Lt. Chris Brown, Chair Willard Payne, Secretary Cpt. Michael Lynch, Trustee Nawal McDaniel, Trustee via Webex Richard Patsy, Trustee

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1 J A C K S O N V I L L E R I C H A R D D I C K C O H E E B O A R D R O O M PRESENT Lt. Chris Brown, Chair Willard Payne, Secretary Cpt. Michael Lynch, Trustee Nawal McDaniel, Trustee via Webex Richard Patsy, Trustee GUESTS Mark Muchowicz, JSO Tiffany Safi, OGC MEETING CONVENED 9:00AM STAFF Timothy H. Johnson, Executive Director Plan Administrator Steve Lundy, Assistant Plan Administrator Kevin Grant, Finance Manager Chuck Hayes, Pension Benefits Manager Randall Barnes, Fund Treasurer Lawsikia Hodges, Office of General Counsel Alex Ford, Wilshire Associates via Webex David Lindberg, Wilshire Associates via Webex Pete Strong, Fund Actuary Bob Sugarman, Fund Counsel via Webex MEETING ADJOURNED 11:23AM NOTICE: Any person requiring a special accommodation to participate in the meeting because of disability shall contact Steve Lundy, Assistant Plan Administrator at (904) , at least five business days in advance of the meeting to make appropriate arrangements. If any person decides to appeal any decision made with respect to any matter considered at this public meeting such person will need a record of proceedings, and for such purpose such person may need to ensure that a verbatim record of the proceedings is made at their own expense and that such record includes the testimony and evidence on which the appeal is based. The public meeting may be continued to a date, time, and place to be specified on the record at the meeting. Additional items may be added / changed prior to meeting. An audio recording of this meeting is available upon request. Contact the Jacksonville Police and Fire Pension Fund Custodian of Public Records, Maria Young at MariaY@coj.net or (904) to make a Public Records Request. I. PLEDGE OF ALLEGIANCE II. MOMENT OF SILENCE Lawton G. Taylor Sr., Retired Police Officer III. PUBLIC SPEAKING PERIOD None.

2 P a g e 2 Willard Payne made a motion to keep Chris Brown as Board Chair, and himself as Board Secretary for Seconded by Richard Patsy. The vote passed unanimously. IV. CONSENT AGENDA ITEMS (01-09)CA Motion to approve: PATSY; Second: PAYNE; PASSED UNANIMOUSLY CA Meeting Summaries Approved 1. Board of Trustees Meeting November 15, 2018 (Revised) 2. Board of Trustees Meeting December 21, 2018 Michael Lynch asked what was revised in the November 15, 2018 Board of Trustees Meeting Summary. Steve Lundy said OGC had requested that he revise the portion of the summary where Chris Brown announced the Shade Meeting to include more detail. Lawsikia Hodges said that was to make it clear per Florida Statutes that we properly opened the Shade Meeting CA Disbursements The listed expenditures in DISBURSEMENTS A & B have been reviewed and deemed payable. The Police and Fire Pension Fund Finance Manager certifies that they are proper and in compliance with the appropriated budget. Transaction lists attached. Disbursements A thru Pinnacle Associates $ 138, Loomis, Sayles & Co. $ 123, Harvest Fund Advisors $ 103, Comercia Bank $ 167, Summit Strategies Group $ 20, TOTAL $ 554, Disbursements B thru

3 P a g e 3 1. Transaction list of Accounts Payable distributions $ 48, Transaction list of Accounts Receivables $ 57, CA Pension Distributions A. December 14, Regular Gross $ 7,993, Regular Lumpsum $ 4, Regular Rollover $ Regular DROP Gross $ 1,201, DROP Lumpsum $ 122, DROP Rollover $ 0.00 TOTAL $ 9,322, B. December 28, Regular Gross $ 5,721, Regular Lumpsum $ 79, Regular Rollover $ Regular DROP Gross $ 1,190, DROP Lumpsum $ DROP Rollover $ 0.00 TOTAL $ 6,990, All calculation and dollar amounts have been reviewed and calculated in accordance with accepted procedures. The following Consent Agenda items (04-05CA) were verified with supporting documentation and approved at the Advisory Committee meeting held on January 9, Vote was unanimous. Meeting Summary attached CA Application for Survivor Benefits CA Application for Time Service Connections

4 P a g e 4 The following Consent Agenda items (06-08CA) were verified with supporting documentation and received as information at the Advisory Committee meeting held on January 9, Meeting Summary attached CA Refund of Pension Contributions CA DROP Participant Termination of Employment CA DROP Distributions CA Educational Opportunities 1. Bi-Monthly Ethics Training for Boards & Commissions COJ February 28, PM 1PM Lynwood Roberts Room, City Hall, First Floor April 25, PM 1PM Lynwood Roberts Room, City Hall, First Floor June 27, PM 1PM Lynwood Roberts Room, City Hall, First Floor August 22, PM 1PM Lynwood Roberts Room, City Hall, First Floor October 24, PM 1PM Lynwood Roberts Room, City Hall, First Floor December 5, PM 1PM Lynwood Roberts Room, City Hall, First Floor (RSVP with Kirby Oberdorfer at koberdorfer@coj.net or ) 2. Chief Officers Summit NCPERS June 13-14, 2019, Chicago, Illinois V. EXECUTIVE DIRECTOR S REPORT Timothy H. Johnson Timothy Johnson informed the Board of Trustees that the Advisory Committee approved their procedures for hearing correction and error appeals. This was sent to all members affected by the Beaches Time Service Connection issue. These members will have 30 days to respond, and then will have 14 days before their hearings. Hearings are anticipated to begin in March. The Board should anticipate a recommendation from the Advisory Committee to resolve these errors. Timothy Johnson mentioned the JFRD Out-Of-Class pay issue. He said Pete Strong would talk about this more later.

5 P a g e 5 Timothy Johnson said Kevin Grant will be presenting a FY2019 Operating Budget Amendment to the Board of Trustees (HANDOUT), and Chuck Hayes will demonstrate the new online Retirees Portal. Kevin Grant discussed his handout FY2019 Operating Budget Amendment: Add $18k to Personnel for part-time hours of 1,500 with a budget amount of $18k for the front receptionist. Reduce Professional Services by $135k for 1st quarter realized savings and reductions in needed professional services. Add $13k to Operating for any increased training, travel and miscellaneous services operationally for staff, board and committee members. Add $85k to Building in anticipation of the buildout of the 3rd floor, security software with enhanced equipment and video/card reader upgrades to cover building and parking garage access points. Add $19k to Parking to cover the cost of the elevator repairs as approved in the December board meeting. Kevin Grant noted these changes have a net $0 effect on the total budget. Only amounts between line items are being moved. Chris Brown asked if this needs Board approval. Timothy Johnson said it does, and he would bring it to City Council. Lawsikia Hodges said that a motion to approve this budget amendment should be inclusive of authorizing OGC to prepare a resolution for signature which is necessary for Council legislation. Willard Payne made a motion to approve the FY2019 Operating Budget Amendment, inclusive of authorizing OGC to prepare the necessary resolution. Seconded by Richard Patsy. The vote passed unanimously. 1. Online Retirees Portal Demonstration Chuck Hayes Chuck Hayes demonstrated the new online Retirees Portal. He said Timothy Johnson, Steve Lundy, Lynn West, and Debbie Manning worked tirelessly on the project. The Retirees Portal will be very helpful to members and will save the PFPF money. He demonstrated the following: Retirees Portal Landing Page Security Features Login Page Direct Deposit Statement example Timothy Johnson remarked that a majority of the PFPF s members see the online Retirees Portal as a benefit. We are moving more into the digital age.

6 P a g e 6 VI. COUNSEL REPORTS Lawsikia Hodges & Pedro Herrera 1. Litigation Summary Update Lawsikia Hodges briefly discussed the Litigation Summary Update as attached. 2. Reemployed Pensioners Update Lawsikia Hodges said she is still working with Bob Sugarman s office reviewing information on this issue. Lawsikia Hodges presented the Proposed Amendment to PFPF Procurement Policy Emergency Purchases Section (HANDOUT). Lawsikia Hodges said with this amendment, Timothy Johnson can act on his own in emergency situations to make purchases. Chris Brown asked if this would allow to replace certain things if they are found to violate the ADA. Lawsikia Hodges said yes, but it depends. This amendment would provide to replace pipes which burst in the middle of the night, in situations where there is no time for an RFP, for example. To the extent Timothy Johnson can plan ahead, he will, but if he finds an elevator is broken, it is needed to go out and fix it before the PFPF is sued. There was no public speaking requested before the amendment went to a vote. Richard Patsy made a motion to accept the Proposed Amendment to PFPF Procurement Policy Emergency Purchases Section. Seconded by Willard Payne. The vote passed unanimously. VII(a). INVESTMENT CONSULTANT REPORTS David Lindberg & Alex Ford 1. Capital Markets Review December 31, 2018 David Lindberg and Alex Ford presented their updated Capital Markets Update handout. They discussed the market decline in the fourth quarter, and the recovery after Christmas. They discussed asset class performance, and the investment of the City s contribution as shown in the handout. --- VII (b) The Board of Trustees discussed union direction received regarding the chapter funds at length. The full transcript is attached to this Meeting Summary as Part II. The motions are listed below:

7 P a g e 7 1. Michael Lynch made a motion to authorize the Executive Director Plan Administrator to transfer funds in accordance with Union directives, contingent upon the Office of the General Counsel ensuring that the plan requirements in section 121 have been met. Seconded by Richard Patsy. The vote passed unanimously. 2. Richard Patsy made a motion to authorize the Executive Director Plan Administrator to propose to the unions that Jan 31st, 2019 is used as the valuation date. The Fund will transfer 90% from that value on February 1 st, and transfer whatever remaining balance of the valuation once it s accurately calculated. Richard Patsy amended his motion: In agreement with both of the unions that we use January 31st, 2019 as valuation date, we transfer 90% of the assets based on that valuation date on February 1st, and transfer the remaining portion of it as soon as practical. Michael Lynch seconded the motion, as amended. The vote passed unanimously. 3. Michael Lynch made a motion to authorize staff, through the investment consultant s recommendation, to rebalance the assets back to the target ranges in the investment policy. (offsetting of what the Board and the FIAC decided last month, and then this month, with cash reserves being phased in through the quarter) Willard Payne seconded the motion. The vote passed unanimously. VIII. ACTUARY REPORT Motion to accept the Actuarial Valuation Report as presented: PATSY; Second: LYNCH; PASSED UNANIMOUSLY. 1. Actuarial Valuation Report as of October 1, 2018 Draft Pete Strong Pete Strong began presenting his draft Actuarial Valuation Report as of October 1, 2018 as attached. He made the following highlights: Page 3: Last year, the contribution requirement was $135 million. This year, the contribution requirement is $140 million. The bulk of the increase in the contribution requirement is driven by the increase in normal cost covered payroll climbed. Data for last year s actuarial report was as of July 1 st. Between July 1 st and October 1 st the date the plan closed there was an influx of new hires which was greater than expected. This added more than $6 million in payroll alone. There was less turnover less retirees driven by members waiting to retire to receive the collectively bargained pay increases.

8 P a g e 8 Steve Lundy said that many members are waiting until October 2021 to enter the DROP. October 2021 is the first quarterly DROP class members can enter to receive complete pension credit for all of the collectively bargained raises from the 2017 pension reform. He said he expects the number of DROP enrollees in that DROP class to be record-breaking. Pete Strong continued his presentation and made the following points: Returns on assets were higher than expected and led to an experience gain. Growth of the surtax increased by 6.25%, higher than the expected 4.25% amount. Page 9: The portion of the surtax allocated to the PFPF fell from 63% to 60.9% due to the City s other two plans unfunded liabilities. This is out of the PFPF s control. The PFPF is exposed to risk of what the City s other two plans do they lowered their assumed rate of return, increasing their unfunded liability, and increasing their share of the pie. Timothy Johnson said that he made Pete Strong s point to City Council last year there are assumptions set forth in the law, and then reality. Things are assumed to go one way, but then they behave another way. City Council is beginning to understand how sophisticated this legislation is. Based on so many variables, actual experience may be different than originally assumed. Timothy Johnson said he requested Pete Strong to assemble the chart on page 9 so that City Council can compare the legislation they passed compared to what is actually happening in reality with the surtax. Pete Strong discussed other sources of experience on page 3 such as salary increases, retirement turnover, mortality, and demographics. Overall experience is in line with expectations. Pete Strong discussed revisions in assumptions since the last valuation such as asset smoothing (shown on page 36) returns are smoothed over 5 years, and the amortization is lowered by 1 year each year. The PFPF made almost 8% last year, but with asset smoothing, a rate of 7.2% is recognized. Pete Strong discussed the funded ratio of 48.07% as shown on page 3. Using the market value of assets, the funded ratio is slightly higher at 48.47%. Pete Strong he typically recommends closed plans lower their return assumptions over time. Now that the PFPF is officially closed, once we start to see payroll go down and we get closer to plan membership being 100% retirees at that point assets need to be reallocated. There will be a much shorter time to invest the money. This is not something to do right now, but in the long term, consideration should be given to lower the PFPF s 7% return assumption. Pete Strong discussed Actuarial Standard of Practice No. 51, regarding the assessment of risks, which became effective November 1, 2018 and is addressed on pages 6-8. GRS recommends a numerical risk assessment to be conducted at least once every 3 to 5 years. Chris Brown asked what would come out of a risk assessment upon which the Board might act.

9 P a g e 9 Timothy Johnson said there are two things: first, the Board doesn t have a comprehensive tool to show how all these variables work together how a change in one of the City s other plans could affect the PFPF. Secondly, this would allow the Board to test some decision making what impact of lowering the discount rate would have it could use the model to forcast. Pete Strong discussed the Plan Maturity Measures on the top of page 7. Pete Strong said that the conclusion is that GRS recommends consideration be given to make extra contributions to the plan. We stay with this recommendation mainly because of the uncertainty which exists in this plan relative to other plans. Richard Patsy made a motion to adopt the Actuarial Valuation Report as presented. Seconded by Michael Lynch. Discussion: Pedro Herrera confirmed that the Trustees were aware that by adopting the Actuarial Valuation Report, they are setting forth the required contribution for the next Fiscal Year. The vote passed unanimously. Richard Patsy encouraged Timothy Johnson to request an additional contribution based on the PFPF s investment returns of around $5 million or so to use the same language used last year. Timothy Johnson asked if that was official, or just Richard Patsy talking. Michael Lynch said he is absolutely always for the City giving us more money. Richard Patsy said, You have to ask that question. I ll make that a motion, if Chris Brown said, I m sure that motion would carry along (NOTE: There was no second of Richard Patsy s motion. It did not go to a vote.) IX. COUNCIL LIAISON UPDATE None. X. OLD BUSINESS None. XI. NEW BUSINESS Timothy Johnson informed the Board of Trustees of some new business: OGC s memorandum titled Jacksonville Police and Fire Pension Fund Securities Litigation. The Board of Trustees was informed of potential securities litigation action, and may consider serving as lead plaintiff. This memo serves to

10 P a g e 10 answer how to administer selection of legal representation and how to evaluate when we should serve as lead plaintiff. He introduced Tiffany Safi of OGC to describe the memorandum. Tiffany Safi said Bob Sugarman presented a comprehensive draft securities litigation policy to OGC. This memorandum follows that draft. This accomplishes three things it outlines the criteria for selecting legal counsel, establishes general criteria to serve as active plaintiff, and ensures proper securities litigation monitoring and regular reporting to the Board of Trustees. Tiffany Safi said the goal of the policy is transparency and consistency. This policy aligns with pension funds across the USA. Tiffany Safi said monitoring counsel or firms will recommend possible lawsuits to the Board of Trustees once identified. This function is considered a fiduciary responsibility. Richard Patsy said a couple of things in the policy stand out. He said he would prefer using the word should instead of shall, referring to the Board of Trustees actions. Richard Patsy said that on page 5, number 3, Duval County and the State of Florida should be removed since the Board of Trustees does not represent those entities. Chris Brown said this is very odd for a memorandum from the attorneys to the Board of Trustees, which the Board of Trustees requested to have so many shalls and direct and you will do this. Chris Brown said, What is the source of this being absolute direction to us, almost as if we are not even given discretion. Tiffany Safi said this policy is a carryover from what Bob Sugarman prepared for the Board. OGC is willing to amend as suggested. These suggestions can be requested. Part of this is discretionary, the only part not discretionary is the portion where OGC is ultimately responsible for engaging counsel. Chris Brown said let s come back next month to discuss the policy. Michael Lynch said he has a legitimate concern regarding the selection of counsel winning X amount of cases with X amount of fees. This could be restricting in an unintended way. Lawsikia Hodges agreed this was a good point. She said OGC will take the Board s comments, amend the policy, and bring it back. Chris Brown said to move this to the beginning of next month s agenda. XII. UPCOMING MEETINGS 1. Board of Trustees Friday, February 22, 2019 at 9:00AM

11 P a g e 11 XIII. ADJOURNMENT 11:23AM VII (b): TRANSCRIPT Regarding the Unions requests to the Board of Trustees, the following conversation occurred at the Board of Trustees meeting at point VII (b) in this Meeting Summary. Due to the sound quality of the meeting audio tape, some words may have unintentionally been omitted from the transcription below: Tim Johnson: I think it s relevant that we talk about it now, we got a request from the JFRD relative to its portion of the reserve money and I wanted to read the preliminary note into the record and give our trustee Lynch a chance to comment on it, because it is a time sensitive comment and while I m pulling this up, if you like to jump into it you sure can. Did you not receive one from the FOP as well? Tim Johnson: I did not get one from the FOP. Ok. But I assume you will get one from them as well. Probably, shortly I don t speak for them obviously, but my understanding is that both of those parties are going be looking for their money, February 1 st, I believe, was their request date. Tim Johnson: Yes, sir. So he is right this just came through yesterday and it is a February 1 st request for the JFRD portion of the money. In addition to that, Randy goes on to say that he is not specific about where he wants the money to go but, that we will be told were he would like the money to go. Can you comment on that? I believe that they have reached out to Northern Trust. To the custodial bank, so the transfer should be very easy. And I was told that they do have a tax-exempt number for the trust that they are going set up or that has been set up for their use. Tim Johnson: Right. You have covered all the main points there are just two other items that it might be worthwhile to chat about briefly. The first is that depending on the date that we get direction from JFRD; if February 1 st is the deadline we may have to transfer liquidated assets that we are in now into cash so that we can act on February 1 st.

12 P a g e 12 Sure. Tim Johnson: In other words if we didn t get the direction until the 30th of January. Right, You can t sell the assets. Tim Johnson: You can t sell the assets and have them ready for you. So, obviously the sooner we can get the direction the better. If you can give us any indication of when you think that might happen that might help us plan. I think you will see it next week. My speculation would be that you will see it next week and a similar request from the FOP along that same timeline which should give us plenty of time to move it. If it was Friday of next week it would give us enough time. If we have the direction by the end of the week that would give us enough time? Right. Pete Strong: Tim, We included an update of those balances through 10/01/18 in our valuation report. The balances for the City and both Unions. Tim Johnson: I m glad you brought that up because the value of those assets as of the date of the direction will be different than the value of those assets as of October 1 st. Pete Strong: Yeah, usually actual return is reflected and so, I mean I would think we would need to know actual return from 10/01 through the date of disbursement. Otherwise, the Fund pays out at a loss. If they are paying out 10/01/18 balance before the markets fell. Tim Johnson: David can you comment on how we can get up to date value of those assets? I m assuming from today s discussion it would be as of the date we got the direction. Do you consider yesterday to be the date that we got the direction? Is that what he said to you? Tim Johnson:

13 P a g e 13 Yeah. Ok, Yeah, I guess it would be up for our discussion whether we felt it was date of direction or date of execution. I don t know that they would split hairs over pennies, but I would assume as we would, if we said it was today, and the market doubled our assets in the next seven days then they would probably have a problem with that. Looking at it objectively, I would say we would have the same argument that we would want to keep that money if the same thing happened. So, my suggestion would be that when we decide, as a board, how we are going to address that if there is a different number than what Mr. Wyse assumed using the valuation report then that conversation should be started I would hope sooner than later. Tim Johnson: You know so there is no confusion, I think it would be appropriate that we had a conversation offline with Wilshire and with the Board of JFRD to make sure the way we administer it is in line with the way the parties expect it to be administered. If we do that rather than acting Oh Absolutely. It s similar with the FOP and we can reach out Right, and Tim, the same way with respect to the account regarding the legal use of Police and Firefighters, the Board shall administer as determined by the legally recognized collective bargaining unit and that is the same issue we just discussed with the chapter funds. I certainly wouldn t recommend that the board take any action today, and I agree, I think the appropriate formal action is to get the party together and let s figure out how we are going to meet the requirements of the ordinance. So, I got to respectfully disagree that my understanding is that the letter you received has the vote of the IAFF reference in it. Tim Johnson: Correct. It does have that vote. Right. Now if there is something beyond that, the vote, here is the tax exempt account for a healthcare trust. If there is something beyond that, that the office of the general counsel would like to feel warm and fuzzy about legal use, I would think they would want to see that sooner than later. Absolutely.

14 P a g e 14 They have absolutely set a time sensitive date on this so that nobody will continue to say, hey wait, no wait, no wait, no, let me see, let me see, let me see and here we are in June or July or who knows when trying to figure out these things. Through the Chair, this is the first I m hearing of this. I haven t seen the letter. I haven t seen the correspondence. Onto my next point, absolutely, your lawyer needs to look at it. Ok. Do you want to read the letter into the record? Tim Johnson: It was my sense that we were going to get a formal letter following this notice. Got it Tim Johnson: That was my sense from the . That this was just a heads up that the letter is coming. When it comes, we will obviously distribute it. But we have two issues, the issue I was talking about was making sure that both parties are on the same page with regard to the valuation of the assets. Right, and ensuring that we have the proper time to take whatever action to meet the February 1 st deadline. Lawsikia s brought up rightfully that there is a legal question about the use of those assets. I guess we will have to do both of this things offline because the board will not convene before February 1 st. So let s back up a sec, how much money are we talking about? 57 million dollars on October 1 or September ? 57 million. Tim Johnson: That number could be different today. On October 1 that s math on the board, 57 million dollars. This is an accumulation of

15 P a g e 15 So in 2017, at the conclusion of pension negotiations between the FOP, the IAFF and the City of Jacksonville, there was roughly a little over 100 million dollars in supplemental accounts. As part of their negotiations they divided that 100 million dollars up with the City of Jacksonville; 20% going to the FOP, 20% going to the IAFF, and 60% going to the City for their future contribution use. That date there was a date on that that said 10/01/17 or 09/30/17 those assets they would take a snapshot of that then, and that is where you would start. Included in that is the interest moving forward. So, for a year and 4 months the money has been sitting in there. The City has used a portion of theirs. Last not this contribution they just made, but the year before that they used 5 I believe million dollars of their money to offset their pension contribution. I believe they waived it this year and they left it in there. So, they have their remaining balance that they can stabilize their pension payments in the future. The FOP and IAFF can use theirs for any legal use and they intend to The Plan participants? Correct. So, is the 57 million between the two? Yes. Let s say one has 29 and one has 28 or one has Pete Strong: Yeah, they are a little different. They are slightly different. Pete Strong: Just because of the amount of chapter 175 and 185 funds are different this year. And they take differently when they pay the retirees bonus. Obviously, if none of the retirees in the Plan last month were police officers, then the distribution from those chapter funds last year would have been different and offset it. They also, the police, currently make a little bit more money on chapter 185 more than the firemen do on chapter 175. So, they should have receive directions from the fire union in regards to that money. So the requirements that the Office of the General Counsel explained were needed in the past have been met it seems like. We need to make sure the FOP sends something similar.

16 P a g e 16 I read my version of it. Did you get the ? Is it just from Mr. Wyse? Timothy Johnson: Mm hmm. Ok, alright. The one I got was a joint so that s fine. Regardless, we need to make sure you get that. Obviously, whatever you don t have we should get. But then, that is one issue the other is about the valuation. Has that been cleared up? Tim Johnson: No, but we will figure that out. Pete Strong: Because it doesn t reflect the December 2018 Christmas bonus either yet. Tim Johnson: So, we don t have a meeting before February 1 st and we have to resolve these issues in order to meet the requested deadline. So, we have to figure out from a governance standpoint how we re going to authorize this through this Board if we are not meeting Could it be as simple as us moving contingent upon both unions sending the letter sounds like one has already done that but as long as they send that over, that be honored? Right, but through the Chair, I think it is more than the letter. So, that s great one point is, we need to know that the union has voted on it. But I think, similar to the use of the chapter funds, the office working with pension counsel they also need to make sure that the use is legal. I mean, whatever they direct those funds to be used, you re administering it you re still the Board of Trustees. We had the same thing with the pension We had the same thing, right. And that had to be deemed obviously legal. And you know, you can certainly you know do motions filled with a lot of contingencies. I just don t want to give you the impression that it s a go because, unless we know what the proposal is

17 P a g e 17 I mean it s a legal requirement that they explain what to use it for and neither one of you I m sure has any objection to that. It s just we need to figure out how we can move today to make sure there are no hiccups. So they can get the money by the time that they want it. What s the magic behind February 1 st? That s just when they want it. Their discretion they have asked for February 1 st, which again is fine. It s just as long as all the legal requirements are met. So I guess the question is, how do we form a motion? So this is the similar kind of process we are going to go through every year with the chapter money, correct? I don t believe so. I believe they will give you direction when they get this money. And moving forward, they will have a standing policy in place that they will most likely once a year, maybe October meeting or something just say yup, we are good with it. Okay. So there will be no So in theory there are no We are still figuring this out. This is a one-time thing. So the 57 million dollars that is in there right now we are just using that number, we all understand where it is that money when it is gone that is it. There is no more, the only other funds would be recurring chapter 175 and 185 money to come in mid-year. And then, it would be up to them whether they pay the retiree bonus, or whether they add this money to thee trust account that they have set up with the 57 million. So, my assumption is it would be, they would come in at some point and say, Okay, on October 1, we have these two avenues that we will call three avenues. We will pay retiree bonus, or we are going to put our money in a trust, or we are going to do some portion of both. On October 1, a representative from the union will come in here and say, We want to do A. See you guys later and we then will administer it that way. So, we won t do the holiday bonus anymore?

18 P a g e 18 No, that is going to be at the discretion now of whatever they want to do because again, part of these contract negotiations, you know, as a result now the unions direct where these monies go. How does the money we are off track here but how do they intend to invest the money? That s a big chunk of money. Sure, and to be honest with you, it s not our business It s not but I m just, you know They open a custodial account. They have been open to tell us that. Obviously, they need to tell us that in order to move the money. And I believe it says in there that it is through wire transfer. They will put in a custodial account with a tax number and if they leave it all in cash and earn zero that is their business. So, let s get some advice on how to move forward with the motion. So we can make sure this happens by the time the deadline that they would like. Correct, so I think it s as simple as a motion authorizing the executive director to distribute the assets as directed by the unions, contingent upon the Office of General Counsel confirming that the conditions in sections 121 of the ordinance code have been met. Something like that. Sums up what we have been discussing. Which would include all those points you know we talked about. Ok, any questions? And it may or may not mean meeting the February 1 date because of that contingency. And I think that is where their problem was, because I think the same as you want to see their cards, they want to see yours. What do you consider a legal use? Do you not consider a health trust a defined chapter a legal use? And if you don t, then we can just say leave it now and save the drama and tell them we re not

19 P a g e 19 I don t know, Mike, you re asking me this on the spot and similarly, if you recall, about a year ago, when we were trying to address the chapter funds, we laid out in a legal opinion, here is how these requests need to be teed up to the Board. You need to tell us what you want to do with them, you need to give us evidence that your Board has voted on them. We need a legal opinion from your counsel telling us that the use is legal. We said that in a legal opinion a year ago. So, I don t want to give you the impression that there is a proposal and it s a yes-or-no answer like anything we ve got to review, it may require research. I m not saying that we will not try to meet the deadline. We absolutely will do that. I just don t know that we can guarantee it. If there is an issue that we spot, and it can t be resolved by February 1. Okay. Well, we would feel a lot more comfortable if it was March 1 st. They asked for February 1 st and I think that they did it to make the City move on it, because they do not want this to just drag out. Well obviously, and that s fine, but we would expect the Office of General Counsel, if this is not deemed after they review it to be a legal use, regardless or not we disagree, we expect them to not move on it because, obviously, we would be place in a position of liability. So, at the very least, I think that making this motion with that contingency gets us a step further and we will see what happens over the next week. A recommendation that obviously we will need a motion from you guys. I make a motion to begin the process of moving the account balances to the accounts as requested by the FOP and IAFF, and any necessary conversations that the OGC may need to have to ensure that these are used legally. Effective immediately. Ok, I think that my proposal was stronger, but that s just a motion to begin having conversations without any contingency. I need y all to understand, if you pass that motion, he is directing that the money be transferred and he is saying that the OGC is going to begin conversations. What I am saying is, if OGC, with pension counsel, determines that things are needed to make sure that we comply with 121 or we can t comply with 12, no action needs to be taken by this Board. So, there needs to be a contingency built into any motion you can word it anyway you want that it s all going to be subject to Office of General Counsel s review to make sure that the transfer of the directive by the executive is in compliance with your law, your plan.

20 P a g e 20 Because if we set up a motion it does not require us to take any further action, it wouldn t happen until next month when we convene again. So, we want, I would think, in this motion to place every qualifier needed so as long as everything meets the requirements, we can make it happen for February 1 st. I agree So, can you give us language for a motion that would accomplish what the Chairman has articulated, and would make the OGC comfortable? Right. That we are giving Tim the appropriate verbiage. Right, Yeah. So, I will try it again. So I think, I m sorry Go ahead, go ahead and read out the recommendation, and see if Mike wants to Steve Lundy: I can read it if Oh, that s great, look at that. Steve Lundy: Authorize the Executive Director to distribute assets as directed by the Unions, contingent on OGC confirming conditions set forth in section 121 have been met, including all the points we talked about this may or may not mean meeting the 2/1 deadline. Yeah, so basically we are saying he can distribute in accordance with the directive contingent upon the review that we have met the ordinance requirements in your plan. Mike, do you want to amend your motion? Sure, but I want to strike the may or may not by February 1 I mean they Right, that was just additional talk, I wouldn t, that wouldn t be included in the motion.

21 P a g e 21 They said February 1, I think they mean February 1. Right, so again, the motion is: we are, you as the Board, you re authorizing your executive director to transfer funds in accordance with Union directives contingent upon the Office of the General Counsel ensuring that your plan requirements have been met which would be section 121 in the ordinance code. We need a second. I will second. Any further discussion? Timothy Johnson: Randall, you go first. Randall Barnes: Just one point, I don t know if you need to add something that talks about when you determine the valuation of the dollars, or how you are going to do that, because you need to determine that in order to know how much you can actually pay. Does that need to be wrapped up in the same motion? Tim Johnson: I think it does I think the conversation that we have to Right, I was just going to ask, I don t think we decided that part yet. So, I think maybe either you can include it in this motion or you can pass this motion then have a subsequent motion saying what s approved as pursuant to the last motion We have come this far let s see if we can work this one out then get a new one.

22 P a g e 22 Question, when we transfer the funds to the City for their portion of this, how did we value the assets then? Timothy Johnson: We get a recommendation from the investment consultant. They have only done once and it was that first year s worth. They only used 5 million dollars the City did not care what was left in the bank they just 2017 was a hell of a lot better year than Right, so what I m saying is if we had 100 million dollars in the bank and the City want to use 5, it doesn t matter what they use because they only took 5 and they will deal with that as they move forward. Oh, I see. The City was using it as a credit. Let s do this though: we have gotten through the second. Any specific questions on this particular half of this discussion? We have opened it to the public, that is waived. Alright all in favor for the motion that has been given say aye. All: Aye. Any opposed? I guess the motion carries. So let s go into the second part I m sorry, one quick question and maybe I misunderstood. Tim, did I understand that the police has not sent the direction yet? Not yet. Okay.

23 P a g e 23 I will make sure that the union sends No, No I was just going... ok that s fine. We want clear direction. It s by the unions direction if the FOP chooses not to send anything That s right, that s what I was just going to say, I was just going to say maybe we needed to revise the motion, but we don t its fine. Tim Johnson: So you are recognizing that the motion included both FOP and IAFF. Yes, both Unions. Tim Johnson: This is my point, Mr. Chair, when we liquidate assets in order to reimburse the City every fall, the City fronts our payroll in September. We liquidate assets, and pay them back the money they have fronted us. We get a recommendation from the investment board as to where to take that money from, and a date to execute that. That s what we need to do, between now and February 1 st. We need to get together with David and figure out where this money is going to come from. We need to talk to the unions and make sure we are in agreement on what date that transaction is going to be executed. We should have a fair amount of money in cash from the contribution we got from the City. I don t think that it s enough. Kevin Grant: If you look up on the board. If you look at the bottom number, there is 85 million sitting right there. So we don t have to liquidate anything? Kevin Grant: We don t have to liquidate, we just need to do the transfer.

24 P a g e 24 So I guess, where we are trying to get here is, obviously this whole discussion will take place offline with our director and the unions and the investment consultant Timothy Johnson: Because we don t know the date of it. Is there any further Board action needed? I have a question and thought as you move through this process. So, number one, you guys have discussed spending everything in cash to do it. Then that puts us on February 1 st, I think is the next recommended purchase date. That math does not add up. So, there is still going to be a problem with liquidations by February 1. Albeit a much smaller problem. Then, there will need to be another conversation for March 1 st because there will be no money to be had. Timothy Johnson: That s why the consultant looks at the cash flows. And we have to make the decision based on cash. Obviously, if we had all the time we would say, okay, let s figure it out, let s bring this back to our next meeting and we will go over this but, we just don t have that because of the timeline. So, is it reasonable for the Board to simply authorize our Executive Director and the investment consultant to receive direction from the unions on this and execute based upon that. And I then I would ask, is there a motion needed from us to do that? When you say receive direction from the unions, you mean as to the effect of the valuation as to when we are going to make the distribution? I think that is going to be part of the conversation. Sure, and obviously the specific date, you know the specific date on which to move it. Well I don t know I think that they gave February 1 st. Or by that date. If Tim called in tomorrow and said, hey look, we are done, where do you want me to put it?, then they would provide what they need. But that s obviously not going to happen, it s not going to happen that quickly. So

25 P a g e 25 I think if the Board can just develop a motion to describe when we are going to value the account, as of a date, and then the distribution of that money. So, when you value the money, let s say 10/1/2018. As of 10/01/2018, that is the value of the account that needs to be transferred. Then the second part is what we already took action on. Which is once the approval process has taken place, then Tim can have the discussion with Wilshire and say, okay, we need whatever it is, 58 million dollars, or if it was 56 million dollars as of 10/1. We need 56 million dollars, where do we get if from? Instead of a date, could we say the date in which the official letter is received? Can we go with that that way both the I don t think we have daily valuation of the account. I think you would probably want to tie it back to either 10/1 the beginning of the fiscal year or maybe the most recent quarterly return, the quarterly end date. I believe that the unions tied it to 10/1 or September 30 th, one of those two. There s, sorry not unions, I know that the IAFF s is tied to 10/1 when I read it, it s tied to 10/1. So, if this board has a different perspective on it. So, it would be the value of the account as of 10/1/2018. Which would mean if we have a different perspective, then that s a conversation that needs to be had obviously through, through Tim and both Mr. Zona and Mr. Wyse. Timothy Johnson: Ok, so we have not seen that date yet. It s obvious from David s report that the assets have lost 9% between Oct 1 st and the end of the year. So this is serious money. So it s not up to me, it s up to the board how it wants to value these assets before transfer. The date has a lot to do with how much it is. I agree, I don t think you can pick 2/1 because you re not going to have number. I would expect you would pick the date that is most beneficial. We need to find what would be the logic behind the date selected. What would be we most logical date picked for use as far as valuation. I open this up for discussion for anybody to provide a recommendation for the most logical date. Because of the 4th quarter of 2018 I would like to see. Let me try this out, if we did 12/31 valuation transferred in agreement with the unions, we will have to see if they will agree with this. 90% of what

26 P a g e 26 they are entitled to, pending final valuation as of 12/31, and make up the difference. Whether it is going to be so far in the month it is going to be positive, so we owe additional funds, I mean that s 10% back that the unions will benefit from. But, our participants, our fund, it would be detrimental to our fund. Obviously, it s a smaller amount to our funds than it is to the unions. So let me make sure I understand you right, you want to suggest to them that we figure a date, that we figure an amount, and pay them 90% of it, then true all the numbers up, and pay the remaining balances at a time? Yes. Michael Lynch Ok, so That make sense? But again the date that s picked as far as methodology, sure as long as the unions are good with that but as far as still picking the date, you re choosing Dec 31 st, but still the logic behind the date being picked, where s the logic behind that date or Sep 30 or? Well, the performance of the quarter. Yeah, obviously that s the most recent final quarter date, but I guess I like to hear So, we may have a solution here, as we are reviewing the ordinance code language and the way that it reads effective Oct , 20% of accumulated balances existing on Sep 30, 2017, together with interest thereon is the amount to be administered by the board. So, what we have been discussing is, this is really our answer right here, is as of this date and the interest has been earned together is that exact amount. So the amount of money that was in there Sep 30, 2017, plus any interest earned, based on our total performance. It says together with the interest thereon. Through what day?

27 P a g e 27 It doesn t say, so two things, so our initial thought was, the language in the ordinance specifically says, effective Oct 1, 2017, 20% of the accumulated balances existing on 9/30 of 17. So, the end of the prior fiscal year. This is the part that gets a little bit, I m just going to say maybe, ambiguous, together with interest thereon. With the unfunded liability payment account and the supplemental payment account. So those two accounts Pete Strong: were combined together. We did that on last year s valuation report. Ok, and so, that is the combination of those two accounts, is that withholding the 57 million? Pete Strong. Well the 57 million includes interest through 10/1 18, we have an extra year of interest based on what actually happened during fiscal year 18. But the point is getting at, the combined accounts It s not one account plus the other two accounts. And all those assets that were dedicated to those two accounts were invested as Pete Strong: Comingled, yeah. So obviously the board, in consultation with its attorneys you re charged with interpreting if there s any ambiguity it s fairly clear where it says 20% of the accumulated balances existing on Sep 30, 2017, together with the interest thereon in those accounts. So I think, that the way I m reading it, and that means whatever the balance is and that balance already includes any interest earned through 9/30, So, the date, the evaluation date or the number we re going to be looking at is what was the account balance for that account as of 9/30, So you re not saying Pete Strong: Well we kept rolling interest forward. So the interest thereon portion of this, do you mean that ends Sep 30, 2017?

28 P a g e 28 No, because that wouldn t make sense right? If we re talking about a balance on a date thereon, well of course the balance on the date includes any previous interest. The only thing it could include now would be any interest going forward. That s how I read it. And then I would also say, that if that s the case, then on Sep 30, 2017, that money should have been segregated to a cash account and sat there and done nothing because you don t get two bites of the apple. You don t get to that s goes for us and that goes for the City. So if that s the way, and I think that s the reason for interpretation that would mean that together with interest thereon that would mean that you re going to pick a date closer to now, and that means that together with interest thereon, that also I would think applies losses so you re going to Pete Strong: Well, you had 8% last year then you lose 9-10% I think the most reasonable date to use would be as of the end of the most recent quarter end. Kevin Grant: Through the Chair, or actually pick a date that you do valuation, and allow time for disbursement date maybe 5-10 days afterwards. That way, you get a true value of what s in the account at that particular time and that allows us time The latest evaluation date was Dec 31 st. Pete Strong: They could probably do Jan 31. If it was my money, and we were transferring funds on February 14, I would want the valuation as of February 14. And that s what I think what was recommended, then it was brought up that valuation can t happen I don t know if you can, I m going to defer to the finance folks. I don t know if you can have a daily Pete Strong: You can probably do it at the end of the month.