MINUTES OF THE JANUARY 22, 2016 CITY OF SARASOTA GENERAL EMPLOYEES PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING Present: Chair Gretchen Schneider, Vice Chair Barry Keeler, Secretary Pamela Nadalini, Treasurer John Lege, III, and Trustee Ryan Chapdelain and Bonnie Wagner Others: Attorney Lee Dehner, Pension Plans Administrator Harry Ramphal, Senior Pension Analyst Anthony Ferrer, and Pension Specialist Chinyere Deehan Absent: Trustee Kari McVaugh 1. CALL THE MEETING TO ORDER: Chair Gretchen Schneider called the meeting to order at 10:00 a.m. 2. PLEDGE OF CIMILITY: Chair Schneider read into the record a memorandum for Mayor Willie Charles Shaw, dated February 13, 2015, entitled City Commission and Advisory Board Meeting Protocols and Pledge of Civility. 3. CHANGE TO THE ORDER OF THE DAY: Secretary Nadalini sought Board consensus to add Agenda Item 6, Item No. 1, Presentation and Discussion Re: Center Coast Capital, LP. Chair Schneider noted Board consensus to the Changes to the Order of the Day. 4. ANNUAL UPDATE ADVISORY COMMIITEE BOARDS: Deputy City Auditor and Clerk Karen McGowan, Office of the City Auditor and Clerk, came before the Board, distributed to the Board a form entitled "Information Technology (IT) Division - Workplace, Email, Internet, and Internet Acceptable Use Policy, and requested the form be filled-out and given to the Board's Liaison upon the meeting adjourning, and provided a brief overview on and referenced from sections of the Florida Govemment-n-ne-Sumanne (Sunshine) Law manual and stated that the requirements of the Sunshine Law are three-fold as follows: 1. All public Boards must be open to the public, for example, no luncheon or dinner meetings are to be held among members, but the Sunshine Law does not apply when meeting with a member(s) from a different Board. 2. Reasonable Notice must be given for all meetings, generally considered three business days in advance or one day for emergency posting. 3. Minutes of the meeting must be taken and promptly posted on the City's webpage once approved; however no specific format is required. Deputy City Auditor and Clerk McGowan continued stated that the Florida Govemment-n-neSumanne Law applies to Boards or Commissions of any State agency or authority in the State of Florida; that Fact-Finding Committees are limited to finding facts only and making no recommendations based upon the facts; that all written correspondence is subject to the Sunshine Law along with the use of personal computers and cellular telephones; that the same applies to using Staff or Liaisons as message carriers, which is a violation; that the Public Records Act applies to all material made or received in connection with official business of the public entity, including but not limited to documents, maps, any notes taken at meetings, and data processing software; that all emails and telephone records in connection with official business are subject to disclosure in the absence of a specific statutory exemption. Deputy City Auditor and Clerk McGowan continued further and provided a brief overview on and referenced from sections of the Robert's Rules of Order newly revised 11th edition handbook as related to quorums in Boards and Committees, proceedings the absence of a quorum and the Book 1 Page 1 01/22/16 10:00 A.M. Book 1 Page 2 01/22/16 10:00 A.M. manner of enforcing the quorum requirement, along with providing a brief overview on and referencing from sections of the Florida Commission on Ethics = Guide to the Sunshine Amendment and Code of Ethics for Public Officers and Employees and explaining the use of Form 8B - Memorandum of Voting Conflict for County, Municipal, and other Local Public Officers, and concluding with the distribution of folders to each Board Members which contained the information discussed for reference and their reading pleasure. Chair Schneider on behalf of the Board thanked Deputy City Auditor and Clerk McGowan for her presentation. 5. PUBLIC INPUT: None 6. APPROVAL OF MINUTES: 6.1. Approval Re: Minutes of the Sarasota General Employees' Pension Board Membership Meeting of December 07, 2015 Trustee Chapdelain requested Board consensus to allow Managing Director Charlie Mulfinger of Graystone Consulting to clarify his recommendations with respect to the assumed rate of retum adjustment and moving toward fixed income investments allocation as indicated in the of the December 7, 2015, City of Sarasota General Employees' Pension Board Membership Meeting minutes, under New Business, Agenda Item IV, Item No. 1, Presentation and Discussion Re: Investment Performance. Chair Schneider noted Board consensus to allow Managing Director Charlie Mulfinger of Graystone Consulting to come before the Board. Managing Director Charlie Mulfinger of Graystone Consulting, came before the Board and stated that in response to Trustee Chapdelain request for clarification, if the Board lowered the assumed rate of return there would be no negative consequences; however, he is not recommending this action at this time. Additionally, due to the low interest rate in the market he is not recommending that the management move to fixed income investments. Chair Schneider stated that the minutes of the December 7, 2015, City of Sarasota General Employees' Pension Plan Membership Meeting, under Approval of Minutes, Agenda Item III, Item No. 1, Approval of the Meeting Minutes of the October 19, 2015 General Employees' Pension Plan Board of Trustees Regular Meeting, should be corrected to reflect the motion to approve the minutes was made by' Vice Chair Keeler and not her since she is unable to make a motion, and Secretary Nadalini stated that the Chair does have the ability to make a motion for approving minutes. Secretary Nadalini stated that the recording would be reviewed and the necessary clarification and correction made if deemed necessary. A motion was made by Trustee Chapdelain, seconded by Vice Chair Keeler to approve the December 7, 2015, City of Sarasota General Employees' Pension Plan Board of Trustees Membership Meeting minutes, with the noted clarification and correction. Motion carried unanimously (5-0). 7. NEW BUSINESS: 7.1. Presentation and Discussion Re: Center Coast Capital, LP Joe Herman, Vice President, Center Coast Capital, LP came before the Board to present a general market update and detailed account overview of the company's investments and briefly discussed how the volatility of oil prices affects the market value of Master Limited Partnerships. In response to a question from Treasurer Lege about natural gas prices, Mr. Herman stated that the outlook for natural gas prices is better than that of crude oil in the long-term and briefly provided a detailed discussion regarding crude oil and natural gas fundamentals in relation to expectations of these commodities' future prices. 7.2. Presentation and Discussion Re: Quarterly Investment Performance Report as of December 31, 2015 Charles Mulfinger, Managing Director, and Scott Owens, Institutional Consultant, Graystone (Graystone) Consulting, came before the Board to present the Quarterly Performance summary for the quarter ending December 31, 2015. Mr. Mulfinger provided a market update and stated that while there has been a decline in the equity market, the recommends is that the current investment allocation remain unchanged and wait for asset values to regain recent losses. In response to a question by Attorney Dehner asking if Graystone would provide the Board with a report detailing investment losses, Mr. Mulfinger stated that he would consult with the Graystone Compliance Department to have a report created for presentation to the Board. In response to a request from Secretary Nadalini asking for clarification regarding regrets of the Plan being invested in Master Limited Partnerships (MLPs) as stated by Mr. Mulfinger, Mr. Mulfinger stated that the Board made a prudent decision to allocate Plan funds to this asset class; that decision was made with the support of the Board's Investment Consultant, and briefly described that MLPS are a fundamentally sound asset class which has experienced a shock due to volatility in the oil market; that any regrets expressed was due to the loss of the Plan market value. Secretary Nadalini stated that she was not in favor of increasing any additional funds to MLPS, Mr. Mulfinger stated that the Plan has lost approximately $1,871,000 in the Center Coast Capital, LP account from when opened January 2015 through the end of the calendar year. Mr. Mulfinger continued and briefly discussed the breakdown of returns among the managers, and stated that the portfolio's total quarterly retum was 2.78% while the benchmark index realized a quarterly return of 2.91%. 7.3. Discussion Re: Assumed Rate of Return Pete Strong, Senior Consultant and Actuary, Gabriel, Roeder, Smith & Company, was telephone conference to discuss the assumed rate of return, and advised the Board that of the current valuation results not readily available due to the audit of the plan assets currently being progress. Mr. Strong continued that results based on last year's valuation were run to get an idea of how an impact would affect investment returns, and discussed briefly the statutory requirement which the Board must adopt as related to the Florida Retirement System (FRS) mortality tables in 2016. In response to a question from Trustee Chapdelain regarding the length of time the new mortality tables would be utilized, Mr. Strong advised that the new mortality tables would be used for the next three or four years and after that, any changes to the mortality tables depends on what the FRS is experiencing. Book 1 Page 3 01/22/16 10:00 A.M. Book 1 Page 4 01/22/16 10:00 A.M. Secretary Nadalini stated that due to the requirement to adopt the revised mortality tables, it would be prudent for the Board to wait to make any changes in the Plan's assumed rate of return and to be reminded of the Board's fiduciary responsibility to the Plan since any. potential change would require input from Treasurer Lege in his capacity as the City's Financial Administration Director. A motion was made by Treasurer Lege, seconded by Secretary Nadalini, to maintain the Plan's Assumed Rate of Return at 7%. Motion passed 5-1. 7.4. Presentation and Discussion Re: USF Affiliate Services, Inc., Independent Service Auditor's Report Bradley Rinsem, President and Chief Executive Officer, and Lynn Skinner, Vice President, Salem Trust Company, came before the board to discuss the Auditor's Report and issues pertaining to Salem Trust Company's recent software conversion. Mr. Rinsem stated that Salem Trust Company encountered several issues that affected its ability to provide sufficient services to clients; that the public accounting firm of Crowe Horwath conducted a Statement on Standards for Attestation Engagements (SSAE) No. 16 Audit, and issued an Audit Report in February 2014 which stated that Salem Trust Company's procedures were not in compliance with existing policy; that Crowe Horwath conducted another SSAE No. 16 Audit on Salem Trust Company's operations in 2015 and reported that there were no exceptions and all serious issues had been resolved. Mr. Rinsem continued and discussed the Audit Report and confirmed the three low-level concerns, and concluded that Salem Trust Company's is now fully competent to serve clients. In response to a question posed by Secretary Nadalini about reimbursement, Mr. Rinsem stated that Salem Trust Company would reimburse the General Employees' Pension Plan, as well as the Firefighters' and Police Officers' Pension Plans for any reasonable legal and other expenses which these plans have incurred while investigating Salem Trust Company failure of internal control. 8. ATTORNEY MATTERS: Attorney Dehner discussed the Legislative Session which will convene shortly and stated that there are no potential legislative issues which would concern the Plan; however the Board is reminded to complete their Form 1 - Financial Disclosures prior to July 1, 2016. 9. OTHER MATTERS: Vice Chair Keeler stated that he has been approached by retirees regarding anticipated Pension Reform and its effect on members of the Plan, and Secretary Nadalini stated that Pension Reform would be related to any legislative changes which may impact the City. 10. ADJOURN. Chair Schneider adjourned the General Employees' Pensions Board of Trustees Regular meeting at 12:24 p.m. a Amknd Chair Gretchen Schneider Secretary Pamela M. Nadalini