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
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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.
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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
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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
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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.
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• 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
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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
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