Hayes (American Realty) Richelle Hayes with American Realty Advisors started her presentation by informing the Board that the core fund is doing very well, leverage is at 23% to 24% and leasing it is very strong. Tenancy rates are stable, strong, and expected to be 94% to 95% by the end of the year. The fund is taking a stronger focus on high quality industrial and multifamily properties due to how attractive they are in the moderate level of depreciation. The board had some questions on why the focus in Florida? Ms. Hayes stated the fundamentals of Florida look great compared to most states, Florida has the third fastest population rate increase in the country, and the unemployment rate is lower than the national average. Ms. Hayes then reviewed the portfolio performance history, noting the year to date calculation is at 2.72%. The 2019 portfolio targets were reviewed and are expected to meet expectations by year end. Ms. Hayes then reviewed the portfolio's focus on income as appreciation has flattened. Ms. Hayes informed the board that business plan metrics expect an 8% average annual income growth which is mostly due to contractual leases and same store return on investment net of operational costs. Currently commercial leases are below market however there is some upside potential. The property types within portfolio include industrial, multifamily housing and commercial space. There are no regional malls within the portfolio which has helped the fund's performance. To focus more on income growth, the portfolio is selling some properties and taking a stronger focus on industrial and multifamily housing as they are expected to be the most profitable moving forward. The ODCE total returns have been reduced, many companies, especially core funds, are reducing their returns to 4-6%. American Real Estate feels that they will stay within 6.5%-7% range due to their evaluations on the markets and the firm's opinion that the industrial fundamentals have never been stronger. Ms. Hayes then informed the board that Hartford Current performed a study which indicates that half of the US population plan to move within the next five years. Jeff Swanson inquired about the value-added fun, Ms. Hayes stated that $3 million is committed to the fund, and so far, $1.5 million has been called. The fund hopes to call the remaining funds in the next year. Since the fund's inception there has been a 9.58% return on investment Minutes 12/11/2019 Page 1 versus the 6.76% benchmark. For the long term the fund has outperformed the benchmark by 317 basis points over to past 10 years. Real estate returns are coming down overall, as a result the value fund will have more volatility quarter to quarter. Ms. Hayes then reviewed the specific property holdings within the portfolio along with some specific highlights of each property. MELLON INFRASTRUCTURE PRESENTATION William Adams and McKenzie Jones introduced themselves to the Board and thanked them for the opportunity to present their Infrastructure Investment Fund. Ms. Jones reviewed Mellon which is a global multi -specialist invest manager with a full spectrum of research -driven solutions. Mellon has $524.6 Billion in assets undermanagement, with over 500 employees, and clients in 27 countries and territories. Mellon's headquarters is in Boston, and Mellon satellite offices located in Pittsburgh, San Francisco, London, Singapore, and Hong Kong. Mr. Adams started the presentation by reviewing the economic and social infrastructure of the Fund which consist of traditional and nontraditional infrastructure categories. For traditional infrastructure, there are three categories: Transports, which includes bridges, tunnels, toll roads, railways and public transport, seaports, and airport. Energy, which includes extraction, power plants, oil and gas pipelines. The third category is Utilities, which includes electricity, gas, and water distribution, water treatment, and waste treatment. For Nontraditional there is one category of Communication and Social Assets. Theses assets include satellites, television transmitters, hospitals, prisons, schools and universities. The key characteristics for this fund are hard assets, stable cash flows, and regulatory oversight. The Portfolio is income focused and the assets are passive in down markets. Brad Seidensticker inquired about how often the investments are valued. Mr. Adams informed the Board that the Market values the portfolio which gives full transparency, The differences between traditional and nontraditional infrastructure was reviewed with the Board. Currently in the tractional infrastructure 40% is in utilities, 40% is in transport, and 20% in energy. These investments are currently in Canada, The United Kingdom, and in Japan. Chairman Jay Spencer inquired why there are not invested in the United States, Mr. Adams stated that when the fund was created, Canada was the first opportunity that was chosen due to the benchmark being at 11%. Mr. Adams then proposed that the Pension Plan have a separate account with Mellon where funds would be held for potential capital calls. Out of the 500 names in the Portfolio, there are only 25 to 30 stocks invested at a time. There are two names that the fund has held for over eight years now and Mr. Adams feels that the fund has a pretty good mix within it. Next the strategy overview of the Portfolio was reviewed with the Board in addition to Mellon's Florida Institutional Relationships by Client Type, noting that Mellon currently has 18 public funds invested in the Portfolio. The presentation was concluded with a review of the minimum investment and the management fee. Mr. Adams stated that there is no minimum to invest in the Infrastructure Portfolio and the management fee is a flat 0.40%. The Board thanked William Adams and McKenzie Jones for their presentation. IFM GLOBAL INFRASTRUCTURE PRESENTATION Chris Falson thanked the Board for the opportunity to present the IFM Global Infrastructure Fund. Mr. Falson started his presentation by reviewing IFM Investors, noting that his firm is the largest open-ended Fund with the longest track record. Minutes 12/11/2019 Page 2 The fund was established and owned by 27 pension funds in Australia with over $103 billion across four asset classes and the firms has nine strategic global locations. IFM Investors is a leader in the global infrastructure investment sector with $42 billion in funds under management and 24 years of experience with investing in infrastructure. Currently IFM has two open-ended infrastructure equity funds and the firm employs over 80 infrastructure investment professionals. The IFM Global Infrastructure Fund is an open-ended fund with a diversified portfolio with mature infrastructure assets. The trailing net returns for this fund are 11.7% for the past year, 15.2% for the past three -years, the five-year returns are at 13.6%, seven-year returns of 11.2%, ten- year returns of 12.0%, and since inception, the fund has earned 9.1%. Investments are done on a quarterly basis and it takes approximately 11-12 months to be fully drawn into the fund. Investors only pay fees on the amount of funds that are drawn into the fund and the fund has an investment return goal of 10%. Mr. Falson noted that currently there are 8 public pension plans in the state of Florida. Mr. Faison then reviewed the Global Infrastructure Team and the investment strategy of the fund and the Portfolio has conservative leverage when it comes to investing. The benefits of the IFM Global Infrastructure Fund is that the Fund is aligned to core infrastructure investments, access to liquidity, no blind pool risk, sourcing capabilities, manager alignment, and no j -cure risks. Distributions from the fund are done on a semi-annual basis, investors can take all of their investment at any time and there is quarterly liquidity within the fund as well. There is a $5 million minimum investment requirement to invest in the fund. The Board requested a ten-minute break at 10:45am. The Board came back from their break at 10:56am. INVESTMENT CONSULTANT REPORT - ANDCO John McCann presented the Investment Consultant Report for AndCo for the period ending September 30, 2019, starting off with reviewing the fiscal year to date growth at 2.24%, compared to the benchmark of 3.81%. for the current quarter, the Plan earned 1.00% compared to the benchmark of 1.14%. The fiscal year to date return is 2.24% compared to the 3.81% benchmark. The three-year return is 8.80%, compared to the benchmark of 9.00% and the five-year return average is at 7.63%, compared to the benchmark of 7.86%. Mr. McCann stated that the one-year and fiscal year to date returns were very disappointing for the Plan. Both Mellon and IFM Global were reviewed by Mr. McCann, noting that Mellon is not a traditional infrastructure investment. Chairman Jay Spenser stated that he believes that infrastructure is the future with diversification. The asset allocations of the Pension Plan were reviewed and there was a lengthy discussion regarding how much and where to pull funds to invest in Mellon and IFM Global and it was noted that Investment Policy needed to be updated. Marc Glass made a motion to update the Investment Policy Statement. The Motion received a second from Greg Mull and was approved by the Trustees 5-0. The discussion to reallocate funds continued along with the need to have Attorney Bonni Jensen review the contracts with Mellon and IFM Global. Marc Glass made a motion to move $2.5 million from Fixed Income to American Realty Advisors Value, $2.5 million from Rhumbline S&P 500 to Mellon Infrastructure, and allocate $5 million to IFM Global to cover capital Minutes 12/11/2019 Page 3 calls when they are issued. The Motion received a second from Brad Seidensticker and was approved by the Trustees 5-0. Mr. McCann reviewed AndCo's proposal to increase their fees by $5,000 annually to manage additional assets held by the Pension Plan. • Marc Glass made a motion to approve AndCo's $5,000 annual fee increase to manage additional assets. The Motion received a second from Allan Owens and was approved by the Trustees 5-0. ATTORNEY REPORT JENSEN MEMO USERRA: Bonni Jensen presented a Memo to the Board regarding the uniformed Services Employment and Reemployment Rights Act of 1994. Ms. Jensen reviewed the rights and responsibilities of employers and retirement plans and the USERRA. Military breaks in service under the USERRA must be treated as continuous employment and employers are required to make pension contributions only during the time employees actually work for the employer, therefore, employers are not obligated to make contributions to a pension plan on behalf of employees while they are serving in the military. Ms. Jensen concluded her review stating that those who serve or who will serve in the military have substantial protections under USERRA; employers and retirement plans need to ensure proper tracking of these individuals time while serving in the armed forces. JENSEN MEMO DIVORCING MEMBERS AND SPOUSES: Ms. Jensen reviewed the Divorce Memo with the Board that should be given out to any members who are going through a divorce. Ms. Jensen noted that the Pension Plan is not covered by ERISA, and for this reason, the Pension Plan is not required to and cannot honor Qualified Domestic Relation Orders (QDROs). MODEL ORDER DISTRIBUTING MARITAL ASSETS: Ms. Jensen provided the Board with a sample of an Order Distributing Material Interests in a Public Employee Retirement Plan. JENSEN FEE INCREASE: Ms. Jensen informed the Board that her fees will be increasing from $265 an hour to $300 an hour. It was noted that increase has part to do with the increased cost Ms. Jensen's firm has incurred over the years with the need to hire legal assistants to help process and manage the ever increasing workload. • Marc Glass made a motion to approve Klausner Kaufman Jensen & Levinson Law Firm's hourly rate from $265 an hour to $300 and hour. The Motion received a second from Jay Spencer and was approved by the Trustees 5-0. SERVICE PROVDER CYBER SECURITY INSURANCE CERTIFICATES: Ms. Jensen provided the Board with the Cyber Security Certificates for AnclCo, The Resource Centers, Salem Trust, and her law firm for the Board to review. SUMMARY PLAN DESCRIPTION UPDATE: Ms. Jensen provided the Board with an updated draft of the Summary Plan Description which was reviewed by the Board. There was a discussion regarding the members who have passed their normal DROP eligibility date and the provisions allowing these members to reach the maximum 75% before going into the DROP and it was noted that these individuals only have a Minutes 12/11/2019 Page 4 30 day window after reaching 75% to enter the DROP. The Board requested that Resource Centers reach out to GRS for information regarding these individuals. • Greg Mull made a motion for the actuary to review the 75% cap in order to let all members know when their 30 -day window is. The Motion received a second from Marc Glass and was approved by the Trustees 5-0. • Allan Owens made a motion to approve the Summary Plan Description as amended. The motion received a second from Marc Glass and was approved by the Trustees 5-0. SPECIAL TAX NOTICE: A discussion commenced regarding the Special Tax Notice about when it is needed and when it is not needed. Denise McNeill confirmed that when a member takes any form of withdrawal out from the Pension Plan, the member has to sign the Special Tax Notice. REHIRE AFTER RETIRMENT: Trustee Marc Glass stated that in the City Ordinance, it states that a police officers must be separate for one year if rehired by the city. The language of the Ordinance was reviewed and there was a consensus that the manner which the Ordinance was written is very confusing. • Greg Mull made a motion for Attorney Bonni Jensen to submit an ordinance Change to clarify items under section 50-137. The Motion received a second from Jay Spencer and was approved by the Trustees 5-0. ADMINISTRATOR REPORT RESOURCE CENTERS MEMO - SOC1 AUDIT & CYBER SECURITY: Denise McNeill presented the Board with a memo regarding The Resource Centers SOC 1 Audit and Cyber Security. Ms. McNeill started his discussion with Cyber Security Measures mentioned in his memo. She informed the Board that the information is only a general overview of The Resource Centers current security procedures that are in place to prevent a cyber security breach within the company. She noted that due to the Board Meeting being a public meeting per the requirements of Florida Sunshine Laws, some of the safety steps taken are not mentioned in the memo, however, if any Trustee would like more details on the steps taken, The Resource Centers would be more than happy to schedule a meeting to review these details. Ms. McNeill then reviewed The Resource Centers SOC 1 Type 2 Audit noting that not all Pension Plan Administration firms have a third party come in and perform this type of audit. The SOC 1 Audit results had no findings or exceptions found, which means that all The Resource Center's Policies and Procedures are being followed correctly. Ms. McNeill informed the Board that The Resource Center has $3 Million in cyber liability coverage across three separate insurance providers and is looking into increasing the cyber liability coverage. Ms. McNeill stated that the Plan's exposure is the Service Providers that the Plan uses, such as The Resource Centers, Auditor, Actuary, Law Firm, and Custodial Bank. CYBER LIABILITY INSURANCE QUOTE: Ms. McNeill presented the Board with the cyber liability insurance quote that was requested at the last Board Meeting. Ms. McNeill informed the Board that the Lloyds of London cyber liability insurance policy is the same policy as the NCPERS policy plan that the members heard about at the Trustee Conference in Orlando Florida. Minutes 12/11/2019 Page 5 • Jay Spencer made a motion to purchase a cyber security policy for $250,000. The Motion received a second from Allan Owens and was approved by the Trustees 5-0. FIDUCIARY LIABILITY POLICY CHANGES: The Fiduciary Liability Policy Changes were presented to the Board for review. FISCAL YEAR 2016-2018 SHARE ACCOUNT ALLOCATION WORKSHEET: Ms. McNeill presented the 2016-2018 Share Account Allocation Worksheet to the Board for review. ELECTION NOTICE 12-12-19: Ms. McNeill presented the Board with the Notice of election due to the term expiration of Marc Glass. It was noted that Mr. Glass is still able to sit on the Board as a Hold Over Position until the election process is completed. There was a discussion regarding how the Board wished to conduct the election if another member expressed an interest in running and decided that electronic form of election would be the most efficient manner to count the votes. RESOURCE CENTERS QUOTE FOR ONLINE QRS DROP STATEMENT ACCESS: Ms. McNeill presented the Board with the quote to provide DROP Statement available for online access. The one-time website development cost is $650 and the cost to post the DROP Statements each quarter is $100. • Greg Mull made a motion to approve adding online access for DROP Statements. The Motion received a second from Allan Owens and was approved by the Trustees 5-0. AUTHORIZED SIGNER UPDATES: Mr. Lovingood presented the Board with an updated authorized signer forms for the Board to sing. Mr. Lovingood informed the Board that these updates were needed due to the recent change in Plan Administrator's for the Pension Plan. MINUTES The August 23, 2019 minutes were presented in the Trustee packets for review and were tabled till the next Board Meeting. DISBURSEMENTS The Disbursements through December 11, 2019 were presented in the Trustee packets for review. • Brad Seidensticker made a motion to approve the Disbursements as presented. The Motion received a second from Marc Glass and was approved by the Trustees 5-0. FINANCIAL STATEMENTS The interim financial statements through November 2019 were provided for informational purposes. BENEFIT APPROVALS Minutes 12/11/2019 Page 6 The Benefit Approvals for December 11, 2019 were presented in the Trustee packets for review. • Greg Mull made a motion to approve the Benefit Approvals as presented for December 11, 2019. The Motion received a second from Allan Owens and was approved by the Trustees 5-0. OTHER BUSINESS PROPOSED MEETING DATES 2020: Denise McNeill provided the Board with the 2020 proposed Board Meeting dates. Attorney Bonni Jensen recommended that the Board stay with the four quarterly Board Meetings a year and add additional special meetings as needed. PUBLIC COMMENTS There were no public comments at this time. ADDTITIONAL DOCUMENTATION The Following documents were provided to the Board. GreatBanc 2019 SOC 1 Bridge Letter, GreatBanc 2019 SOC 1 Audit, Salem Trust 2019 SOC 1 Audit, Salem Trust Service Report Summary as of September 30, 2019, and the Highland Capital Investment Review as of September 30, 2019. ADJOURN There being no further business, the Trustees officially adjourned the meeting at 1:55PM. The next meeting is scheduled for Thursday, March 12, 2020 at 9:00 AM. Respectfully submitted, Brad Seidensticker, Secretary Minutes 12/11/2019 Page 7