HomeMy WebLinkAboutMinutes - 10/20/2009 - Police Pension BoardPOLICE PENSION BOARD
CITY OF MCHENRY
Tuesday, October 20, 2009
A meeting of the McHenry Police Pension Board was called to order on Tuesday, October 20,
2009, at 3:30 PM in the City of McHenry Municipal Center, 333 South Green Street.
At roll call, the following members were present: Sgt. Jeff Foerster, Bob Hettermann, Ormel
Prust, and Officer Robert Roske. Absent: Daniel Kinnerk.
Other present at the meeting were Jim Schmidt, LPL Financial; Eric Snively, American Funds;
Gary Karshna, Capital Gains; Carolyn Lynch, Chris Black, and Marci Geraghty, City of
McHenry.
Reading and Approval of Minutes
Roske made a motion seconded by Prust to approve the July 21, 2009 minutes as
presented and to hold them for audit. All ayes, motion carried.
Presentation
Jim Schmidt of LPL Financial introduced Eric Snively of American Funds. Mr. Snively thanked
the board for the opportunity to introduce himself. He has been with American Funds for 16
years. American Funds was formed in 1931 in the middle of the great depression. For the
past 80 years the company has remained private. American Funds has outperformed its
competition in part due to maintaining a rainy day fund equal to two years of operating
expenses. Mr. Snively added that although the country is in the second worst bear market in
U.S. history the company is able to continue day to day operations on behalf of share holders
amid revenue shortages due to its long term approach to investing.
Old Business
LPL Financial. American Funds has outperformed the S&P 500 with the exception of second
quarter 2009. Foerster asked what the dollar value would be if the pension invested in the S&P
500 instead of American Funds. Schmidt noted that as of September 30th, $5,510,563 pension
dollars are in the American Funds as opposed to $3,685,985 had the pension fund invested in
the S&P 500 — a difference $1,824,578. Schmidt concluded by reporting that equity
investments are doing well.
Capital Gains, Inc.
Gary Karshna reported on fixed assets as of September 30, 2009. Statistical data and rates of
return for the first five months for FY 200/10 are as follows:
FY YTD 2009/2010:
Portfolio Market Valuation $7,861,217
Portfolio Book Valuation $7,696,193
Average Maturity 8.50 years Effective Duration 4.04 years
Police Pension Board
October 20, 2009
Page Two
Returns FY TD 2009/2010
Lehman Intermediate Govt. Bond Index — .90%
�- McHenry Police Market Value — 6.87% - 2.89%
Returns — Past 12 Months
Lehman Intermediate Govt. Bond Index — 6.26%
McHenry Police Market Value — 6.87%
The bond market appears to be sensing weakness in the economy. Prices have rallied pushing
the yields on 10 year US Treasury Notes to 3.31 %. That level is near the lower end of the
trading range of 3.25% and 4.00%. Municipal bonds are on sale with yields over 6%. Karshna
is watching US TIPS and Municipal Bonds and will capture profits from these instruments
should the opportunity present itself. In September, one US TIPS were sold capturing $6,923 in
profits and one municipal bond was purchased with a .75% yield to maturity. Karshna reported
that the pension fund bond portfolio continues to perform well in this fiscal year. He will
continue to monitor the financial markets and adjust the portfolio accordingly
Gary Karshna told the board that he is available to provide training as required by the Pension
Ethics Public Act noting that the pension board attorney or persons who are GFOA certified can
also provide the training.
Treasurer's Report
Carolyn Lynch presented the Treasurer Report for the period ending, September 30, 2009 was
presented. Full market value of the fund for the period was $15,603,433.69, an increase of
approximately 7.2% from June 30tn
Prust made a motion, seconded by Hettermann to approve the Treasurer Report for the
period ending September 30, 2009 as presented and to hold it for audit. All ayes, motion
carried.
Lynch reported that a certificate of deposit held with McHenry Bank & Trust for $1,000,000 will
mature on December 14, 2009. Foerster asked Lynch to secure quotes from local banks to
reinvest the money. He also suggested that a special meeting of the board be held on
December 11, 2009 to review quotes.
Finance Director Chris Black told the board that the fund is spending $1.2M to pay disabililty
and pension benefits. He noted that recent increases in retirements and the amount of revenue
coming in is not enough to pay the bills. The city's contribution and employee deductions will
not quite cover the cost of the increases. Additional funds will come in from tax receipts, but not
until June. He said that the city has the funds to pay for January but will need additional funds
to cover February through May, approximately $350,000. He also informed the board to expect
only a slight increase in the city's annual contribution to the fund. Black reported that consumer
spending trends are down causing a decrease in tax revenue. He added that most Illinois
municipalities are experiencing decreases in sales tax revenues. Foerster stated that at the
special meeting in December, the board will determine if funding the city needs to pay bills will
come from investing only half of the money from the CD or from the fixed account.
Roske made a motion, seconded by Prust to authorize the Finance Director to seek terms
and rates from local banks for one, two, and three year certificates of deposits for
L... $500,000 and $1,000,000. All ayes, motion carried.
Police Pension Board
October 20, 2009
Page Three
Hettermann asked if the city was cutting back or laying -off employees. Black reported that four
full time positions in the police department were eliminated and over the past two years, 15
positions have been either eliminated or not filled in all departments of the city.
New Business
a) Hettermann made a motion, seconded by Roske to approve pension increases for
Kathleen Leonard and Thomas O'Meara effective November 1, 2009 and for
Richard Meier effective December 1, 2009. All ayes, motion carried.
b) Prust made a motion, seconded by Hettermann to approve applications to police
pension from new patrol officers: Kristopher Rigan, 10/19/09; Ryan Gregorio,
9/14109; Jamie Mecher, 9/14/09; and Robert R. Beaidoin, 10/20/09.
Bills for Approval
Prust made a motion, seconded by Roske to approve payment of Invoice #1536 from
Capital Gains for $4,234. All ayes, motion carried.
Adjournment
Roske made a motion, seconded by Hettermann to adjourn the meeting. All ayes, motion
carried.
The meeting was adjourned at 4:29 PM.
Respectfully submitted,
Marci Geraghty,17-1bordi I
Secretary