Book 1 Page 213 02-26-2021 8:15 a.m. MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING FEBRUARY 26, 2021 Present: Chair Demetri Konstantopoulos, Vice Chair Johnathan Todd, Ronnie K. Baty, and Trustee Joseph Hudgins. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, Senior Pension Analyst Anthony Ferrer, Pension Specialist Peter Gottlieb. Absent: Secretary/Treasurer: Shayla Griggs 1. CALL MEETING TO ORDER: Presenter(s): Chair Konstantopoulos. Chair Konstantopoulos called the meeting to order at 8:15 a.m. 2. PLEDGE OF CIVILITY: Presenter(s): Chair Konstantopoulos. Chair Konstantopoulos stated for the reçord, "We may disagree, but we will be respectful of one another. We will direct all comments to issues. We will not engage in personal attacks. 3. ROLL CALL: Presenter: Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin called roll. Chair Konstantopoulos, Trustee Baty, and Trustee Hudgins appeared in person. Vice Chair Todd appeared telephonically. Pension Plans Administrator Martin advised Secretary/Treasurer Griggs would request an excused absence at the next meeting. Also attending in person were. Attorney Christiansen, Senior Pension Analyst Ferrer, and Pension Specialist Gottlieb. Pension Plans Administrator Martin appeared telephonically. Trustee Baty made a motion to declare extraordinary circumstances, seconded by Trustee Hudgins. The motion carried unanimously (4-0). 4. PUBLIC INPUT: None. 5. APPROVAL OF MINUTES: 5.1. Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Regular Meeting of January 22, 2021. Presenter(s): Chair Konstantopoulos. Trustee Hudgins made a motion to accept the minutes of the January 22, 2021 meeting. Trustee Baty seconded the motion. The motion carried unanimously (4-0) 6. RETIREMENT REQUESTS: 6.1. Approval Re: DROP Retirement Request of Clifford Cespedes. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated that Mr. Cespedes requests to enter the DROP as of January 1, 2021; he is 56 years old, has 25.42 years of service time, and elected the 75% to joint annuitant option. Vice Chair Todd made a motion to accept Mr. Cespedes' retirement request. Trustee Hudgins seconded the motion. The motion carried unanimously (4-0). 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: Burgess Chambers & Associates, Larry Cole, Investment Performance Summary for the Period Ending December 31, 2020. Presenter(s): Larry Cole, Burgess Chambers & Associates. Larry Cole of Burgess Chambers & Associates (BCA) appeared before the Board telephonically and introduced himself. Mr. Cole gave a market summary, noting a possible "v" shape economic recovery, and discussed the Rotation from Growth Stocks to Value Continues page of BCA's materials. He asserted stock prices are at a relative low point and he therefore does not recommend taking money out of the stock market at this time. He expects prices to gradually rise over the calendar year, with the exception being the tech sector, in which some companies have very high price-to-earnings multiples. Mr. Cole discussed the Quarterly Market Summary and compliance review noting there were no issues. He reviewed the Investment Performance = Net, stating the actual retum for the quarter was 12.9%, Actual VS. Target Allocation noting convertibles had the greatest contribution to the portfolio's performance, the Asset Allocation, Historical Asset Allocation, and Asset Allocation & Performance - Gross noting the parenthetical numbers are the Plan's relative rankings compared to approximately 500 other public pension plans in the country. Mr. Cole recalled suggested investment in convertibles as an alternative to bonds at a time interest rates were lower however they are currently performing very well. Mr. Cole advised the Board that Boston Company, which is owned by BNY/Mellon, is in the process of an internal restructure and merging with a group named Newton, however it will remain under BNY/Mellon; the investment strategy and investment team remain the same. Attorney Christiansen asked to be advised if the contract with BNY will need to be amendment. Mr. Cole stated he would like to put an active manager in place of the Large Cap Growth Index Fund and present it to the Board in person at a future meeting. He discussed the relative performances for the quarter Book 1 Page 214 02-26-2021 8:15 a.m. Book 1 Page 215 02-26-2021 8:15 a.m. of the Russell 1000 Value Index and Russell 1000 Growth Index which further indicates a growth/value rotation. He reviewed the Private Real Estate sector, stating that JP Morgan has reported strong rent collections in both retail and commercial spaces and there are greater numbers of transactions as well. He reported the Plan has liquidated approximately $4 million with another $6 million remaining in the queue. Mr. Cole reviewed the Bond sector, noting their significant performance for the year. Regarding the Fiscal Year Rates of Return, Mr. Cole advised that the presentation materials incorrectly state the assumed rate of return as 7%, and it should reflect 6.75% as of October 1, 2020; it will be corrected on the next report. He reviewed the 2020 fiscal year and 2021 fiscal year to date returns. As of Wednesday, February 24, 2021, the portfolio value was $316.6 million, which is up 16% on a fiscal year basis. Mr. Cole reviewed the Total Fund, 5 Year Rolling Percentile Ranking. Mr. Cole referred to the Asset Allocation page of BCA's materials and advised the $4 million liquidated from real estate had been deposited after. January 1, 2021 in the Fifth Third R&D Cash Accountfor an approximate balance of $4.3 million and not stated in BCA's report. Mr. Cole recommended investing, from the R&D account, $2 million into global infrastructure, with $1 million going to Cohen & Steers Global Infrastructure Fund, and $1 million going to Lazard Global Infrastructure. He further recommended reducing the balance in domestic equities, which are overweighted, by taking $1 million from Boston Co, and $1 million from Fidelity Large Cap Growth, and invest those proceeds equally amongst the 3 fixed income managers. Trustee Hudgins noted the portfolio is 6 basis points overweighted in equities and asked why not rebalance those to convertibles. Mr. Cole stated that the convertible universe, which contains a lot of growth sectors is more vulnerable to a correction than global infrastructure. Global infrastructure is more defensive than convertibles as they offer more dividend payments and greater downside protection. Trustee Hudgins made a motion to invest, from the R&D Cash Account, $1 million into Cohen and Steers Global Infrastructure, and $1 million into Lazard Global Infrastructure. Trustee Baty seconded the motion. The motion carried unanimously (4-0). Trustee Hudgins made a motion to sell $1 million from Boston Company and $1 million from Fidelity Large Cap Growth, and reinvest those proceeds divided evenly between the 3 fixed income managers. Trustee Baty seconded the motion. The motion carried unanimously (4-0). Chair Konstantopoulos thanked Mr. Cole for his presentation. 8. UNFINISHED BUSINESS: None 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Mauldin & Jenkins, Independent Auditors Report for the Fiscal Years ending September 30, 2020 and 2019. Presenter(s): Alison Wester, CPA, Partner, Mauldin & Jenkins. Alison Wester of Mauldin & Jenkins appeared telephonically before the Board and introduced herself. Ms. Wester presented the financial statements, stating they are clean and unmodified. She discussed the Independent Auditor's Report, Management's Discussion and Analysis, the Statements of Fiduciary Net Position noting growth in the investment side, the Statements of Changes in Fiduciary Net Position which illustrates the investment growth, and each of the Notes to Financial Statements. Regarding Note 3, Deferred Retirement Option Plan, Ms. Wester explained the balances are included as a component of net position. Regarding Note 4, Investments, Ms. Wester discussed the duration of outstanding investments, year-to-year changes, the single concentration in mutual funds, credit risk, interest rate risk, custodial credit risk, the restriction in foreign currency risk, and fair value measurements in which she clarified Level 1 investments are identical assets in active markets; Level 2 investments are similar assets in active markets; and Level 3 are any other investment methods used to value those. This year, the Plan has no investments under the net asset valuation method. Regarding Note 5, Net Pension Liability, Ms. Wester noted the net position increased from 87% in 2019 to 92% in 2020 and discussed the discount rate used in the assumptions in the actuarial valuation. Under Required Supplementary Information, Ms. Wester discussed the Schedule of Changes in the City's Net Pension Liability and Related Ratios and explained this would eventually include data from 10 years. Trustee Hudgins commented that the amount of Net Pension Liability is the lowest it has been in a decade, and although based on assumptions, it is a promising number. Ms. Wester noted how the Net Pension Liability changes based on the investment assumptions and returns. Ms. Wester discussed the Schedule of Contributions, which are based on a percentage of the covered payroll necessary to support the liability, as well as the Schedule of Pension Investment Returns noting the Plan has maintained positive returns. Ms. Wester reviewed the Other Auditor's Report and Independent Auditor's Report on Internal Controls Over Financial Reporting and on Compliance and Other Matters. Ms. Wester discussed Auditor's Discussion and Analysis, which includes a firm overview as well a as a granular breakdown of the independent auditor's report, and the Required Communications which stated there were no significant disagreements or issues with management. Trustee Hudgins made a motion to accept the independent Auditor's Report; Trustee Baty seconded the motion. The motion carried unanimously (4-0). Chair Konstantopoulos thanked Ms. Wester for her presentation. 9.2. Presentation and Discussion Re: Declaration of Expected Rate of Investment Return. Presenter(s): Chair Konstantopoulos. Attorney Christiansen advised that when the Board approves an actuarial valuation, the state requires the Board to declare an expected rate of investment return for the next year, several years, and long term thereafter. Mr. Cole advised the Board that the current assumption rate of6.75% is a reasonable expectation. Trustee Hudgins noted the Auditor's report shows the history of investment returns to average 6.78%, and therefore an expectation of 6.75% is very reasonable. Trustee Hudgins made a motion to declare an expected rate of investment return of 6.75% for the next year, several years, and long term thereafter. Trustee Baty seconded the motion. The motion carried unanimously (4-0). 10. ATTORNEY MATTERS: 10.1. Presentation and Discussion Re: Christiansen & Dehner, Proposed Ordinance. Book 1 Page 216 02-26-2021 8:15 a.m. Book 1 Page 217 02-26-2021 8:15 a.m. Presenter(s): Scott Christiansen, Christiansen & Dehner. Attorney Christiansen advised he has received additional information regarding this item which he would like to incorporate before presenting to the Board and asked it to be tabled until the next meeting. Attorney Christiansen advised the Board of Senate Bill 758 which would require appointed public officials to receive 5 additional hours of on-line training on board governance and fiduciary responsibility. The bill specitically requires "appointed" trustees to receive training and does not refer to elected trustees. Attorney Christiansen stated he would need clarification if enacted. Trustee Hudgins suggested all training has had some benefit, and the bill passes, the Board may agree to a resolution requiring all trustees to take the additional training, rrespective of being appointed or elected. Mr. Van Gostein has filed a motion for re-hearing on the court's decision, Attorney Christiansen has filed response, and they await the judge's decision. Should the judge deny Mr. Van Gostein's motion, Mr. Van Gostein would be afforded the right to appeal. 11. OTHER MATTERS: Trustee Hudgins discussed his vote at last meeting regarding the actuarial equivalency tables. He stated it was difficult for him not having Mr. Strong at the meeting to present the item, which was compounded by not having presentation materials. The Board agreed that if that person who proposes an agenda item is unable to attend a meeting to present that item, absent a compelling reason to proceed, the item should be deferred until al later meeting. 12. ADJORN. Chair Konstantopoulos adjourned the meeting at 9:03 a.m. ChairDemetri Konstantopoulos Secre/a/y/Treasurer: Shay Sele Gniggs