September 23, 2003 – Board Agenda

Closed Session – Conference with Counsel on Anticipated Litigation – Significant exposure to litigation pursuant to subdivision (c) of Government Code §54956.9: number of Cases – 1.

Public Session

1.

Call to Order

2.

Board Business

2.1

Roll Call

2.2

Acceptance of Certification

2.3

Swearing-in of Trustee

3.

Approval of the Minutes

4.

Oral Communications

4.1

Oral Communications From the Board

4.2

Oral Communications From the Public

5.

Benefit & Actuarial Services

5.1

Adoption of Consent Calendar

5.2

Consideration of items removed from Consent Calendar

5.3

Acceptance of June 30, 2003 Actuarial Valuation

5.4

Adoption of 2004-2005 Fiscal Year Employer & Member Contribution Rates

5.5

Acceptance of Status Report from the Ad Hoc Medicare Part-B Premium Reimbursement Program Review Committee

5.6

Consideration of the appeal of Rex Smith regarding staff’s denial of his request for re-consideration

6.

Investment Services

6.1

Acceptance of Monthly Portfolio Performance Report

6.2

SamCERA’s Investment Manager Structure – U.S. Equity

6.3

Annual Investment Manager Review – INVESCO Realty Advisors

6.4

Acceptance of Status Report on INVESCO’s proposed Commingled - Open End - Core Real Estate Fund

6.5

Approval of Topics for Investment Manager Review – Barclays Global Investors

6.6

Approval of Contract Extension for Bank of Ireland Asset Management

6.7

Adoption of Due Diligence Policy & Procedures

6.8

Review, Revision & Reaffirmation of Investment Committee Charter

7.

Board & Management Support Services

7.1

Acceptance of Monthly Financial Reports

7.2

Presentation of Auditor’s Report and Acceptance of SamCERA's Draft Financial Statements

7.3

Acceptance of SamCERA’s Response to the 6/30/2003 Audit’s Management Letter

7.4

Introduction of SamCERA’s Comprehensive Annual Financial Report

7.5

Public Hearing on Amendments to the Regulations of the Board of Retirement

7.6

Oral report on preparation of amendments to SamCERA’s Human Resources Plan in preparation for implementation of Ventura II and 2005 retirement formula enhancements

7.7

Approval of proposal to utilize Action Minutes format rather than Discussion Summary Minutes format

8.

Approval or Acceptance of Reports

8.1

Chief Executive Officer's Report

8.2

County Counsel's Report

8.3

Investment & Finance Manager’s Report

8.4

Assistant Executive Officers’ Report

8.5

Report on Actions taken in Closed Session

9.

Adjournment

September 23, 2003 – Board Minutes, as corrected

0309.1

Call to Order:  Ms. Colson, Chair, called the Public Session of the Board of Retirement to order at 1:00 p.m., September 23, 2003 in SamCERA’s Board Room, Suite 125, 100 Marine Parkway, Redwood Shores.

0309.2.1

Roll Call:  Mr. Bryan, Mr. Buffington, Ms. Colson, Mr. Hooley, Mr. Lewis, Mr. McMahon, Ms. Salas & Ms. Stuart.  Excused:  Ms. Tonsfeldt.  Alternate Board Member:  Ms. Arnott.  Staff:  Mr. McCausland, Mr. Hood & Mr. Clifton.  Counsel:  Ms. Carlson.  Consultants:  Ms. Chapman, Ms. Jadallah & Ms. Rathbun.  Custodian:  Mr. Azfar, Retirees:  2, County: 1, Public: 1.

0309.2.2

Acceptance of Certification:  Mr. McCausland reported that the Board of Supervisors forwarded certification of its appointment of James Hooley to the Sixth Member trustee position on the Board.  Without objection, Ms. Colson accepted the certification.

0309.2.3

Swearing-in of Trustee:  James Hooley swore to serve as faithful fiduciary for all members, retirees and beneficiaries; to serve as prudent administrator of the County's Retirement System; and to support, defend and bear true faith and allegiance to the Constitutions of the United States of America and the State of California in accordance with Regulation 2.3.1.

0309.3

Approval of the Minutes:  Mr. McMahan and Mr. Bryan protested Mr. McCausland’s submittal of action minutes.  Ms. Carlson noted that the Minutes as submitted were consistent with the Board’s Regulations.  Mr. Bryan noted that the Board had previously instructed staff to submit discussion summary minutes and that staff should do so until instructed by the Board to change.  Mr. Lewis and Ms. Colson noted that the format of the minutes would be taken up under Agenda Item 7.7.  Motion by Bryan, second by McMahon, carried seven ayes (Bryan, Buffington, Hooley, Lewis, McMahon, Salas & Stuart) to one no (Colson) to continue approval of the August Minutes to the October 28^th meeting.

0309.4.1

Oral Communications From the Board:  Ms. Stuart extended an invitation from SCORPA to trustees and staff to attend SCORPA’s annual picnic on September 24^th.

0309.4.2

Oral Communications From the Public:  None.

0309.5

Benefit & Actuarial Services

0309.5.1

Adoption of Consent Calendar:  Motion by Stuart, second by Bryan, carried unanimously, to adopt the Consent Calendar as submitted, as follows:

The Board ratifies the following actions taken by staff pursuant to the Board's Delegation of Authority and the Regulations of the Board of Retirement:

Service Retirements:

Rosales, Marianna

August 29, 2003

QDRO of Laurence Rosales

Frame, Robert

September 1, 2003

Department of Public Works

Pascas, Oscar

September 5, 2003 (from deferred)

San Mateo County Medical Center

Nero, Patricia

September 6, 2003

San Mateo County Medical Center

Baarts, John

September 8, 2003

Department of Human Services

Duhamel, Meredith

September 14, 2003

Department of Public Health

Saltzman, Ellen

September 14, 2003

Department of Social Services

Lopez, Elizabeth

September 20, 2003

Department of Superior Court

Martin, Paul

September 26, 2003

Sheriffs’ Department

Valcov, Allen

September 27, 2003

Department of Mental Health

Jennings, Louis Jr.

September 27, 2003

Department of Public Works

Saltzman, Linda

September 27, 2003

Department of Human Services

Continuance of Benefits:

Corning, Mabel

Beneficiary of Bertram

Dixon, Phyllis

Beneficiary of Alfred

Foley, Dolores

Beneficiary of James

Gallagher, Brian

Beneficiary of Mary

Deferred Retirements:

Grima, Anthony

Sheriffs’ Department

Refunds for September 2003:

Arias-Ramirez, Nancy

G4 non vested

$1,399.55

Banaag, Michael

G4 non vested

$117.42

Carr, Daniel

G4 vested

$25,524.19

Federis, Aristotle

G4 non vested

$33.50

Martinez, Thomas

G4 non vested

$6,819.37

Miller, Loren

G4 non vested

$2,890.36

Moreno, Suzanne

G4 non vested

$410.05

Portugal, Rowena

G4 non vested

$275.17

Pruitt, James

G4 non vested

$1,996.19

Salvosa, Mia

G4 non vested

 $504.60

Sandoval, Johanna

G4 non vested

$3,211.66

Sullivan, Arthur

G4 non vested

$191.38

Tavlian, Lorane

G4 non vested

$14.78

Van Etta, Patricia

G4 non vested

$42.80

Total Refunds for September:

$43,431.02

Rollovers for September 2003:

Fairfull, Caryl

G4 non vested

$6,899.43

Lau, So

G4 non vested

$5,986.61

Total Rollovers for September:

$12,886.04

0309.5.2

Consideration of items removed from Consent Calendar:  None.

0309.5.3

Acceptance of June 30, 2003 Actuarial Valuation:  Marcia Chapman and Michelle Rathbun of Mercer Human Resources Consulting were present to review the actuarial valuation.  (The Actuarial Valuation is available for review on SamCERA’s website at www.samcera.org.)  Ms. Chapman reported that Mr. Yeung had submitted his resignation in order to accept another position.  She noted that Ms. Rathbun had worked on the SamCERA account over the past four years, since processing of the valuation was transferred to the Portland office.  Ms. Rathbun reviewed the actuarial valuation process.  Ms. Chapman reviewed the process for setting contribution rates.

Benefit Changes:  The 2003 valuation incorporates the actuarial impact of all of the retirement benefit changes the County and its unions agreed to during the last round of collective bargaining.  Those changes are described in the Upcoming Changes document on SamCERA’s website.

Actuarial Assumption Changes:  The Valuation was based upon previously approved actuarial assumptions.  The Board of Retirement, based on Mercer’s recommendations, had approved new non-economic assumptions (with longer life expectancy being the most costly), lowered its actuarial interest assumption from 8.25% to 8% and its inflation assumption from 4.25% to 3% while retaining its graded salary assumptions (~6.25%).  The Board of Retirement also had established a ±20% corridor for the spread between the market value of assets and the smoothed actuarial value of assets and had extended the period for retiring the unfunded liability to June 30, 2022.  The 3% inflation assumption reduces the anticipated present value of future cost of living allowances for General and Safety Plan 1, thereby reducing annual employer contribution rates.  The extension of the funding period reduces annual employer contribution rates.  The other significant assumption changes increase both member and employer annual contribution rates.

Ms. Chapman and Ms. Rathbun reviewed the report in detail in response to questions from the Board.

Motion by Salas, second by Lewis, carried unanimously, to accept the June 30, 2003 Actuarial Valuation as submitted by Mercer Human Resources Consulting.

Summary of the Results of SamCERA’s Last Three Actuarial Valuations

Valuation Date

6/30/2003

6/30/2002

6/30/2001

Market Value of Assets

$1,233,272,000

$1,207,484,000

$1,307,972,000

minus Market Stabilization Account

(154,249,000)

(241,497,000)

(127,620,000)

equals Actuarial Value of Assets

1,387,521,000

1,448,980,000

1,435,592,000

Valuation Assets

1,353,941,000

1,416,821,000

1,384,586,000

Actuarial Value of Liabilities

1,781,544,000

1,660,566,000

1,404,060,000

Funding Ratio (V Assets / AV Liabilities)

76.0%

85.3%

98.6%

Unfunded Actuarial Accrued Liability

427,603,000

243,746,000

19,474,000

Ratio of Active to Retired & Deferred Members

1.1457:1

1.1426:1

1.1457:1

Contribution Rates Effective in Fiscal Year:

2004-2005

2003-2004

2002-2003

Employer Rate (Actuary’s Estimated Aggregate)

22.84%

18.69%

11.66%

% Increase

22.2%

60.3%

-2.2%

Member Rate (Actuary’s Estimated Aggregate)

8.38%

7.10%

5.86%

% Increase

18.0%

21.2%

-2.8%

Employer Contributions(Actuary’s latest Estimate)

$73,995,000

$60,528,000

$35,211,000

% Increase

22.2%

71.9%

7.7%

Member Contributions(Actuary’s latest Estimate)

$27,153,000

$21,440,000

$17,684,000

% Increase

26.6%

21.2%

7.0%

Total Employer & Member Contributions

$101,148,000

$81,968,000

$52,895,000

% Increase

23.4%

55.0%

7.4%

Sample Member Contribution Rates including Cost Sharing

General Plan 2 Entry Age 35

10.24% (3/05)

6.90%

5.82%

Safety Plan 2 Entry Age 30 (15 years of service)

13.16% (1/05)

9.53%

7.03%

Probation Plan 2 Entry Age 30

10.86% (1/05)

9.83%

7.87%

Reconciliation of 2-year Cumulative Change in County Employer Contribution Rate

% of Pay

% Change

Employer Rate Fiscal Year 2002-2003

11.66

Enhanced Retirement Benefits

6.08

54.38%

Employee Cost Sharing

-1.00

-8.94%

Elimination of Deputies 15% pick-up

-0.20

-1.79%

Enhancements impact on rates

4.88

43.65%

Investment Shortfall Amortization

5.23

46.78%

Investment impact on rates

5.23

46.78%

Actuarial Assumptions Changes

2.44

21.82%

Market Stabilization Corridor Change

0.70

6.26%

2-years’ experience other than expected

-0.47

-4.20%

20-year Amortization Period Change

-1.60

-14.31%

Actuarial impact on rates

1.07

9.57%

Two-year increase in employer rate

11.18

100.0%

Employer Rate Fiscal Year 2004-2005

22.84

95.88%

0309.5.4

Adoption of 2004-2005 Fiscal Year Employer & Member Contribution Rates:   Marcia Chapman and Michelle Rathbun of Mercer Human Resources Consulting were present to review the recommended contribution rates.  Following the Board’s review, motion by Bryan, second by Stuart, carried unanimously, to adopt Resolution 03-04-03, as follows:

Whereas, Government Code §31453 mandates the periodic actuarial valuation of the Retirement Fund and requires that the Board...shall, at least 45 days prior to the beginning of the succeeding fiscal year, recommend to the Board of Supervisors such changes in the rates of interest, in the rates of contributions of members, and in the county and district appropriations as are necessary...; and

Whereas, the Board has received, reviewed and accepted the June 30, 2003 Actuarial Valuation and recommendations from its actuary, Mercer Human Resources Consulting, and the Chief Executive Officer setting forth the changes necessary to assure the actuarial soundness of the Retirement Fund.  Therefore, be it further

Resolved that the Board hereby adopts the actuary's recommended Employer Contribution Rates for Fiscal Year 2004-2005, effective July 4, 2004, for the County in accordance with the following schedule, as a percentage of compensation earnable:

Plan 1

Plan 2

Plan 3

Plan 4

General Member Rates:

Normal Cost

14.66%

12.27%

6.84%

10.26%

Contribution to Unfunded Accrued Actuarial Liability

14.19%

  7.57%

  6.80%

  6.07%

Total General Member Rates

28.85%

19.84%

13.64%

16.33%

Safety Member Rates:

Normal Cost

22.69%

22.46%

None

19.74%

Contribution to Unfunded Accrued Actuarial Liability

28.97%

20.21%

None

18.04%

Total Safety Member Rates

51.66%

42.67%

37.78%

Probation Member Rates:

Normal Cost

34.97%

24.48%

None

17.39%

Contribution to Unfunded Accrued Actuarial Liability

14.36%

14.65%

None

12.30%

Total Probation Member Rates

49.33%

39.13%

29.69%

Be it further

Resolved that the Board hereby adopts the actuary's recommended Employer Contribution Rates for Fiscal Year 2004-2005 effective July 4, 2004, for the Mosquito Abatement District in accordance with the following schedule, as a percentage of compensation earnable:

Plan 1

Plan 2

Total General Member Rates

23.24%

14.60%

11.62%

Be it further

Resolved that the Board hereby orders the Chief Executive Officer to implement the remainder of the Cost Sharing Member Contribution schedules set forth in the ratified County Memorandums of Understanding payable without regard to any other provision of law.

 Be it further

Resolved that the Board hereby orders the Chief Executive Officer to refund the Cost Sharing Member Contributions and interest credited thereon collected from each General Member age 65 or greater who retires during the period of time that GC§31676.16 is operative in San Mateo County.

Be it further

Resolved that the Board hereby adopts the actuary's recommended Entry Age Member Contribution Rates for the County and Mosquito Abatement District in accordance with the schedule set forth below, as a percentage of compensation earnable, effective July 4, 2004:

0309.5.5

Acceptance of Status Report from the Ad Hoc Medicare Part-B Premium Reimbursement Program Review Committee:  Ms. Stuart reported that the Ad Hoc Committee had met on September 3^rd.  The Committee agreed to evaluate SamCERA’s current and alternative methods for funding the program and to prepare recommendations for the Board’s consideration.  The Board adopted a work plan, assigned tasks, decided against conducting a survey of retirees and agreed to meet again on September 23^rd.  Without objection, Ms. Colson accepted the report.

0309.5.6

Consideration of the appeal of Rex Smith regarding staff’s denial of his request for re-consideration:  Mr. McCausland reported that the Board must determine if it has the authority to accept an appeal filed by a member who retired in 1978.  Ms. Carlson noted that Mr. Smith failed to exercise his legal appeal rights on a timely basis in 1978.  She reported that the Board no longer has jurisdiction to determine Mr. Smith’s disability.  She concluded that Mr. Smith’s only recourse is to the courts.  Motion by Bryan, second by Salas, carried unanimously, to deny Rex Smith’s request that the Board accept his appeal due to the Board’s lack of jurisdiction to determine the causality of his disability.

0309.6

Investment Services

0309.6.1

Acceptance of Monthly Portfolio Performance Report:  Mr. Clifton reported that in August the Retirement Fund passed through the $1.3 billion level for the third time.  He reported that the Bank of Ireland Asset Management’s performance over the trailing twelve months was 784 basis points below the MSCI ACWI Free ex-US Index, which caused total portfolio returns to trail its benchmark.  He noted that funds were transferred from the Russell 1000 in August and September to fund retiree benefits.  Proceeds from the close of the Hunter’s Creek sale will be set aside to fund October retiree benefits.

Asset Class

Market Value

1-Month

1-year TTWRR

5-year TTWRR

Domestic Equity

$  694,054,390

2.57%

15.66%

3.94%

International Equity

    186,249,201

0.89%

4.38%

0.67%

Total Equity

$  880,303,590

2.21%

12.97%

2.38%

Fixed Income

368,017,904

0.66%

4.36%

6.65%

Real Estate Aggregate

65,700,481

0.59%

14.83%

8.27%

Cash Equivalents

-1,208,030

0.19%

   2.17

Total Fund

$1,312,813,946

1.68%

11.03%

4.65%

Benchmark

1.91%

12.01%

4.32%

Without objection, Ms. Colson accepted the report.

0309.6.2

SamCERA’s Investment Manager Structure – U.S. Equity:  Ms. Colson reported that Ms. Jadallah and Mr. Thomas had met with the Investment Committee to review alternatives for SamCERA’s U.S. Equity manager structure.  Ms. Jadallah reported that the Committee had provided additional instructions for a range of active / passive, growth / value and large cap / small cap allocation permutations that SIS will bring back to the Committee in October for its review.  Without objection, Ms. Colson accepted the report.

0309.6.3

Annual Investment Manager Review – INVESCO Realty Advisors:  Max Swango, Sally Kittles and Steve Walker of INVESCO Realty Advisors were present for the review.  Mr. Swango reviewed the organizational structure of AMVESCAP, noting that Mr. Ridley had been promoted to head the new Alternative Investment Group and to serve on the AMVESCAP Board, while continuing to managing INVESCO Realty Advisors.  He noted that INVESCO Realty Advisors now has 28 institutional clients.  He noted that two new ’37 Act clients, Contra Costa and San Bernardino, had been added since the last report.  

Ms. Kittles reviewed the objectives for, and composition of, SamCERA’s real estate portfolio, noting that the Hunter’s Creek sale closed this day.  She reminded the Board that SamCERA weights 70% of the return objective to income and 30% to appreciation.  She noted that, with the sale of Hunter’s Creek, three of the remaining properties exceed SamCERA’s target limit of 20% allocated to a single property.  She noted that Hurricane Isabel missed SamCERA’s properties.  SamCERA’s real estate portfolio has generated 10.72% net returns since inception.  (However, when the REIT returns are factored in, the net return declines to 7.87%.)

Mr. Walker noted that real estate fundamentals are weak, driven by lack of demand rather than by the historical norm of overbuilding.  The combination of debt-costs-at-forty-year-lows and equity-market-declines have brought high net worth individuals into the acquisition arena, thereby putting additional upward pressure on prices at a time when institutional investors are trying to increase their real estate allocations.  While the office market recovery still has a long way to go, industrial and retail properties should be relatively stable in the mid term.  Office occupancy levels are forecast to be at 85% in two years, which will suppress office rents.  There are significant declines in construction forecasts.  He noted that real estate is still expected to generate 400 to 500 basis point internal rate of return spreads.

In response to a question from Mr. Clifton, Mr. Swango reviewed INVESCO Realty Advisors key management team.  Ms. Colson noted that there is only one woman among the top twenty-five managers.  Mr. Swango noted that the firm is currently developing an aggressive affirmative action program with the intent to increase the firm’s diversity.  Ms. Colson encouraged Mr. Swango to carry the message back to Dallas that women should be advancing into INVESCO’s senior management.  Ms Stuart asked that INVESCO use its clients’ full name in future reports.

0309.6.4

Acceptance of Status Report on INVESCO’s proposed Commingled – Open End - Core Real Estate Fund:  In response to a question from Ms. Jadallah, Mr. Swango reported that INVESCO recently added four new separate accounts.  The four accounts added were due to special situations (Ohio P&F, Florida, SBC and San Diego City).  He stated that INVESCO is closed to new separate accounts and that going forward potential new clients will be directed to the new funds.  Mr. Walker reported that INVESCO’s lead asset manager for the new fund will be a woman. 

Mr. Walker noted that INVESCO is in the midst of completing the private placement memorandum and investment terms.  He hopes to have the draft to SamCERA for review by the end of October.  In response to a question from Ms. Colson, Mr. Swango assured the Board that INVESCO would examine recovery of the organizational expenses on this open ended fund very carefully.  In response to another question from Ms. Colson, Mr. Walker stated that at this point the plans did not include a cash management fee for uninvested capital, but that INVESCO would consider an equitable alternative to charging the asset management fee on uninvested capital.  Ms. Colson also questioned the procedures for amending the management agreement, with Mr. Bryan noting that changes should only require a 50%+ majority.  Ms. Colson noted that the Committee was also concerned about where the fund would fit into INVESCO’s acquisition log, with Ms. Kittles noting that the new fund would enter at the bottom of the log and have to work its way to the top.  In response to a question from Mr. McMahon, Mr. Walker described the valuation process for the purchase and sale of units.  Mr. Lewis asked for an estimate of fund expenses, to which Mr. Walker noted that audit and appraisal fees are the major external costs aside from the asset management and property management costs.  Mr. Walker stated that he would provide a pro forma financial statement for the Board’s review.  In response to a question from Ms. Colson, Mr. Walker noted that the fund will be governed by outside directors, most of whom will be investors in the fund.  Ms. Colson noted that the Board was more interested in having outside experts on the Board than fund participants.  In response to a question from Mr. Lewis, Mr. Walker noted that one investment objective is for leverage not to exceed 30% and that historically the level is closer to 15%.  Ms. Colson asked for clarification of when the 18-month lock-up period commences, to which Mr. Walker noted that he believes the 18 months will be from the date of commitment and will be for all investors joining the fund.  

0309.6.5

Approval of Topics for Investment Manager Review – Barclays Global Investors:  Motion by Salas, second by Stuart, carried unanimously, to approve the Investment Committee’s recommended topics.

0309.6.6

Approval of Contract Extension for Bank of Ireland Asset Management:  Mr. Clifton noted that the Board is waiting to complete its review of the investment management structure before making any long-term commitments or changes.  Motion by Buffington, second by Bryan, carried unanimously to extend the current Investment Management Agreement between the Board and Bank of Ireland Asset Management through April 30, 2004.

0309.6.7

Adoption of Due Diligence Policy & Procedures:  Ms. Colson noted that the Investment Committee had instructed staff to prepare a less formal policy and procedures proposal of its consideration.  Without objection, Ms. Colson put the item over to the October meeting.

0309.6.8

Review, Revision & Reaffirmation of Investment Committee Charter:  Noting that the Investment Committee intended to integrate elements of the due diligence policy into the committee charter, without objection, Ms. Colson put the item over to the October meeting.

0309.7

Board & Management Support Services

0309.7.1

Acceptance of Monthly Financial Reports:  Mr. Clifton presented SamCERA’s financial statements for the fiscal year through August 31^st, which may be viewed on SamCERA’s website.  He noted that employer contributions were up for the year.  He also noted that member contributions were up, in part because of the increased purchases of upgraded service credit. 

0309.7.2

Presentation of Auditor’s Report and Acceptance of SamCERA's Draft Financial Statements:  Mr. Andy Paulden of Brown Armstrong noted that he had reviewed the draft reports in detail with the Ad Hoc Audit Committee.  He reported that Brown Armstrong issued an unqualified opinion on SamCERA’s financial statements.  He reported that no noncompliance issues or internal control issues came to light during the course of the audit.  He also reported that no reportable incidents occurred during the course of the audit.  Without objection, Ms. Colson accepted the draft financial statements and instructed staff to set the final statements for acceptance on October 28^th. 

0309.7.3

Acceptance of SamCERA’s Response to the 6/30/2003 Audit’s Management Letter:  Mr. Lewis noted that the Ad Hoc Audit Committee had reviewed the one problem identified during the audit with Mr. Paulden and staff.  Mr. Paulden noted that during the testing of active member data, the auditors noted an incorrect hire date of one member.  He noted that management’s response and proposed course of action to the auditor’s recommendation was appropriate.  Mr. McCausland noted that the actuary extrapolates the hire date by subtracting the service credit from the valuation date.  In the case noted in the audit, the member had more than a year of extra help service credit, which means that his actual hire date will be earlier than that calculated by the actuary.  However, in the case identified in the audit there was an actual error in the hire date that staff is investigating.  Without objection, Ms. Colson accepted staff’s response to the June 30, 2003 Management Letter.

0309.7.4

Introduction of SamCERA’s Comprehensive Annual Financial Report:  Mr. Lewis told trustees that if they have any changes to propose to the CAFR, to submit them to staff within the next two weeks.  In response to a question from Mr. Buffington, Mr. Paulden noted that a CAFR lends credibility to the plan’s disclosure of information for its members because it is in a nationally recognized and validated format.  Without objection, Ms. Colson instructed staff to set the CAFR for acceptance on October 28^th. 

Mr. Bryan noted that the Board had been prudent in its decision to retain an outside auditor to verify that SamCERA’s internal controls and financial statements were adequate.  He went on to recommend that the Board consider utilizing the County Auditor’s services in the future, since the outside auditor has verified the adequacy of SamCERA’s systems.  Mr. McCausland noted that staff was very pleased with the professional caliber of the audit team.  He also noted that the team’s use of SamCERA’s manuals had allowed the team to design an extremely efficient audit plan.  Mr. McCausland also noted that he had expected the outside auditor to find things that the County Auditor might have missed, but in fact they did not.  He indicated that he had hoped to obtain additional insights into how to improve SamCERA’s processes.  Mr. Hooley noted that there is a level of fiduciary comfort associated with having the perspective of the outside auditor.  Without objection, Ms. Colson instructed staff to bring this matter back to the Board when it is time to begin preparations for the June 30, 2003 audit.

0309.7.5

Public Hearing on Amendments to the Regulations of the Board of Retirement:  Mr. Hood noted that Mr. McCausland has proposed transferring much of the material in the draft amendments to a CEO’s manual and trustee’s manual for use as a legal resource that has not been available in the past.  He noted that Ms. Carlson felt that much of the material exceeded the role typically played by regulations.  Ms. Colson echoed Ms. Carlson’s sentiments.  Mr. McCausland noted that the absence of a legal resource document had greatly hampered his administration of SamCERA when he was hired and that he was determined to leave his successor with a roadmap of the legal checkpoints. Without objection, Ms. Colson instructed staff to bring a revised set of amendments to the regulations to the October 28^th and await further instructions from the Board before distributing them for public comment.

0309.7.6

Oral report on preparation of amendments to SamCERA’s Human Resources Plan in preparation for implementation of Ventura II and 2005 retirement formula enhancements:  Mr. Hood reported that SamCERA will experience escalating workloads over the next twenty-one months and staff will be preparing alternative strategies for meeting the challenge.  Mr. McCausland noted that most SamCERA operations are now highly efficient and automated, but when a significant number of unresolved divorces, purchase requests and disability applications all come through the door in a short period of time, staff resources are too limited to respond efficiently.  Mr. Buffington criticized management for not prioritizing its personal efforts to provide more timely resolution of member requests for service. 

Mr. Bryan noted that Ventura II workloads will materialize, AB 55 workloads will materialize, 2% @ 55.5 workloads will materialize and the Board does need to prepare for them, but that the balance between permanent and extra help staff needs to be determined.  Ms. Colson noted that the Board wants SamCERA to have the staff that is needed to get the work done, but that the Board needs a better understanding of the volume of work, the management of peaks and valleys, the use of temporary help and the impact of Friday closures on workload.  Mr. Lewis noted that telephone calls are one good metric and that the Board needs that kind of data.  Ms. Arnott suggested the use of the County’s A-87 forms as a useful workload tracking tool.

Mr. McCausland noted that the purpose of the agenda item was to establish a dialogue between the Board and the staff, so that as the plan is formulated, the Board’s concerns can be fully integrated into the plan.

0309.7.7

Approval of proposal to utilize Action Minutes format rather than Discussion Summary Minutes format:  Ms. Colson noted that she felt the Board would be well served by using more action oriented minutes.  She noted that there is more opportunity for editorial liberty in the discussion format, which may prove to be less prudent down the road if it does not accurately reflect the trustee’s actual comments.  Mr. Lewis supported the use of briefer minutes.  Ms. Carlson noted that the less said in minutes the better from a legal standpoint.

Ms. Salas encouraged the Board to retain the discussion summary format because it provides a good history for new trustees and that the Board consistently amends the minutes as appropriate.  Mr. McMahon noted that the minutes are an excellent learning tool and is very helpful to a trustee with limited expertise.  Mr. Bryan noted that he uses the minutes as a form of corporate memory.

Ms. Carlson noted that the Board might want to review other systems’ minutes to help it identify an appropriate format.  Mr. Buffington suggested that there might be a happy medium between what we have become use to and the action format.  Ms. Colson instructed Mr. McCausland to propose a methodology for reducing the amount of time that he dedicates to preparing the minutes.     

Motion by McMahon, second by Bryan, carried five ayes (Bryan, Lewis, McMahon, Salas & Stuart) to three noes (Buffington, Colson & Hooley), to maintain the current discussion summary minutes.

Motion by Lewis, second by Hooley, carried seven ayes (Bryan, Buffington, Colson, Hooley, Lewis, McMahon & Stuart) to one no (Salas), to instruct staff to survey the format of minutes utilized by other systems.

0309.8

Approval or Acceptance of Reports

0309.8.1

Chief Executive Officer's Report:  Mr. McCausland reported that a member had asked the Board to >in cases of doubt as to whether a person is eligible to become a safety member, the board shall decide.  He reported that he and Ms. Carlson had reviewed the member’s request and had determined that the County acted properly in>

Mr. McCausland reported that a delegation representing three Japanese pension funds responsible for more than $1.8 trillion U.S. would be onsite September 24^th and he invited trustees to participate.

He distributed a memorandum from the County Manager to the Board of Supervisors highlighting the final changes to the County budget.  Mr. McCausland noted that the last paragraph describes the Medicare Part-B Premium Reimbursement Program, noting that the program is included in the budget for the current fiscal year. 

Ms. Colson instructed Mr. McCausland to contact Mr. Cottle on behalf of the Board to determine an appropriate tribute to Mr. Cottle for his service on the Board.

0309.8.2

County Counsel's Report:  Ms. Carlson distributed a memorandum regarding SamCERA staff >Westly, Corcoran and the Government Code.

She noted that a San Francisco C&CERS appellate decision had excluded terminal pay from compensation earnable. 

She reported that SamCERA had lost its appeal of the attorney fees in Ventura II.

0309.8.3

Investment & Finance Manager’s Report:  Mr. Clifton reported that he had received the audited financials for the Bank of Ireland Group Trust.  He noted that sale of Hunter’s Creek had closed this day.

He noted that staff had no recommendation for a January Board retreat.  Ms. Colson noted that the Board can consider the matter again in November.

0309.8.4

Assistant Executive Officers’ Report:  Mr. Hood reported that he and Mr. Ali had attended the annual PensionGold users’ conference.  He noted that the users have asked that properly formatted web member statements be integrated into the base project.  He noted the LRS is also working on a variety of web retired member services. 

Mr. Hood also reported on his conversations with LRS regarding the future for support of Version 1.  LRS committed to four or five years of support unless a major incompatible platform change in the interim forced early migration.

Ms. Stuart reported that the Ad Hoc Medicare Part-B Premium Reimbursement Program Review Committee is cancelled and will meet on another day.

Ms. Colson recessed the Public Session at 4:30 p.m.

Ms. Colson called the meeting back to order at 4:59 p.m.

0309.8.5

Report on Actions taken in Closed Session:  Mr. McCausland reported that Ms. Colson convened the Board in Closed Session at 4:31 p.m. with all trustees present for roll call in attendance. 

Counsel reviewed SamCERA’s exposure to potential litigation per GC§54956.9(c). 

The Board provided direction to Counsel and staff, but no formal action was taken.

There being no further business, Ms. Colson adjourned the Closed Session at 4:59 p.m.

0309.9

Adjournment in Memory of the following Deceased Members:  There being no further business, Ms. Colson adjourned the meeting at 5:00 p.m. in memory of the following deceased members:

HUTCHINSON, AVA

JULY 20, 2003

BENEFICIARY OF JOHN

MANNING, EMMA

AUGUST 3, 2003

CHOPE HOSPITAL

NEMES, GERTRUDE

AUGUST 6, 2003

DEPARTMENT OF SOCIAL SERVICES

GALLAGHER, MARY

AUGUST 8, 2003

DEPARTMENT OF MENTAL HEALTH

REHBOCK, RUTH

AUGUST 9, 2003

DEPARTMENT OF MENTAL HEALTH

WIGGINS, RUSSELL

AUGUST 9, 2003

OFFICE OF EMERGENCY SERVICES

DIXON, ALFRED

AUGUST 13, 2003

CONTROLLERS’ DEPARTMENT

CARDINAL, BARBARA

AUGUST 14, 2003

FAMILY SUPPORT DIVISION

FOLEY, JAMES

AUGUST 14, 2003

DISTRICT ATTORNEYS’ OFFICE

DUNNING, JEAN

AUGUST 18, 2003

BENEFICIARY OF JOHN BROOK

TEDDLETON, CHRISTOPHER

AUGUST 20, 2003

CHOPE HOSPITAL

LOCATELLI, THELMA

AUGUST 21, 2003

DEPARTMENT OF CIVIL DEFENSE

CORNING, BETRAM

AUGUST 25, 2003

DEPARTMENT OF SOCIAL SERVICES

HALL, CATHERINE

AUGUST 30, 2003

CRYSTAL SPRINGS REHAB CENTER