HomeMy WebLinkAboutMinutes - 04/17/2007 - Police Pension BoardMEETING OF THE BOARD OF TRUSTEES
OF THE POLICE PENSION FUND
CITY OF McHENRY
Tuesday, April 17, 2007
A meeting of the Board Of Trustees of the McHenry Police Pension Fund was called to order on
Tuesday, April 17, 2007, at 3:31 PM in the City of McHenry Municipal Center, 333 S. Green
Street.
At roll call, the following members were present, Sgt. Jeff Foerster, Ormel Prust, and Dan
Kinnerk. Others in attendance: Gary Karshna, Capital Gains, Inc.; Jim Schmidt, LPL Financial;
Chris Black, Director of Finance, Carolyn Lynch, Accountant, and, Recording Secretary Marci
Geraghty; City of McHenry. Absent: Robert Hettermann and Officer Robert Roske.
Introduction
City of McHenry Finance Director Chris Black and Accountant Carolyn Lynch were introduced to
the board.
Pension Board Member Robert Roske entered the meeting at 3:33 PM
Pension Board Member Robert Hettermann entered the meeting at 3:36 PM.
2007 Board of Trustees of the Police Pension Fund Election Results
President Foerster announced that pursuant to state statute, an election was held on April 16,
2007 for the positions of retired board member and two active members. The beneficiaries of
the pension fund re-elected Daniel Kinnerk to represent them on the board. Sgt. Jeffery
Foerster and Officer Robert Roske were re-elected to the board by the active members of the
fund. In addition, Mayor Low intends to announce the reappointment of Ormel Prust to the
Pension Board of Trustees at the April 30, 2007 City Council annual meeting. The term of
elected members shall be two years, beginning on the second Tuesday of the first May after
the election, or May 8, 2007.
Minutes
Kinnerk made a motion, seconded by Roske to accept and hold for audit, the January 16,
2007 Police Pension Board meeting minutes as presented. All ayes, motion carried.
Bob Hettermann made a request to receive future meeting minutes earlier.
Treasurer Report
Carolyn Lynch presented a report of investments for the period ending March 31, 2007
and investments sold during fiscal year 06/07. Jim Schmidt noted that the initial
investment amount reflected in the report for the American Funds should read
$2,762,187.00. He further stated that the percentage of equities invested in the fund is
just under the state cap of 45%.
Police Pension Board
April 17, 2007
Page Two
OEM
As of March 31, 2007:
Full Market Value
$15,315,746.52
Amcore Checking Acct.
$171,607.84
LaSalle Money Market
$1,896,713.44
Government Agency
$3,738,017.25
US Government
$1,144,620.00
Fixed Income Trust Acct.
$4,882,637.25
Lincoln/American Legacy $486,663.21
American Funds $6,178,124.78
McHenry Bank & Trust CD $1,000,000.00
(expiration 0610212006)
Home State Bank CD $700,000.00
(expiration 1211412007)
Prust made a motion, second by Kinnerk to accept and hold for audit, the Treasurers
Report for the period ending March 31, 2007 as presented. All ayes, motion carried.
Old Business
a. Capital Gains, Inc. Fixed assets manager Gary Karshna presented a summary of
fixed asset investments for the period ending March 31, 2007. Karshna reported that
increases in revolving credit has offset about 20% of the decline in cash -out
refinancing or increased home equity lines off credit since 2005. Since consumer
spending is the primary drive of economic growth, any drop off in consumer spending
could have a dramatic impact on the domestic economy later this year and in 2008.
March Transactions: Two US Agency Notes were called during the month of March.
Karshna recommended investing some of the proceeds of the sale in longer term
securities once yields move above the 5% level. The remaining proceeds should be
invested in short-term US Agency Notes.
Karshna is of the opinion that the bond market is still in a 50 basis point trading
range, with the yield on 10-year US Treasury Notes moving from 4.50% to 5.00%.
The Police Pension Fund portfolio outperformed the Lehman Intermediate
Government Bond Index by a significant margin, fiscal year -to -day and over the past
12-months.
Market Value Returns Past 12-Months:
Lehman Intermediate Govt. Bond Index 5.75%
Police Pension Fund 6.55%
McHenry Police Returns FY Year to Date:
McHenry Police Bond Portfolio 6.58%
Portfolio Market Valuation $6,811,385
Portfolio Book Valuation $6,858,154
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April 17, 2007
Page Three
Average Maturity 5.06
Effective Duration 4.03
b) LPL Financial. Jim Schmidt distributed a copy of the investment report for the period
ending April 16, 2007. The total value of equity investments for the period was
$6,923,582 up 6.43% for the year compared to the S&P 500 at 3.50%.
Schmidt reported that the State of Illinois proposed ban on Sudanese investments
was defeated however, this may change. A discussion ensued on pending
legislation and the effects it will have if passed, on pension fund investments.
c) Investment Strategies. The board discussed the status of CD investments noting
that a $1-m certificate of deposit with McHenry Bank & Trust will expire on June 2,
2007. It was the consensus of the board to hold a special meeting to discuss
investment strategies and review quotes on Thursday, May 31, 2007, at 4:00 PM.
Carolyn Lynch was asked to contact local banking institutions prior to the meeting in
May, to obtain quotes to reinvestment the funds for 12, 18, and 24-month durations.
President Foerster reported that he emailed letters to state legislators urging them to
oppose Senate Bill 1166 that provides for state control of the downstate police and
firefighter pension funds in certain circumstances.
Gary Karshna and Jim Schmidt left the meeting at 4:20 PM.
The board discussed the pros and cons of fixed income investments versus
laddering investments in short term vehicles such as certificates of deposit.
New Business
a) Timothy Sharpe — May 1, 2006 Actuarial Report. Mr. Sharpe discussed the
highlights of the actuarial results for the period ending May 1, 2006.
Highlights: Investment return for the period ending May 1, 2006 was approximately
10.50%. The annual payroll increased 12%, which is higher than expected.
However, the percent funded remained at 62% noting that the state average is 65%.
The City of McHenry pension fund is still young. In 2006, there was approximately
$14.1-million in the fund with a ratio is 20:1, which is good. He further stated that the
investment return increased 27% in the last three years. The only concern he has is
regarding the city's required contribution, which is about $200,000 behind due to tax
caps. There are 27-years left in the amortization schedule.
Sgt. Foerster explained that the 2005 collective bargaining contracts were approved
and as a result large retroactive paychecks were distributed, citing this as a possible
reason for the sharp increases in salaries.
Sharpe closed his presentation by stating that the fund is strong and looks good for
the future, and he does not recommend revising the assumptions. A report will be
emailed to the members.
Police Pension Board
April 17, 2007
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b) Application to Police Pension Fund
Sgt. Foerster presented a request to participate in the City of McHenry Police Pension
Fund from Probationary Patrol Officer Corey Manno who was hired in February.
Roske made a motion, seconded by Hettermann to accept the application from
Corey Manno to participate in the City of McHenry Police Pension Fund. All ayes,
motion carried.
Bills for Approval
IPPFA Membership Renewal: $750
Capital Gains Investment Fees $514
Prust made a motion, seconded by Hettermann to approve the bills as presented. All
ayes, motion carried.
Adjournment
There being no further business to discuss before the board, Kinnerk made a motion,
seconded by Roske to adjourn. The meeting adjourned at 4:36 PM.
Respectfully submitted,
Marcia M. Geraghty
Recording Secretary