File Ref. #193 (3 of 3)
CITY OF MIAMI BEACH, FLORIDA
UNCLASSIFIED EMPLOYEES AND ELECTED
OFFICIALS RETIREMENT SYSTEM
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
SPEAR() co.
SAFER\' T
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PROFessIONAt.... .~'b-
ASSOCIATION
CERTIFIED PUBLIC ACCOUNTANTS
8350 N.W. 52nd Terrace, Suite 301
Miami. Florida 33166
1-800-776-1099
Tel: (305) 591-8850
Fax: (305) 593-9883
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of City of Miami Beach,
Florida, Unclassified Employees and Elected
Officials Retirement System
Miami Beach, Florida
We have audited the accompanying statements of plan net assets of the City of Miami Beach, Florida,
Unclassified Employees and Elected Officials Retirement System (the "Plan") as of September 30, 1999
and 1998, and the related statements of changes in plan net assets for the years then ended. These
financial statements are the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We belieye that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
information regarding the Plan's net assets as of September 30, 1999 and 1998 and changes therein for
the years then ended in conformity with generally accepted accounting principles.
The supplementary schedules of funding progress and employer contributions are not required parts of
the basic financial statements, but are supplementary information. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the methods of
measurement and presentation of the supplementary information. However, we did not audit the
information and express no opinion on it.
:S~5rfl~i uz-:
Miami, Florida
December 16, 1999
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CITY OF MIAMI BEACH, FLORIDA
UNCLASSIFIED EMPLOYEES AND ELECTED OFFICIALS RETIREMENT SYSTEM
Statements of Plan Net Assets
September 30, 1999 and 1998
1999 1998
Assets:
Cash $ 253.849 $ 265,879
Receivable for securities sold 472,790
Interest and dividend receivable 77.161 75.500
Total Receivables 77,161 548,290
Investments, at fair value:
Common stocks 68,836,099 54,939,287
Commingled fixed income trust funds 15,734,128 15,745,541
Short-term investments 659,629 3,022,708
Other bonds 250,000 250,000
Total Investments 85.479,856 73,957,536
Net Assets Held in Trust for Pension
Benefits (a schedule of funding progress
is presented on Page 8) $ 85,810,866 $ 74,771.705
See accompanying notes to financial statements.
1
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CITY OF MIAMI BEACH, FLORIDA
UNCLASSIFIED EMPLOYEES AND ELECTED OFFICIALS RETIREMENT SYSTEM
Statements of Changes in Plan Net Assets
Years Ended September 30, 1999 and 1998
1999 1998
Additions:
Contributions -
Employer $ 285,305 $ 594,655
Employee 613,211 648,982
898,516 1,243,637
Transfers from other Systems 15.1 64 52,775
Total Contributions 913,680 1,296.412
Investment Income -
Net increase (decrease) in fair value of investments 12,052,423 (1,935,741 )
Interest 1,144,019 1,101,865
Dividends 785.194 640,004
13,981,636 (193,872 )
Less investment management expenses (290,863 ) 052.441)
Net Investment Income (Los~) 13.690.773 (546.313 )
Total Additions 14.604.453 750.099
Deductions:
Benefit paid 3,249,378 2,902,944
Contributions refunded 128,280 66,440
Administrative expenses 187,634 129.738
Total Deductions 3.565.292 3,099.122
Net Increase (Decrease) 11,039,161 (2,349,023 )
Net Assets Held in Trust for Pension Benefits:
Beginning of Year 74,771,705 77.120,728
End of Year $ 85,810.866 $ 74.771,705
See accompanying notes to financial statements.
2
CITY OF MIAMI BEACH, FLORIDA
UNCLASSIFIED EMPLOYEES AND ELECTED OFFICIALS RETIREMENT SYSTEM
Notes to Financial Statements
Years Ended September 30, 1999 and 1998
NOTE 1 - PLAN DESCRIPTION
All elected officials and full-time employees of the City of Miami Beach, Florida (the "City")
who hold unclassified positions and who do not have civil service status are covered by the
City of Miami Beach, Florida, Unclassified Employees and Elected Officials Retirement
System (the "Plan"). The Plan is the administrator of a single-employer pension plan that was
established by the City in accordance with City Ordinance 88-2603 (the "Ordinance"), as
amended through February 19, 1997. At October I, 1998 and 1997, membership consisted of:
1998
1997
Retirees and beneficiaries currently receiving
benefits and terminated employees entitled to
benefits but not yet receiving them
130
116
Current Employees
112
128
Eligible employees in the predecessor plan prior to April 1, 1988 had the option to become a
participant of the Plan or remain in the General Employee Retirement Plan. Each elected
official and full-time unclassified employee of the City, subsequent to April 1, 1988, except
for the City Manager and City Attorney, must participate in the Plan starting on the first day of
employment. Subsequent to October 18, 1992, new employees have the option to join the
401(a) Plan or this Plan.
The Plan provides retirement benefits as well as death and disability benefits. For all
employees in the Plan prior to October 18, 1992, benefits vest after 5 years of credited service.
These employees who retire at or after age 50 with 5 years of credited service are entitled to an
annual retirement benefit, payable monthly for life, in an amount equal to 4% of their final
average monthly earnings ("FAME"), for each year of credited service until October 18, 1992,
plus 3% thereafter, not to exceed 80% of their FAME. FAME is the employee's earnings
during their last year of credited service. If an employee, however, had 20 or more years of
credited service on October 17, 1992, their maximum benefit is 90%.
3
CITY OF MIAMI BEACH, FLORIDA
UNCLASSIFIED EMPLOYEES AND ELECTED OFFICIALS RETIREMENT SYSTEM
Notes to Financial Statements (Continued)
NOTE 1 - PLAN DESCRIPTION (Continued)
Effectiye on October 18, 1992, the Ordinance was amended to provide a different level of
benefits for new employees. For these employees, benefits vest with 10 years of service at age
60, with their FAME calculated on their highest 3 years of credited service.
If an employee leaves covered employment or dies before 5 years of credited service, or 10
years for new members after October 17, 1992, accumulated employee contributions plus an
additional 10% of the employee's accumulated contributions multiplied by years of service,
not to exceed 10 years, is returned to the employee or designated beneficiary. For a member
terminated with 5 or more years of credited service, or 10 years for new members after
October 18, 1992, the member may either receive a return of accumulated employee
contributions plus the additional amount described above or the accrued benefit at the normal
retirement date.
A 1.5% Cost of Living Adjustment ("COLA") compounded annually is provided to benefit
recipients. For new members, after October 18, 1992, the 1.5% COLA is not compounded.
All covered employees are required by ordinance to contribute 10% of their salary to the Plan.
Employee contributions include buybacks.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The Plan's financial statements are prepared using the accrual basis of
accounting. Employee and employer contributions are recognized as revenues in the period in
which employee services are performed. Benefits and refunds are recognized when due and
payable in accordance with the terms of the Plan. Effective October 1, 1996, the Plan has
implemented Statement 25 of the Governmental Accounting Standards Board for financial
statement presentation. Effective June 15, 1997, the Plan has also implemented Statement 27
of the Governmental Standards Board for financial statement presentation.
Investments - Investments in common stocks, commingled fixed income trust funds, and other
bonds are recorded at fair value as determined by quoted published prices. Short-term
investments are recorded at cost which approximates fair value. Dividend and interest income
are recognized when earned. Gains and losses on sales and exchanges of investments are
recognized on the trade date.
Investments may be made as deemed appropriate by the investment managers of the Plan.
4
CITY OF MIAMI BEACH, FLORIDA
UNCLASSIFIED EMPLOYEES AND ELECTED OFFICIALS RETIREMENT SYSTEM
Notes to Financial Statements (Continued)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Administrative Expenses - Administrative expenses are paid directly by the Plan. These
expenses include, but are not limited to, all attorney fees and costs incurred by or on behalf of
the Plan. The Plan is reimbursed for 60% of the expenses paid that benefited both the Plan
and the General Employees Retirement Plan.
Year 2000 Issue - The year 2000 issue is the result of shortcomings in many electronic data
processing systems and other electronic equipment that may adyersely affect the City's
operations as early as fiscal year 1999.
The City of Miami Beach, Florida has completed an inventory of computer systems and other
electronic equipment that may be affected by the year 2000 issue and that are necessary to
conducting City operations. The City has identified the following systems as they relate to the
unclassified plan requiring year 2000 compliance:
The financial system was upgraded and made year 2000 compliant during fiscal year 1999.
The payroll systems yalidation and testing will be completed by December 31, 1999.
Estimates - The preparation of financial statements in conformity with generally accepted
accounting principles requires the plan administrator to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results may differ from
those estimates.
NOTE 3 - CONTRIBUTIONS
The Plan's funding policy provides for periodic employer contributions at actuarially
determined rates that, expressed as percentages of annual covered payroll, are sufficient to
accumulate sufficient assets to pay benefits when due. Level percentage of payroll employer
contribution rates are determined using the entry age actuarial cost method. There is no
unfunded actuarial accrued liability at October 1998, date of latest actuarial report.
Significant actuarial assumptions used in the latest actuarial report include (a) investment
return of9.0%, net after administrative expenses, (b) 1983 Group Annuity Mortality Table for
males and females (effective October 1, 1996), (c) for retirement, a probability of retirement
based on age, once a member is eligible to retire, is used (effective October 1, 1996), (d)
projected salary increases of 6.0% per year compounded annually, (e) cost of living increases
of 1.5% per year, and (f) projected inflation of 4% per year.
5
CITY OF MIAMI BEACH, FLORIDA
UNCLASSIFIED EMPLOYEES AND ELECTED OFFICIALS RETIREMENT SYSTEM
Notes to Financial Statements (Continued)
NOTE 3 - CONTRIBUTIONS (Continued)
The contribution made to the Plan during the year ended September 30, 1999 was $898,516 of
which $285,305 contributed by the City was made in accordance with actuarially determined
requirements computed through an actuarial valuation performed as of October 1, 1997. The
employer contribution was attributable to amortization of overfunded actuarial accrued
liability of$153,039 and normal costs of$I,051,555. For the year ended September 30,1999,
the City contributed $285,305 and employees contributed $613,211 which represents 4.8% and
10.3%, respectively, of covered payroll.
NOTE 4 - INVESTMENTS
As of September 30, 1999 and 1998, the level of credit risk of the Plan's investments is in
Category 1 as defined by the Governmental Accounting Standards Board, which includes
investments that are insured or registered or securities held by the Plan or its agent in the
Plan's name. There are no investments, loans to or leases with parties related to the Plan.
There were no investments in anyone company which individually exceeded 5% of the net
assets available for Plan benefits.
The carrying amounts for investments held at September 30, are as follows:
1999
1998
1999 1998
Common stocks $ 58,695,216 $ 40,982,565
Commingled fixed income trust funds 15,919,472 14,623,357
Short-term investments 937,842 3,022,708
Other bonds 250.000 250.000
$ 75.802.530 $ 58.878,630
Net increase (decrease) in fair value of the Plan's investments for the years ended
September 30, (including investments bought, sold, and held during the year) is as follows:
Common stocks and index funds
Commingled fixed income trust funds
$ 13,359,952
(1.307.529)
$ (2,943,852)
1.008.111
$ 12.052.423
$ (1.935.741)
6
CITY OF MIAMI BEACH, FLORIDA
UNCLASSIFIED EMPLOYEES AND ELECTED OFFICIALS RETIREMENT SYSTEM
Notes to Financial Statements (Continued)
NOTE 4 - INVESTMENTS (Continued)
The calculation of realized gains and losses is independent of the calculation of net increase
(decrease) in fair value of Plan investments. Realized gains and losses on investments that had
been held in more than one fiscal year and sold in the current year were included as a change
in the fair value of investments in the prior years and current year.
Net realized gains on the sale of investments, using the historical cost method of accounting,
for the years ended September 30, 1999 and 1998, amounted to $6,318,219 and $10,512,204,
respectively.
NOTE 5 - LITIGATION
Certain members of the Plan filed a lawsuit against the City. The effect, if any, upon the Plan
would be to require funding by the City under State law to cover any future benefits payable.
On or about October 7, 1998, two individuals filed suit against the Board, its Chairman and
others in Miami-Dade County Circuit Court. Plaintiffs seek to invalidate certain City
ordinances under which the Board administers the Plan. The Board and its Chairman have
filed a motion to dismiss the complaint. At present, an evaluation of the likelihood of an
unfavorable outcome cannot be made.
7
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CITY OF MIAMI BEACH, FLORIDA
UNCLASSIFIED EMPLOYEES AND ELECTED OFFICIALS RETIREMENT SYSTEM
Required Supplementary Information - Schedule of Employer Contributions
Year Ended Annual Required Percentage
September 30 Contribution Contributed
1993 $ 1,600,386 110.6%
1994 1,509,587 100.0
1995 574,282 100.0
1996 602,174 100.0
1997 572,832 100.0
1998 594,655 99.0
9
CITY OF MIAMI BEACH, FLORIDA
UNCLASSIFIED EMPLOYEES AND ELECTED OFFICIALS RETIREMENT SYSTEM
Notes to Required Supplementary Information
The information in the required supplementary schedules was determined as part of the
actuarial valuations at the dates indicated. Additional information as of October 1, 1998, the
latest actuarial valuation, follows:
Actuarial Cost Method
Frozen Entry Age
Actuarial Asset Valuation Method
5 year smoothed market
Actuarial Assumptions:
Investment rate of return
Projected salary increases
Inflation
Cost of living adjustment (COLA),
compounded
9%
6%
4%
1.5%
10