MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF JANUARY 22, 2021. Present: Chair Ryan Chapdelain, Vice Chair Susan Blake, Secretary Shayla Griggs, Treasurer Kelly Strickland, Trustee Kari McVaugh, Trustee Robert Reardon, Trustee Mark Nicholas. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, Senior Pension Analyst Anthony Ferrer, Pension Specialist Peter Gottlieb Absent: None. 1. CALL MEETING TO ORDER: Chair Chapdelain called the meeting to order at 10:00 a.m. 2. PLEDGE OF CIVILITY: Chair Chapdelain stated for the record, "We may disagree, but we will always be respectful to one another. We will direct all comments to issues, and we will not engage in personal attacks. n 3. ROLL CALL: Pension Plans Administrator Martin called roll. Chair Chapdelain, Vice Chair Blake, Secretary Griggs, Trustee Nicholas, Trustee McVaugh, and Trustee Reardon were present in City Chambers. Treasurer Strickland was not present at the time of roll call. 4. PUBLIC INPUT: None 5. APPROVAL OF THE MINUTES: 5.1. Approval Re: Minutes of the General Employees' Pension Plan Board of Trustees Regular Meeting of December 7, 2020. Presenter(s): Chair Chapdelain. A motion was made by Vice Chair Blake, seconded by Trustee McVaugh to approve the minutes of the General Employees' Pension Plan Board of Trustees Regular Meeting of December 7, 2020. The motion carried unanimously (6-0). 6. APPROVAL OF RETIREMENT REQUEST/S): 6.1. Approval Re: DROP Retirement Request of Dwight T. Gordon. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin explained that the volume of retirees on the agenda in this meeting was a result of timing issues with participants returning notarized documents to Pension Administration related to COVID-19. Treasurer Strickland entered the meeting in person at 10:02 a.m. Pension Plans Administrator Martin stated that Mr. Gordon is 52 years of age and wishes to enter the DROP Book 1 Page 231 01-22-2021 10:00 a.m. Book 1 Page 232 01-22-2021 10:00 a.m. effective November 1, 2020 with 30.08 years of service and selected the lifetime only option. Secretary Griggs stated for the record that Treasurer Strickland had entered the meeting. Vice Chair Blake made a motion to accept Mr. Gordon's request. Trustee Nicholas seconded the motion. The motion carried unanimously (7-0). 6.2. Approval Re: Normal Retirement Request of Harry Coleman. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator stated Mr. Coleman is 56 years old, with 30 years of service time, and requests a normal retirement effective December 1, 2020; he selected the 100% to joint annuitant option. Trustee Nicholas made a motion to accept Mr. Coleman's request. Vice Chair Blake seconded the motion. The motion carried unanimously (7-0). 6.3. Approval Re: Early Retirement Request of Steven Myers. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator stated Mr. Myers is 57 years old, with 18.68 years of service time, requested an early retirement effective November 3, 2020, and selected the lump sum option. The backup materials include an extra page because Mr. Myers worked for 4 years and 8 months from January 1988 to October 1992, then returned to work in the Plan in September 2006 and repaid his refunded contributions with interest in post-tax contributions. Trustee McVaugh made a motion to accept Mr. Myers request. Trustee Nicholas seconded the motion. The motion carried unanimously (7-0). 6.4. Approval Re: DROP Retirement Request of Keith Flagler. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator stated Mr. Flagler is 54 years old, with 30.03 years of service, and requests a normal DROP retirement effective December 1, 2020; he selected the lifetime only option. Trustee Nicholas made a motion to accept Mr. Flagler's request. Trustee McVaugh seconded the motion. The motion carried unanimously (7-0). 6.5. Approval Re: Early Retirement Request of Michael Del Rossi. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator stated Mr. Del Rossi is 64 years old, and requests a retirement effective December 30, 2020, after 14.33 years of service time, and he selected the lifetime only option. Vice Chair Blake made a motion to accept Mr. Del Rossi's request. Trustee McVaugh seconded the motion. The motion carried unanimously (7-0). 6.6. Approval Re: Early Retirement Request of Gretchen Schneider. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator stated Ms. Schneider is 56 years old, and requests an early retirement date of December 29, 2020, after 16.5 years of service time, and she selected the lifetime only option. Trustee McVaugh made a motion to accept Ms. Schneider's request for retirement. Trustee Nicholas seconded the motion. The motion carried unanimously (7-0). 6.7. Approval Re: DROP Retirement Request of Clifford Smith. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator stated Mr. Smith is 65 years old, with 13.82 years of service; he has requested to enter the DROP effective November 1, 2020, and he selected the 50% to joint annuitant option. Trustee McVaugh made a motion to accept Mr. Smith's request. Trustee Nicholas seconded the motion. The motion carried unanimously (7-0). 6.8. Approval Re: DROP Retirement Request of Gloria Gorritz. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator stated Ms. Gorritz is 65 years old, with 13.73 years of service; she has requested to enter the DROP effective December 1, 2020, and she selected the lifetime only option. Vice Chair Blake made a motion to accept Ms. Gorritz's request. Trustee Nicholas seconded the motion. The motion carried unanimously (7-0). 6.9. Approval Re: Early Retirement Request of Katherine Gusie. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator stated Ms. Guise is 64 years old, and requests an early retirement effective January 9, 2021, after 17.58 years of service; she has requested the lifetime only option. Trustee Nicholas made a motion to accept Ms. Guise's request. Vice Chair Blake seconded the motion. The motion carried unanimously (7-0). 6.10. Approval Re: DROP Retirement Request of Cory Holding. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator stated Mr. Holding is 53 years old, has 30.15 years of service; he has requested normal retirement to enter the DROP effective January 1, 2021. He requested the lifetime only option. Trustee McVaugh made a motion to accept Mr. Holding's request. Trustee Nicholas seconded the motion. The motion carried unanimously (7-0). 6.11. Approval Re: Early Retirement Request of Curtis Gillespie. Presenter(s): Debra Martin, Pension Plans Administrator. Book 1 Page 233 01-22-2021 10:00 a.m. Book 1 Page 234 01-22-2021 10:00 a.m. Pension Plans Administrator stated Mr. Gillespie is 55 years old, with 26.84 years of service; he has requested an early retirement effective January 6, 2021 and he selected the lifetime only option. Vice Chair Blake made a motion to accept Mr. Gillespie's request. Trustee Nicholas seconded the motion. The motion carried unanimously (7-0). 6.12. Approval Re: Early Retirement Request of Valerie Churchill. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator stated Ms. Churchill is 55 years old, with 19.58 years of service; she has requested an early retirement effective December 30, 2020, and she selected the lifetime only option. Trustee McVaugh made a motion to accept Ms. Churchill's request. Vice Chair Blake seconded the motion. The motion carried unanimously (7-0). 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: Graystone Consulting Quarterly Performance Summary and Quarterly Performance Report as of December 31, 2020. Presenter(s): Scott Owens, CFA, CIMA, Associate Vice President, Institutional Consultant, Andy Mclivaine, Institutional Consultant, Graystone Consulting. Scott Owens of Graystone Consulting appeared before the Board telephonically and introduced himself, Mr. Mclivaine, and their presentation. Mr. MclIvaine advised that allocations in ClearBridge and Polen, the Plan's large cap growth managers, had been close to the tops of their respective ranges and needed to be reduced to stay in compliance; proceeds were invested in Templeton, which is the Plan's international value manager, which outperformed large cap growth for the quarter. Further, the portion of the balance with Allianz, the Plan's small cap growth manger, was shifted to NFJ, the Plan's small cap value manager; although small cap value outperformed small cap growth in general, NFJ did not perform consistently with its class. Mr. Mclivaine noted Graystone is monitoring Allianz due to its recent personnel change; there appears to be no other red flags and Allianz has performed well for the last two quarters. Mr. Owens gave an overview of the market performance over the last year as well as the federal stimulus and market stabilization efforts. He cautioned that government spending has fueled market and economic performance which may plateau or decline as spending is reduced. Further, he believes technology investments have peaked or will peak soon, and there will be a rotation from tech-type stocks to non-tech stocks as well as to midsize value companies. Mr. Owens reviewed various aspects of the economy including employment, corporate profits, Gross Domestic Product, and the manufacturing and servicing indexes, which have shaped Graystone's forecast. Mr. Owens discussed the Summary Report, including the Capital Market Returns noting the rotation from large cap to small- and mid-cap, sector performance, international markets, and fixed income which he believes will underperform in the short term. Mr. Owens discussed the Total Fund Executive Summary and the Risk/Return Analysis since inception. In reviewing the Asset Allocation and Time Weighted Performance, Mr. Owens recommended the Board approve reallocating HGK which is underweight, and ClearBridge and Polen which are overweight, to set each holding to the allocation target. Chair Chapdelain asked if the net returns for each manager had been provided in the past. Mr. Owens advised Graystone added this to their reports, and it shows the returns net of manager fees, but not net of all fees. The remaining fees include, but are not limited to custodial fees, administrative costs, attorney fees, and actuary fees. Chair Chapdelain asked if the amount of cash-on-hand was typical; Mr. Owens stated he works with Pension Administration for operation and administrative costs and added that cash is not held as an investment. Chair Chapdelain asked Mr. Owens to confirm if he recommended reallocating HGK from 14.6% up to 15%, and Clearbridge and Polen, which are both at 7.8%, down to 7.5%. Mr. Owens stated that the market has moved significantly since December 31, 2020 and would use current market values to bring each of the three to be equal. Vice Chair Blake made a motion to adjust the large cap value to 15% and each large cap growth funds to 7.5% at the current market values. Treasurer Strickland asked Mr. Owens if the motion would adequately address the issue he presented; Mr. Owens stated he believed it would. Treasurer Strickland seconded the motion. The motion carried unanimously (7-0). Mr. Owens reviewed each of the managers' performance for the quarter. Mr. Owens expressed concern for HGK, stating that while value and HGK have performed well, it should have performed better than its benchmark. He stated he will be monitoring its performance as iti is hindering the entire portfolio's performance. From an absolute basis, it has performed adequately, but the low alpha decreases the efficiency of the Plan's portfolio. Trustee Nicholas asked Mr. Owens to clarify why he had concerns regarding HGK when the Board just voted to rebalance HGK upward to its target. Mr. Owens stated that HGK's absolute performance is acceptable and better than growth, so the reallocation takes assets from the less-favored growth and puts them into the more favored value; even if the return is less than benchmark, the returns are gains for the portfolio. In that context, the decision is an asset class decision and not a manager decision. Mr. Owens stated he has some concern that ClearBridge did not perform as well on a relative basis, but it still had a 27% return for the quarter which alleviated those concerns for the time being. Regarding Polen, Mr. Owens discussed its portfolio concentration, 3-year history, 1-year and quarter-periomance. He was not as concerned with its performance relative to its benchmark as benchmarks do not have the same weighting constraints as investment policies. Regarding NFJ small cap value, he noted the higher return and lower risk, but stated that its underperformance in the last quarter was due to stock selection, which is concerning considering this amount of underperformance in an environment which favors value funds. Mr. Owens does not anticipate this underperformance to continue for multiple consecutive quarters, and on an absolute basis it is still performing well as an asset class. Mr. Owens discussed Allianz Small Cap Growth's significant outperformance. Because of senior management changes, Allianz has been under watch, although it outperformed its benchmark. Mr. Owens discussed Templeton International Value being compared to a blended value/growth benchmark, noting its performance has been satisfactory with a higher return and lower risk. Renaissance International Growth did better over the last year considering its diversified holdings in a concentrated market and has, on average, outperformed its benchmark by 0.5%. Turning to Invesco Fixed Income, Mr. Owens stated that it has positive but unexciting retumns with lower risk, but over the long term at 3% return, Mr. Owens stated he would be very satisfied with that amount over the next 12 months. Regarding AEW real estate, Mr. Owens expressed surprise at their positive returns considering the nature of real estate investments which require a longer time horizon to respond to economic conditions. Mr. Owens discussed UBS, noting it is less risky than AEW with less leveraged assets, but it underperformed due to retail space. He stated real estate in general will not do well in the current environment, but the Plan's portfolio is underweighted in this sector. Mr. Owens explained how returns are generated in this sector and how UBS's quarterly valuation process reduced its returns; AEW, however, has a different portfolio construction and therefore the appraisal process impacted its retums differently than that process impacted UBS. Chair Chapdelain asked if it would be appropriate to put UBS on watch. Mr. Owens stated that UBS has recently changed its management structure and property managers, and has taken a more proactive approach to its portfolio, which he believes will have a positive effect, which Graystone is monitoring. Mr. Owens reviewed Lazard Global Infrastructure, noting the Plan has held it since September 2020, and 90 days is insufficient time to determine if it has been a positive or negative investment. Book 1 Page 235 01-22-2021 10:00 a.m. Book 1 Page 236 01-22-2021 10:00 a.m. Mr. Owens reviewed the Compliance Checklist, noting the only "no" has been addressed with Invesco which is in the process of determining whether it will cure the issue by increasing the quality of holdings or sell off the lower-class bonds; the investment policy statement allows managers a reasonable amount of time to cure compliance deficiencies. Mr. Owens discussed the Policy Index History, noting the Board's decisions have had positive effects on the portfolio. Mr. Owens stated he would remain in the meeting through the actuary's discussion of the valuation. Trustee Nicholas exited the meeting at 11:18 a.m. and returned at 11:20 a.m. 8. UNFINISHED BUSINESS: None 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Actuarial Valuation Report for Fiscal Year Ended September 30, 2020. Presenter(s): Pete Strong, FSA, EA, MAAA, FCA, Senior Consultant and Actuary, Gabriel, Roeder, Smith & Company. Nicholas Lahaye, FSA, MAAA, FCA, of Gabriel Roeder, Smith & Company appeared before the Board telephonically, and advised he would be presenting on behalf of Mr. Strong who was unable to attend. Mr. Lahaye presented the Actuarial Valuation Report for the Fiscal Year Ended September 30, 2020, starting with the Observed Experience, noting the City's actuarially required contributions for the fiscal year beginning October 1, 2021 is $6.97 million, which is 69.84% of covered payroll, and a decrease of approximately $75,000 from the prior year. The funded status is 75.1%, which is an increase from the prior year by 0.9%. Mr. Lahaye discussed the elements of the observed experiences. Secretary Griggs exited the meeting at 11:23 a.m. and returned at 11:30 a.m. He reviewed the Changes in Benefits, Changes in Actuarial Assumptions, noting the reduction in the assumed rate of investment return and the Florida Retirement System's change in mortality assumptions had a combined effect of increasing the City's required contributions by approximately $37,000, Required Contributions in Later Years, noting GRS expects the required City contributions as a dollar amount to remain in the $6.8 to $7.4 million range over the next few years, and the Relationship to Market Value, explaining that if the valuation used the Market Value as the basis, the City's contribution requirement for the fiscal year ending September 30, 2022 would have been higher and the funded ratio would have been lower. Mr. Lahaye advised that the contributions for the fiscal year ending September 30, 2022 of $6.97 million was calculated using an assumed investment rate of return of 6.55% as noted with examples of variations on the page titled Contributions to Finance Benefits of the Pension Fund, section Total Contribution Requirement, line "City Portion @." Mr. Lahaye reviewed the Contributions to Finance Benefits of the Pension Fund, noting that the normal costs, the amortization of the unfunded actuarial liability, and the administrative expenses, total the Total Contribution Requirement of $7.57 million. Mr. Lahaye explained that over time, the total normal costs will decline due to less active participants, and the contributions should eventually equal the unfunded liability payment. In response to Chair Chapdelain's question, Mr. Lahaye explained the Plan's goal is to reduce its unfunded liability to 0; as projected on the page titled Sources and Financing of Unfunded Actuarial Accrued Liability, column Remaining Financing Period 9/30/20, the unfunded liability is forecasted to be paid down to $0 in 17 years if there are no changes to the assumptions, experience changes, or gains/losses. Mr. Lahaye discussed the Unfunded Actuarial Accrued Liability, noting the Plan has decreased its unfunded liability by about $1.3 million, and how the actuarial present value of future normal costs was calculated. Mr. Lahaye discussed Accounting Information Submitted for Valuation, Statement of Plan Assets at Market Value, Reconciliation of Plan Assets, noting the Plan has less employee contributions and relies more on investment income to satisfy its retired member obligations, and Development of Funding Value of Pension Fund Assets where he explained how using the actuarial value of assets instead of the market value decreased the required contributions. Chair Chapdelain asked Mr. Lahaye for his opinion on a reasonable assumed rate of return. Mr. Lahaye explained it would depend on the Plan's asset allocation; the Plan may wish to shift a portion of its equity investments to fixed income which would then make it more appropriate to lower the expected rate of return. With approximately 70% of assets currently in equity, the expected rate of return of 6.55% is reasonable; if the Plan's portfolio were balanced at 609/30%/10%, lowering the assumed rate of return to 6% would be reasonable, however that would be predicated on the economic and market conditions at the time. Mr. Lahaye suggested that if the intent were to lower the expected rate of return, making incremental decreases of 25 - 35 basis points at a time would be more effective than more frequent but smaller reductions of 5 - 10 basis points. Mr. Lahaye reviewed the Schedule of Changes in the Employer's Net Pension Liability and Related Ratios GASB Statement No. 67. The Board did not have any questions for Mr. Lahaye regarding the Actuarial Valuation. Treasurer Strickland made a motion to accept the Actuarial Valuation Report for Fiscal Year ending September 30, 2020. Vice Chair Blake seconded the motion. The motion carried unanimously (7-0). 9.2. Presentation and Discussion Re: GASB No. 67 Plan Reporting and Accounting Schedules for Fiscal Year Ended September 30, 2020. Presenter(s): Pete Strong, FSA, EA, MAAA, FCA, Senior Consultant and Actuary, Gabriel, Roeder, Smith & Company. Mr. Lahaye stated he had presented the GASB 67 in his comments in item 9.1. Attorney Christiansen noted the Board did not need to make a motion to accept the GASB 67 reporting. 9.3. Presentation and Discussion Re: Proposal for Updating Actuarial Factors for Optional Forms of Benefit Payments. Presenter(s): Peter Strong, FSA, EA, MAAA, FCA, Senior Consultant and Actuary, Gabriel, Roeder, Smith & Company. Mr. Lahaye asked Attorney Christiansen if he would like to explain his conçerns regarding this item. Attorney Christiansen stated that the definition of"actuarial equivalency" in ordinances is sufficiently broad to not require a change and referred the question to Pension Plans Administrator Martin. Pension Plans Administrator Martin explained that approximately every 5 years, the actuarial equivalent factor tables used by Pension Administration to calculate estimated optional benefit payments are updated. She stated Mr. Strong had explained to her that the cost to update the factor table would be approximately $4,000. Vice Chair Blake made a motion to authorize thel Plan's actuary to update the actuarial equivalency charts used to calculate optional forms of benefit payments. Trustee Strickland seconded the motion. The motion carried unanimously (7-0). Chair Chapdelain thanked Mr. Lahaye for his informative presentation. 10. ATTORNEY MATTERS: Book 1 Page 237 01-22-2021 10:00 a.m. Book 1 Page 238 01-22-2021 10:00 a.m. Attorney Christiansen noted that when the Board approves an actuarial valuation, the State of Florida requires the Board to also declare an expected rate of return and asked Mr. Owens to recommend an expected rate of return. Mr. Owens stated that a 6.55% rate of return was reasonable. Treasurer Strickland made a motion, as stated by Attorney Christiansen, that based on advice of its investment consultant, the Board expects to receive an investment return of 6.55% for the next year, several years, and long-term thereafter. Trustee McVaugh seconded the motion. The motion carried unanimously (7-0). Attorney Christiansen explained that, at the request of the Board, he had presented an ordinance change to the City Commission to address changes in controlling IRS provisions; he reported the Commission approved the ordinance unanimously without question on first reading. Now the proposed ordinance should be sent to the State with a "no-impact" letter, and the City can adopt the ordinance. Attorney Christiansen noted he has received a new disability retirement application from former employee Kandy Lee and is in the process of collecting disability records. 10.1. Presentation and Discussion Re: Allianz Virtus Consent Letter, December 14, 2020. Presenter(s): Scott Christiansen, Christiansen & Dehner, PA. Attorney Christiansen stated the Plan's small cap growth manager had initially been Nicholas Applegate, and the contract was either changed or assigned to NFJ Investment Group, LLC; the contract was then assigned to Allianz Global Investors US, LLC, which is where it is now. The letter at issue states that Allianz Global Investors now wishes to assign the contract to a newly formed entity called NFJ Investment Group, LLC. The Plan also has a small cap value manager, NFJ Investment Group, a Delaware General Partnership, which was assigned in 2009 to NFJ Investment Group LLC. Attorey Christiansen is still researching the issue and will discuss it with Mr. Owens, although the only practical changes from the Plan's perspective will be the parent company to which the fund managers report. Vice Chair Blake made a motion to approve the consent to assignment. Trustee Nicholas seconded the motion. The motion carried unanimously (7-0). 10.2. Presentation and Discussion Re: New Mandatory Florida Law F.S.5448.095 Registration and Use of the "E-Verify" System, Christiansen & Dehner. Presenter(s): Scott Christiansen, Christiansen & Dehner, PA. Attorney Christiansen explained the Florida legislature adopted a law effective January 1, 2021 which requires public entities and the firms which contract with public entities to use E-Verify to determine the immigration status of persons hired on January 1, 2021 and after. While this would not apply to the Board directly, it would apply to vendors which contracted with the Plan which must assure the Plan they comply with the new law. Attorney Christiansen stated that he drafted a letter for Pension Administration to distribute to existing vendors and that he will add language to new contracts requiring the vendors to affirm they use E-Verify. This would apply to fund managers except for mutual funds. 11. OTHER MATTERS: Vice Chair Blake asked how many active members are currently in the Plan and Pension Plans Administrator Martin stated the Plan has 123 active members as of January 1, 2021. The Board noted Mauldin & Jenkins is on the agenda for the next meeting. 12. ADJOURN: Chair Chapdelain adjourned the General Employees Pension Plan Board of Trustees Regular Meeting at 12:09 p.m. - Chair RyanChapdelâih Secretary shayla Griggs Book 1 Page 239 01-22-2021 10:00 a.m.