2012-04-02_Agenda Packet--Dossier de l'ordre du jour,7 A.
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City of Saint John
Common Council Meeting
Monday, April 2nd , 2012
Committee of the Whole
1. Call to Order
5:00 p.m. 8th Floor Boardroom City Hall
1.1 Employment Matter 10.2(4)0)
1.2 Land Matter 10.2(4)(d)
Regular Meeting
1. Call to Order — Prayer
6:00 p.m. Council Chamber
2. Approval of Minutes
3. Adoption of Agenda
4. Disclosures of Conflict of Interest
5. Consent Agenda
6. Members Comments
7. Proclamation
8. Delegations / Presentations
9. Public Hearings
10. Consideration of By -laws
11. Submissions by Council Members
12. Business Matters — Municipal Officers
12.1 Commissioner of Finance and Administrative Services: 2011 Oustanding
Contributions re: Pension Plan Going Concern Unfunded Liability
13. Committee Reports
13.1 Committee of the Whole: Resolution
13.2 Pension Board of Trustees: Response to Minister Higgs' Comments in Telegraph
13.3 Committee of the Whole: Report from City Solicitor — Motion to Amend January
Resolution of Council re Outstanding Contributions re Pension Plan Going Concern U
T
12.1
REPORT TO COMMON COUNCIL
March 29, 2012
His Worship Mayor Ivan Court and
Members of Common Council
Your Worship and Councillors:
SUBJECT: 2011 Outstanding Contributions re: Pension Plan Going
Concern Unfunded Liability
Background:
At the March 26th, 2012 meeting of Common Council the following
resolution was defeated:
"Resolved that the resolution adopted by Common Council at its open
session meeting held on January 31, 2012, dealing with special payments
to the City of Saint John Pension Fund, as well as a request to the Province
for an associated loan and permission to defer special payments over a
period not to exceed 10 years, be amended as follows:
1. The figure "$7,900,000.00" each time it appears be deleted and in each
such case the figure "$8,699,453.00" be substituted; and
2. The figure $12,800,000.00 be deleted and the figure $13,600,000.00 be
substituted."
As was communicated by the City Manager at the March 26th, 2012 meeting
there is a statutory obligation to make this contribution to the Pension Plan.
The payment was due to be made by March 30th, 2012. I am seeking
direction from Common Council as to their wishes with respect to this
matter.
k
The City of Saint John
Report to Common Council
March 29, 2012
Recommendation:
Page 2
That Common Council provides direction to the Commissioner of Finance
and Administrative Services as to how they would prefer to resolve this
situation.
Respectfully
Gregory J. Yeo ns, CGA, MBA
Commissiono,6f Finance and Administrative Services
I -�.I
Cite Hall
15 Market Square
March 27`h, 2012
P,O. Box 1971
Saint John
New Brunswick
Canada E2L 4L1
Your Worship, Deputy Mayor and Councillors:
City of Saint John
Subject: Committee of the Whole - Capital Budget for Fit -up and Occupancy of the New
Police Headquarters Facility
The Committee of the Whole, having met on March 26`", 2012 adopted the following resolution:
RESOLVED that the Committee of the Whole recommends that the budget of $1,995,000 (net
of HST) for the fit -up and occupancy budget of the new Police Headquarters facility be approved
and responsibility to administer the budget be assigned to the Saint John Board of Police
Commissioners.
Respectfully Submitted,
Jonathan Taylor
Assistant Common Clerk
City Hall
15 Market Square
Your Worship and
Members of Common Council
April 2, 2012
P.O. Box 1971
Saint John
New Brunswick
Canada E2L 4L1
Subject: Response to Minister Blaine Higgs' comments in Telegraph Journal
At a meeting today, the Pension Board of Trustees passed the following resolution:
City of Saint John
"RESOLVED that the Pension Board of Trustees forward to Council a statement for the media,
prepared today, in response to Minister Higgs' comments in the March 31, 2012 Telegraph
Journal as well as the letter from API Asset Performance Inc., dated April 2, 2012 clarifying the
Board's investment strategy."
Attached is the
Pension Board's statement in response to Minister Blaine Higgs' comments in
the March
31, 2012 Telegraph Journal as well as a copy
of a letter from API Asset Performance
Inc. dated
April
2, 2012 clarifying the Board's investment
strategy.
Sincerely,
Elizabeth Gormley
Secretary
Pension Board of Trustees
STATEMENT
Saint John Board of Pension Trustees Respond to Statements of
Finance Minister Blaine Higgs
April 2, 2012
Saint John — The City of Saint John Board of Pension Trustees today responded to certain
comments attributed to Finance Minister Blaine Higgs, in which he is said to have stated that the
strategy for investment was a "double or nothing" program and compared the investment
strategy to spending "time in a casino ".
The Trustees have responsibility for the investment of the pension fund assets. At all times,
these assets have been invested in compliance with the requirements of the provincial Pension
Benefits Act and based on advice received from qualified professional investment advisors. The
Trustees are advised that the current investment program for the pension fund is no different
than the investment program followed by major pension plans across Canada. The investment
program is designed to manage risk in the investment portfolio, while still achieving a
reasonable rate of return.
Over the last number of years, both before and after the 2008 financial crisis, the Trustees, with
the advice of qualified investment advisors, have embarked on a systematic program to reduce
the risk associated with the investment of the pension fund while still endeavouring to earn a
reasonable return. Through 4 separate investments made to date, the Trustees have increased
their investments in alternative assets classes and have reduced equity investments. The
Trustees continue to maintain a fixed income investment portfolio. No additional money has
been placed in equity investments subsequent to the beginning of the 2008 financial crisis.
These investment changes are common with the investment programs of most major public
pension funds across Canada. Aon Hewitt has advised that these investments in alternative
investments provide better diversification, reducing the investment risk of the pension fund,
while still maintaining a reasonable expected rate of return.
Management of risk in a pension investment portfolio is a continuing responsibility for the
Trustees. In early 2011, the Trustees engaged Aon Hewitt to analyse the investment portfolio
and provide advice on how risk may be further reduced, while still maintaining a reasonable
return. Aon Hewitt reported to the trustees in January 2012, with advice on the current risk
associated with the investment portfolio and an approach to further reduce risk over time.
The results of the Aon Hewitt review have been shared with the Superintendent of Pensions.
Discussions with the Superintendent are continuing with respect to the appropriate investment
strategy for the pension plan, in the context of the proposed pension reforms. However, at no
time has the Trustees' investment strategy been imprudent or out of step with the investment
program of the vast majority of other pension funds in Canada. Continued management of
investment risk remains an ongoing focus of the Trustees.
The statements attributed to Minister Higgs appear to have arisen in the context of the current
proposals by Common Council for reform of the Saint John Pension Act. These proposed
changes are currently with the Province for review. The Trustees note that the ultimate
responsibility for seeking reforms to the terms of the pension plan rests with Common Council,
as sponsor of the pension plan. The Trustees have made their actuarial advisor available to
Council and the Province, but have otherwise played no formal role in the reform discussions
that have been underway for a considerable period of time between Council, employee groups,
and the Province. While these discussions are underway, the Trustees continue to comply with
their legal responsibilities, including, at all times, prudent investment of the pension fund, with
the assistance and advice of qualified investment advisors.
The necessary reforms to the plan continue to present significant challenges that will require the
ongoing commitment and participation of Council, employee groups and provincial officials.
While these discussions are continuing, it is important that any public comments be accurate,
particularly since approximately 1700 employees, retirees and their families depend on the
pension fund for their retirement income. The pension Trustees trust that the information in this
statement regarding their investment strategy and program will assist in establishing an
accurate basis for future discussion.
The Trustees will be also seeking an immediate meeting with Minister Higgs on these matters in
order to ensure he is fully apprised of the Trustees' role in the investment of the pension fund,
and the details of investment program, particularly the Trustees' focus on the management of
investment risk.
For further comment, please contact:
Greg Yeomans
Treasurer
Board of Pension Trustees
Tel - 649 -6028.
164
6 111 API ASSET PERFORMANCE INC.
I Performance Measurement, Inveslmenl Management & Risk Analysis
Vancouver
#400 - 777 W. Broadway
April 2, 2012 Vancouver, BC, V5z 437
Tel: 604- 669 -5588
Mr. Greg Yeomans Fax: 604 - 669 -0611
Commissioner of Finance Toronto
City of Saint John 5160 Yonge Street
15 Market Square, PO Box 1971 Suite sot
Saint John, New Brunswick Toronto, ON M2N 61_9
E2L 41_1 Tel: 416- 922 -2822
Fax: 416 - 922 -8599
Dear Mr. Yeomans,
The words of the New Brunswick Minister of Finance, as quoted in the
Telegraph Journal Saturday March 31, referring to the City of Saint John
Pension Plan are puzzling. "As I understand, the strategy for investment was
almost like a (double -or- nothing) program... You know, if we lost a little more
money last year, we will invest a little more in the situation this year to try to get
it back. I don't know how many of you spend any time in a casino, but I don't
think that works well."
• The City of Saint John Pension Plan is structured in accordance with the
Mean - Variance model published by Professor Harry Markowitz in 1952,
where as a mathematician he documented the case for investment
diversification, holding non - correlated investments, and not having "all of
one's eggs in one basket ".
Furthermore the Pension Plan is in accordance with Modern Portfolio
Theory whereby the Pension Plan is structured to be in accordance with
the Efficient Frontier, i.e. to maximize Return in accordance with a
calculated Risk level. Downside Risk is calculated quarterly for the
Pension Plan.
The Pension Plan has always been governed by the Prudent
Man /Prudent Person Rule. In the context of a pension fund deficit with
bonds yielding 3.5 -4.0 % per annum and the Actuary stating that at least
6.0 % per annum is required to pay for future estimated liabilities it would
be imprudent to invest in 100% Bonds just as it would be imprudent to
invest in 100% Equities due to the volatility of that asset class.
Virtually all pension funds are structured 60 %/40% in Equities and Bonds
with some ranges extending to 70 % /30 % in accordance with a prudent
strategy.
The City of Saint John Pension Plan as at December 31, 2011 was 22%
Fixed Income 54% Equities 23 % Alternatives. The Alternatives asset
class is primarily Real Estate and Hedge Funds, both of which have
correlations between the Equity and the Bond markets and are offsets to
w w w. a p i n e s• t. c o m
both. This asset mix has prevailed for a number of years as has the
money manager line -up and percentage fluctuations have been due to
securities markets and individual money manager performance. Since
2002 in every year apart from 2002 and 2008 the City of Saint John has
performed superior to the average pension plan and ranks in the top 27%
of Canada's pension plans over the period. In the latest year 2011 City of
Saint John ranked in the top 43% of Canada's pension plans, which
proved the Asset Mix is functional in all markets because in that year
Equities lost money and Bonds had substantial returns.
• The asset mix is reviewed each year at the beginning of the year but no
changes have been made, apart from consideration of less volatile
investments, because the Pension Board and their consultant avoid trying
to time the market.
I hope these points address the erroneous words reported in the Telegraph
Journal. Please don't hesitate to contact me at 416- 922 -2822 should you have
any questions.
Yours Sincerely,
i
A�
Vaino V. Keelmann
Partner
w w w. a p i ass • 1. C am
The City of saint john
April 2, 2012
Committee of the Whole
of Common Council of
The City of Saint John
Mayor Court and Committee Members:
City Solicitors Office
Bureau de Pavocat municipal
Re: March 26, 2012 Meeting of Council
Motion to Amend January 31, 2012 Resolution of Council re
Outstanding Contributions re Pension Plan Going Concern Unfunded
Liability
On March 26, 2012 the following motion was placed before Common Council
Meeting at Open Session:
"Resolved that the resolution adopted by Common Council at its
open session meeting held on January 31, 2012, dealing with special
payments to the City of Saint John Pension Fund, as well as a
request to the Province for an associated loan and permission to
defer special payments over a period not to exceed 10 years, be
amended as follows:
1. The figure "$7,900,000.00" each time it appears be deleted and in
each such case the figure "$8,669,453.00" be substituted; an
2. The figure $12,800,000.00 be deleted and the figure $13,600,000.00
be substituted."
In my opinion, there is no question but that the City must make the payment
described by the Commissioner of Finance in his correspondence of March 23,
2012 addressed to Committee of the Whole.
The vote taken on that motion was 7 in favour and 2 opposed. The Common Clerk
advised Council that a 2/3 vote of the whole Council was required to adopt a
motion to amend a previously adopted motion. This advice was based on the
provisions found in Robert's Rules of Order (see: Henry M. Robert III, William J.
Evans, Daniel H. Honemann, Thomas J. Balch, Robert's Rules of Order, 10th
Edition. (Cambridge: Perseus Publishing, 2000)). Robert's Rules of Order is
implicated in resolving procedural issues respecting Common Council's
W
SAINT JOHN P.O. Box 1971 Saintjohn, NB Canada E2L4L1 I www.saintjohn.ca I C.P. 1971 Saintjohn, N.-B. Canada E21- 4L1
2 I Common Council
April 2, 2010
proceedings by virtue of section 3.2 of Council's Procedural By -Law (the By -Law),
which reads as follows :
3.2 Reference — Robert's Rules of Order
When any matter relating to proceedings in Council or in committees
or Committee of the Whole arises which is not covered by a provision
of this By -law, the procedure to be followed shall be decided with
reference to Robert's Rules of Order (10th Edition).
Consequently, and subsequent to the March 26, 2012 meeting, we have
undertaken in consultation with the Common Clerk's office and the Commissioner
of Finance an examination of the means by which the matter of the payments
lawfully required to be made by the City could be once again placed before
Common Council for its consideration.
In the course of that examination, we have come to the conclusion that the vote
taken on March 26, 2012 did in fact result in the adoption of the motion before
Council at that time, i.e. the vote succeeded and a resolution resulted.
My reasoning briefly stated is based upon the authority of the Common Council to
make decisions on matters lying within its jurisdiction and also upon the provisions
of the By -Law. First, the City of Saint John is a common law corporation with the
powers and capacity of a natural person except to the extent that its intangibility
otherwise prevents and also except as modified by legislation. The deliberative
nature of a Municipal Council in New Brunswick is clear from the terms of the
Municipalities Act. Similarly, it is a necessary implication of the Municipalities Act
in my view that a Common Council's authority to make decisions, includes the
authority to change those decisions. (For example see sections 4, 79 10.2 of the
Municipalities Act.)The consequences which result from a change of mind will be
borne by the municipality and so the Council will be obliged to consider any such
consequences in the course of deciding whether to do so. The authority to amend
a resolution previously adopted is thus in my view a natural incident of a
municipality's authority to make decisions lying within its jurisdiction. The By -Law
does not confer authority upon a Council, rather it is the document by which a
Council expresses its policy respecting the manner in which its authority is
exercised. The pertinent provision of the by -law in the circumstances at hand is, I
believe, section 3.9 which states:
3.9 Resolutions — by -laws — passed — enacted — majority vote
Except as otherwise provided, resolutions and by -laws are passed
and enacted by majority vote. [my emphasis]
3 I Common Council
April 2, 2010
Since the by -law does not provide otherwise, in my view, a motion to amend a
previously adopted motion will be adopted if the majority votes in favour. Where it
is intended otherwise, the by -law clearly states so. For example, section 3.10
provides:
3.10 Motion to Rescind
The motion can only be made by a member who voted with the
prevailing side, requires a two- thirds vote for adoption and can be
applied to the vote on any motion except a) an affirmative vote
whose provisions have been partly carried out; b) an affirmative vote
in the nature of a contract when the party to the contract has been
notified of the outcome; c) any vote which has caused something to
be done that it is impossible to undo.
The question
then becomes: what is a "majority vote". "A
majority" is not defined
in the by -law;
however, read in
its entirety the language of
the by -law leads me to
the conclusion that "a majority"
signifies the majority of members present and who
are eligible to
vote. When the
by -law intended otherwise it
has expressly said so.
For example,
in section 3.6 it is
stated:
3.6 Quorum — majority of members
A quorum of Council shall consist of a majority of the members of the
Council.
As a consequence, it is my opinion that the motion put before Common Council on
March 26, 2012 was in fact adopted on a 7 -2 vote. The Commissioner of Finance
is accordingly authorized to proceed as described in the adopted motion. Should
any member of Council wish to amend that resolution, they may make a motion to
that affect and it will succeed if it receives the support of a majority of members
present, eligible to vote.
Respectfully Submitted,
John C. Nugent
City Solicitor