The URL can be used to link to this page

Home My WebLink AboutMinutes - 04/21/2009 - Police Pension BoardPOLICE PENSION BOARD �-- CITY OF MCHENRY Tuesday, April 21, 2009 A meeting of the McHenry Police Pension Board was called to order on Tuesday, April 21, 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, Daniel Kinnerk, and Officer Robert Roske. Other present at the meeting were Jim Schmidt, LPL Financial; Gary Karshna, Capital Gains; Carolyn Lynch, Chris Black, and Marci Geraghty, City of McHenry. New Business a) 2009 Election Results: Officer Robert Roske and Sgt. Jeff Foerster were reelected to the Police Pension Board of Trustees by the active members of the fund for the term of two years ending April 30, 2011. Daniel Kinnerk was reappointed to the Police Pension Board of Trustees by the beneficiaries of the fund for the term of two years ending April 30, 2011. At the April 27, 2009, annual City Council meeting, Mayor Low intends to reappoint Ormel Prust to the Police Pension Board of Trustees for a two year term ending April 30, 2011. b) Let the record show: results of the annual election of Board officers held by the Police Pension Board of Trustees in July 2008 were Sgt. Jeff Foerster, President; Daniel Kinnerk, Vice -President; and Officer Robert Roske, Secretary. c) Hettermann made a motion, seconded by Prust to approve an increase to the annual monthly pension Increases as presented. All ayes, motion carried. d) Let the record show: acknowledgement of the 2006 and 2008 appointments of Trustee Robert Hettermann by Mayor Susan Low to the Police Pension Board of Trustees for two years terms expiring on April 30, 2008 and April 30, 2010 respectively. Meetina Minutes Discussion: Hettermann noted a change should be made to the first page, second paragraph under Old Business - grown should be growth. Motion by Roske, seconded by Kinnerk to approve the January 20, 2009, Police Pension Board meeting minutes as amended and to hold them for audit. All ayes, motion carried. Treasurer Report City of McHenry Accountant Lynch presented the Treasurer Report for the period ending, March 31, 2009. Full market value of the fund for the period was $13,728,722.40 down over $500,000 from last yearend. Lynch reported that a $1-million certificate of deposit held with McHenry Bank & Trust expires on June 2nd. Foerster asked Lynch to obtain quotes from local financial institutions to purchase a CD with the funds. A discussion ensued on the amount that should be reinvested. Chris Black reported that the recent increase in pension benefits equals approximately $250,000. Taxes Police pension Board of Trustees meeting April 21, 2009 Page Two and deductions will not quite cover the cost of the increases. Black further stated that we may need extra cash flow. Answering Kinnerk's question, Black announced the fund was 61 % funded by the city and the city will contribute approximately $650,000 this fiscal year and approximately $400,000 will be contributed by employees. Foerster announced that a special meeting would be called in May to discuss investment options for the $1-million CD. He stated that the board may need to retain the cash or perhaps purchase a six-month CD versus one-year. Prust made a motion, seconded by Roske to approve the Treasurer Report for the period ending March 31, 2009, as presented and to hold it for audit. All ayes, motion carried. Old Business a. Capital Gains. Gary Karshna reported on fixed assets as of March 31, 2009. Statistical data and rates of return for the first eleven month for FY 2008/09 are as follows: Portfolio Market Valuation $7,660,134 Portfolio Book Valuation $7,554,988 Average Maturity 8.59 years Effective Duration 3.36 years Returns in Past 12-months: Lehman Intermediate Govt. Bond Index — 5.99% McHenry Police Market Value — 5.58% A discussion ensued on the government's stimulus programs designed to re - inflate the economy. Karshna noted that the programs are making US Treasury Inflation Protection Securities (TIPS) more attractive alternatives to US Treasury notes and US Agency bonds. Profits were captured by selling one US TIPS position in mid -February, because US TIPS were rather expensive and a profit making opportunity was available. From a longer term perspective, Karshna still recommends investing in US TIPS because they are the one fixed income security that will insulate the portfolio from escalating inflation. With the Feds doing everything to re -inflate the economy, US TIPS will become an important component in fixed income portfolios. Karshna reported that he waited for a pull back in US TIPS prices and acquired three additional US TIPS positions. Specifically, in March, one FHLMCX note matured and two US STRIPS positions were sold, capturing profits of $50,602. The proceeds were invested in three US Treasury Inflation Protected Securities (US TIPS) positions with final maturity dates in 2012, 2016, and 2017. Current portfolio structure: Money Market 21 % Call US Agencies 31 % US TIPS 20% US Agencies 18% STRIPS 6% Taxable Muni's 4% Police pension Board of Trustees meeting April 21, 2009 Page Three Karshna concluded his report by stating that he will continue to seek investment opportunities in the fixed income market that will enable the fund to benefit from the massive stimulus programs currently being implemented by the government. b. LPL Financial. Jim Schmidt presented the equities investment report for the period ending April 20, 2009. Total value of investments for that period was $4,172,084, down (6.26%) from last yearend. Schmidt noted that the S&P 500 was down (7.05%) for the same period. Schmidt reported that Washington Mutual was the worst performing fund in the portfolio. Schmidt suggested that funds be reallocation from Washington Mutual and Capital World Growth & Income to AMCAP; a better performing fund in down markets. AMCAP is 100% U.S. which will reduce international exposure. He suggested that the volume be capped between $700K-$800K. No fees would be incurred as a result of the reallocation. If the assets were reallocated, the pension fund would be 25% invested internationally. Kinnerk made a motion, seconded by Roske to reallocate $250,000 from Washington Mutual and $250,000 from Capital World Growth & Income to the AMCAP fund. All ayes, motion carried. At 4:10 PM, Gary Karshna and Jim Schmidt left the meeting. Other Business a) Audit Letter. Sgt. Foerster presented a letter he intends to send to the Acting Chief Administrator for the Public Pension Division in response to a recent examination of the city's police pension fund. The letter explains the work that has been done to rectify deficiencies noted in the report: 1) Annual elections of officers will be documented 2) The Treasurer is a required signer on all accounts 3) Letter from city addressing fund contributions/tax revenues 4) Adjustment of monthly surviving spouse benefit for Charlene Lange 5) Missing applications inserted in member files 6) Birth certificates and/or passports inserted in member files 7) Corporate records will be addressed in future meeting minutes Kinnerk made a motion, seconded by Prust to authorize Sgt. Foerster to send the letter to Acting Chief Administrator for the Public Pension Division in response to a recent examination of the city's police pension fund as presented. All ayes, motion carried. Bills for Approval There we no bills presented. New Business Kinnerk made a motion, seconded by Hettermann to schedule a special meeting to discuss investments strategies relating to the $1,000,000 certificate of deposit that will mature on June 2"d. The meeting will be held on Wednesday, May 27th, at 3:30 PM. All ayes, motion carried. 'Police Pension Board of Trustees meeting April 21, 2009 Page Four Adjournment Roske made a motion, seconded by Kinnerk to adjourn the meeting. All ayes, motion carried. The meeting was adjourned at 4:25 PM. Respectfully submitted, Marci Geraghty, Re ordin Secretary