Book 1 Page 42 12/05/16 10:00 A.M. MINUTES OF THE CITY OF SARASOTA GENERAL EMPLOYEES' PENSION PLAN BOARD OF TRUSTEES REGULAR MEETING OF DECEMBER 5, 2016 Present: Chair Barry Keeler, Vice Chair Ryan Chapdelain, Secretary Pamela Nadalini, Treasurer Kelly Strickland, Trustees Gretchen Schneider, Kari McVaugh, and Bonnie Wagner Others: Attorney Scott Christiansen, Pension Plans Administrator Harry Ramphal, Senior Pension Analyst Anthony Ferrer, and Pension Specialist Chinyere Deehan Absent: None 1. CALL THE MEETING TO ORDER: Chair Keeler called the meeting to order at 10:00 a.m. 2. PLEDGE OF CIVILITY: Chair Keeler 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. ROLL CALL: Secretary Nadalini called the roll and a quorum for the meeting was noted. 4. PUBLIC INPUT: Susan Blake, Member of the Teamsters Local 173, a Union representing certain General Employees', came before the Board and stated that the Teamsters Union has been in discussion with the City's Human Resources Department regarding the proposed changes in the Pension Ordinance and is still not satisfied with the proposed changes; that current, active General Employees' (GE) Pension Plan Members are represented by the Southwest Florida Police Benevolent Association (PBA), Inc.; that to her knowledge, the PBA has not reviewed the proposed Ordinance changes. Ms. Blake continued that two former General Employees are currently employed with the Sarasota Police Department who are covered under the PBA Contract and are entitled to a Defined Benefit Pension Plan since they are not members of the GE Pension Plan. 6. APPROVAL OF MINUTES: 6.1. Approval Re: Meeting Minutes of the October 17, 2016 General Employees' Pension Plan Board of Trustees Regular Meeting A motion was made by Vice Chair Chapdelain, seconded by Trustee Wagner to approve the minutes of the October 17, 2016, General Employees' Pension Plan Board of Trustees Regular Meeting. Motion carried unanimously (7-0). 6. APPROVAL OF RETIREMENT REQUEST/S): 6.1. Approval Re: DROP Retirement Request of W. Susan Bouley Pension Plans Administrator Ramphal stated that W. Susan Bouley requested a DROP retirement date of December 1, 2016; that Ms. Bouley is 61 years of age, has 30 years of service, and elected the Lifetime Option. A motion was made by Trustee Schneider, seconded by Vice Chair Chapdelain to approve the DROP retirement request of W. Susan Bouley. Motion carried unanimously (7-0). 6.2. Approval Re: DROP Retirement Request of Herman Ezzell Pension Plans Administrator Ramphal stated that Herman Ezzell requested a DROP retirement date of December 1, 2016; that Mr. Ezzell is 72 years of age, has 10 years of service, and elected the Lifetime Option. A motion was made by Trustee Schneider, seconded by Vice Chair Chapdelain to approve the DROP retirement request of Herman Ezzell. Motion carried unanimously (7-0). 6.3. Approval Re: DROP Retirement Request of Rhonda Graham Pension Plans Administrator Ramphal stated that Rhonda Graham requested a DROP retirement date of December 1, 2016; that Ms. Graham is 60 years of age, has 30 years of service, and elected the Lifetime Option. A motion was made by Vice Chair Chapdelain, seconded by Trustee Wagner to approve the DROP retirement request of Rhonda Graham. Motion carried unanimously (7-0). 6.4. Approval Re: DROP Retirement Request of William Heffner Pension Plans Administrator Ramphal stated that William Heffner requested a DROP retirement date of December 1, 2016; that Mr. Heffner is 68 years of age, has 11.87 years of service, and elected the Lifetime Option. A motion was made by Treasurer Strickland and seconded by Trustee McVaugh to approve the DROP retirement request of William Heffner. Motion carried unanimously (7-0). Chair Keeler stated that he had an opportunity to speak with Mr. Heffner and he was not fully aware of his eligibility for the DROP; that Pension Administration should look for ways to reach out to those eligible active General Employees' Pension Plan (GEPP) Members in an effort to educate these members regarding Plan benefits. Secretary Nadalini stated that Pension Administration provides the General Employees' Summary Plan Description to each member and that this document is available online. 7. INVESTMENT PERFORMANCE REVIEW: 7.1. Presentation and Discussion Re: UBS Trumbull Property Fund Ronald Lanier, Managing Director, UBS (UBS) Realty Services Inc., came before the Board to present and discuss the performance of the Plan's investment in the Trumbull Property Fund; that the Plan's initial investment of $6,500,000 in September 2014 has grown to $7,339,000 as of September 30, 2016; that this represents an annualized net rate of return of 9.76%. Mr. Lanier continued and discussed the specific geographic regions of the United States in which the Trumbull Property Fund owns properties and provided detailed descriptions of some of the portfolio's holdings. In response to a question from Secretary Nadalini about the Trumbull Property Fund, Mr. Lanier stated that the Trumbull Property Fund is well-positioned to withstand an increase in interest rates as any increase in cost will be passed onto the Fund's tenants; that real estate in general is positively correlated to inflation; that UBS has been preparing for an increase in interest rates; Book 1 Page 43 12/05/16 10:00 A.M. Book 1 Page 44 12/05/16 10:00 A.M. that this portfolio is a value-added alternative investment which complements a pension fund's income seeking portfolio. Mr. Lanier concluded by thanking the Board for the opportunity to serve the General Employees' Pension Plan and stated that the Trumbull Property Fund strives to provide an annual rate of return that exceeds the rate of inflation by 5%. 7.2. Presentation and Discussion Re: Graystone Consulting Investment Performance as of September 30, 2016 Charles Mulfinger, Managing Director, and Scott Owens, Institutional Consultant, Graystone Consulting, came before the Board to discuss the Plan's overall investment perrormance as of September 30, 2016. Mr. Mulfinger stated that he is pleased to report that the Plan earned approximately $5,000,000 in the quarter ending September 30, 2016; that this performance, while impressive, is still under the benchmark, as some of the Plan's investment managers were defensively positioned. Mr. Owens gave a brief overview of the economic and financial market condition and stated that the volatility in investment returns is due to uncertainty regarding the Brexit vote, the United States Presidential Election, and events such as the Italian referendum; that volatility is expected for much of 2017; that the Plan's investments are strategically positioned for strong expected returns in 2017. Mr. Mulfinger stated that as of September 30, 2016, the Plan had over $138,000,000 of invested assets; that for the quarter ending September 30, 2016, the Plan experienced a net return of 3.83%, and for the fiscal year ending September 30, 2016, the Plan had a 7.89% net return and discussed the specific quarterly investment returns of each of the Plan's investment managers. Mr. Mulfinger continued and stated that the belief is equities will achieve greater returns than bonds during 2017. In response to a question from Secretary Nadalini regarding the outlook of real estate prices, Mr. Mulfinger stated that while real estate in general is not cheaply valued, it is fairly valued. In response to a question from Vice Chair Chapdelain regarding the Plan's stock and bond portfolio, Mr. Mulfinger stated that as the active membership of the Plan becomes retired, an increased investment allocation to fixed-income investments is favored. In response to a question from Trustee Wagner asking where the funding for this increased allocation would come from, Mr. Mulfinger stated that an increased fixed-income allocation would result in a decreased allocation to the large cap equity portfolio. Secretary Nadalini left Chambers at 11:01 a.m. and returned at 11:13 a.m. Discussion ensued about the differences between passive and active equity portfolios. Trustee Schneider left Chambers at 11:34 a.m. and did not return to the Chambers. Mr. Mulfinger thanked the Board for his ability to serve the General Employees' Pension since 1993. 8. UNFINISHED BUSINESS: 8.1. Status Report Re: Proposed Ordinance No. 16-5185, amending the City of Sarasota General Employees' Defined Benefit Pension Plan Attorney Christiansen stated that he is prepared to attend the Sarasota Regular City Commission Meeting later in the day regarding the proposed change in Ordinance, that he has had extensive discussion with union representatives and City Officials, and that his position is that the Commission approve the change. In response to a question from Secretary Nadalini regarding the proposed Ordinance, Attorney Christiansen stated that he has no reservations in recommending this change to the Commission. Human Resources Director Stacie Mason, Human Resources (HR) Department, came before the Board, and stated that she and Assistant City Manager John Lege, City Manager's Office met with Union Representatives and they expressed concerns regarding the proposed change related to lump sum payments to eligible members language during the meeting. Secretary Nadalini sought Board consensus for the Union Representation to come before the Board to clarify the noted concerns. Chair Keeler noted Board consensus from the Union Representation to come before the Board to clarify the noted concerns. Susan Blake, Member of the Teamsters Local 173, a Union representing certain General Employees, came before the Board and stated that the Union does have an issue with the proposed changes in Ordinance; that the Union has engaged a third-party Actuary to verify previous lump sum payments to eligible members. Attorney Christiansen stated that in the event the Union third-party Actuary renders an opinion the language in the Code regarding lump sum distributions to terminated eligible members is vague and subject to interpretation; that this procedure has been properly applied by prior Pension Staff and that the ultimate responsibility for the nterpretation of the Code lies with the Board of Trustees. Chair Keeler stated that there has indeed been instances of this calculation being performed by previous Pension Staff inconsistently, thus resulting in under-payments to Plan Members, and Secretary Nadalini stated that these cases would not have been discovered if not for the scrutiny faced by the lump sum distribution paid by Pension Administration in February 2016. Secretary Nadalini stated that the proposed Ordinance will be read at today's Regular City Commission Meeting and the City Commission will be informed that the Union has concerns regarding the lump sum distribution language in the proposed Ordinance; that prior to the second reading before the City Commission, Attorney Christiansen will advise the Board whether or not the Union's concerns are addressed. 9. NEW BUSINESS: 9.1. Presentation and Discussion Re: Assumed Rate of Return Charles Mulfinger, Managing Director, and Scott Owens, iInstitutional Consultant, Graystone Consulting, came before the Board and Pete Strong, Actuary, Gabriel Roeder Smith and Company were telephone conference to discuss the Plan's Assumed Rate of Return. Mr. Mulfinger stated that the Plan's current Assumed Rate of Return is 7%, that this rate is conservative when compared to other similar pension plans, and that over a 20-year investment horizon, the Plan should expect to meet this benchmark and sees no reason to change the Assumed Rate of Return at this juncture. Book 1 Page 45 12/05/16 10:00 A.M. Book 1 Page 46 12/05/16 10:00 A.M. Mr. Strong agreed with Mr. Mulfinger, and stated that there is no current need to alter the Assumed Rate of Return as this is a closed Plan; that as time goes on, there will be less active members as individuals retire; that at some point the investment allocation should favor fixed-income investments and a corresponding lowering of the Assumed Rate of Return. In response to a question from Vice Chair Chapdelain regarding the future Assumed Rate of Return in this scenario, Mr. Strong stated that when an increased fixed income portfolio is implemented, the target Assumed Rate of Return would be approximately 5% given the current low interest rate environment. In response to a question from Vice Chair Chapdelain about incrementally lowering the Assumed Rate of Return, Mr. Strong stated that any change in the Assumed Rate of Return could be in units as small as 5 or 10 basis points. Secretary Nadalini stated that lowering the Assumed Rate of Return in the immediate future would cause undue burden to the City in light of the recent adoption of the Florida Retirement Mortality Tables approved by the Board earlier in the year, and Vice Chair Chapdelain agreed. Vice Chair Chapdelain stated that he would like to address incrementally lowering the Assumed Rate of Return in the next year and added that he would like to see the rate lowered in increments of 5 or 10 basis points at a time, over a 10 to 15 year period, rather than 50 to 100 basis points at a time. 9.2. Approval Re: Revised General Employees' Summary Plan Description Attorney Christiansen stated that while the revised Summary Plan Description has been previously approved by the Board, the Actuary has provided an Exhibit to the Summary Plan Description; that Board's approval of the Summary Plan Description as presented with the Actuary's Exhibit is sought. Secretary Nadalini stated that while the Summary Plan Description had been previously approved by the Board, the Exhibit had not been previously disseminated to the Board; that the belief is the Plan in its entirety, should be approved by the Board. Pete Strong came before the Board and stated that the number of active participants stated in the Summary Plan Description is inaccurate. Attorney Christiansen stated that he would review the 2015 Actuarial Valuation and revise this number. Secretary Nadalini stated that the Summary Plan Description should be revised to state Director of Financial Administration Kelly Strickland as the Treasurer. On a motion by Secretary Nadalini and a second by Vice Chair Chapdelain, the Summary Plan Description with the above changes was approved. Motion carried unanimously (6-0). 9.3. Approval Re: Proposed 2017 Regular Meeting Schedule for the General Employees' Pension Plan Board of Trustees Pension Plan Administrator Ramphal presented the proposed 2017 Meeting Schedule of the General Employees' Pension Plan to the Board. Attorney Christiansen stated that the March meeting of the Board is the Membership Meeting and the time should be changed to noon to accommodate Members who may like to attend. A motion was made by Vice Chair Chapdelain, second by Trustee McVaugh, to change the March meeting of the proposed 2017 Meeting Schedule of the General Employees' Pension Plan timeframe to noon to accommodate Members who may want to attend. Motion carried unanimously (6-0). 10. ATTORNEY MATTERS: Attorney Christiansen stated that he has not received any correspondence from Andrew Goenne, that in the near future, the Board should discuss whether or not to pursue any further action against Mr. Goenne. 11. OTHER MATTERS: Vice Chair Chapdelain thanked Susan Blake, Member of the Teamsters Local 173, for voicing her concerns regarding the number of actual Pension Plan members that comprise the Board. Attorney Christiansen stated that at some time in the future, Board membership may need to be open to retired members of the Plan, and that this change may only be made by the City Commission. 12. ADJOURN: Chair Keeler adjourned the General Employees Pensions Board of Trustees Regular meeting at 12:27 p.m. R. BeeerDLeRer CRPT. Chair Barry Keeler Secretary Pamela M. Nadalini Book 1 Page 47 12/05/16 10:00 A.M.