MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING SEPTEMBER 24, 2021 Present: Chair Demetri Konstantopoulos, Secretary/Treasurer: Shayla Griggs, Trustee Ronnie K. Baty, and Trustee Joseph Jody" Hudgins. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, and Pension Specialist Peter Gottlieb. Absent: Vice Chair Johnathan Todd. 1. CALL MEETING TO ORDER: Presenter(s): Chair Konstantopoulos. Chair Konstantopoulos called the regular meeting of the Police Officers' Pension Plan (Plan) Board of Trustees to order at 8:15 a.m. 2. PLEDGE OF CIVILITY: Presenter(s): Chair Konstantopoulos. Chair Konstantopoulos stated for the record, "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 and noted that Vice Chair Todd was absent. 4. PUBLIC INPUT: None. 5. NEW BUSINESS: 5.1. Presentation and Discussion: Proposal to Provide Professional Auditing Services. Presenter/(s): Alison Wester, CPA, Partner, Mauldin & Jenkins. Alison Wester of Mauldin & Jenkins appeared before the Board telephonically and introduced herself. Ms. Wester thanked the Board for the opportunity to continue providing services to the Plan. She reviewed Mauldin & Jenkins' transmittal letter, the firm's experience and licensure, staff, and organizational chart. She stated that, subsequent to preparing the materials, Jennifer Cook left Mauldin & Jenkins to pursue other opportunities; Jennifer Trotter, who assisted in previous pension audits, would be able to assist in this year's audit as appropriate. Ms. Wester reviewed the proposed pricing. Trustee Hudgins and Ms. Wester discussed training offered by Mauldin & Jenkins; Ms. Wester stated that this training is available to trustees and covers topics such as changes in GASB rules and new legislation applicable to defined benefit pension plans. Book 1 Page 240 09-24-2021 8:15 a.m. Book 1 Page 241 09-24-2021 8:15 a.m. Attorney Christiansen advised he reviewed Mauldin & Jenkins' retention letter and found it acceptable. Trustee Hudgins made a motion to approve Mauldin & Jenkins' request for audit services and authorize the Chair to execute the associated retention letter. Trustee Baty seconded the motion. The motion carried unanimously (4-0). 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Regular Meeting of July 23, 2021. Presenter(s): Chair Konstantopoulos. Trustee Hudgins stated that the language in the first paragraph of item 6 was unclear. SecretaryTreasurer Griggs agreed and that the language would be written more precisely. Chair Konstantopoulos made a motion to accept the minutes of the July 23, 2021, subject to Trustee Hudgins' requested correction; Trustee Baty seconded the motion. The motion carried unanimously (4-0). 7. RETIREMENT REQUEST(S): 7.1. Approval Re: DROP Retirement Request of Juan Sanchez. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated Officer Sanchez is 50 years old and has served 20.98 years of service in the Plan. Officer Sanchez requests to enter the DROP effective September 1, 2021, and he has selected the 100% to joint annuitant option. Trustee Baty made a motion to accept Officer Sanchez's request to enter the DROP; Trustee Hudgins seconded the motion. The motion carried unanimously (4-0). 8. INVESTMENT PERFORMANCE REVIEW: 8.1. Presentation and Discussion Re: National Investment Services, Investment Performance Summary for Period Ending June 30, 2021 Presenter(s): Mark Anderson, CFA, Chief Strategy Officer; Ray Caprio, Director, Institutional Sales, National Investment Services. Ray Caprio of National Investment Services appeared before the Board telephonically and introduced himself and Mr. Anderson. Chair Konstantopoulos stated that the presentation should be constrained to Plan pertormance and issues of substançe. Mr. Caprio thanked the Board for the opportunity to serve and advised there have been no significant changes at the firm. Secretary/Treasurer: Griggs left the meeting at 8:27 a.m. and returned at 8.29 a.m. Mr. Anderson discussed the Performance Overview and noted the data was as of August 31, 2021; he explained the portfolio generally performed close to the Bloomberg Barclays Aggregate Bond Index, although the portfolio had started to lead as the market transitions from decreasing interest rates to rising rates. As rates rise, bond prices typically fall, and correspondingly, fixed income fund prices also decline; to hedge against rising rates, NIS has been moving assets out of corporate bonds and into US Treasuries and cash positions. Mr. Anderson reviewed the Sector Overview, noting the portfolio is holding approximately 6% in money markets, cash equivalents, however the Bloomberg Barclays index does not have an allocation for cash; he explained that the index always has bonds which are maturing, which is comparable to cash. He compared the portfolio allocation to its targets, noting the portfolio is more diversified. Mr. Anderson explained that it holds more Commercial Mortgage Backed and Asset Backed securities than the index; while those have traditionally underperformed the broader index, they currently are outperforming. He discussed why Municipal securities are attractive, but NIS has reduced its holdings from approximately 12% to 9%. Mr. Anderson stated the portfolio carries an approximate 6-month interest rate exposure, which is less than the index and therefore the portfolio is positioned in anticipation of rising interest rates. He explained NIS's expectations for interest rates to increase over the next 12 to 18 months based on measurements of the labor supply, inflation and inflation expectations, and manufacturing productivity. Trustee Hudgins asked for the book value of the portfolio. Mr. Anderson stated the book value as of August 31, 2021, is approximately $15.163 million, which is approximately 96-97% of market value. Larry Cole of Burgess Chambers Associates appeared elephonically and introduced himself. Mr. Cole asked Mr. Anderson if NIS invests in TIPS and floating rate securities. Mr. Anderson stated NIS owns approximately 40 basis points of TIPS across its portfolio, but that NIS tends to be underweighted in duration ifi it believes interest rates will rise. It is not currently bullish on that investment vehicle due to past experiences, and NIS remains cautious. NIS has some exposure to floating note rate bonds however these do not typically appear in high quality portfolios. Chair Konstantopoulos thanked Mr. Anderson and Mr. Caprio for their presentation. 8.2. Presentation and Discussion Re: Wells Fargo Asset Management, Investment Performance Summary as of June 30, 2021. Presenter(s): Dann Smith, Business Development/Relationsnp Management, Institutional Asset Management; Doug Basile, Senior Portfolio Specialist, Heritage Growth Equity, Wells Fargo. Asset Management. Dann Smith and Doug Basile appeared before the Board telephonically and introduced themselves. Chair Konstantopoulos requested that the presentation focus on market and performance reviews. Mr. Basile discussed the Heritage Growth Equity team and stated that Joe Eberhardy, lead manager of the small cap portfolio, has retired; this will have a minimal effect on the Plan's portfolio. Wells Fargo has also added Joel Hoeffler as a research analyst. Mr. Basile discussed the portfolio's Performance as of June 30, 2021. He noted the rally in the earlier part of 2021 is more of a headwind for Wells Fargo's investment style, however, year-to-date as of close of Book 1 Page 242 09-24-2021 8:15 a.m. Book 1 Page 243 09-24-2021 8:15 a.m. business on September 23, 2021, the portfolio was up 19.4% and the benchmark was up approximately 19.6%; the portfolio's 1-year trailing retumn is 42.4% and the Russell 1000 Growth index is at 39.6%. He discussed how earnings estimates indicate a stronger recovery which is would benefit cyclicals, that interest rates remain low and supportive, however even if interest rates rise the portfolio may still perform well just as it had in 4 prior periods of rising rates. Mr. Basile reviewed the Portfolio Attribution and discussed some of the best and worst performing sectors and companies; he also reviewed the Portfolio positioning. Mr. Smith added that the firm is in the process of separating from Wells Fargo and will soon refer to themselves as Alispring Global Investments; with an anticipated date of completing the separation during the 4th quarter of this calendar year. The Board thanked Mr. Basile and Mr. Smith for their presentation. 8.3. Presentation and Discussion Re: Burgess Chambers & Associates, Investment Performance Summary as of June 30, 2021. Presenter(s): Larry Cole, Executive Vice President, Burgess Chambers & Associates. Mr. Cole discussed a general market overview for the quarter and estimated that the Russell 3000 index is up more than 3% for the quarter, and the Plan's portfolio is up approximately 2% from the amounts stated in his materials. He anticipates a positive year, albeit a rocky month, due to the Federal Reserve keeping interest rates low, the amount of government stimulus in the US and world-wide, and quarterly earnings are stronger than expected. While he is cautiously optimistic for a positive year, Mr. Cole will recommend a small rebalancing request later in the presentation. He is reviewing alternatives for fixed income which he may present to the Board at a later meeting. Mr. Cole discussed the Investment Policy Compliance Review noting no issues, the Investment Performance Net and the Actual VS. Target Asset Allocation, pointing out an overweight in domestic equities and an underweight in fixed income; he suggested real estate may soon become more attractive again. Mr. Cole reviewed the Asset Allocation noting no concems with any specific manager. He reviewed the Asset Allocation & Performance - Gross. He explained that all the fixed income manager rankings are poor relative to their universe, however the range between the top and bottom quartiles is extremely narrow, and each of the three fixed income managers have biases towards quality and conservative investment strategies. Further, while they rank low, they each have outperformed their respective benchmarks. Mr. Cole had no current recommendations regarding fixed income 0. Turning to the Fiscal Year Rates of Return, Mr. Cole noted the assumed rate of return is 6.75%, and that as of today, the FYTD is even closer to 25%. On the Total Fund slide, Mr. Cole pointed out that over the 5- year rolling percentile ranking, the Plan has consistently remained in the top 25% of municipal pension funds surveyed. Mr. Cole recommended de-risking the portfolio by taking $2 million from BNY Mellon and investing $1 million into Cohen & Steers and $1 million into Lazard. He sees this as a defensive strategy in considering legislation regarding infrastructure is pending in Congress. He is looking at other options regarding private credit as well as real estate, however those will be brought up at later times. Trustee Hudgins asked Mr. Cole to provide research materials on private credit insurance in advance of the next meeting. Pension Plans Administrator Martin asked Mr. Cole to send the information to her and she would distribute the materials to all the trustees. Trustee Hudgins made a motion to take $2 million from BNY Mellon domestic equity and invest $1 million in Lazard and $1 million in Cohen & Steers. Trustee Baty seconded the motion. The motion carried unanimously (4-0). Trustee Hudgins noted the actual rate of return for the year and assumed rate of retum of 6.75% is reducing the unfunded actuarial liability of the Plan even faster than anticipated. 9. UNFINISHED BUSINESS: 10. NEW BUSINESS: 11. ATTORNEY MATTERS: Attorney Christiansen asked if the State of Florida money has been received, in the amount of $678,608; Pension Plans Administrator Martin confirmed it had been received and Mr. Cole confirmed it has been invested appropnately. 11.1. Presentation and Discussion Re: Update to Summary Plan Description. Presenter(s): Scott Christiansen, Christiansen & Dehner, PA. Attorney Christiansen advised the Plan is required to update the Summary Plan Description every 2 years and distribute it to the active members of the Plan. Trustee Baty made a motion to accept the revised Summary Plan Description as provided by Attomey Christiansen; Trustee Hudgins seconded the motion. The motion carried unanimously (4-0). Attorney Christiansen stated he is downsizing his firm and giving up 15 clients, however he is retaining the Plan as a client. The Board and Attorney Christiansen discussed the potential for transitioning to a new attorney when Attorney Christiansen retires. He anticipates retiring within a year or two but would give several months advance notice to the Board. Currently Sugarman & Suskind, which represents the City of Sarasota's Firefighters' Pension Plan, and Klausner, Kaufman, Jensen & Levinson are the only two firms in Florida which specialize in pension administration, and there are not many attorneys in this field. Trustee Hudgins suggested a workshop to discuss identifying and transitioning to a new attorney due to the critical role the attorney plays in the governance of the Plan. Attorney Christiansen stated there is no subgroup within the Florida Bar for pension attorneys, although there is a national organization. Attorney Christiansen noted his office location changed from unit 107 to 106; the street address, phone numbers and e-mail addresses did not change. 12. OTHER MATTERS: 12.1. Presentation and Discussion Re: Administrative Budget Expense Report, April 1, 2021, through June 30, 2021. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated the total expenses are at 72% expended at 75% of the year. The Board had no questions. Book 1 Page 244 09-24-2021 8:15 a.m. Book 1 Page 245 09-24-2021 8:15 a.m. 12.2. Presentation and Discussion Re: Check Register. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated this is presented as Pension Administration makes payments via ACH, and therefore copies of checks are not available. The Board had no questions. 12.3. Presentation and discussion Re: 2022 Meeting Calendar. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated she worked with Attorney Christiansen's office to determine the proposed dates of the 2022 calendar. Trustee Hudgins made a motion to approve the dates of the proposed 2022 calendar; Trustee Baty seconded the motion. The motion carried unanimously (4-0). Pension Plans Administrator Martin stated Pension Administration performed a final review of a DROP schedule for a member who had entered the DROP in January 2018 which identified an error on the DROP payment schedule. This triggered a complete review of all current DROP members; an error was found in a second member's DROP schedule; both erroneous DROP schedules had been computed on the same day in January 2018. At the time these two DROP computations were performed, Pension Administration was understaffed, had minimal supervision and internal controls, and the existing staff at the time had many other high-priority responsibilities affecting the entirety of retirees of all three of Sarasota's defined benefit pension plans. Pension Administration contacted both affected members, discussed the errors with them, and provided each with corrected DROP schedules. In both cases, no monies had been paid at the time the errors were detected. Trustee Hudgins and Pension Plans Administrator Martin discussed how the error was identified. Pension Plans Administrator Martin stated she performs a review of each DROP computation before payments are made. Further, one of the internal controls that Pension Administration has implemented in the past couple ofy years is as secondary review of DROP schedules before being presented to members who enter the DROP. Additionally, DROP documentation includes a note advising members to visit Pension Administration prior to leaving the DROP sO that an additional final review may be performed to confirm accuracy. Pension Plans Administrator Martin believes appropriate controls are now in place SO that these types of errors will not recur. Trustee Hudgins asked how an overpayment would be recovered if an error was identified after payments were made. Pension Plans Administrator Martin advised payments could be amortized over time sO that a retiree would not be required to make a lump sum payment with little notice. Chair Konstantopoulos asked who the supervisor at the time the errors were made; Pension Plans Administrator Martin stated it was Cynthia Akersloot, who was abruptly terminated from the position. Pension Plans Administrator Martin noted the City Auditor and Clerk at that time did not assume any additional oversight of Pension Administration, and the Pension Plans Administrator position remained vacant from January 2018 to October 2018. Attorney Christiansen, at Chair Konstantopoulos' request, advised the City's code regarding over- and under- payments is clear and the Board's responsibility is to ensure payments are accurate. Trustee Baty asked by what percentage were the two miscalculated DROP calculations in error. Pension Plans Administrator Martin stated that in both calculations, an additional 3.2% Cost of Living Adjustment applied in 3 of the 5 years. In one of the calculations, the member elected a 100% to joint and survivor option which reduces the member's benefit, however a higher benefit amount was used in the computation of DROP payments. Trustee Baty opined that because the DROP computations are not performed until a member enters the DROP, each member's decision to enter the DROP was made before their respective computations were performed. 13. ADJORN. Chair Konstantopoulos adjourned the meeting at 10:20 a.m. Chair Demetri Kohstantopoulos Secfelah/Treasurer Shayls Griggs Book 1 Page 246 09-24-2021 8:15 a.m.