Transcript

AGENDA
MEETING OF THE
STATE BOARD OF ADMINISTRATION
(Contact Person: Dorothy Westwood - (850) 488-4406)
THE CAPITOL
September 11, 2001

1. APPROVAL OF MINUTES OF MEETINGS HELD AUGUST 28, 2001. (Att. #1)

2. RESOLUTION OF THE STATE BOARD OF ADMINISTRATION APPROVING THE FISCAL SUFFICIENCY OF AN AMOUNT NOT EXCEEDING $23,500,000 STATE OF FLORIDA, FLORIDA BOARD OF EDUCATION, THE FLORIDA STATE UNIVERSITY RESEARCH FOUNDATION, INCORPORATED, REVENUE BONDS, SERIES 2001:

The Division of Bond Finance of the State Board of Administration of Florida (the Division) has submitted for approval as to fiscal sufficiency a proposal to issue an amount Not Exceeding $23,500,000 State of Florida, Florida Board of Education, The Florida State University Research Foundation, Incorporated, Revenue Bonds, Series 2001 (the Bonds) for the purpose of paying the cost of constructing research and development facilities for the benefit of Florida State University, purchasing a municipal bond insurance policy, funding a debt service reserve account, providing for capitalized interest and paying certain costs associated with the issuance and sale of the Bonds. The Authorizing Resolution for the Bonds was adopted by the Governor and Cabinet on June 12, 2001. It is anticipated that the Governor and Cabinet will adopt the sale resolution for the Bonds on September 11, 2001.

The proposed Bonds shall be secured by a first lien upon the Pledged Revenues which are defined by the Authorizing Resolution.

A study of this proposal and the estimates of revenue expected to accrue from the Pledged Revenues, indicate that the proposed Bonds are fiscally sufficient and that the proposal will be executed pursuant to the applicable provisions of law.

RECOMMENDATION: It is recommended that the Board approve the fiscal sufficiency of the proposal outlined above. (Att. #2)

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3. APPROVAL OF FISCAL SUFFICIENCY OF AN AMOUNT NOT EXCEEDING $110,000,000 STATE OF FLORIDA, FULL FAITH AND CREDIT STATE BOARD OF EDUCATION PUBLIC EDUCATION CAPITAL OUTLAY REFUNDING BONDS, 2001 SERIES [LETTER DESIGNATION(S) TO BE DETERMINED]:

The Division of Bond Finance of the State Board of Administration (the Division), on behalf of the State Board of Education, has submitted for approval as to fiscal sufficiency a proposal to issue an amount Not Exceeding $110,000,000 State of Florida, Full Faith and Credit State Board of Education Public Education Capital Outlay Refunding Bonds, 2001 Series [Letter Designation(s) to be determined] (the Bonds) for the purpose of refunding all or a portion of the outstanding State of Florida, Full Faith and Credit State Board of Education Public Education Capital Outlay Refunding Bonds, Series 1986-B; provided, however, that none of the said Bonds shall be issued in excess of the amount which can be issued in full compliance with the State Bond Act and other applicable provisions of law, and pursuant to Section 9(a)(2), Article XII of the Constitution of Florida, as amended. It is anticipated the Governor and Cabinet will adopt on September 11, 2001 the Twenty-fourth Supplemental Authorizing Resolution authorizing the issuance of the Bonds. It is anticipated the Governor and Cabinet will adopt on September 11, 2001 a sale resolution for the Bonds.

The State Board of Education has heretofore issued Public Education Capital Outlay and Capital Outlay Refunding Bonds, Series 1985 through 2001 Series B of which $7,283,740,000 in principal amount will be outstanding and unpaid on August 31, 2001. The State Board of Education received approval as to fiscal sufficiency on July 25, 2000 for $220,000,000 Public Education Capital Outlay Bonds, 2000 Series [letter designation(s) to be determined], of which $20,000,000 remains unissued. The State Board of Education has received approval as to fiscal sufficiency on August 14, 2001 for $300,000,000 Public Education Capital Outlay Refunding Bonds, 2001 Series [letter designation(s) to be determined] and $250,000,000 Public Education Capital Outlay Bonds, 2001 Series [letter designation(s) to be determined.] The State Board of Education received approval as to fiscal sufficiency on August 28, 2001 for $220,000,000 Public Education Capital Outlay Refunding Bonds, 2001 Series [letter designation(s) to be determined]. None of the bonds that received approval as to fiscal sufficiency on August 14, 2001 and August 28, 2001 have been sold. The proposed Bonds shall be junior, inferior, and subordinate to the outstanding and unpaid Public Education Capital Outlay and Capital Outlay Refunding Bonds Series 1985 through 1992-A as to lien on and source and security for payment from the Gross Receipts Taxes. The proposed Bonds shall be issued on a parity as to lien on

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and source and security for payment from the Gross Receipts Taxes with the outstanding and unpaid Public Education Capital Outlay and Capital Outlay Refunding Bonds, 1992 Series B through 2001 Series B and if issued, the approved $20,000,000 Public Education Capital Outlay Bonds, 2000 Series [letter designation(s) to be determined], $300,000,000 Public Education Capital Outlay Refunding Bonds, 2001 Series [letter designation(s) to be determined], $250,000,000 Public Education Capital Outlay Bonds, 2001 Series [letter designation(s) to be determined] and the $220,000,000 Public Education Capital Outlay Refunding Bonds, 2001 Series [letter designation(s) to be determined].

A study of this proposal and the estimates of revenue expected to accrue from the Gross Receipts Tax, indicate that the proposed Bonds and all other outstanding bonds having a lien on the Gross Receipts Tax are fiscally sufficient and that the proposal will be executed pursuant to the applicable provisions of law.

RECOMMENDATION: It is recommended that the Board approve the fiscal sufficiency of the proposal outlined above. (Att. #3)

4. APPROVAL OF FISCAL SUFFICIENCY OF AN AMOUNT NOT EXCEEDING $190,000,000 STATE OF FLORIDA, DEPARTMENT OF ENVIRONMENTAL PROTECTION, PRESERVATION 2000 REVENUE REFUNDING BONDS, SERIES (TO BE DESIGNATED):

The Division of Bond Finance of the State Board of Administration (the Division), on behalf of the Department of Environmental Protection of Florida, has submitted for approval as to fiscal sufficiency a proposal to issue Not Exceeding $190,000,000 State of Florida, Department of Environmental Protection, Preservation 2000 Revenue Refunding Bonds, Series (to be designated) (the Bonds). The proceeds of the Bonds are to be used for the purpose of refunding all or a portion of the Preservation 2000 Revenue Bonds, Series 1995A. It is anticipated the Governor and Cabinet will adopt on September 11, 2001 the Sixteenth Subsequent Resolution authorizing the sale and issuance of the Bonds.

The Department of Environmental Protection has heretofore issued Preservation 2000 Revenue and Revenue Refunding Bonds, Series 1991A through 2000A and Florida Forever Revenue Bonds, Series 2001A of which $2,412,595,000 in principal amount was outstanding and unpaid on August 31, 2001. The Department of Environmental Protection received approval as to fiscal sufficiency on February 6, 2001 for $210,000,000 State of Florida, Department of Environmental Protection, Preservation

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2000 Revenue Refunding Bonds, Series (to be designated). The proposed Bonds shall be issued on parity with the outstanding and unpaid Preservation 2000 Revenue and Revenue Refunding Bonds, Series 1991A through 2000A and Florida Forever Revenue Bonds, Series 2001A, and if issued, the approved $210,000,000 State of Florida, Department of Environmental Protection, Preservation 2000 Revenue Refunding Bonds, Series (to be designated) as to source and security for payment.

The Bonds shall not be secured by a pledge of the full faith and credit or the taxing power of the State of Florida or any political subdivision thereof.

The estimate of funds pledged to the Bonds indicates that sufficient monies can be pledged to exceed the debt service requirements of the proposed issue and that in no State fiscal year will the monies pledged for the debt service requirement of the proposed issue be less than the required coverage amount.

RECOMMENDATION: It is recommended that the Board approve the fiscal sufficiency of the proposal outlined above. (Att. #4)

5. APPROVAL OF FISCAL SUFFICIENCY OF AN AMOUNT NOT EXCEEDING $100,000,000 STATE OF FLORIDA, DEPARTMENT OF ENVIRONMENTAL PROTECTION, FLORIDA FOREVER REVENUE BONDS, SERIES 2001B:

The Division of Bond Finance of the State Board of Administration (the Division), on behalf of the Department of Environmental Protection of Florida, has submitted for approval as to fiscal sufficiency a proposal to issue an amount Not Exceeding $100,000,000 State of Florida, Department of Environmental Protection, Florida Forever Revenue Bonds, Series 2001B (the Bonds). The proceeds of the Bonds are to be used for the acquisition and improvement of land, water areas, and related property interests and resources to accomplish environmental restoration and enhance public access and recreational enjoyment in the State of Florida. It is anticipated the Governor and Cabinet will adopt on September 11, 2001 the Seventeenth Subsequent Resolution authorizing the sale and issuance of the Bonds.

The Department of Environmental Protection has heretofore issued Preservation 2000 Revenue and Revenue Refunding Bonds, Series 1991A through 2000A and Florida Forever Revenue Bonds, Series 2001A of which $2,412,595,000 in principal amount was outstanding and unpaid on August 31, 2001. The Department of Environmental Protection received approval as to fiscal sufficiency on February 6, 2001 for

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$210,000,000 State of Florida, Department of Environmental Protection, Preservation 2000 Revenue Refunding Bonds, Series (to be designated). The Department of Environmental Protection is requesting approval as to fiscal sufficiency on September 11, 2001 for an amount not exceeding $190,000,000 State of Florida, Department of Environmental Protection, Preservation 2000 Revenue Refunding Bonds, Series (to be designated). The proposed Bonds shall be issued on parity with the outstanding and unpaid Preservation 2000 Revenue and Revenue Refunding Bonds, Series 1991A through 2000A and Florida Forever Revenue Bonds, Series 2001A, and if issued, the approved $210,000,000 State of Florida, Department of Environmental Protection, Preservation 2000 Revenue Refunding Bonds, Series (to be designated), and if approved and issued, the proposed $190,000,000 State of Florida, Department of Environmental Protection, Preservation 2000 Revenue Refunding Bonds, Series (to be designated) as to source and security for payment.

The Bonds shall not be secured by a pledge of the full faith and credit or the taxing power of the State of Florida or any political subdivision thereof.

The estimate of funds pledged to the Bonds indicates that sufficient monies can be pledged to exceed the debt service requirements of the proposed issue and that in no State fiscal year will the monies pledged for the debt service requirement of the proposed issue be less than the required coverage amount.

RECOMMENDATION: It is recommended that the Board approve the fiscal sufficiency of the proposal outlined above. (Att. #5)

6. PRELIMINARY APPROVAL OF THE LAST THREE UNBUNDLED INVESTMENT PRODUCT PROVIDERS:

• Foreign Stock Active Fund (non-US broad stock product) - Putnam and Fidelity
• Yield Plus Money Market Fund (enhanced cash product) - Barclays and Federated
• Index Fund Products - Barclays

These product recommendations were presented to a joint meeting of the IAC/PEORPAC on Thursday, August 30. The recommendations for the Foreign Stock Active Fund and the Yield Plus Money Market Fund were unanimously endorsed by the Advisory Committee.

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There was considerable discussion about the relative merits of Barclays and Deutsche as the Index provider. A motion was made and passed unanimously to recommend Deutsche as the Index Fund provider as opposed to Barclays, which was the staff recommendation. The Advisory Committee cited fees, manager diversification (since Barclays has been tentatively selected for two other mandates) and reasonably equal capabilities as the reasons for their recommendation. Staff concurred that either firm could adequately service the PEORP but reiterated the operational efficiencies, securities lending, and crossing capabilities that result from the significantly larger indexed assets managed by Barclays. Additionally, they noted that the Deutsche and Barclays fee differentials will likely be offset by the higher levels of lending income at Barclays.

Action on these products signifies the completion of this phase of the investment selection process (Tiers I-III). All unbundled investment product providers recommended for preliminary approval, as well as recommended bundled providers, will be evaluated and presented to the Trustees for final product approval for the overall PEORP later in the fall.

Staff also reviewed with the Advisory Council members recommended revisions to the unbundled product design. Our view has always been that the product design would be optimized after the individual products and managers were selected. Revisions were made to three (3) products (see attached report).

The Advisory Council accepted the recommendations and after considerable discussion, the members indicated that minor revisions to product design need not come back to the Council. Instead, only major product design changes, if any, should be revisited by the council members.

7. PROPOSED LEGISLATIVE INITIATIVES AS A DISCUSSION ITEM:

(a) Public Employee Optional Retirement Program (PEORP) Related
(b) Other

(a) The Florida State Board of Administration (FSBA) seeks the following technical and/or substantive legislative changes related to the implementation and ongoing activities of PEORP:

• Public records exemption to maintain the confidentiality of all PEORP participants and their account activities;

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• The Internal Revenue Service's Private Letter Ruling requires the following two statutory changes as it relates to the recently enacted Economic Growth and Tax Relief Reconciliation Act (permit PEORP Participants to rollover contributions and account balances into PEORP from 401(k), 403(b), 457(b), and 401(a) plans):
  
  
• o Asuthorizing language to allow rollovers or trustee-to-trustee transfers to PEORP;
  
  
• o Authorizing language to permit the beneficiary or joint annuitant of a deceased PEORP member to also rollover the account balance of the member's account into an eligible plan.
  
  
• Allow "reemployed" or "renewed" retirees in the DB plan the option to join PEORP (currently accepted Division of Retirement practice is to refer to a "renewed member" as a Florida Retirement System (FRS) retiree who has returned to FRS employment);
  
  
• Current law states that local agency senior managers have the option to withdraw completely from the FRS. The FSBA seeks to clarify that members in this situation cannot participate in PEORP;
  
  
• Authority to notarize documents related to PEORP, similar to the manner in which documents are notarized for the DB plan;
  
  
• Current law provides that nonvested accumulations transferred from the account of a terminated participant to the suspense account of the PEORP Trust Fund shall be forfeited by the participant if the participant is not reemployed as an eligible employee within five years after termination. The FSBA seeks to clarify that monies in the suspense account be invested by the FSBA and that reemployed employees be credited with actual earnings.

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There are additional PEORP related initiatives that may be filed by other organizations. The following are examples of such initiatives offered for discussion purposes:

• Allow members of the current State Community College System Optional Retirement Program (SCCSORP) and State University System Optional Retirement Program (SUSORP) the option to join PEORP;
  
  
• Currently, members of the current Senior Management Service Optional Annuity Program (SMSOAP) have the option to join PEORP. However, current law states an employee's election to participate in the optional annuity program is irrevocable. Therefore, amendatory language is required to clarify their irrevocable status as well as those members' status should they join PEORP and then exercise their one-time switchback option (i.e., allow those participants to return to SMSOAP or the DB plan, or both.). We will work with the Division of Retirement, as the administrators of the SMSOAP, and interested parties on the required clarification;
  
  
• Clarification, with the Division of Retirement's input, of the Division of Retirement's date change for FRS employers' payroll due date from the 20th of the month to earlier in the month, etc.

(b) The Florida State Board of Administration (FSBA) seeks the following legislative changes:

• The Florida State Board of Administration (FSBA) is requesting the repeal of current statutory language related to Northern Ireland investments. Current language directs the FSBA to invest in companies making advances in eliminating ethnic and religious discrimination in Northern Ireland as well as directs the FSBA to correspond with financial institutions with which we maintain accounts in order to gauge their exposure to operations in Northern Ireland. Since enactment of the statute, we have monitored and reported on our investments in Northern Ireland. To date, no transactions have occurred. Repeal of the language would streamline our investment and reporting process.
  
  
• Amendatory language, pursuant to the Trustees' August 14 request, regarding the annual appointment of the Executive Director to be upon the approval of a majority of the Trustees.