Fort Walton Beach Council agenda — 12-11-2007 regular agenda — reading text

called for the vote to adopt Res. 07- 28 and it failed by a vote of 2 to 5 with Miller Garvie in favor and Holmes, Reeves, Pullen, Hartwell, and Minich opposed. to Mr. Reeves moved to direct Staff to develop an ordinance that would allow City Council Mr. Holmes seconded motion and it carried unanimously with consider the request. Holmes, Miller, Reeves, Garvie, Pullen, Hartwell, and Minich in favor. RECESS The meeting recessed at 9: 00 p. m. RECONVENE The meeting reconvened at 9: 15 p. m. ACCEPTANCE OF INVESTMENT REPORTS ENDING 9/ 30/ 07 9/ 30/ 07 for Consideration of a request to accept the investment reports for the quarter ending for the the General Employees' Pension Plan. City Council sitting as the Board of Trustees General Employees' Pension Plan. Scott Howe of Alliance Bernstein and Larry Cole of Merrill Lynch presented the investment results for the quarter ended September 30, 2007. Mr. Minich moved to accept the report on investment results for the quarter ending Plan. Mr. Hartwell seconded September 30, 2007, for the General Employees' Pension Hartwell, motion and it carried unanimously with Holmes, Miller, Reeves:, Garvie, Pullen, and Minich in favor. 240 11/27/ 07 Regular Council APPROVAL OF AMENDMENTS TO GENERAL EMPLOYEES PENSION PLAN Consideration of a request to approve amendments to the City' s General Employees' Pension Plan Statement of Investment Policy. Two amendments to the Investment Policies are proposed to reflect the changes to the investment focus for the two managers, Aletheia and Davis Hamilton Jackson. Mr. Minich moved to approve the two amendments to the Statement of Investment Policies for the General Employees' Pension Plan. Mr. Hartwell seconded motion and it carried unanimously with Holmes, Miller, Reeves, Garvie, Pullen, Hartwell, and Minich in favor. UPDATE ON SEC ACTION REGARDING MERRILL LYNCH City Council to receive an update on the SEC action regarding Merrill Lynch. Jim Linn, the City' s Pension Attorney, discussed the Securities and Exchange Commission SEC) investigation and proposed regulatory action again Mike Callaway and Merrill Lynch' s Florida pension consulting group with respect to disclosure of fees and alleged conflicts of interest. Mr. Linn stressed this is only a recommendation from the SEC staff and that the SEC itself has not taken any action with respect to Mr. Callaway. He continued that Mr. Callaway received a " Wells Notice" indicating what the SEC staff intends to recommend, and that Mr. Callaway has written letters denying any wrongdoing. Mr. Linn further advised that no other actions have been made against any other employees of MerrillLynch including Mr. Cole, who serves as the City' s contact person and account representative from Merrill Lynch. Mr. Linn stated that the fact that the SEC staff made these recommendations is a serious thing, but it is not known how this will affect the City' s pension fund. He discussed that the City could, if it so desired, bring in an SEC attorney to get an assessment before the actual SEC process is played out, but that would be an additional cost to the City. The City Attorney asked Mr. Cole if there was a way that Merrill Lynch would pay for the cost of an SEC attorney, and Mr. Cole advised he did not have an answer to that. with Larry Cole of Merrill Lynch stressed that no one, including himself, has been charged there are certain areas anything. He explained the Wells Process, in that the SEC Staff feels they will recommend to the Commission that they proceed with regulatory action against Mr. of the specifics, the seriousness or extent of the Callaway. Mr. Cole stated he is not aware nor allegations. Mr. Cole further advised that all disclosures have been made to the City' s Advisory Committee by Merrill Lynch, and he is confident in that knowledge. Council requested Mr. Cole notify the City, via the City Manager or Finance Director, as soon possible with any kind of updates on this matter. MERRILL LYNCH CONTRACT WITH THE CITY as 1.. l~~ Council to receive an update on their directive to review the Financial Advisory Agreement with Merrill Lynch and determine whether the contract should be renegotiated, maintained or terminated.  241 Regular Council 11/27/ 07 MERRILL LYNCH CONTRACT WITH THE CITY ( CaNT) Mr. Linn advised the City directed him to review the agreement between the City' s General Employees' Retirement Fund and Merrill Lynch, and to make recommendations regarding revisions to the agreement. He explained that under the Investment Advisers Act of 1940, Merrill Lynch has acknowledged that it is an investment adviser under that Act, and that it owes a fiduciary duty to act in the best interest of the Fund with respect to the investment advisory services it proves, to place the interest of the Fund before its own interests, and to fully disclose potential conflicts of interest. However, Mr. Linn continued that Merrill Lynch is not willing to acknowledge that it is a fiduciary under the provisions of the Employee Retirement Income Security Act ( ERISA) of 1974, which means it is not willing to bear responsibility for losses resulting from the negligence of co- fiduciaries, including portfolio managers. Mr. Linn advised that a decision must be made on how much risk the Fund will assume and how much risk will be shared with its investment adviser, and that at a minimum the current agreement should be revised to include language proposed by Merrill Lynch concerning its duty to the Fund. If it is decided that the ERISA fiduciary standard should be incorporated, this should also be included in the revised agreement. Discussion included the fact that the Pension Board, according to State law, must meet the fiduciary standard under ERISA; however, it does not state that advisers and consultants have to meet that standard. The City Manager advised the City carries fiduciary insurance for all three pension boards. Mr. Linn also advised that the managers are all fiduciaries and acknowledge their fiduciary status with respect to the fund. Mr. Cole noted that the managers are the ones who touch and move the money, Merrill Lynch does not; Merrill Lynch makes recommendations but does not actuaUy move the money, their position is they are not willing to take full fiduciary responsibility for other full fiduciaries when they do not have control over what they are doing. Further discussion included the possibility of an increase in fees by Merrill Lynch under a revised contract. Mr. Minich moved to authorize the City Manager and Pension Attorney to negotiate a revised Consultant Agreement with Merrill Lynch. Mr. Hartwell seconded motion. Mr. Garvie expressed his concern that the SEC does not look at something for two years and starttaking some action if something wasn' t there; therefore, he is voting against the renegotiation of the contract with Merrill Lynch. The Mayor called for the vote on the motion and it carried by a vote of 6 to 1 with Holmes, Miller, Reeves, Pullen, Hartwell, and Minich in favor and Garvie opposed. SETTLEMENT AGREEMENT- LAMAR SIGNS Consideration of a request by Lamar Texas Limited Partnership, d/ b/ a Lamar Advertising of Fort Walton Beach to modify the settlement agreement between the City of Fort Walton Beach, FL and Lamar Texas Limited Partnership, d/ b/ a Lamar Advertising of Fort Walton Beach to allow for the removal of seven billboards and permanent replacement of three billboards. Mr. Reeves disclosed that he is currently advertising with Lamar Advertising for his business, and he has not had contact with any representative from Lamar. 242 Regular Council 11/27/ 07 LAMAR SIGNS ( CONT) Dr. Pullen also disclosed he has had communication with Lamar Advertising in regards to the Governor Stone and there has been no money passed and there is no financial interest on his part. The Mayor noted that Lamar has provided free billboards congratulating him for being Mayor of the Year. Joe Raines of Lamar Advertising, 223 Green Acres Road, was available to answer any questions that Council might have. The CDS Director reviewed the proposed modified settlement agreement that calls for the removal of seven existing billboards and the reconstruction/ replacemE~nt of two with a location reserved for a third billboard. She advised Lamar has also agreed to maximum heights for the billboards and to provide landscaping around the base of the signs. The City Manager explained the Revised Exhibit B in that the sign to be constructed on the east side of Eglin Parkway and south of Perry has been reserved due to problems with the property owner, and placement of the sign is reserved with final approval of the determined location shall be by the City Council as an addendum to this Modification of Settlement Agreement. Mr. Raines advised that for each of the three billboards the City will have a 6- second spot on each board, as well as public safety alerts, and the wording ' Welcorne to Fort Walton Beach' permanently on the sign.