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Home My Public Portal About2016_06_14_R082 Authorizing and Establishing an OPEB Trust and Creation of a Finance Board to Oversee the OPEB Trust The Town of Leesburg, 'Virginia PRESENTED June 14. 2016 RESOLUTION NO. 2016-082 ADOPTED June 14. 2016 A RESOLUTION: AUTHORIZING AND ESTABLISHING AN OTHER POST- EMPLOYMENT BENEFITS (OPEB) TRUST AND AUTHORIZING INVESTMENT MANAGEMENT, CUSTODY AND TRUST AGREEMENTS, AND CREATION OF A FINANCE BOARD TO OVERSEE THE OPEB TRUST WHEREAS, in 2008, Town Council authorized participation in the VMLNACo Pooled Other Post-Employment Benefits Trust (VML Trust), and has annually contributed significant assets to the VML Trust which totaled $8,625,252 as of March 31, 2016; and WHEREAS, the Town's returns in the VML Trust have significantly under-performed their benchmarks for 3-years, 5-years, and inception to-date and are not meeting the Town's actuarially assumed rate of 7.0% over the long-term; and WHEREAS, Town staff has no input or control over the investments chosen in the VML Trust and the Town has no representation on VML Trust's Finance Board; and WHEREAS, Town staff has determined that the formation of an Other Post-Employment Benefits Trust (OPEB Trust) to be organized and operated by the Town with the assistance of a private bank and investment firm will yield more positive returns; and WHEREAS, as a result, Town staff has conducted a procurement process and reviewed five (5) proposals offering comparable investment plans and has determined that competitive venues exist at a lower cost for similar investment trust arrangements and where the Town can control risk and expect better returns; and WHEREAS, Town staff has compared the proposals to each other and to the VML Trust and has selected PFM Asset Management LLC ("PFMAM") because it has the lowest overall long-term cost and best fits the Town's operational needs for an OPEB Trust; and -9- A RESOLUTION: AUTHORIZING AND ESTABLISHING A TOWN OF LEESBURG OTHER POST EMPLOYMENT BENEFITS TRUST AND AUTHORIZING INVESTMENT MANAGEMENT, CUSTODY AND TRUST AGREEMENTS, AND CREATION OF A FINANCE BOARD TO OVERSEE THE OPEB TRUST WHEREAS, under Virginia law, the Town's OPEB investments must be placed into an irrevocable trust compliant with Internal Revenue Code (IRC) Section 115 in order to be transferred from the VML Trust to the OPEB Trust and in order to meet the requirements of the Governmental Accounting Standards Board statements; and WHEREAS, an independent fiduciary trustee is necessary to meet the requirements of IRC Section 1115 requirements and to ensure that assets within the OPEB Trust are not subject to liens, garnishment or other legal processes and to meet the requirement that assets may not be withdrawn from the OPEB Trust for any purpose other than the payment of OPEB benefits to retired Leesburg employees as provided for under the Town's OPEB Benefits Plan and necessary operating expenses; and WHEREAS, the Town's financial policy requires that the assets of the OPEB Trust be kept safe under an independent custodian who is solely responsible for safekeeping of the assets of the OPEB Trust and who has no authority to make decisions about the investment of the assets except as directed by the Town's duly authorized Investment Advisor or agents in the employ of the Investment Advisor; and WHEREAS, PFMAM's proposal included and recommended the use of U.S. Bank National Association (US Bank) as the fiduciary trustee and custodian for the Town's OPEB Trust assets and US Bank's proposed fees are competitive, reasonable, usual and customary; and WHEREAS, the Code of Virginia Section 15.2-1547 requires the Town Council establish a Finance Board to oversee the investments of a OPEB Trust ; and WHEREAS, the investment of Town OPEB Trust funds must be governed by an -3- A RESOLUTION: AUTHORIZING AND ESTABLISHING A TOWN OF LEESBURG OTHER POST EMPLOYMENT BENEFITS TRUST AND AUTHORIZING INVESTMENT MANAGEMENT, CUSTODY AND TRUST AGREEMENTS, AND CREATION OF A FINANCE BOARD TO OVERSEE THE OPEB TRUST Investment Policy appropriate to long-term investment of fiduciary funds that are more risk tolerant and that generate higher returns than the investment of temporarily idle tax funds or bond proceeds; and WHEREAS, in order for the OPEB Trust to operate, the Town Manager must be authorized to enter into contracts and agreements and take certain actions in order to establish the required trust, move funds, establish procedures, make investment decisions and direct service providers. THEREFORE, RESOLVED, by the Council of the Town of Leesburg in Virginia that: 1. An independent OPEB Trust to be known as the "Town of Leesburg OPEB Trust" is hereby created, approved, and authorized; and 2. Contracts with US Bank and PFMAM or any successor firm or successor trustee appointed and approved by the Finance Board are hereby approved; and 3. Funds from the VML Trust shall be irrevocably placed into the OPEB Trust and that all OPEB Trust assets, investments and returns are not subject to liens, garnishment or other legal processes and that assets may be removed from the OPEB Trust solely for the payment of OPEB benefits to retired Leesburg employees as provided for under the Town's OPEB Benefits Plan and the necessary operating expenses of investment management and operation of the OPEB Trust and; 4. Should changes in federal and or state law eliminate the need for or make illegal the payment of OPEB benefits to retired Town employees as provided for under the Town OPEB Benefits Plan; that after the payment of all outstanding benefits obligations to providers of health -4- A RESOLUTION: AUTHORIZING AND ESTABLISHING A TOWN OF LEESBURG OTHER POST EMPLOYMENT BENEFITS TRUST AND AUTHORIZING INVESTMENT MANAGEMENT, CUSTODY AND TRUST AGREEMENTS, AND CREATION OF A FINANCE BOARD TO OVERSEE THE OPEB TRUST care benefits to retired Town employees and the payment of all operational and termination expenses of the OPEB Trust, and that only in such circumstances, residual assets shall revert to the Town of Leesburg's General Fund; and 5. The Town Manager, the Director of Finance and Administrative Services and the Finance Board are hereby authorized to enter into agreements with U.S. Bank, PFMAM and other service providers as needed for the efficient and effective investment of OPEB Trust assets and the operation of the OPEB Trust; and 6. The attached Town OPEB Trust Investment Policy is approved and shall govern the investment of assets within the OPEB Trust as written or as may be amended or revised from time to time by the Town Council; and 7. That a Finance Board under the provisions of Code of Virginia Section 15.2-1547 is hereby created and authorized to oversee the operations and investments of the OPEB Trust and to act on all matters relating to the OPEB Trust, and that the Finance Board shall consist of five (5) members as follows: 1. The Town Manaeer or designee; 2. The Director of Finance and Administrative Services (who will serve as Chair); 3. The Deputy Director/Treasurer of Finance and Administrative Services; 4. An ex-officio member who is a representative or employee of the Investment Advisor, and; 5. A person appointed by the Town's financial advisor (currently Davenport, Inc.) who is also a resident of the Commonwealth of Virginia and has a -5- A RESOLUTION: AUTHORIZING AND ESTABLISHING A TOWN OF LEESBURG OTHER POST EMPLOYMENT BENEFITS TRUST AND AUTHORIZING INVESTMENT MANAGEMENT, CUSTODY AND TRUST AGREEMENTS, AND CREATION OF A FINANCE BOARD TO OVERSEE THE OPEB TRUST financial/investment background, expertise and/or training and who has no business interests or dealings related to the Town OPEB Trust. PASSED this le day of June. 2016. j,& ,, / David S. Butler, Mayor Town of Leesburg ,ATTEST\ otn'1 Clerk of Co . ci P:UtesolutionsV01610614 Authorizing and Establishing an OPEB Trust.docx