MINUTES OF THE CITY OF SARASOTA POLICE OFFICERS' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF MAY 22, 2020 VIA TELECONFERENCE, which is allowable under Executive Order No. 20-69 issued by Governor DeSantis on March 20, 2020 Present: Chair Ronnie Baty, Vice Chair Demetri Konstantopoulos, City Auditor and Clerk Shayla Griggs, Trustee Johnathan Todd, and Trustee Jody Hudgins. Others: Attorney Scott Christiansen, Pension Plans Administrator Debra Martin, Senior Pension Analyst Anthony Ferrer, and Manager of Public Broadcasting Miles Larsen. Absent: None 1. CALL MEETING TO ORDER: Chair Baty called the City of Sarasota Police Officers' Pension Plan (Plan) regular Board meeting to order 8:15 a.m. Chair Baty called a roll call. Chair Baty, Vice Chair Konstantopoulos, Trustee Todd, Trustee Hudgins, Pension Plans Administrator Martin, Senior Pension Analyst Ferrer, Attorney Christiansen appeared telephonically. City Auditor and Clerk Griggs appeared in person. Larry Cole of Burgess Chambers & Associates (BCA), Michael Opry and James A. Kowell of SSI Investment Management, Chris Greco and Liridon Gila of Sawgrass Asset Management, Leigh Anne Yoo and Bill Teichner of Frontier Capital Management Co., LLC, and Peter Strong of Gabriel Roeder, Smith & Company appeared telephonically. 2. PLEDGE OF CIVILITY: Chair Baty read into the record a memorandum from Former Mayor Willie Charles Shaw, dated February 13, 2015, entitled "City Commission and Advisory Boards Meeting Protocols and Pledge of Civility." City Auditor and Clerk Griggs confirmed no one from the public had called to participate telephonically. 3. PUBLIC INPUT: None. 4. APPROVAL OF THE MINUTES: 4.1 Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Regular Meeting of February 28, 2020. 4.2 Approval Re: Minutes of the Police Officers' Pension Plan Board of Trustees Special Meeting of March 27, 2020. Trustee Hudgins motioned to approve the minutes of the Regular Meeting ofFebruary 28, 2020 and Special Meeting of March 27, 2020; Trustee Todd Seconded the motion. The Board approved the minutes unanimously (4-0). 5. BOARD OF TRUSTEE REPORTS: 5.1. Presentation and Discussion Re: Highlights of Pension Activity for 2019. Presenter(s): Shayla Griggs, City Auditor and Clerk. Book 1 Page 178 05-22-2020 8:15 a.m. Book 1 Page 179 05-22-2020 8:15 a.m. City Auditor and Clerk Griggs presented the Highlights of Pension Activity for 2019. Trustee Todd made a motion to accept the report. Vice Chair Konstantopoulos seconded. The Board accepted the report unanimously (4-0). 5.2 Presentation and Discussion Re: Treasurer's Report for the Period Ending September 30, 2019. Presenter(s): Shayla Griggs, City Auditor and Clerk. City Auditor and Clerk Griggs presented the Treasurer's Report for the Period Ending September 30, 2019. Trustee Todd made a motion to approve the report. Vice Chair Konstantopoulos seconded. The Board accepted the report unanimously (4-0). 5.3 Presentation and Discussion Re: Annual Board Report for 2019. Presenter(s): Shayla Griggs, City Auditor and Clerk. City Auditor and Clerk Griggs presented the Annual Board Report for 2019 regarding attendance; she stated the report had been presented to the City Commission on March 16, 2020, and she presented it to the Board for informational purposes. Attorey Christiansen noted that the Annual Attendance Board Report incorrectly listed City Auditor and Clerk Griggs as a Trustee. City Auditor and Clerk Griggs agreed to revise the report to state she was appointed to represent the City of Sarasota and remove indication she was a trustee. Trustee Hudgins requested the report be amended to state she was appointed as a non-voting member until such time as her position with the City of Sarasota is affirmed. Attorney Christensen agreed. Chair Baty affirmed consensus to accept the Annual Board Attendance Report as amended. 5.4 Presentation and Discussion Re: Proposed Annual Budget for Fiscal Year 2020-2021. Presenter(s): Shayla Griggs, City Auditor and Clerk. City Auditor and Clerk Griggs presented the details of the Administrative Expense Report; she explained the Fiscal Year 2019-2020 budget did not accurately reflect staff salary increases, and that item had been corrected on the 2020-2021 budget. City Auditor and Clerk Griggs commented that the difference was approximately $5,300. The Board accepted the report unanimously (4-0). 6. RETIREMENT REQUESTIS!: None. 7. INVESTMENT PERFORMANCE REVIEW: 7.1 Presentation and Discussion Re: SSI Investment Management, Performance and Portfolio Review as of April 30, 2020 Presenter(s): Michael Opre, Portfolio Manager, James A. Kowal, Vice President, Institutional Client Service and Marketing, SSI Investment Management via teleconference. James A. Kowal, Vice President, Institutional Client Service and Marketing, and Michael Opre, Portfolio Manager, of SSI Investment Management came before the Board telephonically and introduce themselves. Mr. Kowal stated there had been no significant institutional changes at SSI since their last presentation to the Board. He provided an organizational overview of SSI and assured the Board it has an established business continuity plan and disaster recovery plan, which are standard industry practices. Mr. Opre presented the portfolio and performance review; he discussed the 2020 economic contraction and market downfall, industry challenges related to the COVID-19 health crisis, and benefits of the federal government's response. He stated that, as of April 30, 2020, the Plan's portfolio value was approximately $12.6 million, that the Plan's fiscal year to date retums remained positive at 3.62% gross, and 3.17% net, which was better than its ICE Bank of America All Domestic benchmark of3.05%. The Plan's calendar year to date return was -3.96% gross,-4.2% net, while the benchmark was -4.04%. Mr. Kowal provided a general discussion of convertible bonds in the context of current market conditions. Mr. Opre discussed the Plan's portfolio: the top and bottom five contributors, relevant characteristics, construction, and SSI's investment strategy. He noted the information presented on page 10 was in response to a specific previous request. Larry Cole of Burgess Chambers added that convertible investments were intended to protect the Plan's assets during a declining market, and the investments under SSI performed as expected. The Board thanked Mr. Kowal and Mr. Opre for their presentation. 7.2 Presentation and Discussion Re: Sawgrass Asset Management, LLC, Investment Performance as of March 31, 2020. Presenter(s): Christopher Greco, Partner, Institutional Sales and Client Service, Liridon Gila, Fixed Income Portfolio Manager, Sawgrass Assets Management, LLC via teleconference. Mr. Greco and Mr. Gila came before the Board telephonically and introduced themselves. Mr. Greco provided al brief operational overview of Sawgrass, and noted they have been the Plan's high-quality, core fixed income manager since 2016, with an approximate portfolio value of $13.5 million as of March 31, 2020, which provides protection to Plan assets during declining markets. Mr. Greco noted the Plan's quarter-to-date rate of return is 3.88%; that the Plan's one-year rate of retum was 9.60% compared to the benchmark Barclays Capital Aggregate Index return of 8.93%. Mr. Gila provided additional details about the portfolio and performance, noting the largest driver of return for the quarter was the Sector Allocation, noting the lowest quality underperformed and the longer maturity Treasuries performed best. Mr. Gila stated the yield to maturity was 1.93% compared to the aggregate index of 1.62%. Trustee Hudgins pointed out through discussion that because the Fed's reduction in the overnight rate was unforeseen, Sawgrass's returns were a result of circumstance rather than strategy. Mr. Cole added that funds holding treasury bonds found greater retums compared to those with investment grade corporate bonds. Mr. Gila added that there have been no downgrades this quarter. The Board thanked Mr. Gila and Mr. Greco for their report. 7.3 Presentation and Discussion Re: Frontier Capital Management Co., LLC, Portfolio Review as of March 31, 2020 Presenter(s): Leigh Anne Yoo, Director of Sales and Marketing, Frontier Capital Management Co., LLC via teleconference. Ms. Yoo came before the Board telephonically and introduced herself, William Teichner, CFA, Portfolio Manager, and Rushan (Greg) Jiang, CFA, Portfolio Manager. She advised Frontier focuses on small and mid-cap equity portfolios, provided a brief organizational and strategy overview, and that there have been no institutional changes since their last presentation. Ms. Yoo gave a brief Plan history with Frontier, and stated that the Plan has, as of May 22, 2020, approximately $5.4 million in assets under management, including recent withdrawals of approximately $2.8 million. Ms. Yoo noted Frontier has, since July 1, 2011, outperformed the Russell 2000 Value fund benchmark by 2.6%, but underperforming the benchmark on a year-to-date, one-year, and three-year basis due to the events of Book 1 Page 180 05-22-2020 8:15 a.m. Book 1 Page 181 05-22-2020 8:15 a.m. first quarter of 2020. Ms. Yoo pointed out that, although her presentation materials included return information between March 25, 2020 through May 7, 2020 which was 5.6% better than benchmark, that excess retum increased to 6% through May 22, 2020, which she attributed to stock selection. Mr. Teichner stated that the portfolio had been positioned in 2019, with anticipation of a significantly different economy than what had transpired calendar year-to-date. Mr. Teichner stated that despite the underperformance during the last quarter, he believes the market is improving, albeit slowly, and will continue to improve through the third and fourth quarters, although he expects high unemployment and reduced GDP in this and the next quarter. Ms. Yoo compared the current market to the 2008 recession, during which the market was down approximately 37% and Frontier was approximately 10% ahead of its benchmark for that timeframe, which was among the top 6.4% of small cap value equity portfolio managers. Mr. Cole added that he believed this was an atypical quarter and not representative of Frontier's performance under normal market conditions. The Board thanked Frontier for their presentation. 7.4 Presentation and Discussion Re: Burgess Chambers & Associates Investment Performance as of March 31, 2020 via Teleconference. Presenter(s): Larry Cole, Executive Vice President, Burgess Chambers & Associates via teleconference. Mr. Cole came before the Board and introduced himself. Trustee Hudgins advised he would soon need to leave the meeting in the event he was needed for a vote. Mr. Cole stated that Wells, one of the Plan's large cap growth managers, requested a change in the Plan's guidelines to allow it to increase their maximum individual holdings, which are currently 7%, to be comparable to their benchmark, the Russell 1000; Mr. Cole suggested the Plan consider Wells be allowed to increase individual holdings to the benchmark plus 3% weighted limit, until further amended. Mr. Cole noted Wells holds approximately 8% of the portfolio, and therefore a maximum individual position would have an approximate 1% impact. He further explained the entire portfolio limited individual issuer holdings to 5%. Trustee Hudgins made a motion to allow Wells to increase holdings to the benchmark plus 3%. Trustee Todd seconded the motion. The motion carried unanimously (4-0). Mr. Cole stated he would work with Pension Plan Administrator Martin to draft the addendum and provide it to the Board for execution and distribution. At Attorney Christiansen's request, Pension Plan Administrator Martin confirmed the investment policy statement approved at the Board's February 2020 meeting was executed by the Board and distributed as required. Mr. Cole gave aj performance and portfolio review and began bys giving a market history with focus on post-correction performance, noting those periods may be opportunities for investment rather than divestment. He stated that the Plan, as of May 20, 2020, is invested 39% in small and mid-cap domestic equities with a 35% target, although he saw no need for rebalancing at this point. He stated the Plan is over-weighted in real estate by 3.5% - 4% and has $10 million in pending withdrawals from JP Morgan, and the market has recovered by approximately 30% since March 24, 2020. He stated that from the end of the quarter through Wednesday, May 20, 2020, the Plan was up approximately 9.91%, which roughly estimates to a fiscal year position of -0.2%. Mr. Cole stated that he believes the most significant issue ini the market currently is the lack of available price-to-earnings ratios due to the disruption of commerce by the COVID-19 pandemic, which inhibits valuation determinations. He discussed details of the remainder of his presentation materials. Attorney Christensen asked for the status of the Cohen and Steers Collective Investment Trust; Mr. Cole stated the Plan became invested during the first week of April 2020, along with Lazard, which will appear on Burgess Chambers & Associates' next report. The Board thanked Mr. Cole for his report. 8. UNFINISHED BUSINESS: 8.1 Presentation and Discussion Re: Investment Return Assumption Rate. Presenter(s): Pete Strong, FSA, EA, MAAA, FCA, Senior Consultant and Actuary, Gabriel, Roeder, Smith & Company via Teleconference. Mr. Strong came before the Board and introduced himself. Mr. Strong noted the Board had requested at its January 2020 Meeting, when discussing the 2019 Actuarial Valuation Report, a 3-year projection of potential effects of the Florida Retirement System's (FRS's) revised mortality rates and reduction in investment return assumption rate to 6.85%. Mr. Strong stated that the Plan is projected to experience greater savings due to its Cost of Living Adjustment (COLA) than plans without a COLA as the mortality tables remove the Plan's most expensive payout years; he also noted the projections were determined prior to the market changes due to the COVID-19 health crisis and assumes a 7% investment retum per year. He explained that the adoption of a lower retum assumption rate would offset the decreased costs associated with the reduced FRS mortality rates to yield a cost neutral effect for the Plan. A discussion of the effect on the Plan's funded ratio, the timing of a Board decision to reduce the Plan's expected return rate, and other historical information relevant to FRS's reduction in its mortality rate ensued. Trustee Hudgins made a motion to reduce the Plan's 7% assumed investment return rate to 6.75% based on the FRS mortality rate for special risk class members effective with the October 1, 2020 valuation. The motion was seconded by Trustee Todd. The motion passed unanimously (4-0). The Board thanked Mr. Strong for his report. 9. NEW BUSINESS: None 10. ATTORNEY MATTERS: Attorney Christiansen reminded thel Plan traditionally selects or reselects officers in June, and requested it be added to the next Agenda. Attorney Christiansen also stated that the Plan should soon receive by mail required financial disclosure forms which need to be filed by July 1, 2020. He inquired regarding the status of notifying the State of Florida, the City of Sarasota, and the Plan's actuary that a declaration of investment return had been determined in its February 2020 meeting; Pension Plan Administrator Martin advised she believed it had been filed appropriately and would follow up to ensure it was. Attorney Christensen noted that oral arguments in the Con Agra class action suit for the defendant's motion to dismiss have been scheduled for June 25, 2020. Attorney Christiansen also stated that thej judge in David Van Gostein's disability case has not issued an opinion yet, and he expected the COVID-19 health crisis may cause additional delays. 11. OTHER MATTERS: 11.1 Presentation and Discussion Re: Administrative Expense Budget Analysis. Presenter(s): Debra Martin, Pension Plans Administrator and Lori Boyer, Senior Pension Accountant. Book 1 Page 182 05-22-2020 8:15 a.m. Book 1 Page 183 05-22-2020 8:15 a.m. Pension Plan Administrator Martin presented the Administrative Expense Budget Analysis, and noted it was on a cash basis except for insurance which is paid once a year but amortized over a 12-month basis. Chair Baty asked if any over-runs were anticipated; Pension Plan Administrator Martin explained that, as the prior year's budget did not accurately reflect staff salary increases therefore there may be a small overrun on salaries, and in payroll services as the Plan had to open a new company with ADP to appropriately handle 1099 reporting for members with line-of- duty disability, but that the total amount should not be exceeded. Attomey Christiansen noted the State of Florida looks at the total budget amount, and not the line-item amounts. Pension Plan Administrator Martin also advised that when an Administrative Expense Budget Analysis is presented, a check register would also be presented due to moving to an ACH process instead of paper checks. Pension Plan Administrator Martin pointed out that the next regular meeting was scheduled for June 12, 2020 and had one presenter; she stated thet following meeting is scheduled for July 24, 2020. Vice Chair Konstantopoulos made a motion to cancel the June 12, 2020 meeting; the motion was seconded by Trustee Todd. The Board approved the motion unanimously (4-0). Pension Plan Administrator Martin advised the fall school for CPPT certification has been cancelled as its summer conference was moved to thei fall; the next track fort trustee training for CPPT certification will be January 24-27, 2021. 12. ADJOURN. Chair Baty adjourned the meeting at 10:13 a.m. C ghair Ronnie KBaty Tempbfary Secretary and Treasurer Trustee Johnathan Todd