NEW PORT RICHEY POLICE

      Of a Quarterly meeting of the Board of Trustees
       Meeting at 6739 Adams Street , Police Station,
             New Port Richey, Florida 34652
      Tuesday, the 31st day of July 2012, at 5:00 P.M.

The meeting was called to order by Mr. Pratt at 5:07 PM.

Trustees Present:
       Mr. Glen Pratt
       Mr. Bill Woodard
       Officer Steve Wade
       Det. Chris Trapnell
Trustee Absent:
       Mr. Eric Rhodes
Consultants Present:
       Mr. Brendon Vavrica
       Mr. Lee Dehner
       Mr. Dana Stewardson
       Mr. John Pieper
       Mr. T. Scott Baker
       Mr. Doug Haag, City Finance Director

ITEM #1 --    Approval of the minutes of the meeting of 06/19/2012

       Motion:       Det. Trapnell made a motion to approve the minutes of the
meeting. Officer Wade seconded the motion. The motion passed without opposition.

ITEM #2 --    City of New Port Richey Financial Condition
                     –     Doug Haag, Finance Director

Mr. Haag said he didn’t have a formal presentation and apologized for not attending the
previous board meeting. He said he had read minutes of previous meetings and noticed
the board may have questions regarding the city’s financial condition. He said he wanted
to assure the board that the city’s very last option would be bankruptcy or financial
emergency. He said he had provided his memo and said the city’s latest revenue updates
that the city is looking at a projected $14 million (with the recent fee increases) deficit
over the next five years. He said one of the items he mentioned in the memo was the city
manager asking for a 10% across the board cuts throughout the city. He said they were
able to achieve 6%, not the goal, however said this was about $900,000 worth of cuts,
saying there are 24-25 full and part time jobs that are being eliminated. Mr. Haag said he
was there to ask for the board’s help, with anything that can be done to help.

Officer Wade asked Mr. Haag how close the city was in disbanding, bankruptcy, or
financial emergency as it is something that is heard over and over again. Mr. Haag said if
nothing was done then the city would be looking at a financial emergency situation in
about 24 months. He said this is not the case, as the council took action last week and
approved storm water & street lighting increases. He said this doesn’t sound like a lot,
but that along with the debt re-structuring will cut the projected deficit by about $2 ½
million (from the original $17 million). Mr. Haag said the tough part is that these are long
term debt issues (because of the CRA debt, and declining property values taking a 11%
hit this past year).

Officer Wade said Cpl. Phillips would be speaking to the city to open up contract talks
this week and he said they have been hearing that the city would be looking for additional
employee contribution going towards the cost of the pension for contributions and asked
if he could provide what the amount of increase the city would be looking at. Mr. Haag
said this was an item that was on the table and didn’t want to be presumptuous at this
point as far as what’s going to be discussed at the meeting. Officer Wade asked if they
were looking at any changes to the pension plan itself and Mr. Haag said he didn’t know.
He said they are hoping to sit down and work together and come up with some items that
will help reduce the city’s overall cost. Mr. Haag said in terms of the two pension plans
(Police & Fire) that alone makes up $1/4 million dollars a year in costs. He said for the
current fiscal year, combined Police and Fire pension costs are about $1.4 million total,
out of a $16 million budget.

Mr. Pratt said the board is trying to make adjustments to improve investments and do
different things such as the recent real estate manager search and is being progressive. He
said as far as administrative fees they have tried to get the best fees possible in regards to
all of the consultants’ fees. He said the board has asked for lowest fees and said he
doesn’t know if it will make a huge difference and there hasn’t been major differences in
fees (and said there may be a couple hundred dollar difference). Mr. Pratt said one of Mr.
Haag’s comments was to combine the two pension boards, and Mr. Haag said not the
boards necessarily. Mr. Haag said he didn’t know if there was a way for the both boards
to jointly request a quote for actuary or auditing services

Mr. Pratt asked Mr. Vavrica if there would be a discount for his company on doing both
plans. Mr. Vavrica said if the meetings were held back to back (and they do not work for
the Fire plan) there may be a savings. Mr. Baker said on the investment side you
wouldn’t be saving anything as costs are based on percentage of the investment assets
and Mr. Vavrica said the percentage is the percentage, which really wouldn’t change. Mr.
Vavrica said the cost of preparing the reports would be the same and that the savings
would come from travel, if the meetings were back to back. Mr. Pratt asked Mr. Dehner if
he works for the Fire plan and he said he did. He asked if his fees would be reduced and
Mr. Dehner said they currently split travel fees with Dade City as he has a meeting there
on the days he has this meeting, so therefore the board is already receiving a discount. He
said if this meeting was held back to back with the Fire plan then the fees for travel could
be split again with them. Mr. Haag said he hadn’t met with the Fire Board yet and would
be doing so in August. He said if there was any interest in looking into combining
services to let him know and he would pass this information on.

Mr. Pratt asked if part of the reason the city is having problems is due to some of the
property the city owns and had purchased. Mr. Haag said it was and Mr. Pratt asked if the
city was trying to sell the properties. Mr. Haag said unfortunately the way the market is,
that makes selling the properties difficult. Mr. Haag said they are also attempting to
develop the Hacienda and a development around Orange Lake, which would be on the
tax rolls. Mr. Woodard said a bad thing is that with the Save Your Florida Homes Act the
property values are going to stay low and are not going to come back, as they can only
increase your property value 3% per year.

ITEM #3 --     Logan Capital Quarterly Report – Mr. Dana Stewardson

Mr. Stewardson said he had brought John Pieper along with him, who works in client
services and based in Tampa. He said to go back, they have outperformed over the last
three years, and were off to a great start this year but have given a lot of that back
(apologizing). He said it has been a very tricky time in the growth markets and some of
the things that have had affects locally have also been seen in the global economy. He
said issues that are affecting everyone in investing are Europe and the upcoming election,
and said they thinks there will be a little bit of slowdown in various parts of the economy
and a pickup in others. But said they do think the US Stock Market (particularly the
growth part of the equation) is extremely undervalued.

Mr. Stewardson said once some of this news is clarified (with Europe and doesn’t think it
will be wonderful news in the short run, but ultimately less bat). He said with the
election, regardless of the results, the clarity will help. He said the Fed is committed to
keeping the rates low and many of their great companies are delivering excellent numbers
and results. By owning Apple instead of Dell and Amazon instead of Best Buy, he said
security selection is paramount in getting things right, but in the short run they have
underperformed. He said the account is up $350,000 for the year, but it is a lot less than
what they like and a lot less than where it was at the end of the first quarter.

Mr. Stewardson said the portfolio has great companies and have been delivering. He said
they have avoided the really tough stocks, not owning Facebook or Coach (which got hit
today), and avoided a lot of the collisions. He said it is a time to preserve capital and said
the election will have a lot to do with improving the environment. He asked for any

Mr. Pratt asked whether Mr. Stewardson felt there would be further digression with the
economy or recession. Mr. Stewardson said he thought there would not be a recession
and that it would gradually improve, but parts of it would still be painful. Mr. Pratt asked
if he thought companies were holding onto reserves (more so than before) and Mr.
Stewardson said they were and were scared to re-invest. He said what’s happening is
(giving the following example): They own Cooper Industries in the portfolio which is an
industrial company (an electronic components company) and Eaton Corporation has
offered to buy them out, so ultimately there is so much cash around that when someone
sees a good opportunity they’ll buy the whole thing.

Mr. Woodard asked what’s going to happen to the health care stocks. Mr. Stewardson
said companies like Edwards Life Sciences continue to innovate and said those are the
companies that are most interesting to them. He said from a political point of view some
of the managed care companies could be big winners or big losers, but his opinion is the
innovators are going to win in any environment, and interest them.

Det. Trapnell asked about the three companies that were listed in their guideline
disclosure saying that Fossil seams to be the least of the three, but asked why they were
still holding onto Netflix and Halliburton. Mr. Stewardson said that Netflix is
controversial and said Fossil (makes watches) and Halliburton (in the energy business)
and two great companies. He said Fossil is the leader in their business in providing
watches for their own brand and others and is pretty well positioned. He said Halliburton
is a very undervalued stock and very entrenched throughout the construction and energy
world. He said he is one of the people on the team that really hasn’t been a fan of holding
onto Netflix, but said there are more people on the team that want to give it some time.

ITEM #4 --     Performance Monitor Report – Mr. Brendon Vavrica
                     - Intercontinental Real Estate Corp. contract update

Mr. Vavrica said in an update for Intercontinental Real Estate, who was selected to
manage a portfolio by the board at the last meeting, that Lee Dehner has received the
contract paperwork and will review it before moving forward to sign. He said assuming
there are no complications that things should be moving forward in about 30 days. He
said the assets really haven’t changed since the last meeting so therefore the dollar value
that had been assigned to their funding is consistent.
Mr. Vavrica began reviewing his report on page 2 (Index Comparison) and said overall
the picture was negative, but one thing that was lost in the snapshot is the quarter was
actually significantly worse two-thirds of the way through (at negative 9% and negative
10% for some of the indexes) but by the end of the quarter they ended between negative
2% and negative 5%. Mr. Vavrica said for the 12 month period Fixed Income was the
number one performer for the trailing 12 months and for the equities some were positive
and some were negative. Moving across to the trailing 3 year period, he said Fixed
Income was up about 5 ½ %, but all of the major equity domestic indexes were up
between 15-18%.
Mr. Vavrica continued to page 3 (Total Fund Compliance) he said question #3 is a no
because over the 5 year period the fund is trailing the 8% actuarial assumption, which has
been an issue the last couple of years, and like all other plans. Moving to page 4
(Compliance Individual Equity) there were questions 2, they are trailing on the 5 year
return and negative Alpha under question 6. He said BRC also has two no’s as they
trailed for the quarter and question 3, they are ranked outside the 40th percentile for the
two year period. Continuing to page 5, Mr. Vavrica said Garcia Hamilton has two no’s,
both universe related.
 Mr. Vavrica continued to page 6 (Asset Allocation) saying the portfolio had 59% in
equity (or $9.7 million), 39% in Fixed Income (or $6.5 million), and about $350,000 in
cash which was 2% of the assets. He said this is a grand total of $16,651,000 and an
update as of yesterday the fund is at $16,738,000 (up about $100,000 or 50 basis points).
Mr. Vavrica continued to page 9 showing the returns and said overall for the quarter the
fund underperformed, at a negative 2.81%, versus the policy which was down 1.22%. He
said the most important number on the page is the next column, fiscal year to date (and at
the ¾ mark) the return is 15.12%, placing in the 29th percentile and outperforming the
policy which was up 14.48%. He said the fund is currently 20-30 basis points better than
that as it sits today, which would bring the return to 15 ½%, with two months to go. Mr.
Vavrica said the total fund for the one year period the fund is trailing 1.38% versus the
policy at 5.23%, but outperforming on the three and five year periods.
Mr. Vavrica said equities were the main driver of the results and down 5 ½ % for the
quarter versus the benchmark of negative 3.11%. But again, like the total fund, fiscal year
is outperforming, trailing on the one year, but then again outperforming on the 3 and 5
year basis. He said Garcia Hamilton had a good quarter gaining 1.55% versus the
benchmark up 1.48%. For the fiscal year to date, one year, and 2 year they are
Continuing to page 10, Mr. Vavrica covered the individual equity manager’s performance
and said Logan was down 8.7% for the quarter, versus the benchmark down 4% and
placed last in the 100th percentile. For the fiscal now trailing 17.7% versus the benchmark
at 21.7%, outperforming for the three year, and trailing by about 2.4% for the five year
period. He said BRC for the quarter was down 2 ½ % versus the policy at negative 2.2%
as they underperformed but still placed in the 23rd percentile. He said the fiscal year to
date gained 26.18% versus the policy at 22.9% and placed in the 1st percentile and for the
two year return gaining 16.7% and outperforming the policy of 15.2% and doing quite
Mr. Vavrica discussed the risk taken by each manager as shown on the graph on page11.
He said the fund is getting a little bit more return than the policy, net of fees, but are
taking a little more risk in order to get that. He said that number has come down since last
quarter, but said the fund is getting more return than the policy on the trailing 5 years. He
said the good news is the fund is in very good shape for the fiscal year with only two
months left for the fiscal year end.

ITEM #5 --     Legal Report – Mr. Lee Dehner

Mr. Dehner said there were a couple updates and said he anticipates more legislative
proposals coming forward, which would probably be negative to pension plans, this next
session. He said by the next quarterly meeting there may be some Bills filed and would
address them when they come. He said the Governor did sign two Bills into law and both
became effective July 1st which will have an affect on the administration of the plan. He
said one is with respect to confidentiality of information that’s exempt under 119 for
public record requests (covers addresses, day care/schools, etc.) and now added to that
list is birthdates. He said if the board receives a public records request, along with
redacting the other information that is covered, birthdates would be redacted as well.
A second item is with respect to beneficiary designations, and would apply to a plan
member who designates their spouse as their beneficiary (most common) and then there
is a subsequent divorce the statute now provides that in that situation where the spouse
becomes the ex-spouse the beneficiary designation will become void. Mr. Dehner said he
believes this will be challenged and when it is believes it will be found to be
unconstitutional as an impairment to contract rights. He said in the mean time members
should be encouraged to keep their beneficiary designations current. He said this is
printed on the Summary Plan Description and suggested possibly sending letters to

Mr. Dehner reminded the Trustees about filing the financial disclosures with the
Supervisor of Elections Office. He asked Mr. Baker if he had checked on-line to see if the
Trustees were on record as having filed. He said he had checked a few weeks ago and
found only one listed. Mr. Dehner said they have had numerous times had Trustees file,
get a stamped copy, but for some reason they are not of record. He said the significance
of determining if you’re not of record prior to September 1st is that if you determine that
before September 1st you can get it squared away with the local Supervisor of Elections
Office. If it is after September 1st then you have to deal with the Ethics Commission in

Officer Wade said there was an Officer working for the department that was in the
military reserves and was going to be deployed and asked Mr. Dehner how this affected
his pension time and contributions. Mr. Dehner said there was both state and federal law
concerning this issue. He said when there is a separation to go into the military for
service (voluntary or involuntary) it has to be into active duty and where the individual
returns within a year after an honorable separation or honorable discharge then that
person is entitled to be credited service for up to 5 years for the time he/she was gone. He
said under the federal law (The Uniform Services Employment Re-Employment Rights
Act) he said you can actually charge the individual contributions they would have made
based on their last salary during the period of military service. He said they have to pay it
within a certain period of time. He said the state law liberalizes this with Chapter 185 that
states in that situation you just credit with the time and you don’t charge contributions.
He said all of the requirements have to be met: In the service active duty, return within
the year and the person is credited the time without paying for the contributions.

Mr. Pratt asked about the memo sent out by Mr. Dehner concerning Avoidance of Benefit
Overpayments. He said this was something that needed to be done with Fiduciary Trust
to make sure payments are correct and that there are no overpayments.

ITEM #6 --     Refund of Personal Contributions
                     - Non-Vested Terminated Member, John Horning

Mr. Baker said that John Horning had worked for the city for about one year and
paperwork had been provided to him concerning the return of his personal contributions.
The Lump Sum paperwork had been received back from Mr. Horning and he had
requested direct payment made to him. The amount of his personal contributions totaled

       Motion:       Officer Wade made a motion to approve the expenditure to Mr.
Horning in the amount of $1,040.07. Mr. Woodard seconded the motion. The motion
was passed without opposition.

Mr. Dehner asked if a signed receipt was obtained from Mr. Horning showing he
received the special tax notice and he said that the document was received as part of the

ITEM #7 --     Approval of expenditures

Mr. Baker stated there were 5 Distribution Authorizations. They are: $4,186.00 to Thistle
Asset Consulting for Performance Monitoring for the quarter ending 06/30/2012,
$7,074.00 to Logan Capital Management Inc. for Investment Management Fees for the
quarter ending 06/30/2011, $4,193.28 to Garcia Hamilton & Associates for Investment
Management Fees for the quarter ending 06/30/2012, $1,783.00 to Gabriel, Roeder,
Smith & Co. for Actuary & Special Consulting services for the quarter ending
06/30/2012, $33.10 to Christiansen & Dehner for Legal Fees
     Motion:        Officer Wade made a motion to approve the expenditures. Mr.
Woodard seconded the motion. The motion was passed without opposition.
Mr. Baker also had a new signature form for Fiduciary Trust due to the addition of a new
Trustee and updating their records.

ITEM #8 --     Any other business

Mr. Baker said he had received notice from the state that the plan’s annual report had
been approved. Mr. Vavrica said he wanted to confirm that the next quarterly meeting
(October 23, 2012) would be the fiscal year end and asked if the board wanted all three
managers at the meeting. Mr. Pratt said that was correct and he said he would schedule

       Motion:       Officer Wade made a motion to adjourn. Det. Trapnell seconded
the motion. The motion passed without opposition. The meeting was adjourned at 6:04


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