City of Peoria Firemen's Pension Fund Board of Trustees met Jan. 27.
Here is the minutes provided by the board:
A Regular Meeting of the Board of Trustees of the Firemen's Pension Fund of Peoria, Illinois, was held this date at City Hall, 419 Fulton Street, Room 404, Peoria, Illinois, at 9:30 AM., with proper notice having been given, for the purpose of conducting regular Firemen's Pension Fund business.
ROLL CALL
Roll Call showed the following Board Members present: Ball, Nichting, Smith, Tomblin, President Troglio-5;
Absent: None.
Others present: Mr. Thomas McShane, First Vice President -Investments, Senior Investment Management Consultant with Graystone Consulting, a business of Morgan Stanley/Smith- Barney in Chicago and Chief Deputy City Clerk Stefanie Tarr.
INVOCATION
Trustee Troglio requested a moment of silent prayer or silent reflection in remembrance of those Firefighters who lost their lives while serving their community.
MINUTES
Recommendation to Approve the Minutes of the Rescheduled Regular Board Meeting held on November 19, 2019, as printed.
Trustee Smith moved to approve the Minutes of the Rescheduled Regular Board Meeting held on November 19,2019, as printed; seconded by Trustee Tomblin.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO. 1
MONTHLY PORTFOLIO PERFORMANCE REVIEW by TOM McSHANE GRAYSTONE CONSULTING (A business of Morgan/Stanley Smith-Barney), and Discussion Regarding Recommendations, Possible Action Regarding the Firemen's Pension Fund Portfolio Performance, and Discussion and Review of the Asset Allocations, Review of the Open Orders with the S&P 500 Exchange Traded Fund (ETF), with Request to Receive and File Reports or Take Other Action.
A copy of the Performance Update for the period ending December 31, 2019, was distributed to all members of the Board. The Performance Update showed the portfolio valued at $147,821,494. Since its inception, the total portfolio performance returned 6.24% versus the custom benchmark of 6.07%.
Mr. McShane reviewed the current asset allocation reporting the cash allocation was on target, fixed income was under-allocated by design and partly by market movement, and equity was over-allocated and above the target outlined by State Statute due to appreciation of the assets. He reviewed the small cap allocation at 5.33% versus the target of 3.00% reporting that Kayne Anderson was performing well, and the Board was slowly lowering that allocation. He reviewed Emerging Markets noting that it was allocated with the International Manager.
Discussions were held regarding the cash account and Trustee Nichting said the Fund should be receiving over $1 million from the Personal Property Replacement Tax. Mr. McShane recommended reallocating $2 million from the Vanguard S&P 500 into the cash account.
Mr. McShane reviewed year-to-date returns reporting the overall portfolio returned 20.19% versus a benchmark of 17.93%. He said the Board recently hired Aristotle in 2019 and did not have a year-to-date to report. He reviewed Kayne Anderson reporting a one-year return of 41.49% versus the benchmark of 25.53%; Thornburg returned 26.27% versus a benchmark of 27.34%; and Segall returned 6.58% versus the benchmark of 6.80%. He said the Board recently hired BlackRock Event Driven, which was an alternative portfolio, that had an annual year-to-date return goal of 5.0 - 6.0%.
Mr. McShane reported the Board previously reallocated money from Kayne Anderson in May and September, and yet the manager continued to perform well. He reported the small cap stocks, in general, lagged the market. He recommended reallocating $2 million from Vanguard S&P 500 to the cash account.
After a brief discussion, Trustee Smith moved to reallocate $2 million from Vanguard S&P 500 into the cash account; seconded by Trustee Tomblin.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
Mr. McShane reviewed the markets reporting the 10-year bond was returning 1.75%. He said the trend of the market was still up. He distributed a handout entitled "S&P 500 Index at Inflection Points". He reported the market was trading at 18.2 times earnings, noting the average Price to Earnings (PE) ratio was 16.0. He reviewed historical PE ratios reporting in March of 2009 there was a PE of 10.3. He said the PE ratio was not always an accurate· indicator of the market. He said the 25-year average for a PE ratio was 16.28, noting the current market was reasonably valued. He reviewed characteristics of bull markets and bear
markets and he reported that the markets were in 129 months of a bull market - the longest ever. He reviewed life expectancy of retirees and the probability of reaching ages 80 to 90. He reviewed fixed income yields and returns reporting most of the return for a bond portfolio came from the interest rate on the bond. He remarked on the potential for a correction in the market and he reviewed the Intra-Year Decline chart for the S&P 500 annual returns. He said the maximum decline was approximately -10% and the average annual return was about 12%. He reported the market for 2019 was down at 7%, but he said the year ended 23.2% in the positive. He commented that earnings were increasing for corporations and housing sales have picked up.
Mr. McShane provided data on five different International Equity Managers: American Funds EuroPacific, Clearbridge INTL Growth, Harding Loevner INTL EO, Thornburg Int Growth, and Tweedy Browne Global. He said Thornburg was already part of the portfolio. He reviewed each manager noting the cost, style, strategy and sector breakdown.
Discussions were held regarding the market cap breakdown and Mr. McShane reviewed the breakdown for each manager. He reported that all five International Equity Managers that were being reviewed had done better than the marketplace. He reviewed the 7-year risk return analysis and the 7-year market capture ratios as of December 2019. He reviewed how each manager performed in the up and down markets. At the conclusion of the review, Mr.
McShane recommended American Funds EuroPacific Growth or to exchange the ETF for Vanguard Mutual Fund.
In response to Trustee Smith, Mr. McShane said the American Fund was not too aggressive and not too conservative and was cost efficient at 49 basis points. In response to President Troglio, Mr. McShane said the Vanguard ETF cost approximately 11 basis points. He said the American Funds would help the portfolio, but the Fund was also well served with Vanguard Mutual Fund. He reviewed the current allocation in the Vanguard ETF and in Thornburg. He commented that internationals were cheaper. He said it was his recommendation to move from Vanguard ETF to active managers or a mutual fund.
Discussions were held as to why it was determined that ETFs were no longer permissible, and Mr. McShane explained why the letter from the Department of Insurance regarding the Fund's ETFs was no longer valid. He said he was proposing an exchange from an ETF to a Vanguard Mutual Fund or American Funds.
The Board determined not to vote on the matter and to have Mr. McShane provide the Board with an analysis of the upper 50% percentile of investments at the February Board meeting.
At the conclusion of the review, Trustee Smith moved to receive and file the Performance Update Report as of December 31,2019; seconded by Trustee Tomblin.
Approved by viva voce vote.
ITEM NO.2 Report from Fire Marshal Tony Ardis of Pension Fund Contributions, which were made by payroll deductions during the MONTH of NOVEMBER 2019, from the Active Members of the Peoria Fire Department and which Checks were Turned in to the City Treasurer's Office by Director of Finance/Comptroller, with Recommendation to Concur, Receive and File.
Trustee Ball moved to concur and place on file the Fire Marshal's Report for November 2019; seconded by Trustee Smith.
Approved by viva voce vote.
ITEM NO.3 Report from Fire Marshal Tony Ardis of Pension Fund Contributions,
which were made by Payroll Deductions During the MONTH of DECEMBER 2019, from the Active Members of the Peoria Fire Department and which Checks were Turned in to the City Treasurer's Office by Director of Finance/Comptroller, with Recommendation to Concur and Receive and File.
Trustee Ball moved to concur and place on file the Fire Marshal's Report for December 2019; seconded by Trustee Smith.
Approved by viva voce vote.
ITEM NO.4 Discussion Regarding PENSION BENEFIT INCREASES for 2020, with a Request to Approve.
Trustee Tomblin moved to approve the pension benefit increases for 2020; seconded by Trustee Ball.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO.5 Request to Approve the Following BILLS:
RATIFY the Following BILLS for DECEMBER:
Ratify Pensions for December 2019 (Dated December 31, 2019) $1,292,588.64
Lauterbach & Amen - Professional Services November 2019. 3,345.00
Lauterbach & Amen - Professional Services October 2019. 3,345.00
Reimer & Dobrovolny - Quarterly Retainer, Disabilities, and Divestiture 2,260.80
Stefanie Tarr - 4thQuarter 2019 Administrative Services 1,350.00
Lauterbach & Amen - Municipal Compliance Report - Dec 31, 2018. 600.00
SUB - TOTAL FOR DECEMBER $1,303,489.44
**Morgan Stanley - Investment Advisory Fee Oct through Dec 2019. $28,485.15
TOTAL FOR DECEMBER 2019 $1,331,974.59
APPROVE the Following BILLS for JANUARY:
Pensions for January 2020 (Dated January 31, 2020) $1,302,172.44
Lauterbach & Amen - Professional Services December 2019. 3,345.00
*Kent Tomblin - New Trustee Training Reimbursement. 1,455.63
*Donna's Deli - Boxed Lunches for Disability Hearings on 1/9/2020. 96.00
TOTAL FOR JANUARY 2020 $1,307,069.07
GRANT TOTAL DECEMBER AND JANUARY $2,639,043.66
"No check should be processed for this amount. Check was already sent.
""No check should be processed for this amount. This amount is to be automatically deducted from the account.
Trustee Smith moved to ratify the bills for December 2019, in the amount of $1,331,974.59; seconded by Trustee Tomblin.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
Trustee Tomblin moved to approve the bills for January 2020, in the amount of $1,307,069.07;
seconded by Trustee Smith.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO.6
REQUEST to APPROVE PAYMENT for DENISE G. STAUTHAMMER, Wife of Deceased Firefighter CAPTAIN GARY A. STAUTHAMMER, as a Result from the Board's Approval of her APPLICATION for SURVIVING SPOUSE BENEFITS/LINE OF DUTY DEATH, at the January 9, 2020, Special Board Meeting, to become effective September 27,2017, (last day paid by the City was September 26, 2017) based on 100% of his Annual Salary of $110,059.35 (includes 8% longevity). Pension to be paid for the Underpaid Balance of $74,720.44 as of January 2020, and $9,171.61 for every month thereafter.
After a brief discussion, Trustee Tomblin moved to approve payment for Denise G. Stauthammer, wife of deceased Firefighter Captain Gary A. Stauthammer, as a result from the Board's approval of her Application for Surviving Spouse Benefits/Line of Duty Death, at the January 9,2020, Special Board Meeting to become effective September 27,2017, (last day paid by the City was September 26,2017) based on 100% of his annual salary of $110,059.35 (includes 8% longevity) with pension to be paid for the underpaid balance of $74,720.44 as of January 2020, and $9,171.61 for every month thereafter; seconded by Trustee Smith.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO.7 REQUEST for FINAL APPROVAL of PAYMENT for BATTALION CHIEF ALDO G. SCOTT, as a Result from the Board's Approval of his APPLICATION for OCCUPATIONAL DISEASE DISABILITY at the January 9, 2020, Special Board Meeting, to become effective April 13, 2019, (last day paid by the City was April 12, 2019) based on 74.79% of his Annual Salary of $127,163.02 (includes 8% longevity). Disability pension to continue, in the amount of $7,925.62, as of January 2020, and to continue for every month thereafter.
Trustee Tomblin moved to approve the final payment for Battalion Chief Aldo G. Scott, as a result from the Board's Approval of his Application for Occupational Disease Disability at the January 9, 2020, Special Board Meeting, to become effective April 13, 2019, (last day paid by the City was April 12, 2019) based on 74.79% of his annual salary of $127,163.02 (includes 8% longevity) with disability pension to continue, in the amount of $7,925.62, as of January 2020, and to continue for every month thereafter; seconded by Trustee Smith.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO.8 QUALIFIED ILLINOIS DOMESTIC RELATIONS ORDER for Christina M. Snowden, Previously Married to Firefighter DOUGLAS A. SNOWDEN, with Request to APPROVE.
Trustee Tomblin moved to approve the Qualified Illinois Domestic Relations Order for Christina M. Snowden, previously married to Firefighter Douglas A. Snowden; seconded by Trustee Smith.
Approved by viva voce vote.
ITEM NO.9
REQUEST to APPROVE the REMOVAL from the PENSION ROLLS of NINA LE MODGLIN due to her Death on December 19,2019, and to make payment to the Nine Le Modglin Estate, in the Amount of $5,064.48, for 19 Days of December 2019. Recommendation: RECEIVE and FILE the Death Certificate and to APPROVE the Payment of $5,064.48 for 19 days of December.
Trustee Tomblin moved to approve the removal from the pension rolls of Nina Le Modglin due to her death on December 19, 2019, and to make payment to the Nina Le Modglin Estate, in the amount of $5,064.48, for 19 days of December 2019 and to receive and file the death certificate; seconded by Trustee Smith.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO. 10 REQUEST to APPROVE the REMOVAL from the PENSION ROLLS of DAVID PAUL WENZEL due to his Death on December 13,2019, and to make payment to the David Paul Wenzel Estate, in the Amount of $2,536.19 for 13 Days of December 2019. Recommendation: RECEIVE and FILE the Death Certificate and to APPROVE the Payment of $2,536.19 for 13 days of December.
Trustee Tomblin moved to approve the removal from the pension rolls of David Paul Wenzel due to his death on December 13, 2019, and to make payment to the David Paul Wenzel Estate, in the amount of $2,536.19 for 13 days of December 2019 and to receive and file the death certificate; seconded by Trustee Smith.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO. 11 APPROVE the REFUND of CONTRIBUTIONS, in the Amount of $122,274.01, to JOEY E. CAMP Due to his Resignation on March 1, 2018, from the
Peoria Fire Department.
Trustee Smith moved to approve the refund of contributions, in the amount of $122,274.01, to Joey E. Camp due to his resignation on March 1, 2018, from the Peoria Fire Department; seconded by Trustee Tomblin.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO. 12 MONTHLY FINANCIAL REPORTS from LAUTERBACH & AMEN, LLP for the Month of NOVEMBER 2019, which Includes the STATEMENT OF PLAN NET ASSETS, STATEMENT OF CHANGES IN PLAN NET ASSETS, SUMMARY of CASH AND INVESTMENTS, BALANCE SHEET, REVENUES and REVENUE REPORT, EXPENSES and EXPENSE REPORT, PAYROLL JOURNAL, and VENDOR CHECKS REPORT, with Recommendation to Approve.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
Trustee Ball moved to approve the monthly financial reports from Lauterbach & Amen, LLP for the month of November 2019, which includes the Statement of Plan Net Assets, Statement of Changes in Plan Net Assets, Summary of Cash and Investments, Balance Sheet, Revenues and Revenue Report, Expenses and Expense Report, Payroll Journal and Vendor Checks Report; seconded by Trustee Smith.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO. 13 MONTHLY FINANCIAL REPORTS from LAUTERBACH & AMEN, LLP for the Month of DECEMBER 2019, which Includes the STATEMENT OF PLAN NET ASSETS, STATEMENT OF CHANGES IN PLAN NET ASSETS, SUMMARY of CASH AND INVESTMENTS, BALANCE SHEET, REVENUES and REVENUE REPORT, EXPENSES and EXPENSE REPORT, PAYROLL JOURNAL, and VENDOR CHECKS REPORT, with Recommendation to Approve.
Trustee Ball moved to approve the monthly financial reports from Lauterbach & Amen, LLP for the month of December 2019, which includes the Statement of Plan Net Assets, Statement of Changes in Plan Net Assets, Summary of Cash and Investments, Balance Sheet, Revenues and Revenue Report, Expenses and Expense Report, Payroll Journal and Vendor Checks Report; seconded by Trustee Smith.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO. 14 REQUEST for APPROVAL of a RESOLUTION Authorizing Trustee Patrick Nichting the POWER TO INVEST and Authorize Trustee Nichting to Maintain a Minimum of $10,000.00 in the HARRIS BANK ACCOUNT.
Trustee Ball moved to approve a Resolution authorizing Trustee Patrick Nichting the power to invest and authorize Trustee Nichting to maintain a minimum of $10,000.00 in the Harris Bank Account; seconded by Trustee Tomblin.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO. 15 DISCUSSION Regarding the Auditing Services of SIKICH, LLP for Annual Auditing for the Period of January 1, 2019, to December 31, 2019, with Request to RATIFY the ENGAGEMENT LETTER.
Trustee Nichting moved to approve the Engagement Letter for auditing services for Sikich, LLP for annual auditing for the period of January 1, 2019, to December 31,2019; seconded by Trustee Tomblin.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
ITEM NO. 19 DISCUSSION regarding the 2020 IPPFA ILLINOIS PENSION CONFERENCE, to be Held May 5 - May 8, 2020, in Springfield, Illinois.
RECOMMENDATION: To Allow Board Members to Attend, if they wish, and to Receive a Per Diem, and Reimbursement for Hotel and Travel Expenses OR to Receive and File.
Discussions were held regarding the registration of Trustees for the IPPFA Conference in Springfield. It was noted that Trustee Ball and Trustee Smith planned to attend. Trustee Ball asked that the rest of the Board contact her office by Friday, January 31, 2020, if interested in attending. She said her office would register those interested in the conference, but everyone needed to reserve their own hotel room.
Trustee Nichting moved to allow Board Members to attend the 2020 IPPFA Illinois Pension Conference to be held May 5 - May 8, 2020, in Springfield, Illinois, and to receive a per diem and reimbursement for hotel and travel expenses, if needed; seconded by Trustee Tomblin.
Approved by viva voce vote.
ITEM NO. 17 DISCUSSION Regarding the DISSOLUTION of the COALITION FOR QUALIFIED PLAN STATUS and the Refund of Contributions by December 31,2019, with Request to RECEIVEand FILE.
Trustee Nichting said there was money left over from the dissolution of the Coalition and the Board would receive a remaining balance.
Trustee Nichting moved to receive and file the discussions regarding the dissolution of the Coalition for qualified Plan Status and the refund of contributions by December 31, 2019; seconded by Trustee Smith.
Approved by viva voce vote.
ITEM NO. 18 DISCUSSION Regarding the CITY'S PETITION FOR LEAVE TO APPEAL in the MICHAEL BROOKS DISABILITY and to Review the Board's Options, with Request to RECEIVE and FILE or Take Other Action Deemed Necessary.
By agreement, this item was moved to after Item No. 19.
ITEM NO. 19 DISCUSSION Regarding the Pension Fund's LEGAL REPRESENTATION, to Review the Contract Terms of Reimer & Dobrovolny, and to Determine Whether to have Legal Counsel Attend in Person or by Teleconference at Future Meetings, with Request to RECEIVE AND FILE or Take Other Action.
President Troglio said the Board entered into an agreement with Reimer & Dobrovolny in January 2016. He commented that the renewal of the legal contract was generally done at the Board's annual meeting in the Spring.
Discussions were held on whether the Board's attorney needed to be present at all Board meetings. It was noted if the Board wanted an attorney present, then the law firm would need notified well in advance of the regular meeting or a special meeting would need to be scheduled so an attorney could attend.
President Troglio said if the Board was pleased with the legal representation, then Reimer & Dobrovolny should be retained another year. Discussions were held regarding retainers and costs. President Troglio recommended the regular rate without the quarterly retainer.
It was the consensus of the Board to continue with the legal representation of Reimer & Dobrovolny without a quarterly retainer.
Trustee Nichting moved to approve the legal representation of Reimer & Dobrovolny with no retainer fee and at the hourly rate; seconded by Trustee Tomblin.
Approved by roll call vote.
Yeas: Ball, Nichting, Smith, Tomblin, President Troglio - 5;
Nays: None.
The Board recessed the meeting at 10:45 AM. The Board resumed the meeting at 11:03 AM. Mr. McShane left the meeting at 11:03 AM.
ITEM NO. 18 DISCUSSION Regarding the CITY'S PETITION FOR LEAVE TO APPEAL in the MICHAEL BROOKS DISABILITY and to Review the Board's Options, with Request to RECEIVE and FILE or Take Other Action Deemed Necessary.
A conference call was placed to Attorney Rick Reimer at 11:05 AM.
Attorney Reimer provided an update on the appeal noting that the Board had won. He said the City filed a Petition for Leave to Appeal in the Illinois Supreme Court and he explained the likelihood of the matter being accepted by the Court, noting only 4.0% of Petitions were
granted. He inquired whether the Board wanted to file an answer to the Petition for Leave, noting it was optional. He said if the Board chose to file an answer it would need to be done by Monday, February 3, 2020. He said if an answer was not filed and the Court accepted the Petition, the Board would still have an opportunity to file a response. He explained what was covered by insurance, noting that he had notified the Board's carrier.
Conference call concluded at 11: 17 AM.
At the request of Trustee Tomblin, President Troglio provided an overview of the case, noting the Board had granted Mr. Brooks a disability and the City of Peoria had an interest in the matter. He reviewed the City's Petition to Intervene noting the Board gave the City limited access to intervene, which was upheld by the Appellate Court.
Discussions were held on whether the Board had the right to determine the level of involvement the City had in a disability case.
At the conclusion of the discussion it was the consensus of the Board to not file an initial answer and to wait to see if the Supreme Court decides to hear the case before filing an answer.
Trustee Nichting moved to receive and file the information regarding the City's Petition for Leave to Appeal in the Michael Brooks Disability; seconded by Trustee Smith.
Approved by viva voce vote.
UNFINISHED BUSINESS
It was determined that there was no unfinished business to come before the Board of Trustees at this time.
NEW BUSINESS
It was determined that there was no new business to come before the Board of Trustees at this time.
CITIZENS' OPPORTUNITY TO ADDRESS THE BOARD OF TRUSTEES
It was determined that there were no citizens who wished to address the Board of Trustees.
EXECUTIVE SESSION
It was determined that an Executive Session was not needed at this time.
ADJOURNMENT
Trustee Ball moved to adjourn the Regular Firemen's Pension Board Meeting; seconded by Trustee Tomblin.
Approved by viva voce vote.
The meeting adjourned at 11:38 A.M.
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