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03-25-1992 ,.,. ...., CrrY OF EDGEWATER FIREMEN'S PENSION BOARD MINUTES REGULAR MEETING Wednesday, March 25, 1992 6:40 P.M. The Regular Meeting of the Firemen's Pension Board was called to Order by Chairman Al Gilbert on Wednesday, March 25, 1992 at 6:40 P.M. in the Community Center. ROLL CALL: Members present were: Firefighter James Castetter, Mr. Ben Wagner, and Chairman Al Gilbert. Lt.Carson arrived at 6:45 p.m. Mr. Robert Morin was absent. Also present was Recording Secretary Lisa R. Warren. Chairman Gilbert introduced Bill Thomas and Steve Burkhalter, financial consultants, from Shearson Lehman Brothers and asked them to present their proposal for Custodian Services. They discussed the services they would be able to provide for the Board. Mr. Thomas stated Shearson Lehman Brothers 1S bonded and the Boards' assets would be protected up to $25,000,000 per account. They do not charge for custody of funds. He stated there are two plans they can go with: 1) set up by Florida Statutes or 2) elect to establish a plan of their own. He stated the Disbursements for the plan could be done: 1) set up a multiple signature checking account under the Board's direct control, or 2) set up a Disbursement Order System that releases funds at the Board's direction. There would be a fee of $100/year for using the check system. There would be no charge for the Disbursment Order System. Mr. Thomas stated the Administrative reporting would be provided on a monthly basis and a yearly basis. He suggested getting an outside actuary and noted the Board still had use of the State's Actuarial Service. He stated the Administrator of the plan was another significant person and as the administration is relatively simple at this point it can be run by the Board itself. He stated the only administrative charges the Board would incur would be if they went with the multiple signature check service. Mr. Steve Burkhalter was introduced to cover the investment aspects. He stated they felt it was a two step process: 1) deciding who was going to be Custodian and moving the money and 2) deciding how they want to invest. He discussed having an outside third party that would manage the money and Shearson Lehman would evaluate along with the Board how they are doing. He stated their job is to help the Board evaluate their investment objectives and then place you with an appropriate investment or investment manager to meet those objectives and evaluate how they are doing. There are no fees on CDs. 1 '-'" ""-' Edgewater Firemen's Pension Board 3/25/92 Page 2 Whenever they hire a professional manager Shears on Lehman charges a flat fee. That fee is based on the market value of the account. There is an ongoing quarterly fee based on the performance of the account. Mr. Burkhalter stated they have the ability to diversify a great deal with a very small amount of money. The Board can spread that money between domestic bond fund, international bond fund, as well as a stock fund, small cap or large cap, or even an international stock fund; the risk varies. He stated it is their job to make the Board aware of the risks and then they can make a decision. Chairman Gilbert stated the Board had to go by the Chapter 175 rules and they can only invest 5% of the money in stocks and bonds, but they could put most of it in a CD and play with the 5% under the risk plan. Mr. Burkhalter stated the Board would receive a monthly statement showing all the Pension Board investments. If a money manager is hired, they also send a quarterly statement. Chairman Gilbert thanked the gentlemen for their proposal. He called a recess at 7:05 p.m. Meeting resumed at 7:08 p.m. Chairman Gilbert introduced Mr. Daniel Dy from Key Trust Corporation. Mr. Dy presented his proposal for Custodian Services. He stated their jobs were to: 1) Keep securities safe, 2) Settle purchases and sales, 3) Collect dividends and interest, 4) Invest it all ln cash, 5) Provide the Board with a monthly statement of assets, 6) Provide the Board with an annual report on assets, 7) Handle all aspects of benefit payments, 8) Handle all expense payments. Mr. Dy stated his company was very aware of the restrictions imposed by Chapter 175 and would look for the highest interest available that would not endanger receiving State Funds. Mr. Dy stated the fees are $500 flat fee for the first year, $750 for the second year, and $1,000 for the third year. This includes the monthly report and the investment in the money market fund, cutting expense checks, disability benefit checks, retirement checks, and basically everything. He stated at the end of three years they would see if there is a need for an investment manager and renegotiate the fee depending on market climates. Chairman Gilbert asked if they did the actuarial services. Mr. Dy stated no, but they could do the summary plan description and the State report. Chairman Gilbert asked if this was included in the $500. Mr. Dy stated no, at this time their fee was $500 to do an annual report for the State. Chairman Gilbert thanked Mr. Dy for his proposal and recessed the meeting at 7: 35 p.m. Meeting resumed at 7:45 p.m. Chairman Gilbert presented the for approval. Lt. Carson moved Firefighter Cas tetter seconded. Minutes of the February 24, 1992 to approve the minutes as written. Motion CARRIED 4-0. 2 'W' -....1 Edgewater Firemen 's Pension Board 3/25/92 Page 3 NEW BUSINESS: Mr. Wagner stated he felt both companies for Custodian had their facts together. He questioned if the second presentation was saying he would do the same thing for us as the first presentation for $400 a year more. Chairman Gilbert stated the second presentation was going to do what he was going to do for $400 more, but if you look at what the first presentation would give us for $100 per year he believed the Board had more umbrella. Mr. Wagner stated the second presentation would do equal or less than the first presentation. Chairman Gilbert stated yes. Mr. Wagner asked how long the $100 per year guarantee before it goes up. Chairman Gilbert stated they did not have that answer. Mr. Wagner stated that Shears on Lehman Brothers was local and he knew the gentlemen, and he felt their presentation made more sense to him. He stated he felt their presentation was aimed more at what the Board expected to hear and how they expected their pension money to be put to use. He stated the financial fees were more in our standing. Chairman Gilbert agreed. Lt. Carson stated Shearson Lehman Brothers would diversify the money more whereas Key Corp was going to put it into a money market fund where they are not earning that high of a yield right now. He added Shears on Lehman Brothers would be able to diversify the money out into other markets and they will earn money back at a higher rate. There was discussion concerning the fees and how they were tied to the amount of money made by the fund by one company and not by the other. Chairman Gilbert stated both companies qualify by State guidelines. Chairman Gilbert stated that as of this date the Board has the money. He stated the Finance Director sent some suggestions on where to put the money. Lt. Carson asked if they expected to get any more presentations. Chairman Gilbert stated these were the only two that seemed to want to talk to a group with a small amount of money in the fund. Mr. Wagner moved to accept the proposal of Shearson Lehman Brothers as Custodian. Lt. Carson seconded. Motion CARRIED 4-0. Chairman Gilbert stated they would have to contact the attorney to go over the contract and he will send it to the Board for their review. There was discussion regarding the recent seminar several of the Board members had attended and what they learned about liability and responsibility. 3 .-- ..... Edgewater Firemen 's Pension Board 3/25/92 Page 4 Chairman Gilbert asked where the Board members learned the most. It was agreed they learned most during the breaks where they talked to other Boards and saw the problems they were having. Chairman Gilbert read a letter from Mr. Sugarman to the City Attorney regarding control of the penSlon funds. Chairman Gilbert stated there were two things that happened ln Tallahassee for the Board I s information. They are: 1) Direct deposit of State Funds as of the 15th of June, and 2) Changes ln benefits were not passed but they are still working on it. Chairman Gilbert read a letter to Mr. Sugarman from the City Attorney stating there had been no formal request for release of funds from the entire Board. Chairman Gilbert suggested the money to be reimbursed to the Board members who attended the Seminar should wait until the money was put into place at Shears on Lehman Brothers. The next meeting date was set for April 30th ln the Conference Room. Chairman Gilbert stated there may need to be a Special Meeting between now and then to go over a temporary contract. There being no more business to come before the Board at this time, Lt. Carson moved to adjourn. Mr. Wagner seconded. Meeting adjourned 8:05 p.m. Minutes respectfully submitted by: Lisa R. Warren, Recording Secretary If any person decides to appeal any decision made by the Pension Board of Trustees with respect to any matter considered at the above meeting, that person will need a record of the proceedings and, for such purpose, may need to ensure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. lw 4