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HomeMy WebLinkAboutMinutes - 10/08/2013 - Police Pension BoardPolice Pension Board of Trustees Regular Meeting October 8, 2013 A meeting of the City of McHenry Police Pension Board of Trustees was called to order at 3:30 PM by President Jeffrey Foerster. Other board members present: Jon Meyer, Marc Fisher, and Kelly Ducak. Absent: Ormel Prust. Others present: Gary Karshna, Capital Gains, Inc.; Jim Schmidt, LPL Financial; and recording secretary Marci Geraghty. Public Input None. Approval of Minutes M. Fisher made a motion, seconded by K. Ducak to approve meeting minutes from July 9, 2013 as presented and to hold them for audit. All ayes, motion carried. Treasurer Report The Treasurer Report for the period ending September 30, 2013 was presented. Full market value of cash and investments at that time was $19,721,280.46, which is an increase of 5.2% from June 30, 2013 and 9.6% from December 31, 2012. Motion by J. Meyer, seconded by K. Ducak to approve the Treasurer Report for the period ending September 30, 2013 as presented and to hold it for audit. President Foerster called for a roll call vote: Ayes: Ducak, Fisher, Foerster, Meyer Absent: Prust Abstain: None Motion carried Investment Reports a) Capital Gains, Inc.: Gary Karshna of Capital Gains, Inc. presented the fixed assets report for the period ending August 31, 2013. Mr. Karshna reported the portfolio continues to outperform the benchmark Barclays Intermediate Government Bond Index with significantly less market risk. Although the market value rate of return is -1.20% the book value rate of return is a positive .53% fiscal year-to-date and the rate of return is 3.28%, which on paper, is an increase of 7% over the past three -months. As of August 31S`, the portfolio market valuation was $9,156,738 and book valuation was $9,312.516. Average bond maturity was 2.70 and effective duration was 2.29. b) LPL Financial: Jim Schmidt of LPL Financial presented the equities report. Value of the fund as of September 71h was $10,020,920. Year-to-date, equities have increased 19.34%. Equities have increased on average 10% per year, which matches the actuarial forecast. 2013 Actuarial Quick Study & 2014/15 Tax Levy President Foerster announced Actuary Tim Sharpe provided some numbers using the "Projected Unit Credit" `— actuarial method the state recently adopted. This new method is a three-year amortization period, 90% amortization target and asset smoothing (5-year average market value) and uses the RP-2000 Mortality Table. The investment return was more than assumed and salaries increased a little less than assumed with the same number of active members contributing to the fund. Using an interest rate of 7.5% and salary scale of 5.5%, the tax levy will increase to $1,295,577 (8.5%) and the percent funded decreased slightly from 53.5% to 53.0%. At the April board meeting, J. Meyer suggested the board may want to use a different interest and salary percentage when calculating the study and suggested using a 7% interest rate and a more realistic 4.5% salary scale, while also using the RP-2000 mortality table. He said he expected the combination of rates to reduce the tax liability while also being valid assumptions. President Foerster asked Mr. Sharpe to submit numbers using J. Meyer's suggested calculations and at 7% interest and 4.5% salary scale, the levy requirement would be $1,379,479, which is higher than the original assumption. J. Meyer made a motion, seconded by K. Ducak to use the model originally submitted by Mr. Sharpe and to send a letter to the Mayor and McHenry City Council recommending a tax levy of $1,295,577. The board also agreed to revisit this topic at the next actuary discussion. President Foerster called for a voice vote. Ayes: Meyer, Ducak, Fisher, Foerster Absent: Prust Abstain: None Motion carried 1�1_ Semi-annual Review and Discussion of Police Pension Investments and Investment Policy President Foerster presented a FY13-14 and 14-15 Cash Analysis prepared by Treasurer Lynch. In March 2014, the board will be short $58,278.11 in cash to pay bills and the cash analysis for FY 14-15 reflects a cash deficit of $450K. President Foerster told the board they will need to resolve this situation by at the January meeting. Mr. Karshna noted there is a $250K cash balance in the bond fund that could be used if necessary. J. Meyer inquired about the maximum percentage the fund was permitted to investment in equities. President Foerster answered the state permits 55% and the Investment Policy states equities shall not exceed 50% of the market value of the pension fund's net present assets. Mr. Karshna was asked about language used in pension funds he is involved with and he said most use broader language and do not include an exact percentage in their policy. A discussion ensued on the current language in the Investment Policy regarding equity funds and the board agreed to Mr. Karshna's offer to provide sample language and revise the current policy. J. Meyer made a motion, seconded by M. Fisher to revise the current investment policy to reflect state statute that permits Illinois Pension Funds to hold a total equity investment in an amount not to exceed 65% of the market value of the Pension Fund's net present asset valuation at fiscal year-end. President Foerster called for a voice vote Ayes: Meyer, Fisher, Ducak, Foerster Absent: Prust Abstain: None Motion carried Unfinished Business a) Disabilijy Application for Justin Debolt. This matter was tabled and a special meeting will be held in the next few weeks. . b) Public Pension Trustee Training Update. It was noted new trustees are required to complete 32 hours of training their first year in office, from August to August, after which 16 hours per year is required. New Business a) K. Ducak made a motion, seconded by M. Fisher to approve applications to the pension fund submitted by newly hired officers Joseph Lazicki and Alan Klechak. Discussion: President Foerster noted Officer Lazicki will be submitting a request to the Village of Winnetka to transfer his pension fund account to the City of McHenry. Ayes: Ducak, Fisher, Foerster, Meyer Absent: Prust Abstain: None Motion carried b) J. Meyer made a motion, seconded by K. Ducak to approve the 2014 Pension Board of Trustees meeting schedule as presented: January 14, April 8, July 8, and October 14. All meetings will begin at 3:30 PM and held in the City of McHenry Municipal Center. Ayes: Absent: Abstain: �— Motion carried Adjournment Meyer, Ducak, Foerster, Fisher Prust None K. Ducak made a motion, seconded by M. Fisher to adjourn the meeting. Ayes: Ducak, Fisher, Foerster, Meyer Absent: Prust Abstain: None Motion carried. The meeting was adjourned at 4:25 PM. Respectfully submitted, l Marci Geraghty, Rec mg S�Cretary 3