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Minutes 04-17-76MINUTES OF SPECI~_L~ CITY COUNCIL ~'~ETING OF TB~ CiTY OF BOYNTON BEACH, FLORIDA, HELD IN CITY HAL~, ~UPSDAY, APRIL 15, t976 PHESENT Joe DeLong, Mayor Joseph F. Zack, Vice Y~yor Edward F. Harmening, Councilman Emily M. Jackson, Councilwoman Norman F. Strnad, Councilman Frank Kohl, City Manager Tereesa Padgett, City Clerk Mayor DeLong called the meeting to order at 2:30 P. M. and announced it was a special meeting called by the Mayor for the purpose of having the City Council advised by a reDre- sentative, M~w. John H. Crawford, of the Investment Counselors. Ee ascertained that both members of the Police and Fire Pen- sion Funds were present. He believes according to correspon- dence received ambiguities exist between the State Statute and City Ordinances insofar as the investment of funds are concerned. He then called upon M~. Crawford from investment Counselors. ~. Crawford appeared before the Council and stated he was not really sure exactly what was expected of him today. He suggested that he give an outline of his understanding of what the ambiguities are. Mayor DeLong informed him that this meeting of the City Council was specifically designed with the intention of whatever he has to say is of vital concern to them. He explained how the City Council was the legislative body of the City. They should be thoroughly familiar with what has to transpire. ?~. Crawford informed the Council that it was called to his attention about six weeks ago by ~. M~rvin Clayton, Assis- tant Director of Police and Firemen,s Funds for the State that the fund was not invested in line with the guidelines of the Florida Statutes. Those Statutes being Ordinance 71-32 and 7~-33. The chief difference being under the State's interpretation of these ordinances in which they may own uo to 36w~ of the total assests of the funds in corporate bond~ and stocks. The wording of their ordinance is such that they consider stocks and bonds the same thing. A total of 30% for both. It had been their underst~uding that the fund allowed up to 50% in common stocks only and the remainder in either corporate or government bonds. In his conversation with ~. Clayton, he indicated the State would require com- pliance within a reasonable period of tim~. It is his under- standing from ~. Clayton also, and the City Attorney can ~erify this, tha% i~.is an option of the City Council to pass a specific ordinance by the Council determining what the in- vestments of these pension funds may beo ~. Cra%~ford continued that his purpose of being here was to explain how the fund is invested at the present time. He will add whatever insights he can and whatever advice he may MIS~JTES -SPECIAL CITY CO%~CIL MEETING BOYNTON BEACH, FLORIDA APRIL 15, 1976 give about a prudent course of action if they wish to adoot their own ordinance and assist in drafting in whatever wa~ he can. He would like to emphasize that these funds are in excellent shape at the presen~ time. The funds could be liquidated completely, both of them~ and nice profits would be established; There is no risk of loss to the funds at this time if it is the wish of the Council to stay with the State Ordinance. The funds are invested approximately 30% in common stocks and 7~g in government and corporate bonds. Mm. Crawford then reviewed the status of the funds. As far as the Police Fund is concerned, it'currently has up to b~arch 31~ $433~768i~and this compares with a cost of $399,765, which is a net gain of approximately $34,000. It currently is accuring interest of $26,856 which is 6.72% return on its cost. As far as the Fire Fund, it currently has a market value of $366~470 and this compares with a cost of $335,705, which is an unrealized net gain of aoproximately $22 021 which is 6.52% return on its cost. - ' Mm. Crawford said that it seems to him the question the Coun- cil should address itself to is whether or not it is appro- priate to allow investments to be mmde in these pension funds which~?~ould increase the yield above what the State Statues would allow for greater exposure to stocks. There are two advantages to bonds and also disadvantages. An advantage of stocks is that as time progresses, dividends from the stoc~ can grow. As an example, both funds own a portion in Cater- pillar Tractor and yesterday they voted to increase the divi- dends from 56 cents to 56½ cents per share. They believe it is a reasonable expectation that if common stocks of compan- ies are o~ed, dividends will increase, if you buy all bonds or savings certificates, those rates are fixed. The second aspect of common stocks to consider is the ability of common stocks to increase in value over a period of time. The other side of the proportion of growth is that stocP~ can decline. In the last few years, most oeople who own stocks have been painfully aware they can go ~own as well as up. ?~. Crawfor~ informed the Council that it would be their recom- mendation that the portion of the fund invested in common stocks be limited. He explained how he felt it would be in- appropriate to write an ordinance allowing it to go to 10~. They have been operating with 3~ in common and 70% in bonds. The vitality of the fund is low. It would be their recommen- dation to continue to have portfolios invested at 3~ common stocks and 70~ bonds. Mayor DeLong requested that these recommendations be for- warded to the Council and ~. Crawford replied that he would be glad to do so. Mayor DeLong ascertained that the Council members agreed. N~. Crawford continued that it would be his MI~JTES - $_~ECL~L CITY COUNCt~ ~ETI_~G APRIL 15, 1976 BOYNTON BEACH, FLORIDA suggestion that they provide the Council with language spell- ing out the requirements and have the City Attorney review it. He will be happy to do this. ~yor DeLong announced the Chair would accept a motion to in- struct the Investment Counselors to make reco~endations for the verbage for the ordinance to be adopted to protect the ene~lts of the investment funds. ~. Strnad sa.~moved, seconded by Mr. Harmening. Under discussion, ~s. Jackson asked if the City Attorney was going to be present todsy and Mayor DeLong replied: no, ~m. Kohl can t~/<e care of this. Mrs. Jackson remarked that it would have been helpful if he could have heard it first-hand. Mayor DeLong replied that it would come back to the Council for final action. He then re- quested a roll call vote on the motion and ~s. Padgett took i~ as follows: ~. Harmening - Aye Mrs. Jackson Aye ~. Strnad - Aye Vice Mayor Zack We Mayor DeLong ~ve Motion carried 5-0. Mayor DeLong informed Mm. Crawford that he was instructed to proceed. }~ir. Crawford replied that he was be~ically finished with his remarks unless there were additional questions. ~. Harmenir~ referred to ~v~. Crawford,s letter and stated he was not quite sure he understood where their present two exist- ing ordinances differed from the Florida Statutes. ~s. Jackson also asked if the State Statute superseded their ordinances? ~. Crawford replied that it is his understand- ing and from his experience with working with other munici- palities that it is within the power of the City Council to determine their own ordinances, if they do not determine an ordinance on their own, it automatically falls under the State,s. _w~. Harmening asked how their two ordin~ces dif- fered from the State Statute and ~. Crawford replied that apparently they do not have a local ordinance. M_'~. Harmen~ng referred to the ~ - _~tter stating 71-32 and 71-33 and it would ap~ar to indicate the funds fall under these. M~r. Clayton informed him that these were ~erely quoted in his letter based on a _ether received from M_~. Clayton. He requested that they keep in mind that 7t-32 and 71-33 allow up to a 3~ investment zn corporate bonds and stocks. The difference they have been operating under is tna~ stocks and bonds are different, but ~e State cor~_siders them as one. !~s. Jackson asked if this was a new State Statute emd iww. Crawford replied that he had no ~idea. ~s. Jackson remarked that she was just wondering why it was coming to light now and _~. Crawford replied that -3- MINUTES - SPECIAL CITY COUNC17~ ~ETING BO~-'NTON BF~CH, FLORIDA APRIL 15~ 1976 he really couldn,t answer, but he doesn,t th~nk it is a new Statute. ~s. Jackson remarked that they were going against the State Statute and didn't know it. Ym. Harmening referred to Mm. Crawford having eluded in his presentation that they could pass an ordinance~ more restric- tive than State law, but could not pass one less ~estrictive. Mm. Crawford replied that he was speaking from his experience in deali.~ with other funds in the State. M~. Harmening asked if this would be a legal question and ~. Crawford agreed. Mr. Harmening stated that ordinarily they cannot pass ~u ordi- nance less restrictive than the State ordinance. ~. Crawford informed them that there were e number of municipalities within the State which are less restrictive than this. He added that in his conversation with ~. Clayton, he asked him the alter- natives and he replied that a City ordinance could be passed. He was surprised himself smd apparently it can be done. He really thinks the City Attorney should give an opinion. Mayor DeLong referred to Nm. Crawford stating that State Statute prevails if in the event you have no City ordinance and ~. Crawford agreed this was his assumption. M~yor DeLong stated he believed they would get someplace if he presented his recommendations for the City Attorney,s review. M~. Harmening referred to the other cities and questioned their a~e~age reoresentation in their po-~folios ~n equity and ~. C~awford ~ · _nformea h~m that in two other cities, the funds in,~one allowed up to 50% in common stocks and the other is 75%. Mayor DeLong remarked that this was risky ~m. Crawford replied that it was a m~tter of opinion. In mauuy cases, people consider 50% to be a very conservative ratio. He feels 30% is a very conservative ratio. He thinks where you have a pension plan which is oriented to the long term payment benefits to the participants, you really need to have some liberties within the fund for growth. This relieves the entire burden of the benefits from the shoulders of the ~axpayers sm_d enables greater potential of retirement. Mayor DeLong clarified that he was making an allowance for slippage and gain over a period of time and [~. Crawford agreed. Mm. Crawford c ~' ~ · onulnuea that zf they have 3~ in common stocks, their exposure is quite limited. If they write into the Statute very stringent provisions for quality companies only, this is an additional step to preserve the capital as well as make it grow. These type of things can b~ written in to insure very s~a~le~ ~ corpora- tions are owned by the fund. Mayor DeLong asked if the State's interest was in view of the fact that the State contributes to both funds and M~. Crawford replied that he didn't know how to answer. Mayor DeAong stated that the State does contribute to both funds and Mr. Crawford agreed. Mayor DeLong continued that their interest would concern the grant or subsidy they provide. '4-- MINUTES - SPECIAL CITY COUNCIL M~ETING BOYNTON BEACH, FLORIDA APRIL 15, 1976 Mayor DeLong then referred ~o no State Statute being relative to the City Employees, Fund and they should consider this today. He believes there should be a similar arrangement as on the Police and Fire Funds. As it is now, they can take the entire fund and invest it in common stock. He asked if M~. Kribs had this information. Mr. Kribs stated that if there were ambiguities he was not aware of it, but it is very possible. The Treasur~rand he looked it up and there seems to be no prohibition on State Statutes on investments. Of course, there are City Ordi- nances. If there is a soecific State Statute, he would ap- preciate knowing and Cap~ain Hamilton referred him to Chapter 185. Mr. Kribs =s_~ed~ w if this limited investments and Captain Hamilton replied that it did some, but not the 70-30 passed onto them ~'oy the City Attorney. He cannot find mn° the State Statutes that limitationt It does limit ~ ~ ~nvestme~_ts in co~mon stock, but does not seem to limit common stocks emd bonds. Mm. Kohl requested~that they review this State Statute. He suggests that ~. Kribs, the City Attorney, and himself see it. Mayor DeLong stated that the objective of this meeting today with so many trends of thought, it was best to bring before the Council so they would know what is going on. It appears tha~ now everybody has a different version. They 8~e employ- ing investment counselors and this is their field. They must notify us when finding something ambiguious and called this to our attention. It would not be prooer for him to sit in with the Police and Fire Departments a~d keep the rest of the Council from the informmtion from the investment Counselors. He suggests they let the Investment Counselors come in with their recommendations. They now have first-hand information and are~ in a better position to arrive at a decision. They know ~rst-hand just exactly what is supposed to be the pro- blem. Mayor DeLong advised that he asked I~. Kribs about the em- ployees' provision and understands there is nothing there for any protection whatsoever as existing in the police and fire. The entire amount of money in the Employees, fund could be invested in common or coroorate stock. There is no restriction as far as percentage. Mr. Kribs agreed and added that he thought ~ ~ should be spelled out. l~Jor DeLong clarified that this was a second oroblem. They have taken care of the first problem with th~ Investment Counselor. He is calling this second problem to the attention of the City Council of having no provisions in the Employees, Fund. Mrs. Jackson remarked that when they are using some- one else~s money, they must be extra careful. ~yor DeLong -5- MINUTES - SPECIAL CITY COUNCIL ~ETiNG BOYNTON BEACH, FLORIDA APRIL 15, ~976 agreed and stated this and is calling this to stration as to what the is one reason why he is very careful the attention of the present admini- existing conditions are. Mayor DeLong asked for a motion to instruct the City Manager to have, in conjunction with the City Attorney and cooperation if necessary of the Finance Director, an amendment to the present City Employees& Pension Ordinance with the view,of strengthening or protecting the investments. Mx. S~rnaa so moved, seconded by Mrs. Jackson. Under~iscussion, ~. Harmening asked how the City Employees' fund was presently invested and ~. Eribs replied that he ~elieved it was 70% bonds ~ud 30°~mcommon stock. Mayor DeLong asked if there were any restrictions and ~. Kribs replied: no. ~s. Jack. on stated that she definitely felt there should be and Harmening agreed and adde~ that there might be someone within the employees' structure that might invest in anything. Mrs. Padgett then took a roll call vote as follows: Motion Councilman Harmening - Aye Councilwoman Jack, on - Aye Councilman Strnad - Aye Vice M~yor Zack Aye Mayor DeLong - Aye carried 5-0. Mayor DeLong requested ~. Eohl to carry out the instructions of the City Council. Mayor DeLong announced~there was another matter to bring before the Council pertaining to the chairmanship of the different pension boards. He thinks it is outdated and outmoded to have the Mayor as the Chairman of all these pension boards. The Mayor should not be aaddled with this responsibility. It was all right in days gone by when they did not have the City Council/City Manager form of govern- ment. His recommendation would be, if there is to be any selection of Chairman, the man who deals in finances, the Finance Director. He deals in fina~nces and investments smd he thinks he should be the Chairman of the various pension boards, it is an administrative function. ?~. Strnad agreed it was a good idea and referred to the M~yor serving two years or possibly four years, but the Finance Director could be in there for many yeses instea~ of getting a different Mayor every year. M~s. Jackson stated that she didn't quite agree. She feels it is the Council's duty to work with this. She feelsthe Mayor should be on the bo~d an8 the Vice Mayor should sit in and be there because the Vice Mayor steps up to be Mayor and should have the ~uowledge. She thinks there should be continuity. She thinks the Finance Director would be a fine person, but thinks it is un to the Council to decide where to spend money. -6- MIi%~u~TES - SPECL~L CITY COUNCIL BOYNTON BEACH, FLORIDA APRIL ]5, t976 }~yor DeLong explained how' he could not agree under their type of government. Chief Huddleston informed M~or DeLong that Florida State Statute 175.061 does name the M~vor on the pension board. ~yor DeLong questioned if this could be amended suud referred to Mr. ~Crawford,s statement that they did not have.Co follow the State Statute. ~. Crawford in- formed him that he did no~ k~ow whether it was the case with any law, but it is hi'ms understanding regarding investin~ funds. Mmyor DeLong stated that if it was possible to draft an ordinance to eliminate the M~kvor that should be the motion ~ud if not, it would remain the same. ~ Strnad remarked that there were only six to eight Statutes they cannot a~mend by ordinance emd Mayor DeLong replied that this was different. He stated that they should leave it up to the discretion of the legal opinion of the City Attorney. Mayor DeLong announced that a motion was in order that if it is possible to ammend the ordinance whereby the Finance Di- rector will be the Chairman of the Boards in lieu of the Ms, or, we will do so. Mr. Strnad so moved, seconded by M~. Zack. Under ~iscussion, ~h~. Harmening agreed it may be all right to eliminate the Mayor, but referred to having had a greater turnover of Finance Directors than ~yors in this City. This would not lend itself to continuity. Mayor DeLong clarified that he did not mention continuity, but explained how k~uowiedge and expertise for this position would fall in the realm of~he ~inance Director. Also, he has experience of investments of City funds. M~. Harmening agreed this was true, but nointed out that most of the City funds were zn?est~d in relatively short term treasury bills or slightly longer term bonds. They are now talking about common stocks. In these pension funds, rather than let the Finance Director pick by name, amount, etc., they should certainly have a good investment counselor to do the actual ~nvestmng. Mayor DeLong replied that he thought they had gotten off the track. He is trying to point out that the Finance Director km. ows finances, investments~ etc. He is not the individual who m~es the investments. The First Bank & mrusv makes t~e - znves~m~n~s for the Emoloyees, Fund smd the investment Counselor makes the investments for the Police and Fire Funds. ~. Mribs will only be there because he has kmowledge of what investments are, He is mn a better position to do it than the individual who is M~yor. ~s. ~dgett then took a roll call vote as follows: Councilman Harmening Aye Councilwoman Jackson No Councilman Strnad - Aye Vice ~yor Zack - Aye Mayor DeLong - Aye Motion carried 4-1. -7- MINUTES S~CI~_L -, v ,~ ~ - C±T_ COUNCIL ~TI_~G BOYNTON BEACH, FLORIDA APRIL 15, 1976 ?~s. Jackson made a motion to adjourn, seconded by M~. Strnad~ Motion carried 5-0 and the meeting was properly adjourned at 3.1~ ~ M. CiTY OF BOYNTON BEACH, FLORiDA r AT.ST: Counc!~ Member ~//City Clerk Respectfully submitted, Suzanne ~ruse Recording Secretary (One Tape) -8-