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HomeMy WebLinkAbout1985-07-11 - City Commission Joint Special Meeting Minutes• • MAIL REPLY TO: P.O. BOX 25010 TAMARAC, FLORIDA 33320 5811 NORTHWEST 88TH AVENUE TAMARAC, FLORIDA 33321 TELEPHONE (305) 722.5900 July 2, 1985 NOTICE OF WORKSHOP MEETING CITY COUNCIL OF TAMARAC, FLORIDA There has been a Joint Workshop Meeting of the City Council and the Pension Board scheduled for Thursday, July 11, 1985, at 9:00 a.m., in the Council Chambers of City Hall, 5811 NW 88 Avenue, Tamarac. The purpose of this meeting is to discuss certain aspects of the Employee Retirement Plan. The public is encouraged to attend. OAL.�' eZ2"t-� Carol E. Barbuto Assistant City Clerk AN EQUAL OPPORTUNITY EMPLOYER POLICY OF NONDISCRIMINATION ON THE BASIS OF HANDICAPPED STATUS MAIL REPLY TO: P.O. BOX 25010 TAMARAC. FLORIDA 33320 5811 NORTHWEST 88TH AVENUE TAMARAC, FLORIDA 33321,p TELEPHONE (305) 722-5900 ***REVISED July 10, 1985 NOTICE OF JOINT WORKSHOP MEETING CITY COUNCIL AND THE PENSION BOARD There has been a Joint Workshop Meeting of the City Council and the Pension Board scheduled for Thursday, July 11, 1985, at 9:00 A.M. in the Council Chambers of City Hall, 5811 NW 88 Avenue, Tamarac. The purpose of the meeting is to discuss the following: 1. Pension Plan Expenses 2. Pension Plan Design - Facciani Report 3. Investments 4. Long -Term Disability The public is encouraged to attend. Marilyn Bertholf, CM_;�9' C Ci ty Cl erk Pursuant to Section 286.0105, Florida Statutes If a person decides to appeal any decision made by the city Council with respect to any matter considered at such meeting or hearing, he will need a record of the proceedings and for -such purpose, he may need to ensure that a verbatim record includes the testimony and evidence upon which the appeal is to be based. a AN EQUAL OPPORTUNITY EMPLOYER POLICY OF NONDISCRIMINATION ON THE BASIS OF HANDICAPPED STATUS Tape 1 6 CITY OF TAMARAC, FLORIDA JOINT WORKSHOP MEETING CITY COUNCIL AND PENSION BOARD July 11, 1985 CALL TO ORDER: Mayor Kravitz called the meeting to order at 9;00 A.M. on Thursday, July 11, 1985 in the Council Chambers of City Hall. ROLL CALL: CITY COUNCIL- PRESENT: Mayor Philip B. Kravitz Vice Mayor Helen Massaro Councilman Arthur H. Gottesman ABSENT: Councilman Raymond J. Munitz Councilman Sydney M. Stein PENSION BOARD -PRESENT: Judy Deutsch Larry Perretti, Stephen Melnick Peter Prior Norma Bairan Lucy Curtis Jim Godin Acting City Manager ABSENT: George Strittmatter Robert Helton ALSO PRESENT: Jon Henning, City Attorney Robert Klausner, Attorney FOP Ruth Russo, Representative PPE Melanie Reynolds, Aide to Charter Board Michael McGrane, President FOP V. Diane Williams, Secretary 1. PENSION PLAN EXPENSES: Judy Deutsch said that this year the Pension Board had recommended that they have their own operating budget. She said that based on prior year's expenses, Dan Saale recommended that $7,000.00 be appropriated for Actuarial Services, $18,000.00 for Investment Custodial Services, and $5,000.00 for Travel, Other, which encompasses any local and state seminars regarding Pension, for a total budget of $30,000.00. She said that was sent to the City Manager for inclusion as a recommended item in the new budget. Mayor Kravitz said that was at the request of the Police and Fire Departments in the Pension Board meeting. Jon Henning, City Attorney, said it was presented as a budget proposal so that if this workshop or later Council action decides to entertain it as part of the budget, then it is in the format to act on. Mayor Kravitz said this money was to come from general funds of the City. 1 7/11/85 /vg Mr. Henning rear' from Florida Statutes 175.351 (9)(c), (10), and (11) and explained that in order to have a plan, it has to be actuariay sound, the actuary must be paid by the plan or the municipality, and wherever the shortfall is, the City must contribute in order to qualify. He said there are certain advantages to the Pension Plan knowing what the funds are and whether they came from the City and if given a budget, will have a certain amount of control over it. Lucy Curtis asked what is considered normal costs. Robert Klausner, Attorney for Fraternal Order of Police, said there are two kinds of costs in a Pension - Normal Costs and Unfunded Liability. He explained that when a Pension Plan is started, the employees who worked for many years, accrued years of credit, which is an Unfunded Liability. He said the City would have a liability to give them a Pension based on all the past years but there would be no money in it. He explained that Normal Costs is the yearly amount of money which must be spent, such as legal fees, actuarial fees, investment fees, as well as the amount of money that must be spent that year in benefits. He said the fund must have a certain amount of liquid assets to be able to pay existing retirees and all costs during that year, as well as be able to set aside payment on that Unfunded Liability so that all of it can be paid off over a forty year period. Judy Deutsch said there is, in the proposed budget, $18,000.00 for the new fiscal year for Investment Custodial Services. Mr. Henning said the Investment Counsel's fee is one --half of one percent of the gross, which is about $10,000.00 and this was being paid by the Council quarterly. He said there were brokerage fees which came out of the fund because they would determine the net cost or value of the securities that were traded. Judy Deutsch said the bank's custodial fees came from the general fund but commissions for investments came out of the money that was invested. V/M Massaro asked what right the Investment Counsel has to invest in anything but government securities. Mr. Henning said that he consulted with Gordon Rogers of Muller & Mintz, Attorneys, and referred to Florida Statutes 175.071 which lists the type of investments that the Pension Board can direct to be made. He said stocks and bonds are permitted but there are very conservative restrictions as to percentages placed on them. He said that if the City wanted to impose the Charter provisions on the Pension Plan, and referred to Florida Statutes 7.08(c), it can be done but it goes back to Chapter 175.351(10) which states that if the plan does not make any money, the City has to pick up the shortage. He said that he has not explored this fully but the Charter or Council restrictions can probably be imposed on the Pension Plan because the statutes seem to say what it may do, not what it must and section 175.301 refers to funds that are under the responsibility of the Finance Director. V/M Massaro said that funds under the responsibility of one person, such as the Finance Director, would have no advantage unless he was bonded to that extent because he must be able is to support the amount of money he is responsible for. Mr. Henning concluded that the Council could make some restrictions but must be prepared to make the subsidies if the investments are too conservative. Stephen Melnick asked if those State Statutes supersede the City Charter. 7/11/85 /vg 2 V/M Massaro said it probably would but would ask if everything required under the State Statutes is complied with because the City would be the one to have to pick up the slack if something went wrong. She said there is a two and one-half million dollar deficit in this City now and said she does not feel the City should be paying the expenses on this account if there is money. She said she can not find anywhere that the City is responsible by agreement or contract to pay those expenses. She said the City must find out how much money is coming in from the various sources, how much there is in the account, how much would this account earn, does the City have a slack to pick up and until these questions are answered and it is evident that the City can financially take it, she will not approve the proposed budget. She said some of this budget must be cut. Stephen Melnick said that some of these things are very necessary and if the City wants to keep its employees for a long period of time, the Pension Plan could be a benefit that makes the difference. V/M Massaro said the City does have a good Pension Plan, good wages, vacation periods, and sick leave. She said the City also must cut down on any spending that can be avoided. She said there are responsible investments that can be made that may not bring in as large a return but also involve less risk. She said she needs to see how much money comes into this fund from different sources and what the cost of this fund really is. She said the fund should pay its own expenses and if, at the end of the year, there is a deficit then it would be the responsibility of the Council. Peter Prior asked V/M Massaro if she sees any improprieties in the investments at this time. V/M Massaro said she did not but questioned if this Plan meets the State requirement and if it does then the possible loss is cut down. She said the City has the right to control the expenditures since it has to make it up, if necessary, and in the meantime, all expenses must come out of the fund. C/M Gottesman said he thinks that it is unfair for the Pension Board to ask the City to pay for their expenditures to go to the seminars and then try to enhance the fund at the expense of the City. He said if Pension Board members wish to be further educated, it is their responsibility to pay for it. Peter Prior stated that the Pension Board is trying to get the tools to do the best job possible and does not feel members should pay to educate themselves for the benefit of everyone. Stephen Melnick said that if members learn how to invest money at seminars and save the City money, it benefits everyone. Judy Deutsch said that in regard to travel, until this year, only two members attended one seminar and the funds were taken from the departmental budget. She said the Facciani seminar was a local, free meeting that she attended. She said the members need to educate themselves in order to effectively do the job as fiduciaries and elected administrators of the board. She said that when this board decided that it wanted an independent actuary to review the Plan and make suggestions, it appeared before Council for approval prior to contracting with him and the bill came before the Council. Mr. Henning said that V/M Massaro has asked if that bill was paid and he said that he was under the impression that it had been. 7/11/85 Jim Godin said, in regard to bonding, that there is an insurance policy for three million dollars which covers the board members if they are being held personally liable. He said it does not cover any loss due to stocks. Robert Klausner said that the State Department of Insurance is the custodian and source of the Chapter 175 and 185 monies. He explained that the money is actually a rebate from insurance companies and for every dollar of coverage and premiums that is written on fire insurance, the State gives two percent of that premium to the municipalities and one percent for casualty insurance for police. He said Chapter 175 and 185 say that if a City wants to participate in receiving that money, the standards must be met and if investment is made outside the guidelines that are stated in those chapters, the State performs an annual audit of the fund and reviews the actuarial report, accounting reports, and investment reports before it gives the municipality the money each year. He stated that this Pension Plan is following the guidelines because the actuary checks it out each year and there are two places in Florida where the annual reports for pension must be sent -- one to the State Department of Administration, Division of Retirement, and one to the Bureau of Police and Fire Pensions in the Department of Insurance. He stated that Florida is the model in the United States for management and reporting of public employee pension plans. Tape 2 V/M Massaro said the Investment Counsel Company and the Tamarac Pension Plan dated February 28th have figures of the performance and on April 3, 1985, the stocks we're down $33,498.00 and it yielded 3.7 percent. She asked why thousands of dollars are being paid for this. Judy Deutsch said that she had contacted the Investment Counsel and asked them for a recap since January, 1984. She said that at that time they were given two million dollars and the total return has been 24.1 percent net, for a total value of $2,481,000.00. She added that it is the best performance this Plan has had since its inception. V/M Massaro said that if the investment had been in government securities, the value would be there no matter what happened to the market. She said the percentage could not be much worse than 3.7 percent. She added that if the board wanted to turn these stocks in now, $35,000.00 would be lost. Mr. Klausner said that in order to run the fund, there must be a custodial bank to make the transfers and pay the benefits. He said the expenses may be paid directly as a budget item of the City commission or the fund pays the expenses directly but when it comes time for the City's contributions to the fund, that much more money is going to be needed against the payroll authorization. Mr. Henning summarized by saying what was heard today was to omit the risk, omit the sophistication and go with a straight return. He said there may be a smaller percentage but the Investment Counsel fees, the stock brokerage fees, and some of the banking fees must be added. Mr. Klausner said that based on the comments regarding the Investment portfolio, the return was 24 percent on a two million dollar investment, which means a net return of $480,000.00 was made. Mr. Henning said that he was told by Mr. Rogers that most city general funds pay the expenses. He said that through a telephone survey of six cities, Lauderdale Lakes is the only city that the general fund of the City pays for the Plan. He said that Lauderhill, Pompano Beach, Hollywood, Oakland Park and Fort Lauderdale all pay out of the fund. 11 is 7/11/85 /vg . V/M Massaro said that she personally gets an insurance bill with a Fort Lauderdale address which means that the money goes to that City. She said a campaign should be started and the different sections, presidents and clubs in the City should be engaged to have everyone return their bills if they are not properly addressed. It was suggested that the Public Information Committee handle this project. Mayor Kravitz summarized by saying that V/M Massaro does not feel that the City is in a position to go along with the proposed budget of the Pension Plan and the City Attorney said that there is a choice of taking expenses from the Plan or from the City. Mr. Klausner said the actuary is the one who fixes the pension costs at the beginning of the year, studies the plan and advises how much will be needed. He said in the income category, there is a fixed amount of money that comes from the State. Mayor Kravitz said he recently received copies which specifically say that under Chapter 175, the monies go into the pension trust fund for municipal Fire Fighters and the same for the Police. Mr. Klausner said the money may be commingled with general employee monies so long as the benefits paid out under the fund are greater for Fire Fighters and Police than for general employees. He said the biggest expenditure is benefits and other expenses are professional fees, seminars and office needs. He added that the more fees that are spent, the larger the City's share gets. He explained that if it is decided that the Plan will not pay for these expenses, just benefits, the City's share on the payroll side gets smaller but the general City budget must include pension expenses. Mr. Henning said that he assumed that the City Council will ultimately pass, by ordinance, an amendment to the Plan as to where the expenses are going to come from. He said that as to the approval of the individual expenditures, if paid by the Council, the Council has the final say. He said the Plan has more control if it pays its own way. Mr. Klausner said the investment income should always be as big as possible and the fund always wants to try to keep expenses down. He said actuarial, accountant, custodial bank, Investment Counsel fees will always have to be paid. Judy Deutsch said this is a Defined Benefit Plan which puts no pressure on the employee. Jim Godin asked Mr. Henning if it is possible to have direct management from the Finance Department which would avoid expenses. Mr. Henning said it is possible. Peter Prior said that in the past, the Finance Department has made investments for the Pension Board and they have been less than satisfying compared to the 24 percent return of this year. He said if the board is to tell the Finance Department where to put the money, who will tell the board where to put the money since they are not experts. He also suggested that if the expense item of the budget for the Pension Plan, in regard to travel and seminars, is turned down by the Council, they do not deny the department heads add expenses for travel on their budgets. 7/11/85 /vg v 5 2. PENSION PLAN DESIGN -- FACCIANI REPORT Tape 3 Judy Deutsch said there is great concern for escalating costs in the Pension Plan. She said Facciani and Company was authorized at a cost of $7,500.00, to review the Plan from an actuarial point of view and return for recommended changes. They were told that the board's objective was to increase benefits. She said the Plan is extremely well -funded and while in this position, would like to make the improvements. She said it was projected that if this Plan was terminated and a Defined Contribution Plan was adopted, there is enough money to buy twice the amount of benefits that have been projected for the employees without ever contributing any more money. She added that when looking to the future when there are more retirees, the Plan should be reviewed and changes that are in the best interest of the employees be made. Stephen Melnick said a request for an actuarial study was made at the last meeting and asked if a decision has been made. V/M Massaro asked Dan Saale if the City is still in a position that they have to fund this program. Dan Saale said that is a joint decision of the Council and the Pension Board. He said the Pension Plan is fairly wealthy in the amount of money that it has verses the amount of benefits presently being paid out. He said the Plan is strong and may want to consider bearing the cost themselves. Mr. Klausner said the report is needed because state law requires that before any legislative changes in a Pension Plan is made, an actuarial impact study must be made. Stephen Melnick asked if the Pension Board has the authority to take the money from the fund for this. V/M Massaro said that it has been indicated that before any money can be spent, approval must be given by Council. Mr. Klausner said the board wants to know if the City Council wants to take the position that expense costs of the fund be taken out of the assets of the fund or if the Council wants to make it a budget line item - Pension Expense Costs. Mayor Kravitz said the question is if the Council should reject paying for the actuarial study, does the board have the right to pay it from their funds. V/M Massaro said that in her personal opinion, the Council would recognize that actuarial study is important and can be done if paid out of the fund. Mr. Henning said the board is trying to get a $30,000.00 budget and wants to know how the Council would feel about this budget coming out of the fund. Mayor Kravitz suggested it be put on the next Council Meeting agenda scheduled for July 24, 1985. 3. INVESTMENTS Mayor Kravitz advised that the date of the monthly meeting of if the Pension Board has been changed from the first Thursday of the month to the fourth Thursday in order to give the Investment Counsel an opportunity to bring the report more up to date. He suggested that when that report is received, all Council members are given a copy. Mr. Godin referred to Chapter 12.02 of the Charter and asked if the Pension Plan comes under the Charter. 7/11/85 /vg 6 �. Mr. Henning explained that the Charter mandates that the City have a plan and when the plan was established, it had to be advertised and available to the public. 4. LONG TERM DISABILITY Judy Deutsch said that the Pension Plan is to provide benefits for retirees. She said there is a disability provision in the Plan in order to comply with Chapters 175 and 185. She said the present benefit is 20 percent of salary at time of injury and there are very few employees who could pay their bills on 20 percent of their salary. She said her primary concern is that the benefits that have been set aside for retirement are being eroded. She added that this does not affect the employees because they have a Defined Benefit Plan. She said that this Plan has become a Disability Plan and it should be a Retirement Plan and that money is being used to pay disability. She said she does not believe disability belongs in the plan. She stated that when the Plan was incepted, one percent was to be collected from employees initially, in order to comply with Chapters 175 and 185 with the least financial impact on the City. V/M Massaro asked if Chapters 175 and 185 require a Disability Plan. Judy Deutsch said they do but it stipulates with ten years of service. She said that provision is not in this Plan and it must be provided for Police and Fire but does not have to be provided for general employees. She said it is being provided for all employees and the history of disability payouts has been more for general employees than for Police and Fire. She suggested that a separate Disability Plan, apart from the Pension, be provided. Stephen Melnick said he is presently out on workman's Compensation and one can not survive on 20 percent of his/her salary. Mayor Kravitz said that he believes that the actuary will point out what additional cost it would be to the City to change that Plan to give more benefits. Vice Mayor Massaro asked if it is possible for employees to set up a Disability Fund for themselves without the City being involved. She said it is up to an employee to save money to be used at a time when he/she is ill or disabled and not depend on anyone else for their comforts. C/M Gottesman said that at time of disability, in addition to the 20 percent of one's salary from the Pension Fund, an amount of money is received from Social Security. Jim Godin said that is a disability provision from Social Security and there is a one year waiting period. Stephen Melnick said that just the necessities, such as food, electric, telephone and mortgage costs a lot more than 20 percent of his salary and because of the economy, bills, children, and medical bills, it is impossible to save for "future comfort needs" as V/M Massaro suggested. Mr. Henning asked Larry Perretti if one of the items that come under the $1000.00 worth of benefits on the latest contracts is a Disability Plan that can be purchased. Mr. Perretti agreed that there is but they and the I.A.F.F. have not chosen not in the F.O.P. as it. 7/11/85 /vg 7 r Mr. Henning said it seems to be agreed that there is a need for disability provisions but the question is how will it be funded. He said it also seems like it is agreed that insurance is the way to go instead of the City Plan. He added that the dollars that are being put into the Plan for the 20 percent benefit may be better spent going to an insurance company which is better equipped to provide the disability coverage and the determination that one is permanently disabled. He said that about two years ago, an amendment to the personnel manual called injury time was proposed which was a compromise that approximately one week salary might be paid for injury time over and above salary and sick leave, if it was an on-the-job injury and some other benefits were also included. However, no action was taken. Mr. Godin said he has been working on investigation of a Disability Plan through an insurance company and one requirement is 75 percent of the employees must participate. Peter Prior said insurance companies will not insure Police and Firemen. Judy Deutsch explained that when a Disability Policy is taken out through an insurance company they have both accident and injury relating to the job and free time. She said it is coordinated with Workman's Compensation so the premiums become more realistic. Peter Prior suggested that a Disability Plan for Fire Fighters and Police cover retirement at a 75 percent disability rate for fully disabled and 50 percent if partially disabled. Mr. Godin said he would further investigate insurance companies and report the findings to Council as soon as possible. Mayor Kravitz suggested Mr. Godin attend the next Council Meetng with this information. V/M Massaro suggested letters from the insurance companies be received. Mr. Henning suggested that a City staff member also be responsible to further investigate this. it was suggested that Judy Deutsch be the staff member involved. Stephen Melnick requested this be placed on the July 24th City Council Meeting agenda at 10:00 a.m. Mayor Kravitz agreed and ADJOURNED the meeting at 11:15 a.m. Assistant City Clerk This public document was promulgated at a cost of $182.60 If or $10.74 per copy to inform the general public and public oficers and employees about recent opinions and consider- ations by the City Council and Pension Board of the City of Tamarac. 7/11/85 s /vg 16 Tape 1 F1 CITY OF TAMARAC, FLORIDA JOINT WORKSHOP MEETING CITY COUNCIL AND PENSION BOARD July 1l, 1985 CALL TO ORDER: Mayor Kravitz called the meeting to order at 9:00 A.M. on Thursday, July 11, 1985 in the Council Chambers of City Hall. ROLL CALL_: CITY COUNCIL- PRESENT: Mayor Philip B. Kravitz Vice Mayor Helen Massaro Councilman Arthur H. Gottesman ABSENT: Councilman Raymond J. Munitz Councilman Sydney M. Stein PENSION BOARD -PRESENT: Judy Deutsch Larry Perretti, Stephen Melnick Peter Prior Norma Bairan Lucy Curtis Jim Godin Acting City Manager ABSENT: George Strittmatter Robert Helton ALSO PRESENT: Jon Henning, City Attorney Robert Klausner, Attorney FOP Ruth Russo, Representative FPE Melanie Reynolds, Aide to Charter Board Michael McGrane, President FOP V. Diane Williams, Secretary 1. PENSION PLAN EXPENSES: Judy Deutsch said that this year the Pension Board had recommended that they have their own operating budget. She said that based on prior year's expenses, Dan Saale recommended that $7,000.00 be appropriated for Actuarial Services, $18,000.00 for Investment Custodial Services, and $5,000.00 for Travel, Other, which encompasses any local and state seminars regarding Pension, for a total budget of $30,000.00. She said that was sent to the City Manager for inclusion as a recommended item in the new budget. Mayor Kravitz said that was at the request of the Police and to Fire Departments in the Pension Board meeting. Jon Henning, City Attorney, said it was presented as a budget proposal so that if this workshop or later Council action decides to entertain it as part of the budget, then it is in the format to act on. Mayor Kravitz said this money was to come from general funds of the City. 7/11/85 /vg 1 J Mr. Henning read from Florida Statutes 175.351 (9)(c), (10), and (11) and explained that in order to have a plan, it has to be actuarily sound, the actuary must be paid by the plan or the municipality, and wherever the shortfall is, the City must contribute in order to qualify. He said there are certain advantages to the Pension Plan knowing what the funds are and whether they came from the City and if given a budget, will have a certain amount of control over it. Lucy Curtis asked what is considered normal costs. Robert Klausner, Attorney for Fraternal Order of Police, said there are two kinds of costs in a Pension - Normal Costs and Unfunded Liability. He explained that when a Pension Plan is started, the employees who worked for many years, accrued years of credit, which is an Unfunded Liability. He said the City would have a liability to give them a Pension based on all the past years but there would be no money in it. He explained that Normal Costs is the yearly amount of money which must be spent, such as legal fees, actuarial fees, investment fees, as well as the amount of money that must be spent that year in benefits. He said the fund must have a certain amount of liquid assets to be able to pay existing retirees and all costs during that year, as well as be able to set aside payment on that Unfunded Liability so that all of it can be paid off over a forty year period. Judy Deutsch said there is, in the proposed budget, $180000.00 for the new fiscal year for Investment Custodial Services. Mr. Henning said the Investment Counsel's fee is one-half of one percent of the gross, which is about $10,000.00 and this was being paid by the Council quarterly. He said there were brokerage fees which came out of the fund because they would determine the net cost or value of the securities that were traded. Judy Deutsch said the bank's custodial fees came from the general fund but commissions for investments came out of the money that was invested. V/M Massaro asked what right the Investment Counsel has to invest in anything but government securities. Mr. Henning said that he consulted with Gordon Rogers of Muller & Mintz, Attorneys, and referred to Florida Statutes 175.071 which lists the type of investments that the Pension Board can direct to be made. He said stocks and bonds are permitted but there are very conservative restrictions as to percentages placed on them. He said that if the City wanted to impose the Charter provisions on the Pension Plan, and referred to Florida Statutes 7.08(c), it can be done but it goes back to Chapter 175.351(10) which states that if the plan does not make any money, the City has to pick up the shortage. He said that he has not explored this fully but the Charter or Council restrictions can probably be imposed on the Pension Plan because the statutes seem to say what it may do, not what it must and section 175.301 refers to funds that are under the responsibility of the Finance Director. V/M Massaro said that funds under the responsibility of one person, such as the Finance Director, would have no advantage unless he was bonded to that extent because he must be able 41- to support the amount of money he is responsible for. Mr. Henning concluded that the Council could make some restrictions but must be prepared to make the subsidies if the investments are too conservative. Stephen Melnick asked if those State Statutes supersede the City Charter. 7/11/85 /vg 2 ,, V/M Massaro said it probably would but would ask if everything required under the State Statutes is complied with because the City would be the one to have to pick up the slack if something went wrong. She said there is a two and one-half million dollar deficit in this City now and said she does not feel the City should be paying the expenses on this account if there is money. She said she can not find anywhere that the City is responsible by agreement or contract to pay those expenses. She said the City must find out how much money is coming in from the various sources, how much there is in the account, how much would this account earn, does the City have a slack to pick up and until these questions are answered and it is evident that the City can financially take it, she will not approve the proposed budget. She said some of this budget must be cut. Stephen Melnick said that some of these things are very necessary and if the City wants to keep its employees for a long period of time, the Pension Plan could be a benefit that makes the difference. V/M Massaro said the City does have a good Pension Plan, good wages, vacation periods, and sick leave. She said the City also must cut down on any spending that can be avoided. She said there are responsible investments that can be made that may not bring in as large a return but also involve less risk. She said she needs to see how much money comes into this fund from different sources and what the cost of this fund really is. She said the fund should pay its own expenses and if, at the end of the year, there is a deficit then it would be the responsibility of the Council. Peter Prior asked V/M Massaro if she sees any improprieties in the investments at this time. V/M Massaro said she did not but questioned if this Plan meets the State requirement and if it does then the possible loss is cut down. She said the City has the right to control the expenditures since it has to make it up, if necessary, and in the meantime, all expenses must come out of the fund. C/M Gottesman said he thinks that it is unfair for the Pension Board to ask the City to pay for their expenditures to go to the seminars and then try to enhance the fund at the expense of the City. He said if Pension Board members wish to be further educated, it is their responsibility to pay for it. Peter Prior stated that the Pension Board is trying to get the tools to do the best job possible and does not feel members should pay to educate themselves for the benefit of everyone. Stephen Melnick said that if members learn how to invest money at seminars and save the City money, it benefits everyone. Judy Deutsch said that in regard to travel, until this year, only two members attended one seminar and the funds were taken from the departmental budget. She said the Pacciani seminar was a local, free meeting that she attended. She said the members need to educate themselves in order to effectively do the job as fiduciaries and elected administrators of the board. She said that when this board decided that it wanted an independent actuary to review the Plan and make suggestions, it appeared before Council for approval prior to contracting with him and the bill came before the Council. Mr. Henning said that V/M 14assaro has asked if that bill was paid and he said that he was under the impression that it had been. 7/11/85 /vg cQ J Jim Godin said, in regard to bonding, that there is an insurance policy for three million dollars which covers the board members if they are being held personally liable. He said it does not cover any loss due to stocks. Robert Klausner said that the State Department of Insurance is the custodian and source of the Chapter 175 and 185 monies. He explained that the money is actually a rebate from insurance companies and for every dollar of coverage and premiums that is written on fire insurance, the State gives two percent of that premium to the municipalities and one percent for casualty insurance for police. He said Chapter 175 and 185 say that if a City wants to participate in receiving that money, the standards must be met and if investment is made outside the guidelines that are stated in those chapters, the State performs an annual audit of the fund and reviews the actuarial report, accounting reports, and investment reports before it gives the municipality the money each year. He stated that this Pension Plan is following the guidelines because the actuary checks it out each year and there are two places in Florida where the annual reports for pension must be sent - one to the State Department of Administration, Division of Retirement, and one to the Bureau of Police and Fire Pensions in the Department of Insurance. He stated that Florida is the model in the United States for management and reporting of public employee pension plans. Tape 2 V/M Massaro said the Investment Counsel Company and the Tamarac Pension Plan dated February 28th have figures of the performance and on April 3, 1985, the stocks we're down $33,498.00 and it yielded 3.7 percent. She asked why thousands of dollars are being paid for this. Judy Deutsch said that she had contacted the Investment Counsel and asked them for a recap since January, 1984. She said that at that time they were given two million dollars and the total return has been 24.1 percent net, for a total value of $2,481,000.00. She added that it is the best performance this Plan has had since its inception. V/M Massaro said that if the investment had been in government securities, the value would be there no matter what happened to the market. She said the percentage could not be much worse than 3.7 percent. She added that if the board wanted to turn these stocks in now, $35,000.00 would be lost. Mr. Klausner said that in order to run the fund, there must be a custodial bank to make the transfers and pay the benefits. He said the expenses may be paid directly as a budget item of the City commission or the fund pays the expenses directly but when it comes time for the City's contributions to the fund, that much more money is going to be needed against the payroll authorization. Mr. Henning summarized by saying what was heard today was to omit the risk, omit the sophistication and go with a straight return. He said there may be a smaller percentage but the Investment Counsel fees, the stock brokerage fees, and some of the banking fees must be added. Mr. Klausner said that based on the comments regarding the Investment portfolio, the return was 24 percent on a two million dollar investment, which means a net return of $480,000.00 was made. Mr. Henning said that he was told by Mr. Rogers that most city general funds pay the expenses. He said that through a telephone survey of six cities, Lauderdale Lakes is the only city that the general fund of the City pays for the Plan. He said that Lauderhill, Pompano Beach, Hollywood, Oakland Park and Fort Lauderdale all pay out of the fund. • 1 is 7/11/85 /vg 4 V/M Massaro said that she personally gets an insurance bill with a Fort Lauderdale address which means that the money goes to that City. She said a campaign should be started and the different sections', presidents and clubs in the City should be engaged to have everyone return their bills if they are not properly addressed. it was suggested that the Public Information Committee handle this project. Mayor Kravitz summarized by saying that V/M Massaro does not feel that the City is in a position to go along with the proposed budget of the Pension Plan and the City Attorney said that there is a choice of taking expenses from the Plan or from the City. Mr. Klausner said the actuary is the one who fixes the pension costs at the beginning of the year, studies the plan and advises how much will be needed. He said in the income category, there is a fixed amount of money that comes from the State. Mayor Kravitz said he recently received copies which specifically say that under Chapter 175, the monies go into the pension trust fund for municipal Fire Fighters and the same for the Police. Mr. Klausner said the money may be commingled with general employee monies so long as the benefits paid out under the fund are greater for Fire Fighters and Police than for general employees. He said the biggest expenditure is benefits and other expenses are professional fees, seminars and office needs. He added that the more fees that are spent, the larger the City's share gets. He explained that if it is decided that the Plan will not pay for these expenses, just benefits, the City's share on the payroll side gets smaller but the general City budget must include pension expenses. Mr. Henning said that he assumed that the City Council will ultimately pass, by ordinance, an amendment to the Plan as to where the expenses are going to come from. He said that as to the approval of the individual expenditures, if paid by the Council, the Council has the final say. He said the Plan has more control if it pays its own way. Mr. Klausner said the investment income should always be as big as possible and the fund always wants to try to keep expenses down. He said actuarial, accountant, custodial bank, Investment Counsel fees will always have to be paid. Judy Deutsch said this is a Defined Benefit Plan which puts no pressure on the employee. Jim Godin asked Mr. Henning if it is possible to have direct management from the Finance Department which would avoid expenses. Mr. Henning said it is possible. Peter Prior said that in the past, the Finance Department has made investments for the Pension Board and they have been less than satisfying compared to the 24 percent return of this year. He said if the board is to tell the Finance Department where to put the money, who will tell the board where to put the money since they are not experts. He also suggested that if the expense item of the budget for the Pension Plan, in regard to travel and seminars, is turned down by the Council, they do not deny the department heads add expenses for travel on their budgets. 7/11/85 /vg 5 i v 2. PENSION PLAN DESIGN - FACCIANI REPORT Tape 3 Judy Deutsch said there is great concern for escalating costs in the Pension Plan. She said Facciani and Company was authorized at a cost of $7,500.00, to review the Plan from an actuarial point of view and return for recommended changes. They were told that the board's objective was to increase benefits. She said the Plan is extremely well -funded and while in this position, would like to make the improvements. She said it was projected that if this Plan was terminated and a Defined Contribution Plan was adopted, there is enough money to buy twice the amount of benefits that have been projected for the employees without ever contributing any more money. She added that when looking to the future when there are more retirees, the Plan should be reviewed and changes that are in the best interest of the employees be made. Stephen Melnick said a request for an actuarial study was made at the last meeting and asked if a decision has been made. V/M Massaro asked Dan Saale if the City is still in a position that they have to fund this program. Dan Saale said that is a joint decision of the Council and the Pension Board. He said the Pension Plan is fairly wealthy in the amount of money that it has verses the amount of benefits presently being paid out. He said the Plan is strong and may want to consider bearing the cost themselves. Mr. Klausner said the report is needed because state law requires that before any legislative changes in a Pension Plan is made, an actuarial impact study must be made. Stephen Melnick asked if the Pension Board has the authority to take the money from the fund for this. V/M Massaro said that it has been indicated that before any money can be spent, approval must be given by Council. Mr. Klausner said the board wants to know if the City Council wants to take the position that expense costs of the fund be taken out of the assets of the fund or if the Council wants to make it a budget line item - Pension Expense Costs. Mayor Kravitz said the question is if the Council should reject paying for the actuarial study, does the board have the right to pay it from their funds. V/M Massaro said that in her personal opinion, the Council would recognize that actuarial study is important and can be done if paid out of the fund. Mr. Henning said the board is trying to get a $30,000.00 budget and wants to know how the Council would feel about this budget coming out of the fund. Mayor Kravitz suggested it be put on the next Council Meeting agenda scheduled for July 24, 1985. 3. INVESTMENTS Mayor Kravitz advised that the date of the monthly meeting of the Pension Board has been changed from the first Thursday of the month to the fourth Thursday in order to give the Investment Counsel an opportunity to bring the report more up to date. He suggested that when that report is received, all Council members are given a copy. Mr. Godin referred to Chapter 12.02 of the Charter and asked if the Pension Plan comes under the Charter. I if 7/11/85 /vg 6 ,/ Mr. Henning explained that the Charter mandates that the City have a plan and when the plan was established, it had to be advertised and available to the public. 4. LONG TERM DISABILITY Judy Deutsch said that the Pension Plan is to provide benefits for retirees. She said there is a disability provision in the Plan in order to comply with Chapters 175 and 185. She said the present benefit is 20 percent of salary at time of injury and there are very few employees who could pay their bills on 20 percent of their salary. She said her primary concern is that the benefits that have been to set aside for retirement are being eroded. She added that this does not affect the employees because they have a Defined Benefit Plan. She said that this Plan has become a Disability Plan and it should be a Retirement Plan and that money is being used to pay disability. She said she does not believe disability belongs in the plan. She stated that when the Plan was incepted, one percent was to be collected from employees initially, in order to comply with Chapters 175 and 185 with the least financial impact on the City. V/M Massaro asked if Chapters 175 and 185 require a Disability Plan. Judy Deutsch said they do but it stipulates with ten years of service. She said that provision is not in this Plan and it must be provided for Police and Fire but does not have to be provided for general employees. She said it is being provided for all employees and the history of disability payouts has been more for general employees than for Police and Fire. She suggested that a separate Disability Plan, apart from the Pension, be provided. Stephen Melnick said he is presently out on Workman's Compensation and one can not survive on 20 percent of his/her salary. Mayor Kravitz said that he believes that the actuary will point out what additional cost it would be to the City to change that Plan to give more benefits. Vice Mayor Massaro asked if it is possible for employees to set up a Disability Fund for themselves without the City being involved. She said it is up to an employee to save money to be used at a time when he/she is ill or disabled and not depend on anyone else for their comforts. C/M Gottesman said that at time of disability, in addition to the 20 percent of one's salary from the Pension Fund, an amount of money is received from Social Security. Jim Godin said that is a disability provision from Social Security and there is a one year waiting period. Stephen Melnick said that just the necessities, such as food, electric,. -telephone and mortgage costs a lot more than 20 percent b7f his salary and because of the economy, bills, children-, and medical bills, it is impossible to save for "future comfort needs" as V/M Massaro suggested. Mr. Henning asked Larry Perretti if one of the items that come under the $1000.00 worth of benefits on the latest contracts is a Disability Plan that can be purchased. Mr. Perretti agreed that there is but not in the F.O.P. as they and the I.A.F.F. have not chosen it. 7/11/85 /vg 7 `� Mr. Henning said it seems to be agreed that there is a need for disability provisions but the question is how will it be funded. He said it also seems like it is agreed that insurance is the way to go instead of the City Plan. He added that the dollars that are being put into the Plan for the 20 percent benefit may be better spent going to an insurance company which is better equipped to provide the disability coverage and the determination that one is permanently disabled. He said that about two years ago, an amendment to the personnel manual called injury time was proposed which was a compromise that approximately one week salary might be paid for injury time over and above salary and sick leave, if it was an on-the-job injury and some other benefits were also included. However, no action was taken. Mr. Godin said he has been working on investigation of a Disability Plan through an insurance company and one requirement is 75 percent of the employees must participate. Peter Prior said insurance companies will not insure Police and Firemen. Judy Deutsch explained that when a Disability Policy is taken out through an insurance company they have both accident and injury relating to the job and free time. She said it is coordinated with Workman's Compensation so the premiums become more realistic. Peter Prior suggested that a Disability Plan for Fire Fighters and Police cover retirement at a 75 percent disability rate for fully disabled and 50 percent if partially disabled. Mr. Godin said he would further investigate insurance companies and report the findings to Council as soon as possible. Mayor Kravitz suggested Mr. Godin attend the next Council Meetng with this information.' V/M Massaro suggested letters from the insurance companies be received. Mr. Henning suggested that a City staff member also be responsible to further investigate this. It was suggested that Judy Deutsch be the staff member involved. Stephen Melnick requested this be placed on the July 24th City Council Meeting agenda at 10:00 a.m. Mayor Kravitz agreed and ADJOURNED the meeting at 11:15 a.m. ya� e - Assistant City Clerk This public document was promulgated at a cost of $182.60 or $10.74 per copy to inform the general public and public oficers and employees about recent opinions and consider- ations by the City Council and Pension Board of the City of Tamarac. 1i 1 7/11/85 /vg F