MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF DECEMBER 7, 2020. Present: Chair Ryan Chapdelain, Vice Chair Susan Blake, Secretary Shayla Griggs, Treasurer Kelly Strickland, Trustee Kari McVaugh, Trustee Mark Nicholas, and Trustee Robert Reardon. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, and Senior Pension Analyst Anthony Ferrer. Absent: None. 1. CALL MEETING TO ORDER: Chair Chapdelain called the meeting to order at 8:31 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." 3. ROLL CALL: Pension Plans Administrator Debra Martin called roll. Chair Chapdelain, Secretary Griggs, Treasurer Strickland, Trustee McVaugh, Trustee Nicholas, and Trustee Reardon appeared in person. Vice Chair Blake appeared telephonically. Attorney Scott Christiansen and Pension Specialist Peter Gottlieb also appeared in person. Pension Plans Administrator Martin and Senior Pension Analyst Anthony Ferrer appeared telephonically. 4. PUBLIC INPUT: None. 5. APPROVAL OF THE MINUTES: Attorney Christiansen stated that, because some of the Board was attending telephonically, the Board must determine extraordinary circumstances existed to authorize telephonic appearances and affirm a quorum was present. Secretary Griggs made a motion to affirm extraordinary circumstances exist to justify telephonic appearances by some trustees along with the quorum was physically present to hold the meeting. Trustee McVaugh seconded the motion. The motion passed unanimously (7-0). 5.1. Approval Re: Minutes of the General Employees Pension Plan Board of Trustees Regular Meeting of October 19, 2020. Presenter: Chair Chapdelain. Trustee McVaugh made a motion to approve the minutes of the October 19, 2020 meeting. Trustee Nicholas stated that the minutes should reflect, in section 9.3., Declaration of the Rate of Return, Vice Chair Book 1 Page 225 12-07-2020 10:00 a.m. Book 1 Page 226 12-07-2020 10:00 a.m. Blake's motion had been seconded by Chair Chapdelain, and not Trustee Reardon. Chair Chapdelain also noted the last word of the next-to-last paragraph on page 222 should be "range." The motion to accept the minutes as amended passed unanimously (7-0). 6. APPROVAL OF RETIREMENT REQUEST/S): 6.1. Approval Re: Normal Retirement Request of Diane Taylor. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin stated Ms. Taylor requests a normal retirement after 18.6 years of service. She has selected the 50% to joint annuitant option. Vice Chair Blake made a motion to accept Ms. Taylor's request and Trustee McVaugh seconded. The motion passed unanimously (7-0). 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: INVESCO Performance Review as of September 30, 2020. Presenter(s): Dane Hoard, Client Portfolio Manager, and Marvin Flewellen, Head of Client Management, Investments/Senior Client Portfolio Manager, INVESCO. Mr. Flewellen appeared before the Board telephonically and introduced himself and Mr. Hoard. Chair Chapdelain requested Mr. Flewellen limit his presentation to approximately 15 minutes. Mr. Flewellen discussed the Portfolio Summary noting it is a high-quality fixed income fund, Market Value Reconciliation, and Trailing Performance as of September 30, 2020. Chair Chapdelain asked Mr. Flewellen to address the $1.9M distribution noted on the Market Value Reconciliation slide; Pension Plans Administrator Martin advised the distributions were taken to pay monthly payroll and DROP distributions which had occurred. Mr. Hoard stated, regarding the fund's performance, that on a 10-year trailing basis, the portfolio returned 3.06% annualized on a gross basis compared to the benchmark's 2.98%; on a net basis, the portfolio returned 2.87% versus the benchmark's 2.58%. Secretary Griggs left the meeting at 8:50am and returned at 8:53am. Mr. Hoard discussed the top and bottom contributors year-to-date, annual performance, characteristics, sector distribution, and relative positions. Scott Owens of Graystone Consulting appeared before the Board telephonically and asked Mr. Hoard to discuss the direction of interest rates and his one-to-three-year outlook. Mr. Hoard reviewed the US Treasury Yields historical information in the presentation materials; he stated there is slack in the market globally, and there exists the potential for policy action to cause conflict, but from a pure economic standpoint, he expected rates to remain relatively benign over the next 12-18 months. He reviewed the Asset Class Comparison on pages 18 and 19 of the presentation materials. Chair Chapdelain thanked Mr. Hoard and Mr. Flewellen for their presentation and service. 7.2. Presentation and Discussion Re: Graystone Consulting, Quarterly Performance Summary and Quarterly Performance Report as of September 30, 2020. Presenter(s): Scott Owens, CFA, CIMA, Associate Vice President, Institutional Consultant, Andy Mclivaine, Institutional Consultant, Graystone Consulting. Mr. Owens and Mr. MclIvaine appeared before the Board telephonically and introduced themselves. Mr. MclIvaine asked if $600,000 had been disbursed from Allianz; Pension Plans Administrator Martin confirmed the disbursement had been completed. Mr. MclIvaine stated that Graystone had brought a small cap growth manager search in the event the Board would like to discuss it. Mr. Owens gave a recap of the economy and market during 2020 and discussed the Quarterly Performance Summary Capital Market Returns. Trustee McVaugh left the meeting at 9:12am and returned at 9:15am. Mr. Owens discussed emerging market funds, domestic and global fixed income funds, and the total fund executive summary. He discussed the portfolio asset allocation noting he would recommend rebalancing funds out of Allianz into NFJ, as well as funds out of ClearBridge and Polen on a pro rata basis into Templeton sO that these holdings meet their respective target weights. Chair Chapdelain stated the Board would take up the issue at the end of Mr. Owens' presentation. Mr. Owens discussed each of the fund managers. Chair Chapdelain left the meeting at 9:21am and returned at 9:22am. Mr. Owens stated that two Allianz executives had departed from the firm which prompted him to bring a small cap growth manager search, however the fund has continued to outperform its benchmark during the quarter and year; he does not recommend replacing that fund in the portfolio. Regarding AEW Private Real Estate and UBS Private Real Estate, Mr. Owens noted the Plan uses these defensively to guard against rising interest rates, and that he expects property valuations to decline in the short term but rise over the next few years. He stated property managers in both funds are working to retain tenants to maintain rental income, and he does not believe the Board should act regarding either at this time. Mr. Owens advised he would like the Board to consider the portfolio's allocation and recommends rebalancing the small cap managers to their respective targets. Treasurer Strickland made a motion, as explained by Mr. Owens, to reduce the balance at Allianz and invest it in NFJ, as well as increase Templeton to its target with proceeds from the portfolio's large cap growth managers. Trustee McVaugh seconded the motion. Chair Chapdelain asked Mr. Owens to confirm the rebalancing would correct Templeton from 6.1% to 8.8% using proceeds from overweighted large cap growth managers and reduce Allianz, which is at 12.7%, to its target with proceeds going to NFJ. Mr. Owens confirmed NFJ and Allianz would . take care of each other and put them right back at their 10%," which would, put them right on top of their targets, and that the only other overweighted holdings in the portfolio were large cap growth which were at the top of their range, noting, ClearBridge was at 8.6% with a range of 8.8%, sO it would make sense to bring that back and put iti into your underweight at Templeton. n Mr. Owens clarified his reports were as of September 30, 2020, and the numbers as of today will be different. Chair Chapdelain asked if Allianz should be brought back to 10%, or at the top of its range. Mr. Owens stated that value has started to outperform growth during the current quarter, and he did not want to be underweight in value ifi it is doing well now. The motion passed unanimously (7-0). Mr. Owens explained he had sufficiently discussed his concerns regarding the small cap growth managers and did not believe there was a need to further discuss item 8.2. Chair Chapdelain thanked Mr. Owens for his presentation and service and invited him to remain in the meeting for item 8.1. Book 1 Page 227 12-07-2020 10:00 a.m. Book 1 Page 228 12-07-2020 10:00 a.m. 8. UNFINISHED BUSINESS: 8.1. Presentation and Discussion Re: Declaration of the Rate of Return. Presenter(s): Chair Chapdelain. Pete Strong of GRS appeared before the Board elephonically and introduced himself. Chair Chapdelain gave a brief introduction of the circumstances regarding the Florida Retirement System's (FRS's) revised mortality tables which led to the Board's ability to reduce its declared expected rate of investment return, which aligns with its goal to reach a declared rate of return of 6% within 10 years. Mr. Strong explained that the FRS mortality table will offset roughly a 22-23 basis point reduction, and a modest investment gain from 2016-18 will aid in offsetting another 2-3 basis points for a combined 25 basis point reduction. Mr. Strong suggested two options to the Board: a) reduce the declared rate of return on a cost- neutral basis as much as possible, which he believed would be approximately 6.55%, or b) allow GRS to set the discount rate at whatever it needs to be to maintain a level contribution by the City from the prior year. He noted the second option may allow for a greater reduction if there are other positive gains on the demographic side, and it allows greater flexibility to adjust the rate based on the totality of circumstances. Mr. Strong, in response to the Board's question, stated that opportunities to significantly reduce the stated rate of return on a cost neutral basis are rare. A discussion of the matter ensued. Mr. Strong recommended a long-term goal of a stated rate of return of 6% by the time the majority of participants were retired sO that the Plan can be managed more conservatively at that time, although 6% may not be low enough. Reducing the declared rate of retum now eases that transition sO that when the Board revisits the issue, future reductions may be less significant. Mr. Strong opined one pathway could be to reduce the rate now to 6.55% and then reduce it by 5 basis points each year for the next 10 years. Mr. Strong noted that, if there were to be demographic losses, a 6.55% rate of retum could result in a slight cost increase. The Board discussed modifying Mr. Strong's suggestion by authorizing GRS's discretion to set the rate of return while limiting the reduction to a maximum of 25 basis points. Treasurer Strickland made a motion to declare an expected rate of return that is revenue cost neutral but reduce the rate of return to no lower than 6.55%. Trustee Nicholas seconded the motion. The motion passed unanimously (7-0). Mr. Strong stated he expects to present a valuation report at the Board's January 2021 meeting. Chair Chapdelain thanked Mr. Strong for his presentation and service. Attorney Christiansen advised the Board that not all reductions in the declared rate of return will be cost neutral, and eventually, a reduction may increase the City's contribution level. He applauded the Board for taking advantage of the opportunity created by the revised FRS mortality tables to lower the rate of return. 8.2. Presentation and Discussion Re: Graystone Consulting, Small Capitalization Growth Manager Search. Presenter(s): Scott Owens, CFA, CIMA, Associate Vice President, Institutional Consultant, Andy MclIvaine, Institutional Consultant, Graystone Consulting. Chair Chapdelain stated the item had been tabled for the time being. 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Proposed Ordinance Amending Chapter 24, Article II, Division 4, Sections 24-103, 24-108, and 24-116. Presenter(s): Scott Christiansen, Christiansen & Dehner, PA. Attorney Christiansen stated the proposed ordinance, as explained in his letter, is to reflect changes in the Internal Revenue Code to increase the age of required mandatory distributions from age 70 to 72, as well as to allow a person who had retired before the age of 59 % and was rehired to avoid penalty. Secretary Griggs stated the proposed ordinance would likely go before the City Commission in January 2021. The Board asked Attorney Christiansen to appear at the appropriate City Commission meeting when the item is presented. Vice Chair Blake made a motion to move the ordinance to the City Commission. Trustee McVaugh seconded the motion. The motion passed unanimously (7-0). 10. ATTORNEY MATTERS: Attorey Christiansen reminded the Board that the fiscal year-end reportlegislative reporting requirement is pension letter 2. It does not require action by the Commission. Attorney Christiansen asked the Board for the authority to update the Summary Plan Description (SPD), which Florida State law requires be done every two years, and the SPD was last updated in January 2019. Treasurer Strickland made a motion to authorize Attorney Christiansen to update the SPD; Trustee Nicholas seconded the motion. The motion passed unanimously (7-0). Attorney Christiansen stated he would check for pre-filed bills and report at the next meeting. 11. OTHER MATTERS: 11.1. Presentation and Discussion: Administrative Expense Budget Analysis. Presenter(s): Debra Martin, Pension Plans Administrator Pension Plans Administrator Martin presented the Administrative Expense Budget Analysis, and noted the actual budget was 82.4% of the proposed, with a significant savings due to lack of travel during the year. The Board had no questions. 11.2. Presentation and Discussion Re: Pension Fund Check Register, July 1, 2020 to September 30, 2020. Presenter(s): Debra Martin, Pension Plans Administrator. Pension Plans Administrator Martin advised the Check Register was presented due to the ACH process (trustees no longer see supporting documentation with checks presented for signing). The disbursements to Mass Mutual and VALIC were related to participants' DROP payments. The payment to Patricia Book 1 Page 229 12-07-2020 10:00 a.m. Book 1 Page 230 12-07-2020 10:00 a.m. Shinkle was to replace a lost check issuded by ADP, the Plan's payroll service. Chair Chapdelain asked Pension Plans Administrator Martin to distribute the final 2021 meeting schedule. 12. ADJOURN: Chair Chapdelain adjourned the General Employees Pension Plan Board of Trustees Meeting at 10:01 a.m. Chair Ryan Ghapdelain Secretay Shayla Griggs gbp