I. CALL TO ORDER The Special Meeting was called to order at 6:00 p.m. by Councilor Diaz.

DRAFT 6/18/09 MINUTES FINANCE COMMITTEE SPECIAL MEETING TUESDAY, JUNE16, 2009 6:00 P.M. ANNEX MEETING ROOM I. CALL TO ORDER The Special Meeting was called to order at 6:00 p.m. by Councilor Diaz. II. ROLL CALL - Present were committee members Diaz, and Wadecki. Also present was Finance Director Marcia Hancock, Public Works Director Steve Masalin, Water and Sewer Director Greg Tiefert, and Representatives from Merrill Lynch Mr. Dwight Cobb, Ms. Gina DeVose, and Mr. Mark Temple. III. RESIDENTS' COMMENTS None. IV. PRESENTATIONS Merrill Lynch Representative Mr. Dwight Cobb provided some background stating that Merrill Lynch was founded in 1914 and has become a large global organization with $150 trillion in client assets from 150 countries. He stated that Merrill Lynch does 99% of their business with the Fortune 500 and he stated that they provide services to many towns throughout Connecticut. He provided a handout containing the following information: Organization background, Due Diligence, a sample proposal (portfolio and process used to select managers); Defined Contribution, Investment Policy, and References. Mr. Cobb stated that most municipalities use Merrill Lynch s Consulting Services Program. He explained that this program is a separate division within Merrill Lynch, and he stated that their function is to find the best independent money management firms operating throughout the world. He stated that Merrill Lynch would typically use between 6 10 managers for a municipality such as Ledyard and he stated that these managers have been pre-screened. He noted that the Consulting Services Program fee is 84 basis points and provides the following: (1) On going consultation with s Financial Advisor; (2) A review of investment strategy; (3) Access to experienced professional investment managers; (4) Securities safekeeping; (5) Merrill Lynch transaction services; (6) Rebalancing of Diversified portfolios; (7) Ongoing review of managers; (8) Automatic sweep to money market fund or bank deposit; (9) A Merrill Lynch Priority Client Statement; (10) Day to day discretionary portfolio management; (11) Asset Information and Measurement Report; and (12) Account protection to its full net equity value. He stated that the Equity Managers bills at 1% annually and that the Fixed Income Securities Holdings (FISH) bills at 60 basis points for the bonds; for a combined blended cost of 84 basis points per year; billed on a Page 1 of 9

quarterly basis. He stated as the Financial Advisor that he would meet with the town on a quarterly basis to review their portfolio. He discussed the importance of an open architecture platform (non-proprietary) which would allow firms to win their business by being the best and the brightest find. He continued by reviewing the town s current subscription agreement, portfolio, broad asset allocation policy, asset investments, and fees drawing distinctions between the town s current provider s services and the services that Merrill Lynch provides. He stated that the town is currently paying a total of 83 basis points or $62,060 annually. He also discussed the town s current limited exposure of assets to a proprietary parent. He explained that Merrill Lynch s relationship with their clients involve a collaboration in which there would be on-going quarterly discussions regarding asset allocations, new money, etc. He stated that Merrill Lynch would welcome a shared fiduciary responsibility with the town s fiduciaries (Finance Committee). He continued to explain that because Merrill Lynch acts as the fiduciary for the town s assets, that they would not need the added expense of contracting for a Trust for a cost of 20 additional basis points. He deferred to Mr. Mark Temple who is a Retirement Plan Specialist for Merrill Lynch. Retirement Plan Specialist Mr. Mark Temple stated that currently Ledyard has a Defined Benefit pension plan, which has been the primary source of savings for both the union and non-union town employees. Councilor Diaz stated that beginning July 1, 2009 all new non-union employees will be going into Defined Contribution pension plan. Mr. Temple requested clarification noting that the existing employees, who are in the Defined Benefit plan, will continue to participate in the Defined Benefit plan; and he noted that the fifty-five retired individuals, who are receiving benefits, will continue to receive their pension benefit. He stated that employees hired after July 1, 2009 will not be eligible for the Defined Benefit plan, and will go into the Defined Contribution plan. He went on to state that in addition to the Defined Benefit plan that the town currently provides a 457B Defined Contribution Plan which is a Government Non-for-Profit program. He stated that with the adoption of the Pension Protection Act (requiring companies to fund their under funded defined pension plan) that the Defined Contribution Plan has become the primary vehicle source for retirement at most companies. He addressed the importance for the town to educate their new employees on the Defined Contribution Plan because it will be their primary source for retirement and it will be an essential part of any platform going forward. He noted that Page 2 of 9

the 457B plan provides some benefits to employees that other plans such as the 401K do not provide. He noted as an example that the 457B provides an Enhanced Catch-Up provision; and it does not have a 10% penalty for early withdrawal. He noted that the Segal Company is the town s actuary for the Defined Benefit Plan, therefore, he stated that they may also be the actuary for the 457B Plan as well, however, he suggested that the Finance Committee research this. He continued by stating that in researching options for a Defined Contribution Plan that the town review the following: (1) Copy of the current investment line up; (2) Investment Policy Statement of potential plans; (3) Open architecture platform with access to many investment managers; (4) Summary Plan Description/Plan Document; and (5) Review Plan Design. He noted that the investment manager Principal provides 457B Defined Contribution Plans and he stated that they are number one in terms of total number of lives and total number of plans and he stated that they are in top ten managers in thir total number of assets. He stated that Fidelity is the number one manager. He stated that the Principal is an open architecture platform, provides a high level of record keeping services, and provides a high level of fiduciary reassurance in that they do a prescreening of all the funds that they provide in their platform. The Principal will stand by the investor in their fiduciary responsibility, providing that the investor stays within the mutual funds that are screened. He stated that the Principal will help cover court costs and settlements in the event a plan participant (employee) files a suit against their employer for fiduciary malpractice. He stated that the Principal provides fiduciary indemnification or services. He explained that the Principal s pricing is customized and he stated that Merrill Lynch will need to obtain more information from Ledyard relative to the flow into the plan. He continued by questioning the anticipated number of employees that will be hired after July 1, 2009. Councilor Wadecki explained that currently this change in the pension plan has only been implemented with one group of employees and will need to be negotiated for other contracts. Councilor Diaz stated that the Finance Committee was also interested in the cost to offer the employees currently enrolled in the Defined Benefit Plan with a payout option to move their pension funds over to the Defined Contribution Plan. He also stated that they will need to determine whether the town has enough people to make a transition to the Defined Contribution Plan; and he noted that eventually their goal would be for everyone to be in the Defined Contribution Plan. Mr. Temple addressed the Page 3 of 9

transition from the Defined Benefit plan to Defined Contribution plan and he explained that most corporations no longer offer a Defined Benefit Plan to their employees because it is too costly to administer and because the employer has to make mandatory contributions. He stated that most unions are one of the last labor groups to move away from the Defined Benefit Plan. Finance Director Marcia Hancock addressed the municipalities who have switched to the Defined Contribution Plan and she questioned the correlation between those who have been successful in doing so relative to the municipalities match to the program. Mr. Temple stated that he would have to research the matches that municipalities have used to provide an incentive to move their employees to the Defined Contribution Plan. He stated that a 4% match would be a generous match. The Finance Committee and Mr. Temple discussed the following benefits of the Defined Contribution Plan: (1) Portability - The employee can take the funds with them from one employer to another employer; (2) Early retirees can take benefits without a penalty; (3) Funds can be passed along after death. Ms. Hancock questioned how having both the Defined Benefit Plan and Defined Contribution Plan would be administered. Mr. Temple explained that the funds from the two plans would be held in two separate corporate trusts and that they would not be co-mingled. He suggested the Town contact the Segal Company to discuss the two separate plans. Councilor Wadecki questioned the process to move the town s investments from Altus ING to Merrill Lynch. Mr. Cobb stated that the transition would essentially be seamless; and he explained that the assets would be liquidated and transferred to the accounts that would be set up. He stated that Merrill Lynch would work with the town to develop a formal recommendation (Asset Allocation). He stated because it is a retirement plan that there would not be any tax consequences. He stated that Merrill Lynch uses Aetna to pay the retirees and he stated that if Ledyard is currently using Aetna that this would also be a seamless transition and that the fees for Aetna to manage the cash accounts to pay the retirees would remain the same, which is about $3,000 - $4,000 per year. He stated that Merrill Lynch s role would be to provide the following: (1) Statements; (2) Platform; (3) Due diligence of the managers; (4) Quarterly meetings with the town to review investments and portfolio. He stated that the fee of 84 basis points is all inclusive and he encouraged Ledyard to contact the Town of Killingworth to discuss Merrill Lynch s services. He stated that Merrill Lynch appreciated the opportunity to meet the Finance Committee and he stated they would welcome the opportunity to work with Ledyard. He recommended a handbook for investment fiduciaries titled Prudent Investment Practices and he explained that it a good reference for protocols. Page 4 of 9

The Finance Committee took a recess at 7:30 p.m. The meeting was called back to order at 7:40 p.m. Merrill Lynch Ms. Gina DeVose addressed Merrill Lynch and Bank of America s relationship and she explained that they expect to have a full integration by January 2010. IV. REVIEW AND APPROVAL OF PRIOR MEETING MINUTES MOTION to approve the following: Regular Meeting Minutes of March 17, 2009 Special Meeting Minutes of April 7, 2009 Regular Meeting Minutes of May 5, 2009 Regular Meeting Minutes of May 19, 2009 Regular Meeting Minutes of June 2, 2009 2 0 Approved and so declared V. FINANCE DIRECTOR S REPORT Finance Director Marcia Hancock briefly reported on the status of the Blue Cross/Blue Shield account. VII. OLD BUSINESS 1. No action on the Discussion and possible action on the MOITON to recommend the Town Council approve the Bid Waivers as follows: As included in the Standing Bid Waiver List for the 2009-2010 1. Fiscal year as presented in FBR 2009-05-08; 2. For participation in Capital Region Purchasing Council Bids; and 3. For participation in State of Connecticut Bids. Discussion: The Finance Committee agreed to include this item on the Town Council s June 22, 2009 agenda. 2. No action on the Discussion and possible action regarding the proposed An Ordinance for the Abatement of Property Taxes on Land Preserved for Open Space or for Public Rights of Way as contained in the draft dated April 6, 2009 as forwarded by the LUPPW Committee. Page 5 of 9

IX. NEW BUSINESS 1. MOTION to recommend the Town Council appropriate up to $45,000 from CNR Fund 6 Undesignated to CNR Fund 6 account 6-10-20-2006 (Renovate Ambulance Bld) to finance renovations to the old ambulance building according to the proposed plans. Discussion: Public Works Director/Town Engineer Steve Masalin stated that the Mayor has proposed that the former LVES building be renovated to convert the old bays into three separate spaces in accordance to the design plan that was provided. He stated that various proposals to renovate the former LVES building to increase the inventory of office space and to provide more efficiency of staffing have been discussed for several years. He noted that the engineer s projected estimate for the project is expected to cost $41,000 however, he stated that he was proposing that $45,000 be appropriated for the work. He noted that the WPCA temporarily moved to a trailer on Town Farm Road and have been paying a monthly rent of $600.00. He stated that the WPCA has exceeded the timeframe in which they were allowed to be in the trailer. Therefore, he stated that the Mayor s plan, as presented this evening, will create a space to move the Registrars to the former LVES building to free up space to restore the WPCA office staff to the Town Hall complex. He also noted that the Mayor s plan includes using the back space of the former LVES building as an exercise room. He stated that this proposal would be part of the Nurse s program for health maintenance in terms of diet and exercise and for the Police Department s use. He stated that the plan for the approximately 700 square feet would include partitions, framing in the bay door,and installing a regular door entrance to provide a proper egress into and out of the building in two separate locations. He stated that this would also include work for handicap access. Councilor Wadecki questioned the reason they don t move the WPCA back to their original office space in the Annex Building. Councilor Diaz questioned whether the requested $45,000 would include the work and materials for the telephone lines, computer and internet connections. He also questioned how the space would be heated and cooled (air conditioning) and the septic system capacity. Mr. Masalin noted that the demolition plan cites materials that the town previously purchased for the project and it requires the contractor to use these materials for the renovation project (wall board, metal stud framing, ceiling panels Page 6 of 9

and insulation). He went on to note that the $45,000 would be used to supplement the materials that are already on site, and labor costs such as the electrical work, etc., to complete the project. Councilor Wadecki stated with this year s budget (09/10) that the town will be laying off some employees, therefore, she questioned the need for additional office space. She stated that they have identified that they need office space for the WPCA, however, they have not shown a plan to make space for the WPCA. Therefore, she stated that for the Finance Committee to consider this project that the Mayor will need to provide a space plan showing who will be moved into these newly renovated office spaces to be sure they are creating space that will meet the town s current and future needs. Finance Director Marcia Hancock stated that the Mayor plans to move the Registrars to the new office space in the former LVES building. Councilor Wadecki questioned where the WPCA will go; and she suggested that the WPCA take the newly renovated space in the former LVES building. Water and Sewer Director Greg Tiefert stated that the WPCA is currently renting a trailer on Town Farm Road for their office staff at a cost of $600.00 per month. He stated that the town would recover the $45,000 from the rent savings over a six year period by moving the WPCA back to Town Hall. Councilor Wadecki explained that this would not be a savings to the town, as the ratepayers bare the operational costs of the WPCA. She continued to explain that the WPCA should pay the town rent for their office space. Councilor Diaz commented that more information is needed for the Finance Committee to consider this request. Mr. Masalin noted that the last Administration provided a comprehensive space needs plan showing where the various departments would be located when they presented a proposal to renovate the former LVES building a few years ago. MOTION to table the MOTION to recommend the Town Council appropriate up to $45,000 from CNR Fund 6 Undesignated to CNR Fund 6 account 6-10-20-2006 (Renovate Ambulance Bld) to finance renovations to the old ambulance building according to the proposed plans. 2 0 Approved and so declared Page 7 of 9

2. MOTION to recommend the Town Council appropriate $104,000 from CNR Fund 6 account 6-950-1-87 (Undesignated ) to CNR Fund 6 account 6-312-002-0089 (Road Restoration Fr Surplus) to finance resurfacing in accordance with the Road Restoration Plan. of Town Farm Road. CNR Fund 6 Undesignated will be reimbursed $104,000 upon receipt of LoCIP grant funds. Discussion: Public Works Director/Town Engineer Steve Masalin explained that $104,000 was allocated in the Fiscal Year 2009/2010 budget from LoCIP funding for road resurfacing work. He stated that he does not need these funds until July 1, 2009, however, he noted that this would be the last meeting before July 1 st, therefore, he wanted to obtain approval so that he would be able to move forward at the beginning of the new fiscal year. He continued to explain that he would proceed with the road restoration work in accordance with the Road Restoration Plan, and that Town Farm Road was the next road to be addressed. Councilor Wadecki questioned the status of the water projects and whether Town Farm Road would be affected by the projects. Mr. Masalin stated that if Town Farm Road was going to be affected that he would hold off on resurfacing that road until the water project was completed and that he would move forward to address the next road in accordance with the Road Restoration Plan. Councilor Wadecki suggested that language be changed to state resurfacing in accordance with the Road Restoration Plan and that the following language be deleted: of Town Farm Road.. Councilor Diaz agreed to the language change as a friendly amendment. 2 0 Approved and so declared 3. MOTION to recommend the Town Council appropriate $100,000 from CNR Fund 6 account 210-001-0088 (Revaluation) to CNR Fund 6 account 6-312-002-0089 (Road Restoration Fr Surplus) and $50,000 from CNR Fund 6 account 6-300-019-2006 (Conveyance Fees-Capital Projects) to CNR Fund 6 account 6-312-002-0089 (Road Restoration Fr Surplus) to finance FY10 road restoration efforts. Discussion: Public Works Director/Town Engineer Steve Masalin explained that the approved Fiscal Year 2009/2010 budget contemplates using $150,000 from CNR Fund 6 for road resurfacing work, as follows: $100,000 from excess revaluation reserve funds; and $50,000 from conveyance funds. Therefore, he stated that he was requesting a transfer of these funds to the road restoration account. 2 0 Approved and so declared Page 8 of 9

4. No action on the Discussion and possible action on the MOTION to recommend the Town Council approve the amended salary plan for Secretarial, Administrative, and Professional employees to be effective July 1, 2009. 5. No action on the Discussion and possible action on the MOTION to recommend the Town Council approve the Non- Union, Part-Time and Temporary Personnel Salary Scale as proposed effective July 1, 2009. 6. MOTION to recommend the Town Council authorize the Mayor to sign the Memorandum of Understanding Concerning Emergency Traffic Duty as contained in the draft dated April 11, 2009. Discussion: The Finance Committee reviewed the Memorandum of Understanding Concerning Emergency Traffic Duty as contained in the draft dated April 11, 2009 and the town s process which includes the Town Council to authorize the Mayor to sign the MOU. Although the Finance Committee agreed with the concept for volunteers to be reimbursed for expenses to stand traffic patrol they expressed concern with some of the language, as contained in the proposed MOU. They agreed to draft a memo to the Mayor to request that he ask the labor attorney to review the language in the MOU to be sure the town would not be putting themselves at risk with any labor issues. MOTION to withdraw the MOTION to recommend the Town Council authorize the Mayor to sign the Memorandum of Understanding Concerning Emergency Traffic Duty as contained in the draft dated April 11, 2009. 2 0 Approved and so declared VIII. ADJOURNMENT Councilor Diaz moved the meeting be adjourned, seconded by Councilor Wadecki. 2-0 Approved and so declared, the meeting was adjourned at 8:30 p.m. Respectfully submitted, James Diaz Finance Committee Chairman Pro-tem Although we try to be timely and accurate, these are not official records of the Town and there is no guarantee of such accuracy. The Town Council Office Minutes are on file in the Town Clerk's Office. Page 9 of 9