Peter Morin, Chair, called the Board to order at 12:35 p.m.

Transcription

1 Minutes of the Regular Meeting Friday, January 19, 2007, at 12:35 p.m. Retirement Bldg., 2520 South I.H. 35, Ste. 205 Austin Police Pension Office Members Present Members Absent Staff/Guests Peter Morin Art Alfaro Sampson Jordan Sean Mannix Stephanie Willie Fred Fletcher Wes Martin Kendall Thomas Mark Fenlaw John Ross Margaret Teinert Catherine Haggerty Karen Kennard Sean Mannix Mike Jung Vanessa Downey-Little Peter Morin, Chair, called the Board to order at 12:35 p.m. Sam Jordan, Pension Administrator reported the Regular Board Meeting scheduled for Wednesday, January 17, 2007 at 12:30 p.m. was cancelled because of inclement weather (ice storm) that closed all City and State Offices in Austin, Texas and subsequently rescheduled to Friday, January 19, 2007 by Peter Morin, APRS Chair which is within 72 hours, as allowed by Texas Open Meetings Law, Section No Action Required by the Board. Approval of Minutes from the December 20, 2006, Regular Board Meeting Peter Morin, Chair, stated the December 20, 2006, Board Meeting Minutes as written in trustee packets, were up for discussion and approval. Vanessa Downey- Little, Mike Jung and Sean Mannix all reported they were in attendance at the meeting requested the minutes be amended. Peter asked for a motion to amend and approve the minutes. John Ross made a motion to amend and approve the minutes showing Sean Mannix, Vanessa Downey-Little and Mike Jung were in attendance and approve the minutes of December 20, Fred Fletcher seconded the motion. Service Purchases for December 20, 2006 Peter Morin, Chairman, reported the Service Purchases for December 2006, as written in trustee packets, were up for discussion and approval. Not hearing any discussion, Peter asked for a motion of approval. John Ross made a motion to approve the Service Purchases for December Fred Fletcher seconded the motion. NAME Caudill, Bonnie Caudill, Robert Diaz, Santiago Diaz, Santiago Eveleth, Michael Gamboa, Marcelino TYPE OF BUYBACK LENGTH OF BUYBACK 24 Mos. 24 Mos. 5 Mos. 5 Mos. 6 Mos. 12 Mos.

2 Hightower, Robert Israel, Derek Israel, Derek Johnson, Edward Knutson, David Mahoney, David Mahoney, David Newbery, Gary Santiago, Tobias Simoneaux, Billy Tableriou, Brett Zumwalt, Erin 18 Mos. 24 Mos. 6 Mos. 12 Mos. 6 Mos. 6 Mos. 17 Mos. 6 Mos. 5 Mos. 12 Mos. 24 Mos. 5 Mos. New Retired Member(s) December 2006 Peter Morin, Chairman, reported the New Retired Members for December 2006, as written in trustee packets, was up for discussion and approval. Not hearing any discussion, Peter asked for a motion of approval. John Ross made a motion to approve the New Retired Members for December Fred Fletcher seconded the motion. NAME OPTION RETIREMENT DATE AGE Yrs./Mos. Service Hector Arrendondo Life 12/31/ yrs. 3 Mos. 28 yrs. 2 Mos. Harold Campbell I 12/31/ yrs. 7 Mos. 20 yrs. 0 Mos. Michael Sheffield I 12/31/ yrs. 2 Mos. 28 yrs. 3 Mos. Christopher Hearon Life 12/31/ yrs. 5 Mos. 27 yrs. 3 Mos. John Neff II 12/31/ yrs. 4 Mos. 29 yrs. 5 Mos. Life = Life Only Annuity I = 100% Joint & Survivor II = 50% Joint & Survivor III = 66 2/3% Last Survivor IV = Joint & 66 2/3% Last Survivor V = 15 Year Certain & Life DROP = Lump Sum Distribution QDRO = Qualified Domestic Relations Order PROP Distributions for December 2006 Peter Morin, APRS Chair, reported the PROP Distribution for December 2006, as written in trustee packets, was up for discussion and approval. Not hearing any discussion, Pete asked for a motion of approval. John Ross made a motion to approve the Prop Distribution for December Fred Fletcher seconded the motion. NAME AMOUNT DATE ACCOUNT BALANCE Thomas Davis N/A 12/31/06 N/A

3 Investment Committee Meeting, January 17, 2006 A. Manager Monthly & YTD Performance Report Kendall Thomas, Investment Committee Chair in absence of Ron Partain, Investment Consultant presented the APRS Manager performances report as prepared by Consulting Services Group as of December 31, 2006 using handout material titled Market Value and Returns Summary. The handouts presented by Kendall showed the APRS total composite return was 1.0%, Current Month, 15.6% Year to Date, 15.6% Trailing 1 Year, 14.6% Trailing 3 Years and 10.9% Trailing 5 Years. Kendall reported the following three managers Snow Capital, Waddell & Reed and Private Capital trailed their benchmarks year to date. He also reported the portfolio Asset Allocation Decision Tree was 59% Market Dependant (Equity, US & International-40% and Fixed Income, US & International-19%) and 41% Alternative Investments (Private Real Estate-22%, Timber-10% and Natural Resources-9%). No action required by Board. B. Capital Point Partners Mezzanine Loan Investment Kendall Thomas, Investment Committee Chair, reported the Committee met at 9:00 a.m. on Friday, January 19, 2007, to discuss Mezzanine Loan investing with Capital Point Partners, Inc s management team Alfred Jackson, Don Rice and Jeffrey Sangalis, CFA. The Committee was provided presentation material showing that mezzanine investing in a fund with Capital Point Partners in middle markets mezzanine lending would earn 12%-14% quarterly cash interest payments with 1.75% fee. The Fund will provide favorable investment characteristics, allow credit protections along with equity participation, GP will take actions to protect investments and drive realizations, and invest in transactions not accessible to buyout equity. Prior mezzanine investment performances with the management team of Jeff Sangalis and Don Rice has produced and average return of 18.1% between the years Kendall stated he recommended investing $5 million in the Capital Point Partners, Inc. Fund after CSG consultants Joe Meals and Ron Partain reported the investment would compliment the APRS investment portfolio in the fixed income sector allocation. John Ross made a motion to invest $5 million in the Capital Point Partners Fund, using investment return proceeds from the real estate portfolio investments as they payout, subject to legal counsel and consulting due diligence review. Sean Mannix seconded the motion. C. Main & Main, Inc. Performance & Investment Opportunities Kendall Thomas, Investment Committee Chair reported the Committee met with Main & Main, Inc. investment managers, Ralph and Garrett Reed, on Friday, January 19, 2007 at 9:00 a.m. regarding performance on the Retail Property Fund, LP, along with additional investment opportunities. Kendall reported the Retail Fund account APRS is a limited partner investor in with a $682,353 market value, along with Cypress, LLC and other smaller investors has a projected 35% investment return with its first investment. An another investment opportunity in the Retail Fund had to be postponed in January, until more due diligence was performed, when an underground fuel tank storage was discovered on land soon to be acquired by the fund. Kendall went onto report the Main & Main managers briefed the Committee on potential investment opportunities in a North Texas shopping center and South Carolina retail drugstores with both investments offering returns in the upper 20% percentage range. However, the investment size ($10 million & $1 million) requires more due diligence before the Committee can make any recommendation of investing in them. No action required by the Board. D. Rebalancing and Asset Allocation Kendall Thomas, Investment Committee Chair reported the Committee met on Friday, January 19, 2007 and they did not make any recommendations to rebalance or make any other asset allocation changes to the APRS investment fund portfolio. No action required by the Board.

4 Goals and Objectives Committee Meeting January 17, 2007 A Legislative Packet Sean Mannix, Goals & Objective Committee Chair reported the Committee met on Friday, January 19, 2007 at 10:30 a.m. regarding the status of legislation amending the Austin Police Retirement System. He reported the legislation drafted by APRS attorney, Terry Kendall was still waiting a bill number, but once it was obtained resolutions of support would be needed from the Austin Police Retirement System (APRS), Austin Police Retired Officers Association (APROA), Austin Police Association (APA) and Austin City Council for presentation to sponsor Representative Dawna Dukes. Sean reported, the Committee recommended a resolution of support drafted by APRS attorney, Terry Kendall be approved for presenting to the organizations as discussed and upon execution be presented to Texas House of Representative sponsor Dawna Dukes. Catherine Haggerty made a motion to seek resolutions of support from APRS, APROA, APA and Austin City Council for presentation to House sponsor Representative Dawna Dukes. Vanessa Downey-Little seconded the motion. B. State Proportionate Retirement Option Proposal Sean Mannix, Goals & Objective Committee Chair reported Bob May and Mark Fenlaw APRS actuaries at Rudd & Wisdom, Inc. and Terry Kendall, APRS attorney met with the Committee on Friday, January 19, 2007 regarding the State Proportionate Retirement Option Proposal. The report presented by Bob May titled, Study of Feasibility of Participation by Austin Police Retirement System in Texas Statewide Proportionate Retirement Program, acknowledged the following two scenarios, 1) If the Austin City Council and the Board of Trustees of the Retirement System elect to participate in the statewide Proportionate Retirement Program and the City of Austin does not transfer the PSEM (Public Safety Employees Management) Department employees to the Police Department (and to the Retirement System), then the City of Austin would be required to contribute an additional 1.31% of payroll, which could be rounded to 1.35% of payroll. This would increase the City s total contribution rate to the Retirement System from 18% of payroll to 19.35% of payroll. 2) If the Austin City Council and the Board of Trustees of the Retirement System elect to participate in the statewide Proportionate Retirement Program and the City of Austin does transfer the PSEM (Public Safety Employees Management) Department employees to the Police Department (and to the Retirement System), then the City of Austin would be required to contribute an additional 0.22% of payroll, which could be rounded to 0.25% of payroll. This would increase the City s total contribution rate to the Retirement System from 18% of payroll to 18.25% of payroll. The legislative bill DRAFT presented by Terry Kendall enables both Austin Fire & Police Retirement Systems to elect participation in the state proportionate program provided the City of Austin shall appropriate and pay to the retirement system at the same time that the municipality makes its monthly contribution to the retirement system all additional contributions determined by the system s actuary to be necessary in order to fund the additional liabilities incurred by the retirement system as a result of participating in the proportionate retirement program. Sean Mannix Chair of the Goals & Objective Committee reported the Committee did not make a recommendation on the proposed study or the legislative bill written by Terry Kendall. Peter Morin, APRS Chair requested a vote be taken to determine if there was enough interest Spirit of Intent on the board for the proposed proportionate retirement option. Fred Fletcher made a motion to move forward on the proportionate retirement option and legislation drafted, subject to the City adopting and approving the proportionate study and legislation as drafted. Catherine Haggerty seconded the motion. Sheryl Cole, Karen Kennard abstained from the vote. C. Retirement Disability Benefit Tax Free Option Sean Mannix, Goals & Objective Committee Chair reported Terry Kendall, APRS attorney met with the Committee on Friday, January 19, 2007 and made a presentation using the IRS Tax Code, Section handout, titled Compensation for injuries or sickness. In the presentation Terry, reported APRS is not allowed to offer a Tax Free disability benefit unless it changes its computation formula in the pension statute

5 6243n-1. The APRS statute calculates the disability benefit using years of credited service, average 36 month salary and multiplier (YCS X Average 36 Mos. Salary X 3% Multiplier) instead of a flat percentage of salary calculation as IRS requires, in order to have the benefit received as tax free. The most commonly used calculation for receiving Tax Free Disability is 50% of current salary, which is less than APRS currently pays for its On Duty service benefit of 60% and which soon will go to 66%, effective December Sean reported, the Committee after discussion did not recommend changing the pension statute 6243n-1, disability computation formula in order to provide tax free disabilities. No action required by the Board. D. Accumulated Deposit Adj. for Actives & Vest Members Sean Mannix, Goals & Objective Committee Chair, reported the Committee met on January 19, 2007 at 10:45 a.m. to discuss the crediting of interest on Accumulated Deposits for Actives and Vested Members contributions. The rate of interest credited is to be applied on December 31, 2006 for account balances standing to the members credit on January 1, 2006 of the same calendar year. The APRS law requires the Board to pay a rate of 5% or a rate determined by the board each and every year. Sean reported, actuary Bob May, of Rudd & Wisdom, Inc., presented a report to the Goals & Objective Committee titled, December 31, 2006, Interest Rate on Accumulated Deposits. The report in summary stated in recent years at its December meeting, the board has determined the interest rate to be used in crediting interest at the end of the year on a member s accumulated deposits at the beginning of the year. The rate of interest credited as of December 31 of the past several years is as follows: Year Rate 0% 2% 2% 2% 4% 5% 5% 5% 5% 5% The actuarial valuation as of December 31, 2005 assumed that a rate of 3% would be credited to members accumulated deposits each year. If less than 3% is credited on December 31, 2006, then the system will have a very small actuarial gain because somewhat smaller than assumed refund of accumulated contribution benefits will be paid to members who quit and withdraw. If more than 3% is credited, then the system will have a very small actuarial loss because somewhat greater than assumed refund of accumulated contribution benefits will be paid to members who quit and withdraw. In conclusion the report stated the information provided was to assist the Board in making it decision on this issue. Sean reported, the Committee unanimously recommended crediting 0% interest rate on accumulated deposits to be paid on December 31, 2006, for members deposits as of January 1, Catherine Haggerty made a motion to approve a 0% 2006 Accumulated Deposit Adjustment on members accounts, as of December 31, 2006, as recommended by the Committee, and acknowledged to be actuarially and financially favorable to the System by actuaries Bob May and Mark Fenlaw. Fred Fletcher seconded the motion. E Retiree & Beneficiary Cost of Living Adjustment Sean Mannix, Goals & Objective Committee Chair, reported the Committee met on January 19, 2007 at 10:45 a.m. to discuss the 2006 Cost of Living Adjustment (COLA) for Retirees and Survivors, to be paid on the January 2007 payroll. He stated the Committee consulted with actuary Bob May, of Rudd & Wisdom, Inc., who presented to the Board a report titled, January 1, 2007, Increase in Benefits for Persons Currently Receiving Monthly Benefits. Sean stated the Committee, reviewed the report presented and written by Bob May and Mark Fenlaw, actuaries at Rudd & Wisdom, Inc. that explained the law governing the System requires any cost of living adjustment granted by the Board

6 be approved by the system s actuary. The actuarial conclusion in the report stated the amortized unfunded actuarial accrued liability (UAAL) based on the most recent actuarial valuation as of December 31, 2005, reflects an amortization period of 38.3 years and although the PRB guidelines indicate periods of years is acceptable. The actuaries at Rudd & Wisdom, Inc. require the amortized period to be less than 30 years thus allowing some margin for adverse experience, such as investment experience. Therefore, the cost-of-living increase presented for approval by the board is not approvable based on the 38.3 year amortization period as of December 31, Fred Fletcher made a motion to approve the actuarial report that does not grant a (COLA) increase for Retirees and Survivors effective January 1, 2007, as was presented to the Goals and Objective Committee by Bob May and Mark Fenlaw, actuaries at Rudd & Wisdom, Inc. Catherine Haggerty seconded the motion. F. Pension Review Newsletter Topics Sean Mannix, Goals & Objective Chair, reported the Goals & Objective Committee met on Friday, January 19, 2007 at 11:00 a.m. with Sam Jordan, Pension Administrator, to discuss the Special 2007 Pension Review newsletter topics. He stated, after reviewing the topics proposed for the newsletter, (see below), the Committee recommended approval of them and adding one new topic to explain that in the Healthcare Enhancements for Local Public Safety (HELPS) retirees portion of the Pension Protection Act 2006 enacted into law, IRS has ruled self insured plans like the City of Austin, United Health Care Plan as not eligible for the exemption. Pension Protection Act of 2006 Service Purchase Rate Increase Notice New Forward DROP Option-(5% interest paid on deposits in this option) Financial Planning Seminar (special Forward DROP and PROP Deferral seminar) New APRS Website Notice of Interest rate paid on Contributions & COLA Adjustment Auditor Hired and Actuarial Valuation to be performed on 2006 Assets Report on Fund Performance 2006 at Year End-(Unaudited) Notice on Regular Scheduled Board Meetings for 2007 Report on Updating Personal Information and Designated Beneficiary Forms at City and Pension Office 3rd and 4th Quarter Retirees Annual Statements Mailed Recent Deaths HELPS $3000 Exemption & 10% Early penalty changes Kendall Thomas made a motion to approve the topics recommended by the Goals & Objective Committee, as presented by Sam Jordan, Pension Administrator, for publishing in the Special Edition of the Pension Review Newsletter. John Ross seconded the motion. Facilities Management Agr. Space Plan Design Proposal Peter Morin, APRS Chair recognized Margaret Teinert, Principal and owner of Facilities Resource, Inc. who came before the Board to present a Proposal Letter for Interior Design and Construction Documentation Services, Construction Administration Services and Move Coordination. The proposal was in direct response to the December 20, 2007 meeting, at which the Board approved moving downstairs within the police retirement building into 4,250 square feet of work space. The proposal is to renovate the first floor work space per schematic plans in Option 3 approved at the December 20, 2007 meeting. The proposed design fee of $27,500 is to perform interior planning services and engineering services, but does not include estimated plan reviews, fees and reimbursable expenses. After discussion Fred Fletcher made a motion to move forward with the proposal to hire Facilities Management, Inc. for $27,500 to provide Interior Design, MEP Engineering Services, Construction Administration Services and Move Coordination on Option 3 selected at the December 20, 2007 Regular Board Meeting. Karen Kennard seconded the motion.

7 Pension Office Report A. Treasury Report Sam Jordan, Pension Administrator, presented to the Board of Trustees the December 31, 2006, monthly Treasury Report. He reported the System asset valuation (unaudited) at year-end was $452,366, million, an increase of $71,123, million over the December 31, 2005 valuation of $381,242, million and $3,204, million over the November 30, 2006 valuation of $449,161, million. The total fund commitments awaiting Capital Calls on investments as of December 31, 2006 was $32,565, and APRS has treasury bonds and cash of $27,500,000 available to fund these investments. This is inline with Investment Consultant recommendation to have at least 2/3 of the commitment set aside in liquid investments for these capital calls. The Administrative Expenses paid year to date at December 31, 2006 of $585, was less than the total projected of $644, made in January No action required by the Board. B Monthly Scheduled Board Meetings Sam Jordan, Pension Administrator, presented the following dates as the Year 2007 Regular Board Meetings/Monthly schedule. Wednesday, February 21, 2007 Wednesday, March 21, 2007 Wednesday, April 18, 2007 Wednesday, May 16, 2007 Wednesday, June 20, 2007 Wednesday, July 18, 2007 Wednesday, August 15, 2007 Wednesday, September 19, 2007 Wednesday, October 17, 2007 Wednesday, November 21, 2007 Wednesday, December 19, 2007 The Board approved by acclamation to accept these dates for holding their Monthly Regular Board Meetings with a start time of 11:30 a.m. C Monthly Scheduled Investment Meetings Sam Jordan, Pension Administrator, presented the following dates as the Year 2007 Investment Committee Meetings/Monthly schedule. Wednesday, February 21, 2007 Wednesday, March 21, 2007 Wednesday, April 18, 2007

8 Wednesday, May 16, 2007 Wednesday, June 20, 2007 Wednesday, July 18, 2007 Wednesday, August 15, 2007 Wednesday, September 19, 2007 Wednesday, October 17, 2007 Wednesday, November 21, 2007 Investment Meeting begins approximately at 8:00 a.m. Wednesday, December 19, 2007 The Board approved by acclamation to accept these dates and times for holding their Investment Committee Meetings/Monthly schedule. An itinerary will be mailed prior to each meeting confirming date and time of meeting. D Retirement Refunds Sam Jordan, Pension Administrator, presented a report on the contributions refunded in His report showed there were thirty-two (32) refunds paid in the amount of $745, (unaudited) in the year No action required by the Board. E Retirements Sam Jordan, Pension Administrator, presented a report on the retirements in the year His report showed there were thirty-four (34) members who took retirement in calendar year 2006, which increased monthly payroll by $171, No action required by the Board. F Deferred Retirement Option Plan Accounts Sam Jordan, Pension Administrator, presented a report on the Deferred Retirement Option Plan (DROP) accounts chosen by members in His report

9 showed there were twelve (12) members who elected the DROP option for an (unaudited) total dollar amount of $1,305, No action required by the Board. G Post Retirement Option Plan Distributions Sam Jordan, Pension Administrator, presented a report on the Post Retirement Option Plan (PROP) Distributions in His report showed there were three (3) members who took distributions from their PROP accounts for combined (unaudited) total dollar amounts of $75, No action required by the Board. H Lump Sum Post Retirement Option Plan Accounts Sam Jordan, Pension Administrator, presented a report on the Lump Sum Post Retirement Option Plan (PROP) accounts for His report showed there were five (5) members who rolled their DROP funds into the Post Retirement Option Plan (PROP) during 2006 for combined (unaudited) total dollar amount of $254,562.65, there were seventeen (17) members currently using the option for combined (unaudited) dollar amount of $1,604, He also reported the total dollar amounts in prior years were 2005 $1,159,947.53, 2004 $1,007,709.20, 2003 $738,935.28, 2002 $268, and the first year 2001 $48, No action required by the Board. I Monthly Post Retirement Option Plan Accounts Sam Jordan, Pension Administrator, presented a report on the Monthly Post Retirement Option Plan (PROP) accounts for His report showed there were two (2) members who set up monthly annuity deferrals into their Post Retirement Option Plan (PROP) during 2006 for combined (unaudited) total dollar amount of $88, He also reported the total amount in prior years was $-0-, since this option began on April 1, No action required by the Board. Old/New Business Sam Jordan, Pension Administrator, presented to the Board of Trustees the 2007 Texas Public Employee Retirement System (TEXPERS), Delegates Certification form, which needs to be submitted acknowledging the APRS official delegates for the March 18 th 22nd meeting. The Board agreed by acclamation to name Kendall Thomas, Peter Morin, John Ross, and Sam Jordan as delegates with Sean Mannix to serve as alternate. Sam Jordan, Pension Administrator reported a real estate broker with JB Goodwin met with Kendall Thomas and himself regarding listing the property at 2424 and 2430 So. IH 35, but neither of them recommended listing the property until an appraisal was performed to determine the market value. Sam reported he had contacted the appraiser who performed the last appraisal and ordered an update at a cost of $1750. The Board agreed by acclamation. Sam Jordan, Pension Administrator reported the IRS had issued Miscellaneous Pension Protection Act Changes which includes interpretations for the HELPS provision of the Act, providing $3000 tax exemption to police, fire and emergency medical public employees. The most profound IRS interpretation declares that accident or health plans receiving the payments of qualified health insurance premiums from qualified retirees cannot be from self-insured plans. Sam stated the City of Austin had informed the pension office the United Health Insurance Plan option provided to retirees was selfinsured and therefore not eligible for this tax exemption. However, this interpretation was under appeal and would be monitored. No action required by the Board.

10 Adjournment Peter Morin, Chair