MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF JANUARY 26, 2018 Present: Chair Barry Keeler, Vice Chair Ryan Chapdelain, Treasurer Kelly Strickland, Secretary Pamela Nadalini, Trustees Gretchen Schneider and Kari McVaugh Others: Attorney Lee Dehner, Senior Pension Analyst Anthony Ferrer, and Pension Specialist Lois Belle Absent: Trustee Bonnie Wagner 1. CALL MEETING TO ORDER: Chair Keeler called the meeting to order at 10:00 a.m. 2. PLEDGE OF CIVILITY: Chair Keeler read into the record a memorandum from Mayor Willie Charles Shaw, dated February 13, 2015, entitled "City Commission and Advisory Boards Meeting Protocols and Pledge of Civility." 3. ROLL CALL: Secretary Nadalini conducted the Board roll call, noting that Trustee Wagner was absent; that Trustee Wagner did contact her office prior to meeting and stated that she was unable to make the meeting. Secretary Nadalini presented the Change to the Order of the Day Memorandum. Discussion ensued around timing of when the proposed changes to the section 24-98 of the General Employees' Defined Benefit Pension Plan could be presented to the City Commission. Board consensus to approve Change to the Order of the Day Memorandum and move this agenda item to the General Employees' Pension Plan Board of Trustee Regular Meeting of February 12, 2018. 4. PUBLIC INPUT: No one signed up to speak. 5. APPROVAL OF THE MINUTES: 5.1. Approval Re: Minutes of General Employees' Pension Plan Board of Trustees Regular Meeting of December 4, 2017 A motion was made by Trustee Schneider and seconded by Vice Chair Chapdelain to approve the minutes of the General Employees' Pension Plan Board of Trustees Regular Meeting of December 4, 2017. Motion passed 5-1 (Treasurer Strickland voted no). 6. APPROVAL OF RETIREMENT REQUESTIS): None Book 1 Page 89 1/26/18 10:00 a.m. Book 1 Page 90 1/26/18 10:00 a.m. 7. INVESTMENT PERFORMANCE REPORT: 7.1. Presentation and Discussion Re: Graystone Consulting Performance Review as of December 31, 2017 Presenter(s): Charlie Mulfinger, Managing Director, and Scott Owens, Institutional Consultant, Graystone Consulting Mr. Charlie Mulfinger, Managing Director, and Scott Owens, Institutional Consultant, Graystone Consulting, came before the Board and introduced themselves for the record. Mr. Mulfinger stated that market was again at an all-time high; that the fund had a total gain of $5,553,556 net of fees as of December 31, 2017. Mr. Owen provided an overview of the economy and the market; that Gross National Product (GDP) is 2.6% (last quarter 3.2%); that Unemployment is 4.1%; that the strong market performance is due to earning being up year over year from pro-growth mandates; that the market is moving from a valuation driven to an earnings driven market and will increase volatility; that all ten (10) sectors of the Standard & Poor's Indices were positive; that the total 1 year return for the fund was 14.05% (net of fees). Mr. Mulfinger reviewed the investment managers' performances; that he recommends continuing to be overweight in equity and underweight in bonds; that real estates has helped; that he is not recommending any changes to the current asset allocation; that going forward not expecting the same market results; that Polen Capital is currently under watch but that Graystone is not conçerned; that the fund is performing in the northwest quadrant which means higher returns with less risk and is in compliance. Mr. Mulfinger provided al historical review of fund values and Graystone's fees; he requested the Board consider changing the current fee structure to a more consistent year over year approach to take effect January 2019. A motion was made by Secretary Nadalini and seconded by Vice Chair Chapdelain to approve the proposed fee agreement and direct the Plan's attorney to draft a contract addendum. Motion carried The Board thanked Mr. Mulfinger and Mr. Owens. 8. UNFINISHED BUSINESS None 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Actuarial Valuation Report for Fiscal Year Ended September 30, 2017 Presenter(s): Mr. Pete Strong, FSA, EA, MAAA, FCA, Senior Consultant and Actuary, Gabriel, Roeder, Smith & Company Pete Strong, FSA, EA, MAAA, FCA, Senior Consultant and Actuary, Gabriel, Roeder, Smith & Company (GRS) came to the dais and introduced himself. Mr. Strong presented the Actuarial Valuation Report as of September 30, 2017; that the recognized experience gain for the fiscal year was $1,596,213 causing a $144,597 decrease in the City's contribution requirement; that the decreased contribution rate is attributable to investment returns that were more favorable than expected and an increase in covered payroll; that the funded condition oft the Plan is 72.7% compared to last year's 71.4%; that the funded ratio would have been 73.5% without the assumption change; that the investment return assumption was lowered from 7.0% to 6.9% causing a $196,260 increase in the City's contribution requirement. Mr. Strong discussed the unfunded actuarial accrued liability and stated that the target is to pay off the unfunded and future liability by 2037; that the financing period is decreased annually; that he recommends targeting an assumed rate of return long-term closer to 6.0% given the closed status oft the Plan; that the strategy should be to reduce the assumed rate of return incrementally in years where there is a positive investment year to lessen the impact of the reduction over the course of the next 15 years, by the time the majority of active members have retired. Secretary Nadalini asked Mr. Strong tot talk about experience study recommended for thel Police Officers' Pension Plan. Mr. Strong stated that the General Employees' Defined Benefit Pension Plan is a closed Plan but that there were still actives in the plan for at least 15 years; that GRS recommends performing an experience study for the plan at least every five (5) to seven (7) years; that while not as critical due to the closed status there is still a valid reason to perform as it has not been done for the plan in at least seven years; that he could perform an experience study focusing on three main assumptions: termination, retirement and salary increases for approximately $8,000; that he would come up with new assumption and run through the valuation software. Secretary Nadalini was supportive of the recommendation and stated that the study it is part of due diligence. A motion was made by Secretary Nadalini and seconded by Trustee McVaugh to authorize Mr. Strong, as the Plan's actuary, to proceed with an experience study as recommended. Motion carried unanimously (6-0). Mr. Strong stated that he will perform the experience study as directed in the summer, prior to the next annual valuation report. Attorney Dehner stated that the Board must declare a short-term, intermediate-term and long-term expected rate of return which will need to be filed with the State. A motion was made by Vice Chair Chapdelain and seconded by Trustee Schneider to declare an assumed rate of return of 6.9% for the short-term, intermediate-term and long-term. Motion carried unanimously (6-0). Discussion ensued around how the change in the assumed rate of return impacts the City of Sarasota's contribution requirements. Mr. Mulfinger came to the dais and stated that he is completely supportive of the change in the assumed rate of return declaration of 6.9% for the short-term, intermediate-term and long-term and the overall strategy to reduce to 6.0% over 15 years. A motion was made by Secretary Nadalini and seconded by Vice Chair Chapdelain to accept the Actuarial Valuation Report for Fiscal Year Ended September 30, 2017 as presented by the Plan's actuary. Motion carried unanimously (6-0). Attorney Dehner stated that Senate Bill 534 requires additional disclosure reporting and asked Mr. Strong whether he would be preparing that report to comply, Mr. Strong stated that he would be preparing and submitting the additional disclosure as required for the Plan. Book 1 Page 91 1/26/18 10:00 a.m. Book 1 Page 92 1/26/18 10:00 a.m. In response to a question by Secretary Nadalini asking ifMr. Strong would be filing the actuarial valuation report for the Plan electronically, Mr. Strong stated he would be filing the report with the State electronically however he recommended that the report also be submitted via mail to the State and posted on the City of Sarasota website. 9.2. Presentation and Discussion Re: GASB No. 67 Plan Reporting and Accounting Schedules for Fiscal Year Ended September 30, 2017 Presenter(s): Mr. Pete Strong, FSA, EA, MAAA, FCA, Senior Consultant and Actuary, Gabriel, Roeder, Smith & Company Mr. Strong stated that the GASB No. 67 disclosure is a requirement for pension funds in preparation for the audited financials and more for informational purposes; that the GASB No. 67 is on a gross market basis and there is no smoothing involved; that there is a slight increase in employer contributions and an increase in state contributions due to salary increases. There were no questions from the Board regarding the GASB No. 67 disclosure and the Board thanked Mr. Strong for his presentations. 9.3. Presentation and Discussion Re: Proposed Changes to Section 24-98 of the City of Sarasota General Employees' Defined Benefit Pension Plan, amending the Board of Trustees Section of the Plan to Provide Eligibility for DROP Members and Retirees of the Plan to Become Trustees of the Board (NOTE: Change to the Order of the Day Memorandum) Presenter/(s): Attorney Lee Dehner, Law Offices Christiansen & Dehner, P.A. Board consensus to approve Change to the Order of the Day Memorandum and this agenda item was removed; that the item is to be presented and discussed at the General Employees Pension Plan Board of Trustee Regular Meeting of February 12, 2018. 10. ATTORNEY MATTERS: SB 980 is a proposed bill in the Senate; that we are watching closely to see what comes out of this legislative session; bill proposes that the Plan's actuary will provide a recommended rate of return based on forward looking capital market assumptions and if the Board or governing body does not accept the Actuary's recommendation they must submit why in writing to the State. 11. OTHER MATTERS: Chair Keeler requested an update as to when the Annual Benefit Statements would be completed; Mr. Strong stated that the General Employees' Annual Benefit Statements are usually done in April timeframe. 12. ADJOURN. Chair Keeler adjourned the General Employees' Pension Plan Board of Trustees Regular Meeting at 11:37 a.m. BReai AKeer CPRT Ow 0( Chair Barry Keeler Secretary Pamela Nadalini