PATTI'S NOTES
SDCERS BOARD MEETINGS November 19-20, 2009

(These notes are from the Business and Governance Committee on Thursday and the Board meeting on Friday. Notes are by subject. Closed Session reporting is from Channel 24. They are my understanding of what happened.)
SDCERS Web Access - Board meetings, with subject access, are available for viewing at www.sdcers.org
TELEVISION- If you live in the City limits, Board meetings are on Channel 24 around 5 or 6pm, usually the third Friday of the month, and usually repeat on the following Sunday at 1pm
Official CDs of SDCERS' committees and Board meetings are available through the Board Secretary; visual recordings are available through City Channel 24. Motions and votes are in SDCERS monthly summaries of Board meetings.

Directions to on-line pension numbers:
Jay Goldstone has SDCERS' numbers on-line (pdf) at the City's bond investors web site. Go to City web site, on the upper left hand corner click on "Investor Information", at the bottom you must click on "read terms of use now". This takes you to the Investor page. Go down about 9 sentences/paragraphs, and click on the blue "OK" at the bottom. Click on "pension up-date".  Click on pension by month. It is approximately four pages long.

JOIN CITY OF SAN DIEGO RETIRED EMPLOYEES ASSOCIATION FOR ACCESS TO PREVIOUS PATTI'S NOTES ON SDCERS BOARD MEETINGS, PROGRAMS, LUNCHEONS, ETC.
Contact SDCERS at 619-525-3600 and ask for a payroll deduction form for the $2.00 monthly dues to CSDREA.

Last Meeting of SDCERS CEO/Administrator David Wescoe
With much humor, and high recognition by San Diego Business Journal as Most Admired CEO of the year, David Wescoe prepared to leave SDCERS for the much larger Hollywood's private pension system. Former President Peter Preovolos' press release noted David came to SDCERS with a vision of success and did what is right in turbulent times when it is not easy.
Here are samples of comments from non-agenda, and Board comment time:
SDCERS Board President Mark Sullivan noted that three years ago David arrived to 60 recommendations for change by the Navigant and Kroll investigations. SDCERS was engaged with the IRS' Voluntary Compliance Program to stay in tax-qualified status. There were three years of CAFRs to revise. The Port wanted to pull out of SDCERS and the Airport wasn't happy either. SDCERS had a lawsuit against the City for SDCERS independence and the City Attorney was regularly threatening to sue the Board and staff. SDCERS was so toxic that 20 Trustees had left.

Wescoe, from Kansas, was inspired to show SDCERS could be fixed when the San Diego Union Tribune article reported that a Missouri pension administrator said it could not be done. Wescoe said he wanted the job because he knew he could fix SDCERS. Wescoe's wife, a psychiatrist, called him nuts. Wescoe added that his daughter heard City Attorney Aguirre called him an idiot on television. He concluded by saying "It has been the experience of a lifetime."

After joking that Aguirre was going to be Wescoe's legal help in Hollywood, Bill Farrar, President of the Retired Fire and Police Association thanked David for making SDCERS approachable and transparent. Joan Raymond, from Union 127 , recalled David transforming SDCERS from the atmosphere of a Jerry Springer Show into an organization focusing on service to members. She appreciated his re-assuring rapport at meetings with 127's blue collar workers. Patricia Karnes noted that Wescoe was "too young and too bright" to stay at SDCERS.
"He was our champion", who re-energized staff into a high performance team with courage, commitment and confidence, in the face of hostile press, a volatile City Attorney and a host of litigation, said Joe Flynn. Joe presented Wescoe with the City of San Diego Retired Employees Association Annual Outstanding Award to the person who contributed most to the well being of retirees. Joe enjoyed watching Wescoe's fact-filled, rapid fire responses to the City Council.
Trustee Greg Bych concluded by asking Wescoe to publicize how much of every movie ticket that we buy goes to pensions.
___________________________
SDCERS Interim CEO/Administrator announced: CFO Mark Hovey
Reporting out on SDCERS Board's Closed Session on City Channel 24's replay, President Mark Sullivan announced that there was unanimous Board vote to approve SDCERS' current Chief Financial Officer Mark Hovey as SDCERS' interim Chief Executive Officer/Administrator.
The Board also approved hiring a search firm. 
Hovey' team won a "Certificate of Achievement Excellence in Financial Reporting" award from the Government Finance Officers Association (GFOA) for SDCERS FY 2008 CAFR. It is the highest form of recognition in government accounting and financial reporting.
Hovey also won SAN DIEGO BUSINESS JOURNAL's  Chief Financial Award in the government category this year after correcting and bringing all SDCERS CAFRs up to date.
CSDREA members met Hovey when he was SDCERS' new CFO, at their August 2008 program.

Corbett & 13th Check
There was no vote on the 13th Check and Corbett as there were not enough investment returns to pay them. It would be illegal to pay them when they did not qualify to be paid.
Sullivan noted at least $100 million in earnings was needed to pay them.
Joe Flynn noted that these benefits were especially important to those whose entire annual payments were less than the combined Corbett/13th Check and asked members be notified as soon as possible.
Mark Hovey, CFO reported, "In years where the 13th check is not paid, the Corbett benefit...is carried forward and will be paid in the next year when the 13th check is paid."
"...investment earnings received for the fiscal year ended June 30, 2009 are insufficient under the above formula to pay the 13th Check and Corbett settlement benefits.  Investment earnings received were actually a loss of $309,319,275. . which is insufficient to trigger the payment of the 13th check and Corbett benefit payments, as well as insufficient to credit interest to the Supplemental COLA reserve pursuant to MC Section 24.1504."

PAYMENT OF DE MINIMUS CORBETT TO ESTATES
This item was returned to the Business and Governance committee and staff was asked to research the maximum that could be paid so families could close estates, without impacting SDCERS. About 20 members die each month.

WIDOW/WIDOWER SUPPORT MATERIALS
CSDREA's support materials for widows and widowers are helpful with staff assisting members, reported Member Services Director Cynthia Queen.

JUNE 30, 2009 ACTUARIAL VALUATION AND CAFR
Hovey wrote: " Cheiron is nearly complete with their June 30, 2009 Actuarial Valuation, on-target for presentation to the Board in December."

Hovey expects the 2009 CAFR to be ready in December. It is in technical review and with SDCERS audit committee members. The audit committee plans to meet Wednesday, December 16 at 9:00 a.m. 401 West A Street, 3rd floor.

Also SDCERS actuary, Cheiron, will have numbers ready for the City Council in December regarding the impact on SDCERS numbers due to the corrections of the 1981 plan's purchase of service for General Members.

FY 2010 SDCERS INVESTMENT ASSETS and RETURNS
Wescoe noted a $1 billion positive swing over year to year performance in SDCERS net appreciation. Staff noted that indications are by the end of October 2009 SDCERS would be ahead of October 2008 on a year to date basis. This is even higher than at the end of September 2009, when SDCERS was still under 3% year to date.
October 31, 2009 SDCERS unaudited total portfolio value was $4,208,913,640 according to the Actual Asset Allocation Exposure report of November 18, 2009.
September 30, 2009, SDCERS audited net assets was $3,829,143,000 in Sara Jimenez' SDCERS Group Trust Financial Statements, Nov. 9, 2009.

The fund was up 1.35% for the first quarter of 2010 fiscal year, just under the quarterly performance bench mark of 1.48%, announced SDCERS Chief Investment Officer Elizabeth Crisafi, referring to Callan Associates Inc. Investment Measurement Service, Quarterly Review, September 30, 2009,.
Crisafi noted that the biggest GPD growth was from Federal stimulus funds.

DROP INTEREST CREDITING FOR ACTIVE MEMBERS
SDCERS General Counsel Elaine Reagan noted that the interest rate cannot be tied to an index and must be evaluated by Board vote. Trustee Ray Ellis asked this item be returned as an action item next month to consider changes and the impacts on both SDCERS and members' decisions. Clarification of  IRS guidelines was also requested.

QUARTERLY BUDGET REVIEW
Investment expenses are increasing as assets increase, a good thing, since increased fees are directly related to increased earnings.
Technology is under budget.
Outside legal expenses are up. Ray Ellis noted that the Ad Hoc litigation committee is working with the Mayor/Council to bring down legal expenses. Inside legal expenses are down because Elaine Reagan has less staff.

UPCOMING HEARINGS:
Judge Barton case has trial set for March 18, 2010. City Motion for Summary Judgement denied November 2, 2009.
Firefighter case with Ron Saathoff, has a hearing on SDCERS demurrer to complaint on January 8, 2010.
Police Officers' Presidential Benefit has hearing on SDCERS demurrer to First Amended Complaint on December 18, 2009.
MEA and Italiano has cross-motions for summary judgement regarding liability on April26, 2010.

SCHEDULE OF BOARD MEETINGS?
Board will vote on time changes in December.)
Discussed in November, this proposal to meet for approximately every six weeks will be voted on by the Board in December. Staff was concerned about timely approval of disability applications if meetings were more than 6 weeks apart. Ray Ellis said the six week rotation would help those running a business and he thought more outside mayoral appointees could be recruited. Trustee Franklin Lamberth noted the moving target of rotating dates. Cynthia Queen will take care of notifying members on TV re-play viewing times.
This is what the 2010 SDCERS Board Meeting Schedule may look like:
Jan. 22, Feb none, Mar 5, April 16, May 28, June none, July 9, Aug 20, Sept none, Oct 1, Nov 5, Dec 17

There are questions regarding the proposed Business and Governance, Disability and Investment committees meeting all in one day.
Proposed schedule:
Thursdays before Board meetings:
Disability- 8:30 am - 10:00am
Business & Governance 10:30 am - 12:00 pm
Investment 1:30 pm - 4:00 pm

Rebecca Wilson, Chief of Staff, written report to the Board's request for cutting the numbers of meetings:
Rebecca wrote that approximately half of national public retirement systems "…meet monthly and the other half meet fewer than 12 times a year."
"In considering a change to the Board meeting schedule, the current committee meeting schedule was also reviewed….Disability and Business and Governance committee meetings have been trending toward shorter durations over the past 24 months. Given this trend it would be most efficient to hold all three committee meetings on the Thursday before the Board meeting." "A meeting schedule set approximately every six weeks would increase the amount of staff time available to resolve member issues, improve communications, and troubleshoot new issues that arise." The meeting schedules would be approved each November for the following January.

PROBLEM WITH DISABILITY AND VESTED RIGHTS
A police disability applicant listed legal problems in non-agenda comment. If she waives the 30 day notice so her application will be on the SDCERS agenda for December, then she believes she will forfeit her vested benefits according to SDCERS Board Rules.
She believed her application should have gone to the Board in 2007. In March 2008 there was a discussion between staff and Board regarding the reason the application was being sent to an adjudicator. She believed the staff asked the doctor to change his report.
She said Mr. Tisi, SDCERS disability attorney, had cancelled her presentation to the judge after she had paid $1500 to legally notify witnesses and prepared 1000 pages of documentation. She believed Tisi told the judge her application would be granted by the Board in December. However, she was not notified by SDCERS in the required 30 days in advance and now felt pressured by SDCERS to waive all her rights to go on the December agenda and that standards used to evaluate her case may be changed. 
One of her issues is her temporary job description at SDPD. She described an active policing assignment during the Cedar fires after she was disabled. (Patti's Note: There has been on-going debate between SDCERS Disability attorneys and applicants regarding temporary assignment being counted as permanent  accommodation.)

SERVICE CREDIT BY PRE-TAX PAYROLL DEDUCTIONS
SDCERS cannot "grandfather" in use of pre-tax deductions for purchasing service credit according to the IRS guidelines. Roxanne Story Parks said there are better options for members and pre-tax deductions, for purchase of service credit, are no longer allowed at SDCERS.

AD HOC COMMUNICATION COMMITTEE
VP Trustee Ray Ellis announced this item was returned to committee for more thought and information on legal implications. This committee plans to discuss and review SDCERS' communications with plan sponsors, members, and community.

THANKS TO CSDREA
VP Trustee Ray Ellis thanked the CSDREA Board of Directors for all that they do. Ellis spoke at CSDREA's November presentation regarding SDCERS Board's fiduciary responsibilities, along with General Counsel Elaine Reagan, and former President Peter Preovolos.