07-15-1975 Supporting DocumentsMINUTES N1.11,16 j
REGULAR MEETING
A Regular Meeting of the City Council of the City of Clermont war, hold in the
Council Chambers on Tuesday, July 15. 1975. The meeting was called to order at
7:30 P. M. by Mayor Claude E, Smoak, Jr. with the following members present,
Councilmen Oswalt, Byrd, Schroedel, and Blackburn. Other officials present wore:
City Manager Hopkins, City Attorney Baird, City Clerk Carroll, City Controller
Fleming, Director of Community Services, Smythe, Building Official Nagel, and
Chief of Police Tyndal. Others present were: Mesdames Ray, Millikin, Sheldon,
Walker, Oswalt; Mr. and Mrs. William Wilkins, and the Messrs. Czech, Sarg9ant,
Cunningham, Williams, and Dougherty. A representative of the Sentinel/star.was also
present.
The invocation was given by Councilman Byrd, followed by repeating of the pledge
of Allegiance in unison by those present.
There was an addition to the Minutes of the Meeting held July 8, 1975 as follows:
Mayor Smoak spoke in favor of all three of the requests as made by the Library Board,
and had voted Naye on the motion made by Councilman Blackburn because he thought
authorization should have been granted for making an entrance for off-street parking
at that time. The Minutes were then approved as amend:d.
City Manager Hopkins reported as follows: That in correspondence with the Department
of Natural Resources regarding the city's grant application filed with them con-
cerning the swimming pier he had been advised he should have some information back
from them in about three or four weeks, and, That following Council action on
July 8th wherein authorization was given to purchase the necessary paint and have
city crews paint the new addition to the Library, he had received a request from
Mr. Richard J. Klaas to paint the entire library building for $420.00. Council
inquired if this offer included proper sealing, painting of the trim, use of a
first class masonry paint, etc. and City Manager Hopkins advised he assumed so,
but did not have anything in writing. Motion was made by Councilman Byrd, seconded
by Councilman Schroedel and carried that the City Manager be intructed to accept
ecessary s
City Attorney Baird reported he had been advised by Mr. Bryan of the DOT that they
were in need of a Resolution from the city designating that the proposed site for
one of the drainage basin locations (Sunset Lake area) is not now being used as
a park nor will it be in the future, in order to continue receiving funds from
state and federal sources. Motion was made by Councilman Schroedel, seconded by
Councilman Blackburn and carried that City Attorney" Baird prepare such a Resolution.
Mayor Smoak asked that Council, in their 75-76 General Fund Budget Consideration,
consider the inclusion of a $500.00 appropriation for a tree planting program, which
has been previously discussed and which is in support of a recommendation made a
couple of years before by Councilman Schroedel to start a city nursery at the
treatment plant site, utilizing the spray irrigation located there.
Councilman Schroedel reported briefly on his recent attendance of the Cooper Memorial
Library Board meeting wherein it was reported the book circulation had doubled in
June as compared to June of a year ago, and that the current summer program being
offered was very successful with large numbers of children in attendance.
Councilman Schroedel inquired if any further word had been received regarding the
property on which the Garden Club is located as being owned by Lake County when
it had been assumed to be owned by the city, and City Attorney Baird advised he
had not been contacted as yet by the County Attorney who was to investigate the matter
and report back, but that he would again contact him.
MINUTES NV 1166
REGULAR MEETING
A Regular Meeting of tile. City Council of the City of Clermont was held in the
Council Chambers on Tuesday, July 15, 1975. The meeting was called to order at
7:30 P. M. by Mayor Claude E. Smoak, Jr. with the following members present:
Councilmen Oswalt, Byrd, Schroedel, and Blackburn. Other officials present were:
City Manager Hopkins, City Attorney Baird, City Clerk Carroll, City Controller
Fleming, Director of Community Services, Smythe, Building Official Nagel, and
Chief of Police Tyndal. Others present were: Mesdames Ray, Millikin, Sheldon,
Walker, Oswalt; Mr. and Mrs. William Wilkins, and the Messrs. Czech, Sarggent,
Cunningham, Williams, and Dougherty. A representative of the Sene tinl/Star_ycas ,also
present.
The invocation was given by Councilman Byrd, followed by repeating of the Pledge
of Allegiance in unison by those present.
There was an addition to the Minutes of the Meeting held July 8, 1975 as follows:
Mayor Smoak spoke in favor of all three of the requests as made by the Library Board,
and had voted Naye on the motion made by Councilman Blackburn because he thought
authorization should have been granted for making an entrance for off-street parking
at that time. The Minutes were then approved as amended.
City Manager Hopkins reported as follows: That in correspondence with the Department
of Natural Resources regarding the city's grant application filed with them con-
cerning the swimming pier he had been advised he should have some information back
from them in about three or four weeks, and, That following Council action on
July 8th wherein authorization was given to purchase the necessary paint and have
city crews paint the new addition to the Library, he had received a request from
Mr. Richard J. Klaas to paint the entire library building for $420.00. Council
inquired if this offer included proper sealing, painting of the trim, use of a ---
first class masonry paint, etc. and City Manager Hopkins advised he assumed so,
but did not have anything in writing. Motion was made by Councilman Byrd, seconded
by Councilman Schroedel and carried that the City Manager be instructed to accept
the offer of Mr. Klaas in lieu of the action taken by Council on July 8th, making
sure that the necessary safeguards are included to do a good Job. Councilman Blackburn
voted Nave on passage of the motion.
City Attorney Baird reported he had been advised by Mr. Bryan of the DOT that they
were in need of a Resolution from the city designating that the proposed site for
one of the drainage basin locations (Sunset Lake area) is not now being used as
a park nor will it be in the future, in order to continue receiving funds from
state and federal sources. Motion was made by Councilman Schroedel, seconded by_
Councilman Blackburn and carried that City Attorney' Baird prepare such a Resolution.
Mayor Smoak asked that Council, in their 75-76 General Fund Budget Consideration,
consider the inclusion of a $500.00 appropriation for a tree planting program, which
has been previously discussed and which is in support of a recommendation made a
couple of years before by Councilman Schroedel to start a city nursery at the
treatment plant site, utilizing the spray irrigation located there.
Councilman Schroedel reported briefly on his recent attendance of the Cooper Memorial
Library Board meeting wherein it was reported the book circulation had doubled in
June as compared to June of a year ago, and that the current summer program being
offered was very successful with large numbers of children in attendance.
Councilman Schroedel inquired if any further word had been received regarding the
property on which the Garden Club is located as being owned by Lake County when
it had been assumed to be owned by the city, and City Attorney Baird advised he
had not been contacted as yet by the County Attorney who was to investigate the matter
and report back, but that he would again contact him.
� El
MINUTES N11 1167
Councilman Byrd inquired if any information had been forwarded by the School Board
on the tennis courts located at the Elementary School, and City Manager Hopkins
reported he had received nothing in writing Iodate.
Upon City Manager Hopkins submitting a drawing of the annexed property to Council
showing locations of existing buildings, it was determined there was insufficient
space to be of any benefit to^rezone asly desi
port-ionof thi1111-1rnni d hvilman lCouncas uSchro_ede
City Manager Hopkins submitted a preliminary feasibility report and estimated
costs for servicing the Bob Wade property, located abutting the east city limits
south of State Road 50, with water and sanitary sewer should it be annexed to the
city. The report reflected that water service could be extended at a reasonable
cost to Bob Wade ($1980.00) with work being done by city forces and using
asbestos cement pipe already in stock, but that it was not recommended to provide
sanitary sewer service at this time because of the cost of capital improvements,
the type of facility that would be utilizing the service once it was in, and the
amount of user fees that would be generated by that service, with the initial
approximate cost for providing this service O $42,400.00. Mr. Hopkins advised
this report had been discussed with Mr. Wade, and he appeared to be in agreement
with the recommendations. Mayor Smoak advised he had met with Mr. Wade concerning
this matter and he had advised he would not be interested in the sewer service
cause of its exceptionally high cost with no other users at this time to share
because
the initial capital investment, but iscbfinitely interested in the water service
and being annexed to the city.
Mayor Smoak suggested to Mr. Wade that Council would probably consider it in those
views, and that if his property was annexed, that there would be some written
agreement from Council to him to the extent that he would not be furnished with
ewer service for x number o
a sanitary sf years, that, in essence, the sewer service
is not a condition upon annexation, that Mr. Wade is interested primarily in
fire - police protection and water service and feels that he and the city can come
to an agreement for these services based on the figures submitted in Mr. Hopkins'
report. Mayor Smoak felt that it would be in order, if Council so desired, to
authorize the City Manager to meet with Mr. Wade and develop a proposal to present
to Council so that the city will have protection as far as state law is
concerned to meet the requirements of annexation and that Mr. Wade has a clear-cut
understanding that sewer services will not be furnished to him in the near future,
that he felt the City Manager and Mr. Wade could work out an agreement between
the city and Mr. Wade that would be agreeable to Mr. Wade and advantageous to
the city. Motion was made by Councilman -Byrd +got a��mmendateonsoenumeratedpkins be lb� ec
Council discussed at length the legal position of the city as submitted by City
Attorney Baird with regards the Baker -City Lease Agreement. Motion was made by
Councilman B rd, seconded by Councilman Oswalt and carried that Cit A ttorney Baird
nntifv Mr. Baker that_the city wishes to continue the lease agreePmn+t�binllinn 00 to
City Manager Hopkins submitted a list of the city's delinquent lot mowing accounts
and recommended It be given to the City Attorney for collection. City Attorney
Baird recommended that a primary attempt for recovery be made via letter, with
tive being to file claims in the County Small Claims Court. Motion was
_ ,a., ti„ rnnnrilman Oswalt, seconded b Councilman Schroedel and carried}that n.4MA
on.
0
MINUTES Ntl 1168
inasmuch as all of Council was not familiar with tho proposed gonoral rules for
the city fire department as developed by Fire Chief Smythe, motion was made by
With regards an obligation made by a former City Manager in 1969 to Don M. McCaffrey
wherein property deeded to the city by Mr. McCaffrey would be reserved as street
right-of-way and improved and/or a street constructed at a later date with no
expense to Mr. McCaffrey in lieu of granting an casement for sanitary sewer
construction, City Manager Hopkins advised Mr. McCaffrey had requested that the
improvements be made. City Attorney Baird was requested to investigate the
matter to determine the city's legal obligation and standing and report back to
Council,and, City Manager Hopkins was requested to formulate an approximate cost
for such a capital improvement.
With regards City Manager Hopkins' report that the South Lake Press building could
only be served with sanitary sewer by an easement across private property
abutting on the south, and that the city had been unsuccessful in attempts to
obtain such an easement, motion was made by Councilman Byrd seconded by
c-r- .. _ .,Dan , fi rn c tv Attornev Baird
The meeting was adjourned at 9:00 P. M. by Mayor Smoak.
C/L
Claude E. Smoak, Jr., Mayor
Dolores W. Carroll, City Clerk
ACCGIIMT!;
PAYAfILIt - .,In,Y 1075
Glrmianl: P'UPIn
Advance Elootri.c
(2 [nllnntn)
Andornon Engines, I.no.
(Rinr�c, P,o(1n, Piston, Oac+kCts, Cot)
Billy J. McMurphy
(Bulbn at 'PCnnin Court)
Bureau of Bucinonn Practice
(Poaca.)
Cal IN-gotroin
('ibner. & Paper)
Clements
(July Pant Control)
Coblon' Radiator & Auto Electric ,iar.
(:itartor RCbuilt & Repair)
Duct -Pox Scrvice
(Uniformn)
F & R Office Supply, Inc.
(Ditto Paper)
Hughes Supply, Inc.
(Cone odo Seats, Coolers, & Drill)
Hunts Garden Censlar, Inc.
(Sean & Dog Feel)
Hovis & Baird
(Legal Feco)
Konsler Steel Co.
(Angle & Expanded Metal)
Lakeland Batteries, Inc.
(Batteries)
Lake Apopka Natural Gan
(Utilities)
Market Baskett
(Forks, Spoons & Cups)
Mobil Oil Corp.
(Gas)
Municipal Equip. Company
(Brooms & Broom Refills)
Standard Auto Parts, Inc.
(Belts, Bolts, Bose, Filters, ect)
Southern Building Code Congress Inter.
(Plumbing Code)
South Lake Press
(Complaint Reports)
Valbro Business Forms, Inc.
(CR 558 Receipts)
Womectco Citrus Tower
(Over Head Drums)
U.r=IES DEPARTMFX
Allied Chlorine & Chemical Pro., Inc. (Cylinders Chlorine)
B & H. Sales, Inc.
(Pipe, Meter Base, Clamps)
Brooks Products of Fla., Inc.
(Meter Boxes)
Hughes Supply, Inc.
(Bender)
Moreland Chemical Co., Inc.
(H. T. H. Granular)
The National Cash Register Co.
(Water Billing)
Sta-Con Inc.
(Relays, Phase Monitors & B0:7bs)
Standard Auto Parts, Inc.
(Paint & Paint Thiner)
56.80
3.2.58
30.00
13.71
198. 115
9.00
41.00
14.6o
110.05
71.83
13.80
175.00
68.70
20.85
25.00
2.50
586.14
329.114
152.013,
36.6o
192.75;'
51.00
2,162.50
29.70
111.12
130.12
10.27
75.95
192.28
96.82
23.40
669,l66
TO: City Council
FROM: City Manager
SUBJECT: R&R Fund/Inter-fund Accounts
BATE: July 15, 1975
Attached is a letter dated June 10, 1975 from Auditor John Greenlee
wherein he recommends that the Equipment Renewal and Replacement
Fund (General Fund) and its inter -fund Accounts be eliminated and
any assets transferred.
Also that theached is a $111,500.00rduedown of from thehGeneralund. It is and UtilityrFundsebeed
cancelled and the remaining assets be transferred to the General
Fund.
Since the city has been receiving federal revenue sharing and using
the funds primarily for capital outlay, transfers of operating
funds to equipment renewal and replacement have not been made.
In addition, the Utility Fund owes the General Fund $35,000.00
obligated during the sewer program. It is further recommended
that this debt be cancelled.
Attachments
cc: City Clerk w/attachments Agenda 7/22/75
Controller w/attachments
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149�1 ]III UIIIn Inllll :l r,�..11A1 IU(111 ,1nAllnll
MY.MIIrn1
NIl ,I-n[LIIILI. II f. IAA
1. —m A 1•.II, : n . Clermont, Florida AMr n1c AN INn rlrure oP
wnl .• •,,nl,•, r• A tune 1.0, 1975 Ll Nllx U:n PUI1419 A-0-1AII1A
In.•... •. aPA
__ ruamlA 1Nnnnln: or
.• I I•Allll. C P A r:l'In lxn'.N PNNLIr. Ar foI1N lAN rU
IUIu)IUY II
lh : It ,pert Ih,pl ins RECEIVED JUN 11 1975
C11•, Mager
I i Clermont
Cl urlaon t, jlorida 32711
Dear Eob:�.
,ii
ThjS letter confirms our position oh the matter we discussed in
your office a few days ago regarding; the Equipment Renewal and Replace-
ment Fund and its inter -fund accounts.
It is our opinion that since there is no reasonable expectation
that the Equipment Renewal and Replacement Fund will accumulate money
for equipment replacement in the near future, the inter -fund accounts- -------- -=
should be eliminated. We believe further that the Equipment Renewal
and Replacement Fund itself should be eliminated as the only remaining
assets would be minor. The elimination of the inter -fund accounts
should be,approved by council action and can be handled by book entries.
The elimination of the fund, if d,s!red, should also be approved by
council action :Ind a dori:.[on will need to be made as to which fund should
get the remaining assets.
We also believe that all other inter -fund accounts should be examined
y by yourself and Mr. Fleming and if there appears to be no intention, of
x ,/' paying such accounts to -U- these also should 6e eliminated by council
action.
As you know this matter did not arise suddenly but has been under con- !
sideration for several years. Please call on us if we can answer any
questions or be of further help to you in this matter.
Yours very truly,
GREENLEE, PAUL & FURNAS
Ey
C ti ed lic�.coun.:..t
IIJG/.ib
EQUIPMENT AND REPLACEMENT FUND
6-3-75
Exchange Dank of Clermont
Tax Certificates
Street Assessments
Due from Other Funds:
General Fund
W & S Dept.
Total Assets
ASSETS
i 4,163.12
549.31
1,908.21
$52,500.00
59,000.00 ill 500.00
$ 118,120.64
LIABILITIES - NONE
SCHEDULE M'
TAX CERTIFICATES #40
CcrCI fJ c:,i Co.. N.O ..
6• .30-76^
19fi6 A '4
$ 36.16
6
67.47
6
4.03
9
21.33
11
74.90
15
58.33
18
16.03
24
8.98
34
13.09
1967 1
97.31
15
42.93
19
2.55
1968 —9-
"
-164.92—
11
-3, 83--
12
34.73
19
10.01.
20
42.97
24
5.07
25
10.83
26
2.59
Total E 549.31
l
�1
i.
SCHEDUH: Or
PAVING ASSESSI-IERTS
1974.1975 I140-148
Balance
6-30-75
8oseke, R. E.
$ 85.92
Cooper, tom. Estate
139.99
Davis, Rosemary
254.17
Fleming, Ralph
30.00
Floyd, Asbury
43.18
Floyd, Asbury
25.62
[lodges, Sedo
323.25
Hodges, Sedo
75.28
Jackson, Eugene
43.19
Jackson, ,Eugene
187.29
Johnes, Aaron
135.25
Jones, Aaron, Jr.
45.37
Morris, Carrie
109.69
Peck Carolyn
243.61
Richardson, Mamie
47.24
Richardson, Mamie
.72
Stevenson; Robert
85.21
Wootson, Tommy
36.13
Wright, Maybelle
3.90
$ 1908.21
TO: City Council
FROM: City Manager
SUBJECT: Actuarial Services
DATE: July 15, 1975
Attached is correspondence dated June 25, 1975 from Dr. William
Howard regarding his charges for actuarial services to the City
of Clermont with regard to the pension plan for employees.
�Rkins
Attachment
cc: City Clerk w/attachment Agenda 7/22/75
Controller w/attachment
WILLIAM M. HOWARD, PH.D, uop Idn il. unw�nurry uan nur,
fl All'I Ke1V II.l.K, ♦4111,111A :1VAon
June 26, 1976
RECEIVED JUN2 7 1975
Mr. Robert M. Hopkins, City Manager
City of Clermont
Clermont, FL 32711
Dear Mr. Hopkins:
The purpose of this letter is to set forth a basis for charges for
actuarial services with regard to the pension plan for employees
of the City of Clermont for the next two years. For the past year
or two we have not had a formal basis for determining charges.
Changing price levels and other factors have led me to review a
number of aspects of the actuarial services which I provide for a
number of Florida cities. I have found that my charges have gotten
rather seriously out of line -- on the low side -- for some cities,
with the result that I am realizing a rather low return on the time
I spend on consulting services.
The time required for actuarial valuation of a pension plan depends
on the number of employees, the number of classifications of employees
included in the plan (fire, police and general), the complexity of
pension plan benefits (service retirement benefits, disability retire-
ment benefits, survivors benefits) and whether or not employee contri-
butions are required. On the one hand, your pension plan is complicated
by the separate reporting on firemen, policemen and general employees
required by Chapters 175 and 185 of the Florida Statutes. On the other
hand, the plan provides benefits which require relatively simple calcu-
lations and it does not require employee contributions.
A schedule of charges I have prepared produces an annual fee for
actuarial services for the City of Clermont of $800 plus travel expense
based on 45 employees. This is a rather significant increase over the
$487 for which I recently sent you a statement. So I propose that, in
addition to travel expense, the fee be increased to $625 for the
1975-76 fiscal year, $750 for the 1976-77 fiscal year and the schedule
of charges to which I have referred thereafter. If the price level
continues to increase as it has in the recent past, I may revise the
schedule before the 1977-78 fiscal year. But I would expect the charge
to be the same except for changes in the price level.
pane two
Mr. Hopkins
June 26, 1975
If you would like to consider having the plan valued biennially,
rather than annually as In the past, with consulting services
available continuously, I would be pleased to submit a proposal on
that basis. The charge might be one-fourth to one-third less.
There are advantages to annual valuation, particularly during periods
of rising prices, but some cities do have their pension plans valued
biennially.
The charges proposed cover essentially the same actuarial services I
have provided in the past: annual actuarial valuation of the pension
plan including a report on the results in a form which is useful to
City officials and acceptable to the director of the Police and Fire
Pension Trust Fund in Tallahassee; an annual visit to Clermont at a
mutually convenient time to discuss various aspects of the plan and
related matters with City officials; verification of calculated
retirement benefits as employees retire; and the usual correspondence
and telephone calls occasioned by the normal administration of the
plan. The proposed charges do not cover special studies requiring
additional calculations or additional written reports that may be
requested. The arrangement may be canceled by either party with
reasonable notice.
Actuarial valuation of the plan is to be based on employee data to be
provided by the City of Clermont and on financial data included in the
report of the trustee of the plan or the City's annual audit report
which includes figures on the assets of the plan. Consulting services
provided by professors at the University of Florida are subject to
approval by the Board of Regents. I would appreciate learning your
opinion on the appropriateness of this proposal and would be glad to
answer any questions you might have with regard to it.
Sincerely,
William M. Howard
WMH/lb
Enclosure
A sc11fi011L1: OF CHARGES I'OR ACTUARIAL SERVICES
MUNICIPAL PENSION PLANS
Nasic charge for the rirst Fifty Employees
Ilonofit S_—_.tructurdl
Employee
Simile Com Rex Contributions{'
i
One pension plan
One group of emgrloyoes $600 $900 $100
Second group of ermplayeos° 200 400 100
Second pension plan 400 600 100
An additional charge of two dollars is made for each employee over fifty'
employees. The expense of travel incurred at the clients request is also
charged.
t A simple benefit structure is one that includes only service retirement
pensions (including vested pension credit) determined by a relatively
simple formula. A complex benefit structure is one that may include some
combination of disability benefits, survivors benefits, and other types
of benefits.
b An extra charge of one hundred dollars is made if the plan requires con-
tributions by employees.
Some municipal pension plans require separate accounting for pension lia-
bilities and costs on account of fire fighters, police Officers, and gen-
eral employees, though all are members of the same plan and are included
in a single report on actuarial valuation.
d Some cities maintain separate pension plan for two or more groups of em-
ployees, and separate reports on actuarial valuation are required for each.
5/15/75
TO: Cll.y CeuncII
rRom: City Manager
SIIBJUT Pension Investments
DATE: July 14, 1975
Attached is correspondence dated July 11, 1975 from R, L. Carle of the
Sun First National Bank of Leesburg.
Upon Council authorization this correspondence will he forwarded to
Doctor rogler and a Joint meeting as recommended by Mr. Carle will
he arranged.
�l1i
Attachment /
cc: City Clerk w/attachment Agenda 7/22/75
Controller w/attachment
dun 1 Sun First National Bank of Leesburg
inK
July 11, 1975
RECEIVEDJUL 1 4 1975
Mr. Robcrl: M. Hopkins
City Manager
City of Clermont
1 West Gate Plaza
Clermont, Florida 32711
Dear Mr. Hopkins:
I am enclosing a copy of a letter received fran our investment advisors
in Orlando, relating to Dr. Fogler's Statement of Investment Authorization
from which it would appear that there will be no particular problem in working
within the guidelines established by Dr. Pogler. i
We have always valued very highly our relationship with the City of Clermont
and wish very much to handle the trust account in a satisfactory manner.__We . I
_. .____:.
believe that more frequent visits by the trustee to the appropriate city officials
might- very well be in order and also that a line of carmunication with Dr. rogler
ought to be established by us and our investment advisors in Orlando. With this
in mind, we think it would be beneficial to all parties concerned if we and our
investment advisors could sit down with you and Dr. Fogler and discuss the future
administration of the pension trust.
If you agree, we would appreciate your advising us when it would be convenient
for you and Dr. Fogler to meet with us in Clermont.
I
Very truly yours,
I
R. L. Carle
Senior Vice President
and Trust Officer
enc. j
i
P.O. Box 8 / Leesburg, Florida 32748 / (904) 787-4111
B' . Sun First National Bank of Orlando
no
July 2, 1975
mr, II.I,. Carlo
Senior Vice President and Trust Officer
Sun First National Bank of f,cesburg
P.O. Box Fight
L,00sburg, Florida 32748
Dear Bob -
RE: City of Clermont Pension Plan Trust
After reviewing the Statement of Investment Authorization as prepared
by Dr. Russell Fogler for the City of Clermont Pension Plan Trust, I
see no particular problems with meeting the recommendations discussed
in the correspondence. We are encouraging similar meetings with many
of the accounts with whom we are dealing.
The adoption of a Statement of Investment Authorization by the city of
Clermont is appropriate. It indicates a sense of responsibility on the
part of the city council. However, a meeting with the trustee to discuss
the guidelines would probably have been beneficial prior to their adoption.
In general, we agree with most of the guidelines as presented in Dr. Fogler's
statement. There are a few areas where we think a comment is appropriate.
Under the heading Savings Accounts and Short Term Securities the guidelines
establish an absolute Limit of 20% of the total market value of the portfolio in
this type of security. This necessarily implies that the funds will always be
nearly fully invested. Obviously, this type of limitation would involve very
little protection during the market declines of 1973 and 1974. We agree that
the account is not of sufficient size to make prudent use of short term vehicles
other than savings accounts and Treasury Bills.
The fixed income securities guidelines are acceptable, although our own
investment guidelines for an account of this nature would be to have approx-
imately 50°/n of the total fund invested in fixed income securities. Dr. Fogler
has recommended between 250/. and 35%. A copy of our own policy guidelines
for employee benefit accounts is enclosed for your information. We feel that
the rationale set forth in this memorandum justifies a higher percentage in
fixed income securities. We agree with the quality rating of "A" or better.
'i'he guidelines suggest using bonds up to 25 years maturity. In employee
P. O. Box 3631 / Orlando, Florida 32802
1-
benefit accounts wo tiro currently limiting till of our purchnson to necuritien
with nnnturltics of ton ycnrs or lcse. It in our opinion that the fixed income
portion of an employce benefit portfolio should l;encratu a return consistent
Willi rurrcnl intoreril rnten. The prohlenin experienced during the 1060's
Willi rising Interest rates made long, term bonds inappropriate for thl:, function.
We feel that investing In long term bonds at this point in time would be somewhat
speculative, The rote of inflation is declining, but we have never experienced
a period of large federal budget deficit financing without inflationary pressures
resulting in the ensuing years. We therefore would avoid maturities in fixed
income securities exceeding ten years. We endorse the proposal for diversifi-
cation among types of issuers. We would add one additional guideline which we
feel Is appropriate hnving to do with marketability. We would recommend that
issues of fixed income securities with an initial offering size of less than
$50 million not be considr_red for purchase. Small Initial Issues generally have
a very linrlled secondary marketabillty, We feel that marketabill.Ly Is another
very desirable characteristic In a fixed income portfolio.
The common stock guidelines indicate that between 50110 and 700/6 of the total
market value of the portfolio could be invested in common stocks. We commented
earlier that we would limit this exposure to approximately 50%. The guide-
lines regarding the quality of the companies to be invested in are appropriate,
and we agree with them. We do not find it necessary to limit our purchases
to stocks listed on the New York Stock Exchange, but do not find this to be a
major encumbrance. Under item D of the common stock guidelines there is -
a provision that 40°/o of the well established company investments be limited
to low price earnings ratio industrial companies. This provision implies
In our opinion the purchase of common stocks that will probably possess
cyclical characteristics. There are of course exceptions, but generally this
is the type of company that would fall into this category. We feel that these
companies are appropriate for investment, but do not feel that funds should
be forced into these issues, particularly to the extent of 4016 of the funds
committed to common stocks. It also presents somewhat of a potential conflict
with item G in this category regarding turnover. Cyclical stocks are generally
good investments only if purchased at the right times and sold at the right times.
1 he turnover percentages as established under item G we feel could be somewhat
limiting, particularly with 40% of your stocks limited to this type of security.
We agree with the diversification provisions but point out again the limitations
of the turnover guidelines. The account is approximately $60, 000 in size, and
if the maximum amount allowable were invested in common stocks it would I
amount to some $42, 000. If this $42, 000 were invested in twenty individual
issues of common stocks the average commitment would be slightly over
> 2, 000. A 5%, average turnover rate on a $60, 000 account would limit you
to something on the order of *3, 000 per year. It Is our opinion that if a large
i
prrrrotnt,o of your Intnl tilorlui Is goln/, to ho Invotited In ritocks With cyclical
characteristics, that this could bo a detrlmontul limitation. However, we agree
With the concept that a high rate of turnover actually Impedes rather than
enhances the performance results from an Investment portfolio. We simply
disagree with the absolute sine of limitation.
Someone from our organization will he glad to meet with the city of Clermont
to discuss the views I have exprossed above. If we can provide you with any
additional Information, please let me know.
Sincerely yours,
WL11[am C. Norton
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