FIRE & POLICE PENSION BOARD
December 16, 2013
MINUTES OF THE REGULAR MEETING OF THE CHARTER TOWNSHIP OF SHELBY FIRE & POLICE PENSION AND RETIREMENT BOARD HELD ON MONDAY, DECEMBER 16, 2013 AT FIRE STATION #1, 6345 23 MILE ROAD, SHELBY TOWNSHIP, MICHIGAN.
The meeting was called to order at 5:04 p.m. by Chairman Matt Stachowicz.
Members Present:David Diegel, Michael Flynn, Jerry Moffitt,
Mark Semaan, Matt Stachowicz
Also Present:Lewis Thumm, Pension Board Attorney
Brian Green, Consultant, Graystone
Franklyn Pierce, Shelby Township Fire Department
APPROVAL OF MINUTES
MOTION by Semaan, supported by Diegel, to approve the minutes of the regular meeting of the Charter Township of Shelby Fire & Police Pension and Retirement Board held on Monday, November 18, 2013 and the Special Meeting held on November 25, 2013, as presented, and waive the reading.
Motion carried.
Mr. Diegel reviewed the “Itemized Budget for Projected 2014 Expenditures” and questioned the fee listed under “Investment Fund Managers” as .85% basis points (subject to change). Mr. Semaan responded that was what we were paying Merrill Lynch. We budgeted the same amount as we had last year. Mr. Diegel stated that we net those fees against our proceeds so do we really need to budget for it. We end up getting whatever the funds earned minus their fees and that comes in as revenue. Mr. Semaan suggested that we ask this question of Mr. Green from Graystone. This needs to be clarified.
PRESENTATION
Graystone Consulting – Asset Allocation Review
Mr. Brian Green from Graystone advised that the transition from Merrill Lynch to Comerica is nearly complete. The transition for the trading of the existing assets into Vanguard will be complete this Friday. Once everything is in and consolidated with Comerica, he will e-mail the members and make them aware of the status. Once the transition is complete, he will also send an e-mail and keep everyone informed.
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Mr. Green made a lengthy presentation with regard to asset allocation. He reviewed pertinent sections of the report that had been submitted prior to the meeting. They are currently not talking about adding any asset classes to the mix. They want to make sure there are no changes in what the Pension Board has from an equity, fixed income and real estate standpoint and we are all on the same page.
Mr. Green addressed infrastructure. They would like to go through the education process in January and February. They had a unique opportunity that they found through their due diligence process that they are introducing to a number of clients that they feel makes sense for plans from a cash flow needs standpoint to a return needs standpoint.
Mr. Green explained submittals included in the report in detail as they pertain to Key Asset Class Historical Performance as of 9/30/2013 for one year, three years, five years, ten years, fifteen years and twenty years; Graystone/MS Return Projections; Impact of Public Act 314, Analysis Inputs – Long Term; Analysis Inputs – Intermediate; Efficient Frontier – Intermediate; Current vs. Long Term – Intermediate; Current vs. Maximum Return – Intermediate; and Current Allocation vs. Long/Interim Targets.
Mr. Green made a comparison between the current allocation of investments vs. their long-term recommended target.
Current
Global Equities60.0%
Global Fixed Income35.0%
Cash 0.0%
Real Estate 5.0%
Infrastructure 0.0%
Recommended Long-Term Target
Global Equities57.0%
Global Fixed Income31.0%
Cash 2.0%
Real Estate 5.0%
Infrastructure 5.0%
Graystone’s recommendation from a manager’s selection standpoint is with the understanding that as they talk about implementing things in the coming months that allocating assets to fixed income for example will be below that 31 % target and global equities will be above that 57% target. After the next few meetings when we get things taken care of from a traditional manager standpoint, the simplest way to reduce the dependence the Board has on the equity market to generate a 7 ½% return is to look at items like private equity such as private real estate. We have to understand the asset classes thoroughly and this will be discussed over the next several months.
A schedule was submitted highlighting what Graystone would like to accomplish during the next several months. They want the Board to become comfortable with the long-term asset allocation targets. The next step in the process would be education and interview on infrastructure to take place at the January meeting. They would like to bring in one specific manager and review the asset classes as a whole and talk about their specific approach to it. In conjunction with that, they want to continue to review the investment policy statement. At the February meeting, they would like to talk about things from an operational standpoint, the Board’s preference and approach.
When they do a manager search, they bring in 3 to 5 solid candidates. The Board can hire any one of the managers or none of them, whatever they choose.
Mr. Green said they may have a list of 12 managers to select from. He was asked that the list be forwarded to the members for review. Mr. Moffitt may be able to recognize if a manager would not work for us based on past experience. We don’t want to waste anyone’s time. Mr. Moffitt suggested that we do infrastructure in January and fixed income in February and equity subsequent to that.
Questions of the Board were addressed by Mr. Green.
Mr. Green spoke briefly with regard to the investment policy statement. He received 3 of the 5 questionnaires back and is waiting for submittals for the remaining members.
Mr. Semaan asked if we received any correspondence from Merrill Lynch indicating how much has been transferred. He was told the only information received from Merrill Lynch was the November 29, 2013 Treasurer’s Report.
TREASURER’S REPORT
Mr. Semaan reviewed the Treasurer’s Report for the month ending November 29, 2013. The beginning market value was $67,613,645 and the ending balance is reflected at $67,751,138.
Mr. Semaan advised that the Pension Board is expecting one more statement from Merrill Lynch indicating the final payout to our account.
Mr. Green said the transfer will be done tomorrow and the actual trading of the portfolio from the old into Vanguard should be completed on Friday.
MOTION by Diegel, supported by Semaan, to receive and file the Treasurer’s Report, as submitted.
Motion carried.
OLD BUSINESS
Publication Requirements – Information Available to Participants (Mr. Thumm)
Mr. Thumm wants to make sure that the Pension Board is compliant with existing laws that govern its procedures.
The actual language of the statute (Sec 20h(3) exempts calculation of actual or estimated retirement benefits for members of the system from disclosure under the Freedom of Information Act. The Board can make rules to ensure confidentiality of these records. If the information is kept in Finance, are they kept confidential and maintained properly?
Mr. Semaan brought up instances at Board meetings where the pensions of retirees are disclosed.
Discussion followed.
Mr. Thumm responded that the final monthly payment figure can be disclosed; however, the calculations indicating how these figures were arrived at is confidential. The supporting documents cannot be released.
Input was provided by Mr. Green.
The members felt that Financial Management and Human Resource should be notified that they cannot release calculation sheets.
MOTION by Diegel, supported by Flynn,that we notify the Human Resource Department and Financial Management that the calculation sheets for pensions have been deemed not releasable under FOIA based on Sec. 20h(3) of Public Act 347 of 2013, as amended.
Motion carried.
It was agreed that a copy of the statute be provided to both departments.
Mr. Thumm referred to Sec 20h (1) of the same Act. It states that the system is subject to the applicable accounting, auditing and reporting requirements contained in Statute MCLA 141.421-440a. He pointed out the recommended budget content. It was agreed that the summary of 2012 fees will be requested from our Finance Department. Mr. Diegel advised that he will review this summary and put something together for the next meeting.
As far as auditing requirements, the Pension Board audit is included in the audit prepared by Plante Moran for of all of the Township funds. We are billed for our portion of the audit.
The members briefly discussed Sec 20h (6) dealing with the publication of their Annual Summary Report. The secretary was asked to have the Annual Summary Report and all Pension Board agendas and minutes posted on the web page.
Mr. Semaan added that all active members receive a copy of the Annual Summary Report. The retirees have it made available to them if they would like to stop at the Clerk’s Office. They also have the option of having it mailed to them upon request.
Review of Policies and Procedures with Pension Board Attorney and Investment Consultant
Policy Resolution
Exhibit A to Policy Resolution
Service Provider Fee Policy
Policy & Budget for Retirement Board Members Annual Education, Training and Travel
Record Keeping Policy
Itemized Budget for Projected 2014 Expenditures of the Retirement System
The members asked that this item be tabled until the next meeting until they have an opportunity to review the contents.
Mr. Diegel had a question of Mr. Green. On the Itemized Budget Report, certain items are required. With regard to the cost of investment fund managers, we net those fees against the proceeds of the investment. Do we need to fill out that section? We will have a budget with nothing expended against it. Can we ignore that question?
Mr. Green responded to his inquiry. He referred to one of the studies that they do at least once a year. For example, they take the assets as of July 31, the current fee schedule for each of the managers, and the cost to run the system from an investment standpoint. You can use that from a budgeting standpoint. The irony is if you are paying your managers a base fee you want to be over budget every year. If you are over budget every year, it means that your assets increased. If you are 20% over budget, it should be because your assets increased by 20%. Those who are comfortable in a municipal budgeting background, provide a detailed budget. Other budgets that they have seen are basic and only include the two requirements - travel related and other. These were the only issues focused on when theAct was updated.
Mr. Diegel said he will put something together by the next meeting.
Discussion followed among the members.
Mr. Diegel asked Mr. Thumm if the Budget Resolution is an internal document. He was told it needs to be published on our website.
The information needed to complete the Resolution should be available in last year’s summary statement that he will obtain from Mr. McDonald of Financial Management.
This item will be tabled until the January meeting.
APPROVAL OF BILLS
$8,333.34Morgan Stanley – 4th quarter consulting fee prorated
5,552.08Merrill Lynch – 3rd & 4th quarter consulting fees prorated
100.00MAPERS - Annual membership fee
MOTION by Flynn, supported by Moffitt, to pay the bills.
Motion carried.
It was agreed that the next Pension Board Meeting will be held on Monday, January 20, 2014 at 5:00 p.m.
MOTION by Flynn, supported by Diegel, to adjourn.
Motion carried.
The meeting adjourned at 6:45 p.m.
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Mark C. Semaan, Secretary
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