MINUTES OF THE CITY OF SARASOTA FIREFIGHTERS PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF JULY 24, 2019 Present: Chair Michael Hartley, Vice Chair Shelia Roberson, Trustee Charles Joseph and Trustee Scott Snow Others: Attorney Pedro Herrera, Pension Plans Administrator Debra Martin, and Senior Pension Analyst Anthony Ferrer Absent: Secretary/Treasurer Shayla Griggs 1. CALL THE MEETING TO ORDER: Chair Hartley called the meeting to order at 9:02 a.m. 2. PLEDGE OF CIVILITY: Trustee Snow read into the record a memorandum from Mayor Willie Charles Shaw, dated February 13, 2015, entitled "City Commission and Advisory Board Meeting Protocols and Pledge of Civility." 3. PUBLIC INPUT: None 4. APPROVAL OF MINUTES: 4.1. Approval Re: Minutes of the Firefighters' Pension Plan Board of Trustees Regular Meeting of June 19, 2019. Amotion was madel by" Trustee Snow and seconded by Trustee Joseph to approve thel Minutes of the Firefighters' Pension Plan Board of Trustees Regular Meeting of June 19, 2019. Motion carried unanimously (3-0). Attorney Herrera entered chambers at 9:04 a.m. 5. INVESTMENT PERFORMANCE REVIEW: 5.1. Presentation and Discussion Re: HGK Asset Management Performance Review as of June 30, 2019. Presenter: Matthew Witschel, Director, National Accounts, HGK Asset Management Mr. Witschel came before the Board and introduced himself. Mr. Witschel provided an overview of the Plan's performance since inception from May 2015 through June 2019; the Plan started with $14,069,477.00; market value as of June 30, 2019 of 14,847,693.00; net of withdrawals over the past four years is approximately $800,000.00; as of June 2019, annualized return rate of 5.64% versus the Russell 1000 benchmark of 7.74%. Book 1 Page 153 07-24-2019 9:00 a.m. Book 1 Page 154 07-24-2019 9:00 a.m. Vice Chair Roberson entered chambers at 9:14 a.m. Mr. Witschel gave a brief overview of the attribution analysis as outlined on page ten of the presentation material. Mr. Owens, Institutional Consultant, Graystone Consulting came before the Board and introduced himself. Mr. Owens addressed Mr. Witschel asking what HGK earnings per share are relative to the benchmark, Mr. Witschel replied higher and briefly reviewed HGK investment philosophy; discussion ensued regarding the benchmark earnings per share for the assets in the portfolio and market catalysts. Chair Hartley asked for review of the risk retumn figures on page seven of the presentation materials, Mr. Owens stated over the reported three-year time there was a lot more volatility than its respective benchmark; this time period also had the highest return. Vice Chair Roberson posed the question to Mr. Owens regarding the cash HGK has on hand in the account at June 30, 2019, Mr. Witschel noted typical approximately a 2% cash position; Mr. Owens noted 2-3% is average for any portfolio manager. Chair Hartley asked if there are any changes in the firm and Mr. Witschel noted no recent changes in the large cap team. Mr. Owens posed the question to Mr. Witschel in an environment with fundamentals looking great if there is no rise ini interest rates, when do you think rates will go up Mr. Witschel replied inflation in the economy could be a catalyst, also tariffs and the trade war. Discussion ensued. The Board thanked Mr. Witschel for his presentation. 7. NEW BUSINESS: 7.1. Presentation and Discussion Re: 2018 GASB 68 Engagement Presenter(s): Kimberli Radtke, Director, Office of Financial Management, Sarasota County, Nicole Jovanovski, CPA, CGMA Director of Finance, Sarasota County Clerk & Comptroller and Michael Regnier, Sarasota County Fire Chief Ms. Radtke, Ms. Jovanovski and Mr. Regnier came before the Board and introduced themselves. Ms. Jovanovski stated, as in years past, for the County to meet the requirements of GASB 68 and 71 regarding pension, the County has worked with the Plans auditor as well as the Plans actuary to get the reporting components needed for the County to file their requirements in its annual report. As in years past a letter has been submitted requesting a report from the auditor that will give the information related to the net pension liability, total deferred inflows and outflows of resources and pension expense reflective of the proportionate share for the City and the County, as well as the Plan's auditor rendering an opinion on the actual actuaries schedule of collective pension amounts. Vice Chair Roberson asked if this report is in addition to the Plan's audit and if the County has a relationship directly with Maudlin and Jenkins with the payment directly from the County, Ms. Jovanovski confirmed this. Chair Hartley asked for GASB 71 details, Ms. Jovanovski replied GASB 68 and 71 are the two standards from the Governmental Accounting Standards Board that represent the pension liability, one is for the pension Plan itself and the other is for the Plan sponsor. Attorney Herrera confirmed that GASB 71 relates to the Plan sponsor. A motion was made by Vice Chair Roberson and seconded Trustee Joseph to approve and authorize the auditor, Mauldin and Jenkins, to provide the requested information and opinions as set forth in the correspondence. Motion carried unanimously (4-0). Ms. Martin stated Pension Administration will coordinate with Mauldin and Jenkins for an engagement letter. 5.2. Presentation and Discussion Re: Graystone Consulting Investment Performance as of June 30, 2019. Presenter(s): Scott Owens, Institutional Consultant, and Andy Mcilvaine Institutional Consultant, Graystone Consulting Mr. Owens and Mr. Mcilvaine came before the Board and introduced themselves. Mr. Owens reviewed correspondence from UBS on a 16% write-down of the retail portion of the portfolio resulting in about a 4-5% reduction in market value; discussed retail space, quarterly appraisers and external auditors and concluded that his opinion is no action needed at this time. Attorney Herrera posed the question if there are other funds that do not have such a large exposure to the retail space Mr. Owens replied yes; asset class chosen for income and lower volatility, and the income has not been affected; the hit has been taken; and concluded that his opinion is that this likely will not reoccur; discussion ensued. Mr. Owens will review a potential transfer of Funds from the TPF to TPI and associated time frame. Trustee Snow left chambers at 10:13 a.m. and returned at 10:15 a.m. Mr. Mcilvaine provided the quarterly report; reviewed economic factors; the overall market did well; S& P 500 had the best first half of the year since 1997, up 18 % % year to date; Russell 1000 up 4.25% year to date; Russell 2000 up 2.10% year to date; except for energy, ten out of the eleven sectors all had positive returns; Barclays Capitol Aggregate positive 3.08%. Mr. Owens noted a portfolio value of $155,030,940.00 representing a gain, net of fees and transactions, of $4,143,426.00 for the quarter. Mr. Owens gave a brief overview of the portfolio performance with a breakdown of returns. Mr. Owens reviewed page five outlining the total gain and loss of each manager and the net contribution figures. Vice Chair Roberson requested that inception dates be provided in future reports, Mr. Owens confirmed this. Mr. Owens gave an overview of the risk and return graph as outlined on page seven and compliance checklist on page eight of the presentation material. Vice Chair Roberson inquired on page 8, actuarial rates of return listed at years 1,3, and 5 are at 7%; Mr. Mcilvaine stated this should state 6.85%; and that the change will be made. Mr. Owens discussed revising the compliance checklist so that the investment policy compliance is on one page and the performance review on a separate page. Attorney Herrera stated this will give a clearer perspective viewing the information. Chair Hartley commented on the HGK and Renaissance historical analysis figures, Mr. Owens responded that the Renaissance diverse rebalancing strategy has been influenced by the international markets. Book 1 Page 155 07-24-2019 9:00 a.m. Book 1 Page 156 07-24-2019 9:00 a.m. Mr. Owens concluded with an overview of infrastructure, an alternative asset class, this is a more prevalent investment strategy now; driven by urbanization, global exposure, and new energy forms; generation of consistent income from long term government contracts. Ms. Martin left chambers at 10:52 a.m. and returned at 10:57 a.m. Consensus from the Board for recommendations on asset classifications, percentages and an exit strategy from MLPs; Mr. Owens noted an asset allocation study will be prepared for the September meeting. Discussion ensued. Consensus to have infrastructure managers available to present at the September 25, 2019 meeting; a revised investment policy statement will be provided by Attorney Herrera in preparation of reallocations. Chair Hartley requested Cohen and Steers, Inc. to present at the September 25, 2019 meeting. Vice Chair Roberson posed the question seeking to obtain a matrix of ten different comparable pension funds containing al breakdown of assets and percentage of asset classifications. Attorney Herrera replied this would be a collaborative effort and even with the same asset allocations it is not an apple to apples comparison. Discussion ensued. The. Attorney, Actuary and Graystone will collaborate and prepare this report. Mr. Owens will send the completed report to Pension Plans Administrator Debra Martin for distribution to the Board. Mr. Owens gave an overview of private credit investing. The Board noted consensus to the performance report prior to to deciding if Mr. Owens will be requested to provide additional information on private credit investing for the September Meeting. The Board thanked Mr. Owens and Mr. Mcilvaine for their presentation. 6. UNFINISHED BUSINESS: 6.1. Fiduciary Insurance Quotes Debra Martin, Pension Plans Administrator Ms. Martin noted 6.1A was presented at the June meeting at which additional quotes were requested as outlined: Proposed Premiums: $25,298.00 with $3m Limit and $5,000 deductible $20,907.00 with $2m Limit and $5,000 deductible Other options with different limits: $25,953.00 with $4m Limit and $50k deductible $23,747.00 with $3m Limit and $25k deductible $19,374.00 with $2m Limit and $25,000 deductible Chair Hartley asked what limits and deductibles are currently in place and PPA Martin replied $5m Limit with a $50,000 deductible and the premium for 2018-2019 was $29,027.00. Trustee Joseph asked Attorney Herrera for recommendations Anthony Herrera replied the Plan is closed sO there are no more calculations; there are sufficient controls and staff in place; it is a cost benefit analysis while the overall limit is important, a more important consideration is the deductible amount. Discussion ensued. A motion was made by' Vice Chair Roberson and seconded by Trustee Joseph to renew the Fiduciary insurance with $2m Limit and $5,000 deductible at the $20,907.00 rate. Motion carried unanimously (4-0). PPA Martin reviewed the need for commercial insurance which covers office equipment, business personal property and includes accounts receivables and valuable papers coverage. PPA Martin noted that after discussion with thei insurance broker, the broker asked if the City's property package specifically lists the pension plans individually as named and additionally insured entities, if not it is strongly suggested to keep the insurance at a premium quoted at $856.00 per year. Ms. Martin added she is awaiting a response from the City's risk management division. Attorney Herrera added the Board can approve a motion to conditionally approve binding the policy as quoted, should risk management advise the Pension Plans Office it is not specifically identified as named insured on the existing City's property package. A motion was made by Vice Chair Roberson and seconded by Trustee Joseph to conditionally approve binding the policy as quoted, should risk management advise Pension Plans Office is not specifically identified as named insured on the existing City's property package. Motion carried unanimously (4-0). 7. NEW BUSINESS: 7.2. Legislative Update and Plan of Action Re: Florida Statute 112.1816 Presenter: Pedro Herrera, Attorney, Sugarman and Susskind, P.A. Attorney Herrera gave a brief overview of Florida Statute 112.1816;; from the Pension Plans perspective the new law amends chapter 112 to provide an additional presumption for in line of duty or service connected deaths and/or disabilities; the new law states if a qualified firefighter is diagnosed with one of the 21 enumerated forms of cancer, and if you meet the Plans definition of total and permanent disability is met, unable to perform useful and efficient services a firefighter., and it is a result of the diagnosis of the cancer of the issue that arises with the treatment of that cancer, itis presumed to bei incurred in thel line of duty; there is some discussion as to whether this presumption is rebuttable; the Plan is closed and as a result of all being retired, no member is eligible for disability benefits and no member is eligible for preretirement death benefit. Therefore, the new amendment does not affect this Plan at all. Attorney Herrera added from the employer standpoint the new law provides additional benefits should an individual who is diagnosed with cancer elect not to pursue the workers compensation benefits which they would then be eligible for a $25,000 lump sum payment from the employer; the law requires that the employer pay for any out of pocket expenses incurred by the member as a result of the cancer treatment; the law also provides fort the employee if the employee remains on the employer sponsor health plan after the employee separates service, the same benefit would be afforded to those individuals for up to ten years after they stop working. Attorey Herrera reminded the board the Form 1 Financial Disclosures were due on July 1 and asked Pension staff to check Sarasota County, or any County of residence, website to assure all forms were submitted. Attomey Herrera noted there has been a bout of lawsuits against public agencies because the websites are not compliant with ADA. There is no risk to the Pension Fund as the Fund does not have a separate website. Attomey Herrera discussed a recent bout of hackers breaking into agency systems, installing malware and Book 1 Page 157 07-24-2019 9:00 a.m. Book 1 Page 158 07-24-2019 9:00 a.m. requesting a ransom before releasing the data. 7.3. Avoidance of Benefits Overpayments, PBI Death Audit Services Proposal Presenter: Debra Martin, Pension Plans Administrator Ms. Martin gave an overview of Pension Benefit Information, LLC (PBI) company currently contracted with the City of Sarasota's other two Defined Benefit Pension Plans; PBI has quoted a fee of $1300.00; PBI is used by the Florida Retirement System as well as the Ft Lauderdale Police/Fire Pension office with positive feedback from all. A motion was made Vice Chair Roberson and seconded by Trustee Snow to direct staff to enter into a contract with PBI death audit service, CertiDeath, for the Fire Pension Board for $1300.00. Motion carried unanimously (4-0). 8. ATTORNEY MATTERS: 9. OTHER MATTERS: 10. ADJOURN: Chair Hartley adjourned the Firefighters' Pension Plan Board of Trustees Regular Meeting at 11:58 a.m. Swl Bda Chair Michael Hartley Vice Chair Shelia Roberson